C-367/98

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lation which limits the access of foreigners, 5. Decree-law No 65/94 of 28 February including Community nationals, to the 1994 7 sets a limit of 25% on foreign capital of undertakings which are in the capital holdings in undertakings whose process of being privatised and also makes process of privatisation has been com- any subsequent transfer of those shares pleted, unless a higher limit has been subject to ministerial authorisation. The determined. applicant considers that each of those two aspects of the legislation constitutes an infringement of the principles underlying freedom of establishment and free move- ment of capital.

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Case C-483/99, Commission v France 10. Decree No 93-1296 of 13 December 1993 concerning, amongst other matters, certain rights linked to special holdings, 10 provides that the decree authorising a person having a special holding to object to operations 'to sell or charge assets which might adversely affect the national inter- ests' must list, in an attached schedule, the 7. Article 2 of Decree No 93-1298 of assets concerned (Article 1). 13 December 1993 creating a special share for the State in Société Nationale Elf-Aqui- taine 9 provides that any transaction which causes a natural or legal person, acting alone or with others, to have a direct or indirect holding which exceeds one tenth, 11. A statement expressing the intention to one fifth or one third of the company's sell or charge those assets must be sub- share capital or its voting rights, must have mitted to the Minister for Economic the prior approval of the Minister for Affairs, together with all the documents Economic Affairs (Paragraph 1). necessary for examination of the case. The operation will be deemed to be approved if the Minister does not raise an objection within a period of one month, which may be extended by 15 days, from the date of receipt of the complete file. Before that period elapses, the Minister may waive his right to object (Article 2).

8. Furthermore, the Ministers for Econ- omic Affairs and Industry each appoint a non-voting member of the company's board of directors to represent the State Infringement of these obligations results in (Paragraph 2). automatic annulment of the operations carried out (Paragraph 3).

holding in Société Nationale de Transport ernment representatives to SNTC's board par Canalisations (SNTC), to which are of directors, with the right to speak but not attached certain special powers to be to vote. These representatives may appeal exercised by the Minister for Energy (Ar- to the Minister against resolutions of the ticle 1). board of directors, within four days of their adoption or of the date on which they learn of their adoption, if they consider them to be contrary to Government guidelines on energy policy, including energy supply objectives. Such appeals have suspensory 13. The Minister may object to any trans- effect and lapse if not upheld within eight action relating to the capital of SNTC days. which 'might adversely affect national interests in the field of energy' (Ar- ticle 2(1)). 'Transaction' means any oper- ation by which a natural or legal person directly or indirectly acquires 5% or more of the capital or voting rights of SNTC, or increases his holding in the capital or 16. By virtue of a Royal Decree of 16 June voting rights in such a way as to hold 1994, 13 a similar system applies to the 10% or more (Article 2(2)). 12 company Distrigaz.

14. The special holding authorises the Minister to object to any sale, charging or change of use of any pipes or conduits owned by SNTC which constitute large Procedure infrastructures for the transmission of energy products nationally or which might serve as such. Prior notification of any operation of that nature must be given to the Minister, who has 21 days in which to 17. I do not think the pre-litigation pro- exercise his right to object (Article 3). cedure in the three cases displays any points of interest which deserve special attention.

Preliminary considerations

20. First of all, the types of legislation whose compatibility with Community law The three actions must therefore be con- may be questioned in the three cases must sidered in relation to the fundamental be clearly identified. The first category is freedoms of establishment and movement legislation which applies only to non- of capital, although I think that only the nationals, as opposed to that which applies former requires in-depth examination. without distinction to nationals and foreigners. Within the latter category restrictions relating to the acquiring or increasing of a holding in the capital of a privatised company ('access restrictions') must be distinguished from restrictions which, by granting public authorities powers to oversee the resolutions adopted by the company bodies, have an effect on the very management of the company Restrictions applicable only to the ('management restrictions'). nationals of other Member States

21. It is also necessary to determine the legal basis of the alleged infringements, in 22. This type of restriction appears only in the light of which the actions must be Case C-367/98 Commission v Portugal.

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24. Moreover, Decree-law No 65/94 sets a limit of 25% on foreign company share- holdings in undertakings whose privati- sation procedure has been completed, unless a higher limit has been determined. 27. Second, Portugal claims that, in spite of the wording of Article 13(3) of Law No 11/90, the Portuguese authorities had made a 'political' commitment to the Commission not to include Community 25. The Commission considers that the companies in the definition of 'foreign restrictions imposed on non-Portuguese entities'. This undertaking was reinforced Community undertakings, by framework by Article 8 of the Portuguese Constitution, law No 11/90, the various implementing which provides that Community law takes decree-laws and Decree-law No 65/94, in full effect in the Portuguese legal order, respect of access to the capital of privatised thus preventing any interpretation of undertakings, constitute discrimination national provisions which contradicts its between Portuguese nationals and fundamental principles. nationals of other Member States which is incompatible with Articles 52 (now, after amendment, Article 43 EC) and 73b of the EC Treaty (now Article 56 EC).

28. It must be inferred, from the very broad 26. The Portuguese Government draws terms of Article 13(3) of Law No 11/90, attention, first, to the fundamental import- that the restriction it authorises affects both straightforward foreign holdings in the capital of the privatised undertakings and 14 — See point 4 above. those which entail involvement in manage-

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29. Now, the defendant's arguments are not adequate to justify, under those provi- Restrictions applicable without distinction sions, legislation which expressly purports to apply to other Community nationals. Furthermore, it may be clearly inferred from the historical explanation given by the 31. The Commission alleges that the three Portuguese Government that the legislation defendant States have retained schemes does not exclude the nationals of other which, although applicable without dis- Member States from the restrictions it tinction to their own nationals and to the imposes. It is also significant, as the Com- nationals of other Member States, consti- mission points out, that the Portuguese tute, in the Commission's view, restrictions Government submitted an unsuccessful on the free movement of capital and free- proposal to the Assembly of the Republic dom of establishment. for the amendment of Law No 11/90, removing from it any aspects which could be considered to discriminate against Euro- pean Union investors. 15 Anyway, an infringement by the State does not cease to be one because the Community rule 32. It specifically complains that Portugal which has been infringed has direct effect applies Decree-law No 380/93 which sub- jects to prior authorisation by the Minister for Financial Affairs any acquisition of 15 — Decree law No 24/96 (if 20 March 1996, which the shares over a certain threshold in com- Assembly, by resolution of 9 May 1996, refused to validate. panies which are being privatised.

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36. The applicant adds that the authori- sation for the acquisition of specific quotas in the capital of the companies concerned must be subject to objective, stable and 34. Finally, the criticism levelled at Bel- public criteria, so as to reduce the discre- gium is that, under two Royal Decrees, of tionary power of the national authorities to 10 and 16 June 1994, the Minister for a minimum. Energy is able to object to any transaction relating to the assets of the SNTC and Distrigaz which 'might adversely affect national interests in the field of energy.' The Minister may prohibit any transfer, charging or change of use of the large infrastructures for the transmission According to the Commission, the various nationally of energy products owned by measures at issue do not fulfil those those companies. Furthermore, a procedure requirements. In particular, their discre- is available for objecting to any resolution tionary nature precludes any assessment of adopted by the company bodies which may proportionality. be contrary to Government guidelines on energy policy, including the energy supply objectives.

37. For their part, the defendant Member States contend that their respective regu- lations observe the principles of Commu- nity law. They assert that they are of a purely transitional nature (Portugal) or that they fulfil the conditions of relevance and proportionality needed to justify an excep- 35. Referring inter alia to the case-law relating to the right of free establishment encapsulated in the judgment in Geb- 16 — Case C-55/94 Gebhard [1995] ECR I-4165, paragraph 37.

40. Article 295 EC (formerly Article 222 of the EC Treaty) states, very emphatically, that the EC Treaty 'shall in no way preju- dice the rules in Member States governing the system of property ownership.' 42. For the Commission, the expression 'system of property ownership' seems only to include two opposing situations: public ownership and private ownership. Fur- 41. In its Communication on certain legal thermore, that ownership can be exercised aspects concerning intra-EU investment, 17 the only reference to Article 295 EC is 18 — furthermore, in the application against Belgium, the Commission insists that the provision is irrelevant, 'since, i n any event, the State's rules relating to the total or partial privatisation of companies must be adopted i n compliance 17— O J 1997 C 220, p. 15. with Community law.'

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only by having a sufficient holding in the 46. However, it is only possible to evaluate capital of the company concerned. This the fundamental nature of that provision reductionistic interpretation of Article 295 after analysing the function assigned to it EC is not in keeping — as I shall demon- by the Treaty. strate — with its significance within the Treaty or with the function which the Treaty assigns to it.

47. Owing to its broad terms, a purely literal interpretation cannot provide any 43. The first indication of the fundamental conclusive information beyond those terms. importance which must be accorded to By that I mean that the imprecision, from a Article 295 EC within the EC Treaty is to legal point of view, of the expression be found in its position in that document. It 'system of property ownership' may be is included in Part Six, which is devoted to not completely unproductive: it constitutes general and final provisions and affects all perhaps the clearest indication that this is the Treaty rules. 19 not a legal, but an economic, concept. 21

45. Article 295 EC is in the unique position 21 — This, even from a legal perspective, must relate to more of deriving its authority directly from the than the system for distributing assets between public and private owners and include all the powers affecting Schuman Declaration of 9 May 1950, on ownership, conferred by a legal system, under public and private law. See, in support of this, Thiesing, J., Kom- which it has been based, 20 which reinforces mentar zum EWG-Vertrag, Article 222, second note. its specific nature and symbolic import- 22 — At most, it makes it possible to exclude from the scope of Article 295 EC the concept of 'industrial and commercial ance. property' contained, as an exception to the free movement of goods, in Article 30 EC. Indeed, this last exception would otherwise be superfluous because it would be subsumed in the general reservation in Article 295 EC. See, in support of this, the brilliant study by Burghardt, G., 19 — In arithmetical terms, it is placed 'in front of the bracket'. Die Eigentumsordnungen in den Mitgliedsstaaten und der 20 — The text of the Declaration reads: 'L'institution de la EWG-Vertrag, Hamburg, 1969, pp. 21-23. Curiously, it is Haute Autorité ne préjuge en rien du régime de propriété in the fields of intellectual ana industrial property that des entreprises.' Article 295 EC has been most frequently invoked.

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OPINION OF MR RUIZ-JARABO — CASES C-367/98, C-483/99 AND C-503/99

adopted by the Committee of Heads of 54. From this, first, it may be inferred — Delegation of 6 March 1957, which once again — that the expression 'system deleted the additional phrase 'of the under- of property ownership' contained in takings'. Article 295 EC refers not to the civil rules concerning property relationships — an aspect which is, furthermore, wholly alien to the purposes of the Treaties — but to the ideal body of rules of every kind, deriving from both private and public law, which are capable of granting economic rights in respect of an undertaking: in other 52. It may be clearly inferred from the words, rules which allow the person vested foregoing analysis of the gestation of the with such ownership to exercise decisive precept and a comparison of it with its twin influence on the definition and implemen- provision in the ECSC Treaty, that its aim tation of all or some of its economic is to declare the neutrality of the Treaty in objectives. respect of the ownership of undertakings, in the economic sense, that is to say, as means of production.

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COMMISSION' v PORTUGAL

57. It is now necessary to look closely at holding and whose activities are exempt, at the various rules which the Commission least in part, from the rules of the Treaty by maintains are incompatible with the Treaty virtue of Article 295 EC, 28 and (b) the because they constitute restrictions, in others, all of them private undertakings, principle applied in a non-discriminatory amongst them those to which these pro- manner, on freedom of establishment and ceedings relate. The Commission adheres the free movement of capital. here to a purely private-law interpretation of the concept of ownership of an under- taking.

58. In all three cases, exceptional rights and powers have been conferred on the public authorities.

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OPINION OF MR RUIZ-JARABO — CASES C-367/98, C-483/99 AND C-503/99

powers constitute. The choice is correct, contain a provision whose sole aim is to but it is not consistent with the line of state the obvious, namely that the Treaty argument it develops in relation to the first does not affect the structure of property point. legislation in the Member States. It does not affect parent-child relations either; or inheritance rules, or grounds of nullity of marriage; or even the law of obligations; but there is no need for provisions to point this out: it is not the aim of the EC Treaty to integrate the private law of the Member 62. The nature of the various measures States. which are the subject of these proceedings is also diverse; authorisation for acquiring shareholdings above a certain threshold, objection to any sale, charging or change of use of the undertaking's main assets, appointment of members of the board of directors, objection to resolutions contrary 64. As a consequence of the Commission's to Government guidelines. approach, different treatment would be accorded to two situations which, never- theless, produce identical effects from the point of view of the fundamental freedoms established in the Treaty: on the one hand, that of an undertaking either wholly or mostly owned by a public authority; and, The common denominator of these meas- on the other, that of a private undertaking ures is that they constitute means by which subject to a general system of admini- the public authorities may participate in the strative supervision in respect of its activities of certain undertakings of stra- decisions. The comparison is even more tegic interest for the national economy, powerful if made between a public under- with the purpose of imposing economic taking, in the Commission's definition, a policy objectives. That is to say, precisely preserve which is closed to Community the matter reserved for the sovereignty of candidates, and a private undertaking, the Member States, according to the inter- which is open to those same candidates, pretation of Article 295 EC which I have although part of its activities are subject to just expounded. administrative control.

66. In any event, I do not wish to miss the opportunity of echoing a common-sense maxim invoked by the Spanish Govern- ment: 'he who is able to do the most, can 67. The question of the legal consequences also do the least'. It is almost unthinkable of applying the neutrality requirement in that the Treaty should be intended to allow Article 295 EC to the measures at issue the Member States to retain the full share- remains to be resolved. Its application in no holding in any undertaking, with the maxi- way entails exemption from the mandatory mum restriction on the freedoms of estab- provisions of the Treaty. They all produce lishment and movement of capital which their effects in accordance with their terms, that implies, and, at the same time, to stand in particular the prohibition of discrimi- in the way of a liberalised system subject to nation on grounds of nationality. limited administrative conditions which are Article 295 EC does not detract from non-discriminatory and, therefore, more in application of the fundamental rules of keeping with the aim of integration. the Treaty. What it does imply is those measures do not have to be considered per se as incompatible with the Treaty: they are covered, it may be said, by the presumption of validity conferred on them by the legitimacy of Article 295 EC. For these purposes, it is particularly enlightening that To put it another way: if withdrawing the reservation in Article 295 EC is worded financial activities from the private sector, as a prohibition against 'prejudicing'.32 If by allocating them to publicly owned the Treaty 'in no way prejudices', this

means, at the very least, that a national 70. As regards maximum scope, it may be measure concerning the public sector sys- inferred from the principle of neutrality in tem for adopting decisions must be the ownership of the undertakings that not regarded as compatible with the Treaty, just any type of measures which affect the unless it is proved otherwise. And use of the organisation and management of those term 'prejudice' specifically implies that a undertakings is acceptable, but only those measure which is in itself not discrimina- which the State would have been able to tory might be used in an unjustifiably adopt if it had kept the company under discriminatory manner. public ownership. In fact, it is only a matter of ensuring that privatisation does not have adverse consequences for the operational system ('instrumentaler Einsatz') 33 of the undertakings called upon to achieve, directly or indirectly, economic policy objectives. Amongst the measures which 68. Subject to that proviso, it is clear that may be justified in this way are, of course, the specific exercise of the powers which those which allow the State to participate the three defendant Member States have in the selection of the majority shareholder retained in the various cases, if it were or shareholders in the privatised undertak- contrary to the Treaty, could give rise to ing. It is undeniable that the identity of three cases for infringement before the those holding a majority of the shares is of Court of Justice. That applies, in particular, fundamental importance in predicting what to any arbitrary inequality of treatment on strategy options an undertaking will adopt. grounds of nationality and to the failure to observe the Community provisions protect- ing free competition, in which Article 85 EC, and also Articles 81 EC and 82 EC, will very probably be of paramount import- ance.

71. In so far as concerns the temporal aspect, I think that the improvement of the internal market, as foreshadowed by Article 4(1) EC, must lead to a reduction in the effectiveness — which is already, in itself, far from absolute — of the reserva- tion contained in Article 295 EC. 3 4The adoption of sectorial legislation will have Analysis of the relevant case-laiu to mark the first step towards limiting it in time. Furthermore, even in the absence of any legislative intervention, the Court of Justice will be able to consider whether or not a restriction is timely by reference to the criterion of Objective justification' 73. The judgment in Commission v Italy37 which, according to its settled case-law, had already considered the compatibility must characterise specific intervention with Articles 43 EC and 56 EC of 'special measures. 35 powers' retained by the defendant Govern- ment in the privatised companies ENI SpA and Telecom Italia SpA. Article 2(1) of the revised wording of Decree-law No 332 of 31 May 1994 38 provided that the President of the Council of Ministers was to deter- 72. I am aware, in any event, that the mine by decree the companies controlled interpretation which I propose is tinged by directly or indirectly by the State and a degree of what has come to be called operating in the defence, transport, tele- 'judicial restraint'. This restraint seems to communications, energy resources and me, however, to be favoured by the Treaty, other public service sectors in whose stat- as I have explained, and required by the utes, before the adoption of any measure resulting in the loss of control, a provision was to be inserted, by decision taken at an 3 4 — Article 4(1) EC, introduced by the Treaty on European Union, subjects Article 295 EC to the requirements of the single market and the principles of free competition. To that effect, see Edward, D.A.O., Article 90 EC-Treaty and the Deregulation, Liberalisation ami Privatisation of 36 — Sec, also, Edward, D.A.O., op cit., pp. 2 0 - 2 1 . Public Enterprises and Public Monopolies, Zentrum fur 37 — Case C-58/99 Commission v Italy [2000] LCR I-5811. Europäisches Wirtschartsrechr, Vortrage und Berichte, No 60, 1 9 % , p. 4. 38 — GURI No 126 of 1 June 1994. Converted, with amend- ments, into Law No 474 of 30 July 1994 providing tor 35 — This view is shared by Turrun, R., Privatisations et droit acceleration of the procedures for the sale of shareholdings communautaire. Revue de droit des affaires inter- held by the State and public bodies in joint stock nationales. No 5, 1991, pp. 830-831. companies (GURI No 1 7 7of 30 July 1994).

79. In general, the Court of Justice has 76. That judgment is disturbing in so far as merely stated briefly that application of it seems to accept that the parties are free to Article 295 EC does not detract from decide how an action for failure to fulfil application of the fundamental rules of obligations under the Treaty is to be the Treaty. disposed of. However, it is clear that actions under Article 226 EC affect, as well as the parties to the proceedings, the 39 — Case 182/83 Fearon [1984] ECR 3677 and Case C-302/97 Community public interest and, therefore, Konle [1999] ECR I-3099. 40 — Cases C-235/89 Commission v Italy [1992] ECR I-777 and in the matter of interpreting the law, the C-30/90 Commission v United Kingdom [1992] ECR defendant's acquiescence does not lead I-829, Joined Cases C-92/92 and C-326/92 Phil Collins [1993] ECR I-5145, and Case C-350/92 Spain v Council automatically to a judgment against it. [1995] ECR I-1985.

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81. The second of the abovementioned precedents may give the impression of coming into conflict with certain aspects of the interpretation of Article 295 EC which I suggest. In the Konle case it was necessary to evaluate, in the light of the freedoms established by the Treaty, Aus- trian rules subjecting the acquisition of building plots in the Tyrol to prior admini- strative authorisation. The Court of Justice stated that a rule of that nature was contrary to the freedom of movement of 82. Similar reasoning is also found, in capital, in spite of the fact that the system essence, in Cases C-235/89 Commission v was, in theory, applicable without distinc- Italy and C-30/90 Commission v United tion to nationals and foreigners. Kingdom, cited above, which dealt with the compatibility with the principle of the free movement of goods of certain national provisions granting patent licences. Those cases differ, furthermore, from the present cases not only because, in them, Article 295 EC is invoked inappropriately, as I have already shown, but also because The similarity with the cases at issue here is the declared aim of the rules in question more apparent than real. In the first place, was to promote national production. They as I have already pointed out, within the were, therefore, openly discriminatory.

41 — Paragraph 7. 42 — Paragraphs 41 and 49.

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83. In other judgments it is rightly stressed Commission had in no way encroached on that Article 295 EC does not exempt the rules governing property ownership and undertakings, whether publicly or privately had merely given identical treatment to owned, from the competition rules. public and private owners of an undertak- ing. 4 7

43 — Case 41/83 Italy v Commission [1985] ECR 873. 47 — Ibidem, paragraph 24. 44 — Ibidem, paragraphs 21 and 22. 48 — [2001] ECR I-2613. 45 — Case C-305/89 Italy v Commission [1991] ECR I-1603. 49 — Ibidem, paragraph 59. 46 — Ibidem, paragraph 17. 50 — Case C-309/96 [1997] ECR I-7493.

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reasoning, it held that 'given the absence of the Commission's powers under Article 90 specific Community rules on expropriation of the Treaty to exert an influence on the and the fact that the measures relating to internal structure of public undertakings, the common organization of the agricul- inasmuch as 'the public authorities' free- tural markets have no effect on systems of dom to engage in economic activity may agricultural property ownership, it follows not be restricted to a greater extent than from the wording of Article 222 of the that provided for in the Treaty'. 53 Treaty that the Regional Law concerns an area which falls within the purview of the Member States. 51

88. From this review of the case-law I am In a similar context and in line with that concerned above all to bring to light the interpretation, Advocate General Tesauro, lack of an express ruling by the Court of in the Opinion in Case C-202/88 France v Justice on the scope of Article 295 EC in Commission, 54 maintained that it follows the area in which it should properly take from the direct and self-evident relationship effect, that is to say in relation to the between Article 90 and Article 222 of the capacity of the public authorities to impose EC Treaty that 'there is at least a strong economic policy options by exercising presumption in favour of the legality of a powers to intervene in the running of public undertaking, or a holder of exclusive undertakings. rights as such.' 55

91. To sum up, I consider that the special prerogatives of the public authorities with which the present infringement proceedings are concerned constitute rules governing public intervention in the activities of certain undertakings, with the aim of 93. In Case C-367/98, if the application is imposing economic-policy objectives, and dismissed in part, as I propose, each party that they are on the same footing as forms should, under Article 69(3) of the Rules of of ownership of the undertakings whose Procedure, pay its own costs. organisation is a matter for the Member States by virtue of Article 295 EC. The existence of such rules is not in itself contrary to the fundamental freedoms established by the Treaty, although the specific manner in which they are applied may indeed be so. 94. In Cases C-483/99 and C-503/99, the applicant must be ordered to pay the costs under Article 69(2) of the Rules of Pro- cedure.

92. Accordingly, I propose that, with regard to that part of the application 95. The interveners should bear their own costs in accordance with Article 69(4) of 56 — Opinion in Case C-202/88, point 28 in fine, ECR I-1248. the Rules of Procedure.

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Conclusion

96. In the light of the foregoing considerations, I propose that the Court of Justice should:

— order the Commission to pay the costs. I - 4755