European backing for state role at Volkswagen

Germany has won a decisive victory over the european Commission in its bid to preserve state influence at Volkswagen, after europe’s top court rejected an attempt by Brussels to scuttle a law that helps shield the company from takeovers.

The 1960 law, introduced when VW listed on the stock market, gives the state of Lower Saxony, where VW is headquartered, a veto over key decisions such as factory closures, mergers and acquisitions.

Lower Saxony, which holds a fifth of VW’s voting stock, backs workers who argue that the law protects jobs as well as their role in corporate decision-making, which they say has fostered VW’s rise to become the world’s third-largest carmaker in 2012.

The commission says that by effectively preventing foreign buyers from acquiring VW, the law hinders the cross-border integration of industry in the european Union, in breach of eU single market legislation.

Putting an end to the 11-year dispute, the Luxembourg-based eU Court of Justice decided yesterday that Germany had fully complied with a 2007 court ruling ordering it to water down the VW law.

a year after the 2007 ruling, Germany scrapped elements of the law, but kept untouched the right of any shareholder with a 20 per cent stake to veto strategic decisions. That prompted the commission to pursue Germany again, for protectionism.

“The law neither privileges specific shareholders nor discriminates against anyone else’s interests,” Lower Saxony prime minister Stephan Weil said yesterday.

The VW law is cited as an example of Germany’s consensus-based industrial relations. The company’s board is evenly split between management and worker representatives.