Action brought on 25 April 1998 — Commission of the European Communities v Portuguese Republic

(Case C-171/08)

(2008/C 171/36)

Language of the case: Portuguese

Parties

Applicant: Commission of the European Communities (represented by E. Montaguti, P. Guerra e Andrade and M. Telles Romão, acting as Agents)

Defendant: Portuguese Republic

Form of order sought

Pleas in law and main arguments

The Portuguese State holds 500 golden shares in Portugal Telecom S.A. (PT). Those shares give the State the right of veto in respect of resolutions for the election of the officers of the General Assembly, the election of the Chairman of the Audit Committee and of the Official Auditor, the application of profit and loss accounts, alteration of the memorandum and articles of association, increase in capital, restriction and removal of preferential rights, issue of bonds and other real property, the fixing of the general aims and fundamental principles of the company's policies, defining of the general policy principles for participation in other companies, authorisation of change of the company seat and authorisation of the purchase of shares representing more than 10 % of share capital by shareholders carrying on, directly or indirectly, an activity in competition with that of the companies controlled by PT, and the right of veto in respect of a third of the total number of directors, including, necessarily, the Chairman of the Board of Directors.

The Commission is of the view that such rights of veto constitute restrictions of movements of capital and of freedom of establishment. Such measures amount to an impediment to direct investment in PT, an impediment to portfolio investment and an impediment to the exercise of freedom of establishment.

Those special rights of the State constitute State measures, for the golden shares are not a consequence of a normal application of company law.

The golden shares have nothing to do with lawful objectives of public interest or, especially, with those pleaded by the Portuguese State, viz., public order and safety, maintaining of cable and copper networks and maintaining of wholesale and retail activity within PT, public service concessions, the pattern for regulating the market in telecommunications and any disturbance of the capital market.

In any case, the Portuguese State has not observed the principle of proportionality, for the measures at issue are not apt to ensure that the objectives pursued are attained and they go beyond what is necessary in order to attain those objectives.