Germany may be forced to pay millions of euros in penalties for Vw takeover law

Article by Christian A., on March 14, 2013

The European Commission may impose penalties on Germany amounting to millions of euros for its failure to modify its so-called Volkswagen law to conform to EU rules. In relation to a lawsuit filed at the EU Court of Justice, the European Commission contended that the bloc’s laws are being violated by Germany's changes to a law that has protected Volkswagen from takeovers since 1960 since government veto powers at the company continue to exist.

The European Commission said that instead of throwing out three provisions that were ruled unlawful by the court, the country scrapped two and kept the blocking minority. Gerald Braun, a lawyer for the EU executive authority, told the Luxembourg-based court's 15-judge panel, that for over a dozen years, the commission has attempted to repeal this law.

He also said that in a first ruling, the court has determined that the contested provisions in the VW law were “unlawful." In October 2007, the EU's top court revoked the law that shielded Volkswagen by putting a cap on shareholder's voting rights at 20%, without consideration of the size of their holdings. This is match to the stake held in the past 40 years by the German state of Lower Saxony, where Wolfsburg is positioned.

Germany is facing a fine for not being able to terminate Lower Saxony's blocking minority at the car company when it changed the law in 2008. The commission, which won the 2007 case, filed a lawsuit against Germany in 2012 once more for its "piecemeal approach" to modifying the law.

The EU executive authority is demanding that Germany pay a fine of 31,114 euros-a-day ($40,535) from the 2007 ruling until it abides by the rules or until the decision in the current case. It also wants a 282,725 euro daily fine from the ruling in the present case until the VW law conforms to EU rules.

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