[A-List] Germany: against European Commission

["Michael Keaney" <michael.keaney@xxxxxx>]

EU to sue Germany over Volkswagen takeover law
By Francesco Guerrera in Brussels
FT.com: February 26 2003

European regulators are to launch legal action against the German government
over a controversial law that protects the carmaker Volkswagen from a
takeover.

The move is set to trigger a bitter row between the European Commission and
the Berlin government, which has repeatedly refused to change the law.

Brussels insiders said the decision to send Germany a "letter of formal
notice" - the first step of a legal action that could take years - could
come as early as next week.

However, they warned the move could be opposed by several of the 20
commissioners who need to approve it and a final decision on timing had not
been taken.

"We expect to take a decision in the next few weeks," the Commission said.

However, people close to the case say the Commission's internal market
department has reached the preliminary conclusion that the VW law, which
gives the German state of Lower Saxony a de facto power of veto over a
takeover, should be changed.

After a long investigation, the Commission believes it has evidence the law
acts as a golden share, preventing bidders from launching a takeover of the
company. Frits Bolkestein, the EU internal market commissioner, has launched
a series of actions against golden shares, which he considers as a crucial
hurdle to the free movement of capital across Europe.

The German Chancellor Gerhard Schröder, a former premier of Lower Saxony and
VW board member, has repeatedly vowed to defend the law. Faced with fading
popularirity because of the economic slowdown, he is likely to renew his
fight if Brussels takes action.

Under EU rules, the German government will have up to two months to reply to
the Commission's letter to explain why the law is not illegal. If the
Brussels authorities are not satisfied with the response, they will send a
formal request to Germany to change or scrap the law. If Berlin refuses, the
Commission has the power to take Germany to the European Court of Justice.