Commission of the European Communities v French Republic.
Date: 2002-06-04
35 It must be recalled at the outset that Article 73b(1) of the Treaty gives effect to free movement of capital between Member States and between Member States and third countries. To that end it provides, within the framework of the provisions of the chapter headed Capital and payments, that all restrictions on the movement of capital between Member States and between Member States and third countries are prohibited.
36 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, may be used for the purposes of defining what constitutes a capital movement (Case C-222/97 Trummer and Mayer [1999] ECR I-1661, paragraphs 20 and 21).
37 Points I and III in the nomenclature set out in Annex I to Directive 88/361, and the explanatory notes appearing in that annex, indicate that direct investment in the form of participation in an undertaking by means of a shareholding or the acquisition of securities on the capital market constitute capital movements within the meaning of Article 73b of the Treaty. The explanatory notes state that direct investment is characterised, in particular, by the possibility of participating effectively in the management of a company or in its control.
40 That argument cannot be accepted. Article 73b of the Treaty lays down a general prohibition on restrictions on the movement of capital between Member States. That prohibition goes beyond the mere elimination of unequal treatment, on grounds of nationality, as between operators on the financial markets.
41 Even though the rules in issue may not give rise to unequal treatment, they are liable to impede the acquisition of shares in the undertakings concerned and to dissuade investors in other Member States from investing in the capital of those undertakings. They are therefore liable, as a result, to render the free movement of capital illusory (see, in that regard, Joined Cases C-163/94, C-165/94 and C-250/94 Sanz de Lera and Others [1995] ECR I-4821, paragraph 25, and Case C-302/97 Konle [1999] ECR I-3099, paragraph 44).
43 As is also apparent from the 1997 Communication, it is undeniable that, depending on the circumstances, 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 (see today's judgments in Case C-367/98 Commission v Portugal, not yet published in the European Court Reports, paragraph 47, and Case C-503/99 Commission v Belgium, not yet published in the European Court Reports, paragraph 43).
44 However, those concerns cannot entitle Member States to plead their own systems of property ownership, referred to in Article 222 of the Treaty, by way of justification for obstacles, resulting from privileges attaching to their position as shareholder in a privatised undertaking, to the exercise of the freedoms provided for by the Treaty. As is apparent from the Court's case-law (Konle, cited above, paragraph 38), that article does not have the effect of exempting the Member States' systems of property ownership from the fundamental rules of the Treaty.
45 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 73d(1) of the Treaty 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 State. 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, to that effect, Sanz de Lera, cited above, paragraph 23, and Case C-54/99 Église de Scientologie [2000] ECR I-1335, paragraph 18).
46 As regards a prior administrative authorisation scheme such as that forming the subject-matter of the Commission's main complaint, as contained in head (a) of the form of order sought by it, and relating to Article 2(1) of Decree No 93-1298, the Court has previously held that such a scheme must be proportionate to the aim pursued, inasmuch as the same objective could not be attained by less restrictive measures, in particular a system of declarations ex post facto (see, to that effect, Sanz de Lera, paragraphs 23 to 28; Konle, paragraph 44; and Case C-205/99 Analir and Others [2001] ECR I-1271, paragraph 35). Such a scheme must be based on objective, non-discriminatory criteria which are known in advance to the undertakings concerned, and all persons affected by a restrictive measure of that type must have a legal remedy available to them (Analir, cited above, paragraph 38).
47 In the present case, the objective pursued by the legislation at issue, namely the safeguarding of supplies of petroleum products in the event of a crisis, falls undeniably within the ambit of a legitimate public interest. Indeed, the Court has previously recognised that the public-security considerations which may justify an obstacle to the free movement of goods include the objective of ensuring a minimum supply of petroleum products at all times (Campus Oil, paragraphs 34 and 35). The same reasoning applies to obstacles to the free movement of capital, inasmuch as public security is also one of the grounds of justification referred to in Article 73d(1)(b) of the Treaty.
48 However, the Court has also held that the requirements of public security, as a derogation from the fundamental principle of free movement of capital, must be interpreted strictly, so that their scope cannot be determined unilaterally by each Member State without any control by the Community institutions. 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, Église de Scientologie, cited above, paragraph 17).
50 In that connection, as regards the Commission's main complaint concerning Article 2(1) of Decree No 93-1298, it should be remembered that, under the system established by that provision, any direct or indirect shareholding which exceeds certain limits, regardless of its nature or legal form, must first be approved by the Minister for Economic Affairs in respect of each of the persons participating in that holding. According to the applicable provisions, the exercise of that right is not qualified by any condition, save for a reference, formulated in general terms in Article 1 of that decree, to the protection of the national interest. The investors concerned are given no indication whatever as to the specific, objective circumstances in which prior authorisation will be granted or refused. Such lack of precision does not enable individuals to be apprised of the extent of their rights and obligations deriving from Article 73b of the Treaty. That being so, such a system must be regarded as contrary to the principle of legal certainty (Église de Scientologie, paragraphs 21 and 22).
51 Such a wide discretionary power constitutes a serious interference with the free movement of capital, and may have the effect of excluding it altogether. Consequently, the system in issue clearly goes beyond what is necessary in order to attain the objective pleaded by the French Government, namely the prevention of any disruption of a minimum supply of petroleum products in the event of a real threat.
52 As regards the Commission's complaint concerning Article 2(3) of Decree No 93-1298, which provides for a right to oppose any decision to transfer or use as security the assets of four subsidiaries of Société Nationale Elf-Aquitaine located abroad, the same considerations apply. Even though what is involved here is not a system of prior authorisation but a system of opposition ex post facto, it is common ground that the exercise of that right is likewise not qualified by any condition limiting the wide discretion of the minister concerned regarding controls on the identity of the holders of the assets of the subsidiary companies. It follows that the system clearly goes beyond what is necessary in order to attain the objective pleaded by the French Government, namely the prevention of disruption of a minimum supply of petroleum products in the event of a real threat. Moreover, the French legislative provisions in issue do not reflect any such limitation.
53 Since the structure of the system established does not include any precise, objective criteria, the legislation in issue goes beyond what is necessary in order to attain the objective indicated.
56 To the extent that the legislation in issue involves restrictions on freedom of establishment, such restrictions are a direct consequence of the obstacles to the free movement of capital considered above, to which they are inextricably linked. Consequently, since an infringement of Article 73b of the Treaty 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.