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Commission requests Greece to comply with EU rules on free movement of capital and the right of establishment

The European Commission has today acted to ensure that Greece complies with its obligations to implement EU rules on free movement of capital and the right of establishment (Articles 63 and 49 of the Treaty on the Functioning of the EU-TFEU). The non-compliance with EU law results from the application of a State measure, adopted in the context of Deutsche Telekom's (DT) participation in the Hellenic Telecommunication Organisation (OTE) and granting special rights (“golden share”) to the Greek State. The Commission's request to Greece takes the form of a reasoned opinion. If the national authorities do not reply satisfactorily within two months, the Commission may refer the matter to the Court of Justice of the European Union.

Greece and Deutsche Telekom (DT) entered into a share purchase agreement (SPA) for 3.03% of the Hellenic Telecommunication Organisation's (OTE) shares and a Shareholders' Agreement (SA). Upon completion of the SPA, Greece and DT each held 25% plus one of OTE shares. On 11 July 2008 the aforementioned agreements were ratified by national law (where it was explicitly stipulated that the agreements take the effect of a law).

The Commission contests the provisions of the above-mentioned law that:

  • introduces special rights for the State such as: the possibility for the State, even as a minority shareholder, to appoint half of the members on OTE governing bodies,
  • includes a wide range of veto rights on corporate and business matters such as a company's dissolution or merger, transfer or conversion of a strategic company's assets, changes in a company's nationality or capital,
  • requires prior approval by the Greek authorities for the transfer of OTE shares by DT and a change of control clause (which stipulates that, in case the control in DT changes and the person acquiring the control does not meet the requirements set out in national law, Greece has the right to require DT to sell back all OTE shares it held).

The Commission considers that the national law enables the Greek Government to participate in OTE’s governing bodies in a more significant manner than its shareholder status would normally allow. Therefore, investors, other than the Greek State and DT, might be dissuaded from increasing their investment in OTE. Consequently, these provisions are considered to be incompatible with the Treaty freedoms on capital movement and establishment, Articles 63 and 49 TFEU respectively.

What is the aim of the free movement of capital and the freedom of establishment rules? The Treaty freedoms of capital movement and establishment are at the heart of the Single Market. They allow for integrated, competitive and efficient markets and services in Europe. For citizens they mean the ability to undertake a range of operations abroad, such as buying shares in non-domestic companies, purchasing a real estate, establishing business. For companies they mean the ability to invest in, own and manage companies in other European countries.