Leiden Law Blog

Are absolute privatisation bans allowed under articles 345 TFEU jo 63 TFEU?

Posted on by Jelle Nijland in Private Law
Are absolute privatisation bans allowed under articles 345 TFEU jo 63 TFEU?

Governments may want to retain control in strategic companies, but measures giving them special positions are under close scrutiny from the Court of Justice of the European Union (CoJEU). Only measures that are in conformity with the fundamental freedoms are allowed.

However, it remains to be seen whether or not absolute privatisation bans are allowed under the Treaties because of Article 345 TFEU. Exactly this question is at the core of a reference for a preliminary ruling from the Hoge Raad der Nederlanden (the Dutch Supreme Court). A recent opinion given by Advocate General Jaaskinen in these joint cases of the State of the Netherlands versus Essent NV and Essent Netherlands BV, Eneco Holding NV and Delta NV seems to leave room for absolute privatisation bans. The system as set out in Dutch law amounts to an absolute ban on privatisation: shares in companies that operate distribution networks of electricity and gas can be transferred only within the circle of public authorities. This absolute privatisation ban is accompanied by a group ban and a ban on secondary activities.

Jaaskinen – whilst discussing the conformity of the Dutch liberalisation measures of the strategic economic sectors of electricity and gas – takes a stance on the relationship between Articles 345 TFEU and 63 TFEU (free movement of capital). Jaaskinen states in paragraphs 42 and 43 that since Article 345 TFEU contains the principle of neutrality of property (either public or private) the fact that private investors cannot acquire shares in a company because they are reserved for public shareholders, cannot be considered as a restriction within the scope of the situations prohibited by the Treaty. This does not mean that ‘the restrictive effects, other than those directly and inevitably result from the regulation of public or private property’ are not subject to the fundamental freedoms enshrined in the Treaty. Jaaskinen however reasons that in this particular case, the other restrictive measures concerning a group ban and a ban on secondary activities would seem justifiable under the rules of free movement because they are appropriate to achieve the objective pursued and do not go beyond what is necessary. If the CoJEU were to follow the same reasoning put forward by  Advocate Jaaskinen, a long-lasting dispute between the Dutch government and the protesting electricity and gas sectors would be put to rest. And more importantly, the relationship between Articles 345 TFEU and the fundamental freedoms would be illuminated. To be continued…

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