WRITTEN QUESTION E-1794/02

by Erik Meijer (GUE/NGL) to the Commission

(24 June 2002)

Subject: Obstacles placed in the way of protection measures for public authorities in largely privatised companies as a result of a judicial ruling

1. Does the Commission recall that objections to the privatisation of public enterprises were refuted in the past by the argument, inter alia, that although private capital would be attracted, the public authorities would still retain a large measure of control thanks to protection mechanisms such as minority participation combined with the right of veto, over location, type of production, number of employees, mergers with, or takeover of, other companies and the role of the company in the context of social and environmental needs?

2. What are the consequences of the ruling by the Court of Justice on the golden shares of the French and Portuguese States, which it deems not to be in the public interest and to violate the principle of free movement of capital within the European Union?

3. Can the Commission confirm that it considers the similar participation of the Belgian authorities in Distrigaz and of the Netherlands authorities in the postal company TPG and the telecom provider KPN to be of major public benefit? In what way do the Netherlands and Belgian protection mechanisms differ from the French and Portuguese ones?

4. Now that the ruling referred to in question 2 has been delivered, can the national authorities of the Member States continue to protect what they consider to be vital interests in the areas of energy provision, water supplies, postal services, telecommunications and public transport, as well as the environment and employment, while not holding a majority of shares?

5. If question 4 is answered in the affirmative, in what way and under what circumstances can this protection take place?

6. If question 4 is answered in the negative, does this mean that the protection sought can only be given if the entire company or, at least, a majority of its shares remains in public ownership or if the majority of the shares are reacquired?

(Source: De Volkskrant and Metro, Netherlands edition, 5 June 2002)

Answer given by Mr Solbes Mira on behalf of the Commission

(9 August 2002)

1. Article 295 of the EC Treaty reads as follows: This Treaty shall in no way prejudice the rules in Member States governing the system of property ownership. According to these provisions, Member States are free with regard to the regime of property since the EC Treaty neither imposes nor introduces in the Community legal order a new conception or regulation of property. Therefore, Member States have the right either to nationalise or to privatise. However, according to Court of Justice jurisprudence, the implementation of a privatisation decision (for instance) has to abide by the principles of Community law, in particular the freedom of capital movements.

2. According to Article 228.1. of the EC Treaty, If the Court of Justice finds that a Member State has failed to fulfil an obligation under this Treaty, the State shall be required to take the necessary measures to comply with the judgement of the Court of Justice. In the present case, Portugal and France have now to amend, respectively, the framework law on privatisations (and related decree-laws) and the decree vesting in the State a golden share in Elf-Aquitaine in such a way that they comply with Community requirements in the field of capital movements. In order to verify the satisfactory character of the planned amendments, the Commission will request from both Member States a description of the measures which they intend to take for that purpose, as well as a timetable for adoption.

3. As ruled by the Court of Justice, certain concerns may justify the retention by Member States of a degree of influence within undertakings that were initially public and subsequently privatised, where those undertakings are active in fields involving the provision of services in the public interest or strategic services. However, the free movement of capital, as a fundamental principle of the EC Treaty, may be restricted only by national rules which are justified by reasons referred to in Article 58 of the EC Treaty (e.g. public policy or public security) or by overriding requirements of the general interest and which are applicable to all persons and undertakings pursuing an activity in the territory of the host Member States. Furthermore, in order to be so justified, the national legislation must be suitable for securing the objective which it pursues and must not go beyond what is necessary in order to attain it, so as to accord with the principle of proportionality.

As far as the Belgian protection mechanism is concerned, the Court of Justice has ruled that, first, the regime in issue is one of opposition (no prior approval is required). Furthermore, the regime is limited to certain decisions concerning the strategic assets of the companies in question (including in particular the energy supply networks) and to such specific management decisions relating to those assets as may be called in question in any given case. Finally, the Minister may intervene pursuant to the Royal Decree vesting a golden share in the State only where there is a threat that the objectives of the energy policy may be compromised.

Therefore, the scheme enables the Member State concerned to intervene with a view to ensuring, in a given situation, compliance with the public service obligations incumbent on Distrigaz, whilst at the same time observing the requirements of legal certainty. As to the participation of the Dutch authorities in TPG and KPN is concerned, the Commission decided to send a letter of formal notice to the Dutch authorities, which was responded to. The arguments presented by the Dutch authorities to justify the special rights attached to the golden shares existing in both companies involved are being analysed by the Commission, in particular in the light of the above Court of Justice ruling of 4 June 2002.

4. As mentioned in the reply to question 3, Member States may retain a certain degree of influence within privatised undertakings active in fields involving the provision of services in the public interest or strategic services. However, restrictions to the free movement of capital have to be justified either by reasons referred to in Article 58 of the EC Treaty or by overriding requirements of the general interest. Furthermore, in order to be so justified, the national legislation must be suitable for securing the objective which it pursues and must not go beyond what is necessary in order to attain it, so as to accord with the principle of proportionality.

Moreover, it might be recalled that the existing Community framework governing a number of areas referred to in the question generally contains provisions aiming at safeguarding the public interest or establishes policies designed to guarantee it whilst respecting the rules of the internal market.

5. The means through which and the circumstances under which restrictions to capital movements may be established in order to protect the general interest in conformity with Community requirements have been presented in the replies to questions 3 and 4.

6. The question has been answered in the affirmative.