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COMMISSION
OFTHE
EUROPEAN COMMUNITIESCOM(82)38 final
Brussels,4thFebruary1982
FOROFFICIAL USEONLY
GeneralSecretariat
NEGOTIATIONS FORTHEACCESSION
OFPORTUGAL TOTHECOMMUNITY
CAPITAL MOVEMENTS
(Communication fromtheCommission totheCouncil)
C0M(82)38final

INTRODUCTION
Atthe17thmeetingoftheConferenceatDeputylevel,the
PortugueseandCommunitydelegationsnotedtheiragreementinprinciple
onsolutionstoPortugal'sproblemswithregardtoadoptionofthe
acquiscommunautaire onCapitalMovements.
Theagreementinprinciplewasmadesubjecttoagreementbeing
reachedonthedurationofandinsomecasesthedetailedarrangements
forthetemporaryderogations envisagedforPortugal.
Havingregardtothespecificnatureoftheproblemsinvolved,the
Commissionisnowreadytoputproposalsregardingtheperiodsof
application anddetailedarrangements inrespectofwhichagreement
hasnotbeenreached.
TheCommissionalsointendstoadvancethenegotiations by
formulatingproposalsinresponsetoPortugueserequestsfortemporary
derogationsortransitional measuresinrespectofwhichnoagreement
hasyetbeenreached.
1CONF-P//82

I.MAINPOINTSOFTHENEGOTIATIONS ONCAPITALMOVEMENTS
1.Innegotiations ontheCapitalMovementsChapter,thePortuguese
delegation^agreedtoaccepttheacquiscommunautaire ,togetherwithany-
transitional measuresandtemporaryderogations whichmight "beagreed
withaviewtofacilitating Portugalfsharmoniousintegrationintothe
Community,thedetailedarrangements ofwhichwillhavetobesetdown
intheinstruments ofaccession.
2.TheConferencenotedthePortuguesedelegation'sagreementto
liberalize onaccessionallcurrentpaymentsandalloperationsrelating
2toinvisibletransactions ,exceptfortouristspending,forwhicha
transitional measurehasbeenagreedon.Thedetailedarrangements
forapplyingthemeasurehavebeenworkedoutjointlybythePortuguese
andCommunitydelegations ,butthedurationhasyettobeestablished .
2
3.TheConferencefurthernotedthatPortugalwouldliberalize from
thedateofaccessionallcapitalmovementsspecifiedinListsAandB
oftheDirectiveof11MayI960,assupplemented andamendedbythe
Directiveof18December1962,andnotsubjecttospecifictransitional
measuresortemporaryderogationsundertheinstrumentsofaccession^".
4.Agreementontheprincipleoftemporaryderogations wasrecorded
inrespectofdirectinvestments intheMemberStatesbyresidentsof
Portugal(ListAIB),
Agreementontheprincipleoftransitional measureshasalsobeen
reachedinrespectofthefollowingoperations :
(i)RealestateinvestmentsintheCommunitybyresidentsofPortugal;
acquisitionofrealestate(ListAVBl).
(ii)Acquisitionbyresidentsofforeignsecuritiesdealtinona
stockexchange;acquisition ofsharesandothersecuritiesof
aparticipating nature(ListBIVBl);acquisitionofbonds
(ListBIVB3).
Thetwodelegationsalsoreachedagreementontheprincipleofand
detailedarrangements forthetransitional measurecoveringpersonal
capitalmovements(ListAXCDEFH).
CONF-P/l/82
2CONF-P//82

-2-
Thenegotiations havenotsofarproducedagreementregardingthe
durationandinsomecasesthedetailedarrangements forapplication of
thetransitional measuresandtemporaryderogations.
Thetwodelegations havenotyetcometoanagreementinprinciple
onPortugal'srequestsfortemporaryderogationsortransitional
measuresinrespectofthefollowingoperations:
(i)DirectinvestmentsinPortugalbynon-residents (ListAIA).
(ii)Repatriation oftheproceedsoftheliquidationofdirect
investmentsinPortugal(ListAIIA),
(iii)Investments "byCommunityresidentsinrealestateinPortugal
-acquisitionofrealestate(ListAVAl).
(iv)Repatriationoftheproceedsofliquidationofrealestate
(ListAVA2).
II.PROPOSALS REGARDING REQUESTSFORTEMPORARY DEROGATIONS ORTRANSITIONAL
MEASURESINRESPECTOFWHICHAGREEMENT INPRINCIPLE HASNOTYETBEENREACHED
A.DirectinvestmentsinPortugalbynon-residents (ListAIA)
5.Inastatementmadeon14January1982^thePortuguesedelegation
requestedatransitional measuretoenableitprogressively toliberalize
directinvestments madeinPortugalbyresidentsoftheMemberStates,
overafive-yearperiodasfollows:
(i)Directinvestmentsnotexceeding,foranygivenproject,an
amounttobefixed,wouldbeliberalizedinthefirstyear
afteraccession.
(ii)Theceilingwouldberaisedeachyearbyatleast20$ofthe
amountfixedforthefirstyear.
(iii)Directinvestmentswouldbewhollyliberalizedonexpiryofthe
transitional measure.
CONF-P/l/82

Atthe14thmeetingoftheConferenceatDeputyLevel*the!
Communityhadalreadysaid^1*,inresponsetoPortugal'srequest;fora
temporaryderogationinrespectoftheseoperations,thatthematterdid
notcomewithintheCapitalMovementschapter.
ThePortugueseauthoritiesoriginally askedforafive-year
ThûU •arâir-'.temporaryderogationtocoveralldirectforeigninvestmentisTheyare&
nowaskingforatransitional measureintheformofphasedliberalization
ofinvestments exceeding acertainamount.Theyintend^ire-practice ,^,
however-tocontinueafteraccessiontoapplytheForeignInvestment'vv
Code-whichconsiderably restrictstheinwardflowofcapitaj.^%p;^^8 ,^^
Inresponsetothisposition,theCommunityobservedvat
the12thmeetingthat: 11v ;VMjl
"Portuguese LawNo.46/77onthedefinitionofthe.publicandprivatek;
sectorslimitsthescopefordirectinvestmentsotelyto.thosesectors •
whicharenotreservedforpubliccapital",'
andthat:Λ:-v.i-«U',;.'^'!îU;<rk,£ ••••%V.£J»v-'
• '/a&Vv'-
·<■■· ·\,ν"thePortuguese ForeignInvestment Codedealswithmatters^relatingta;:M
I•-Si--1'..•'.«
-i^v1 .'
capitalmovements,therightofestablishment ,non-discrimibjrtiorv^n '%'&<
financialmatters(Article221oftheEECTreaty)andtheindustrial
policyappliedinPortugal."
..(1).....-.....Atthe14thmeeting,theCommunityconfirmeditsviews
inthefollowing manner:
"TheCommunitycertainlyunderstands thatintroducing aneffective
industrialpolicyinPortugalcanhelptoimprovethestructureofpro­
ductionandthecountry'sindustrialfabric.However,itwouldstress
thatanyindustrialpolicymustbeframedinawaywhichdoesnotdis­
criminateagainstresidentsofMemberStates,andnotbyimposing
exchangecontroloncapitalenteringPortugalfromtheCommunity."
I
./.'
C1)CONF-P/22/81
(2)CONF-P/7/81CONF-P/22/81
(2)
CONF-P/2/81

Ineffect,thePortuguese requestwouldresultinthe
■'■'Yv■■
submissionofthatpartofanydirectinvestmentofCommunityorigin .'
inPortugalwhichexceededtheceilingtoadiscretionary and'discrimi-1
".'J-VVn 'V'■■.
natorypowerofdecisionwhichwouldimplyalimitationoftheright •;
».'A..j"*: ■'
ofestablishment . J-*1'*'.>:
(1)Inthenegotiations withSpain,theCommunity,;following t
■■•■?..?•* i
theproposaloftheCommission,hasadoptedthepositionthat'restrictions
ondirectinvestments byCommunityresidentsintheacceding .country,-are:i;%
nottobetreatedintheCapitalMovementsChapter,but'inthat'ofRight.....
ofEstablishment .
•*?-*:
Asisthecaseinthenegotiations withSpain>^,this particular sI
requestbyPortugalshouldbeansweredundertheRightofEstablishment
■'V'';'::■'■ >' •1f*>;'y-.■*■chapter,andtheCommissionwillformulate aresponsein*duecourseinits^
proposals ,onthatchapter. ' .•
;ι
Repatriation oftheproceedsoftheliquidation ofdirectinvestments \
inPortugal(ListAIIA) ".'J-fi *S
p-'i-'i■'V
Inastatementon14January,thePortuguesedélégation v Inastatement on14January,thePortuguesedelegation
confirmedthatitwasaskingfor"atemporaryderogationinordertodefer
forfiveyearstheliberalization ofthetransferoftheproceedsofliqui­
dationofdirectinvestments madebyresidentsoftheMemberStatesbefore
1January1981.
Whilethederogationisineffect,thespecialrulesgoverning
freedomtotransfertheproceedsoftheliquidation ofinvestments under
agreements betweenPortugalandanyMemberStatewillbeappliedinanon-
discriminatory manner".
Therequestforaderogation meansthat:
1)repatriation oftheproceedsoftheliquidation ofdirectinvestments
madeinPortugalbyresidentsoftheCommunityfrom1January1981
onwardswillbeliberalized fromthedateofaccession;
./.
C0NF-E/42/80
C2>C0NF-P/1/82

-5-
2)therepatriation oftheproceeds oftheLiquidation ofdirect invest­
ments made inPortugal byresidents oftheCommunity before 1January
1981 will beLiberalized atthe Latest five years after thedate on
which they were made and inanyevent by1January 1986 .
12. The Commission proposes that this request for atemporary
derogation beaccepted ,since thescope oftherestriction envisaged
would bevery limited andtheperiod isnotunreasonable .
However ,theCommission feels that asanadded safeguard ,
the clause inArticle 50ofthe Act ofAccession ofGreece should be
used inthis connection (itisincorporated inthePortuguese request ,
dated 14January 1982 ).
Itwould read asfollows :"During theperiod ofapplication
ofthis temporary derogation ,thegeneral orspecial facilities relating
tothefree transfer oftheproceeds ofthe liquidation ofthese invest­
ments andexisting byvirtue ofPortuguese arrangements orofagreements
governing relations between thePortuguese Republic andanypresent Member
State shall bemaintained andapplied inanon-discriminatory manner ."
C.Investments inreal estate inPortugal byresidents oftheCommunity
-acquisition ofreal estate (List AVA1)
(1)13. Initsinitial statements thePortuguese delegation asked
for afive-year temporary derogation inrespect ofinvestments covered by
List AVA.
Initsstatement on1January 1982^*, itLowered itssights
andrequested only "atemporary derogation toenable ittodefer forfive
years the liberalization oftransfers for real estate investments inthe
purchase ofrural land orexisting buildings intended forhabitation .This
temporary derogation would notapply to :
-investments byCommunity residents 'who come within thecategory of
persons emigrating under thesystem offreedom ofmovement foremployed
orself-employed workers ; ,
m/m
C0NF-P /42/80 (11th meeting )andC0NF-P /7/81(13th meeting )
C0NF-P /1/82

-6-
-investments connectedwiththeexerciseofrightofestablishment by
self-employed workersresidentintheCommunitywhoemigrateto
Portugal."
(1)14. Atthe14thmeeting,theCommunitysaiditwasprepared
toconsiderthepossibility ofdeferringtheliberalization oftransfers
forpurchasesofexistingbuildingsintendedforhabitation,subjectto
certainconditions andforaperiodwhichwouldhavetobeshort.This
temporaryderogationcouldnot,however,applytoCommunityresidentswho
camewithinthecategoryofpersonsemigratingunderthesystemoffreedom
ofmovementforemployedorself-employed workers.Norcoulditapplyto
realestateinvestments connectedwiththeexerciseofrightofestablish­
mentbyself-employed workersresidentintheCommunitywhoemigratedto
Portugal."
15. Itwouldappear,then,thatthePortuguesedelegation has
acceptedtheCommunityproposal,extendingitsscope,however,torural
land,atermwhichcoversbothfarminglandandbuildingland.
Intheaboveproposal,theCommunityexemptedbuilding
investments fromtherestriction,feelingthatconstruction inPortugal
ingeneral,andhouse-building inparticular,shouldbeencouraged,even
usingforeigncapital.Inthatcase,thepurchaseofbuildinglandby
residentsoftheCommunityshouldalsobeliberalized asfromaccession.
Theacquisition offarminglandbyresidentsoftheCommunity,
ontheotherhand,couldbedeferredbyvirtueofatemporaryderogation,
inthesamewayandforthesamereasonsjustifyingthetemporaryderogation
proposedinrespectofexistingbuildingsintendedforhabitation,provided,
asalreadynoted,thatthisdidnotaffecttherightofestablishment ofa
CommunitynationalwishingtofarminPortugal.
16. TheCommissiontherefpreproposesthattheofferofa
temporaryderogationbeextendedtocoverfarmland,thoughnotrural
landingeneral,onthesametermsasthosesetforexistingbuildings
intendedforhabitation (seepoint14above). ,./.
(1>C0NF-P/22/81

-7-
D.Repatriation oftheproceedsofliquidation ofinvestmentsinrealestate .
inPortugalbyCommunityresidents(ListAVA2)
(1)17. Atthe11thmeetingoftheConferenceatDeputylevel,
thePortugusesdelegationstatedthat"transfersoftheproceedsofliqui­
dationwillbeliberalized uponaccession,withtheexceptionoftransfers
ofcapitalgainsforoneyearafterthesale".
(2)Initsstatementon14January1982thePortuguese
delegationtookitspositionastagefurtherbyrequesting atransitional
measurewithaviewtotheprogressiveliberalization overafive-year
period,ontermstobedetermined,ofrepatriation oftheproceedsof
liquidation ofinvestments inrealestateinPortugalbyresidentsof
theMemberStates.
18. Atthe12thmeetingoftheConferenceatDeputylevel
theCommunityhadfeltunabletoaccedetoPortugal'srequestinits
originalform,namelyfortransfersofcapitalgainstoberestricted
foroneyear,asthe"capitalgains"conceptwaslikelytogiveriseto
difficulties ofinterpretation ,particularly astheterminologyvaries
fromonecountrytoanotherandthereisnopreciseCommunitydefinition.
19. WithregardtoPortugal'snewrequest,thepositiontobe
adoptedshouldbethesameasthatadoptedaboveinrespectofrepatri*
ationoftheproceedsofliquidation ofdirectinvestments madein
Portugal.
20. TheCommissionthereforeproposesthat:
1)repatriation oftheproceedsofliquidation ofrealestate
investments madeinPortugalbyCommunityresidentsbefore1January
1981shouldbeliberalizednotlaterthanfiveyearsfromthedate
oftheinvestment.
I
III.PROPOSALS ONTHEDURATION OFTRANSITIONAL MEASURES ANDTEMPORARY DEROGATIONS
21. Initsstatements,thePortuguesedelegationhasproposed
thatthedurationoftransitional andtemporaryderogations shouldbeas
follows: ./.
(1)C0NF-P/42/80
(2)C0NF-P/1/82
(3)C0NF-P/2/81

-8-
Expenditure ontourism(outflow)
Repatriation oftheproceedsofdirect
investments (outflow)5years
5years
(fromthedateof
theinvestment )
Directinvestments intheCommunity
(outflow)7years
Investments inrealestateinPortugal
(inflow) 5years
Repatriation oftheproceedsof
investments inrealestate(outflow)5years
Investments inrealestateinthe
Community (outflow) 7years
Personalcapitalmovements (outflow)5years
Acquisition offoreignsecurities (outflow)5years
22. Anumberofdifferentreasonsmaybeadvancedinsupportof
asufficiently longperiodtopermitthesmoothintegration ofPortugalinto
theCommunity.Theyincludethefollowing :
-thecountry'srelatively lowlevelofeconomicdevelopment andthe
undoubted weaknessofsmallandmedium-sized enterprises vis-a-vis
thepotentialcompetition fromlargeCommunityfirms;
-therelatively lowlevelofpurchasing powerofthePortuguese people,
whowouldbedefenceless againstunlimited andunmatchable offersto
purchasemadebyCommunityresidents;
-theriskofrapidanddestabilizing priceincreasesincertainsectors,
notablylandandbuildings,intheeventofuncontrolled adjustmentto
oralignment onCommunitypricelevels.
23. Againstthisbackground,thefive-yearperiodofapplication
proposedbythePortugueseauthorities forthemajorityofcaseswouldseem
reasonable .
envisagetemporaryderogations ortransitional measuresextendingovera
seven-yearperiod,asthePortugueseauthorities proposeinrespectof
twocategories ofoperations (seepoint21).Considering nowaperiodof
application ofsevenyearsamountsinfacttogranting alongerperiod,in
viewofthetimethatwillelapsebetweennowandaccession.Asolutionof
thiskindcouldobviously beconsideredonlyinexceptional cases.Atthepresentstageofthenegotiationsitisdifficultto
/.

-9-
24. ItmustalsobeborneinmindthatthePortugueseauthorities
willstillbefreetoadoptprogressive schedules,whereappropriate,within
themaximumperiodlaiddownforthetransitional measuresandtemporary
derogations agreed,inallcaseswheresuchprogressive schedulesarenot
alreadyspecified.
(1)TheCommission wouldalsopointoutthat,asitstatedin
October1980,themaximumdurationoftransitional measuresinthissector
shouldnotexceedthatadoptedforthecustomsunionintheindustrial sector.
Withregardtothecustomsunion,theCommission hasoptedforaperiodof
(2)fiveyears
Commission proposal
25. Inthelightoftheconsiderations setoutabove,theCom­
missionproposesthattheperiodofapplication ofthetemporaryderogations
andtransitional measuresagreedintheConference betweentheCommunities
andPortugalbesetatfiveyears.Thisperiodwillapplytoallcategories
ofoperations exceptrepatriation ofdirectinvestments (ListAIIA)and
investments inrealestate(ListAVA2).Thederogation wouldbefor
fiveyearsinthecaseofthesetwocategories ofoperations too,but
wouldrunfromthedateoftheinvestments .
26. Whenthetransitional measuresandtemporaryderogations expire,
allcurrentpayments,invisibletransactions andcapitalmovementssetout
inListsAandBoftheDirectiveof11May1960,assupplemented and
amendedbytheDirectiveof18December -1962,willbeliberalized .
27. Thisproposaloncapitalmovementsistotallywithoutprejudice
toanysolutionsthatmightbeadoptedinotherchaptersofthenegotiations .
Itconcerns acompletelyspecificsector.
IV.IMPLEMENTING ARRANGEMENTS FORTHETRANSITIONAL MEASURES ORTEMPORARY DERO­
GATIONSALREADYACCORDEDINPRINCIPLE
28. Atthe17thmeetingoftheConference atDeputylevel
theCommunitydelegation andthePortuguesedelegation reachedagreement on
implementing arrangements forthetemporaryderogations andtransitional
measures,exceptinthefollowing cases: ./.
(1)C0M(80)697finalof30October .1980
(2)C0M(80)652of30October1980
(3)C0NF-P/../82

-10-
(i) Investments inreal estate intheCommunity layresidents .
(ii)Acquisition "byresidents offoreign securities dealt inona
stock exchange .
A. Investments inreal estate inthe Community byresidents –acquisition
ofreal estate (listAVBl)
29. Forthis type ofoperation ,itshould bepointed outfirst ofall
that ,asalready agreed atthe17th meeting oftheConference atDeputy
level\anytemporary derogation ortransitional measure willapply
solely toinvestments inreal estate inaMember State :
(i)byresidents ofPortugal whodonotcome within thecategory of
persons emigrating under thesystem offreedom ofmovement for
employed orself-employed workers ;
(ii)byself–employed workers resident inPortugal whoemigrate ,
provided that theinvestments inquestion arenot connected with
their establishment .
30. Intheir statement atthe11th meeting oftheConference atDeputy
2level ,thePortuguese authorities hadreferred toaliberalization
ceiling forreal estate investments intheCommunity .Intheir
subsequent statements thePortuguese authorities have made nomention
ofaceiling but have referred toconditions tobedetermined ".
31• IntheActofAccession ofGreece ,thesolution adopted took the
form ofatemporary derogation ,setoutinArticle 5l(l )»asfollows :
"TheHellenic Republic maydefer until 31December 1985s
(a)theliberalization ofreal estate investments ,inapresent
Member State ,bypersons resident inGreece whodonot fall
within thecategory ofthose whoemigrate inthecontext of
freedom ofmovement forworkers andself–employed persons ;
(b)theliberalization ofreal 1estate investment ,inapresent
Member State ,byself-employed persons resident inGreece
who emigrate ,other than investments connected with their
establishment ."
CONF-P //82
2CONF-P /42/8O

-11-
32.TheCommissionthereforeconsidersthatthesolutiontobe
adoptedforPortugalshould "bethesameasthatembodiedintheAct
ofAccessionofGreece.Itdoesnotintendtolaydownstrictlythe
stagesinwhichliberalization istotakeplace.Itwouldbe
appropriatetogivethePortugueseauthorities somefreedomofaction
inthismatter,astheCommissionisawareoftheneedtopaygreat
attentiontoPortugal'sinternaleconomicobjectivesinthefieldsof
savingandinvestment,andtoensurethattoorapidaliberalization of
certainoperationswhichcouldhaveaspeculative dimensiondoesnot
createdifficulties ininternalfinancialchannelsorPortugal's
balanceofpayments.
33.Consequently ,theCommissionproposesthatthesamesolutionbe
adoptedforPortugalasforGreece,namelyatemporaryderogationto
allowliberalization oftheoperationsinquestiontobedeferredfor
fiveyears.
TheCommissionproposes,however,thatthissolutionbeaccompanied
byageneralclauseprovidingforrelaxationoftherestrictions ,tobe
insertedintheaccessioninstruments.Thisisbecausethepossibility
ofanimprovementinPortugal'sexternalbalanceofpaymentshastobe
borneinmind.Thisgeneralclausecouldbewordedonthelinesof
Article55oftheActofAccessionofGreece,asfollows:
"ThePortugueseRepublicwill,circumstances permitting,carry
outtheliberalization ofcapitalmovementsandinvisible
transactions coveredbytemporaryderogations ortransitional
measuresbeforetheexpiryofthetimelimitslaiddown."
B.Acquisition byresidentsofforeignsecuritiesdealtinonastock
exchange–acquisition ofsharesandothersecuritiesofaparticipatory
nature(ListBIVBl)andacquisitionofbonds(ListBIVB3)
34*Atthe17thmeetingoftheConferenceatDeputylevel,agreement
wasreachedonaninitialimplementing procedureforthetransitional
measurerelatingtothiscategoryofoperation^":fortransactionsin
securitiesissuedbytheEuropeanCoihmunities andtheEIB,Portugalwill
settheliberalization ceilingforsubscriptions forsuchsecuritiesat
15millionECUinthefirstyearafteraccessionandwillsubseauentl.y
raiseitatthebeginningofeachyearby20$inrelationtothatfixed
forthefirstyear.TheCommissionconsiders
CONF-P//82

thatthistreasureshouldapplyforfireyears,asproposedbythe
Portugueseauthorities.Attheendofthisperiod,acquisitions
"byresidentsofforeignsecuritiesdealtinonastockexchangewouldbe.
fullyliberalized.
Withregardtootheroperationsinvolvingforeignsecuritiesdealtinon
astockexchange,thepositionsetoutinpoint32shouldbeadopted,for
thesamereasons.
ThisisbecauseacoouxxtmustbetakenoftheConstraintsonthePortuguese
ι
economyinthematterofsavingandinvestment.Forthisreasonthe
CommissionproposesthatinthecaseofPortugalthesamederogation
shouldbeadopted,mutatismutandis,asthataccordedtoGreeoeinArticle53t
asfollows:
"TheHellenioRepubliomaydeferuntil31December 19©5theliberalization
oftheoperationssetoutinListBtotheDirectivesreferredtoin
Article49»andcarriedoutbypersonsresidentinGreece.3
Therewouldthenfollowaparagraphlayingdownthespecial
arrangements alreadyagreedonconcerningtheEIB(seepara
36.Asinthecaseofthereal-estateinvestments above,however,
provisionshould^bemadeforageneralclausewherebythe
restrictions mayberelaxedintheeventofamarkedimprovement
inPortugal'seconomyandbalanceofpayments.
Consequently ,theCommissionproposesthattheoperationsinquestionshouldbe
covoredbythegeneralolause,whichwill^havetobeinoludedintheaccession
instruments andwordedalongthelinesofthesimilarformulaintheActof
AccessionofGreece(seepoint33)•