The Free Movement of Capital in the European Union and the Problem of 'Golden Shares' and Similar Instruments

The free movement of capital is one of the fundamental common market freedoms protected by the European Union (EU). The past decade or so was marked by the privatisation of industries formerly operated as public enterprises. Ownership of such enterprises, ranging from the energy and telecommunications sector to the operation of airports was made available to the broad public, individuals as well as institutionalised investors nationally and internationally. EU-member states have enacted or utilised provisions in their respective regulatory instruments either restricting the amount of shares that may be held by foreign investors or making foreign investment above a certain threshold contingent on the permission by the government or by creat­ing and retaining shares that give its holder, the national government, special voting rights ('golden shares'). The question arises to what extent these measures are, if at all, compatible with the free movement of capital in the EU. The European Court of Justice in Luxembourg (ECJ) has had to deal with a number of these cases in the past and has attempted to develop criteria, which must be met by national regulators. In this article an attempt is made to critically assess the jurisprudence of the ECJ concerning the free movement of capital guarantee and its scope in the light of national attempts to protect national interests. This question is relevant beyond the EU as the free movement of capital is – in principle – applicable also with regard to third countries and non-EU nationals.