* EU court says Germany complied with previous ruling
* Law preventing VW takeover watered down after 2007 ruling
* EU top court says amendments were sufficient
* VW's home state says ruling "closes book on 11-year
* VW law seen as model for consensus-based industrial ties
By Michele Sinner and Andreas Cremer
LUXEMBOURG/FRANKFURT, Oct 22 Germany won a
decisive victory over the European Commission on Tuesday in its
bid to preserve state influence at Volkswagen, after Europe's
top court rejected an attempt by Brussels to scuttle a law that
helps shield the carmaker from takeovers.
The 1960 law, introduced when VW first listed on
the stock market, gives the state of Lower Saxony, where VW is
headquartered, a veto over key decisions such as factory
closures, mergers and acquisitions.
Lower Saxony, which holds a fifth of VW's voting stock, has
long opposed scrapping the law, backing workers who argue that
it protects jobs as well as labour's role in corporate
decision-making, which they say has fostered VW's rise to become
the world's third-largest carmaker in 2012.
The Commission says that by effectively preventing foreign
buyers from acquiring VW, the law hinders the cross-border
integration of industry in the European Union, in breach of EU
single market legislation.
Putting an end to the 11-year dispute between Brussels and
Germany, the Luxembourg-based EU Court of Justice (ECJ) decided
on Tuesday that Germany had fully complied with a 2007 court
ruling ordering it to water down the VW law.
A year after the 2007 ruling, Germany scrapped elements of
the law but kept untouched the right of any shareholder with a
20 percent stake to veto strategic decisions. That prompted the
Commission to pursue Germany again, on the grounds of
"The law neither privileges specific shareholders nor
discriminates against anyone else's interests," Lower Saxony
prime minister Stephan Weil told reporters at VW's base in
Wolfsburg. "Today's ruling should close the book on a long
The VW law has often been cited as an example of Germany's
model of consensus-based industrial relations. The company's
20-member supervisory board is evenly split between management
and labour representatives, an expression of VW's belief in what
it calls "co-determination".
Most of VW's 104 global plants have so-called works
councils, consisting of blue- and white-collar employees that
discuss personnel issues and working conditions with management.
VW has exported that principle across the globe, though is
currently facing difficulties setting up a labour representation
body for workers at its U.S. plant in Chattanooga, Tennessee.
"We have never blocked a decision to set up a new factory,
and we discuss very thoroughly with our management the effects
new factories have on existing plants and jobs," Bernd Osterloh,
VW's top labour representative, told reporters.
The ECJ's decision to uphold the VW law will benefit the
company's goal to overtake rivals Toyota and General Motors as
the world's top carmaker no later than 2018, said Osterloh, who
is also deputy chairman.
Lower Saxony's veto has proved hugely important to the
independence of Volkswagen, not to deter a potential foreign
aggressor, but as an obstacle to sports-car maker Porsche
, when it sought to take over its much bigger rival
in 2008. Porsche's bid foundered and it was subsequently bought
by VW last year.
Nearly 90 percent of VW's voting stock, the ordinary shares,
are now in the hands of three strategic shareholders - Porsche,
Lower Saxony and the Gulf state of Qatar. Most outside investors
hold only a financial interest in VW through its more liquid