Germany Given Until The End Of October To Review VW Law

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

21 September 2004

The European Commission has given the German government until the end of October to remove a law known colloquially as the 'VW law', which the Commission argues represents an infringement of European rules governing the free movement of capital.

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.

According to a report on the matter in the Guardian this week, the late October deadline is, at least in part, due to outgoing Internal Market Commissioner, Frits Bolkestein's desire to resolve the matter before he departs the Commission in November.

However, the UK newspaper revealed that the German authorities have expressed "incomprehension" at the EC's position, and have challenged Mr Bolkestein to explain how he reached the conclusion that the legislation violates European law, suggesting that a quick resolution to the matter is unlikely to be on the cards.

Recommended