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

EU law European Union law is a system of Supranational union, supranational Law, laws operating within the 27 member states of the European Union (EU). It has grown over time since the 1952 founding of the European Coal and Steel Community, to promote ...

case, relevant for

UK enterprise law British 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 by co ...

, concerning

European company law European company law is the 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 c ...

. Following a trend in cases such as ''Commission v United Kingdom'', and '' Commission v Netherlands'', it struck down public oversight, through

golden share In business and finance, a golden share is a type of share of stock that lets its owner outvote all other shareholders in certain circumstances. Golden shares often belong to the government when a government-owned company is undergoing the process ...

s of Volkswagen by the German state of

Lower Saxony Lower Saxony is a States of Germany, German state (') in Northern Germany, northwestern Germany. It is the second-largest state by land area, with , and fourth-largest in population (8 million in 2021) among the 16 ' of the Germany, Federal Re ...

. Soon afterwards, the management practices leading to the Volkswagen emissions scandal began.

Facts

The Commission claimed that the Volkswagen Act 1960 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 Establish ...

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 Establish ...

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) ( or "''CJUE''"; Latin: Curia) is the Judiciary, judicial branch of the European Union (EU). Seated in the Kirchberg, Luxembourg, Kirchberg quarter of Luxembourg City, Luxembourg, this EU ins ...

held that the Volkswagen Act 1960 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 Volkswagen emissions scandal 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 Dr. Ing. h.c. F. Porsche AG, usually shortened to Porsche (; see below), is a German automobile manufacturer specializing in luxury, high-performance sports cars, SUVs and sedans, headquartered in Stuttgart, Baden-Württemberg, Germany. Th ...

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; ) 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 November 2024, the QIA had an estimated $526 ...

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