Commission planning challenge against VW law ‘before Christmas’

Date: 03/10/02

By Peter Chapman

FRITS Bolkestein, the internal market commissioner, is preparing legal action against Germany to challenge a law that prevents hostile bidders from taking over Europe's biggest carmaker, Volkswagen.

The move follows Bolkestein's decision to spare VW from his controversial new proposals for a take-over directive aimed at protecting shareholders and easing company mergers.

The German law protects VW from take-over by preventing any investor from out-voting Lower Saxony - the German state that holds 18.6 of the company's stock.

Bolkestein's proposals reportedly failed to win unanimous backing from his fellow commissioners. Günter Verheugen, enlargement commissioner, and Michaele Schreyer, budget, apparently voted against the plans - raising questions over whether they were acting out of national interests.

Pascal Lamy, trade commissioner, and Philippe Busquin, research, also reportedly failed to back the revised proposal.

Bolkestein's spokesman Jonathan Todd confirmed: 'We are looking at the VW law.

It is possible that there could be an infringement procedure,' he added.

He said legal action could take place before the end of the year, but he refused to confirm that the Commission had already pencilled in a precise date, Wednesday 6 November, to launch the procedure with a warning letter.

Todd added that the Commission was also likely to target other restrictions imposed by governments on take-overs of specific companies. These include laws put in place by Italy and Spain that prevent French state-run utility Electricité de France from buying local firms and Dutch rules protecting post and telecom operators TNT Post and KPN.

Bolkestein told MEPs yesterday (2 October) that the VW law and other national laws protecting firms from take-overs, including so-called 'golden share' arrangements, were not the target of his draft take-over directive.

He said his proposal focused only on setting a level playing field for the private arrangements between companies and shareholders - and not 'public law' such as the VW legislation. However, he insisted he was not turning a blind eye to the distortions that such rules cause to the EU single market.

Meanwhile, Klaus-Heiner Lehne - the German MEP who helped overturn Bolkestein's previous bid to launch a take-over directive last year - has pledged to demand amendments to the latest proposal.

He said it would still leave his country's industrial powerhouses vulnerable while protecting privileged investors, such as the Swedish Wallenberg family. They wield enormous power through special voting rights over firms such as Ericsson, despite owning only a fraction of the company's shares.

Lehne said that under Bolkestein's new proposal Germany would be forced by 2008 to get rid by of its existing rules which allow board members to block hostile take-overs without obtaining specific permission of shareholders.

Bolkestein, who wants the main thrust of his proposals to be law by 2005, opted not to attack special shares such as the 'category A' stock owned by the Wallenbergs after Commission legal advisors suggested the move might breach the EU Treaty and constitutions of member states.

Lehne told European Voice: 'The central problem of finding a level playing field has not been solved.

'It is not the job of European politicians to protect small, rich families.'

The German government also attacked the proposal.

Frits Bolkestein, the internal market commissioner, is preparing legal action against Germany to challenge a law that prevents hostile bidders from taking over Europe's biggest carmaker, Volkswagen.