EU to Challenge Germany′s New Volkswagen Law | Business| Economy and finance news from a German perspective | DW | 14.11.2008
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EU to Challenge Germany's New Volkswagen Law

The EU is set to take legal action against Germany after Berlin passed new legislation to cement state rights over Volkswagen. Porsche, the company’s primary shareholder had lobbied hard against the bill.

Volkswagen logo

The new bill gives Lower Saxony veto rights at VW

The new legislation is an amendment to the 48-year-old "Volkswagen Law," which protects the car manufacturer from takeover. It had been struck down last year by the European Union's highest court.

Berlin, however, on Thursday, Nov. 13, ruled that the state of Lower Saxony would have veto rights at shareholder meetings that normally require a share stake of at least 25 percent. Home to Volkswagen, Lower Saxony owns just over 20 percent of the company.

Porsche, the company's primary shareholder, will own just under 75 percent of the giant car manufacturer by next year.

A solid majority of legislators in Germany's Bundestag lower house of parliament backed the bill, which is a welcome addition because the state is considered a guarantor of jobs at Volkswagen, the largest industrial company in Lower Saxony.

EU vows action

Claiming the revised law violates EU rules on the free flow of capital however, the European Commission is demanding that the law be scrapped.

"We will move ahead with the case in the next few weeks," a Commission spokesman said.

With the new law, Lower Saxony can block strategic decisions made by Porsche, a move that the prestigious automobile brand has contested.

Angela Merkel speaks at VW in Wolfsburg on Sept. 23, 2008

Merkel promised VW workers she would back the new bill in Brussels

Porsche chief executive Wendelin Wiedeking wrote to legislators, predicting that law would cause future problems for Berlin.

Bernd Osterloh, the labor leader at Volkswagen, applauded the law however as a "grand signal" and claimed it is in full compliance with EU law.

Merkel vows to defend new bill

In a speech at the Volkswagen headquarters in Wolfsburg in September, German Chancellor Angela Merkel said that she believed the new law met EU demands and was adamant about defending the blocking minority clause in Brussels.

Thousands of VW workers have demonstrated in support of the law, which is also backed by Christian Wulff, Lower Saxony's premier.

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