De-esclerosying Europe. They can improve, they just need to pressed into to do it!
Golden news for a single market
Published: May 16 2003 15:08 | Last Updated: May 16 2003 15:08
A ruling by Europe's highest legal authority this week could do more to help create a pan-European investment climate than any number of political pronouncements.
The European court of Justice's ruling against so-called golden shares in a number of Spanish companies and in the British Airports Authority, the UK airports operator, will improve the way the EU's cross-border financial market works. It could also help pave the way for a round of consolidation across European industry.
The court's move is a decisive step in a long-running legal battle initiated by the European Commission against a number of EU governments. The EU's executive body has been trying to get rid of golden shares - the loosely-worded term for a range of restrictive measures used by governments to block takeovers in newly privatised companies.
Governments have counter-attacked with the argument that ministers must have the right of veto over strategic assets. For example, the British government's golden share in BAA enables it to have the final say over decisions such as the disposal of an airport. The airports operator also has enshrined in its articles of association at privatisation a clause preventing any party from acquiring more than 15 per cent of its voting shares, effectively blocking any takeover.
Spain has been vehement in its belief that fledgling quoted companies that used to be in the public sector need protection from predators. Many of the EU governments' golden share rules do not discriminate directly against foreign takeovers, although that is often their intent.
However, the courts have strongly backed the Commission's view that these restrictions contravene one of the basic rights of the EU single market - the free movement of capital across borders, and are therefore mostly illegal. The court found that only in a handful of cases, such as for defence companies, could restrictions be justified.
BAA's shares went up on the ruling, although analysts believe it would be an unlikely takeover target.
The Spanish golden share provisions applied to formerly publicly-owned utilities such as Repsol, the oil group, Telefonica, the phone operator, Argentaria, the banking group, Tabacalera, the tobacco company and Endesa, the electricity supplier.
This week's verdict comes after rulings last June against a golden share in France's oil operator Elf Acquitaine and a general Portuguese privatisation law that stopped foreign takeovers.
Italy holds a golden share in Telecom Italia, the phone operator, and Enel, the energy company, the Netherlands retains one in KPN, the phone company and TPG, the postal operator, and Denmark holds a share in Copenhagen Airport.
The Commission has initiated legal action against a number of these.
The court's decision is an important step in clearing the obstacles to the creation of an effective single European investment market. It is also tied up with legislation on common rules on cross-border takeovers, an issue the EU has been trying to agree on for 14 years.
The court's verdict on golden shares could help pave the way for agreement on takeovers although this legislation still faces battles on many fronts. The EU needs consolidation across borders if it is ever going to grow into a market to rival that of the US.
Ironically, part of Spain's rationale for its golden share rules were to protect newly privatised utilities from consolidation at the hands of the acquisitive Electricité de France, which remains in state hands.
Spain argued there was little point in making the effort to privatise its energy sector if it were immediately to fall victim to the deep coffers of France's public operator. But the Commission is threatening Spain and Italy with further court action over legislation drawn up specifically aimed at protecting their utilities from the French energy group.
The French government has angered its EU counterparts by being slow to open up its home energy market to competition. It has now agreed to open up to competitors from abroad by 2007, but has yet to table the legislation.
The EU clearly needs to look at liberalisation on a number of fronts before investors can feel comfortable that the single market is providing them with a proper choice for their portfolios.
deborah.hargreaves@ft.com |
