Keywords

Summary



Keywords

1 Free movement of capital - Movements of capital within the meaning of Article 73b of the Treaty - Definition - Creation of a mortgage - Included

(EC Treaty, Art. 73b; Council Directive 88/361)

2 Free movement of capital - Restrictions - Prohibition by a Member State of registration of a mortgage in the currency of another Member State - Not permissible - Justification - None

(EC Treaty, Art. 73b)

Summary

1 It is apparent from the nomenclature in respect of movements of capital annexed to Directive 88/361 for the implementation of Article 67 of the Treaty - which, despite the fact that the directive was adopted on the basis of Articles 69 and 70(1) of the EEC Treaty, still has the same indicative value as it did before Articles 67 to 73 of the EEC Treaty were replaced by Article 73b et seq. of the EC Treaty - that both the liquidation of an investment in real property (Point II of the nomenclature) and the grant of sureties, other guarantees and rights of pledge (Point IX of the nomenclature) constitute movements of capital within the meaning of Article 73b. Since a mortgage is inextricably linked to the liquidation of an investment in real property, and since, as the classic method of securing a loan linked to a sale of real property, it constitutes an `other guarantee', it is covered by Article 73b of the Treaty, prohibiting restrictions on the movement of capital between Member States and between Member States and third countries.

2 Article 73b of the Treaty precludes the application of national rules requiring a mortgage securing a debt payable in the currency of another Member State to be registered in the national currency, since it cannot be registered for an amount greater than the corresponding value of that debt in the national currency as at the date of the application for registration.

Such rules must be regarded as a restriction on the movement of capital, since their effect is to weaken the link between the debt to be secured, payable in the currency of another Member State, and the mortgage, whose value may, as a result of subsequent currency exchange fluctuations, come to be lower than that of the debt to be secured. This can only reduce the effectiveness of such a security, and thus its attractiveness. Consequently, those rules are liable to dissuade the parties concerned from denominating a debt in the currency of another Member State, thus depriving them of a right which constitutes a component element of the free movement of capital and payments.

Moreover, the obligation imposed by the rules at issue, requiring recourse to the national currency for the purposes of creating a mortgage, cannot be justified by any overriding factor designed, in the public interest, to ensure the foreseeability and transparency of the mortgage system. Although a Member State is entitled in that connection to take the necessary measures to ensure that the mortgage system clearly and transparently prescribes the respective rights of mortgagees inter se, as well as the rights of mortgagees as a whole vis-à-vis other creditors, the rules at issue enable lower-ranking creditors to establish the precise amount of prior-ranking debts, and thus to assess the value of the security offered to them, only at the price of a lack of security for creditors whose debts are denominated in foreign currencies.