All That Glitters Is Not Gold: European Court of Justice Strikes Down Golden Shares in Two Dutch Companies

Abstract

This paper seeks to provide an analysis of Commission v. Netherlands, a judgment handed down by the First Chamber of the European Court of Justice (hereinafter, ECJ) on 28 September 2006. Although this is the eighth ruling in the increasing series of so-called Golden Share judgments, it too raises interesting questions concerning the relationship between the holding of special rights or golden shares by the state in a privatised company and the EC Treaty provisions on the free movement of capital.

The first issue which is analysed is the application of Article 56 EC to the situation where golden shares are not created by legislation but within the framework of domestic company law. The ECJ decided that even in such a situation the member state concerned is acting, not as a private shareholder, but as a public authority whose actions fall within the scope of application of Article 56 EC. This approach by the ECJ is applauded firstly because it prevents member states from escaping the reach of Article 56 EC by having recourse to mechanisms of general company law and secondly because it allows the ECJ to avoid the thorny issue of whether Article 56 EC is capable of horizontal direct effect.

The holding of golden shares as a restriction on the free movement of capital is then examined. In this context the expansive interpretation given by the ECJ to the concept of restriction is criticised. Attention is then focused on the justification ground invoked by the Dutch state with regard to the golden share in TPG NV, namely the need to guarantee a universal postal service.