Brussels Launches Probe into "VW Law"
June 21, 2002
The European Court recently banned the use of "golden shares" in former state-owned companies. Now the European Commission is looking into other mechanisms through which governments can intervene in the takeover process, and Lower Saxony’s special rights within Volkswagen are high on its list.
The European Union Commission on Thursday said it would be launching a probe into Germany's so-called VW Law, the special regulation that effectively protects car maker Volkswagen AG from a hostile takeover. A spokesman for Internal Market Commissioner Frits Bolkestein said that his office would be examining the VW Law "very carefully".
Meanwhile, Chancellor Gerhard Schröder categorically rejected the idea of any change in the VW Law. Schröder told a meeting of the VW works council: "Under my leadership, there will be no alterations to this law in Germany, and we will fight anybody who tries, via the European Union, to get a change of this kind introduced."
When he was premier of the German state of Lower Saxony, Schröder had a seat on the VW supervisory board. Lower Saxony's government owns just under 20% of VW's shares, and a special regulation prevents any other shareholder from controlling more than 20% of the company's voting rights.
That regulation made Volkswagen the only German company to enjoy the kind of protection afforded the French former state-owned firms by the "Golden Share" mechanism. And it's a recent landmark ruling by the European Court of Justice, effectively banning the use of golden shares, that has led Bolkestein to look into other ways in which governments within Europe have secured themselves the right to intervene in the takeover process.
Along with the VW Law, nine other similar arrangements are up for review, said the commissioner's spokesman.
Over one year ago, a British investor group lodged a complaint in Brussels against the VW Law. The Commission did not act on the complaint because it preferred to wait for the European Court ruling on the golden shares.