EU’s top court rules Germany can keep VW veto law

Germany won a decisive victory over the European Commission yesterday in its bid to preserve state influence at Volkswagen (VW), after Europe's top court rejected an attempt by Brussels to scuttle a law that helps shield the carmaker from takeovers.

The 1960 law, introduced when VW first listed on the stock market, gives the state of Lower Saxony, where VW is headquartered, a veto over key decisions such as factory closures, mergers and acquisitions.

Lower Saxony, which holds a fifth of VW’s voting stock, has long opposed scrapping the law, backing workers who argue that it protects jobs as well as labour’s role in corporate decision-making, which they say has fostered VW’s rise to become the world’s third largest carmaker in 2012.

The commission says that by effectively preventing foreign buyers from acquiring VW the law hinders the cross-border integration of industry in the EU, in breach of EU single-market legislation.

Putting an end to the 11-year dispute between Brussels and Germany, the Luxembourg-based EU Court of Justice decided yesterday that Germany had fully complied with a 2007 court ruling ordering it to water down the VW law.

A year after the 2007 ruling Germany scrapped elements of the law but kept untouched the right of any shareholder with a 20 per cent stake to veto strategic decisions. That prompted the commission to pursue Germany again, on the grounds of protectionism.

"The law neither privileges specific shareholders nor discriminates against anyone else's interests," Lower Saxony prime minister Stephan Weil (above) said at VW's base in Wolfsburg. "Today's ruling should close the book on a long dispute."

Nearly 90 per cent of VW's voting stock, the ordinary shares, are now in the hands of three strategic shareholders – Porsche, Lower Saxony and the Gulf state of Qatar. – (Reuters)