Germany faces court challenge over VW
The EC is to take Germany to court to try to force changes in a law protecting car manufacturer Volkswagen from hostile takeovers.
The European Commission took the long-awaited step after Berlin failed to react to repeated demands from Brussels to change the law, which Internal Market Commissioner Frits Bolkestein argues violates laws on the free movement of capital.
“Within a single European market, people and companies should be able to invest where they like without artificial obstacles,” said Bolkestein’s spokesman, Jonathan Todd.
The lawsuit at the European Court of Justice in Luxembourg could result in hefty fines for Germany if it loses.
The Commission objects to provisions of a 1960 law privatising Volkswagen that cap a shareholder’s voting rights at 20%, regardless of the number of shares held, and requires a majority of 80% for “important decisions.”
That gives the state government of Lower Saxony, where VW is based, an effective veto over company decisions, since it holds roughly 20% of the stock and voting rights. It also has two mandatory seats on the board.
“Essentially this law prevents anyone from gaining control or even significant influence over strategic decisions at Volkswagen,” Todd said, reiterating charges made last March when the commission issued its second warning to Germany.
The state and federal governments insist the law does not violate the EU’s single market rules and argue it promotes stability at the company.
