Europese Hof van Justitie verwerpt Duitse Volkswagen-wet (en)
The European Court of Justice i (ECJ) has ruled that a German law from 1960 aiming to protect car manufacturer Volkswagen (VW) from hostile takeovers restricts the free movement of capital in the EU i.
The German law - also known as the "Volkswagen law" - stipulates that no single shareholder can have more than 20 percent of the voting rights in the VW company; that Germany and the region of Lower Saxony are each entitled to appoint two members to the firm's supervisory board; and that the majority required to pass a resolution at a general shareholders meeting is over 80 percent.
The European Commission i had brought Germany to court in 2005, saying the provisions of this law were infringing the freedom of establishment and of movement of capitals in the EU - both being fundamental part of the EU's single market rules.
The Court has agreed with the EU executive that the German law is in "breach of the free movement of capital".
"The Court points out that the free movement of capital may be limited by national measures that are justified by legitimate interests", reads an ECJ press release.
"However, the Federal Republic of Germany, beyond setting out general considerations concerning the need for protection against a large shareholder which might by itself dominate the company, has in the present case failed to explain why the provisions at issue are necessary to protect the interests relied on", it goes on.
But as regards Brussels' allegations that the German law is hindering freedom of establishment, the Court said the Commission has failed to "make specific arguments" in this respect.
The VW law has been a source of major frictions between Brussels and Berlin in the past, as German politicians and labour unions see it as a means to protect the company - and the local jobs it provides - from hostile takeover bids.
Political tension over the law came to ahead under Germany's previous chancellor Gerhard Schroeder. He accused the EU executive of wanting to interfere too much in member states' own business.
As a result, this ruling is seen as creating a precedent and establishing limits as regards protection by member states of companies they say are of high importance to their national economy.
The judgement is also set to have implications for other legal tussles such as the commission's fight with Spain over Madrid's protection of its major energy company Endesa.