C-463/00

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4. The Law provides: (c) the activity is exempt in whole or in part from the rules on competition under Article 90 of the Treaty Estab- lishing the European Economic Com- munity.

'Article 1. Substantive scope

2. Commercial undertakings which arc part of a group, as defined in Article 4 of This Law shall apply to: Law 24/1998 of 28 July on the Stock Market, in which any of the undertakings falling within paragraph (1) above has a dominant position, provided that they meet any of the conditions referred to in sub- paragraphs (a), (b) or (c) of paragraph (1). 1. Commercial undertakings in which, on the date on which this Law enters into force, the State holds, directly or indirectly, more than 2 5 % of the share capital and which are controlled by the State member in any of the ways laid down by the Article 2. Conditions for application applicable commercial legislation, provided that, as regards the activity carried out by the undertaking, on its own account or as a result of a holding in other companies, any of the following conditions are met: The system of prior administrative appro- val set out in Article 3 et seq. of this Law shall apply where the public holding of the State member of the undertakings referred to in the preceding article falls within either (a) essential services or public services of the following cases: formally defined as such are supplied;

1. Where, in one transaction, or a series of (b) activities are carried out which by law transactions, the holding is disposed of in and for reasons of public interest are such a way that it is reduced by a per- subject to specific a d m i n i s t r a t i v e centage equal to, or greater than, 10% of review procedures, applying particu- the share capital, provided that the result- larly to the persons carrying out the ing direct or indirect State holding in that activities; capital is less than 5 0 % .

Article 3. Prior administrative approval (a) operations consisting in dealing in the share capital which result, following one transaction or a series of trans- actions, in the State's shareholding, as regards the undertaking subject to the special regime laid down by this Law, 1. Where one of the conditions for appli- being reduced by a percentage equal to cation referred to in the preceding article or greater than 1 0 % ; has arisen and as established in the Royal Decree referred to in Article 4 of this Law, decisions on the following matters by the managing organs of the undertakings men- tioned in Article 1 of this Law may be (b) the direct or indirect acquisition, subject to prior administrative approval: including through a trustee or other third party, of shares or other securities capable of conferring a right, directly or indirectly, to subscribe for or acquire shares or securities, where the acquisition results in a holding of at (a) the voluntary winding-up, demerger or least 1 0 % of the share capital. merger of the undertaking;

(b) any kind of disposal or charging, under any name whatsoever, of the assets or shareholdings necessary for the attain- Article 4. System of administrative appro- ment of the undertaking's object and val which are defined as such;

1. The system of prior administrative approval shall be established by Royal (c) a change in the undertakings's object. Decree made in the Council of Ministers

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on a proposal from the Minister competent 5. The documents before the Court show in the relevant sphere and following an that since 1996 the system of prior adminis- opinion from the Council of State. trative approval introduced by Law 5/1995 has been applied by means of various Royal Decrees. The Commission's complaints relate to the following privatisation pro- grammes: 2. The Royal Decree establishing the sys- tem to which this article refers shall enter into force prior to the transactions men- tioned in Article 2 and shall specify:

OPINION OF MR RUIZ-JARABO — CASES C-463/00 AND C-98/01

Case C-98/01 Commission v United King- — the company ceasing to control a sub- dom sidiary operating a designated airport (Gatwick, Heathrow and Stansted);

6. Under the Airports Act 1986, the public — the winding-up or dissolution of the authority which used to own and operate company or of any subsidiary oper- the United Kingdom's international air- ating a designated airport, other than ports (British Airports Authority) was pri- in the case of a scheme of reconstruc- vatised and its assets were transferred to tion; the private company BAA pic ('BAA').

— the disposal of a designated airport, or any part thereof, or of the operation of such an airport. BAA's Articles of Association, dated 7 July 1987, created a special one pound share which was allocated to the Secretary of State for Transport. 8. The Special Shareholder is entitled to receive notice of general meetings or meet- ings of a similar kind but does not have a right to vote or any other right apart from the power to give his consent as mentioned above. 7. Article 10 of BAA's Articles of Associ- ation describe the special share. Its holder must be a member of the government or a person acting on behalf of the Crown (paragraph 1). Pursuant to Article 10(2), 9. Article 40(1) of the Articles of Associ- the Special Shareholder's consent in writing ation provides: is required, inter alia, for:

'The purpose of this article is to prevent — any amendment of the articles which any person (other than a Permitted Person) alters the State's special powers within being, or being deemed or appearing to the the company (including the powers in directors to be, interested in shares of the Article 10 itself and those in Article 40); Company which carry (or may in accord-

10. By letter of 26 October 1999, the Commission informed the Spanish Govern- ment that the system of prior adminis- trative approval established by Law 5/1995 and the Royal Decrees implementing it 14. The Commission was unconvinced by might infringe the provisions of the EC those explanations and brought the present Treaty on free movement of capital and action before the Court of Justice.

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Case C-98/01 Commission v United King- IV — Procedure before the Court of Jus- dom tice

17. The United Kingdom Government responded on 5 November 1999, maintain- ing that Member States are competent to (1) declare incompatible with Article 43 define, within the framework of their EC (ex Article 52 of the EC Treaty) and national company law, the essential char- Article 56 EC (ex Article 73b of the EC acteristics of shares in private companies, Treaty) Article 2 and Article 3(1) and which are available on the market, and that (2) of Law 5/1995 of 23 March on the such a measure does not deny access to the legal arrangements for disposal of pub- market in those shares. Furthermore, it lic shareholdings in certain undertak- contended that in the course of a privati- ings, together with Article 1 thereof sation programme, special measures may and the implementing Royal Decrees be needed to protect the public interest. enacted under Article 4 thereof (Royal Decrees No 3/1996 of 15 January 1996 concerning Repsol, No 8/1997 of 10 January 1997 concerning Telefonica de Espana, No 40/1998 of 16 January 1998 concerning A r g e n t a r i a , 18. The Commission was unconvinced by No 562/1998 of 2 April 1998 concern- that reply and brought the present action ing Tabacalera and No 929/1998 of before the Court of Justice. 14 May 1998 concerning Endesa), in so

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far as they implement a system of prior 27 February 2001. Following the written administrative approval procedure, the Court decided to retain the case before the full Court and to open the oral procedure.

— which is not justified by overriding requirements relating to the gen- eral interest,

OPINION OF MR RUIZ-JARABO — CASES C-463/00 AND C-98/01

V — Analysis of the action tion whether a Member State has failed to fulfil its obligations must be determined by reference to the situation prevailing at the end of the period allowed by the Commis- sion in its reasoned opinion, in this instance 2 October 1999. The two dates advanced by the Spanish Government are later than Admissibility that.

25. The Spanish Government submits that the action against it is inadmissible. 27. Second, as regards the alleged disparity and without its being necessary to adjudi- cate on whether it actually exists, it is sufficient merely to read the documents before the Court to establish that the Spanish Government had sufficiently accu- rate information about the nature of the Specifically, the action is inadmissible in so infringements imputed to it and that its far as it relates to Royal Decrees 40/1998 claim cannot therefore succeed. (Argentana) and 552/1998 (Tabacalera), because the special powers provided for in those measures expired on 17 February 2001 and 5 October 2000 3 respectively and, in so far as it concerns Royal Decrees 3/1996 (Repsol), 8/1997 (Telefónica) and 929/1998 (Endesa), because there is a 2 8 . I therefore propose that the action disparity between the disputed legal provi- against Spain be declared admissible in its sions and the terms of the application. In entirety. the last three cases, the system of prior a p p r o v a l had been established under Article 1(2) of Law 5/1995, because it was aimed at groups of undertakings, but in the letter of formal notice, the reasoned opinion and the application itself, the Commission refers to Article 1(1). The principles established by the judgments of 4 June 2002

(a) T h e C o u r t examines the various national rules on intervention, essen- 31. Applying those principles, the Court of tially, in the light of the principles Justice held that the Portuguese legislation relating to free movement of capital: which prohibited the acquisition by inves- failure to observe those principles may, tors from other Member States of more as an ancillary matter, give rise to an than a given number of shares in certain infringement of the principle of free- undertakings was incompatible with the dom of establishment. Treaty. That scheme was clearly discrimi- natory in nature, and the undertaking which the Portuguese Government had given that, purely as a matter of policy, it- would not enforce the restriction vis-à-vis Community operators, was not sufficient to remedy the infringement. 5 (b) In so far as such rules are capable of impeding the acquisition of shares in the companies concerned and of deter- ring investors from other Member States, they amount to restrictions on the free movement of capital. 32. Likewise, on the basis of the same principles, the Court held that rules which applied without distinction, namely (i) the 4 — Cervantes y Saavedra, M. de: The Ingenious Hidalgo Don Quixote de la Mancha, Part II, Chapter 42. Translated by John Rutherford, Penguin Books (Penguin Classics) 2(100, p. 769. 5 — Paragraphs 40 to 42 of Commission v Portugal.

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Portuguese and French rules which made 33. The Belgian regime, however, merited acquisition of a shareholding above a different treatment. Under that regime, the certain level in certain undertakings subject Belgian State could oppose any transfer, to prior administrative authorisation and any use as security, or any change in the (ii) the French legislation which enabled intended destination of lines and conduits representatives of the State to oppose of energy products or of certain other decisions to transfer the assets of various strategic assets, as well as certain manage- companies or use them as security con- ment decisions considered contrary to the stituted an infringement. guidelines for the country's energy policy.

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35. In performing this important task, I restricting the powers of the board of must point out to the Court of Justice the directors relating to the ownership or weak points of the reasoning in its judg- management of the company. Contrary to ments of 4 June 2002, aware as I am of the the Court of Justice's finding, 7the resulting risks involved if its case-law is viewed with restriction of the free movement of capital unqualified admiration, in an unreal light is incidental, rather than inevitable. If that which, casting no shadows, ultimately robs is the case as regards measures affecting the that case-law of any contrast. 6There are in composition of the membership, it is even essence three points: I shall deal with them more true as regards measures restricting with the utmost care and concision. the adoption of company resolutions (change of company object, disposal of assets). In the latter cases, the link with the free movement of capital is hypothetical or very tenuous.

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I shall not delve any deeper into what I in Member States is compatible, per se, consider an incorrect legal classification of with Community law. That principle is the alleged infringement, which is of no based, as the Commission accepted in the further consequence, since the Court of three decided cases, on the premiss of Justice subjects both Community freedoms neutrality inherent in Article 295 EC. There to similar scrutiny. 10 is no doubt, however, that public owner- ship of undertakings does entail, for econ- omic operators from other Member States, a clear restriction on freedom of establish- ment (or, if you prefer, free movement of capital). Similar restrictions can result merely because public bodies have holdings 37. Second, despite the fundamental (regardless of their size) in the capital of importance ascribed to it by the Treaty private companies. In that case other establishing the Community, the judgments restrictions would ensue where public of 4 June 2002 appear to render devoid of bodies, via their representatives, influenced all practical effect Article 295 EC, which certain company resolutions, such as, for provides that the Treaty 'shall in no way example, those which prevent foreigners prejudice the rules in Member States gov- from owning shares or which in any other erning the system of property ownership'. way render direct cross-border investment According to the judgments, that precept less attractive. cannot be pleaded by way of justification for obstacles to the exercise of the freedoms provided for by the Treaty. Citing a decision based on very different facts, 11 the Court of Justice observed that 'that article does not have the effect of exemp- ting the Member States' systems of prop- erty ownership from the fundamental rules of the Treaty'.

free State intervention in companies as it against that regime because, on account of has hitherto been understood. I am not sure a lack of 'any precise, objective criteria, the that the Court sought that result but it legislation in issue goes beyond what is cannot be avoided if its principles are taken necessary in order to attain the objective to their logical conclusion. indicated'. 12 However, under that legis- lation the holder of the special share was entitled to oppose the transfer, or the use as security, of assets capable of adversely affecting the national interest. 13 The Bel- gian legislation, which enables the Minister to oppose disposals of strategic assets when he considers that they may adversely affect In any event, the judgments, without stat- the national interest in the energy sector, 14 ing why, ignore the question of the appli- is scarcely any more specific. cation and scope of Article 295 EC. That cannot be done with impunity, even in the name of the fundamental freedoms, since in the scheme of the Treaty Article 295 EC is as important as they are.

39. Nor are the procedural differences between the rules very revealing. Both 38. The third major criticism concerns the provide for intervention after the event, exception made by the Court of Justice in with an obligation to give prior notice. the Belgian case. To make my explanation That statement must be qualified. It is by clearer, I shall concentrate on the powers no means a question of pure ex post facto which Article 3 of the Royal Decrees of 10 intervention of the kind which affects the and 16 June 1994 confer on the Minister to validity of an act which is, of itself, oppose the transfer, the use as security, or effective. On the contrary, it is clear from any change in the intended destination, of the general scheme of the national legis- the company's strategic assets. lation that, where neither the Minister nor

the competent authority has responded lines and conduits constituting major infra- within the period allowed, the disposal or structures for the domestic conveyance of agreement to transfer, although legally energy products; the French case concerned perfect, is ineffective. If that were not the the majority of the capital of Elf-Aqui- case, it would be possible to circumvent taine's subsidiaries. Even supposing that administrative intervention by quickly sell- that difference influences the assessment of ing on to a third party, against whom the the restriction, it is obvious that it has no special powers could not be used. Looked effect at all on the objectivity or precision at from that perspective, the situation is of the criteria. comparable to a regime which subjects the same acts to prior administrative approval, which is deemed to be granted once a certain period has expired ('positive admin- istrative silence').

The specific application of those principles to the present cases

Nor is the difference in the period within which the right of opposition must be exercised decisive: 21 days in the Belgian case; one month, which may exceptionally be extended by a further 15 days, in the Spanish case.

42. That is not necessarily so if the Belgian regime for opposing the transfer of assets is taken as a yardstick for compatibility with Community law. As I pointed out above, the Court, in dismissing the infringement action, had emphasised various aspects of Furthermore, as the Spanish Government the regime: the ex post facto nature of the contended at the hearing, without being intervention, the imposition of strict time- contradicted on the point by the Commis- limits, the limitation both of the decisions sion, 18 the refusal of approval must, as an which may be affected and of the reasons administrative act, be supported by reasons which may be relied on to use the veto, the and is, for that very reason, subject to formal statement of reasons for the decision effective judicial review. There is no reason and effective review by the courts. to believe that such review is less effective in Spain than in Belgium.

Contrary to the Commission's submission, 17 43. I have already explained that if the there is no good reason to doubt that the Belgian regime is looked at closely, it does Spanish regime on prior approval was not provide for ex post facto intervention, established with the aim of ensuring, within since a measure has no practical legal effect 18 — I am paraphrasing the words used in paragraph 51 of Commission v Belgium, although I am not convinced t h a t , 16 — Article 3(2) of Law 5/1995. in order to establish the provisions of national law, the mere agreement of the parties or the aquiescence of the 17 — See point 40 above. other side is sufficient.

44. The Spanish regime also has a feature which sets it apart from other similar cases before the Court, namely its expressly transitional nature. Thus each of the Royal Decrees sets an expiry date (generally 10 years after the occurrence of the triggering event). The fact that those Decrees are to apply only for a limited time confirms that this is an exceptional regime devised to go In short, the only relevant difference hand in hand with a privatisation pro- between the Belgian and Spanish rules is cedure. It seems to be consonant with the again the different nature of the operations objective of opening up markets, whilst not for which approval is required. And again, wholly relinquishing the State's powers in the ineluctable conclusion is that, even strategically important parts of the econ- though the Spanish rules cover a wider omy. As the Court stated: 'it is undeniable range of matters, given that, as well as that, depending on the circumstances, cer- covering various decisions concerning tain concerns may justify the retention by changes in the company or the transfer of Member States of a degree of influence assets, they also extend to the acquisition of within undertakings that were initially 10% of the share capital, such differences public and subsequently privatised, where those undertakings are active in fields involving the provision of services in the 19 — I stress the fact that, in spite of the wording of paragraph public interest or strategic services'.20 I 51 of Commission v Belgium, which refers to situations where 'there is a threat that the objectives of the energy would add that those concerns are more policy may be compromised', the reality of the legal provisions is that the Minister may oppose the transfer, the readily justifiable when they are precisely use as security, or any change in the destination, of certain delineated in time and serve to prevent the strategic assets if the operation 'adversely affect[s] the national interest in the energy sector' (Article 3(1) of the risks involved in what amounts to a Royal Decree of 10 June 1994). In another sphere, it should be recalled that the Commission also uses imprecise terms to restrict rights. For example, it pleads 'lack of Community interest' to avoid investigating a complaint relating to competition law and thus to limit the access of 20 — See Commission v Portugal, paragraph 47; Commission v individuals to administrative and, where appropriate, France, paragraph 4 3 ; and Commission v Belgium, para- judicial review. graph 4 3 .

Case C-98/01 Commission v United King- dom 45. If account is taken of the novelty of the privatisation of companies whose owner- ship or control by the State had seemed 47. The legal situation reflected in Case legitimate for many years, there is justifi- C-98/01 (Commission v United Kingdom) cation for the variety of measures subject to does not appear to be compatible with the approval and for the relative lack of principles of the case-law recently restated precision in the objective put forward: in this new area. continuity in the company providing the service. Given the unforeseeable nature of possible difficulties, it is understandable that the State should retain a certain discretion. If, in addition, account is taken of the t e m p o r a l limitation which it 48. First, it is of no significance that the involves, the Spanish regime does not go powers of intervention which may be beyond what is necessary to attain the exercised by the State derive from the objective which it pursues. company's Articles of Association (rather than from a legislative provision) or that the phenomenon of non-voting shares con- ferring special powers is permitted under domestic law. Whilst such a case falls squarely within the established category of 'systems of property ownership', it is nevertheless the case that such systems do not fall outside the scope of the fundamen- tal rules of the Treaty, the Court not drawing any distinction (and it is not appropriate to do so) by reference to the 46. All those considerations, viewed in the exact nature of a given system. For the light of the judgments of 4 June 2002 and purposes of classifying the restriction, the the general principle of the neutrality of decisive factor is the economic con- Community law vis-à-vis the State's entre- sequences of the system, not the technical p r e n e u r i a l i n i t i a t i v e s , e n s h r i n e d in details of each set of rules. Were that not Article 295 EC, lead me to think that the so, it would be sufficient, in the future, for potential restrictions on the free movement Member States to convert all kinds of of capital are justified and that they are appropriate and proportionate in relation to the objective which they pursue; and that 21 — See, by a n a l o g y . paragraph 59 of Commission v Belgium.

In spite of appearances, the United King- dom rules are essentially no different from the French rules.

51. Article 40 of BAA's Articles of Associ- ation in practice restricts the holding of any one person or undertaking in the company 50. Under Article 10 of BAA's Articles of to 15% of the voting shares. The United Association, the (public) owner of the Kingdom Government asserts on the basis special share may oppose the winding-up of that percentage that access to the market of the company, the winding-up or disposal is not obstructed. In the French case of a subsidiary which owns one of the (Article 2(1) of Decree No 93-1298), designated airports and the total or partial approval was required once the ceiling of disposal of an airport or the management one tenth, one fifth or one third of the

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5 3 . In those circumstances, the regime established in Articles 10 and 40 of BAA's Articles of Association must be considered, 55. The judgments of 4 June 2002 hold in accordance with the judgments of 4 June that Article 295 EC, which emphatically 2002, to be contrary to the free movement lays down that the EC Treaty 'shall in no of capital, and there is no need for a way prejudice the rules in Member States separate examination of the measures at governing the system of property owner- issue in the light of the rules concerning ship' does not exempt those systems from freedom of establishment. 22 the fundamental rules of the Treaty. To restate a principle in this way without more amounts to begging the question, the 12 — Paragraph 56 or Commission v Portugal and of Commis- practical result of which is that a provision sion v France. of fundamental importance, which the

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57. In short, the Treaty's observance, enshrined in Article 295 EC, of the system of property ownership in the Member The United Kingdom provisions would also States must extend to any measure which, be able to benefit from that presumption of through intervention in the public sector, legality if the United Kingdom Government understood in the economic sense, allows were required to adopt reasoned decisions the State to contribute to the organisation when exercising the powers conferred on it by the Special Share and if such decisions could be subject to review by the courts. 23 — On account of its key position, its forceful and uncon- Failing those guarantees, the BAA regime ditional wording and the fact that it derives its authority does not comply with the requirements of directly from the Schuman Declaration of 9 May 1950, as I pointed out in my Opinion of 3 July 2001. the Treaty.

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VI — Costs 60. In Case C-98/01 (Commission v United Kingdom), the United Kingdom must be ordered to pay the costs in accordance with the criteria employed by the case-law.

59. In Case C-463/00 (Commission v Spain), the applicant must be ordered to 61. The intervener is to bear its own costs pay the costs under Article 69(2) of the in accordance with Article 69(4) of the Rules of Procedure. Rules of Procedure.

VII — Conclusion