They can be shown to be necessary.

A closer look at the European High Court decisions and what they mean for European M&A

On June 4, 2002, the European High Court issued three decisions regarding 'golden shares', Le.

Special shareholder rights designed to enable national governments of EU member states to

Retain certain controls over formerly government-owned and subsequently privatised business

Enterprises. The press over-eagerly announced the end of golden shares in Europe.

I The reasoning of the Court

A closer look at the decisions, however, reveals that this is not yet the case. First, the Court struck

down only two of the three golden-share schemes at issue (namely the French government's

special rights in Elf-Acquitaine and Portugal's law on privatisations), but upheld the Belgian

Regulation. Second, the Court held that special governmental shareholder rights will be considered

justified, even though they constitute a restriction of the free movement of capital, if they: are

Designed to safeguard the provision of services in the public interest or strategic services as

Opposed to mere financial interests; layout well-defined procedures and objective criteria that are

Subject to judicial review; and do not go beyond what is necessary to attain the objective pursued.

After the Court stated the above justification requirements, it addressed whether the requirements

Were met in the schemes of each of the countries. The French scheme was struck down because,

Although it pursued a justified objective (namely, to guarantee supplies of petroleum products in

The event of a crisis), the measures employed went clearly beyond that which was necessary to

Do so. In addition, the Court considered that the French provisions lacked precision and allowed

The government too much discretionary power to control the company in question, Elf-Acquitaine.

The Portuguese scheme was struck down primarily because it prohibited the acquisition of more

Than a given number of shares by nationals of other member states. The Court reasoned that the

Portuguese rule provided for the manifestly discriminatory treatment of investors from other

Member states, with the effect of restricting free movement of capital. The Court rejected the

Justification arguments which were based on economic grounds.

On the other hand, the Court upheld the Belgian scheme, which was aimed at maintaining

Minimum supplies of gas in the event of a serious threat, as it met the justification requirements

Stated above. The objective of safeguarding energy supplies constituted a legitimate public

Interest, and the Belgian scheme provided for the least restrictive means of attaining such and set

Out well-defined procedures.

II The impact on European M&A

Although the discussed judgments address specific regulations in France, Portugal and Belgium,

The principal reasoning of the Court may be extended to many other forms of special shareholder

Date: 2015-12-11; view: 1013