Hedge funds and Private Equity - PES

Article 57
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. In respect of restrictions
existing under national law in Estonia and Hungary, the relevant date shall be 31
December 1999.
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 as they constitute
a step back in Community law as regards the liberalisation of the movement of
capital to or from third countries.
For citizens it means the ability to do many things abroad, as diverse as opening bank accounts,
buying shares in non-domestic companies and investing. For companies it principally means
being able to invest in and own other European companies and take an active part in their
management.
The liberalisation of capital movements in the EU was agreed in 1988 (Directive 88/361/EEC)
and came into effect in 1990 for most Member States, while for the rest specific transitional
periods were agreed.
There are exceptions to the free movement of capital both within the EU and with third countries.
These are actually primarily linked to taxation, prudential supervision, public policy
considerations, money laundering, and financial sanctions agreed under the Common Foreign
and Security Policy.
3.3 Common rules
Abolishing national restrictions goes hand in hand with the necessity to intervene directly at
the legislative level, in order to bring some coherence to different national systems and practises.
The FSAP mentioned above has created the foundations for the financial services market
with 42 texts adopted all soon to be in force. The Action Plan launched in 1999 suggested
indicative priorities and time-scales for legislative and other measures to tackle three strategic
objectives, namely ensuring a Single Market for wholesale financial services, open and secure
retail markets and state-of-the-art prudential rules and supervision. Among the different texts
adopted in the EU to achieve the single market for financial services, one could mention the
following directives:
Directive 2003/71/EC on “the prospectus to be published when securities are offered to the
public or admitted to trading and amending Directive 2001/34/EC” (Prospectus Directive).
Part I – Hedge funds and private equity funds – how they work
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