FRANKFURT, Germany — Sports car maker Porsche has an open road to make another bid for Volkswagen after the Europenion's highest court Tuesday struck down the nearly 50-year-old "VW law" enacted to protect Europe's largest automaker from a hostile takeover.
The ruling will reverberate across Europe, where many governments have tried to protect companies they see as vital to their economies from being bought, particularly by foreign investors.
German politicians and labor unions had argued that the 47-year-old measure was needed to protect local jobs.
The EU Court of Justice, however, said the German law - which capped a shareholder's voting rights at 20 percent, whatever the size of its holding - limited "the free movement of capital," a tenet of the European Union.
It also said the measure discouraged foreign investors from taking a stake in Volkswagen because the German government was able "to exercise considerable influence" over the company. The German state of Lower Saxony is VW's second-biggest shareholder.
The court ruling is a triumph for the European Commission, which has fought several battles against European governments and their "golden shares" in critical companies.
"Special rights have become an ever-more-endangered species on their way to extinction," EU spokesman Oliver Drewes said. "They dissuade investment in the company in their full potential."
The EU is also looking at other companies, as well as countries, including Telecom Italia and Portuguese stakes in Portugal Telecom, Energias de Portugal and GALP Energia. It has warnedboth Hungary and Poland about laws that give the government rights in several companies.
As the EU basked in its triumph over the VW law, Porsche got a green light to take a bigger stake in VW.
The Stuttgart-based maker of high-end sports cars has spent $7.13 billion buying 31 percent of Volkswagen AG since 2005 with what analysts say is a view toward eventually acquiring it outright. Porsche was forced by German law to file a formal offer in April after its holding in Volkswagen surpassed 29.9 percent, but the bid price was intentionally low, and the offer failed.
Since then Porsche CEO Wendelin Wiedeking has done little to dampen speculation about a takeover. He said last month that the company was considering a larger stake.
Wiedeking said Tuesday only that "we obviously have a high interest in exercising our voting rights in full." But he has also said that owning a majority stake in VW would help Porsche's efforts to work with Europe's biggest carmaker in developing new models, engines and other components.
If Porsche were to acquire Volkswagen, it would be a case of a smaller company gobbling up its larger partner.
Porsche sold 97,515 cars in the year ending July 31, while Volkswagen - whose brands include Seat, Skoda, Audi and Lamborghini - sold 3.1 million cars in the first six months of 2007.
Still, Volkswagen's board chairman and former CEO, Ferdinand Piech, is a member of the family that controls Porsche - keeping it a family affair.
Porsche likely could buy more shares, having reportedly lined up a $14.25 billion line of credit to do so. But a decision can come only from its supervisory board, which meets Nov. 12.
Business, Pages 29, 30 on 10/24/2007