Commission of the European Communities v Italian Republic.
Date: 2009-03-26
29. It is to be borne in mind here that the subject-matter of an action for a declaration of failure to fulfil obligations is delimited by the reasoned opinion and the application (see, to that effect, Case C‑350/02 Commission  v Netherlands  [2004] ECR I‑6213, paragraph 20 and the case-law cited). Given that in the instant case those two measures concern only the criteria fixed in Article 1(2) of the Decree of 2004, it must be held that the Commission has not extended the subject-matter of the dispute, with the result that the action is admissible.
33. As regards the question whether national legislation falls within the ambit of one or other of those freedoms, it is clear from well‑established case-law that the purpose of the legislation concerned must be taken into consideration (see, to that effect, Case C‑157/05 Holböck  [2007] ECR I‑4051, paragraph 22, and case-law cited).
34. 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 the company’s decisions and to determine its activities fall within the ambit ratione materiae  of the provisions of the EC Treaty on freedom of establishment (see, to that effect, in particular, Case C‑251/98 Baars  [2000] ECR I‑2787, paragraph 22, and Case C‑112/05 Commission  v Germany  [2007] ECR I‑8995, paragraph 13).
35. 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 undertakings 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 ( Commission  v Germany , paragraph 18, and case-law cited).
36. 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 (see, to that effect, Holböck , paragraphs 23 and 24). Contrary to what the Italian Republic maintains, Cadbury Schweppes and Cadbury Schweppes Overseas  does not support the conclusion that in such a case only Article 43 EC is of relevance. That judgment, as its paragraph 32 makes clear, concerns only a situation in which a company holds shareholdings giving it control of other companies (see Case C‑207/07 Commission  v Spain  [2008] ECR I‑0000, paragraph 36).
38. With regard, first, to the powers of opposition contained in Article 2(1)(a) and (b) of Decree-Law No 332/1994, it is clear from the documents before the Court that the proportion of at least 5% of voting rights or, as the case may be, a lesser percentage fixed by the competent minister has to enable the persons concerned to participate effectively in the management of the company in question, which is covered by Article 56 EC. It is conceivable, in respect of companies having in general large numbers of smaller shareholdings, that the holders of shareholdings corresponding to those percentages might have the power to influence in a definite manner the management of such a company and to determine its activities, which is covered by Article 43 EC, as the Italian Republic maintains. Furthermore, because Decree-Law No 332/1994 fixes a minimum percentage, that legislation is also designed to apply to holdings greater than that percentage which give an obvious power of control. It is therefore necessary to examine the criteria relating to the exercise of those powers of opposition in the light of those two Treaty provisions.
39. With regard, second, to the power of veto contained in Article 2(1)(c) of Decree-Law No 332/1994, that power clearly relates to decisions within the scope of the management of the company and therefore concerns only those shareholders capable of exerting a definite influence on the companies concerned, with the result that the criteria applying to the exercise of that power must be examined in the light of Article 43 EC. Moreover, even if the effects of those criteria are restrictive of the free movement of capital, those effects would be the unavoidable consequence of any restriction on freedom of establishment and would not warrant independent examination in the light of Article 56 EC ( Cadbury Schweppes and Cadbury Schweppes Overseas , paragraph 33). Consequently, the criteria applying to the exercise of the power of veto must be examined solely from the point of view of Article 43 EC.
The criteria set out in Article 1(2) of the Decree of 2004 as they relate to the exercise of powers of opposition
– Failure to fulfil obligations under Article 56 EC
40. A preliminary point to note is that the criteria examined here determine the circumstances in which the powers of the State to oppose the acquisition of certain shareholdings or the conclusion of certain agreements of shareholders in the companies concerned may be exercised. It is apparent from the Court’s case-law that the use of such powers may be contrary to the free movement of capital guaranteed by Article 56 EC (see, inter alia, Case C‑98/01 Commission  v United Kingdom  [2003] ECR I‑4641, paragraph 50, and Commission  v Spain , paragraph 58). The point at issue in this case is whether those criteria fix conditions that make it possible to vindicate the exercise of such powers.
41. It is to be borne in mind, in this regard, that the free movement of capital may be restricted by national measures justified by the reasons set out in Article 58 EC or by overriding reasons in the public interest, in so far as there are no Community harmonising measures providing for measures necessary to ensure the protection of those interests (see Commission  v Germany , paragraph 72, and case-law cited).
42. In the absence of such Community harmonisation, it is in principle for the Member States to decide on the degree of protection they intend to afford to such legitimate interests and on the way in which that protection is to be achieved. They may do so, however, only within the limits set by the Treaty and must, in particular, observe the principle of proportionality, which requires that the measures adopted should be appropriate to secure the attainment of the objective which they pursue and should not go beyond what is necessary in order to attain it (see Commission  v Germany , paragraph 73, and case-law cited).
45. It may be noted that the criteria at issue apply to common interests concerning, in particular, the minimum supply of energy resources and goods essential to the public as a whole, the continuity of public service, national defence, the protection of public policy and public security and health emergencies. The pursuit of such interests may, subject to observance of the principle of proportionality, warrant certain restrictions of the exercise of fundamental freedoms (see, inter alia, judgment of 14 February 2008 in Case C‑274/06 Commission  v Spain , paragraph 38).
48. The Court has earlier held that the mere acquisition of a holding of more than 10% of the capital of a company operating in the energy sector or any other acquisition conferring significant influence on such a company cannot, as a general rule, be regarded as a real and serious enough threat to security of supply ( Commission  v Spain , paragraphs 38 and 51).
51. The Court has previously held that a State’s powers of intervention such as the powers of opposition in respect of which the criteria at issue determine the conditions for their exercise, which are not qualified by any condition, save for a reference to the protection of national interests, formulated in general terms and without any indication of the specific objective circumstances in which those powers are to be exercised, constitute serious interference with the free movement of capital (see, to that effect, Case C‑483/99 Commission  v France  [2002] ECR I‑4781, paragraphs 50 and 51).
52. Those considerations are applicable to the present case. Even if the criteria at issue concern different kinds of public interests, they are formulated in a general and imprecise manner. What is more, the lack of any connection between the criteria and the special powers to which they relate increases the uncertainty surrounding the circumstances in which those powers may be exercised and gives them a discretionary nature, having regard to the latitude enjoyed by the national authorities in making use of them. Such latitude is disproportionate in relation to the objectives pursued.
53. Furthermore, the mere statement in Article 1(1) of the Decree of 2004 that the special powers must be used only in accordance with Community law cannot make the use of those criteria consistent with Community law. The general and abstract nature of those criteria is incapable of ensuring that the special powers will be exercised in accordance with the requirements of Community law (see, to that effect, Case C‑463/00 Commission  v Spain  [2003] ECR I‑4581, paragraphs 63 and 64).
54. Last, while the fact that the exercise of the special powers may be submitted to review by the national court, pursuant to Article 2(1)(a) to (c) of Decree-Law No 332/1994, is essential to the protection of persons having regard to the application of the rules on freedom of establishment, it cannot, on its own, suffice to make good the incompatibility with those rules of the criteria for the application of the special powers.
64. The Court has held, with regard to a right to oppose certain decisions to transfer or use as security the assets of companies operating in the oil sector, that the exercise of that right not being qualified by any condition limiting the wide discretion of the minister concerned regarding controls on the identity of the holders of those companies’ assets, the system in question went beyond what was necessary in order to attain the objective pleaded, namely, the prevention of disruption of a minimum supply of petroleum products in the event of a real threat. The Court added that, failing any precise objective criteria in the structure of the system, the legislation in question was disproportionate to the stated objective ( Commission  v France , paragraphs 52 and 53).
66. The Decree of 2004 contains no details of the circumstances in which the criteria for the exercise of the power of veto provided by Article 2(1)(c) of Decree-Law No 332/1994 may be applicable. Even if that power may be exercised only in situations of real serious risk or health emergencies, in accordance with Article 1(2) of the Decree, and in observance of the conditions referred to in Article 1(1) of the Decree, that is to say, for reasons of public policy, public safety, public health and defence, investors do not know, for want of any information as to the actual circumstances permitting the exercise of the power in question, when the power of veto may be applicable. In consequence, it must be considered, as the Commission argues, that the situations allowing the exercise of the power of veto are potentially numerous, undetermined and undeterminable, and that they leave the Italian authorities broad discretion.
69. The Court has in particular accepted, with regard to bodies operating in the oil, telecommunications and electricity sectors, that the object of ensuring a secure supply of such services in the case of a crisis in the territory of the Member State concerned may constitute a reason of public security and, therefore, justify a restriction of a fundamental freedom ( Commission  v Spain , paragraph 71).
70. The Court has, nevertheless, ruled that if the Member States remain, in essential respects, free to fix, in keeping with their domestic needs, the requirements of public policy and public security, as grounds for derogating from a fundamental freedom, those requirements must be interpreted strictly, so that their scope cannot be determined unilaterally without any control by the institutions of the European Community. So, public policy and public security may not be invoked unless there is a genuine and sufficiently serious threat to a fundamental interest of society (see, inter alia, Case C‑355/98 Commission  v Belgium  [2000] ECR I‑1221, paragraph 28; Case C‑54/99 Eglise de scientologie  [2000] ECR I‑1335, paragraph 17; and Commission  v Spain , paragraph 47).
71. The Court has applied that analysis to an opposition system in force in Belgium in the energy sector, which covered certain decisions concerning the strategic assets of national companies, in particular energy supply networks, and specific management decisions relating to those companies, State intervention being possible only when there was a threat that the objectives of the energy policy might be compromised. The Court considered that that system was based on objective criteria amenable to judicial review and that the Commission had not shown that less restrictive measures could have been taken to attain the objective pursued (Case C‑503/99 Commission  v Belgium  [2000] ECR I‑4809, paragraphs 50 to 53).
72. In the circumstances of this case, however, as found in paragraph 66 above, the Decree of 2004 contains no details of the actual circumstances in which the power of veto may be exercised and the criteria it lays down are not, therefore, based on objective verifiable conditions.