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May 27, 2008

GERMANY: Porsche gets legal against Volkswagen

Porsche has announced that it is taking legal action to force Volkswagen AG to amend its articles of association so that the state of Lower Saxony now longer has a right of veto.

Porsche has announced that it is taking legal action to force Volkswagen AG to amend its articles of association sothat the state of Lower Saxony now longer has a right of veto.

The Porsche action came after a motion to the this effect, filed at the company’s annual general meeting in April, was not approved. This was because the state did not give its approval.

Porsche says the action is needed to clarify the voting rights situation at the company, after the European Court of Justice (ECJ) effectively ruled last year that the state’s power of veto is effectively illegal. That power of veto is enshrined in a special German law, called the Volkswagen law, because it hinders the free movement of capital guaranteed under European law.

The Volkswagen law has been redrafted and is awaiting approval by the German cabinet today, but the company’s articles of association have a similar effect.

The legal action will be heard by the district court of Braunschweig. Porsche said it is basing its claim on the German stock corporation act that allows for appeals questioning whether a company was allowed to pass an AGM resolution legally or not, according to Reuters. Volkswagen is therefore the defendant in the case.

The Volkswagen law has been in place since the company was privatised in 1960. It was intended to protect the company from hostile takeover and protect more than 80,000 employees in Lower Saxony.

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