Treaty provisions

Articles 56 to 60 EC

The relevant Treaty provisions governing the freedom of capital movements are enshrined in Articles 56 EC to 60 EC (formerly Articles 73b to 73h of the EC Treaty). In particular, Article 56 EC provides that 'all restrictions on the movement of capital between Member States shall be prohibited'.

In order to be aware of the scope and extent of this provision in practical terms, one can consult Directive 88/361/EEC (OJ No L178, 8.7.1988, p.5.). Its Annex I , legally in force even if the directive predates Article 56, contains a list of transactions that are to be considered as capital movements. These range from purchases of real estate to the opening of bank accounts.

• Article 56 EC (ex Article 73b)

  "1. Within the framework of the provisions set out in this Chapter, all restrictions on the movement of capital between Member States and between Member States and third countries shall be prohibited.

  2. Within the framework of the provisions set out in this Chapter, all restrictions on payments between Member States and between Member States and third countries shall be prohibited."

• Article 57 EC (ex Article 73c)

  "1. The provisions of Article 56 shall be without prejudice to the application to third countries of any restrictions which exist on 31 December 1993 under national or Community law adopted in respect of the movement of capital to or from third countries involving direct investment - including in real estate - establishment, the provision of financial services or the admission of securities to capital markets.

  2. Whilst endeavouring to achieve the objective of free movement of capital between Member States and third countries to the greatest extent possible and without prejudice to the other Chapters of this Treaty, the Council may, acting by a qualified majority on a proposal from the Commission, adopt measures on the movement of capital to or from third countries involving direct investment - including investment in real estate - establishment, the provision of financial services or the admission of securities to capital markets. Unanimity shall be required for measures under this paragraph which constitute a step back in Community law as regards the liberalisation of the movement of capital to or from third countries."

  Article 57(1) was adjusted by Article 18 of the Act of Accession 2003 for Estonia and Hungary.

• Article 58 EC (ex Article 73d)

  "1. The provisions of Article 56 shall be without prejudice to the right of Member States:

(a) to apply the relevant provisions of their tax law which distinguish between taxpayers who are not in the same situation with regard to their place of residence or with regard to the place where their capital is invested;

(b) to take all requisite measures to prevent infringements of national law and regulations, in particular in the field of taxation and the prudential supervision of financial institutions, or to lay down procedures for the declaration of capital movements for purposes of administrative or statistical information, or to take measures which are justified on grounds of public policy or public security.

2. The provisions of this Chapter shall be without prejudice to the applicability of restrictions on the right of establishment which are compatible with this Treaty.

3. The measures and procedures referred to in paragraphs 1 and 2 shall not constitute a means of arbitrary discrimination or a disguised restriction on the free movement of capital and payments as defined in Article 56."

See also Declaration Nr. 7 on Article 73d. This refers to Article 58(1)(a). The date contained in this declaration is affected by Annex IV referred to in Article 22 of the Act of Accession 2003 (Estonia).

• Article 59 EC (ex Article 73f)

"Where, in exceptional circumstances, movements of capital to or from third countries cause, or threaten to cause, serious difficulties for the operation of economic and monetary union, the Council, acting by a qualified majority on a proposal from the Commission and after consulting the ECB, may take safeguard measures with regard to third countries for a period not exceeding six months if such measures are strictly necessary."

• Article 60 EC (ex Article 73g)

  "1. If, in the cases envisaged in Article 301, action by the Community is deemed necessary, the Council may, in accordance with the procedure provided for in Article 301, take the necessary urgent measures on the movement of capital and on payments as regards the third countries concerned.

2. Without prejudice to Article 297 and as long as the Council has not taken measures pursuant to paragraph 1, a Member State may, for serious political reasons and on grounds of urgency, take unilateral measures against a third country with regard to capital movements and payments. The Commission and the other Member States shall be informed of such measures by the date of their entry into force at the latest. The Council may, acting by a qualified majority on a proposal from the Commission, decide that the Member State concerned shall amend or abolish such measures. The President of the Council shall inform the European Parliament of any such decision taken by the Council."

Source : 'Capital movements in the legal framework of the Community' - Annex to Chapter 5 on Determinants of international capital flows (European Economy  Nr. 6, 2003, p. 322 )

 

Article 114 EC: Annual review of capital movements by the Economic and Financial Committee

Articles 119 & 120 EC: Balance of payments' crisis

Article 119 EC stipulates that a medium-term financial assistance can be foreseen for Member States which have not adopted the Euro and which are experiencing, or are seriously threatened with, difficulties in their current payments or capital movements. Secondary legislation for implementation of Article 119 is based on Article 308 EC. At present, Council Regulation (EC) Nr. 332/2002 of 18 February 2002 governs this type of medium-term financial assistance.

See also MEMO/01/67.