''Commission v Germany'' (2007
C-112/05
is an

EU law European Union law is a system of rules operating within the member states of the European Union (EU). Since the founding of the European Coal and Steel Community following World War II, the EU has developed the aim to "promote peace, its val ...

case, relevant for

UK enterprise law United Kingdom enterprise law concerns the ownership and regulation of organisations producing goods and services in the UK, European and international economy. Private enterprises are usually incorporated under the Companies Act 2006, regulated ...

, concerning

European company law European company law is a part of European Union law, which concerns the formation, operation and insolvency of companies (or corporations) in the European Union. The EU creates minimum standards for companies throughout the EU, and has its own co ...

. Following a trend in cases such as ''Commission v United Kingdom'', and '' Commission v Netherlands'', it struck down public oversight, through golden shares of Volkswagen by the German state of

Lower Saxony Lower Saxony (german: Niedersachsen ; nds, Neddersassen; stq, Läichsaksen) is a German state (') in northwestern Germany. It is the second-largest state by land area, with , and fourth-largest in population (8 million in 2021) among the 16 ...

. Soon afterwards, the management practices leading to the

Volkswagen emissions scandal The Volkswagen emissions scandal, sometimes known as Dieselgate or Emissionsgate, began in September 2015, when the United States Environmental Protection Agency (EPA) issued a notice of violation of the Clean Air Act to German automaker Vol ...

began.

Facts

The Commission claimed that the

Volkswagen Act 1960 The Volkswagen Act is a set of German (originally West German) federal laws enacted in 1960, regulating the privatization of Volkswagenwerk GmbH into the Volkswagen Group. In order to maintain government control in the privately owned company, it ...

provisions on golden shares violated free movement of capital under the

Treaty on the Functioning of the European Union The Treaty on the Functioning of the European Union (TFEU) is one of two treaties forming the constitutional basis of the European Union (EU), the other being the Treaty on European Union (TEU). It was previously known as the Treaty Establishi ...

article 63. The VA 1960 §2(1) restricted the number of shareholder voting rights to 20% of the company, and §4(3) allowed a minority of 20% of shareholders to block any decisions. The Lower Saxony government held those shares. Germany argued that the 1960 law was based on a private agreement between workers, trade unions and the state, and so was not within the free movement of capital provisions under

TFEU The Treaty on the Functioning of the European Union (TFEU) is one of two treaties forming the constitutional basis of the European Union (EU), the other being the Treaty on European Union (TEU). It was previously known as the Treaty Establishi ...

article 63, which did not have horizontal direct effect. Workers and trade unions had relinquished a claim for ownership over the company for assurance of protection against any large shareholder who could gain control over the company.

Judgment

The Grand Chamber of the

Court of Justice of the European Union The Court of Justice of the European Union (CJEU) (french: Cour de justice de l'Union européenne or "''CJUE''"; Latin: Curia) is the judicial branch of the European Union (EU). Seated in the Kirchberg quarter of Luxembourg City, Luxembour ...

held that the

violated TFEU art 63. It was disproportionate for the government's stated aim of protecting workers or minority shareholders, or for industrial policy.

Significance

Soon after the decision, which removed shareholder control from the State of Lower Saxony, the management practices leading to the

began. In 2015, it was revealed that Volkswagen management had systematically deceived US, EU and other authorities about the level of toxic emissions from diesel exhaust engines. VW engineers fixed software to switch off emissions reduction filters while VW cars were driving, but switch on when being tested in regulator laboratories. This occurred while the major shareholders, who directly acquired dominance from the decision, were members of the Porsche family with a controlling share and appointing 5 of the supervisory board members, and the petroleum-based economy's

Qatar Investment Authority The Qatar Investment Authority (QIA; ar, جهاز قطر للإستثمار) is Qatar's sovereign wealth fund. The QIA was founded by the State of Qatar in 2005 to strengthen the country's economy by diversifying into new asset classes. In 202 ...

with a 17% stake.J Armour, 'Volkswagen’s Emissions Scandal: Lessons for Corporate Governance? (Part 2)' (2016
Oxford Business Law Blog
/ref>

Notes

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References

* United Kingdom enterprise case law Court of Justice of the European Union case law

Facts

Judgment

Significance

See also

Notes

References