International law презентация

Powers to Public Shareholders
Judgement of 23/10/2007
Alina Kovalenko

the Court of Justice;

German Federal Laws enacted in 1960, regulating the privatization of Volswagenwerk GmbH into Volkswagen AG(Wikipedia, 2015).
The State of Lower Saxony owned 20% of a voting share and fixed blocking minority at 20% to the major decisions and prevention of the other shareholders’ overruling the procedure (regardless of the extent of ownership),
The State of Lower Saxony and The Federal State were also allowed to appoint two members to the board of Volkswagen AG;

argument brought by the Commission, certain rules of VW Law derogated from the general German Company Law and were liable to deter direct investment and for that reason constituted restrictions on the free movement of capital within the meaning of Article 56 EC;
The meaning of the movement of Capital was recognized by the Court as the following: Movements of capital within the meaning of Article 56(1) EC therefore include direct investments, i.e. investments of any kind undertaken by persons and which serve to establish or maintain lasting and direct links between the persons providing the capital and the undertakings to which that capital is made available in order to carry out an economic activity.(Constitutional Law of the European Union, James D. Dinnage)

that “The voting rights of a shareholder whose par value shares represent more than one fifth of the share capital shall be limited to the number of votes granted by the par value of shares equivalent to 1/5 of the share capital”;
Paragraph 3 states “Resolutions of the general meeting which, under the Law on public limited companies, require the favorable vote of at least three quarters of the share capital represented at the time of their adoption, shall require the favorable vote of more than four fifths of the share capita represented at the time of that adoption”;

Paragraph 4(1) states “The Federal Republic of Germany and the Land of Lower Saxony may each appoint two members to the supervisory board on condition that they hold shares in the company”;
Summarize by the Court: Compulsory representation of public authorities on the VW board, granted a 20% blocking minority particularly in favor of the Land of Lower Saxony and installed a 20% voting cap resulting into powers of blocking significant transactions- including intra-EU cross-border investment;

another EU country acquiring more than a limited amount of voting shares in domestic companies’;
‘measures applied without distinction to all investors, in particular general authorization procedures whereby, for example, any investor( EU and national alike) wanting to acquire a stake in a domestic company above a certain threshold [...] must be authorized’;

(3) ‘the rights given to national authorities, in derogation of company law, to veto certain major decisions to be taken by the company, as well as the imposition of a requirement for the nomination of some directors as a means of exercising the right of veto, etc.’;

COMMUNICATION OF THE COMMISSION ON CERTAIN LEGAL ASPECTS CONCERNING INTRA-EU INVESTMENT. 1997

is privatized, a golden share [government share] retains the government’s right to intervene in the share structure and management of the company. This includes special provisions designed to enable the executive to prevent takeovers or other changes of control.” (Company Law and Economic Protectionism: New Challenges to European Integration, Ulf Bernitz)
Example of the case: Special rights provided to the State of Lower Saxony prevailing and the Federal State of Germany under the VW Law (National Law)

that VW(National) Law and its rules concerning the limitation of the voting rights of every shareholder to 20% of the share capital and the fixing of the blocking minority at 20% for the most important decisions of the general meeting were liable to deter direct investors from other Member States and thus constituted a restriction on the movement of capital within the meaning of Article 56 EC;

and the Land of Lower Saxony each to appoint two representatives to the supervisory board of Volkswagen

Irrespective of the extent of shareholders’ holding, the ECJ decided that this measure gave two public actors the possibility of exercising influence which exceeds their levels of investment, which also added a restriction on the movement of capital.

movement of capital: Commission refers Germany back to Court for failure to comply with the Volkswagen law judgement, October 2015 http://europa.eu/rapid/press-release_IP-11-1444_en.htm,
Free movement of capital: Court of Justice of the European Union rules on restrictions on the free movement of capital in the Volkswagen Law, November 2015http://www.lexology.com/library/detail.aspx?g=4f0c5b7e-2ea9-461e-a27b-7f8b59b1dc73
Commission v Germany (The justification) https://catalyst.uw.edu/gopost/conversation/wawa/839716

State Aid and the European Economic Constitution, Francesco de Cecco;
Report from the Commission to the EU Parliament and the council, November 2015 http://ec.europa.eu/transparency/regdoc/rep/1/2014/EN/1-2014-327-EN-F1-1.Pdf
Communication of the Commission on Certain Legal Aspects concerning intra-EU Investments, November 2015 http://eur-lex.europa.eu/legal-content/EN/ALL/?uri=CELEX:31997Y0719%2803%29
Judgement of the Court(Grand Chamber) of 23 October 2007 http://eur-lex.europa.eu/legal-content/EN/TXT/?uri=CELEX:62005CJ0112