The EU Confronts Poland Over Bank Merger

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

14 March 2006

The European Commission has confronted Poland by launching a procedure against the country under the Merger Regulation for preventing the Unicredit/HVB merger.

The Commission says it has come to the preliminary conclusion that the Polish Government has violated the EU’s Merger Regulation (Article 21), which gives the Commission exclusive powers to take decisions on mergers of a Community dimension.

In particular, the Commission considers that the Polish Government has encroached on the Commission’s exclusive competence by requiring Italian bank Unicredit to divest its shares in Polish bank BPH, despite the fact that the Commission had already authorised, last October, Unicredit’s acquisition of BPH as part of its takeover of German bank HVB. The Commission has therefore decided to send a letter to the Polish authorities, asking them to justify their actions within 15 working days. The Commission has also opened an infringement procedure against the Polish measures based on the EC Treaty’s Internal Market rules.

Competition Commissioner Neelie Kroes stated that “I am determined to ensure that Member States do not stand in the way of mergers falling within the Commission’s exclusive competence. Otherwise the EU’s Single Market will descend into chaos.”

In June 2005 Unicredit decided to acquire the German bank Bayerische Hypo-und Vereinsbank AG (“HVB”), which indirectly controls the Polish bank BPH S.A. (“BPH”). On 18 October 2005, this takeover was cleared under the Merger Regulation by the Commission, which carefully assessed the impact of the takeover on Poland and all other affected markets and concluded that it would not raise serious competition concerns.

However, on 20 December 2005, the Polish Treasury instructed Unicredit to sell its shares in BPH on the grounds that when Unicredit acquired the Polish bank Polska Kasa Opieki S.A. ("Pekao”) in 1999 from the Polish State Treasury, a so-called “non-competition clause” of the Pekao privatisation agreement (as interpreted by the Polish authorities) prevented Unicredit, for a ten year period, from:

• opening subsidiaries and/or branches in Poland;
• acquiring control of banks active in this country; and
• making any capital investment in any company active in the Polish banking sector.

According to the Polish Government, the clause in question was inserted in the Pekao privatisation agreement to ensure the “protection of competition on the Polish market of financial and banking services”. In a subsequent letter of 1 February 2006, the Polish Treasury requested Unicredit to restore compliance with this clause by selling BPH’s shares within three months from receipt of the letter, failing which the whole Pekao privatisation agreement would be revoked.

Under Article 21 of the EC Merger Regulation, the Commission has exclusive competence to assess the competitive impact of concentrations with a Community dimension. Member States cannot apply their national competition law to such operations. Moreover, Member States cannot adopt measures which could prohibit or prejudice (de jure or de facto) such concentrations unless the measures in question:

• protect interests other than competition; and
• are necessary and proportionate to protect interests which are compatible with all aspects of Community law.

Public security, plurality of media and prudential rules are interests that are recognised by the Merger Regulation as being legitimate, but specific measures must still be proportionate and fully compatible with Community law. Any other interest pursued by way of national measures liable to jeopardise a concentration with a Community dimension must be communicated to the Commission before such measures can be implemented. The Commission must then decide, within 25 working days, whether the national measures are justified for the protection of an interest compatible with EC law.

In the present case, the Commission has come to the preliminary conclusion that:

• the decision to invoke and to express the intent to enforce the “non-competition clause” of the Pekao privatisation agreement (as interpreted by the Polish authorities) constitutes a measure taken by the Polish State;
• this measure can de facto prevent, or seriously prejudice, the Unicredit/HVB concentration; and
• it unduly aims to protect competition.

The Commission also takes into account that:

• no other hypothetical interests protected by the measure in question have been communicated to the Commission; and
• in any event the “non-competition clause” of the Pekao privatisation agreement cannot be invoked to prevent the Unicredit/HVB concentration as the clause itself appears to be incompatible with EC law, and in particular EC Treaty rules on the freedom of establishment and the free movement of capital.

The Polish Government has 15 working days to express its view on the Commission’s preliminary conclusion. If its preliminary conclusion is confirmed, the Commission could adopt a decision based on Article 21 of the Merger Regulation requiring the Polish Government to refrain from invoking the “non-competition clause” of the Pekao privatisation agreement to prevent the Unicredit/HVB takeover. Such a decision would be directly applicable, and so could be invoked directly before a national court or public authority in Poland.

Recommended