Commission takes on European heavyweight as it steps up campaign against golden shares
At times, the EU resembles a schoolyard: the member states are like wayward school kids who know the rules but continually break them anyway.
Meanwhile, the European Commission plays the part of a frazzled but determined teacher trying to keep everyone in order.
Certainly, this is true in regard to golden shares, which the commission has been attempting to clamp down on for several years.
Member states are very slowly falling into line, however. Spain bowed to pressure in 2005, while Portugal scrapped golden shares in three companies last July as part of the conditions attached to its €78 bn ($102 bn) bailout. Italy is also expected to play ball soon.
Germany refuses to yield
But the commission has a problem: the biggest kid in the school – Germany – is refusing to yield. Specifically, Germany won’t amend a piece of legislation known as the ‘VW law’, which protects car manufacturer Volkswagen from hostile takeovers.
The VW law dates back to 1960, when Volkswagen was privatized. It gave the state of Lower Saxony a blocking vote of 20 percent and prevented any other shareholder from exercising more than 20 percent of voting rights.
The EU has been campaigning against the VW law since 2001, and in 2007 took Germany to court over it. Germany responded by amending the law to scrap the voting cap on other shareholders, but it left in place VW’s own 20 percent vote block.
Given that major decisions at VW need 80 percent shareholder backing, the company can still, in effect, prevent any other shareholder from gaining control.
Sued again
Now the commission is suing Germany again after the country walked away from negotiations about the law this summer. If Germany loses the case, it will have to make further changes to the law, plus pay a fine backdated to 2007.
In response, the country’s politicians are gearing up for a fight. Berlin has said it ‘regrets’ the decision to sue. In addition, David McAllister, state premier of Lower Saxony, has insisted the existing VW law complies with the EU rules. ‘Doesn’t Europe have better things to do?’ he added.
But the EU is sticking to its guns and the two parties will meet in court unless a deal is done soon. The regulator knows discipline could be a problem if one kid breaks the rules and gets away with it.
