Germany Wins EU Court Battle Over VW Law, Escapes Fines

Germany escaped fines and defeated the European Union’s regulator after the bloc’s highest court said its redraft of the so-called Volkswagen law doesn’t clash with EU rules.

Germany’s changes to the VW law “complied in full” with a 2007 ruling, the EU Court of Justice in Luxembourg said today, rejecting a challenge by the European Commission, the bloc’s executive authority.

The commission returned to the top court to argue that Germany’s overhaul of the VW law, which shielded Volkswagen AG (VOW) from takeovers since 1960, continued to violate the bloc’s rules because government veto powers at the company still existed. Instead of scrapping three provisions that were earlier ruled unlawful by the court, the country abolished two and kept the blocking minority, the Brussels-based EU regulator said.

The commission, which won the 2007 case, sued Germany in 2012 again over its “piecemeal approach” to changing the law. The EU executive authority wanted Germany to pay a penalty of 31,114 euros ($42,560) a day from the 2007 ruling until it complied or until the ruling in today’s case, plus a 282,725-euro daily fine from today’s ruling until the VW law was compliant.

‘Everyone’s Interests’

“The clarification is in everyone’s interest following prolonged litigation,” said Chantal Hughes, a spokeswoman for EU Internal Markets Commissioner Michel Barnier. “Today’s judgment brings the matter to a close.”

In its 2007 decision, the EU tribunal overturned the law that protected Wolfsburg, Germany-based Volkswagen by capping shareholder’s voting rights at 20 percent, regardless of the size of their holdings. That matched the stake held during the previous four decades by the German state of Lower Saxony, where Wolfsburg is located.

“This finally puts an end to the 11-year fight by VW workers to maintain the VW law,” Bernd Osterloh, VW labor chief, said in an e-mailed statement. “This is a good day for VW staff and for Lower Saxony.”

VW shareholders in 2009 approved a change of the German automaker’s corporate charter to safeguard veto rights for labor representatives and the German state of Lower Saxony on important decisions like factory closures regardless of the VW Law.

No Privileges

Lower Saxony is VW’s second-largest shareholder after family-controled Porsche Automobil Holding SE with a 20 percent voting stake. Labor representatives account for 50 percent of the 20 seats on VW’s supervisory board.

Lower Saxony Prime Minister Stephan Weil said the court “finally” confirmed the state’s position which will help bring back calm to the company, according to a statement by his office today. The VW law no longer privileges any single shareholder, not even Lower Saxony, Weil said in the statement.

The VW law will in future continue to maintain that for important decisions an 80 percent majority is needed, which will count for all shareholders, according to Osterloh’s statement.

Marco Dalan, a spokesman for VW, declined to comment and referred to the statements by Lower Saxony and labor representatives.

The case is: C-95/12, European Commission v. Federal Republic of Germany.

To contact the reporter on this story: Stephanie Bodoni in Luxembourg at sbodoni@bloomberg.net

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

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