[JURIST] The European Commission (EC) [official website] Thursday called on Germany [press release] to modify its Volkswagen anti-takeover law within two months or else face referral of the matter to the European Court of Justice (ECJ) [official website]. The law, created in 1960 in order to privatize Volkswagen AG (VW) [corporate website], was aimed at protecting the automaker from hostile takeovers by giving public authorities automatic representation on the VW board, instituting a 20 percent voting cap, and allowing a 20 percent blocking minority. The law was revised [JURIST report] in May, but the provision allowing the 20 percent blocking minority was left in place. The EC disputes the clause as it allows the German state of Lower Saxony [official website], which holds a 20.1 percent stake in VW, to block major business decisions. Also on Thursday, a German court upheld [AFP report] the 20 percent blocking minority provision against a challenge by Porsche SE [corporate website, in German]. The ruling is seen as setback to Porsche's attempted takeover of Europe's largest automaker. Deutsche Welle has more. Xinhua has additional coverage.

The EC initially challenged the law in 2005. The ECJ ruled [JURIST report] in October 2007 that a previous version of the law was illegal because it limited "the free movement of capital" and discouraged foreign direct investment in Germany. The EC has filed or has threatened to file similar suits against Spain and its energy companies, Italy and highway company Autosrade SpA, and Poland for intervening in Italy's UniCredit SpA business in Poland.