page_title: European Union law
section_title: Capital
hierarchical_section_title: European Union law / Free movement and trade / Capital
caption_attribution_description: English: The small plaza outside the Royal Exchange in the City of London.
context_page_description: European Union law is a system of rules operating within the member states of the European Union. Since the founding of the Coal and Steel Community after World War II, the EU has developed the aim to "promote peace, its values and the well-being of its peoples". The EU has political institutions, social and economic policies, which transcend nation states for the purpose of cooperation and human development. According to its Court of Justice the EU represents "a new legal order of international law".
  The EU's legal foundations are the Treaty on European Union and the Treaty on the Functioning of the European Union, unanimously agreed by the governments of 27 member states. New members may join, if they agree to play by the rules of the organisation, and existing members may leave according to their "own constitutional requirements". People are entitled to participate through the Parliament, and their national governments in shaping the legislation the EU makes.
context_section_description: Free movement of capital was traditionally seen as the fourth freedom, after goods, workers and persons, services and establishment. The original Treaty of Rome required that restrictions on free capital flows only be removed to the extent necessary for the common market. From the Treaty of Maastricht, now in TFEU article 63, "all restrictions on the movement of capital between Member States and between Member States and third countries shall be prohibited". This means capital controls of various kinds are prohibited, including limits on buying currency, limits on buying company shares or financial assets, or government approval requirements for foreign investment. By contrast, taxation of capital, including corporate tax, capital gains tax and Financial transaction tax are not affected so long as they do not discriminate by nationality. According to the Capital Movement Directive 1988, Annex I, 13 categories of capital which must move free are covered. In Baars v Inspecteur der Belastingen Particulieren the Court of Justice held that for investments in companies, the capital rules, rather than freedom of establishment rules, were engaged if an investment did not enable a "definite influence" through shareholder voting or other rights by the investor. That case held a Dutch Wealth Tax Act 1964 unjustifiably exempted Dutch investments, but not Mr Baars' investments in an Irish company, from the tax: the wealth tax, or exemptions, had to be applied equally. On the other hand, TFEU article 65(1) does not prevent taxes that distinguish taxpayers based on their residence or the location of an investment (as taxes commonly focus on a person's actual source of profit) or any measures to prevent tax evasion. Apart from tax cases, largely following from cases originating in the UK, a series of cases held that government owned golden shares were unlawful. In Commission v Germany the Commission claimed the German Volkswagen Act 1960 violated article 63, in that §2(1) restricted any party having voting rights exceeding 20% of the company, and §4(3) allowed a minority of 20% of shares held by the Lower Saxony government to block any decisions. Although this was not an impediment to actual purchase of shares, or receipt of dividends by any shareholder, the Court of Justice's Grand Chamber agreed that it was disproportionate for the government's stated aim of protecting workers or minority shareholders. Similarly, in Commission v Portugal the Court of Justice held that Portugal infringed free movement of capital by retaining golden shares in Portugal Telecom that enabled disproportionate voting rights, by creating a "deterrent effect on portfolio investments" and reduing "the attractiveness of an investment". This suggested the Court's preference that a government, if it sought public ownership or control, should nationalise in full the desired proportion of a company in line with TFEU article 345.
  The final stage of completely free movement of capital was thought to require a single currency and monetary policy, eliminating the transaction costs and fluctuations of currency exchange. Following a Report of the Delors Commission in 1988, the Treaty of Maastricht made economic and monetary union an objective, first by completing the internal market, second by creating a European System of Central Banks to coordinate common monetary policy, and third by locking exchange rates and introducing a single currency, the euro. Today, 19 member states have adopted the euro, while 9 member states have either determined to opt-out or their accession has been delayed, particularly since the Eurozone crisis. According to TFEU articles 119 and 127, the objective of the European Central Bank and other central banks ought to be price stability. This has been criticised for apparently being superior to the objective of full employment in the Treaty on European Union article 3.
caption: The European System of Central Banks, including the ECB and member state banks like the Bank of England, has been criticised for harming the prospect of full employment. It interpreted the requirement for price stability as requiring wage suppression in its dealings on the Eurozone crisis.[280]
exif: {"Image Make": "PENTAX", "Image Model": "PENTAX K-50", "Image Orientation": "Horizontal (normal)", "Image XResolution": "300", "Image YResolution": "300", "Image ResolutionUnit": "Pixels/Inch", "Image Software": "Adobe Photoshop CS5 Windows", "Image DateTime": "2014:12:30 12:07:17", "Image Artist": "Matt Buck", "Image YCbCrPositioning": "Co-sited", "Image Copyright": "Matt Buck", "Image ExifOffset": "2390", "GPS GPSVersionID": "[2, 3, 0, 0]", "Image GPSInfo": "4922", "Image XPKeywords": "[50, 0, 48, 0, 49, 0, 52, 0, 59, 0, 67, 0, 97, 0, 109, 0, 101, 0, 114, 0, ... ]", "Image PrintIM": "[80, 114, 105, 110, 116, 73, 77, 0, 48, 51, 48, 48, 0, 0, 0, 33, 0, 1, 0, 22, ... ]", "Image Padding": "[]", "Thumbnail Compression": "JPEG (old-style)", "Thumbnail XResolution": "72", "Thumbnail YResolution": "72", "Thumbnail ResolutionUnit": "Pixels/Inch", "Thumbnail JPEGInterchangeFormat": "5898", "Thumbnail JPEGInterchangeFormatLength": "5467", "EXIF ExposureTime": "13", "EXIF FNumber": "11", "EXIF ExposureProgram": "Aperture Priority", "EXIF ISOSpeedRatings": "100", "EXIF ExifVersion": "0230", "EXIF DateTimeOriginal": "2014:12:16 16:47:03", "EXIF DateTimeDigitized": "2014:12:16 16:47:03", "EXIF ComponentsConfiguration": "YCbCr", "EXIF ExposureBiasValue": "0", "EXIF MeteringMode": "Pattern", "EXIF Flash": "Flash did not fire, compulsory flash mode", "EXIF FocalLength": "18", "EXIF FlashPixVersion": "0100", "EXIF ColorSpace": "sRGB", "EXIF ExifImageWidth": "4617", "EXIF ExifImageLength": "3071", "Interoperability InteroperabilityVersion": "[48, 49, 48, 48]", "EXIF InteroperabilityOffset": "4900", "EXIF SensingMethod": "One-chip color area", "EXIF FileSource": "Digital Camera", "EXIF SceneType": "Directly Photographed", "EXIF CustomRendered": "Normal", "EXIF ExposureMode": "Auto Exposure", "EXIF WhiteBalance": "Auto", "EXIF FocalLengthIn35mmFilm": "27", "EXIF SceneCaptureType": "Standard", "EXIF Contrast": "Normal", "EXIF Saturation": "Normal", "EXIF Sharpness": "Soft", "EXIF SubjectDistanceRange": "3", "EXIF Padding": "[]", "EXIF OffsetSchema": "3764"}