According to a report in the business weekly Capital, the European Union Commission's legal service has decided that a controversial German law restricting shareholder voting rights to block takeovers at Volkswagen conforms with EU legislation and can remain intact.

Germany's so-called 'Volkswagen Law', enacted especially for the company, has limited any investor from holding more than 20% of VW's voting rights. This has prevented the company from being a takeover target in the past. The rule gives an effective right of veto over any takeover bid to the Lower Saxony state government.

The law has come under threat from EU competition officials who oppose legal provisions that hinder takeovers. The European Commission has said that is is studying whether to obligate Germany to rescind the measure protecting Volkswagen. The law has been examined on the grounds that it could be said to interfere with the free movement of capital under European Union rules.