European Commission - Press release
Free movement of capital: Commission refers Germany back to Court for failure to comply with the Volkswagen law judgement
Brussels, 24 November 2011 - The European Commission has decided to refer Germany back to the Court of Justice of the European Union for failing to fully comply with the Court's previous ruling on the Volkswagen law (VW law).
In its 2007 ruling, the Court outlawed certain provisions of the 1960 law privatising Volkswagen. The Court found that the provisions in question granted unjustified special rights to German public authorities (the Land of Lower Saxony and potentially also the Federal Government) and that by maintaining them, Germany had failed to fulfil its obligations under the Treaty rules on the free movement of capital (Article 63 of the Treaty on the Functioning of the EU).
Since Germany has failed to take all the necessary measures to fully comply with the Court's judgement, the Commission has now decided to bring the case before the Court again and will ask the Court to impose financial penalties on Germany of € 31 114.72 per day from the date of the initial Court ruling until Germany complies with the 2007 judgement or until the second Court ruling whichever comes first, as well as € 282 725.10 per day from the date of the second Court ruling until Germany has brought the Volkswagen law into line with EU rules.
The 1960 Volkswagen law granted special powers to the German public authorities. It set out mandatory representation of public authorities on the VW board, granted a 20% blocking minority particularly in favour of the Land of Lower Saxony and installed a 20% voting cap. In the Commission's view, these provisions ran counter to freedom of capital rules enshrined in the EU Treaty as it gave the German authorities powers to block significant transactions – including intra-EU cross-border investments. The Commission started infringement proceedings against Germany in 2001.
The Commission's position was upheld by the EU Court of Justice. On 23 October 2007, it ruled in case C-112/05 that by maintaining in force the state representation, as well as the 20% voting cap and the 20% blocking minority in the Law of 21 July 1960 on the privatisation of equity in the Volkswagenwerk limited company, Germany has failed to fulfil its obligations under the EC Treaty rules on the free movement of capital.
A law amending the VW law entered into force in December 2008. While it abolished the provisions providing for the representation of public authorities on the board and the 20% voting cap, it did not modify the provision establishing a 20% blocking minority in favour of the Land of Lower Saxony. Furthermore, no changes were foreseen to the VW Articles of Association (part of the statute of a company), which contain majority voting requirements mirroring the VW law and which were considered as a State measure by the Court in the present case. These two issues were consequently not resolved by the amendment of the VW law.
Article 260 TFEU leaves no room for a piecemeal approach: Member States are required to take all necessary measures to comply with the entirety of the judgment of the Court of Justice. The Commission decided on 4 June 2008 to send a letter of formal notice and on 27 November 2008 to follow this up by sending a reasoned opinion under ex- Article 228 EC, now Article 260 TFEU ( IP/08/873 and IP/08/1797 ). Many contacts took place at all levels and with all key players with a view to achieving full compliance whilst avoiding a second referral. However, the German authorities declined to make further changes to their law in the summer of 2011.
Free movement of capital
The free movement of capital is at the heart of the Single Market and constitutes one of its "four freedoms". It allows for more open, integrated, competitive and efficient markets and services in Europe. For citizens it means the ability to undertake a range of operations abroad, such as opening a bank account, buying shares in non-domestic companies, or purchasing real estate. For companies it means the ability to invest in and own companies in other European countries, and to play an active role in their management.
Free movement of capital:
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