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PR(03)36: Liechtenstein maintains residence requirement for bank directors


The EFTA Surveillance Authority delivered yesterday a reasoned opinion to Liechtenstein due to the breach by that State of Article 31 of the EEA Agreement.

Article 25 of the Liechtenstein Banking Act states that at least one member of the management board and of the executive management must be resident in Liechtenstein and must be provided with an adequate power of attorney, enabling them to represent the institution in relation to administrative authorities and the courts.

Article 31 EEA provides for the abolition of all restrictions on establishment between the EEA States, including restrictions on the right of nationals of the EEA States to set up and manage undertakings under the same conditions as are laid down by the law of the EEA State of establishment for its own nationals. Further, all covert forms of discrimination, including residence obligations, which, in practice, achieve the same discriminatory results, are prohibited. This is one of the fundamental principles of the EEA Agreement.

Article 33 EEA allows derogations from the fundamental freedom of establishment on grounds of public policy, public security or public health. The EFTA Court has in its advisory opinions in the cases E-3/98 Pucher and E-2/01 Rainford Towning (both concerning Liechtenstein) held that, in order to fall within the scope of these permitted derogations, a residence requirement such as that at issue must be appropriate for securing the objective pursued and be proportionate thereto.

The Liechtenstein Government has mainly argued that the residence requirement is necessary in order to protect the good functioning and reputation of the banking sector.

The Authority acknowledges that the EFTA Court has held that good functioning and good reputation of the financial services sector might be a legitimate public policy objective under Article 33 EEA. However, the Liechtenstein Government has not provided any information that might support the finding that the residence requirement for a member of the management board and of the executive management of a bank is a suitable and necessary measure to attain the public policy objectives of a well functioning and reputable financial sector.

The purpose of a reasoned opinion is to give the State in question a last chance to take corrective measures before the Authority decides whether to bring the matter before the EFTA Court. The Liechtenstein Government is requested to take the necessary measures to comply with the reasoned opinion within three months.

For further information, please contact Niels Fenger, Director, tel.  (32)(0)2 286 18 30

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