Free movement of capital Flashcards
What does the free movement of capital do?
the free movement of capital ensures that capital can move to where it is needed in the internal market. In
doing so, free movement of capital enhances competition among market participants and Member States.
What is the personal scope of art. 63 TFEU?
the personal scope of the free movement of capital is broader than the scope of the
provisions of the other free movements. It is a unilateral liberalization of a sector regarding third
countries. Indeed, the free movement of capital applies to both natural and legal persons and in
relation to third countries.
When is there “capital” or “payment”?
Capital is money in all forms (currencies, other means of payment and negotiable instruments)
constituting financial transactions for the purpose of investment. Payments are about the transactions
themselves. They are a compensation or remuneration in the context of the trade in goods and
services. They are an element of that trade. The Council Directive provides some more details on what
kind of economic activities can actually be covered by the free movement of capital, namely Annex I
of the Council Directive.
What is the difference between free movement of capital and free movement of goods/services?
To make a distinction between the free movement of capital and the free movement of services, the
CJEU analyses the aim of the restriction in question, as well as the center of gravity of the economic
activity. The test question here is: ‘’Is the restriction on the free movement of capital or payments ‘…
merely an unavoidable consequence of the restriction…’ of the free movement of goods/services?’’ In that case, there is a barrier on the free movement of goods/services and the consequence is
automatically that any payments that are linked to the goods/services are restricted (capital). So,
actually, the center of gravity of the economic activity that is being restricted is not capital, but for
example the purchasing of the goods of the providing of services.
Note: in the Fidium Finanz-case, the free movement of capital was not applicable, but the free
movement of services was applicable. Hence, in this case it was about a third-country national and the
free movement of services is not applicable to third-country nationals, so no freedom was applicable.
The free movement of capital versus the free movement of establishment
Article 65(2) TFEU makes quite clear that the free movement of establishment has to be considered.
The check question is: ‘’What is the object and scope of the national measure in question?’’ This is
particularly interesting when looking at cross-border investments in companies. The CJEU has made
clear that if the owner or investor gains a definite influence in a company in another Member State
(for example by becoming a major shareholder or holding voting rights that gives a blocking minority)
that this is covered by the freedom of establishment (Cadbury Schweppes-case). If the investment
does not result in a definite influence on that company, the free movement of capital then applies
How can a breach of art. 63 TFEU be justified?
Express justification: art. 65(1) TFEU
Implied justification: The CJEU has extended its Cassis jurisprudence on the existence of implicit justifications on the free movement of capital. The restrictions may be permitted if the national rules pursue in a nondiscriminatory way an objective in the public interest and if they observe the principle of
proportionality, that is, if the same result could not be achieved by other less restrictive measures.
How can a breach of art. 63 TFEU be excepted?
- art. 61 TFEU
- art. 65 TFEU
- art. 66 TFEU
