The European Commission announced on Tuesday that it has decided to send a formal request to the German government, asking it to amend its so-called 'VW Law'.
The law, which caps the voting rights of shareholders at 20%, requires the support of more than 80% of shareholders for any important decisions, and guarantees the state of Lower Saxony rights of 20% no matter what the size of its stake, has been dubbed "an obstacle to the free movement of capital".
Infringement proceedings were launched against the German authorities with regard to the legislation in March 2003. However, the German government's response to the EC's letter of formal notice has not changed the Commission's view that certain provisions of the law act as a disincentive to investment from other member states, in violation of EC Treaty rules on the free movement of capital and the right of establishment.
The German authorities now have two months to remedy the situation, after which the European Commission will consider referring the case to the European Court of Justice.
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