The German Volkswagen Act comes into force.

The Volkswagen Act (“Volkswagengesetz”) is a German federal law originally enacted in 1960 to regulate the privatization of Volkswagen, which had been a state-owned enterprise. The law was designed to ensure that the company would not fall under disproportionate control by any single shareholder. Notably, it included provisions like limiting shareholder voting rights to a maximum of 20%, regardless of how many shares were held. This was primarily intended to protect the influence of the German federal government and the state of Lower Saxony, both of which held significant stakes in the company. In effect, the law preserved a level of public control over one of Germany’s most important industrial assets.

Over time, the Volkswagen Act came under legal scrutiny, especially from the European Commission, which viewed it as a violation of EU rules on the free movement of capital. The Commission argued that the act created an unjustified restriction on private investment and undermined shareholder rights, especially in a single market context. In 2007, the European Court of Justice (ECJ) ruled that key provisions of the act were indeed incompatible with EU law. Specifically, the court took issue with the 20% voting cap and the special veto rights granted to public shareholders. This decision forced Germany to amend the law, though Lower Saxony was still able to retain a blocking minority under general corporate law due to its approximately 20% stake.

The amended version of the Volkswagen Act, passed in 2008, eliminated the most controversial clauses but was crafted in a way that still maintained significant influence for Lower Saxony. For instance, the state’s shareholding continues to grant it de facto veto power over major corporate decisions, such as mergers or relocations, which require a supermajority vote. Critics argue that this arrangement still bends the spirit of EU competition laws, though it technically complies. The law remains a symbol of the tension between national industrial policy and EU market liberalization, and it has had a lasting impact on the governance structure of Volkswagen, one of the world’s largest automobile manufacturers.