Europese ministers maken nieuwe overname-richtlijn minder streng (en)

European industry ministers have backed a law designed to make cross-border takeovers of companies easier, ending 15 years of political wrangling.

But the decision to make some core elements of the Directive non-binding has weakened the legislation, says the Commission, and highlighted serious differences between Member States.

The Commission initially put forward the proposal for a new takeover code as part of its drive to open up the EU's financial markets.

The EU's executive wanted to see legislation in place that would give more rights to shareholders and prevent a hostile takeover bid being blocked without their agreement.

Different "poison" pills

A deal between Member States has proved so hard to reach because of the different mechanisms that companies in different EU countries use to frustrate takeover bids.

In Scandinavia, so-called "multiple voting rights" are commonplace, where different classes of shareholder can cast more than one vote to block a bid.

Such rights are illegal in Germany, which instead allows the use of "poison pills" to block takeovers. The "poison pill" technique is used to make shares in a company less attractive to the potential buyer.

The Commission had wanted to outlaw the poison pill mechanism, but this worried Germany, who feared that the new legislation would leave their companies more vulnerable to foreign takeovers.

Another defeat for the Commission

In the compromise agreement, agreed on November 27, it will be up to Member States to decide whether they want to ban either technique. Companies in the EU, such as Germany, that allow poison pills will still be allowed to use this option.

But the compromise was seen as a watering-down of the directive and the Commission was unhappy with the result.

Frits Bolkestein, internal market Commissioner, saw the compromise as a danger for the EU's "Lisbon Strategy" - its goal to become the most competitive economy in the world by 2010.

"If the council continues to take decisions like that, the European Union will never attain its fixed objective to become world's most competitive economy by 2010", he said.

"I'm not going to pretend I am pleased with this agreement".

Making cross-border company takeovers easier is seen as an integral part of Mr Bolkestein's five-year Financial Service Action Plan (FSAP), due to be wrapped up next year.

Second body blow

This is the second time this week that ministers have "won" an argument over the European Commission, and in so doing highlighted serious divisions in the Union.

On Tuesday, France and Germany escaped reprimand from the European Commission for breaching the three percent budget deficit limit for the EU's Stability and Growth Pact.