Brussels and Madrid lock horns on energy merger rules
HELENA SPONGENBERG
21.12.2006 @ 09:22 CET
The European Commission has for the second time overturned Spanish conditions on a merger that would create Europe's largest energy company, saying they violate the EU principle of the free movement of capital.
The issue began last summer when Spain's energy regulator Comision Nacional de Energia (CNE) imposed 19 conditions on German energy giant E.ON's 26.9 billion bid for Spanish electricity firm Endesa, although EU regulators had already approved the merger unconditionally.
Spain has until 19 January to withdraw the conditions or face legal action (Photo: European Commission)
"I regret that the commission has once again been obliged to intervene to avoid that a member state places unjustified conditions on a major European takeover," EU competition commissioner Neelie Kroes said in a statement on Wednesday (20 December).
Spain's industry minister cancelled earlier restrictions on the German company's offer but set out a new list of conditions in early November after the EU executive had deemed the first ones illegal.
"We are doing this to demonstrate to the member states that we will not tolerate that they act illegally," EU spokesman Jonathan Todd told journalists on Wednesday.
"If they do not respect our decision, they will bring community law into disrepute and they cannot expect other member states to respect community law to the benefit of Spanish companies if they themselves set a bad example," he explained.
Spain has until 19 January to withdraw the conditions or face legal action, he added. But the Spanish industry ministry reiterated also on Wednesday that the conditions are legal, according to Spanish news agency EFE.
The latest twist
It is the latest twist in a test case for European cross-border deals in the energy sector, which the commission wants to prise open to EU internal market competition by dismantling cartels and eliminating barriers to cross-border takeovers.
The Spanish conditions deemed unlawful by Brussels - demanded that: E.ON does not sell any Endesa assets from the Canaries, the Balearic Islands, Ceuta and Melilla; keeps the Endesa brand for at least five years; uses domestically produced coal and does not divert gas to markets outside Spain.
The commission said the conditions violate EU merger rules by breaching measures on the free movement of capital and of freedom to set up businesses anywhere in the 25-nation bloc. It also added that some of the conditions breach measures on the free movement of goods.
The commission is still evaluating if Spain has obeyed its earlier September order to remove the previous restrictions.
The EU executive said it has the exclusive right to rule on large takeovers that affect the European market and national governments cannot apply national law to European deals and cannot place extra conditions that could block or deter such mergers.