Legal Framework of EU Capital Movement
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Questions and Answers

What is a requirement before a national restriction on the acquisition and disposal of property can be enacted?

  • Public vote on the restriction
  • Immediate consent from property owners
  • Review by international courts
  • Prior administrative authorization (correct)

    • Direct taxation remains fully regulated by the European Union without allowing member states any discretion.

    False

    What are the two grounds based on which measures can be justified under Art. 65(1)(b) TFEU?

    Public policy or public security

    Art. 65(3) TFEU states that the restriction cannot constitute a means of __________ discrimination.

    <p>arbitrary</p> Signup and view all the answers

    Which of the following is an interpretation principle regarding derogations?

    <p>Anyone affected must have access to legal redress</p> Signup and view all the answers

    What legal framework underpins the Free Movement of Capital in the EU?

    <p>Articles 63-66 of the Treaty on the Functioning of the European Union</p> Signup and view all the answers

    Match the following articles of the TFEU with their provisions:

    <p>Art. 64 = Grandfather clause Art. 65(1)(a) = Direct taxation regulation by MSs Art. 65(1)(b) = Measures for public policy or security Art. 65(3) = No arbitrary discrimination</p> Signup and view all the answers

    The Maastricht Treaty allowed for the immediate removal of all restrictions on capital movements.

    <p>False</p> Signup and view all the answers

    Name the case that established the principle that derogations must be interpreted strictly.

    <p>Case 36/75 Rutili</p> Signup and view all the answers

    What are the objectives of the Free Movement of Capital?

    <p>To remove all restrictions on capital movements between Member States and third countries, with certain exceptions.</p> Signup and view all the answers

    The restrictions on capital movements were prohibited starting with the __________ Treaty.

    <p>Maastricht</p> Signup and view all the answers

    The CJEU has developed a non-exhaustive list of 'objective justifications' related to public interest requirements.

    <p>True</p> Signup and view all the answers

    Match the year to the relevant event regarding the Free Movement of Capital:

    <p>1957 = Treaty of Rome was signed 1992 = Maastricht Treaty was established 2009 = Treaty of Lisbon came into effect 1999 = Introduction of the Euro</p> Signup and view all the answers

    What was a major consequence of the Treaty of Rome regarding capital movements?

    <p>Restrictions could only be removed as necessary for the common market</p> Signup and view all the answers

    The Council was responsible for abolishing restrictions on Free Movement of Capital through directives based on Art. 69 EEC.

    <p>True</p> Signup and view all the answers

    Describe the initial approach to capital movements before the Maastricht Treaty.

    <p>Pre-Maastricht rules were limited and closely linked to the stability of economic and monetary policy.</p> Signup and view all the answers

    What was the purpose of Council Directive 88/361/EEC?

    <p>To fully liberalize capital movements between Member States</p> Signup and view all the answers

    The Maastricht Treaty marked the end of capital liberalization in the European Union.

    <p>False</p> Signup and view all the answers

    When did the first stage of monetary union begin as per Directive 88/361/EEC?

    <p>July 1, 1990</p> Signup and view all the answers

    The __________ introduced the free movement of capital as a Treaty freedom.

    <p>Maastricht Treaty</p> Signup and view all the answers

    Which Article of the EEC was highlighted as not having direct effect in the Casati case?

    <p>Article 67(1)</p> Signup and view all the answers

    Match the following directives/terms with their key features:

    <p>Directive 88/361/EEC = Abolishes restrictions on capital movements First Capital Directive = Introduced in 1960 Maastricht Treaty = Free movement of capital as a Treaty freedom Casati Case = Art 67(1) EEC has no direct effect</p> Signup and view all the answers

    The liberalization of capital movements was primarily driven by the Member States themselves.

    <p>True</p> Signup and view all the answers

    What was the objective of Article 1(1) of Directive 88/361/EEC?

    <p>Abolish restrictions on movements of capital between persons resident in Member States.</p> Signup and view all the answers

    Study Notes

    Legal Framework & Origins

    • The Free Movement of Capital is the most recent and broadest EU freedom.
    • Restrictions on capital movements and payments have been prohibited since the Maastricht Treaty.
    • The legal basis is Articles 63-66 of the Treaty on the Functioning of the European Union (TFEU).
    • The objective is to remove all restrictions on capital movements between EU Member States, as well as between Member States and third countries, with exceptions in certain circumstances.
    • Liberalization of capital flows progressed gradually.
    • Treaty of Rome (1957) restrictions only removed to the extent necessary for the functioning of the common market. (Art. 67(1) EEC)
    • The "First Capital Directive" (1960) and the second (1963) led to some degree of liberalization.
    • Further progress occurred with Council Directive 88/361/EEC in 1988, which scrapped all remaining restrictions on capital movements between Member State residents as of 1 July 1990. This directive aims to liberalize capital movements involving third countries similarly.
    • Art. 1(1) of Directive 88/361/EEC states that Member States must abolish restrictions on capital movements between persons residing in Member States.
    • The directive lists an exhaustive nomenclature of capital movements in an annex and facilitates its application.
    • The directive came into force on 1 July 1990, marking the first stage of monetary union.
    • Directive 88/361/EEC now replaced by the new Treaty rules on the Free Movement of Capital, yet still defines the notion of capital movements.
    • The Maastricht Treaty established the free movement of capital as a Treaty freedom and stipulated the second stage of monetary union would begin in 1994.
    • The Treaty of Rome required Member States to remove restrictions only to the extent necessary for the functioning of the common market. (Art. 67(1) EEC)
    • In the Casati case (Case 230/80), the CJEU ruled that Article 67(1) EEC was different from other freedoms in that it did not have direct effect.
    • The dynamic of capital liberalization differed from other freedoms: Member States had a significant role in driving the process.

    Scope of the Capital Rules

    • Restrictions on capital movements and payments prohibited since the Maastricht Treaty (1993).

    Restrictions, Express Derogations, and Justifications

    • Restricting Free Movement of Capital based on nationality, on the acquisition and disposal of property (e.g. needing prior administrative authorization), prohibition on creating a mortgage in a foreign currency, or limitations imposed by the ‘golden share’ holder (usually the state acting as a regulator in the guise of a market participant) is prohibited.
    • The Treaty provisions include the "grandfather clause" (Art. 64 TFEU) and express derogations (Art. 65(1) TFEU).
    • Direct taxation remains in the remit of Member States as long as there is no discrimination based on nationality (Art. 65(1)(a) TFEU).
    • Art. 65(1)(b) TFEU allows public policy or public security justifications, but these measures must be proportionate.
    • Art. 65(1)(b) TFEU also allows fiscal supervision and combatting illegal activities, such as tax evasion, as justifications.
    • Restrictions cannot be arbitrarily discriminatory (Art. 65(3) TFEU). 
    • Derogations must be interpreted strictly (Case 36/75 Rutili).
    • Derogations cannot be misapplied to serve purely economic purposes (Case 36/75 Rutili).
    • Anyone affected must have access to legal redress (Case 222/86 Unectef v Heylens).
    • Derogations are subject to the principle of proportionality.
    • Derogations are subject to the principle of legal certainty (Case C-54/99 Eglise de Scientologie).
    • The CJEU introduced the concept of "objective justifications" (Case C-288/94 Reisch) for restrictions to the Free Movement of Capital in the realm of public interest.
    • Proportionality is a key consideration when applying justifications based on public interest.

    Economic & Monetary Union

    • The Maastricht Treaty introduced the free movement of capital as a Treaty freedom and stipulated the second stage of monetary union would begin in 1994.

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    Description

    Explore the legal frameworks governing the Free Movement of Capital in the European Union. This quiz covers essential treaties, such as the Maastricht Treaty and the Treaty of Rome, alongside relevant directives promoting capital liberalization. Test your knowledge on the historical development and current regulations.

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