61998C0367

Introduction

1. These three actions for infringement of the Treaties brought by the Commission involve the same legal issue: the compatibility with Community law of national systems which grant the executive certain prerogatives to intervene in the share structure and in the management of privatised undertakings in strategically important areas of the economy. These special powers, of which there are various forms (procedures for administrative authorisations, shares to which privileges are attached, appointment of members of company bodies) and which are exercised in various ways (by virtue of the power to object to the acquisition of capital, rights to intervene in dealings affecting assets) are commonly known as golden shares.

In spite of the differences observed between the national provisions at issue, the question of their compatibility with Community law is always raised in similar terms. In the interests of clarity of expression and an economy in the administration of justice, I shall therefore consider the three actions together.

Finally, it should be noted that two further actions for infringements of the same kind are pending, against Spain and the United Kingdom respectively. They have not been joined with the present cases because the proceedings are at an early stage, but there is no doubt that the judgment given now will have a decisive influence on the judgments given in those cases in due course.

Relevant national law

Case C-367/98, Commission v Portugal

2. The Commission complains that the Portuguese Republic has adopted legislation which limits the access of foreigners, including Community nationals, to the capital of undertakings which are in the process of being privatised and also makes any subsequent transfer of those shares subject to ministerial authorisation. The applicant considers that each of those two aspects of the legislation constitutes an infringement of the principles underlying freedom of establishment and free movement of capital.

3. Article 13(3) of Law No 11/90 of 5 April 1990, the framework law on privatisation, allows each decree privatising undertakings to limit the number of shares which may be acquired or subscribed for by companies which are foreign or have mostly foreign capital, and to fix the maximum foreign interest in the share capital of the privatised company and in its management bodies. The penalty for infringement is the compulsory sale of shares which exceed those limits, loss of the voting rights they confer or cancellation of acquisitions or subscriptions.

4. In accordance with that provision, the decree-laws privatising certain undertakings, essentially banks and insurance companies, limited the foreign capital holding to between 5% and 40%, depending on the circumstances.

5. Decree-law No 65/94 of 28 February 1994 sets a limit of 25% on foreign capital holdings in undertakings whose process of privatisation has been completed, unless a higher limit has been determined.

6. Article 1 of Decree-law No 380/93 of 15 November 1993 provides:

1. The acquisition inter vivos, with or without consideration, by a single natural or legal person, of shares representing more than 10% of the voting capital, and the acquisition of shares which, when added to those already owned, exceeds that limit, in companies which are to be privatised, will require the prior authorisation of the Minister for Financial Affairs.

2. Subject to the conditions laid down for each privatisation procedure, the provisions of the previous paragraph will apply only to acquisitions made following privatisation.

Case C-483/99, Commission v France

7. Article 2 of Decree No 93-1298 of 13 December 1993 creating a special share for the State in Société Nationale Elf-Aquitaine provides that any transaction which causes a natural or legal person, acting alone or with others, to have a direct or indirect holding which exceeds one tenth, one fifth or one third of the company's share capital or its voting rights, must have the prior approval of the Minister for Economic Affairs (Paragraph 1).

8. Furthermore, the Ministers for Economic Affairs and Industry each appoint a non-voting member of the company's board of directors to represent the State (Paragraph 2).

9. In short, the special holding makes it possible to oppose any agreement to sell or charge the company's main assets, in the circumstances laid down in Decree No 93-1296.

10. Decree No 93-1296 of 13 December 1993 concerning, amongst other matters, certain rights linked to special holdings, provides that the decree authorising a person having a special holding to object to operations to sell or charge assets which might adversely affect the national interests must list, in an attached schedule, the assets concerned (Article 1).

11. A statement expressing the intention to sell or charge those assets must be submitted to the Minister for Economic Affairs, together with all the documents necessary for examination of the case. The operation will be deemed to be approved if the Minister does not raise an objection within a period of one month, which may be extended by 15 days, from the date of receipt of the complete file. Before that period elapses, the Minister may waive his right to object (Article 2).

Infringement of these obligations results in automatic annulment of the operations carried out (Paragraph 3).

Case C-503/99, Commission v Belgium

12. A Royal Decree of 10 June 1994 establishes in favour of the State a special holding in Société Nationale de Transport par Canalisations (SNTC), to which are attached certain special powers to be exercised by the Minister for Energy (Article 1).

13. The Minister may object to any transaction relating to the capital of SNTC which might adversely affect national interests in the field of energy (Article 2(1)). Transaction means any operation by which a natural or legal person directly or indirectly acquires 5% or more of the capital or voting rights of SNTC, or increases his holding in the capital or voting rights in such a way as to hold 10% or more (Article 2(2)).

14. The special holding authorises the Minister to object to any sale, charging or change of use of any pipes or conduits owned by SNTC which constitute large infrastructures for the transmission of energy products nationally or which might serve as such. Prior notification of any operation of that nature must be given to the Minister, who has 21 days in which to exercise his right to object (Article 3).

15. Furthermore, the special holding allows the Minister to appoint two Federal Government representatives to SNTC's board of directors, with the right to speak but not to vote. These representatives may appeal to the Minister against resolutions of the board of directors, within four days of their adoption or of the date on which they learn of their adoption, if they consider them to be contrary to Government guidelines on energy policy, including energy supply objectives. Such appeals have suspensory effect and lapse if not upheld within eight days.

16. By virtue of a Royal Decree of 16 June 1994, a similar system applies to the company Distrigaz.

Procedure

17. I do not think the pre-litigation procedure in the three cases displays any points of interest which deserve special attention.

18. The United Kingdom and Spain have intervened, the former in support of France and Belgium and the latter in support of France.

19. At the hearing, I asked the parties appearing to express their views, in particular, on the bearing on the cases of the principle of neutrality in relation to the ownership of companies.

Analysis of the actions

Preliminary considerations

20. First of all, the types of legislation whose compatibility with Community law may be questioned in the three cases must be clearly identified. The first category is legislation which applies only to non-nationals, as opposed to that which applies without distinction to nationals and foreigners. Within the latter category restrictions relating to the acquiring or increasing of a holding in the capital of a privatised company (access restrictions) must be distinguished from restrictions which, by granting public authorities powers to oversee the resolutions adopted by the company bodies, have an effect on the very management of the company (management restrictions).

21. It is also necessary to determine the legal basis of the alleged infringements, in the light of which the actions must be evaluated. All three cases are based on Articles 43 EC and 56 EC, that is to say, on the principles deriving from the fundamental freedoms of establishment and movement of capital. Furthermore, in the application against Portugal, the Commission refers to what is now Article 294 EC and also to Articles 221 and 231 of the Act of Accession of Spain and Portugal. I do not think I need to analyse these last three provisions, since they do not add anything significant to the content of the first two. Furthermore, neither the Commission nor the Portuguese Republic has drawn any particular conclusion from those three provisions, other than that the normal rules of the Treaties apply to Portugal.

The three actions must therefore be considered in relation to the fundamental freedoms of establishment and movement of capital, although I think that only the former requires in-depth examination.

Restrictions applicable only to the nationals of other Member States

22. This type of restriction appears only in Case C-367/98 Commission v Portugal.

23. Article 13(3) of Law No 11/90, the framework law on privatisation, in fact authorises the legislature to limit, by means of the corresponding privatising decree, the number of shares which may be acquired or subscribed for by companies which are foreign or which have mostly foreign capital, and to fix the maximum foreign participation in the capital of the privatised company and in its management bodies. This power has been incorporated in numerous implementing provisions.

24. Moreover, Decree-law No 65/94 sets a limit of 25% on foreign company shareholdings in undertakings whose privatisation procedure has been completed, unless a higher limit has been determined.

25. The Commission considers that the restrictions imposed on non-Portuguese Community undertakings, by framework law No 11/90, the various implementing decree-laws and Decree-law No 65/94, in respect of access to the capital of privatised undertakings, constitute discrimination between Portuguese nationals and nationals of other Member States which is incompatible with Articles 52 (now, after amendment, Article 43 EC) and 73b of the EC Treaty (now Article 56 EC).

26. The Portuguese Government draws attention, first, to the fundamental importance, from a historical, political and financial point of view, of Law No 11/90. Passing the Law made it possible to carry out the successful privatisation of companies which had been nationalised at the time of the revolution of 25 April 1974. It related only to companies which had been in Portuguese private ownership and had become public. In 1990 the legislature considered that it was only fair that assets which had been nationalised to the detriment of Portuguese citizens should be returned to the Portuguese people, and that this ought to facilitate the reorganisation of national economic groups.

27. Second, Portugal claims that, in spite of the wording of Article 13(3) of Law No 11/90, the Portuguese authorities had made a political commitment to the Commission not to include Community companies in the definition of foreign entities. This undertaking was reinforced by Article 8 of the Portuguese Constitution, which provides that Community law takes full effect in the Portuguese legal order, thus preventing any interpretation of national provisions which contradicts its fundamental principles.

28. It must be inferred, from the very broad terms of Article 13(3) of Law No 11/90, that the restriction it authorises affects both straightforward foreign holdings in the capital of the privatised undertakings and those which entail involvement in management through the acquisition of certain rights affecting questions of policy. It must be analysed in the light of Articles 43 EC and 56 EC. The restriction also applies to Portuguese entities with mostly foreign capital, a situation which, in so far as it does not fall within the definitions of the aforementioned provisions, will have to be uniformly evaluated under Article 294 EC (equal treatment as regards financial investment in companies) or, as a last resort, under Article 12 EC and the general prohibition it establishes against discrimination on grounds of nationality.

29. Now, the defendant's arguments are not adequate to justify, under those provisions, legislation which expressly purports to apply to other Community nationals. Furthermore, it may be clearly inferred from the historical explanation given by the Portuguese Government that the legislation does not exclude the nationals of other Member States from the restrictions it imposes. It is also significant, as the Commission points out, that the Portuguese Government submitted an unsuccessful proposal to the Assembly of the Republic for the amendment of Law No 11/90, removing from it any aspects which could be considered to discriminate against European Union investors. Anyway, an infringement by the State does not cease to be one because the Community rule which has been infringed has direct effect and primacy in the legal order of the State against which proceedings have been brought. Otherwise, merely to invoke the primacy of Community law would be enough to weaken any action for infringement, thereby depriving that form of action of any substance or effectiveness.

30. It should therefore be declared that the authorisation contained in Article 13(3) of Law No 11/90 and the other provisions implementing it, and also the provisions of Decree-law No 65/94 of 28 February 1994, are contrary to the principles established in Articles 12 EC, 43 EC and 56 EC.

Restrictions applicable without distinction

31. The Commission alleges that the three defendant States have retained schemes which, although applicable without distinction to their own nationals and to the nationals of other Member States, constitute, in the Commission's view, restrictions on the free movement of capital and freedom of establishment.

32. It specifically complains that Portugal applies Decree-law No 380/93 which subjects to prior authorisation by the Minister for Financial Affairs any acquisition of shares over a certain threshold in companies which are being privatised.

33. France is criticised regarding legislation with similar effects, in relation to the company Elf-Aquitaine (Decree No 93-1298), and also various powers to participate in the management of the company, through the appointment of members of the board of directors and the right to object to any sale or charging of the company's main assets which might adversely affect the national interests (Decree No 93-1296).

34. Finally, the criticism levelled at Belgium is that, under two Royal Decrees, of 10 and 16 June 1994, the Minister for Energy is able to object to any transaction relating to the assets of the SNTC and Distrigaz which might adversely affect national interests in the field of energy. The Minister may prohibit any transfer, charging or change of use of the large infrastructures for the transmission nationally of energy products owned by those companies. Furthermore, a procedure is available for objecting to any resolution adopted by the company bodies which may be contrary to Government guidelines on energy policy, including the energy supply objectives.

35. Referring inter alia to the case-law relating to the right of free establishment encapsulated in the judgment in Gebhard, the Commission points out that national measures which, even if not discriminatory, are liable to hinder or make less attractive the exercise of fundamental freedoms guaranteed by the Treaty are incompatible with Community law unless they are justified by imperative requirements in the general interest, are suitable for securing the attainment of the objective which they pursue and do not go beyond what is necessary in order to attain it.

36. The applicant adds that the authorisation for the acquisition of specific quotas in the capital of the companies concerned must be subject to objective, stable and public criteria, so as to reduce the discretionary power of the national authorities to a minimum.

According to the Commission, the various measures at issue do not fulfil those requirements. In particular, their discretionary nature precludes any assessment of proportionality.

37. For their part, the defendant Member States contend that their respective regulations observe the principles of Community law. They assert that they are of a purely transitional nature (Portugal) or that they fulfil the conditions of relevance and proportionality needed to justify an exception to the general rule in order to protect the general interest (France and Belgium).

38. If the applicant's argument is accepted, and even if it is conceded that the national rules pursue objectives of a higher order, it is not easy to escape an unavoidable legal inference: the imprecision of the circumstances in which they apply and the absence of effective criteria governing their application render it impossible to make the assessment of compatibility and proportionality required by the case-law of the Court of Justice.

39. Nevertheless, I am of the view that, as far as the restrictions that apply without distinction are concerned, a fundamental error has been made in the way in which these three actions have been brought: the Commission has sidestepped the legal consequences that follow from Article 295 EC.

40. Article 295 EC (formerly Article 222 of the EC Treaty) states, very emphatically, that the EC Treaty shall in no way prejudice the rules in Member States governing the system of property ownership.

41. In its Communication on certain legal aspects concerning intra-EU investment, the only reference to Article 295 EC is found in the first footnote. When alluding to the privatisation programmes undertaken by various Member States, the Commission feels under a duty to point out that the movement of a firm from the public to the private sector is an economic policy choice which, in itself, falls within the exclusive competence of Member States, stemming from the principle of neutrality in the Treaty vis-à-vis the system of property ownership, established in Article 222.

In keeping with this interpretative approach, in its application against France, the Commission explains that Article 295 EC is not relevant for the purposes of the proceedings, since what is at issue in infringement proceedings is not the State's participation in the control of the privatised company, but certain rights and powers relating to the distribution of the ownership [of that company] between private persons.

42. For the Commission, the expression system of property ownership seems only to include two opposing situations: public ownership and private ownership. Furthermore, that ownership can be exercised only by having a sufficient holding in the capital of the company concerned. This reductionistic interpretation of Article 295 EC is not in keeping - as I shall demonstrate - with its significance within the Treaty or with the function which the Treaty assigns to it.

43. The first indication of the fundamental importance which must be accorded to Article 295 EC within the EC Treaty is to be found in its position in that document. It is included in Part Six, which is devoted to general and final provisions and affects all the Treaty rules.

44. Also, the forceful and unconditional nature of its wording gives an idea of its importance: the expression in no way is not included in any other provision in the Treaty, and there are few precepts which contain no limitations at all (they are usually introduced by conjunctional phrases such as subject always to or within the framework of).

45. Article 295 EC is in the unique position of deriving its authority directly from the Schuman Declaration of 9 May 1950, on which it has been based, which reinforces its specific nature and symbolic importance.

46. However, it is only possible to evaluate the fundamental nature of that provision after analysing the function assigned to it by the Treaty.

47. Owing to its broad terms, a purely literal interpretation cannot provide any conclusive information beyond those terms. By that I mean that the imprecision, from a legal point of view, of the expression system of property ownership may be not completely unproductive: it constitutes perhaps the clearest indication that this is not a legal, but an economic, concept.

48. Nor is a systematic interpretation revealing.

49. It is therefore necessary to adopt a historical and teleological approach in order to ensure that the very generality of the terms used does not render the provision entirely ineffective. In fact, if not prejudice, ne pas préjuger, lasciare impregiudicato or no prejuzgar includes, as it appears to do, any measure affecting the scheme of property ownership, taken in its widest sense, the number of substantive rules (of a treaty pursuing economic integration) which would be affected would be extremely high.

50. A historical interpretation leads me, first, to the proposal presented by the French Minister for Foreign Affairs, Robert Schuman, on 9 May 1950. That founding statement already contained - as I have pointed out - the reservation contained in Article 295 EC. Because of its programmatic nature, it is unthinkable that the reference to system of property ownership is used in any technically legal sense. Furthermore, the reference was to the system of ownership of the undertakings. Article 83 of the ECSC Treaty includes this wording when it provides that the establishment of the Community shall in no way prejudice the system of ownership of the undertakings to which this Treaty applies. Whilst the point relating to subjection to the provisions of the Treaty may be to no avail, being as it is superfluous, the abovementioned term system of ownership of the undertakings suggests that the true concern of the provision has to do, not with the structure of control in each of the Member States, but with the ownership of the companies engaged in trading activities.

51. The preparatory documents confirm this impression. Thus, the first version of what was to become Article 295 EC was presented by the Drafting Committee on 5 December 1956. It was number 9 of the general principles, and stated: Le présent Traité ne préjuge en rien le régime de propriété des moyens de production existant dans la Communauté (This Treaty shall in no way prejudice the system of ownership of means of production which exists within the Community).

The second version, prepared by the Common Market Group, appeared on 18 January 1957. It was the same as that contained in Article 83 ECSC, but was placed amongst the provisions relating to monopolies. Three days later the Group decided to include it amongst the competition rules, and at the same time removed the superfluous reference to subjection to the Treaty.

The definitive version, which was to be incorporated in Part Six of the Treaty, was adopted by the Committee of Heads of Delegation of 6 March 1957, which deleted the additional phrase of the undertakings.

52. It may be clearly inferred from the foregoing analysis of the gestation of the precept and a comparison of it with its twin provision in the ECSC Treaty, that its aim is to declare the neutrality of the Treaty in respect of the ownership of undertakings, in the economic sense, that is to say, as means of production.

53. In order to determine the precise kind of matters relating to the ownership of undertakings which might fall within the scope of the article, it is necessary to adopt a teleological approach. According to the wording put forward by Schuman, the objective of the Treaties establishing the European Communities was to achieve sectorial and, therefore, partial, integration. The definition and implementation of economic policy remained in the hands of the States, which were subject only to restrictions - some of which, however, were very important - relating to the instruments used to pursue their political and economic objectives, such as the rules on free competition and State aid. The Treaties did not affect the other instruments of intervention, of which the most important was the capacity to influence economic life through ownership of the undertakings.

54. From this, first, it may be inferred - once again - that the expression system of property ownership contained in Article 295 EC refers not to the civil rules concerning property relationships - an aspect which is, furthermore, wholly alien to the purposes of the Treaties - but to the ideal body of rules of every kind, deriving from both private and public law, which are capable of granting economic rights in respect of an undertaking: in other words, rules which allow the person vested with such ownership to exercise decisive influence on the definition and implementation of all or some of its economic objectives.

55. At the same time it may be inferred from a purposive interpretation that the distinction between public and private undertakings, for the purposes of the Treaty, cannot be based merely on the identity of its various shareholders, but depends on the opportunity available to the State to impose specific objectives of economic policy other than the pursuit of the greatest financial gain which characterises private business.

56. In short, the Treaty's observance, enshrined in Article 295 EC, of the system of property ownership in the Member States must extend to any measure which, through intervention in the public sector, understood in the economic sense, allows the State to contribute to the organisation of the nation's financial activity.

57. It is now necessary to look closely at the various rules which the Commission maintains are incompatible with the Treaty because they constitute restrictions, in principle applied in a non-discriminatory manner, on freedom of establishment and the free movement of capital.

58. In all three cases, exceptional rights and powers have been conferred on the public authorities.

59. For the present purposes, I think it is important to make two observations.

60. First, it is agreed between the parties that the undertakings subject to special supervision have been privatised recently. That is to say, the State has released its strategic shareholding in them, the same shareholding which allowed the public authorities to participate in the determination of the undertaking's financial objectives through its decisive influence on the shaping of the will of the company organs. The Commission, however, attaches no significance to this fact. For the Commission, there are only (a) public undertakings, defined as those in which the public authorities have a majority shareholding and whose activities are exempt, at least in part, from the rules of the Treaty by virtue of Article 295 EC, and (b) the others, all of them private undertakings, amongst them those to which these proceedings relate. The Commission adheres here to a purely private-law interpretation of the concept of ownership of an undertaking.

61. The second point is that, in so far as these actions are concerned, the specific modalities associated with those prerogatives seem to be accorded no importance. It thus makes no difference to the Commission whether the powers are exercised by virtue of a traditional right of administrative supervision or by recourse to the definition of a special holding in the capital of the undertaking concerned, a definition which may be included in its articles of association. The applicant has not considered, even superficially, whether the expedient of creating a special holding, in so far as it is similar in form to the status of privileged shareholders adopted in the laws of several Member States, could come within the definition of system of property ownership. By its omission, the Commission is, this time, taking a teleological view, of a financial nature, of what the special powers constitute. The choice is correct, but it is not consistent with the line of argument it develops in relation to the first point.

62. The nature of the various measures which are the subject of these proceedings is also diverse; authorisation for acquiring shareholdings above a certain threshold, objection to any sale, charging or change of use of the undertaking's main assets, appointment of members of the board of directors, objection to resolutions contrary to Government guidelines.

The common denominator of these measures is that they constitute means by which the public authorities may participate in the activities of certain undertakings of strategic interest for the national economy, with the purpose of imposing economic policy objectives. That is to say, precisely the matter reserved for the sovereignty of the Member States, according to the interpretation of Article 295 EC which I have just expounded.

63. This teleological approach to the matter at issue makes it possible to preserve the effectiveness of Article 295 EC and, furthermore, to avoid the absurd consequences of the purely private-law interpretation suggested by the Commission. It makes no sense for the EC Treaty to contain a provision whose sole aim is to state the obvious, namely that the Treaty does not affect the structure of property legislation in the Member States. It does not affect parent-child relations either; or inheritance rules, or grounds of nullity of marriage; or even the law of obligations; but there is no need for provisions to point this out: it is not the aim of the EC Treaty to integrate the private law of the Member States.

64. As a consequence of the Commission's approach, different treatment would be accorded to two situations which, nevertheless, produce identical effects from the point of view of the fundamental freedoms established in the Treaty: on the one hand, that of an undertaking either wholly or mostly owned by a public authority; and, on the other, that of a private undertaking subject to a general system of administrative supervision in respect of its decisions. The comparison is even more powerful if made between a public undertaking, in the Commission's definition, a preserve which is closed to Community candidates, and a private undertaking, which is open to those same candidates, although part of its activities are subject to administrative control.

65. Article 295 EC, if it means anything - and there is sufficient evidence to indicate that it does - is concerned with property not in the sense of absolute ownership but rather - I insist - in the sense of possessing economic title, in its various degrees and manifestations. A person or persons are vested with title to something if they are able to exercise a direct and decisive influence over its use or over fundamental aspects of its activity. Whether this influence stems from possession of securities, administrative authorisation, provisions in the articles of association or any other means allowed in private or public law, makes no difference for the purpose of the Treaty.

66. In any event, I do not wish to miss the opportunity of echoing a common- sense maxim invoked by the Spanish Government: he who is able to do the most, can also do the least. It is almost unthinkable that the Treaty should be intended to allow the Member States to retain the full shareholding in any undertaking, with the maximum restriction on the freedoms of establishment and movement of capital which that implies, and, at the same time, to stand in the way of a liberalised system subject to limited administrative conditions which are non-discriminatory and, therefore, more in keeping with the aim of integration.

To put it another way: if withdrawing financial activities from the private sector, by allocating them to publicly owned bodies (nationalisation or socialisation, pure and simple), creates a special system of ownership, as opposed to the ordinary system of ownership, there is no reason why a system of private ownership subject to special powers should not be viewed in the same way or should be treated less favourably.

67. The question of the legal consequences of applying the neutrality requirement in Article 295 EC to the measures at issue remains to be resolved. Its application in no way entails exemption from the mandatory provisions of the Treaty. They all produce their effects in accordance with their terms, in particular the prohibition of discrimination on grounds of nationality. Article 295 EC does not detract from application of the fundamental rules of the Treaty. What it does imply is those measures do not have to be considered per se as incompatible with the Treaty: they are covered, it may be said, by the presumption of validity conferred on them by the legitimacy of Article 295 EC. For these purposes, it is particularly enlightening that the reservation in Article 295 EC is worded as a prohibition against prejudicing. If the Treaty in no way prejudices, this means, at the very least, that a national measure concerning the public sector system for adopting decisions must be regarded as compatible with the Treaty, unless it is proved otherwise. And use of the term prejudice specifically implies that a measure which is in itself not discriminatory might be used in an unjustifiably discriminatory manner.

68. Subject to that proviso, it is clear that the specific exercise of the powers which the three defendant Member States have retained in the various cases, if it were contrary to the Treaty, could give rise to three cases for infringement before the Court of Justice. That applies, in particular, to any arbitrary inequality of treatment on grounds of nationality and to the failure to observe the Community provisions protecting free competition, in which Article 85 EC, and also Articles 81 EC and 82 EC, will very probably be of paramount importance.

69. It is necessary to ascertain the specific features of the categories of State action for which the reservation of Article 295 EC, understood in these terms, must be available, and also to establish whether there may be a temporal restriction on the lawfulness of such action. Although, on this occasion, this is a hypothetical exercise, since there is nothing to indicate that the powers at issue are designed to impose intolerable restrictions on the fundamental freedoms granted by the Treaties, I think it may be helpful to seek some clarification of the matter.

70. As regards maximum scope, it may be inferred from the principle of neutrality in the ownership of the undertakings that not just any type of measures which affect the organisation and management of those undertakings is acceptable, but only those which the State would have been able to adopt if it had kept the company under public ownership. In fact, it is only a matter of ensuring that privatisation does not have adverse consequences for the operational system (instrumentaler Einsatz) of the undertakings called upon to achieve, directly or indirectly, economic policy objectives. Amongst the measures which may be justified in this way are, of course, those which allow the State to participate in the selection of the majority shareholder or shareholders in the privatised undertaking. It is undeniable that the identity of those holding a majority of the shares is of fundamental importance in predicting what strategy options an undertaking will adopt.

Accordingly, the States' concern that a privatised undertaking should not be allowed to revert to the sphere of public-sector decision-making through the acquisition of a majority of its share capital by a public undertaking of another Member State is particularly understandable. Apart from the anomalous imbalance of an operation of that nature, especially if the predatory undertaking has a legal monopoly in its own national territory, the question arises of whether there is not a clear risk that freedom of competition might be reduced and the objectives of privatisation thus frustrated.

71. In so far as concerns the temporal aspect, I think that the improvement of the internal market, as foreshadowed by Article 4(1) EC, must lead to a reduction in the effectiveness - which is already, in itself, far from absolute - of the reservation contained in Article 295 EC. The adoption of sectorial legislation will have to mark the first step towards limiting it in time. Furthermore, even in the absence of any legislative intervention, the Court of Justice will be able to consider whether or not a restriction is timely by reference to the criterion of objective justification which, according to its settled case-law, must characterise specific intervention measures.

72. I am aware, in any event, that the interpretation which I propose is tinged by a degree of what has come to be called judicial restraint. This restraint seems to me, however, to be favoured by the Treaty, as I have explained, and required by the economic reality of the various sectors of activity subject to the privatisation process. In the absence of specific legislation, the Court of Justice seems to me ill-equipped to carry out complex evaluations of economic policy; it does not have the necessary resources, nor is that its task. It is urgent, therefore, that the Community legislature complete the work intentionally left unfinished in 1957.

Analysis of the relevant case-law

73. The judgment in Commission v Italy had already considered the compatibility with Articles 43 EC and 56 EC of special powers retained by the defendant Government in the privatised companies ENI SpA and Telecom Italia SpA. Article 2(1) of the revised wording of Decree-law No 332 of 31 May 1994 provided that the President of the Council of Ministers was to determine by decree the companies controlled directly or indirectly by the State and operating in the defence, transport, telecommunications, energy resources and other public service sectors in whose statutes, before the adoption of any measure resulting in the loss of control, a provision was to be inserted, by decision taken at an extraordinary general meeting, conferring on the Minister for the Treasury one or more special powers. Those powers, which are set out in Article 2(1), include a power to grant express approvals, a power to appoint one or several directors and an auditor, and a right to veto certain decisions. That is what happened in relation to the two aforementioned undertakings.

74. Italy did not contest the allegation of incompatibility and focused its defence on announcing legislative changes which would take into account the criticisms made by the Commission in its reasoned opinion.

75. The Court of Justice pointed out that it could take into consideration only the legal or statutory provisions adopted up to the expiry of the period fixed in the reasoned opinion and declared that there had been a failure to fulfil obligations.

76. That judgment is disturbing in so far as it seems to accept that the parties are free to decide how an action for failure to fulfil obligations under the Treaty is to be disposed of. However, it is clear that actions under Article 226 EC affect, as well as the parties to the proceedings, the Community public interest and, therefore, in the matter of interpreting the law, the defendant's acquiescence does not lead automatically to a judgment against it.

77. I therefore invite the Court of Justice not to attribute any relevance to this precedent.

78. Furthermore, the Court of Justice has barely had occasion to give a ruling on the true purpose and scope of Article 295 EC. What is more, I would venture to say that in most of the cases in which this provision has been raised its application was inappropriate. The subject-matter of the judgments delivered has been - far from the principle of neutrality in relation to State initiative in economic activities - questions relating to immovable property transactions or rules on patent and copyright. Reliance on Article 295 EC in these categories of case, although admissible, given the broad and imprecise wording of the provision, must be considered spurious in relation to the aims in fact pursued, and it is therefore not strange that the Court of Justice has not sought to educe any useful interpretative criterion from that provision.

79. In general, the Court of Justice has merely stated briefly that application of Article 295 EC does not detract from application of the fundamental rules of the Treaty.

80. That is what, of course, occurred in Fearon and Konle, cited above. The former concerned the compatibility with the Treaty of an Irish compulsory acquisition rule. The Commission stated in its observations that expropriation regulations were covered by the reservation in the then Article 222. The Court of Justice considered that that article did not allow avoidance of the fundamental principle of non-discrimination, which underlies the chapter of the Treaty relating to the freedom of establishment.

81. The second of the abovementioned precedents may give the impression of coming into conflict with certain aspects of the interpretation of Article 295 EC which I suggest. In the Konle case it was necessary to evaluate, in the light of the freedoms established by the Treaty, Austrian rules subjecting the acquisition of building plots in the Tyrol to prior administrative authorisation. The Court of Justice stated that a rule of that nature was contrary to the freedom of movement of capital, in spite of the fact that the system was, in theory, applicable without distinction to nationals and foreigners.

The similarity with the cases at issue here is more apparent than real. In the first place, as I have already pointed out, within the scheme of the Treaty, Article 295 EC can only take full effect in relation to matters concerning the control exercised by the public authorities in the undertakings which they partly own. In the second place, contrary to the strictly neutral wording of the national legislation which was the subject of the proceedings, the Court let itself be guided by other considerations which led it to decide that a clear risk of discrimination was inherent in the system of prior authorisation. The existence of those objective circumstances on which the Court of Justice based its argument distinguishes that case from the present ones, in which the Commission has not adduced any evidence capable of leading to the same conclusion.

82. Similar reasoning is also found, in essence, in Cases C-235/89 Commission v Italy and C-30/90 Commission v United Kingdom, cited above, which dealt with the compatibility with the principle of the free movement of goods of certain national provisions granting patent licences. Those cases differ, furthermore, from the present cases not only because, in them, Article 295 EC is invoked inappropriately, as I have already shown, but also because the declared aim of the rules in question was to promote national production. They were, therefore, openly discriminatory.

83. In other judgments it is rightly stressed that Article 295 EC does not exempt undertakings, whether publicly or privately owned, from the competition rules.

84. Thus, in Italy v Commission, the applicant alleged that the then Article 222 of the Treaty authorised the creation of State monopolies and that, therefore, the provisions of Article 86 of the EC Treaty (now Article 82 EC) were not applicable. The Court of Justice considered that the activities at issue in that case were not covered by any lawful monopoly and that therefore nothing precluded the application of Article 86 of the Treaty.

85. In another action brought by Italy against the Commission, this time relating to State aid by injections of capital into the motor-vehicle sector, the applicant claimed that to describe the injections of capital as State aid simply because the funds come from public resources constituted an infringement of the former Article 222 of the Treaty. The Court of Justice held, on the contrary, that the Commission had in no way encroached on the rules governing property ownership and had merely given identical treatment to public and private owners of an undertaking.

86. Finally, in Case C-163/99 Portugal v Commission, in which the Portuguese Republic contested a decision prohibiting the practices regarding the fixing of landing taxes followed by a company responsible for managing airports, the Court of Justice considered that the application of Article 86 of the EC Treaty to the case did not infringe the principle of neutrality as regards property ownership in the Member States.

87. The judgment of 18 December 1997 in Annibaldi is sui generis in that the Court of Justice was asked about the consequences in Community law of the restrictions on the use of property arising out of the establishment of a nature and archaeological park. The Court of Justice considered that this was a solely internal matter. However, by way of alternative reasoning, it held that given the absence of specific Community rules on expropriation and the fact that the measures relating to the common organization of the agricultural markets have no effect on systems of agricultural property ownership, it follows from the wording of Article 222 of the Treaty that the Regional Law concerns an area which falls within the purview of the Member States.

88. From this review of the case-law I am concerned above all to bring to light the lack of an express ruling by the Court of Justice on the scope of Article 295 EC in the area in which it should properly take effect, that is to say in relation to the capacity of the public authorities to impose economic policy options by exercising powers to intervene in the running of undertakings.

89. However, two distinguished Advocates General have indeed addressed the issue of neutrality of the Treaties in relation to economic interventionism on the part of the State.

In his Opinion in Joined Cases 188/80 to 190/80, Advocate General Reischl, when examining the scope of Article 90(3) of the EC Treaty (now Article 86 EC), considered that the then Article 222 placed limits on the Commission's powers under Article 90 of the Treaty to exert an influence on the internal structure of public undertakings, inasmuch as the public authorities' freedom to engage in economic activity may not be restricted to a greater extent than that provided for in the Treaty.

In a similar context and in line with that interpretation, Advocate General Tesauro, in the Opinion in Case C-202/88 France v Commission, maintained that it follows from the direct and self-evident relationship between Article 90 and Article 222 of the EC Treaty that there is at least a strong presumption in favour of the legality of a public undertaking, or a holder of exclusive rights as such.

90. On the basis of those pronouncements, I should like to emphasise that arrangements for the structuring of undertakings vested with exclusive rights, such as those involved in adjusting national monopolies of a commercial character under Article 31(1) EC, that is to say the various ways of organising undertakings that are subject to a certain form of public supervision, are not, viewed in the abstract, contrary to the Treaty. Their compliance with the fundamental principles of Community law must be assessed specifically, by means of a case-by-case examination of the nature and mode of the operation of the legal situation at issue, and of the aims and implications of creating or maintaining it.

91. To sum up, I consider that the special prerogatives of the public authorities with which the present infringement proceedings are concerned constitute rules governing public intervention in the activities of certain undertakings, with the aim of imposing economic-policy objectives, and that they are on the same footing as forms of ownership of the undertakings whose organisation is a matter for the Member States by virtue of Article 295 EC. The existence of such rules is not in itself contrary to the fundamental freedoms established by the Treaty, although the specific manner in which they are applied may indeed be so.

92. Accordingly, I propose that, with regard to that part of the application against the Portuguese Republic which concerns restrictions that are applicable without distinction, and with regard to the other two applications, the Commission's action should be dismissed.

Costs

93. In Case C-367/98, if the application is dismissed in part, as I propose, each party should, under Article 69(3) of the Rules of Procedure, pay its own costs.

94. In Cases C-483/99 and C-503/99, the applicant must be ordered to pay the costs under Article 69(2) of the Rules of Procedure.

95. The interveners should bear their own costs in accordance with Article 69(4) of the Rules of Procedure.

Conclusion

96. In the light of the foregoing considerations, I propose that the Court of Justice should:

in Case C-367/98,

- declare that, by enacting and maintaining in force Article 13(3) of Law No 11/90 of 5 April 1990, the framework law on privatisation, and the Decree-laws enacted in implementation thereof, the Portuguese Republic has failed to fulfil its obligations under Articles 43 EC and 56 EC;

- dismiss the remainder of the application;

- order the parties to bear their own costs;

and in Cases C-483/99 and C-503/99,

- dismiss the applications;

- order the Commission to pay the costs.