ECJ Rules Against UK And Spain In 'Golden Shares' Case

by Ulrika Lomas, for LawAndTax-News.com, Brussels

15 May 2003

The European Court of Justice (ECJ) on Tuesday ruled against the United Kingdom and Spain over government-owned 'golden shares' in various domestic companies.

The Court acknowledged that obstacles to the free movement of capital may be justified for public security reasons. However, with regard to the UK government's involvement in airport company, BAA, the ECJ ruled that it represents an unjustified restriction of the free movement of capital as enshrined in the EC Treaty, and as such should be ended.

Currently, company operations such as the disposal of an airport require the government's consent, and the UK authorities are able to block any single investor from owning more than 15% of the company.

Observers have warned that this week's ECJ decision could lead to further challenges being brought against the UK over its involvement in companies such as the National Grid and Scottish Power.

The ECJ also ruled that golden shares held by the Spanish government in various businesses, including tobacco company Tabacalera, commercial banking group Argentaria, petroleum company Repsol, electricity provider Endesa, and telecommunications firm Telefonica were illegal. However, it added that in the case of the latter three enterprises:

'The Court endorses the objective of safeguarding supplies of such products or the provision of such services in the event of a crisis where there is a genuine and sufficiently serious threat to a fundamental interest of society.'

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