Press Release: Free movement of capital: Commission takes Germany to the Court of Justice on Volkswagen law

The European Commission decided on 13 October 2004 to take Germany to the European Court of Justice with respect to certain provisions of a 1960 law privatising Volkswagen (VW law). This state measure, based on a 1959 agreement between the Bund (federal government) and the Land of Lower Saxony, prevents any shareholder from acquiring more than 20% of voting rights and confers a special blocking minority right on any shareholder which has 20% of voting rights. Additionally, the law confers on the Bund and the Land a specific right of mandatory representation on the company's Supervisory Board, irrespective of the number of shares they hold. The Commission considered that these provisions of the VW law made it substantially less attractive for other EU investors to acquire the company's shares with a view to participating effectively in management decisions or controlling it, and so were contrary to EC Treaty rules on the free movement of capital (Article 56) and the right of establishment (Article 43).