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October 13, 2004

BELGIUM: EU hauls Germany to court over ‘VW law’

The European Commission has decided to take Germany to the European Court of Justice for not having modified its so-called Volkswagen law, which shields the carmaker from hostile takeovers.

By bcusack

The European Commission has decided to take Germany to the European Court of Justice for not having modified its so-called Volkswagen law, which shields the carmaker from hostile takeovers.

The lawsuit is the parting shot of pro-market Internal Market Commissioner Frits Bolkestein at Germany’s protective industrial system which has been defended by Chancellor Gerhard Schroeder.

The European Union executive has repeatedly asked Germany to scrap the law due to provisions that give VW’s home state of Lower Saxony effective control on the firm through a minority stake. The Commission’s decision will not change the fate of VW overnight since the European Court of Justice, the EU’s highest court, takes on average two years to issue a verdict.

In addition to limits on voting rights, the European Commission is wary of a part of the law under which important corporate decisions require the approval of at least 80 percent of shareholders.

The commission is concerned that these two elements of the law give the minority blocking powers to the federal sate of Lower Saxony.

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