Europe: free movement of capital and the VW law

The European Commission has referred Germany to the Court of Justice of the European Union in respect of its failure to comply fully with the court's earlier decision - Commission v Germany (C-112/05) - regarding the so-called Volkswagen law: see here.

Europe: Portugal's golden share in ALP Energia SGPS SA

The Court of Justice of the European Union gave its opinion yesterday in European Commission v Portuguese Republic (Case C‑212/09): see here. The court held that Portugal had failed to fulfil its obligations under Article 56 of the EC Treaty by maintaining its golden share in GALP Energia SGPS SA which gave it, amongst other things, a right of veto regarding the appointment of certain directors and the right to appoint the company's chairman.

Europe: Portugal’s holding of golden shares in Energias de Portugal is contrary to European Union law

The European Court of Justice gave its opinion yesterday in Commission v Portugal (C-543/08), holding that Portugal’s holding of golden shares in Energias de Portugal was contrary to European Union law, such holding being an unjustified restriction on the free movement of capital: see here. A press release is available here (pdf).

Earlier this year the Court of Justice held that the Portuguese State's holding of golden shares in Portugal Telecom, which conferred special control and decision-making rights, constituted an unjustified restriction on the free movement of capital: see here.

Europe: an unjustified restriction on the free movement of capital - golden shares in Portuguese Telecom

In January 2008, the European Commission referred Portugal to the European Court of Justice because it considered that the special rights conferred on the State by its golden shares in Portugal Telecom (PT) discouraged investment from other Member States in violation of the EC Treaty.

Today the European Court of Justice gave its opinion - Commission v Portugal (Case C-171/08) - and supported the Commission's position. The court observed (paras. [60] to [62]):

... the Portuguese State’s holding of those golden shares, in so far as it confers on that State an influence on the management of PT which is not justified by the size of its shareholding in that company, is liable to discourage operators from other Member States from making direct investments in PT since they could not be involved in the management and control of that company in proportion to the value of their shareholdings (see, inter alia, Case C‑112/05 Commission v Germany [2007] ECR I‑8995, paragraphs 50 to 52).

Similarly, the structuring of the special shares at issue may have a deterrent effect on portfolio investments in PT in so far as a possible refusal by the Portuguese State to approve an important decision, proposed by the organs of the company concerned as being in the company’s interests, is in fact capable of depressing the value of the shares of that company and thus reduces the attractiveness of an investment in such shares (see, to that effect, Commission v Netherlands [C-283/04, [2006] ECR I‑9141], paragraph 27).

In those circumstances, it must be found that the Portuguese State’s holding of the golden shares at issue constitutes a restriction on the free movement of capital for the purposes of Article 56(1) EC".

A summary of the decision is available here (pdf). Following Lisbon, Article 56 is now Article 63 in the Treaty on the Functioning of the European Union: see here (pdf).