L6: Capital

Question 1

Article 63

Answer 1

Prohibits all restrictions on the movement of capital, as well as on payments between MS

Question 2

What are examples of free movement of capital?

Answer 2

transporting cash, open and make deposits into bank accounts, register mortgages, buy and sell shares, receive dividends, receive gifts

Question 3

Article 64 (1)

Answer 3

allows Member States and the Union to keep in place specific types of rules affecting free movement of capital to and from third countries that were already in place on a certain cut-off date (31 December 1993 for all Member States except Bulgaria, Estonia, and Hungary, for which the relevant date was 31 December 1999, while for Croatia it is 31 December 2002) even though those rules contravene Article 63 TFEU.

Question 4

Article 65 (1)(a)

Answer 4

TFEU allows the Member States to apply provisions of their tax law which distinguish between taxpayers who are not in the same situation with regard to their place of residence or with regard to the place where their capital is invested. Article 65(1)(b) TFEU permits Member States to, inter alia, take measures which are justified on grounds of public policy or public security.

Question 5

What is capital?

Answer 5

those resources used for, or capable of, investment intended to generate revenue. That term covers, for example, cash, bonds and other debt instruments, and shares.

Question 6

Difference between a payment and capital

Answer 6

Payment: related to an underlying transaction
E.g. goods for which you receive money/need to pay for
Quid pro quo for a transaction

Capital: e.g. invest money in shares/ land acquired
The payment made for acquiring the land = a payment

Goods: physical appearance
Exception: banknotes = capital

Question 7

Are banknotes capital?

Answer 7

Yes (Bordessa)

Question 8

Fidium Finanz

Answer 8

“Where a national measure relates to the freedom to provide services and the free movement of capital at the same time, it is necessary to consider to what extent the exercise of those fundamental liberties is affected and whether, in the circumstances of the main proceedings, one of those prevails over the other”.

Question 9

What are the facts of Fidum Finanz

Answer 9

Swiss bank providing corporate loans to german co’s
Germany
For 3rd country financial institution to provide business loans in Germany requires authorisation by Bafin (German bank regulator)
Fidium Fiananz were told they could not provide business loans (did not have authorisation)
FF claimed an unlawful restriction on freedom of capital
Could not invoke establishment, as 3rd country nationals cannot rely on freedom of establishment
Capital has an external dimension
Court
Provision of services was affected (provision of the loans to customers in Germany)
Underlying capital (the loan) merely incidental to the service
Did not apply capital- focus is predominately on the provision of a service
As a swiss co, FF couldn’t rely on article 56

Question 10

What constitutes a restriction according to Festersen?

Answer 10

Potentially problematic measures “include those which are likely to discourage non-residents from making investments in a Member State or to discourage that Member State’s residents to do so in other States”.

Question 11

Is free movement of capital capable of vertical direct effect?

Answer 11

Yes

Question 12

UK Golden Shares

Answer 12

Prohibition in Article 63 goes beyond the mere elimination of unequal treatment, on grounds of nationality, as between operators on the financial market

Question 13

Commission v Portgual

Answer 13

Portugal had a tax evasion problem
Portuguese republic
If taxes have not been paid => amnesty
On all assets declared, 5% of taxes payable regardless of what the assets are (as opposed to higher rates)
If assets are repatriated to Portugal, 2.5% tax rate
If they are not, 5% tax rate
Undeclared assets after amnesty has passed => criminal prosecution
Justification in the difference in tax rate = in the financial interests of portugal to get the assets (purely economic)
Court
Distinction in the tax rate = inadequate justification

Question 14

Belgian Eurobond

Answer 14

Court ruled that a prohibition on Belgian residents acquiring securities of a loan on the Eurobond market was a restriction on the movement of capital

Question 15

Is a prior authorisation system a restriction?

Answer 15

Yes

Question 16

What is a prior authorisation system?

Answer 16

when authorisation is required for a transaction (e.g. purchase of land- Reisch)

Question 17

Are excessive fines restrictions on movement of capital?

Answer 17

Yes- Chmielewski

Question 18

Chmielwski

Answer 18

Fines imposed on travellers to declare if they are carrying more than 10k in cash

C failed to declare amount of cash he was carrying

fined the equivalent of 60% the cash he was carrying

Question 19

Why did the court find a restriction in Barbier

Answer 19

They discouraged the purchase of immovable property situated in the Member State concerned and the transfer of financial ownership of such property to another person by a resident of another Member State.

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They also had the effect of reducing the value of the estate of a resident of a Member State other than that in which the property is situated who is in the same position as Mr Barbier.

Question 20

Justifications for distinct discrimination

Answer 20

Treaty based exceptions

Question 21

Belgian golden shares

Answer 21

if the legislation properly responded to a genuine and sufficiently serious threat to a fundamental interest of society and found that, because no less restrictive measures could have been taken to attain the objective, it was justified.

Question 22

French golden shares

Answer 22

French legislative provisions did not reflect the limited nature of the justification invoked, since neither the prior authorization regime nor the opposition procedure in the legislation was limited by reference to such circumstances. Unlike the Belgian legislation, it was not based on any precise, objective criteria and so went beyond what was necessary to achieve the goal

Question 23

Criteria for justification of indirect discrimination

Answer 23

1) Non-discriminatory
2) ORPI
3) Suitable for securing attainment of the objective
4) Must not go beyond what is necessary to attain that objective

Question 24

Grounds accepted as ORPI

Answer 24

protection of creditors (by means of the transparency of a mortgage registration system)

maintenance of a permanent population and stable economic activity in rural or mountainous regions

protection of the environment and

‘preserving agricultural communities, maintaining a distribution of land ownership which allows the development of viable farms and sympathetic management of green spaces and the countryside as well as encouraging a reasonable use of the available land by resisting pressure on land, and preventing natural disasters’.85

Question 25

Italian Pharmacies

Answer 25

Italian legislation excluded non-pharmacists from owning and operating pharmacies—in the case of legal persons, only those which were controlled by a natural person qualified as a pharmacist could operate pharmacies. While it was a non-discriminatory restriction affecting the two freedoms equally, the Court accepted that public health could be used to justify that restriction, noting the importance of the objective of ensuring that the provision of medicinal products to the public is reliable and of good quality.

Question 26

Konle

Answer 26

Member State may justify its requirement of prior authorization for the purchase of building land by invoking an object of general interest where, inter alia, the same result cannot be achieved by other less restrictive procedures

Question 27

Konle judgment

Answer 27

A procedure simply involving a declaration would suffice where, as in that case, there would be adequate repressive measures if a breach of the agreed declaration was duly established after the property had been acquired. The restriction in question was not, therefore, ‘essential’.

Question 28

Ospelt

Answer 28

• Regimes in relation to agricultural land
• objective of maintaining viable agriculture
• prior supervision was legitimate to ensure lands suitability was not impaired

Question 29

Trummer v Mayer

Answer 29

Trummer and Mayer
System whereby registered mortgages had to be denominated in the national currency in Austria
Court: unsuitable for achieving it’s aim
Mortgages had to be registered in the value of the secured debt denominated in the national currency or amount of gold.

Question 30

Festerson

Answer 30

acquisition of agricultural land required residency
court= restriction- discourages non residents from making investments