Brussels, 24/11/2011 (Agence Europe) - The European Commission decided on Thursday 24 November to refer Germany back to the Court of Justice of the European Union for failing to fully comply with the Court's 2007 ruling on the law privatising Volkswagen (VW). This piece of legislation protects car manufacturer Volkswagen from takeover bids. The Commission is of the view that the Land of Lower Saxony's 20% blocking minority in Volkswagen's capital is illegal.
The Commission will now ask the Court to impose financial penalties on Germany of €31,114.72 per day from the date of the initial Court ruling until Germany complies with the 2007 judgment or until the second Court ruling, whichever comes first, and also €282,725.10 per day from the date of the second Court ruling until Germany has brought the Volkswagen law into line with EU rules.
In its 2007 ruling, the Court outlawed certain provisions of the 1960 German law privatising Volkswagen. The Court found that the provisions in question granted unjustified special rights to German public authorities (the Land of Lower Saxony and potentially also the Federal Government) and that by maintaining them, Germany had failed to fulfil its obligations under the Treaty rules on the free movement of capital (Article 63 of the Treaty on the Functioning of the EU).
The 1960 Volkswagen law granted special powers to the German public authorities. It set out mandatory representation of public authorities on the VW board, granted a 20% blocking minority to the Land of Lower Saxony and installed a 20% voting cap. In the Commission's view, these provisions ran counter to freedom of capital rules enshrined in the EU Treaty as it gave the German authorities powers to block significant transactions - including intra-EU cross-border investment. The Commission, therefore, opened infringement proceedings against Germany in 2001.
The Commission's position was upheld by the Court of Justice of the EU. On 23 October 2007, it ruled in Case C-112/05 that, by keeping state representation, and also the 20% voting cap and the 20% blocking minority still in force in the law of 21 July 1960 on the privatisation of equity in the Volkswagenwerk limited company, Germany had failed to fulfil its obligations under the EC Treaty rules on the free movement of capital.
A law amending the VW law, which came into force in December 2008, abolished the provisions providing for the representation of public authorities on the board and the 20% voting cap. It did not, however: (1) modify the provision establishing a 20% blocking minority in favour of the Land of Lower Saxony; (2) provide for any changes to the VW Articles of Association (part of the statute of a company), which contain majority voting requirements mirroring the VW law. Despite the many contacts which took place at all levels and with all key players with a view to achieving full compliance whilst avoiding a second referral, the German authorities declined to make further changes to their law in the summer of 2011. (LC/transl.rt)