European Commission v Portuguese Republic.
Date: 2010-11-11
20. In that regard, it must first be recalled that it is not permissible for a party to alter the very subject‑matter of the case during the proceedings, and that the merits of the action must be examined solely in the light of the claims contained in the application initiating the proceedings (see, inter alia, Case 232/78 Commission  v France [1979] ECR 2729, paragraph 3; Case C‑256/98 Commission  v France  [2000] ECR I‑2487, paragraph 31; and Case C‑508/03 Commission  v United Kingdom  [2006] ECR I‑3969, paragraph 61).
21. Furthermore, by virtue of Article 21 of the Statute of the Court of Justice of the European Union and Article 38(1)(c) of its Rules of Procedure, the Commission must, in any application made under Article 258 TFEU, indicate the specific complaints on which the Court is asked to rule and, at the very least in summary form, the legal and factual particulars on which those complaints are based (see, to that effect, Case C‑52/90 Commission  v Denmark  [1992] ECR I‑2187, paragraph 17; Case C‑508/03 Commission  v United Kingdom , paragraph 62; and Case C‑487/08 Commission  v Spain  [2010] ECR I‑0000, paragraph 71).
23. It is true that only in its reply did the Commission for the first time rely on Article 15(1) of the LQP and the right laid down in that provision. However, it is clear from the documents before the Court that, contrary to the contention of the Portuguese Republic, the Commission did not take the view, in its reply, that the Portuguese State had a fresh special power, but made reference as a supplementary argument to show the merits of its complaint, to another right enjoyed by the Portuguese State. Consequently, the fact that the Commission set out in detail a complaint which it had already made more generally in the application did not alter the subject-matter of the alleged infringement, and has thus had no effect on the scope of the proceedings (see Case C‑185/00 Commission  v Finland  [2003] ECR I‑14189, paragraphs 84 to 87, and Case C‑171/08 Commission  v Portugal  [2010] ECR I‑0000, paragraph 29).
40. As regards the question whether national legislation falls within the ambit of one or other of those fundamental freedoms, it is clear from well established case-law that the purpose of the legislation concerned must be taken into consideration (see, in particular, Case C‑157/05 Holböck  [2007] ECR I‑4051, paragraph 22, and Case C‑326/07 Commission  v Italy , paragraph 33).
41. Provisions of national law which apply to the possession by nationals of one Member State of holdings in the capital of a company established in another Member State allowing them to exert a definite influence on that company’s decisions and to determine its activities fall within the ambit ratione materiae  of Article 43 EC on freedom of establishment (see, in particular, Case C‑251/98 Baars  [2000] ECR I‑2787, paragraph 22, and Case C‑326/07 Commission  v Italy , paragraph 34).
42. Direct investments, that is to say, investments of any kind made by natural or legal persons which serve to establish or maintain lasting and direct links between the persons providing the capital and the company to which that capital is made available in order to carry out an economic activity fall within the ambit of Article 56 EC on the free movement of capital. That object presupposes that the shares held by the shareholder enable him to participate effectively in the management of that company or in its control (see, in particular, Case C‑112/05 Commission  v Germany  [2007] ECR I‑8995, paragraph 18 and case-law cited, and Case C‑326/07 Commission  v Italy , paragraph 35).
43. National legislation not intended to apply only to those shareholdings which enable the holder to have a definite influence on a company’s decisions and to determine its activities but which applies irrespective of the size of the holding which the shareholder has in a company may fall within the ambit of both Article 43 EC and Article 56 EC (Case C‑326/07 Commission  v Italy , paragraph 36).
45. It should be noted, at the outset, that, according to consistent case‑law, Article 56(1) EC generally prohibits restrictions on movements of capital between Member States (see, inter alia, Joined Cases C‑282/04 and C‑283/04 Commission  v Netherlands  [2006] ECR I‑9141, paragraph 18 and case law cited; Commission  v Germany , paragraph 17; and Case C‑171/08 Commission  v Portugal , paragraph 48).
46. In the absence of an EC Treaty definition of ‘movement of capital’ within the meaning of Article 56(1) EC, the Court has acknowledged the indicative value of the nomenclature of movements of capital set out in Annex I to Council Directive 88/361/EEC of 24 June 1988 for the implementation of Article [67] of the Treaty (article repealed by the Treaty of Amsterdam) (OJ 1988 L 178, p. 5). Thus, the Court has held that movements of capital within the meaning of Article 56(1) EC include in particular ‘direct’ investments, namely investments in the form of participation in an undertaking through the holding of shares which confers the possibility of effectively participating in its management and control, and ‘portfolio’ investments, namely investments in the form of the acquisition of shares on the capital market solely with the intention of making a financial investment without any intention to influence the management and control of the undertaking (see Joined Cases C‑282/04 and C‑283/04 Commission  v Netherlands , paragraph 19 and case-law cited; Commission  v Germany , paragraph 18; and Case C‑171/08 Commission  v Portugal , paragraph 49).
47. Concerning those two forms of investment, the Court has stated that national measures must be regarded as ‘restrictions’ within the meaning of Article 56(1) EC if they are liable to prevent or limit the acquisition of shares in the undertakings concerned or to deter investors of other Member States from investing in their capital (see Case C‑367/98 Commission  v Portugal  [2002] ECR I‑4731, paragraph 45; Case C‑483/99 Commission  v France  [2002] ECR I‑4781, paragraph 40; Case C‑463/00 Commission  v Spain , paragraphs 61 and 62; Case C‑98/01 Commission  v United Kingdom  [2003] ECR I‑4641, paragraphs 47 and 49; Case C‑174/04 Commission  v Italy  [2005] ECR I‑4933, paragraphs 30 and 31; Joined Cases C‑282/04 and C‑283/04 Commission  v Netherlands , paragraph 20; Commission  v Germany , paragraph 19; and Case C‑171/08 Commission  v Portugal , paragraph 50).
56. Consequently, that right of veto, in so far as it confers on that State an influence on the management and control of EDP which is not justified by the size of its shareholding in that company, is liable to discourage operators from other Member States from making direct investments in EDP since they could not be involved in the management and control of that company in proportion to the value of their shareholdings (see, in particular, Commission  v Germany , paragraphs 50 to 52, and Case C‑171/08 Commission  v Portugal , paragraph 60).
57. Similarly, the right of veto at issue may have a deterrent effect on portfolio investments in EDP in so far as a possible refusal by the Portuguese State to approve an important decision, proposed by the organs of that company as being in the company’s interests, is in fact liable to depress the value of the shares of that company and thus reduce the attractiveness of an investment in such shares (see, to that effect, Joined Cases C‑282/04 and C‑283/04 Commission  v Netherlands , paragraph 27, and Case C‑171/08 Commission  v Portugal , paragraph 61).
58. As regards the fact that the exercise by any shareholder of the voting rights carried by his holding of ordinary shares is restricted to a 5% ceiling, save only that the Portuguese State is not subject to that restriction, it is clear that the voting rights attaching to shares constitute one of the principal ways whereby the shareholder can actively participate in the management of an undertaking or in its control. Consequently, any measure which is designed to prevent those rights being exercised or to subject them to qualifications may deter investors in other Member States from acquiring stakes in the undertakings concerned and constitute a restriction on the free movement of capital (see the judgment of 14 February 2008 in Case C‑274/06 Commission  v Spain , paragraph 24). Furthermore, a voting ceiling is an instrument which is liable to limit the ability of direct investors to participate in a company with a view to establishing or maintaining lasting and direct economic links with it which would make possible effective participation in the management of that company or in its control, and which diminishes the interest in acquiring a stake in the capital of a company ( Commission  v Germany , paragraph 54).
61. In any event, the fact that the general supervisory board is not a decision‑making body, but a monitoring body, is not such as to undermine the position and influence of the public authorities concerned. While Portuguese company law assigns to the supervisory board the task of monitoring a company’s management, it confers significant powers on that body for the purpose of performing that task. Furthermore, as the Commission has pointed out, approval by the general supervisory board is necessary, under Article 17(2) of EDP’s articles of association, for a number of transactions, including, in addition to the acquisition and disposal of assets, rights or shares of significant monetary value, the opening or closure of places of business or significant parts of places of business, the establishment or termination of strategic partnerships or other forms of lasting cooperation, the division, merger or conversion of the company, and amendments of its articles of association, including a change of registered office and an increase in share capital (see, to that effect, Commission  v Germany , paragraph 65).
62. That said, it is clear that the right to appoint a director constitutes a restriction on the free movement of capital since such a specific right constitutes a derogation from general company law and is laid down by a national legislative measure for the sole benefit of the public authorities (see Commission  v Germany , paragraph 61). While it is true that that facility can be conferred by legislation as a right of a qualified minority, it is clear that it must, in such a case, be accessible to all shareholders and must not be reserved exclusively to the State.
67. According to that judgment, the application to products from other Member States of national provisions restricting or prohibiting, within the Member State of importation, certain selling arrangements is not such as to hinder trade between Member States so long as, first, those provisions apply to all relevant traders operating within the national territory and, second, they affect in the same manner, in law and in fact, the marketing of domestic products and of those from other Member States. The reason is that the application of such provisions is not such as to prevent access by the latter products to the market of the Member State of importation or to impede such access more than it impedes access by domestic products (Case C‑384/93 Alpine Investments  [1995] ECR I‑1141, paragraph 37).
68. In the present case, while it is true that the restrictions at issue apply without distinction to both residents and non-residents, it must none the less be held that they affect the position of a person acquiring a shareholding as such and are thus liable to deter investors from other Member States from making such investments and, consequently, affect access to the market (see Case C‑463/00 Commission  v Spain , paragraph 61 and case-law cited, and Case C‑171/08 Commission  v Portugal , paragraph 67).
70. It is clear, as stated in paragraphs 56 and 58 of this judgment, that the national provisions at issue, to the extent that they create instruments liable to limit the ability of investors to participate in the share capital of EDP with a view to establishing or maintaining lasting and direct economic links with it which would make possible effective participation in the management or control of that company, diminish the interest in acquiring a stake in that capital (see, to that effect, Commission  v Germany , paragraph 54).
71. That finding is not affected by the fact that the shareholders of EDP include a certain number of direct investors. That circumstance is not such as to cast doubt on the fact that, because of the provisions of national law at issue, direct investors from other Member States, whether actual or potential, may have been deterred from acquiring a stake in the capital of that company in order to participate in it with a view to establishing or maintaining lasting and direct economic links with it which would make possible effective participation in the management of that company or in its control, even though they were entitled to benefit from the principle of the free movement of capital and the protection which that principle affords them (see, to that effect, Commission  v Germany , paragraph 55).
83. According to settled case law, national measures which restrict the free movement of capital may be justified on the grounds set out in Article 58 EC or by overriding reasons in the public interest, provided that they are appropriate to secure the attainment of the objective which they pursue and do not go beyond what is necessary in order to attain it (see Commission  v Germany , paragraphs 72 and 73 and case law cited, and Case C‑171/08 Commission  v Portugal , paragraph 69).
84. As regards the derogations permitted under Article 58 EC, it cannot be denied that the objective invoked by the Portuguese Republic to ensure a secure energy supply in that Member State in case of crisis, war or terrorism may constitute a ground of public security (see Case C‑274/06 Commission  v Spain , paragraph 38, and Case C‑171/08 Commission  v Portugal , paragraph 72) and possibly justify an obstacle to the free movement of capital. The importance attached by Member States and the European Union to the protection of a secure energy supply can moreover be seen, for example, in Directive 2009/72/EC of the European Parliament and of the Council of 13 July 2009 concerning common rules for the internal market in electricity and repealing Directive 2003/54/EC (OJ 2009 L 211, p. 55).
85. However, it is undisputed that requirements of public security must, in particular as a derogation from the fundamental principle of the free movement of capital, be interpreted strictly, so that their scope cannot be determined unilaterally by each Member State without any control by the institutions of the European Union. Thus, public security may be relied on only if there is a genuine and sufficiently serious threat to a fundamental interest of society (see, in particular, Case C‑54/99 Église de scientologie  [2000] ECR I‑1335, paragraph 17, and Case C‑171/08 Commission  v Portugal , paragraph 73).
89. Even were it accepted that, pursuant to provisions of European Union secondary legislation, a Member State has an obligation to guarantee the supply of energy within its territory, as is claimed by the Portuguese Republic, compliance with such an obligation cannot be relied on to justify any measure which is contrary in principle to a fundamental freedom.
91. Although Article 15(3) of the LQP states that the creation in the share capital of EDP of golden shares which confer special rights on the Portuguese State is subject to the condition, which, it may be added, is formulated in a rather general and imprecise manner, that grounds of national interest must so require, the fact nevertheless remains that neither that law nor EDP’s articles of association lay down any criteria determining the specific circumstances in which those special rights may be exercised (see Case C‑326/07 Commission  v Italy , paragraph 51). The same finding applies to Article 15(1) of the LQP, in that, under that provision, the State’s appointment of a director is subject to the condition, also formulated in a rather general and imprecise manner, of safeguarding the public interest.
92. Thus, such uncertainty constitutes serious interference with the free movement of capital in that it confers on the national authorities, as regards the use of such rights, a latitude so discretionary in nature that it cannot be regarded as proportionate to the objectives pursued (see, to that effect, Case C‑326/07 Commission  v Italy , paragraph 52).
93. Lastly, as regards the justification based on Article 86(2) EC, it must be stated that that provision, in conjunction with Article 86(1) EC, may be relied on to justify the grant by a Member State to an undertaking entrusted with the operation of services of general economic interest of special or exclusive rights which are contrary to the provisions of the Treaty, to the extent that performance of the particular task assigned to that undertaking can be assured only through the grant of such rights and provided that the development of trade is not affected to such an extent as would be contrary to the interests of the European Union (Case C‑340/99 TNT Traco  [2001] ECR I‑4109, paragraph 52; Case C‑220/06 Asociación Profesional de Empresas de Reparto y Manipulado de Correspondencia [2007] ECR I‑12175, paragraph 78; and Case C‑567/07 Woningstichting Sint Servatius  [2009] ECR I‑9021, paragraph 44).
99. In that regard, it is sufficient to note that, in accordance with settled case‑law, in so far as the national measures at issue entail restrictions on freedom of establishment, such restrictions are a direct consequence of the obstacles to the free movement of capital considered in paragraphs 45 to 72 of this judgment, to which they are inextricably linked. Consequently, since an infringement of Article 56(1) EC has been established, there is no need for a separate examination of the measures at issue in the light of the Treaty rules concerning freedom of establishment (see, in particular, Case C‑463/00 Commission  v Spain , paragraph 86; Joined Cases C‑282/04 and C‑283/04 Commission  v Netherlands , paragraph 43, and Case C‑171/08 Commission  v Portugal , paragraph 80).
Costs