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European Court rules on Volkswagen Law

Agence France Press (AFP) recently reported that European Court of Justice will be having its rule on the “Volkswagen Law” today, in line with Porsche’s desire to take control of the German automaker.
Once the 40-year-old law that protects Volkswagen from being taken over becomes void, Porsche will be able to increase its current 31-percent stake to a larger share.

Porsche has openly showed its interest in the German automaker.

The said law was established in 1960 to protect Volkswagen from foreign control. The main idea of the law is that no matter how large the capital is, the shareholder cannot exceed 20 percent of the voting rights in a company.

It is also stated that the German state of Lower Saxony, where Volkswagen is based, can appoint two members to Volkswagen’s supervisory board. This gives them a right to block the majority in implementing certain resolutions. According to the report done by AFP Volkswagen’s second-biggest investor is Lower Saxony with 20.3 percent of the capital.

For a long time now, Porsche has been against the restriction on its voting rights.

“To have 31 percent of the capital but only 20 percent of the voting rights is clearly discrimination,” said its chief executive Wendelin Wiedeking.

AFP also said that it can be expected for the European Court of Justice to rule in favor of the European Commission’s opinion that the Volkswagen Law is restrictive, and may even ask to revise it.

Damaso Ruiz-Jarabo Colomer, the court’s advocate general said in February the law go against European legislation since it limits the free movement of capital within the 27-nation bloc and restricts foreign investment.

Wiedeking said, Porsche will have to enter a “decisive” phase to take control of VW, if the law is revised.

The head of the VW’s supervisory board and co-owner of Porsche, Ferdinand Piech assure changes in Volkswagen. It was his dream to have a car group with global reach.

This entry was posted on Tuesday, October 23rd, 2007 at 12:55 pm and is filed under Uncategorized. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.

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