German state digs in amid 'VW law' dispute

Lower Saxony stuck to its guns Thursday after the European Commission launched legal action against Germany over a new "Volkswagen law" that retains the state's de facto veto over strategic decisions at Europe's biggest carmaker. The decision was "expected but regrettable," a statement quoted regional premier Christian Wulff as saying. "In the next eight weeks, it will be a question of proving" that the new law respects an earlier ruling by the European Court of Justice, Wulff added. The EU Commission initiated its action because it considered that the new law infringed EU competition rules and gave Germany two months to respond before the case would go back to the European court, a spokesman said. Germany's first "VW law" was adopted in 1960 to protect the newly privatised group from takeovers and to guarantee public control over a cornerstone of German industry. That law was declared illegal by the EU in October and Berlin responded by drafting a new bill it said responded to provisions objected to by the European tribunal. A measure was nonetheless retained that requires strategic decisions be approved by a majority of at least 80 percent, compared with 75 percent for other German companies. Because Lower Saxony owns a little more than 20 percent of the shares in VW, it is thus able to block major decisions such as plant relocations. The German justice ministry, which drafted the new law, said Brussels' response "was not extraordinary" because it reproached Germany for failing to respect the court ruling -- but not for having drafted a new law. "We have two months and within that time will inform the Commission of our intentions," a ministry spokeswoman told AFP. For Berthold Huber of the German trade union IG Metall however, the Commission decision "is unbelievable. "The VW law hinders neither the free circulation of capital nor the completion of a single market," he said. The German luxury sports car maker Porsche, which currently owns around 31 percent of VW, has called for the VW law to be abandoned and agreed with the Commission's action. Porsche intends to take full control of VW at some point in the future. "We have already said all there is to say on the subject," a Porsche spokesman told AFP. "The VW law is not needed. The European Commission has confirmed with this procedure our conception of law."