Restrictions on free movement of capital should end in three years

by Anthony Manduca

The last screening session for this year was held last week at the Centre Borschette in Brussels and dealt with the free movement of capital. This chapter of the acquis comprises one of the four fundamental freedoms dealt with by the European Union, the other three freedoms being the free movement of goods, services and persons. Together these form the pillars of what is known as the EU's single market. On the whole, Maltese legislation in this field is moving towards gradual liberalisation.

During this session it was noted that the process of liberalisation should roughly take around three years, except in some areas where restrictions might still be required along the process of liberalisation.

One of the key issues discussed during the session concerned the acquisition of real estate which, according to Community rules, should be liberalised. However, in this regard, the Maltese delegation explained that the government is currently studying the situation in the light of accession negotiations.

Another area relates to authorisation procedures, especially in the case of direct investments by non-residents, where certain prudential measures adopted by Maltese practices might be discriminatory. In this respect the Maltese delegation clarified that the way the system operates is not discriminatory but added that changes to the law might be considered.

With regards to money laundering, it was reported that most of the EU legislation is already in place in the Maltese legal system which already reflects the most recent EU laws in this respect. It was also reported that a Financial Intelligence Unit will be set up which apart from removing a burden from the Police Corps, will also liase with a pan- European network of similar units which share information in order to combat the crime of money laundering.

Payment systems in Malta were also discussed. Although the Central Bank's accounting system already operates on a real-time basis, it was agreed that because of the size of the transactions in Malta, any investment on infrastructure needs to be carefully assessed.

Other areas that were screened included the issue of preferential treatment for exchange control purposes. In this regard, it was reported that the bilateral agreements that Malta has entered into with other States do not favour one country from another in the exchange control regime.

With regards to the process of privatisation, it was reported that there are no restrictions on the freedom of movement of capital in any of the local rules or procedures which apply to privatisation and therefore the Maltese position is already compatible with the EU in this area.

The Maltese delegation was led by Joseph Portelli, Permanent Secretary at the Ministry of Finance and included David Pullicino, Alfred Demarco, Herbert Zammit Laferla and Edmund J. Calleja from the Central Bank of Malta, Dr David Fabri from the Malta Financial Services Centre (MFSC), Saviour Falzon and Dr Andrew Azzopardi from the EU Directorate. Also present were Therese Cutajar from the Malta Mission in Brussels and Fabio Pirotta from the Malta-EU Information Centre (MIC).

The next screening session will be held in January and will deal with Justice and Home Affairs. The final session in the screening process, on agriculture, will also be held in January.