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Poland: ECJ overrules 5% restriction on foreign investments by Open Pension Funds 2

PolandUnited Kingdom
20/01/2012
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On 21 December 2011, the ECJ ruled that provisions limiting foreign investments by open pension funds are incompatible with EU law.

OPFs are limited to foreign investments comprising 5% of the value of their assets, and to a list of possible investments which is significantly less extensive than those allowed within Poland.

According to the ECJ, the imposition of these quantitative and qualitative restrictions on investments in other member states violates the free movement of capital principle and, as such, breaches Article 56(1) of the EC Treaty (currently Article 63 of the TFEU).

Under EU law, the free movement of capital may be limited by national legislation only if this is justified by one of the reasons mentioned in Article 58 of the EC Treaty (currently Article 65 of the TFEU) or by overriding reasons in the public interest. According to the ECJ, the Polish government failed to demonstrate arguments justifying the restrictions.

The ruling does not mean that Polish OPFs may now invest in foreign assets without restrictions. Under Polish law, the quality of any prospective investment in foreign assets must be evaluated by a specialist rating agency recognised on an international capital market. This requirement has meant that foreign investments by OPFs never reach the 5% limit; yet the volume of foreign investments by OPFs should nonetheless be significantly increased by the judgment.

Law: Art. 143 of the Law of 28 August 1997 on the organisation and operation of pension funds

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