Under Belgian legislation gains realised by a Belgian resident on redemption of shares of mutual funds where more than 40% of the portfolio is invested in debt and who do not benefit from an authorization granted under Directive 85/611 (on the coordination of laws, regulations and administrative provisions relating to undertakings for collective investment in transferable securities (UCITS)) that are established in Belgium are not taxable, while capital gains on redemption of shares of such organizations in Norway and Iceland are taxable.

The court concluded that the difference in tax treatment is likely to make it less attractive for a Belgian resident to invest in these types of funds established in Norway or Iceland. Consequently, the Belgian legislation constituted a restriction on the capital movement prohibited by Article 40 EEA. Moreover, Belgium did not invoke any justification of overriding public interest, rather it has recognized the failure alleged by the Commission and has failed to fulfil its obligations under Article 40 of the EEA Agreement.