Germany wins victory over EU Commission in VW Law case

Wed May 29, 2013 9:56am EDT
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By Christiaan Hetzner

BERLIN (Reuters) - Germany looked set to win victory over the European Commission to preserve state influence at carmaker Volkswagen (VOWG_p.DE: Quote) on Wednesday, after an adviser to the EU's highest court rejected the European Commission's bid to overturn the so-called VW Law.

While the final ruling is not expected until later this year, the preliminary advisory decision is a painful setback for the Commission. For years it has been locked in a battle with Germany over the 1960 law that gives the state of Lower Saxony a veto over fundamental decisions at VW such as mergers and acquisitions, even though it only has a 20 percent voting stake.

"The Commission has embarrassed itself on an issue that has practically no relevance. This looks to be a clear victory for Germany," said NordLB analyst Frank Schwope.

Brussels dragged Berlin in front of the European Court of Justice (ECJ) for a second time in 2011, demanding that the last surviving element of the VW Law be repealed - that any shareholder with 20 percent or more of the ordinary voting shares can veto major decisions about the company's future.

But on Wednesday the ECJ's Advocate General, Nils Wahl, said in a written opinion that the judges should dismiss the Commission's demand that Germany be fined for failing to repeal the veto right following an ECJ court ruling in 2007.

That ruling had decided that the combined effect of the 20 percent blocking power in conjunction with a separate 20 percent cap on individual voting rights had violated EU laws, but did not explicitly rule on whether the veto alone was illegal.

Wahl said Germany had thus fully complied with the ECB's 2007 judgment by eliminating the voting cap and Lower Saxony's right to directly appoint two delegates to the company's board.

"The Advocate General further points out that the purpose of the present proceedings is not to determine whether the provision on the blocking minority, considered on its own, infringes EU law, but only whether Germany has complied with the 2007 judgment," the ECJ said in a statement.   Continued...

A Volkswagen logo is seen on the front of a Volkswagen vehicle at a dealership in Carlsbad, California, April 29, 2013. REUTERS/Mike Blake