Commission foot down on VW

Date: 20/03/03

THE European Commission this week called on Germany to dismantle a law it claims protects Europe's biggest carmaker, Volkswagen, from a takeover.

Commissioners agreed to send a legal warning to Berlin two weeks after opting to give their lawyers more time to make sure whether the law was a clear breach of EU rules governing free movement of capital.

Jonathan Todd, spokesman for internal market chief Frits Bolkestein, said the law "constitutes a disincentive to investment in Volkswagen and may be in contradiction with treaty rules on free movement of capital and establishment". He said the Commission's concerns focused on the way the law reserves a 20 blocking minority for the Land of Lower Saxony, and at the same time limits the number of votes a shareholder can have in the company to 20. That limits the possibility of a takeover in the company because more than 80 of shareholder votes are needed to take important decisions.

Todd said the Commission was also concerned about Lower Saxony's right to nominate two members of the supervisory board. The EU executive wanted to avoid court action, he added, and would push for talks with German authorities. Todd refused to endorse comments made by Alex Schaub, internal market director-general, who said the problems would be solved if Lower Saxony merely sold its stake in VW.

"Mr Schaub was expressing a personal opinion," said Todd.

German officials said the law was already in line with EU rules. "There are no doubts on the compatibility of the VW law with European law," government spokesman Bela Anda told a Berlin news conference.

The European Commission has called on Germany to dismantle a law it claims protects Europe's biggest carmaker, Volkswagen, from a takeover.