On 21 February 2008, the Luxembourg Cour de cassation has referred a series of questions to the European Court of Justice for a preliminary ruling. The decision of the European Court of Justice has just been released today at 9.30 a.m.
Background
The proceedings before the Luxembourg courts were initiated in 2001 by the minority shareholders of RTL Group SA (“RTL Group”) against the Belgian company Groupe Bruxelles Lambert (“GBL”), the German company Bertelsmann AG, RTL Group and the members of its board of directors. Audiolux and the other applicants are the minority shareholders of RTL Group, a company with registered office in Luxembourg and whose shares are still traded on the Luxembourg and Brussels Stock Exchanges (and were also traded on the London Stock Exchange). In 2000, GBL held 30% of the shares of RTL Group, Bertelsmann directly or indirectly held 37%, Pearson Television Group held 22% and the other shareholders (including Audiolux) held 11%.
During the first half year of 2001, GBL then transferred its 30% participation held in the capital of RTL Group to Bertelsmann and in exchange had received 25% of the capital of Bertelsmann. The applicants requested, in principal, the cancellation of the agreement through which GBL had transferred its participation to Bertelsmann and had received a percentage of the capital of Bertelsmann.
Their claims were dismissed by the tribunal d’arrondissement of Luxembourg (judgement dated 8 July 2003) as well as by the court of appeal of Luxembourg (judgement dated 21 June 2004). After acknowledging the lack of specific provisions relating to the equal treatment of shareholders under Luxembourg law, both courts have considered that under Luxembourg law there is no general principle of equal treatment of shareholders neither in company law nor financial law. Following the two decisions, the case went before the Luxembourg Cour de cassation which decided to stay the proceedings and to refer a series of questions to the European Court of Justice for a preliminary ruling.
Reference for preliminary rulings
The Luxembourg Cour de cassation submitted the following questions to the European Court of Justice:
- Does there exist a general principle of equal treatment of shareholders under Community law?
The Cour de cassation referred the following question: are the references to the equal treatment of shareholders, and more specifically to the protection of minority shareholders, as mentioned in a series of European Union texts, expressions of a general principle of Community law? (The texts mentioned by the Cour de cassation were the following: the second company law directive n° 77/91/EEC of 13 December 1976, specially article 20 and 42; the Commission’s recommendation concerning a European code of conduct relating to official stock exchange listing of 25 July 1977, specially the Third General Principle and Supplementary Principle 17; Council directive 79/279/ECC of 5 March 1979 coordinating the conditions for the admission of securities to official stock exchange listing and carried over in the consolidating directive of 28 May 2001, specially in schedule C, point 2(A) and directive n° 2004/25/EC on takeover bids, specially 3(1)(a) together with the 8th recital in the preamble thereto).
- In case of an affirmative answer, what would be the scope of such a principle?
The Cour de cassation wished to know whether the said general principle of Community law, if it exists, applies only to the relations between a company and its shareholders or whether it also applies to the relations between majority shareholders exercising or acquiring control of a company and the minority shareholders of that company.
- In case of an affirmative answer to the two questions mentioned above, must that general principle be regarded as having existed and being binding prior to the entering into force of the directive n° 2004/25/EC on takeover bids and prior to the facts which occurred during the first half of 2001?
Opinion of Advocate General Mrs Verica Trstenjak delivered on 30 June 2009 (Case C-101/08, Audiolux SA and Others)
The Advocate General proposed that the Court reply as follows:
- According to Community law there does not exist any general principle of law imposing a compulsory equal treatment of shareholders and granting protection to the minority shareholders of a company meaning that in case of an acquisition of control these shareholders will have the right to sell their shares in the same conditions as those applicable to the other shareholders.
- If a general principle of equal treatment of shareholders could be acknowledged, it would be applicable, in any case, only to the relations between a company and its shareholders (and not to the relations between the shareholders themselves).
The Advocate General stated, inter alia, that such a principle should not be acknowledged as a general principle of law considering the fact that the equal treatment of shareholders has no constitutional value neither according to the European Union’s legal system nor the Member States’ legal system.
Furthermore, if the Court decided to acknowledge such a principle, this would mean that the abovementioned directive n° 2004/25/EC would be applied retroactively, which is not in compliance with the requirement of legal certainty.
Today’s decision of the European Court of Justice
For the first time the Court is called upon to acknowledge whether there does exist a general principle of equal treatment of shareholders or not, and wether such a principle, if it exists, should be considered a general principle of law under Community law.
In essence, the Court noted that the provisions of secondary Community law to which the Luxembourg Cour de cassation refers do not provide any conclusive evidence on the existence of a general principle of equal treatment of minority shareholders.
The Court ruled that “Community law does not include any general principle of law under which minority shareholders are protected by an obligation on the dominant shareholder, when acquiring or exercising control of a company, to offer to buy their shares under the same conditions as those agreed when a shareholding conferring or strengthening the control of the dominant shareholder was acquired”.
As a reference for a preliminary ruling in general calls for the national proceedings to be stayed until the Court has given its ruling, now the decision to be taken by the Luxembourg Cour de cassation will have to be in accordance with the decision of the European Court of Justice.
If you wish to receive any further information, please contact:
Tom Loesch at (352) 2608 8251 or at tom.loesch@linklaters.com
Jean-Paul Spang at (352) 2608 8253 or at jean-paul.spang@linklaters.com
Marc Loesch at (352) 2608 8270 or at marc.loesch@linklaters.com
Laurent Schummer at (352) 2608 8255 or at laurent.schummer@linklaters.com
Guy Loesch at (352) 2608 8212 or at guy.loesch@linklaters.com
