FREE MOVEMENT OF CAPITAL : COURT VALIDATES VOLKSWAGEN LAW'S BLOCKING MINORITY.
The EU Court of Justice has brought to an end the tug of war between the European Commission and Germany over the Volkswagen law', which lasted for more than a decade. On 22 October, it rejected the Commission's second action over this legislation, which establishes an exception to rules on public limited companies in Germany(1). The disputed text maintained preferential shares for German public authorities (the Land of Lower Saxony and potentially the federal government) giving them a voice in the management of the vehicle manufacturer Volkswagen.
Hearing a case brought by the Commission, the EU court ruled, in 2007, that this legislative measure was incompatible with the free movement of capital. The law gave German public authorities mandatory representation in Volkswagen's Supervisory Board, set a blocking minority of 20% (whereas German law sets the threshold of 25%) and capped voting rights at 20% per shareholder(2). Germany complied with this judgement by abolishing, in 2008, the representation of the public authorities in the board and the 20% voting rights cap. However, it maintained the blocking minority, which works to the advantage of the Land of Lower Saxony, owner of 20% of Volkswagen's capital, in order to guard against a takeover of the German manufacturer. Germany argued that it followed from this judgement that the blocking minority alone does not constitute an infringement of EU law, but only in conjunction with the other two measures it abolished.
The Commission did not interpret the judgement the same way. It maintained that each of the...
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