Portugal’s ‘Golden Shares’ in EDP Declared Illegal

(CN) - The Portuguese government can't hold "golden shares" granting it special privileges in Energias de Portugal, the formerly state-run electric company, the European Union's Court of Justice ruled.

The decision follows a similar ruling in July banning golden shares in a major Portuguese telecommunications industry.

The Portuguese state owns about a quarter of shares in Energias de Portugal, which was privatized in 1991. The shares gave it the right to veto amendments to company articles, veto and replace directors with its own appointments, and be exempt from a requirement discounting votes from members holding more than 5 percent of the shares.

Portugal claimed its golden shares would ensure a secure energy supply in case of crisis, war or terrorism, but failed to explain how these privileges would enable this, Europe's high court ruled.

The circumstances for exercising these privileges were not adequately defined, the court said, nor are general economic interests enough to justify them, the court continued.

The Court of Justice found that Portugal's holding of the golden shares interfered with the free movement of capital, because they prevent other EU entities from investing in the utility. It struck down in principle the 5 percent ceiling for voting rights in the utility.

The Luxembourg-based court also pointed out the closed loop allowing the state's influence over the company to be changed only by the state itself.

The ruling follows a nearly identical one in July, where the Court of Justice said Portugal can't hold golden shares in a formerly state-run telecommunications company, privatized in 1995.

In both cases, the European Commission brought the challenge to the EU high court.

Subscribe to Closing Arguments

Sign up for new weekly newsletter Closing Arguments to get the latest about ongoing trials, major litigation and hot cases and rulings in courthouses around the U.S. and the world.

Email *

Submit