EC Closes 'Free Movement Of Capital' Proceedings Over BAA

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

19 October 2004

The European Commission announced on Friday that it has decided to close infringement procedures against the UK government for its failure to comply with an ECJ ruling on the British Airports Authority (BAA).

The European Court of Justice last May acknowledged that obstacles to the free movement of capital may be justified for public security reasons. However, it argued that the UK government's involvement in BAA represented an unjustified restriction of the free movement of capital as enshrined in the EC Treaty, and as such should be ended.

Under the regime in place at the time the ruling was delivered, company operations such as the disposal of an airport required the government's consent, and the UK authorities were able to block any single investor from owning more than 15% of the company.

In the absence of notification from the United Kingdom that it had taken the measures necessary to implement fully the ruling of the Court, a letter of formal notice under Article 228 of the Treaty was delivered to the government on 7 January 2004.

However, on 27 July 2004, the Annual General Meeting of BAA plc agreed to amendments to the Articles of Association of the company to cancel the UK Government’s special share (which was redeemed in October 2003) and to reduce BAA's authorised share capital accordingly.

It also agreed to delete Article 10 and Article 40 of the Articles of Association of the company, thus addressing the outstanding issues raised by the Commission.

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