European court rules Spain broke law in Endesa deal 07/03/2008 00:00

Judgment backs Brussels crusade against economic nationalism

7 March 2008

MADRID - Europe's top court on Thursday condemned Spain for failing to obey a European Commission order to remove conditions imposed on German power giant E.ON's takeover bid for leading Spanish electricity company Endesa.

The European Commission deemed the provisos imposed by the National Energy Commission (CNE), which were later modified by the Industry Ministry, breached EC Treaty rules guaranteeing the free movement of capital. Brussels also claims the exclusive right to vet cross-border mergers and acquisitions within the European Union.

After Spain failed to heed two orders to remove the conditions, the Commission filed suit with the European Court of Justice in April of last year.

"The Court finds that by not withdrawing within the periods prescribed a number of conditions imposed by the decisions of the CNE and the [industry] minister, which were found to be incompatible with community law, Spain has failed to fulfil its obligation," the court ruling said.

The EC, which has been fighting against economic nationalism, welcomed the decision.

"The court ruling today [Thursday] confirms that member states cannot deprive businesses and consumers of the benefits of a single market," EC spokesman Jonathan Todd said. "We would expect Spain and all other member states to take due note of this ruling and respect community law."

The Spanish government accepted the ruling. Spain had argued the conditions were imposed to safeguard the country's energy needs as allowed for under EC rules.

Economy Minister Pedro Solbes said yesterday there were contradictions in the EU's regulations, which he described as extremely complex. "If there is no room for manoeuvre [on the rules] for Spain, there shouldn't be for anyone," he said.

E.ON's bid failed and Endesa was eventually taken over by Italy's Enel and Spanish conglomerate Acciona. The CNE imposed provisos on Enel and Acciona's joint takeover, which the Commission also deemed illegal, prompting another legal case against Spain.

"A member state cannot plead the alleged unlawfulness of a decision addressed to it as a defence to an action for failure to fulfil obligations," the court said in its ruling on the E.ON case.

Todd confirmed yesterday that Spain had asked the Court of Justice to impose "interim measures" while it rules on the Enel-Acciona case. The Spanish government is seeking to be allowed to rule on European deals which it believes could put its energy supply at risk.

The Court also ruled Spain was still obliged to obey Brussels even though E.ON's bid failed. "The fact that E.ON's public offer failed does not necessarily mean that it was absolutely impossible to implement the [Commission's] decisions."

[Copyright EL PAÍS 2008]