Spain faces rap over draft investment law

Date: 14/11/02

SPAIN faces legal action if it presses ahead with a draft investment market law that would discriminate against foreign companies, the European Commission has warned.

The law, which is due to enter into force in January, would give tax benefits on the sale and purchase of shares between types of investment funds that are not formally registered as 'companies' in the country. But the Commission says this would discriminate against foreign groups offering investments such as 'unit trusts' or 'mutual funds' because they are usually registered as firms.

Frits Bolkestein, the single market commissioner, said: 'There appears to be a risk of subsequent restriction of competition and even a new barrier to freely provide services throughout the Union.

'Companies might feel obliged to change their legal firm to a fund in order to be able to continue operating in Spain in a profitable way,' he added. Bolkestein aides said Madrid has yet to reply to a letter asking for an explanation for the apparently illegal tax treatment.

However they said the Commission would have to wait for the law to come into force next year before starting legal action that could ultimately lead to a court case before the European Court of Justice.

Spain faces legal action if it presses ahead with a draft investment market law that would discriminate against foreign companies, the European Commission has warned.