Summary: 6. Free Movement Of Capital And Payments

Read the summary and the most important questions on 6. Free movement of capital and payments

• 1 Introduction

• What are the three fundamentals when it comes to fundamental freedom of capitals acc. To art. 63-66 TFEU?

  • Liberalisation of capital as factor of production
    
  • Movement of capital between MS and between MS and third countries
  • Benefit for lawfully established capital

• 2 Scope

• We also have a prohibition of restrictions of the free movement of capital. This is in cases 286/82 and 26/83 Luisi and Carbone. What are the two different capitals and give some examples?

  Movements of capital - financial operations essentially concerned with investment of funds
  
  - monetary capital: securities, loans, sureties
  - real capital: real estate investments, stake in companies

• We also have a prohibition of restrictions of the free movement of payments. What is the most important transfer and give some examples?

  - Transfer of money: cash, transactions, cheque, bill, as a remuneration in exercising one of the other fundamental freedoms.
  
  Both prohibitions apply between MS and with third countries

• ECJ joined cases 286/82 and 26/83, judgement of 21 Jan 1984, Luisi and Carbone. What were the facts of the case?

  • Italy limited export of foreign currencies for use in a foreign country to 500.000 lira. Italians Luisi and Carbone had collected foreign currencies amounting to a couple of million lira which they intended to use in other MS for touristic purposes and for medical treatment.
    
  • Italian authorities imposes fines. ECJ: Do these facts fall under free movement of capital or free movement of payments?

• ECJ joined cases 286/82 and 26/83, judgement of 21 Jan 1984, Luisi and Carbone. What was the decision of the ECJ?

  • Current payments are foreign currency transfers constituting a consideration for the provision of a service or transfer of a good -> movement of payments
    
  • movement of capital are financial operations essentially concerned with the investment of funds inquisition and not a remuneration ef for a service
  • physical transfer of bank notes, movements of capital where transfer corresponds to an obligation to pay arising from a transaction involving the movement of goods or services
  • controls lawful, but may not effect the "the normal pattern of provision of services"

• We have also a prohibition in discrimination. On what grounds?

  • On grounds of country of origin or destination of capital
    
  • Open and disguised (interest discounts for construction with domestic banks only)
    
  • tax reductions only for income from investments in respective country
    
  • Non-discriminatory rules

• ECJ case C-483/99, judgement of 4 June 2002 COM/France. What were the facts of the case? Is there discrimination?

  • France has adopted rules for a state-held special share of the company Société national Elf-Aquitaine, which supplied France with petroleum products
    
  • The share allowed for the following special rights for France:
  • larger direct or indirect investments were subject to prior authorization by French minister of economic affairs. 
  • Veto right against decisions about the cession of the majority capital of the four subsidiaries or about its use as a surety

• ECJ case C-483/99, judgement of 4 June 2002 COM/France. What was the decision of the ECJ? Is there discrimination?

  • No discrimination, but acquisition of shares may be prevented and investors may be impeded to invest in this company. This measure may render free movement of capital illusory
    
  • Justification: public security; necessity requirement not met. 

• ECJ case C-112/05, judgement of 23 Oct 2007, COM/Germany. What were the facts of the case? Is there discrimination?

  • VW law in Germany:
    
  • limits the voting rights of each shareholder to max. Of 20% of VW's share capital
  • Federal state and Land Lower Saxony were entitled to appoint two representatives each to the company's supervisory board, as long as they own a share
  • requires a majority of 80% of shares represented for certain resolutions of general assembly of shareholders (normally: 75%)

• ECJ case C-112/05, judgement of 23 Oct 2007, COM/Germany. What was the decision of the ECJ? Is there discrimination?

  • VW law is a national measure
    
  • prerogatives of FRG/Land Lower Saxony allow significant influence in spite of low investments
  • Unlawful restriction of movement of capital -> may impede direct investments (chilling effects)