By an OGJ correspondent
PARIS, June 18 -- The European Court of Justice criticized France for its state-owned golden share in TotalFinaElf SA, saying it gives France "excessive discretionary powers" over the evolution of the supermajor's capital and contravenes the principle of free circulation of capital in the European Union.
Golden shares are state-controlled stock holdings that enable governments to veto takeovers of recently privatized companies. The government of France kept its golden share when Elf Aquitaine SA was privatized in the early 1990s and extended it to TotalFinaElf when TotalFina acquired Elf (OGJ, Mar. 27, 2000, p. 36).
France's Finance Minister Francis Mer said the European Court of Justice did not dispute the principle of the golden share, and that France's golden share could be retained if amended to make it more specific to the country's oil supply security needs.
The court ruled that France had retained too much power in the way the golden share could be applied under the privatization law.
For instance, the finance minister's approval is required when specified percentages of TotalFinaElf's equity are taken over by outsiders and when a majority stake of a TotalFinaElf unit is sold. These requirements preserve the parent oil company from any takeover bid, but they exceed France's supply security needs, the court said.