Brussels, 13/10/2004 (Agence Europe) - On Wednesday; the European Commission decided to bring Germany before the European Court of Justice over various provisions of the 1960 law on the privatisation of Volkswagen (VW law). This State measure, which was based on an agreement concluded in 1959 between the Federal State and the Land of Lower Saxony, prevents shareholders from acquiring over 20% of voting rights, and confers a special blocking right upon any shareholder with 20% of voting rights. Furthermore, this law grants the Bund and the Land a specific right of mandatory representation in the company's supervisory board, regardless of how many shares they own. The Bund and the Land have traditionally held some 20% of voting rights in Volkswagen, but now the Land is its main shareholder, with around 20% of voting rights and two guaranteed seats on its board. The Commission feels that these provisions of the Volkswagen law act as a disincentive to investment from other Member States, which would effectively be prevented from taking part in management decisions, and that these are a violation of the rules of the EC Treaty on free movement of capital (article 56) and freedom of establishment (article 43).
In their response to the reasoned opinion from the Commission in March 2004 (see EUROPE of 31 March, p.13), German authorities refused to amend the Volkswagen law. The Commission considers the arguments put forward by Germany in defence of the law are not satisfactory in the light of relevant Court of Justice case-law. Hence the decision taken on Wednesday. In Berlin, it is considered on the other hand that Germany has a good chance of winning the legal battle initiated by the Commission. According to German diplomatic sources in Brussels, Germany is convinced that the law does not violate the principle of free movement of capital and freedom of establishment, in so far as empirical data prove that the way Volkswagen capital is shared out is very similar to that of other companies.