Economics set to play wider role in takeovers directive

Date: 20/03/03

By Peter Chapman

MEPS are set to inject more economics and less legalese into plans for a new directive governing company takeovers.

The move comes after Parliament leaders agreed to give the assembly's economic and monetary affairs committee more say over amendments to the controversial new law.

The decision means that British Liberal Chris Huhne - an economist - will now share centre stage with German Christian Democrat Klaus Heiner-Lehne, rapporteur on the directive for the assembly's legal affairs committee, which previously held the reins.

"From my point of view it obviously makes the whole dossier much more interesting than merely producing an opinion for the main committee," Huhne told European Voice, adding that he is now planning a new report on the issue, likely to be voted on at the end of April.

He said the committee's chairwoman Christa Randzio-Plath had argued that members should have more say because the directive was one of the planks of the reforms to economic and financial policy.

Huhne insisted he shares Lehne's "overwhelming objective" to see the directive adopted without the need for a time-consuming second reading. "I think this is an absolutely key piece of legislation. If we don't get it through it makes the whole Lisbon process a complete joke."

However, he favours dumping a key part of his German counterpart's report on the law - surrounding the thorny issue of how to deal with special categories of shares that carry multiple voting rights.

Lehne claims these shares prevent a level playing field in the market for corporate control because they allow privileged investors to outvote others with more shares. He wants the law to ban new issues of special shares and to outlaw them by 2010.

This would leave member states with the job of deciding compensation levels for holders of the special shares - a job fraught with complex legal pitfalls.

Huhne favours 'grandfathering', or keeping existing special shares, only banning new issues once the law comes into force.

"The benefit of grandfathering as opposed to a time period is that it avoids all the problems of compensation. And you don't get into retrospective legislation by interfering with bargains that have been freely struck.

"There is a very strong liberal case [for this approach]. People have done these agreements because that was the state of the law at the time."

Huhne said Lehne's plan to put in place extra measures to stop US corporate raiders from taking advantage of the new regime to swallow-up EU companies are "a minefield", adding that such a move must be in line with World Trade Organization rules.

Elsewhere, Huhne said he would seek other changes to the directive, proposed by the Commission last year, after MEPs voted to block an earlier attempt.

He said a plan for member states to share jurisdiction over different parts of the takeover process would lead to an "almighty mess" with "enormous amounts of litigation".

MEPs are set to inject more economics and less legalese into plans for a new directive governing company takeovers.