Free movement of capital and golden shares in Volkswagen : unexpected twist or foreseeable outcome?

Abstract

Pursuant to the so-called ‘loyalty to the EU principle’ enshrined in Article 10 EC, Member States are obliged to remove national barriers to free movement of capital (Article 63 TFEU). However there are certain national barriers which the Member States sought to retain in spite of the foresaid obligation. These barriers are the so-called ‘golden shares’ which allow State to retain control over former SOE’s. Typically, the special ‘golden’ share (hereafter: GS) aimed to remain property of State, granting it with special powers and allowing to exercise control over company’s management which could only be exercised by a majority shareholder. In order to be acceptable under the then EC law GS had to be justified on grounds of exceptions laid down in the Treaty, meet legal certainty and proportionality requirement – an imperative that could not be easily satisfied. The EU Commission has long acknowledged that there is no place for unjustified GS and sued erring Member States in the Court of Justice of European Union(CJEU). The CJEU has evaluated the legality of GS in fifteen cases and only in one instance their application has been justified. These condemning judgments are of declamatory character therefore it is up to the national Government to choose how to comply.