Brussels nearer to action over 'Volkswagen' law
By Francesco Guerrera and Birgit Jennen in Brussels and Hugh Williamson in Berlin
Published: October 3 2002 21:37 | Last Updated: October 3 2002 21:37
The European Commission has moved a step closer to taking action against the German government over a law that protects the carmaker Volkswagen from hostile takeovers.
The law, which gives the state of Lower Saxony a power of veto on any bid for VW, is the most politically sensitive of the 10 cases of "golden shares" currently under scrutiny in Brussels.
In a draft letter, seen by the FT, Commission officials conclude that the law should be changed because it limits the free flow of capital in the European single market
Any action against VW would sour the relationship between Brussels and Berlin, which has staunchly defended the law.
In a draft letter, seen by the FT, Commission officials conclude that the law should be changed because it limits the free flow of capital in the European single market.
However, their recommendation has not yet been taken up by the 20 commissioners because of strong resistance from German representatives in both Brussels and Berlin.
The Commission said on Thursday that its analysis of the VW case was continuing and that a decision was expected in the next few months.
If the commissioners side with their officials, they would formally ask Germany to change the law, threatening action in the European Court of Justice if it refuses.
Chancellor Gerhard Schröder - who sat on the VW board when he was premier of Lower Saxony - has said the law is an essential ingredient of German industrial policy.
In February he indirectly accused Frits Bolkestein, European internal market commissioner, of "having it in for VW", adding that those who want to change the law "would have to reckon with resistance from the federal government".
Under the law, shareholders in VW cannot exercise more than 20 per cent of voting rights, even if they own more than 20 per cent of the shares. This means that even if a bidder succeeded in buying 51 per cent of the shares, for instance, it would still not have control of the company. This in effect gives Lower Saxony, which has a stake of 18.6 per cent, the power to block any takeover of the company.
In the four-page letter, copied to the Commission's legal experts in June, Mr Bolkestein's officials criticise the law for "protecting national and regional interests" in Germany, and for "putting foreign shareholders at a disadvantage".
They argue the ECJ ruled that regulation preventing the purchase of shares from another EU member states limits the free movement of capital in the single market.
The letter, which would be sent to the German authorities only if the commissioners approve it, is addressed to Joschka Fischer, the German foreign minister. The ministry and VW were unavailable for comment on Thursday, a public holiday.
The decision on the VW law could reinforce German opposition to Mr Bolkestein's proposals for a single takeover code. German industry and government have already vowed to fight the plans in the European Parliament. |
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