Germany’s upper house of parliament approved a revised law governing Volkswagen on Friday even though it fails to address a key European Commission objection that shields the carmaker from takeover.
The Bundesrat, or upper house, voted to approve the revised law after the lower house, the Bundestag, had endorsed it on November 13. The new law addresses two lesser points the Commission had challenged: a shareholder’s rights are no longer limited to a maximum of 20% if the holding is larger and, secondly, the federal government and Lower Saxony no longer have “special rights” to two supervisory board seats each.
But the new law retains the rule that gives the state of Lower Saxony, which holds just over 20% of Volkswagen shares, an effective blocking minority in the firm. The law allows Lower Saxony, the region where Volkswagen is based, to block strategic decisions taken by the company’s largest shareholder, Stuttgart-based Porsche. The EU has said explicitly that Germany must scrap the rule.
On Thursday, the European Commission gave Germany two months to alter the law shielding Volkswagen from takeover or face court action. EU Internal Market Commissioner Charlie McCreevy launched legal action against Germany in June for failing to properly amend the law that the European Court of Justice said broke EU rules on the free movement of capital across borders. (Reuters)