Bloomberg News

EU Seeks Multimillion-Euro Fine for Germany Over VW Takeover Law

November 24, 2011

Nov. 24 (Bloomberg) -- The European Union will revive legal action against Germany over the so-called Volkswagen Law that shields Europe’s largest carmaker from a takeover.

The European Commission, the EU’s executive arm, said in an e-mailed statement that it will ask the European Court of Justice to impose a multimillion-euro fine on Germany for failing to remove government veto power at VW when it modified the law in 2008.

“Member states are required to take all necessary measures to comply with the entirety of the judgment of the court,” the commission said today in the statement.

The legal action concerns the German government’s failure to respect an October 2007 European court ruling demanding removal of the German state of Lower Saxony’s right to block a deal for VW, which is based in the region, by using its 20 percent minority stake. The court said that restricts the free flow of capital in Europe.

The commission said it will seek a fine of 31,114.72 euros ($21,300) per day dating back to Oct. 23, 2007, when the court overturned the law, until Germany complies. Germany should also have to pay a second daily fine of 282,725.10 euros from whenever the court rules until the government brings the VW law into line with EU standards, according to the statement.

The VW law dates back to 1960 and gives workers and Lower Saxony specific influence over decisions at VW such as factory closures and takeover bids. German sports-car maker Porsche SE counted on the law being abolished when it sought to take over VW in 2008. Porsche’s bid foundered after the carmaker racked up more than 10 billion euros of debt, causing both companies to seek a combination.

‘Completely Unnecessary’

“At a time when the European Commission should be courting people for greater acceptance, it kicks off a completely unnecessary contract-violation procedure,” David McAllister, prime minister of Lower Saxony and a member of Chancellor Angela Merkel’s Christian Democratic Union said in a statement. “The timing of this is grotesque.”

Michel Barnier, the EU’s financial services commissioner who is promoting legal action against the VW law “is a neoliberal arsonist,” Hartmut Meine, a member of VW’s supervisory board and a regional leader of Germany’s IG Metall union, said in an e-mailed statement. “He obviously wants to remove the successful model of co-determination at VW for purely ideological reasons.”

Marco Dalan, a spokesman for VW declined to comment, deferring to the German government. A spokesman at Germany’s Justice Ministry wasn’t immediately available to comment.

--Editors: Christopher Scinta, Peter Chapman To contact the reporter on this story: Andreas Cremer in Berlin at acremer@bloomberg.net; Jim Brunsden in Brussels at jbrunsden@bloomberg.net

To contact the editor responsible for this story: Anthony Aarons at aaarons@bloomberg.net.


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