EU to sue Germany over Volkswagen law

The European Commission is preparing to take Germany to court to force it to change a new law that would allow the state to block a takeover of Volkswagen, Europe's biggest car maker, an European Union spokesman said Tuesday.

Internal market commissioner Charlie McCreevy will ask the EU's other 26 commissioners to support a legal challenge at the European Court of Justice in Luxembourg, his spokesman Oliver Drewes said.

Drewes did not say when that decision would be made, but it is unlikely to meet opposition.

Volkswagen, Europe's biggest carmaker, is at the centre of a possible European Commission court challenge against Germany.(Canadian Press)

The EU has long warned Germany to scrap a rule that gives Volkswagen's second-largest shareholder — its home state of Lower Saxony — the ability to block major decisions.

Germany was forced to redraft a nearly 50-year-old law that protects Volkswagen AG from a hostile takeover after an EU court ruled last year that it deterred bidders and broke European rules guaranteeing all EU companies the right to invest in any part of the 27-nation bloc.

In Berlin, the German Economy Ministry said in a statement that it is ready to look at the law again should the EU go ahead with a formal legal challenge.

German Justice Minister Brigitte Zypries has said that Germany is complying with that ruling, particularly by scrapping a provision that capped shareholders' voting rights at 20 per cent, whatever the size of their holding.

But Berlin has insisted on keeping other provisions, notably one under which "significant decisions" require the approval of shareholders representing 80 per cent of Volkswagen's stock, plus one share, at the annual general meeting.

That would mean that a shareholder with 20 per cent of the stock would continue to hold a blocking minority. Lower Saxony holds just over 20 per cent, and state Gov. Christian Wulff has ruled out selling any of the stake.

Volkswagen's biggest shareholder — fellow German automaker Porsche, which has a 31 per cent stake and has said it plans to raise that to a majority holding — opposes the government's plan.

It has called for the threshold for major decisions to be lowered to 75 per cent in keeping with standard German securities laws.

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