EU ruling against 'golden shares'

TNT was privatized in 1998

The Netherlands is breaking the law in owning a "golden share" in postal firm TNT, Europe's highest court has ruled.

The European Court of Justice (ECJ) said the share - giving the state a veto over mergers - was incompatible with the free movement of capital.

State involvement deterred investment and was not necessary to ensure the firm stayed solvent, the ruling added.

European courts have already ruled against France, Portugal, the UK and Spain in cases of share ownership.

Financial veto

Belgium's golden share in energy firm Distrigaz is the only case of state ownership to be backed under European law since new regulations came into force in 2002.

The ECJ's ruling upholds a European Commission decision against the Dutch government in 2003.

The Dutch government has held a golden share in TNT since the firm was privatised and split into two in 1998, arguing that it was necessary to guarantee a universal mail service.

The court finds that the special shares at issue constitute restrictions on the free movement of capital European Court of Justice

It also retained a golden share in telecoms business KPN, which was set up at the time, but gave this up last year.

Golden shares are separate from individual financial stakes held by investors as they allow governments to authorise or block big financial commitments such as the issue of new shares and dividend payments.

"The court finds that the special shares at issue constitute restrictions on the free movement of capital," the ECJ said in a statement.

"The special share goes beyond what is necessary to safeguard the solvency and continuity of the provider of the universal postal service."

TNT said the ruling would have no impact on its services since it was required to offer a universal service under Dutch law.

Protectionism debate

The ruling comes at a time when European governments are under increasing pressure not to stand in the way of foreign takeovers amid fears of a rising tide of economic protectionism across the EU.

Brussels said on Tuesday that the Spanish government had broken the law in trying to block a German bid for Spanish energy firm Endesa.

Critics claim a government-backed merger of French firms Suez and Gaz de France, which will leave Paris with a large minority stake in the combined business, is designed to make the business "takeover-proof".

But EU Internal Market Commissioner Charlie McCreevy said recently that the French government's plan appeared to be legal.