Volkswagen Act

The Volkswagen Act is a set of German federal laws enacted in 1960, regulating the privatization of Volkswagenwerk GmbH into Volkswagen AG.[1] In order to maintain government control in the privately owned company, it stipulated that the votings on major shareholder meeting resolutions require 4/5th(80%) agreement.[2] This part of the law was deemed to violate the "free movement of capital" principle of European company law by EU members.[3] After a series of challenges by EU from 2007 to 2013, the German parliament finally amended the part in 2013 to EU court satisfaction.[4]

Law

The full title of the law is "Gesetz über die Überführung der Anteilsrechte an der Volkswagenwerk Gesellschaft mit beschränkter Haftung in private Hand", usually abbreviated to "VW-Gesetz". It was enacted on 28 July 1960, when Volkswagenwerk GmbH was privatized. The state of Lower Saxony held a voting share of 20.2 percent, which gave it the ability to veto major decisions and prevent takeovers by other shareholders, regardless of the extent of the ownership. It also allowed the government of Lower Saxony to appoint two members to Volkswagen's board.

Challenges and the EU court ruling

In October 2007, the European Court of Justice ruled that the VW law was illegal in EU[5] because it was protectionist. At that time, Porsche held 30.9% of VW shares and there had been speculation that Porsche would be interested in taking over VW if the law did not stand in its way. The court also prevented the government appointing Volkswagen board members.[6]

In 2008, the German government then rewrote the Volkswagen law, attempting to sidestep the ECJ judgment; removing restrictions on share ownership but still requiring an 80% majority for important decisions, so Lower Saxony would still be able to block major business decisions and takeovers.[7] European regulators took the German government to court again[8][9] and requested a fine of €31,114 per day backdated to when the law was declared illegal in 2007, plus larger ongoing fines from the date of a second court judgment. In March 2012, the German government insisted that it would defend the Volkswagen Law.[10]

In October 2013, the EU Court of Justice in Luxembourg ruled that the redraft of the Volkswagen law “complied in full” with EU rules, bringing "the matter to a close,” as Chantal Hughes, spokeswoman for EU Internal Markets Commissioner Michel Barnier said.[11]

Outcome

During the above developments, Porsche, which traditionally had close relationships with Volkswagen, increased its holding of Volkswagen AG shares as follows (please see Porsche#EU and the Volkswagen Law for details):

October 2005: 18.53%[12]

Nov. 2006: 27.4%[13]

March 2007: 30.9%[13]

September 2008: 35.79%

January 2009: 50.76%[14]

Porsche had many difficulties financing the large investment, and agreed in August 2009 to sell its automobile manufacturing business to Volkswagen AG,[15] while retaining the majority ownership in Volkswagen. Porsche SE officially became the controlling owner of Volkswagen AG when Volkswagen Law was amended to abolish the 20% owner veto rights in 2013, with 50.76% ownership.[11] Please see the Porsche article for details.

References

  1. ↑ "Gesetz über die Überführung der Anteilsrechte an der Volkswagenwerk Gesellschaft mit beschränkter Haftung in private Hand". Bundesministerium der Justiz und für Verbraucherschutz.
  2. ↑ § 4, Abs.3 of the above referenced law.
  3. ↑ F. Sander. "Case C-112/05, European Commission v. Federal Republic of Germany The Volkswagen Case and Art. 56 EC". Columbia Journal of European Law (2008). 14: 359–370.
  4. ↑ "Germany has complied with Volkswagen law ruling". Retrieved 2014-07-28.
  5. ↑ "THE VOLKSWAGEN LAW RESTRICTS THE FREE MOVEMENT OF CAPITAL" (PDF). COURT OF JUSTICE OF THE EUROPEAN COMMUNITIES. 23 October 2007. Retrieved 17 February 2013.
  6. ↑ "'Volkswagen law' is ruled illegal". BBC. 23 October 2007. Retrieved 17 February 2013.
  7. ↑ "EU To Sue Germany Again Over 'Volkswagen Law'". Wall Street Journal. 24 November 2011. Retrieved 17 February 2013.
  8. ↑ Ramsey (27 November 2011). "Germany in court again over "VW Law," could face fines of nearly $375,000/day". Autoblog. Retrieved 17 February 2013.
  9. ↑ "Germany sued for second time over 'Volkswagen law'". The Parliament. 25 November 2011. Retrieved 17 February 2013.
  10. ↑ "Volkswagen AG : Germany To Aggressively Defend Volkswagen Law". 4-Traders. 21 March 2012. Retrieved 17 February 2013.
  11. 1 2 "Germany Wins EU Court Battle Over VW Law". Bloomberg. 22 October 2013. Retrieved 5 February 2014.
  12. ↑ "Porsche Seeks to Acquire Share in Volkswagen". 2005-09-27.
  13. 1 2 Häcker, Joachim. "VW Porsche case study" (PDF).
  14. ↑ "VW Gains as Porsche Refinancing Boosts Expectations (Update1)". Bloomberg. 26 March 2009. Retrieved 9 June 2014.
  15. ↑ Connolly, Kate. "Volkswagen and Porsche to merge". The Guardian.

Further reading

  • A. Endell: Volkswagen im Angebot – VW-Gesetz bietet keinen Schutz vor feindlichen Übernahmen, in: Neue Zeitschrift für Gesellschaftsrecht 2000, S. 1160–1161
  • W. Kilian: VW-Gesetz und Wissenschaftsförderung, in: Neue Juristische Wochenschrift 2002, S. 3599–3601
  • H. Krause: Von „goldenen Aktien“, dem VW-Gesetz und der Übernahmerichtlinie, in: Neue Juristische Wochenschrift 2002, S. 2747–2752
  • R. Ruge: Goldene Aktien und EG-Recht, in: EuZW 2002, S. 421–424
  • St. Grundmann, F. Möslein: Die goldene Aktie, in: Zeitschrift für Unternehmens- und Gesellschaftsrecht 2003, S. 317–366
  • C. Armbrüster: „Golden Shares“ und die Grundfreiheiten des EG-Vertrages, in: JuS 2003, S. 224 ff.
  • F. Sander: Volkswagen vor dem EuGH – Der Schutzbereich der Kapitalverkehrsfreiheit am Scheideweg, Europäische Zeitschrift für Wirtschaftsrecht (EuZW) 2005, S. 106–109.
  • M. Pießkalla: Goldene Aktien aus EG-rechtlicher Sicht, Dissertation, Verlag Dr. Kovac, Hamburg 2006, ISBN 3-8300-2307-3.
  • N. Reich: Kurzbesprechung der Schlussanträge von Generalanwalt Dámaso Ruiz-Colomer v. 13. Februar 2007 in der Rs. C-112/05 - Kommission/Bundesrepublik Deutschland betreffend das VW-Gesetz (VWG), in: EuZW 2007, S. 132 ff.
  • W. Kilian, Vereinbarkeit des VW-Gesetzes mit Europarecht, in: Neue Juristische Wochenschrift 2007, S. 3469 ff.
  • F. Sander: Höchststimmrechte und Kapitalverkehrsfreiheit nach der VW-Gesetz-Entscheidung – Psychologisiert der EuGH den Schutzbereich des Art. 56 EG?, Europäische Zeitschrift für Wirtschaftsrecht (EuZW) 2008, S. 33.
  • A. Kömpf: Staatseinfluss auf die Volkswagen AG: Grenzen der staatlichen Einflussnahme auf Wirtschaftsunternehmen in Privatrechtsform, Dissertation, Verlag Peter Lang, Frankfurt 2010, ISBN 978-3-631-59321-9.
  • Ulrich Seibert: Der Übernahmekampf Porsche/VW und das Schwarze-Peter-Spiel um das VW-Gesetz, Die Aktiengesellschaft, 2013, S. 904 ff.
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