Europe: freedom of establishment and Austrian casinos

The European Court of Justice delivered its judgment yesterday in Case C-64/08 (Criminal proceedings against Ernst Engelmann). The case concerned Austrian legislation which gave the Federal Minister for Finance the power to grant concessions entitling their holders to operate casinos in Austria. The grant of these concessions was restricted to public limited companies with their seat in Austria.

Mr Engelmann, a German national, operated a couple of casinos in Austria without applying for a concession and was found guilty of unlawfully organising games of chance and fined €2000. He appealed to the Landesgericht Linz (Regional Court, Linz, Austria), which referred questions to the ECJ for a preliminary ruling, including whether the Austrian legislation was compatible with European Union Law on the freedom to provide services and freedom of establishment.

The ECJ held - see here (judgment) or here (press release, pdf) - that requiring the company's seat to be in Austria constituted a restriction on freedom of establishment contrary to EU Law: it discriminated against companies with seats in other Member States and prevented them from operating gaming establishments in Austria through an agency, branch or subsidiary. With regard to the argument that such a restriction was justified in the interests of preventing fraud and crime, the ECJ held that the blanket exclusion of companies with seats in other Member States was disproportionate: it went beyond what was necessary to combat crime.

Europe: shareholder liability and the First Company Law Directive

Advocate General Trstenjak gave her opinion in Idryma Typou (Law relating to undertakings) (case C-81/09) last week. The case raised an interesting question regarding European law and the liability of public company shareholders.

Under Greek law, a fine in respect of infringements of legislation and other rules governing the operation of television stations was imposed jointly and severally on a company, its directors and those shareholders holding over 2.5% of the share capital. An annulment of the fine was sought and the court hearing this claim requested a preliminary ruling from the European Court of Justice as to whether the provision providing for the imposition of the fine was precluded by the First Company Law Directive (Council Directive 68/151/EEC) (now Directive 2009/101/EC).

In the opinion of Advocate General Trstenjak, which is not binding on the court, the First Company law Directive did not preclude provisions of the kind adopted by Greece. However, such provisions were, in her opinion, precluded by Articles 43, 48 and 56 of the EC Treaty (see now, respectively, Articles 49, 56 and 63 of the Treaty on the functioning of the European Union: here, pdf). The Advocate General noted (para. [57]):

In the absence of express provision in Directive 68/151 ... the power to prescribe the exceptional extension of liability to shareholders of public limited companies falls within the competence of the national legislature. In the absence of harmonisation, it is for the Member States, in principle, to decide to what extent they wish to take account of the protection of the interest in question in relation to extending liability to the shareholders of a public limited company".

Poland: European Commission refers Poland to the ECJ

The European Commission has referred Poland to the European Court of Justice because, in the Commission's view, the Polish Act on Special Powers of the Treasury and their Exercise in Companies of Special Importance for Public Order or Public Security (and two implementing ordinances) is contrary to the principle of free movement of capital and freedom of establishment under the EC Treaty. 

The Act grants the State special rights - including a right of veto in respect of important management decisions - in thirteen Polish companies in the copper ore mining, media/audiovisual, railway infrastructure, electricity, gas and petroleum, motor spirits and diesel oil sectors.  Further information is available here.