The old Volkswagen law is making headlines again. After three years of silence, the European Commission could drag Germany again in front of the European Court of Justice, Der Spiegel reports. A decision to sue could be made by Wednesday, sources of the German magazine say.
The Volkswagen law was inherited from the days Volkswagen was privatized in 1960. According to the law, no shareholder of Volkswagen could vote more than 20 percent, even if more shares were owned. This was primarily a defense against takeovers. Voting plans are a classical poison pill. Volkswagen’s home state Lower Saxony holds 20.2 percent and can effectively veto any untoward advances.
Brussels took issue with the peculiar “VW law”, and dragged Germany into the EU court. In 2007, the court ruled that the law was in breach of the EU’s principle of free movement of capital. Germany reworked the law in 2008 – in a way:
The illegal cap on 20 percent of the votes was scuppered, but then there was a new clause that requires an 80 percent majority for important decisions. With Lower Saxony holding 20.2 percent, the status quo was preserved: Nothing goes without the Lower Saxony vote. Brussels immediately saw the spirit of the EU court decision violated, and repeatedly threatened to sue. Now, Brussels seems to be ready to pull the trigger.
“Don’t you have more pressing problems?” (or words to that effect) said Lower Saxony’s premier David McAllister, and sent an angry letter to the commission. Reuters obtained a copy:
“People in Germany will not understand why they should provide billions in aid to Greece and other EU member states while the commission pillories VW without sufficient justification.”
“In the current crisis, more than ever, it has become evident how important it is that a company like VW is headquartered in Europe.”
Currently, nobody appears to be lining up for a hostile takeover of Volkswagen, which is firmly in the hands of the Piech clan, with support from the home state government. But you never know. There have been times in the past when the VW share was so cheap that only the poison pill could ward off boarders.
According to Der Spiegel, the EU Commission already has an elegant way to extricate everybody from the imbroglio: If the shareholders agree to the veto right, or to an 80 percent or higher majority, and amend the shareholder agreement as such, then all is kosher, and no court will be needed.