Spain blocks UK's merger reform
Sunday 20 June 1999
It is taking the stance because of its row with the UK government over the sovereignty of Gibraltar. Spain has been blocking EU legislation in the field of justice and legal affairs over Gibraltar, but it is the first time it has extended that action to the economic sphere.
EU ministers are meeting in Luxembourg tomorrow to discuss the takeovers directive that has been on the cards in Brussels since 1985. Spain has invoked the so-called Luxembourg compromise, by which an EU member state can block legislation if it believes its national interests are threatened.
The takeovers directive would oblige countries such as the Netherlands to drop practices that make it difficult for foreign companies to enact a hostile bid for a Dutch firm. All member states would have to guarantee the protection of minority shareholders by introducing into their national legislation a mandatory bid rule.
"The directive would give UK companies a clear set of rules and there would be less frustrating action," said a UK official in Brussels. He said Britain "was waiting to see what Spain would do on Monday".
Spain is objecting to the fact that the directive recognises independent Gibraltar authorities. Under the Gibraltar constitution, competition law is an issue for its own authorities. However, UK and Spanish officials in Brussels admit the British territory is unlikely to establish its own takeover panel because it has no stock market and no listed companies likely to be affected by the legislation.
The Spanish move is likely to be a disappointment for Germany, the current holder of the EU presidency, because it had brokered a delicate compromise that would satisfy the UK.
Britain was worried about a clause in the directive that would enable injured parties in a hostile takeover bid to take their grievances to court. However, under the German compromise, courts in member states could decline to hear a case if they so chose.
In France, challenging a regulators' decision is a commonly used defence against takeover bids. Two months ago, the French banks Societe Generale and Paribas filed a complaint against the French financial market's regulator concerning Banque National de Paris' bid for the two companies who had previously agreed to merge. Although it seems they will lose their legal action, they have successfully delayed the bidding process for several months.
As Voltaire once said, “Ice cream is exquisite. What a pity it isn’t illegal”
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