Volkswagen Law: Center of Legal Arguments in Europe
A senior adviser to the European Unionâs highest court said last Tuesday that the German government is overprotective of Europeâs largest automaker, Volkswagen AG. The judges have already confirmed it that the case raised on the legitimacy of Volkswagen law will affect the national authoritiesâ capacity to protect companies from any plan of takeovers.
According to advocate-General Damaso Ruiz-Jarabo Colomer, âThe German governmentâs approach isâ¦not based on overriding reasons relating to the public interest.â Although not that binding but the full EU court backs the advocate general in abut 80 percent of the cases.
The EU court has also released a statement stating, âThe German law discourages those wishing to acquire a significant number of shares in the company.â The ruling is expected to come out later this year. The case on the Volkswagen law is perceive by most people as a sort of test to see up to what extent is the EU governmentâs capacity to protect companies that they deemed important to their economy.
The legal queries on Volkswagenâs law are not new since it was started by the European Commission in 2005 when it took Germany to court. Since then the argument on the decades-old law didnât stop. The Volkswagen law was created to protect Europeâs largest automaker from a foreign takeover which was seconded by German politicians and labor unions saying that the said VW law will help ensure stability at the company.
âThe VW law has proved its value because it has contributed to the wellbeing of the company and its employees,â said Juergen Peters, Head of Germanyâs largest industrial union.
But despite the positive votes it has from Germanyâs politicians and labor unions, the EU Commission has expressed their objection to the provisions in the 1960 Volkswagen Law which limits a shareholderâs voting rights to 20% regardless of the number of VW stakes they owned plus the 80% majority vote for important decisions.
It was last November 2006 when Porsche AG has expressed its willingness to increase its stakes in Volkswagen AG to avoid hostile takeovers of other foreign investors. It should be noted that Porsche owns 27.4% stakes at VW and with the addition of another 30% will allow the former a full takeover bid.
The second largest shareholder of VW is the state of Lower Saxony which is the very same place where the automakerâs Wolfsburg headquarters is situated. State Governor Christian Wulff have assured that even if the law is abolish it would have no negative impact on the company since Porsche and Lower Saxony can prevent any takeover attempts. âPorscheâs taking a stake in the company means there would be no negative consequences if the VW law is struck down,â explained Wulff in an interview with Neue Presse daily.
Volkswagen is Europeâs largest automaker and maker of the famous Volkswagen Passat Parts. Its headquarters is in Wolfsburg, Germany. VW is currently ranked fourth in the worldâs largest automaker next to GM, Toyota, and Ford.