CELEX: 62019CJ0735
Request for a preliminary ruling
Company law
Directive 2004/25/EC
Takeover bid
first and second subparagraphs of Article 5(4)
Protection of minority shareholders
Mandatory bid
Method of calculating the value of shares in order to determine the equitable price
Power to adjust the equitable price
Exceptions to the standard method of calculation in circumstances and in accordance with criteria that are clearly determined
Liability of the Member State concerned
Damage suffered by the offeror as a result of an excessively high bid

This request for a preliminary ruling concerns the interpretation of, first, Article 5(4) of Directive 2004/25/EC of the European Parliament and of the Council of 21 April 2004 on takeover bids (
OJ 2004 L 142, p. 12
) and, second, the principle of effectiveness.
The request has been made in proceedings between Euromin Holdings (Cyprus) Limited and the Finanšu un kapitāla tirgus komisija (Financial and Capital Markets Commission, Latvia; ‘the Financial Markets Commission’), concerning an application seeking, first, a declaration that the decision of 15 October 2015 by which that commission authorised the repurchase of shares in Ventspils nafta AS, which was the subject of a takeover bid, at a price of EUR 4.56 per share (‘the contested decision’) and, second, compensation for the damage caused by that decision.
Legal background
European Union law
Directive 2004/25
Recital 9 of Directive 2004/25 states:
‘Member States should take the necessary steps to protect the holders of securities, in particular those with minority holdings, when control of their companies has been acquired. The Member States should ensure such protection by obliging the person who has acquired control of a company to make an offer to all the holders of that company’s securities for all of their holdings at an equitable price in accordance with a common definition. Member States should be free to establish further instruments for the protection of the interests of the holders of securities, such as the obligation to make a partial bid where the offeror does not acquire control of the company or the obligation to announce a bid at the same time as control of the company is acquired.’
Article 3 of that directive provides:
‘1.   For the purpose of implementing this Directive, Member States shall ensure that the following principles are complied with:
(a)
all holders of the securities of an offeree company of the same class must be afforded equivalent treatment; moreover, if a person acquires control of a company, the other holders of securities must be protected;
…
2.   With a view to ensuring compliance with the principles laid down in paragraph 1, Member States:
(a)
shall ensure that the minimum requirements set out in this Directive are observed;
(b)
may lay down additional conditions and provisions more stringent than those of this Directive for the regulation of bids.’
Under Article 4(6) of that directive:
‘This Directive shall not affect the power of the Member States to designate judicial or other authorities responsible for dealing with disputes and for deciding on irregularities committed in the course of bids or the power of Member States to regulate whether and under which circumstances parties to a bid are entitled to bring administrative or judicial proceedings. In particular, this Directive shall not affect the power which courts may have in a Member State to decline to hear legal proceedings and to decide whether or not such proceedings affect the outcome of a bid. This Directive shall not affect the power of the Member States to determine the legal position concerning the liability of supervisory authorities or concerning litigation between the parties to a bid.’
Article 5 of that directive provides:
‘1.   Where a natural or legal person, as a result of his/her own acquisition or the acquisition by persons acting in concert with him/her, holds securities of a company as referred to in Article 1(1) which, added to any existing holdings of those securities of his/hers and the holdings of those securities of persons acting in concert with him/her, directly or indirectly give him/her a specified percentage of voting rights in that company, giving him/her control of that company, Member States shall ensure that such a person is required to make a bid as a means of protecting the minority shareholders of that company. Such a bid shall be addressed at the earliest opportunity to all the holders of those securities for all their holdings at the equitable price as defined in paragraph 4.
…
4.   The highest price paid for the same securities by the offeror, or by persons acting in concert with him/her, over a period, to be determined by Member States, of not less than six months and not more than 12 before the bid referred to in paragraph 1 shall be regarded as the equitable price. If, after the bid has been made public and before the offer closes for acceptance, the offeror or any person acting in concert with him/her purchases securities at a price higher than the offer price, the offeror shall increase his/her offer so that it is not less than the highest price paid for the securities so acquired.
Provided that the general principles laid down in Article 3(1) are respected, Member States may authorise their supervisory authorities to adjust the price referred to in the first subparagraph in circumstances and in accordance with criteria that are clearly determined. To that end, they may draw up a list of circumstances in which the highest price may be adjusted either upwards or downwards, for example where the highest price was set by agreement between the purchaser and a seller, where the market prices of the securities in question have been manipulated, where market prices in general or certain market prices in particular have been affected by exceptional occurrences, or in order to enable a firm in difficulty to be rescued. They may also determine the criteria to be applied in such cases, for example the average market value over a particular period, the break-up value of the company or other objective valuation criteria generally used in financial analysis.
…’
Regulation (EU) No 1254/2012
Article 1(1)(a) of Commission Regulation (EU) No 1254/2012 of 11 December 2012 amending Regulation (EC) No 1126/2008 adopting certain international accounting standards in accordance with Regulation (EC) No 1606/2002 of the European Parliament and of the Council as regards International Financial Reporting Standard 10, International Financial Reporting Standard 11, International Financial Reporting Standard 12, International Accounting Standard 27 (2011), and International Accounting Standard 28 (2011) (
OJ 2012 L 360, p. 1
), inserted International Financial Reporting Standard 10, entitled ‘Consolidated financial statements’ (‘IFRS 10’), set out in the annex to that regulation, into Commission Regulation (EC) No 1126/2008 of 3 November 2008 (
OJ 2008 L 320, p. 1
).
Paragraph 22 of the part of the annex to Regulation No 1254/2012 relating to IFRS 10 provides:
‘A parent shall present non-controlling interests in the consolidated statement of financial position within equity, separately from the equity of the owners of the parent.’
Under Appendix A to the part of the annex to Regulation No 1254/2012 relating to IFRS 10, the concept of ‘non-controlling interest’ is defined as ‘equity in a subsidiary not attributable, directly or indirectly, to a parent’.
Latvian law
Article 5 of the Finanšu instrumentu tirgus likums (Law on markets in financial instruments) (
Latvijas Vēstnesis
2003, No 175), in the version applicable to the dispute in the main proceedings (‘the FITL’), provides:
‘The [Financial Markets] Commission, its employees and agents shall not be liable for damage caused to participants in markets in financial instruments or to third parties and cannot be held liable for acts which they have carried out legally, accurately, legitimately and in good faith, by duly performing their supervisory functions in accordance with the procedures laid down by law and other regulations.’
Article 74(1) of the FITL is worded as follows:
‘In a mandatory bid for the repurchase of shares, the price per share shall not be lower than:
(1)
the price at which the offeror or persons acting in concert with him or her purchased shares in the offeree company over the preceding 12 months. If those shares were purchased at different prices, the repurchase price shall be the highest purchase price for the shares over the 12 months preceding the occurrence of the circumstances referred to in Article 66(1) of this law;
(2)
the weighted average price of a share in a regulated market or multilateral trading system with the highest volume of trade for that share over the last 12 months. The weighted average price of a share shall be calculated over the 12 months preceding the occurrence of the circumstances referred to in Article 66(1) of this law;
(3)
the value of a share calculated by dividing the offeree company’s net assets by the number of shares issued. In order to calculate net assets, the offeree company’s treasury shares and its liabilities shall be deducted from total assets. If the offeree company has shares with different nominal values, net assets shall be divided in proportion to the nominal value of shares in that company’s capital.’
Under Article 74(2) of the FITL:
‘For the purposes of calculating the value of a share repurchased in accordance with paragraph 1(3) of this article, the data used shall come from the offeree company’s last audited annual accounts approved by the general meeting of shareholders. The period between the last day of the financial year to which the annual report relates and the date on which the bid is submitted to the [Financial Markets] Commission may not exceed 16 months. Where, in accordance with the applicable legislation, the offeree company prepares an annual report no later than seven months after the end of the reference year, the period between the last day of the financial year for which the annual report is prepared and the date on which the bid is submitted to the [Financial Markets] Commission may not exceed 19 months. For the purposes of calculating the value of a share, the data from the offeree company’s last quarterly report shall be used if the value of the shares calculated using those data is at least 10% higher than the value obtained on the basis of data from the annual report. If the offeree company also prepares a consolidated annual report, it shall use data from that report to determine the value of a repurchased share. If the offeree company prepares annual accounts both under the law of the State in which it is established and according to international financial information standards, it shall use data from the accounts prepared in accordance with international financial information standards.’
Article 13 of the Valsts pārvaldes iestāžu nodarīto zaudējumu atlīdzināšanas likums (Law on compensation for damage caused by public authorities) (
Latvijas Vēstnesis
2005, No 96), in the version applicable to the main proceedings (‘the Law on compensation for damage’), entitled ‘Determination of material damage’, provides:
‘1.   In determining adequate compensation for the damage caused by the authority concerned, account shall be taken of the factual and legal grounds on which that authority’s actions were based, and also of the injured party’s actions.
2.   In determining adequate compensation for the damage caused by the authority concerned, account shall also be taken of other relevant circumstances of the case, if it is possible to demonstrate them objectively.
3.   Material damage shall normally be calculated on the basis of the amount calculated pursuant to Article 12 of this Law, in accordance with the following scale:
(1)
where that amount does not exceed EUR 142288, an award of damages equivalent to 100% thereof shall constitute adequate compensation;
(2)
where that amount is between EUR 142289 and EUR 1422872, adequate compensation may be set at 50 to 100% thereof;
(3)
where that amount exceeds EUR 1422872, adequate compensation may be less than 50% of that amount.
4.   The authority may, of its own motion, redress the material damage suffered by the injured party not by paying him or her compensation but by returning him or her to the factual situation in which he or she was before his or her property was damaged.’
Article 14(1) of the Konsolidēto gada pārskatu likums (Law on consolidated annual accounts) (
Latvijas Vēstnesis
2006, No 178), in the version applicable to the main proceedings (‘the Law on consolidated annual accounts’), entitled ‘Rules for consolidating annual company accounts’, provides:
‘Consolidated annual accounts are the result of combining the annual accounts of the group’s parent and the annual accounts of the subsidiaries concerned, in respect of the amounts indicated in their respective annual accounts as assets, liabilities, equity, revenue and expenditure. Assets and liabilities in the balance sheets of consolidated companies shall be fully included in the consolidated balance sheet. The profits or losses of those companies shall be fully included in calculations of consolidated profit and loss.’
Under Article 21 of that law, entitled ‘Presentation of interests of minority shareholders’:
‘1.   The portion of equity of consolidated subsidiaries corresponding to shares held by minority shareholders shall be indicated in a separate item within equity, entitled “Interests of minority shareholders”.
2.   Profit and loss for the year shown in the accounts of consolidated subsidiaries corresponding to shares held by minority shareholders shall be indicated in a separate consolidated item concerning the calculation of profit and loss, entitled “Share of minority shareholders in profit and loss”.’
The main proceedings and the questions referred for a preliminary ruling
The applicant in the main proceedings had acquired 93.24% of voting shares in Ventspils nafta and therefore, under the FITL, had to make a mandatory bid for shares in that company. To that end, it submitted to the Financial Markets Commission a ‘prospectus’ setting out its bid, which stated that the repurchase price was EUR 3.12 per share in Ventspils nafta.
On the basis of Article 74(1)(3) of the FITL, the Financial Markets Commission rejected the calculations of the applicant in the main proceedings on 6 October 2015. By the contested decision, the Commission subsequently authorised the applicant in the main proceedings to make a mandatory bid at a price of EUR 4.56 per share in Ventspils nafta.
The applicant in the main proceedings brought an action before the Administratīvā apgabaltiesa (Regional Administrative Court, Latvia) seeking a declaration that that decision was unlawful and claiming compensation for the damage which it alleged to have suffered as a result.
The applicant in the main proceedings submitted that the purpose of Article 74 of the FITL was to establish the method for calculating the repurchase price of a share so that it was fair and consistent with the situation on the market concerned. To that end, account should have been taken of Ventspils nafta’s actual total assets and not the amount of assets indicated in its consolidated annual report, which includes the assets and liabilities of all its subsidiaries, including holdings of minority shareholders in those subsidiaries, which are neither assets nor liabilities of Ventspils nafta. The applicant in the main proceedings concluded that, in the contested decision, the Financial Markets Commission had unjustifiably increased Ventspils nafta’s share price by taking into consideration assets which did not belong to that company.
The Financial Markets Commission stated that it had relied on IFRS 10, reproduced in Regulation No 1254/2012, which lays down the principles relating to the preparation of consolidated annual accounts in cases where one company controls one or more other companies and of which paragraph 22 provides that a non-controlling interest must be indicated in consolidated financial statements within ‘equity’. It submitted that the amount of assets indicated in those financial statements did not make it possible to determine what portion of the assets was held by majority shareholders and what portion was held by minority shareholders. It inferred from this that it would have been contrary to the objective of Article 74 of the FITL to deduct non-controlling interests from Ventspils nafta’s assets, since determining the price per share using the total value of that company’s assets allowed that price to be set as close as possible to the share’s actual cash value.
By judgment of 10 March 2017, the Administratīvā apgabaltiesa (Regional Administrative Court) upheld in part the application lodged by the applicant in the main proceedings, declared the contested decision unlawful and ordered the Financial Markets Commission to pay compensation to the applicant in the main proceedings in the amount of 50% of the damage suffered as a result of that decision.
The Administratīvā apgabaltiesa (Regional Administrative Court) observed that Article 74(1)(3) of the FITL did not explain the concepts of ‘total assets’ and ‘net assets’ which it used. It pointed out that this matter had not been discussed in 2006 when the Latvian legislature had imposed the requirement, in respect of that provision, to use data from consolidated annual accounts to determine the price of shares. It observed that, although Article 74(1) of the FITL was not drafted in such a way that the methods referred to in subparagraphs 2 and 3 thereof could be used only in exceptional circumstances, such use could result from the fact that the Latvian share market was extremely limited.
It considered that objective valuation criteria must be used when calculating the price of shares and that Article 74(1)(3) of the FITL should be interpreted as meaning that the concept of ‘net assets’ does not include minority holdings.
Furthermore, the Administratīvā apgabaltiesa (Regional Administrative Court) held that, in accordance with Article 13(3) of the Law on compensation for damage, there were circumstances which justified a reduction in the compensation calculated, but without that reduction exceeding 50% of the amount claimed.
The Financial Markets Commission and the applicant in the main proceedings each brought an application for review against the judgment of the Administratīvā apgabaltiesa (Regional Administrative Court) of 10 March 2017 before the Augstākā tiesa (Senāts) (Supreme Court, Latvia).
In the view of the Financial Markets Commission, the Administratīvā apgabaltiesa (Regional Administrative Court) did not take account of a number of circumstances which precluded its interpretation of Article 74(1)(3) of the FITL. Thus, the requirement to include data from the consolidated annual accounts when calculating the share repurchase price is one of the amendments to the FITL adopted to transpose Directive 2004/25 into Latvian law.
The Financial Markets Commission contends that the Administratīvā apgabaltiesa (Regional Administrative Court) interpreted Article 74(1)(3) of the FITL in a manner contrary to the primary objective of Directive 2004/25, which is to protect the interests of minority shareholders in the process of determining the price of repurchased shares. That commission states that, by including the holdings of minority shareholders in Ventspils nafta’s subsidiaries when calculating the repurchase price for that company’s shares, it complied with the objective of Directive 2004/25 and calculated that price in accordance with the second subparagraph of Article 5(4) of that directive, that is to say, on the basis of ‘objective valuation criteria generally used in financial analysis’.
The applicant in the main proceedings seeks to have set aside the judgment of the Administratīvā apgabaltiesa (Regional Administrative Court) in so far as that court partially dismissed its claim for compensation for the damage suffered as a result of the contested decision. It submits that Article 13(3)(3) of the Law on compensation for damage makes it possible to redress all the damage suffered and that to allow, in the absence of special circumstances, a reduction in compensation of up to 50% of that damage may lead to situations in which the public authorities deal less strictly with difficult questions of interpretation of that law.
The referring court submits that, in order to interpret Article 74(1)(3) of the FITL correctly, it must be determined whether the method laid down by that provision for calculating the price per share is an equitable method of setting the price for the purposes of Directive 2004/25.
It asks whether the inclusion of minority holdings in net assets, which serve as the basis for calculating the repurchase price per share, leads to an equitable price being determined, within the meaning of that directive, and whether that inclusion is, consequently, consistent with that directive’s objectives.
It recalls that the Court has held that the Member States have a degree of discretion in defining the circumstances in which their supervisory authorities may adjust the repurchase price per share, on condition, however, that those circumstances are clearly determined. It asks whether the method for calculating net assets set out in Article 74(1)(3) of the FITL satisfies that condition, noting that the concepts of ‘total assets’ and ‘net assets’ are not explained either in that provision or in any other provision of that law.
The referring court entertains doubts as to whether Article 74(1)(3) and Article 74(2) of the FITL – which do not state clearly whether, for the purposes of calculating the repurchase price per share, net assets must also include minority holdings – are in conformity with the second subparagraph of Article 5(4) of Directive 2004/25.
Finally, the referring court is uncertain whether Article 13(3) of the Law on compensation for damage is compatible with the fundamental principles of EU law, and more specifically with the principle of effectiveness, having regard to the fact that, under that provision, the amount of compensation may be reduced without limit where the damage suffered exceeds EUR 1422872. It also asks whether all the conditions for the State to be rendered liable are satisfied, and in particular whether the applicable rules of Directive 2004/25 confer rights on individuals.
In those circumstances, the Augstākā tiesa (Senāts) (Supreme Court) decided to stay the proceedings and to refer the following questions to the Court of Justice for a preliminary ruling:
‘(1)
Is national legislation which provides that the share price for a mandatory buyback offer is to be calculated by dividing the net assets of the offeree company (including non-controlling (minor) interests) between the number of shares issued contrary to the correct application of Article 5 of [Directive 2004/25]?
(2)
If the first question is answered in the negative, that is to say, to the effect that the net assets of the offeree company do not have to include non-controlling or minority interests, may a method of determining the share price be regarded as clearly determined, within the meaning of the second subparagraph of Article 5(4) of [Directive 2004/25], if it is necessary to apply a method of legal interpretation – teleological reduction – in order to understand it?
(3)
Is legislation providing that the highest price out of the following three variants must be used compatible with Article 5(4) of [Directive 2004/25], that is to say, compatible with the determination of an equitable price?
(a)
the price at which the offeror or persons acting in concert with the latter acquired the shares of the offeree company in the preceding 12 months. If the shares have been acquired at different prices, the purchase price is the highest purchase price for the shares over the last 12 months preceding the legal obligation to make a [buyback] offer;
(b)
the weighted average share price on the regulated market or on the multilateral trading facility via which the largest volume of the shares were traded during the last 12 months. The weighted average share price is to be calculated on the basis of the 12 months preceding the legal obligation to submit a buyback offer;
(c)
the share value calculated by dividing the net assets of the offeree company by the number of shares issued. Net assets are to be calculated by deducting the offeree company’s own shares and liabilities from its total assets. If the offeree company has shares with different nominal values, in order to calculate the share value, the net assets are to be divided by the percentage of each nominal share value in the share capital.
(4)
If the method of calculation laid down by national law, using the discretion granted to Member States by the second subparagraph of Article 5(4) of [Directive 2004/25], results in a higher price than that resulting from the application of the first subparagraph of Article 5(4), is it consistent with the objective of the Directive to always choose the higher price?
(5)
If damage is caused to an individual as a result of the incorrect application of EU law, may national law provide for the limitation of compensation for such damage if that limitation applies equally to damage suffered as a result of the incorrect application of national law and to damage suffered as a result of the incorrect application of EU law?
(6)
Do the provisions of [Directive 2004/25] that are applicable to the present case confer rights on individuals, that is to say, is the corresponding requirement for State liability met?’
Consideration of the questions referred
According to the referring court, the outcome of the main proceedings depends, in essence, on whether, first, Article 5(4) of Directive 2004/25 precludes the method of setting an equitable price specified by national legislation which provides that, for the purposes of a takeover bid, the value of a share is obtained by dividing the offeree company’s net assets, including minority/non-controlling holdings, by the number of shares issued. Second, it considers it necessary to obtain an answer as to whether that directive confers rights on individuals and whether EU law precludes national legislation which limits compensation for damage sustained as a result of the misapplication of that law.
As the various questions raised overlap in several respects, they should be regrouped in order to provide the referring court with the most precise answers possible.
The third and fourth questions
By its third and fourth questions, which will be examined together, the referring court asks whether Article 5(4) of Directive 2004/25 precludes national legislation which prescribes three methods for determining the equitable price at which the offeror must repurchase shares in a company, including the method resulting from the implementation of the first subparagraph of Article 5(4) of that directive, and which requires that the method which results in the highest price must always be selected.
As is clear from recital 9 of Directive 2004/25, its objective is to protect the interests of holders of the securities of companies the control of which is acquired by a natural or legal person and it seeks, in that perspective, to guarantee clarity and transparency of the rules in respect of takeover bids (judgment of 20 July 2017, Marco Tronchetti Provera and Others,
C‑206/16
,
EU:C:2017:572
, paragraph
).
To that end, in accordance with Article 1(1), that directive lays down measures for the coordination of the laws of Member States relating to takeover bids for the securities of companies governed by the laws of those States, where all or some of those securities are admitted to trading on a regulated market (judgment of 20 July 2017, Marco Tronchetti Provera and Others,
C‑206/16
,
EU:C:2017:572
, paragraph
).
Article 3(1) of that directive lays down the guiding principles, naming them ‘general principles’, that must be complied with in the implementation of the directive, including the principle that if a person acquires control of a company, the other holders of securities must be protected (judgment of 20 July 2017, Marco Tronchetti Provera and Others,
C‑206/16
,
EU:C:2017:572
, paragraph
).
With a view to ensuring compliance with those principles, Article 3(2)(a) and (b) of Directive 2004/25 provides that Member States, first, must ensure that the minimal requirements laid down by that directive are observed and, second, may lay down additional conditions and provisions more stringent than those laid down by the directive for the regulation of bids (judgment of 20 July 2017, Marco Tronchetti Provera and Others,
C‑206/16
,
EU:C:2017:572
, paragraph
).
Under the heading ‘Protection of minority shareholders, the mandatory bid and the equitable price’, Article 5 of that directive lays down, with a view to protecting the interests of the holders of securities, essentially two rules that are mandatory for Member States and another that they may choose to apply (judgment of 20 July 2017, Marco Tronchetti Provera and Others,
C‑206/16
,
EU:C:2017:572
, paragraph
).
First of all, Article 5(1) of Directive 2004/25 lays down the principle of the mandatory bid for the holdings of securities in a given company. It provides that where a natural or legal person, as a result of his or her own acquisition or the acquisition by persons acting in concert with him or her, holds securities of a company falling within the scope of application of that directive which, added to any existing holdings of those securities of his or hers and the holdings of those securities of persons acting in concert with him or her, directly or indirectly give him or her a specified percentage of voting rights in that company, giving him or her control of that company, Member States must ensure that such a person is required to make a bid as a means of protecting the minority shareholders of that company, and that bid is to be addressed to all the holders of those securities for all their holdings at the equitable price as defined in Article 5(4) of the directive (judgment of 20 July 2017, Marco Tronchetti Provera and Others,
C‑206/16
,
EU:C:2017:572
, paragraph
).
Next, also with a view to protecting minority shareholders in the company subject to the takeover bid, the first paragraph of Article 5(4) of Directive 2004/25 states that the equitable price is regarded as the highest price paid for the same securities by the offeror, or by persons acting in concert with him or her, during a period determined by the Member States of no less than 6 months and no more than 12 months before the bid referred to in Article 5(1) of that directive ((judgment of 20 July 2017, Marco Tronchetti Provera and Others,
C‑206/16
,
EU:C:2017:572
, paragraph
).
Finally, the second sentence of Article 5(4) of Directive 2004/25 provides that, subject to compliance with the principles set out in Article 3(1), the Member States may authorise their supervisory authorities, referred to in Article 4 of the directive, to adjust the equitable price in circumstances and in accordance with criteria that are clearly determined. To that end, Member States may, first, draw up a list of circumstances in which the highest price may be adjusted either upwards or downwards, and, second, determine the criteria to be applied in such cases, it being specified that those circumstances and criteria must be clearly determined. Examples of such circumstances and such criteria are mentioned in the second subparagraph of Article 5(4) of the directive (judgment of 20 July 2017, Marco Tronchetti Provera and Others,
C‑206/16
,
EU:C:2017:572
, paragraph
).
Thus, for the purposes of setting the equitable price of securities which are the subject of a takeover bid, the first subparagraph of Article 5(4) of Directive 2004/25 lays down a method which, according to recital 9 thereof, reflects a common definition within the European Union.
On that point, the scheme of Article 5(4) of that directive dictates that this method of setting the equitable price is the only permissible method in that respect. The second subparagraph of Article 5(4) of that directive provides that the equitable price, as provided for in the first subparagraph of Article 5(4) of that directive, can be adjusted if Member States decide to exercise that power.
Consequently, it is only by virtue of that power to adjust the equitable price of securities which are the subject of a takeover bid that the Member States may authorise their supervisory authorities to determine the price at which those securities must be sold, using different methods from that prescribed in the first subparagraph of Article 5(4) of Directive 2004/25.
However, where national legislation provides that the equitable price must be determined using a number of methods, one of which reproduces the method prescribed in the first subparagraph of Article 5(4) of that directive, it may, under certain conditions, be considered that the other methods envisaged implement the power to adjust the equitable price provided for in the second subparagraph of Article 5(4) of that directive.
The conditions to be met in that regard are those which are apparent from the very wording of the provision in question.
First, methods of setting the equitable price that are different from the method prescribed in the first subparagraph of Article 5(4) of Directive 2004/25 must be applied by the supervisory authorities established by the Member States and in compliance with the general principles set out in Article 3(1) of that directive. Second, those methods must be implemented ‘in circumstances and in accordance with criteria that are clearly determined’.
On that point, it is appropriate to recall the case-law according to which all Member States must reproduce the rules of Directive 2004/25 within a clear, precise and transparent framework providing for mandatory legal provisions in the field concerned if they are to comply with both the principle of legal certainty and the need to secure the full implementation of directives, in law and not only in fact (see, to that effect, judgment of 20 July 2017, Marco Tronchetti Provera and Others,
C‑206/16
,
EU:C:2017:572
, paragraph
).
Member States are therefore required to ensure, by the legal instrument of their choice, that the circumstances and criteria on the basis of which the equitable price is adjusted are ‘clearly determined’ within the meaning of the second subparagraph of Article 5(4) of Directive 2004/25.
It is for the national court to determine whether the FITL – read, if appropriate, in the light of the reasons for that law – meets those requirements.
Finally, it cannot be ruled out that, in a particular circumstance, the adjustment of the equitable price will always result in a higher price being set than that resulting from the application of the first subparagraph of Article 5(4) of Directive 2004/25.
Moreover, the second subparagraph of Article 5(4) of that directive confirms that possibility, since it provides, in respect of the list of clearly determined circumstances which may be drawn up by the Member State concerned, that the highest price may be adjusted upwards or downwards. Thus, a clearly determined circumstance, for the purposes of that provision, may always lead to a price being set that is higher than the equitable price, as is shown by the examples cited in that provision, in particular where the equitable price, as provided for in the first subparagraph of Article 5(4) of that directive, has been set by an agreement between the purchaser and a seller.
Consequently, the answer to the third and fourth questions referred is that Article 5(4) of Directive 2004/25 does not preclude national legislation which prescribes three methods for determining the equitable price at which the offeror must repurchase shares in a company, including the method resulting from the implementation of the first subparagraph of Article 5(4) of that directive, and which requires that the method which results in the highest price must always be selected, on condition that the methods of setting the equitable price other than the method resulting from the implementation of the first subparagraph of Article 5(4) are applied by the supervisory authority in compliance with the general principles set out in Article 3(1) of Directive 2004/25 and in circumstances and in accordance with criteria that are determined by a clear, precise and transparent legal framework.
The first and second questions
By its first and second questions, which will be examined together, the referring court asks whether the second subparagraph of Article 5(4) of Directive 2004/25 precludes national legislation which provides that, for the purposes of a takeover bid, the value of a share is obtained by dividing the offeree company’s net assets, including minority/non-controlling holdings, by the number of shares issued, in so far as that is not a method of setting the share price that can be considered as satisfying ‘clearly determined’ criteria within the meaning of that provision.
In the first place, it should be noted that, by the contested decision, the Financial Markets Commission authorised the applicant in the main proceedings to make a mandatory bid for the offeree company’s shares on the basis of the method of setting the share price prescribed in Article 74(1)(3) of the FITL, which provides that the share value is to be calculated by dividing the offeree company’s net assets by the number of shares issued. Under Article 74(2) of the FITL, data that come from the offeree company’s consolidated annual report, if it prepares one, are to be used for that purpose.
It should also be noted, first, that Article 14(1) of the Law on consolidated annual accounts provides that consolidated annual accounts are the result of combining the annual accounts of the group’s parent and those of the subsidiaries concerned and, second, that Article 21 of that law states that the portion of the equity of consolidated subsidiaries corresponding to shares held by minority shareholders is to be indicated in a separate item within equity, entitled ‘Interests of minority shareholders’.
Thus, for the purposes of determining the price of shares in the offeree company, in the contested decision, the Financial Markets Commission included, among that company’s net assets, shares held by minority shareholders in its subsidiaries, that is to say, shares which the offeree company does not own.
In the second place, as is apparent from the considerations set out in paragraph 45 above, it should be recalled that the second subparagraph of Article 5(4) of Directive 2004/25 provides that, subject to compliance with the principles set out in Article 3(1), Member States may authorise their supervisory authorities, referred to in Article 4 of that directive, to adjust the equitable price in circumstances and in accordance with criteria that are clearly determined (judgment of 20 July 2017, Marco Tronchetti Provera and Others,
C‑206/16
,
EU:C:2017:572
, paragraph
).
The second subparagraph of Article 5(4) of Directive 2004/25 states, moreover, that, where Member States provide that their supervisory authorities may adjust the equitable price, they may define the criteria to be used in that regard, citing by way of example the average market value over a particular period, the break-up value of the company or other objective valuation criteria generally used in financial analysis.
In the third place, it should be borne in mind that both the principle of legal certainty and the need to secure the full implementation of directives require the rules of Directive 2004/25 to be reproduced, as stated in paragraph 52 above, within a clear, precise and transparent framework providing for mandatory legal provisions (see, to that effect, judgment of 20 July 2017, Marco Tronchetti Provera and Others,
C‑206/16
,
EU:C:2017:572
, paragraph
).
It is in the light of those principles that it must be ascertained whether the pricing method which includes, among the net assets of the offeree company in a takeover bid, shares held by minority shareholders in that company’s subsidiaries, sets out ‘clearly determined’ criteria, within the meaning of the second subparagraph of Article 5(4) of Directive 2004/25.
First, as the Advocate General stated in point 69 of her Opinion, the discretion which that provision affords to Member States, in the event of an adjustment of the equitable price, to set criteria for determining the price of the securities which are the subject of a mandatory bid is limited by the objective of Article 5(4) of Directive 2004/25 as a whole, which is to identify the equitable price of those securities.
To that end, as the Advocate General observed in point 71 of her Opinion, Member States may prescribe any valuation criterion recognised in financial analysis which makes it possible to establish the actual economic value of a holding in the offeree company.
On that point, IFRS 10, incorporated in EU law in Regulation No 1254/2012, takes into consideration all the assets of the parent of a group and the assets of its subsidiaries, irrespective of the extent of the parent’s holdings in those subsidiaries. It follows that the net assets of such a parent are determined taking into account shares held by minority shareholders in its subsidiaries, which are defined in Appendix A to the part of the Annex to Regulation No 1254/2012 relating to IFRS 10, under the term ‘non-controlling interest’, as relating to the ‘equity in a subsidiary not attributable, directly or indirectly, to a parent’.
The international financial reporting standards referred to in Regulation No 1254/2012 concern the provision of information, the objective of IFRS 10 being, according to paragraph 1 of the part of the annex to that regulation relating to that standard, ‘to establish principles for the presentation and preparation of consolidated financial statements when an entity controls one or more other entities’. In that regard, the presentation of non-controlling interests ensures that third parties are fully informed as regards the scope of the group of companies and the extent of the control exercised by the parent over its subsidiaries.
Thus, the identification and the number of shares held by minority shareholders in the capital of the subsidiaries of a parent of a group of companies may be useful pieces of information in financial analysis.
As regards the determination of the value of the parent’s shares, it is for the referring court, when ascertaining whether that valuation method is an objective valuation criterion generally used in financial analysis, to pay particular attention to the fact that such a method requires account to be taken of holdings in the parent’s subsidiaries that do not belong to the parent, as is apparent from paragraphs 68 and 69 above.
Second, any method of determining the equitable price, resulting from the discretion to adjust that price provided for in the second subparagraph of Article 5(4) of Directive 2004/25, must be inferred in a sufficiently clear, precise and foreseeable manner from the legal framework prescribing it, which must also be clear, precise and transparent (see, to that effect, judgment of 20 July 2017, Marco Tronchetti Provera and Others,
C‑206/16
,
EU:C:2017:572
, paragraph
).
In that regard, it should be noted that it is apparent from the documents before the Court that, first, Article 74(1)(3) of the FITL does not define the concept of ‘net assets’, which it uses as a factor in the method of setting the equitable price prescribed by that provision, and, second, although Article 21 of the Law on consolidated annual accounts provides that the portion of the equity of consolidated subsidiaries corresponding to shares held by minority shareholders is to be indicated in a separate item within equity, entitled ‘Interests of minority shareholders’, that article does not refer to the net assets of the parent of a group of companies.
In view of those facts, it is for the referring court to determine whether Article 74(1)(3) of the FITL must be interpreted as meaning that the concept of ‘net assets’ may be understood in a sufficiently clear, precise and foreseeable manner as including, in the case of a parent of a group of companies that draws up a consolidated annual report, holdings of minority shareholders in that parent’s subsidiaries.
Moreover, it must be borne in mind that the requirement for national law to be interpreted in conformity with European Union law requires that the referring court not only consider the whole body of rules of national law but also apply methods of interpretation that are recognised by those rules in order to interpret it, so far as possible, in the light of the wording and the purpose of the directive concerned in order to achieve the result sought by the directive and consequently comply with the third paragraph of Article 288 TFEU (see, to that effect, judgment of 19 January 2010, Kücükdeveci,
C‑555/07
,
EU:C:2010:21
, paragraph
).
It is in the light of those principles that it is for the referring court to determine whether it is able to adopt the interpretation of Article 74(1)(3) of the FITL, referred to in paragraph 74 above, or whether, as appears from the request for a preliminary ruling, it must adopt a restrictive interpretation of that provision from a teleological perspective, excluding the holdings of minority shareholders from being taken into consideration as net assets of the offeree company in a takeover bid in order to determine the price of that company’s shares.
Consequently, the answer to the first and second questions referred is that the second subparagraph of Article 5(4) of Directive 2004/25 must be interpreted as precluding national legislation which provides that, for the purposes of a takeover bid, the value of a share is obtained by dividing the offeree company’s net assets, including minority/non-controlling holdings, by the number of shares issued, unless that method of setting the share price is based on an objective valuation criterion generally used in financial analysis which can be considered ‘clearly determined’ within the meaning of that provision, which it is for the referring court to ascertain.
The sixth question
By its sixth question, the referring court asks whether Directive 2004/25 confers, in the context of the takeover bid procedure, rights on the offeror which may be enforced in an action for damages against the State.
It should be noted that, concerning the conditions rendering the State liable to make reparation for loss and damage caused to individuals as a result of breaches of EU law for which it is responsible, the Court has repeatedly held that individuals who have been harmed have a right to reparation if three conditions are met: the rule of EU law infringed must be intended to confer rights on them; the breach of that rule must be sufficiently serious; and there must be a direct causal link between that breach and the loss or damage sustained by the individuals (judgment of 28 July 2016, Tomášová,
C‑168/15
,
EU:C:2016:602
, paragraph
and the case-law cited).
It also follows from settled case-law that, in principle, it is for the national courts to apply the conditions for establishing the liability of Member States for damage caused to individuals by infringements of EU law, in accordance with the guidelines laid down by the Court for the application of those conditions (judgment of 4 October 2018, Kantarev,
C‑571/16
,
EU:C:2018:807
, paragraph
and the case-law cited).
In the first place, as to whether Article 5(4) of Directive 2004/25 has direct effect, it must be pointed out that such a condition is not required by the case-law for the purposes of holding a Member State liable for a breach of EU law, since the condition required by the case-law is that such a provision confers rights on individuals (see, to that effect, judgment of 4 October 2018, Kantarev,
C‑571/16
,
EU:C:2018:807
, paragraphs
and
and the case-law cited).
In the second place, it is true that Article 4(6) of Directive 2004/25 states, inter alia, that that directive does not affect the power of the Member States, first, to regulate whether and under which circumstances parties to a bid are entitled to bring administrative or judicial proceedings, in particular the power which courts may have in a Member State to decline to hear legal proceedings and to decide whether or not such proceedings affect the outcome of a bid and, second, to determine the legal position concerning the liability of supervisory authorities or concerning litigation between the parties to a bid.
However, the third sentence of Article 4(6) of Directive 2004/25, regarding the legal position concerning the liability of supervisory authorities, does not mean that the Member States may adopt provisions prohibiting the parties to a takeover bid from bringing an action for damages against the State for a serious breach of EU law in connection with such a bid, for two reasons.
First, that third sentence merely states that Directive 2004/25 does not affect the power of the Member States to determine the legal position concerning the liability of supervisory authorities, but does not in any event allow the Member States, as in the first sentence of Article 4(6) of that directive, not to bring administrative or judicial proceedings against the parties to a takeover bid.
Second, it should be remembered that the full effectiveness of EU law and effective protection of the rights which individuals derive from it may, where appropriate, be ensured by the principle of State liability for loss or damage caused to individuals as a result of breaches of EU law for which the State can be held responsible, as that principle is inherent in the system of the treaties on which the European Union is based, whichever public authority is responsible for the breach (judgment of 19 December 2019, Deutsche Umwelthilfe,
C‑752/18
,
EU:C:2019:1114
, paragraphs
and
and the case-law cited).
In the third place, it is true that the main objective of Directive 2004/25 is to protect the minority shareholders of an offeree company in a takeover bid.
To that end, first, Article 5(1) of Directive 2004/25 provides that a person who holds securities of a company which, added to any existing holdings of those securities of his or hers and the holdings of those securities of persons acting in concert with him or her, directly or indirectly give him or her a specified percentage of voting rights in that company, giving him or her control of that company, is required to make a bid as a means of protecting that company’s minority shareholders. Second, the first subparagraph of Article 5(4) of that directive states that a person who is thus required to make a bid for minority shareholders’ securities must offer an equitable price, equivalent to the highest price paid for the same securities by him or her or by persons acting in concert with him or her over a period, to be determined by Member States, of not less than 6 months and not more than 12 months before the bid.
Nevertheless, the rule on setting an equitable price, laid down in Article 5(4) of Directive 2004/25, is just as much intended to protect the offeror in so far as it makes it possible to determine the maximum price which the offeror will have to pay to minority shareholders in a takeover bid, which is equivalent to what that offeror was willing to pay during the period preceding that bid, as the Advocate General observed in point 38 of her Opinion.
Furthermore, the power to adjust the equitable price provided for in the second subparagraph of Article 5(4) of that directive may also protect the offeror’s interests, in that that provision envisages the possibility that the equitable price may be adjusted downwards in certain circumstances determined by the Member States.
Thus, by having a direct effect on the legal situation of a person required to make a takeover bid for the securities of the offeree company’s minority shareholders, the first and second subparagraphs of Article 5(4) of Directive 2004/25 constitute a rule of EU law intended to confer rights on individuals, in this case the offeror.
Consequently, the answer to the sixth question referred is that Directive 2004/25 must be interpreted as conferring, in the context of the takeover procedure, rights on the offeror which may be enforced in an action for damages against the State.
The fifth question
By its fifth question, the referring court asks whether EU law must be interpreted as precluding national legislation which provides that, in a case where a Member State incurs liability for damage caused as a result of a breach of a rule of EU law by a decision of an administrative authority of that State, compensation for material damage resulting therefrom may be limited to 50% of the amount of that damage.
Article 13 of the Law on compensation for damage provides that, where the amount calculated pursuant to Article 12 of that law does not exceed EUR 142288, the material damage caused by a public authority is adequately compensated by an award of damages equivalent to 100% of that amount; where that amount is between EUR 142289 and EUR 1422872, compensation may be set at 50 to 100% of that amount; and where that amount is more than EUR 1422872, compensation may be set at less than 50% thereof.
Pursuant to that provision, the Administratīvā apgabaltiesa (Regional Administrative Court) limited the compensation for the damage suffered by the applicant in the main proceedings, which totalled more than EUR 1422872, to 50% of that amount.
Although, as is apparent from paragraph 82 above, Article 4(6) of Directive 2004/25 states that that directive does not affect the power of the Member States to determine the legal position concerning the liability of supervisory authorities or concerning litigation between the parties to a bid, it must underlined that the conditions for reparation of loss and damage laid down by national law cannot be less favourable than those relating to similar domestic claims (principle of equivalence) or such as in practice to make it impossible or excessively difficult to obtain reparation (principle of effectiveness) (judgment of 29 July 2019, Hochtief Solutions Magyarországi Fióktelepe,
C‑620/17
,
EU:C:2019:630
, paragraph
and the case-law cited).
As regards the principle of equivalence, it is apparent from the request for a preliminary ruling that the possibility of limiting the amount of compensation for material damage applies both in the event of a breach of Latvian law and in the event of a breach of EU law.
As regards the principle of effectiveness, under the Court’s case-law, reparation for loss or damage caused to individuals as a result of breaches of EU law must be commensurate with the loss or damage sustained so as to ensure effective protection for their rights (see, to that effect, judgment of 29 July 2019, Hochtief Solutions Magyarországi Fióktelepe,
C‑620/17
,
EU:C:2019:630
, paragraph
and the case-law cited).
As the Advocate General stated, in essence, in point 104 of her Opinion, a rule of national law under which, in the event that a Member State incurs liability for damage caused as a result of a breach of a rule of EU law by a decision of an administrative authority of that State, compensation for the material damage resulting therefrom, which may be precisely quantified, may be limited to 50% of the amount of that damage is not capable of satisfying the requirement for that damage to be adequately redressed.
It follows that such a rule of national law does not comply with the principle of effectiveness.
Consequently, the answer to the fifth question referred is that EU law must be interpreted as precluding national legislation which provides that, in a case where a Member State incurs liability for damage caused as a result of a breach of a rule of EU law by a decision of an administrative authority of that State, compensation for the material damage resulting therefrom may be limited to 50% of the amount of that damage.
Costs
Since these proceedings are, for the parties to the main proceedings, a step in the action pending before the national court, the decision on costs is a matter for that court. Costs incurred in submitting observations to the Court, other than the costs of those parties, are not recoverable.

On those grounds, the Court (Fourth Chamber) hereby rules:

1.
Article 5(4) of Directive 2004/25 of the European Parliament and of the Council of 21 April 2004 on takeover bids must be interpreted as not precluding national legislation which prescribes three methods for determining the equitable price at which the offeror must repurchase shares in a company, including the method resulting from the implementation of the first subparagraph of Article 5(4) of that directive, and which requires that the method which results in the highest price must always be selected, on condition that the methods of setting the equitable price other than the method resulting from the implementation of the first subparagraph of Article 5(4) are applied by the supervisory authority in compliance with the general principles set out in Article 3(1) of Directive 2004/25, in circumstances and according to criteria determined by a clear, precise and transparent legal framework.

2.
The second subparagraph of Article 5(4) of Directive 2004/25 must be interpreted as precluding national legislation which provides that, for the purposes of a takeover bid, the value of a share is obtained by dividing the offeree company’s net assets, including minority/non-controlling holdings, by the number of shares issued, unless that method of setting the share price is based on an objective valuation criterion generally used in financial analysis which can be considered ‘clearly determined’ within the meaning of that provision, which it is for the referring court to ascertain.

3.
Directive 2004/25 must be interpreted as conferring, in the context of the takeover bid procedure, rights on the offeror which may be enforced in an action for damages against the State.

4.
EU law must be interpreted as precluding national legislation which provides that, in a case where a Member State incurs liability for damage caused as a result of a breach of a rule of EU law by a decision of an administrative authority of that State, compensation for the resulting material damage may be limited to 50% of the amount of that damage.

[Signatures]
(
*1
)	Language of the case: Latvian.