FREE MOVEMENT OF CAPITAL
MAIN ARTICLES
- Article 63 TFEU: Restrictions
- Article 64: Abolition of restrictions.
- Article 65 TFEU: exceptions
BACKGROUND
- Originally, these provisions lacked direct effect and merely endeavoured to abolish
restrictions to the extent that MS’s thought it necessary to ensure proper functioning of
the Common Market, i.e. only used to work towards abolition.
- Casati: provisions lacking direct effect and merely endeavoured to abolish
restrictions to the extent MS’s thought it necessary to ensure proper functioning
of the Common Market.
- Directive 88/361: contains examples of Capital movements that illustrate what
constitutes movement of capital and, therefore, possible restrictions.
- Progress done via legislative decision-making at the time of Lux compromise.
- Single European Act: completion deadline for the internal market (EMU).
- Maastricht Treaty: New provisions in the TEU:
- Sanz de Lera: vertical and horizontal direct effect [41]
- Free movement of capital can now be considered a fully-fledged freedom
alongside goods, services and workers.
- Treaty provisions are only applicable in the absence of specific secondary law
(Tedeschi Principle).
- Services and Capital:
- Regarding issues which touch both issues: whether both Art. 63 and 56 TFEU
apply, depending on the countries involved.
- If the countries are both EU MS’s, both regimes can apply
- If a Third Country is involved and there is no multilateral or bilateral agreement
on the free movement of services, only provisions on the free movement of
capital can apply
- Fidium Finanz (C-452/04 [2006]): Art. 63 does not apply where the service
element prevails.
- Where a national measure concerns both FMOS (Art. 56 TFEU) and
, FMOC (Art. 63 TFEU), it is necessary to consider to what extent
fundamental liberties are affected and if one prevails over the other [34].
- The activity of granting credit on a commercial basis concerns, in
principle, both the FMOS and the FMOC [43]
- Art. 49 EC et seq. cannot be relied on by a company, such as Fidium
Finanz, which is established in a non-member country. [47]
- As regards the free movement of capital within the meaning of Article 56
EC et seq., it is possible that by making financial services offered by
companies which are established outside the European Economic Area
less accessible for clients established in Germany, the rules effectively
make those clients less inclined to have recourse to those services and,
therefore, reduce cross-border financial traffic relating to those services.
However, that is merely an unavoidable consequence of the restriction on
the freedom to provide services [48]
- If rules on the free movement of capital are merely an inevitable
consequence of the restriction imposed on the provision of services, it is
not necessary to consider whether the rules are compatible with Art. 63
[49].
- This is the Predominant Consideration Test
- Fidium Finanze was a Swiss company incorporated under Swiss law,
which granted around 90% of it’s credit to Germans resident in Germany.
The German Authorities took issue with a Swiss company providing
services providing capital in Germany over the internet on the basis of a
law which did not allow for such activities without representatives nor
authorised agents in German territory.
- Credit is an example of Capital. But this instance could also be the
provision of services. The court said that this was primarily a case on the
free movement of services. No need to assess whether there was a
restriction of FMOC
- Switzerland has no bilateral agreement with the EU covering
Services → the situation would be different with an EEA country.
Therefore they could not rely on Free movement of Services
provision as Switzerland is a third country. Could not rely on
FOMC with TC’s as Services were predominant.
- Commission v Portugal ( C-543/08 [2010]):
- Whether national legislation falls within the ambit of one or other of those
fundamental freedoms, the purpose of the legislation concerned must be
taken into consideration [40]
- Provisions of national law which apply to the possession by nationals of
one MS of holdings in the capital of a company established in another MS
allowing them to exert a definite influence on that company’s decisions
and to determine its activities fall within the ambit ratione materiae of
freedom of establishment [41]
- 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 company to
which that capital is made available in order to carry out an economic
, activity fall within the ambit of the free movement of capital. [42].
- SEGRO (Joined Cases C-52/16 and C-113/16):
- Although that legislation is, prima facie, capable of being covered by both
the fundamental freedoms mentioned by the referring court, the fact
remains that, in the context of the main proceedings, any restrictions on
freedom of establishment resulting from that legislation are an inevitable
consequence of the restriction of the free movement of capital and,
therefore, do not justify an independent examination of that legislation in
the light of FMOC [55]
RESTRICTIONS
- Art. 63 TFEU:
- Sanz de Lera (C-163,165 and 240/94 [1995]):
- [Art. 63] lays down a clear and unconditional prohibition for which no
implementing measure is needed. [41]
- [Art. 63] may be relied on before national courts and may render
inapplicable national rules inconsistent therewith. [48]
- → Art. 63 has Direct Effect
- Nothing in the judgement that indicates that Art. 63 cannot be used
horizontally → therefore possible in Theory (Usher (1994) p.27)
- Westdeutsche Landesbank: a private defendant relied on Art.
63
- Burtscher: defendant was a private individual, although the case
concerned a private measure.
- An argument against horizontal applicability could be based by way of
analogy with Art. 34 on FMOG, which has been largely confined to
actions against the state.
- Although the rationale for this limitation is largely based on the
overlap which would otherwise occur between Art. 34 and Arts.
101 and 102.
- Art. 63 (1): restrictions on the movement of capital between Member States and
between Member States and Third Counties shall be prohibited.
- A cross border requirement → internal cases are not covered.
- Libert (C-197/11 & C-203/11)
- It is common ground that the applicants in the main proceedings
are Belgian nationals and that all aspects of the main proceedings
are confined within one Member State. However, it is by no means
inconceivable that individuals or undertakings established in
Member States other than the Kingdom of Belgium have been or
are interested in purchasing or leasing immovable property
located in the target communes and are thus affected by the
provisions of the Flemish Decree in question [34]
- The term ‘Capital’ is not defined in the Treaties → the Court held that
, reference can be made to Annex 1 of Old Directive 88/361 (Trummer and
Mayer (C-222/97 [1999] [21])):
- Court still uses this in making assessing Capital movements.
- SEGRO (Joined Cases C-52/16 and C-113/16)
- Capital movements include investments in real estate, relating to the
acquisition of usufruct over agricultural land, on the territory of the MS by
non-residents. [56-57]
- It is for the CJEU, with the Aid of the Directive to determine what constitutes a restriction
on the free movement of Capital:
- Westdeutsche Landesbank: prohibition on mortgages in a foreign currency is
prohibited by Art. 63.
- Commission v Portugal ( C-543/08 [2010]): Restrictions on share dealings and
‘Golden Shares’ come within Art. 63.
- A veto over resolutions is liable to discourage operators from other MS’s
from making direct investments; portfolio investments and is liable to
depress the value of the shares in the company and thus reduce the
attractiveness of such shares. [56-57]
- Any measure which is designed to prevent the participation of the
shareholder in the management of an undertaking in the company’s
control may deter investors and constitute a restriction on the free
movement of capital [58].
- The right to appoint a director constitutes a restriction of the free
movement of capital. Although a right of qualified minority would be
acceptable, such a right must not be reserved exclusively to the state, as
this would deter investors from other MSs from investing in the share
capital of that company. [62-64]
- Portugal maintained special rights in a Privatised Energy Company,
allocated in connection with golden shares, relating to the exemption from
the 5% voting ceiling applying to the votes of other shareholders, the right
to appoint a director of the company and the right of veto over resolutions
of the general assembly of the shareholders in relation to certain
provisions.
- See also: C-282-283/04 Commission v Netherlands; C-212/09 Commission v
Portugal; C-105-107/12 Netherlands v Essent NV; C-250/08 Commission v
Belgium.
- Sanz de Lera (C-163,165 and 240/94 [1995]):
- The requirement for administrative approval to take amounts of money
out of the country was too onerous and not proportionate as a
declaration → could have achieved the aims in a more
proportionate way.
- Inspecteur van de Belastingdienst (C-376/03 [2005]):
- Restrictions on the acquisition and disposal of property come within Art.
63 (See also: C-443/06 Erika [2007])
