Stake in airport authority illegal

The Government's continuing stake in the privatised British Airports Authority has been declared illegal by a European Court judge.

The arrangements for BAA's flotation in 1987 amount to unjustified restrictions on the free movement of capital, according to an opinion from the Court's Advocate-General.

The European Commission, which launched the legal action, said it would await the final verdict later this year before commenting.

But if the view is upheld by the full court, it will be a victory for the Commission's campaign against "golden shares" - special shares in privatised companies which give governments rights in key decisions.

In BAA's case the Commission objected to the company's flotation terms which allocated special shares to the Secretary of State for Transport, effectively giving the government a say in the disposal of assets.

Another key provision prevented any one person or group of people from controlling equity of more than 15% of the company.

That amounted to a hindrance to capital movements and, potentially, discrimination against nationals of other EU countries, both contrary to the smooth-running of the EU single market, said the Commission.

Under the EU Treaty, governments can only restrict capital movements on grounds of "public security, public order and public health, essential interests of security connected to defence and the exercise of public authority".

The Commission announced last year that it was going to court because "no such justifications have been put forward for the taking of special powers in the case of BAA."

The Commission added: "Even if some of the measures concerned do not discriminate explicitly against non-nationals, they can nevertheless have a restrictive effect on capital movements and establishment".

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