The European Union's highest court delivered a stinging blow to Britain and Spain yesterday in a landmark ruling that will bring down investment barriers across the 15-nation bloc.

By ruling that the two countries broke EU law by holding "golden shares", allowing them to maintain control over privatised companies, the European Court of Justice has paved the way for freeing up the movement of capital in Europe's single market.

The decision by the Luxembourg-based court, which goes against its preliminary findings, could make it virtually impossible for governments to use such devices to protect national champions from takeover.

The court ruled that controls on the privatised British Airports Authority, the UK airports operator, and five Spanish companies broke the EU treaty by restricting the free movement of capital, one of the cornerstones of the single market. - (Financial Times Service