Case C-274/06: Action brought on 23 June 2006 — Commission of the European Communities v Kingdom of Spain
Date: 2006-09-02
Institutions: Court of Justice
Subjects: European Commission, Spain, action for failure to fulfil an obligation, board of management, energy industry, energy supply, free movement of capital, public administration, security of supply, shareholding

2.9.2006

EN

Official Journal of the European Union

C 212/19

Action brought on 23 June 2006 — Commission of the
European Communities v Kingdom of Spain

— there is no justification in the Treaty for that restriction.

(Case C-274/06)

(2006/C 212/32)

Language of the case: Spanish

Parties

Applicant: Commission of the European Communities (repre-
sented by: H.Støvlbæk and R.Vidal Puig, Agents)

Defendant: Kingdom of Spain

Form of order sought

— Declare that the Kingdom of Spain has failed to fulfil its
obligations under Article 56 of the EC Treaty by main-
taining in force measures limiting voting rights of public
entities in Spanish undertakings in the energy sector, such
as the measures provided for in Supplementary Provision
no 27 to Law 55/1999 of 29 December on fiscal, adminis-
trative and social measures, as amended by Article 94 of
Law 62/2003 of 30 December.

— Order the Kingdom of Spain to pay the costs.

Pleas in law and main arguments

Supplementary Provision no 27 to Law 55/199 provides that
where an entity controlled directly or indirectly by a public
authority takes control of, or acquires a significant shareholding
in, an undertaking in the energy sector, the Council of Minis-
ters may within a period of two months decide ‘not to recog-
nise’, or to impose certain conditions on, exercise of the corre-
sponding political rights. The decision is to be based on certain
criteria allegedly designed to safeguard the energy supply.

The Commission considers that Supplementary Provision no
27 to Law 55/1999 is incompatible with Article 56 of the EC
Treaty for the following reasons:

— where public entities take control of, or acquire a significant
shareholding in, Spanish energy-sector undertakings, that is
a ‘movement of capital’ within the meaning of Article 56 of
the EC Treaty;

— the restriction of political rights which the Spanish authori-
ties may decide to impose in connection with such taking
of control or acquisition of a significant shareholding
constitutes a restriction on the free movement of capital,
which is prohibited as a matter of principle by Article 56
EC; and

Specifically,
the Commission considers that Supplementary
Provision no 27 to Law 55/1999 is not justified by the need to
safeguard the energy supply for the following reasons:

— the fact that the entities which take control or acquire a
significant shareholding are controlled by a public authority
does not pose any extra threat to the energy supply, and
therefore cannot justify the introduction of restrictions on
the free movement of capital solely in that case;

— restricting voting rights is not an appropriate means of safe-
guarding the energy supply, there being other more suitable
means of doing so;

— even if restricting voting rights were an appropriate means
of safeguarding the energy supply, the means at issue are
disproportionate, inasmuch as the ‘non-recognition’ of the
exercise of voting rights extends to all the activities and
decisions of the company;

— the power of the Council of Ministers to decide on the
‘recognition’ or the ‘non-recognition’ of
the exercise of
voting rights is not governed by criteria which are objective
and sufficiently precise, amenable to effective review by the
courts.

Reference for a preliminary ruling from the Juzgado de lo
Mercantil No 5 (Commercial Court No 5)/Madrid lodged
on 26 June 2006 — Productores de Música de España v
Telefónica de España SAU

(Case C-275/06)

(2006/C 212/33)

Language of the case: Spanish

Referring court

Juzgado de lo Mercantil No 5 (Commercial Court No 5)/
Madrid

Parties to the main proceedings

Applicant: Productores de Música de España (Promusicae)

Defendant: Telefónica de España SAU