EC Takes Legal Action Against Germany Over VW Law

by Ulrika Lomas, for LawAndTax-News.com, Brussels

18 October 2004

The German Justice Ministry has expressed its disappointment at the European Commission's decision to refer a dispute over the country's so-called VW law to the European Court of Justice.

Under the terms of the legislation in question, the federal authorities, in conjunction with the Lower Saxony government, hold a 20% minority vote in Volkswagen. This effectively blocks other shareholders from making important decisions without their approval, as more than 80% of the vote is required to pass important board decisions.

In addition, the voting rights of other shareholders in the firm are capped by law at 20%, a provision designed to prevent them from gaining control of the firm.

In a statement released last week, the Ministry announced that:

"We regret the decision of the EU Commission to sue Germany before the European Court of Justice. We believe there exists no doubt about the compatibility of clauses...with European laws."

The government department went on to observe that:

"By nature, maximum voting rights make it difficult to attain a majority. That alone does not mean limiting free movement of capital."

In a separate statement issued following the EC's announcement, works council head of Volkswagen AG, Klaus Volkert condemned the decision to take legal action, suggesting that similar arrangements in other EU member states have been left in place by the EC.

He further observed that the decision "prompts workers in Europe to feel that their jobs are being threatened".

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