Commission of the European Communities v Italian Republic.
Date: 2005-06-02
27. Although the Treaty does not define the terms ‘movements of capital’ and ‘payments’, it is settled case‑law that Directive 88/361, together with the nomenclature annexed to it, has an indicative value for the purposes of defining the notion of capital movements (see Commission  v United Kingd om , paragraph 39, and Case C-222/97 Trummer and Mayer  [1999] ECR I-1661, paragraphs 20 and 21).
28. Points I and III of the nomenclature annexed to Directive 88/361 and the explanatory notes which it contains indicate that direct investment in the form of a shareholding in an undertaking and the acquisition of securities on the capital market constitute capital movements within the meaning of Article 56 EC. By virtue of those explanatory notes, direct investment, in particular, is characterised by the possibility of participating effectively in the management and control of a company.
30. In that connection, it must be pointed out that the suspension of voting rights, as provided for in Decree-Law No 192/2001, means that the category of public undertakings concerned is precluded from participating effectively in the management and control of Italian undertakings operating in the electricity and gas markets. Since the objective pursued by Decree-Law No 192/2001 is to avoid ‘anti-competitive attacks by public entities operating in the same sector in other Member States’, it has the effect of dissuading public undertakings established in other Member States, in particular, from acquiring shares in Italian undertakings operating in the energy sector.
31. It follows that the suspension of voting rights provided for by Decree-Law No 192/2001 constitutes a restriction on the free movement of capital prohibited, in principle, by Article 56 EC.
35. In that connection, it must be borne in mind that the free movement of capital, as a fundamental principle of the Treaty, may be restricted only by national rules which are justified by reasons referred to in Article 58(1) EC or by overriding public-interest grounds. 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 (see Commission  v Belgium , paragraph 45, and Case C-319/02 Manninen  [2004] ECR I-7498, paragraph 29).
36. The Italian Government contends that, through the process of liberalisation and privatisation, the energy markets in Italy have been opened up to competition. Decree-Law No 192/2001 is designed to ensure sound and fair conditions of competition in those markets. It makes it possible to ensure that, pending effective liberalisation of the energy sector in Europe, the Italian market is not subjected to anti-competitive attacks by public undertakings operating in the same sector in other Member States that have been placed at an advantage by domestic legislation which has kept them in a privileged position. If control of undertakings operating in the Italian electricity and gas markets were acquired by public undertakings of that kind, the efforts of the Italian authorities to open up the energy sector to competition might be negated.
37. In that connection, as the Court has already held, an interest in generally strengthening the competitive structure of the market in question cannot constitute valid justification for restrictions on the free movement of capital (see Commission v Portugal , paragraph 52).
40. Even though the need to safeguard energy supplies may, under certain conditions, justify restrictions of fundamental freedoms under the Treaty (see Case 72/83 Campus Oil and Others [1984] ECR 2727, paragraphs 34 and 35, and Commission v Belgium , paragraph 46), the Italian Government has not demonstrated in what way a limitation of voting rights affecting only one specific category of public undertakings is necessary in order to attain that objective. In particular, it has not explained why it is necessary for the shares of undertakings operating in the energy sector in Italy to be held by private shareholders or by public shareholders quoted on regulated financial markets for the undertakings concerned to be able to guarantee sufficient and uninterrupted supplies of electricity and gas in the Italian market.