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Britain, Spain Must Scrap 'Golden Shares,' says EU High Court


The European Union's highest court has taken another step to remove government control over private businesses. The action was taken in a ruling that goes against the Spanish and British governments.

The Court of Justice in Luxembourg said Britain and Spain must scrap so-called golden shares that allow them to keep a controlling interest in large privatized firms.

The court said golden shares are a barrier to cross-border investment, and that Spanish and British rules illegally restrict the movement of capital among member states in the 15-nation European Union.

The case involved Britain's control over airport operator BAA and a Spanish law that enables the government to block takeovers of phone company Telefonica, power company Endesa and other privatized firms.

The ruling confirms a landmark case last June that led to the dismantling of public control over the French oil company Elf Acquitaine, which is now part of TotalFinaElf.

These rulings bolster the European Commission's push against investment hurdles in the European Union. Spokesman Jonathan Todd says the ruling clears the way for further moves by the European executive body, which has challenged golden share-type arrangements in Italy, Germany, Denmark and the Netherlands.

One big case involves carmaker Volkswagen. In March, the commission challenged a German law that protects Volkswagen from takeovers.

Golden shares were mostly established at the end of a European privatization drive in the 1980s and 1990s. They allow governments to maintain control of firms to protect services of general interest, or for security reasons.

But the commission says governments can abuse this device to unfairly protect big companies from takeovers. Some business experts say golden shares are a thing of the past and will fade away as a more competitive Europe emerges.