-  Thursday 01 October 2020

    EC ready to take France to court

    The European Commission is to take legal action against France over the country's new decree restricting foreign investment, risking a dramatic showdown in a bid to halt the slide into protectionism."This decree is a clear breach of EU law as it discriminates in favour of French firms," a spokesman for Charlie McCreevy, the single market commissioner, told The Daily Telegraph yesterday.

    "We have written to the French government demanding an explanation but have received no reply. We are now instructing our lawyers to prepare a case to take to the European Court of Justice which will be technically ready in a few days."The French decree gives Paris the power to veto or impose conditions on foreign takeovers in 11 "strategic" sectors, covering computers, energy, biotechnology, aviation, defence, data security and casinos.While directed at "sensitive technology", it is so loose it could be stretched to cover large chunks of the economy.The recourse to legal action is likely to cause outrage in Paris, where politicians on both Left and Right increasingly view the EU institutions as pawns of a British-led bloc with free-market leanings.It follows a week of defiant protectionist moves by Paris, including a separate "poison pill" law to make it easier for French companies to fight off foreign bids by issuing stock warrants at a discount.

    Dominique de Villepin, the French prime minister, orchestrated a move days later to merge Suez with state-owned Gaz de France to shut Italy's Enel out of the French energy market.Italy's premier, Silvio Berlusconi, yesterday protested to the European Commission about an "enormous violation of Community law".Brussels said it deplored the French attempt to create a national champion in such a fashion but had no legal grounds so far to block the deal. "Mr McCreevy is very concerned about this protectionist move. Strictly speaking, the letter of the law on free movement of capital has not been breached, but things are not always what they seem," said a spokesman.Suez and GdF released details yesterday of an all-paper stock swap with a €1 special dividend for Suez shareholders. The deal has the keen backing of Suez's biggest investors in France and Belgium, including Brussels financier Albert Frere with 11pc of the stock and Credit Agricole with 4.6pc.

    The French state owns 80pc of GdF. It will acquire a "blocking minority" of over 34pc of the combined entity, entailing a de facto nationalisation of Suez. The €72bn (£49bn) merger will create Europe's biggest gas company.Brussels declined to say how it would respond to a parallel crisis developing in Madrid where the Spanish government has threatened to dust off a 1999 law to block a move by Germany's Eon to buy the Spanish electricity group Endesa.The Commission warned Madrid last week in the strongest terms not to resort to legal chicanery to thwart the bid. It is already taking Spain to the European Court for failure to abolish its golden share, or veto, in Endesa.The Spanish government is backing a rival bid by Barcelona's Gas Natural to create a national champion. Gas Natural is this week expected to raise its scrip bid above Eon's €27.50 offer, perhaps as high as €30 a share.

    Gary Titley MEP, the Labour leader in Brussels, said the EU was now facing a cathartic crisis as France battled to come to terms with its loss of influence in Europe."The French are clinging to their Colbertiste mercantilism, but frankly they are now way out of kilter with the free-market majority," he said.


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