Germany’s Redraft of VW Law Is Legal, EU Court Adviser Says

Germany should escape fines after an adviser to the European Union’s top court said it complied with a 2007 ruling to change legislation known as the Volkswagen law.

Updates to the German measures that shielded Volkswagen AG from takeovers since 1960 are “fully” in line with the ruling from the tribunal, Advocate General Nils Wahl of the EU Court of Justice said today. The Luxembourg-based EU court usually follows such advice.

Germany’s overhaul of the VW law continue to violate the bloc’s rules because government veto powers at the company still exist, the European Commission is arguing in a lawsuit at the EU court. Instead of scrapping three provisions that were ruled unlawful by the court, the country abolished two and kept the blocking minority, the Brussels-based EU regulator has said.

The EU’s top court in October 2007 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.

Germany risks being forced to pay millions of euros in penalties for failing to end Lower Saxony’s blocking minority at the carmaker when it modified the law in 2008, if the EU tribunal eventually sides with the Brussels-based commission.

VW advanced as much as 0.4 percent after the opinion. The shares closed at 166.80 euros, down 0.4 percent, in Frankfurt trading.

‘Good Development’

“It’s a good development for Lower Saxony and for Volkswagen.” said Michael Juerdens, a spokesman for the government of the state where VW is based.

The opinion “backs the federal government’s view that it fully implemented the 2007 ruling by the European Court of Justice,” Adrian Toschev, a spokesman for the German Economy Ministry, said in an e-mail.

Chantal Hughes, a spokeswoman for Michel Barnier, the EU’s financial services commissioner, said the commission takes note of the opinion and awaits the judgment of the court.

The commission, which won the 2007 case, sued Germany in 2012 again over its “piecemeal approach” to changing the law. The EU executive authority wants Germany to pay a penalty of 31,114 euros ($40,000) a day from the 2007 ruling until it complies or until the ruling in today’s case, and a 282,725-euro daily fine from the ruling in today’s case until the VW law is in line with EU rules.

Volkswagen spokesman Eric Felber declined to comment.

“It’s a good day for the Volkswagen workforce,” Bernd Osterloh, the top labor representative at VW, said in an e-mailed statement. “Now the path has been cleared to not sacrifice a unique law to the one-sided ideology of the free capital market.”

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

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