14 Colum. J. Eur. L. 359 (2008)
Florian Sander. Associate, Freshfields Bruckhaus Deringer, Hamburg, Germany; LL.M., Harvard Law School, 2005; Dr. Jur. (Ph.D.), University of Hamburg, 2003.
As expected, on October 23rd, 2007, the ECJ ruled that the so-called VW-Gesetz (“Volkswagen Law”) – a statute designing Volkswagen AG’s corporate laws in a manner that deviates from the general German corporate laws – constitutes an infringement of the freedom of capital movements (Art. 56 EC). Following General Advocate Ruiz-Jarabo Colomer’s February 2007 opinion stipulating that the ECJ should reject the VW-Gesetz,# the ECJ has articulated what most observers considered the most likely outcome. The invalidation of the VW-Gesetz eliminates another element of state-driven protectionism that counteracts the EU paradigm of a free flow of substantial market resources. However, a closer look at the Court’s principle arguments with respect to the scope of Art. 56 EC is also necessary.
I will attempt to demonstrate that the decision, while consistent with the so-called “golden share” cases, fails to clarify the substantive scope of Art. 56 EC. In particular, the Court might have more precisely presented a typology of takeover protection by establishing a viable distinction between legitimate corporate governance designs and illegitimate Member State encroachments upon the capital market. In order to promote a clear and practicable understanding of Art. 56 EC, the ECJ should have concentrated on objective criteria rather than drawing on a subjective, essentially psychological criterion (dissuasion of strategic investors). Such clarification would have contributed to a more predictable body of take-over protection case-law. This comment will provide alternative criteria and will demonstrate that concentration on objective criteria might have prevented Art. 56 EC from drifting towards an unpropitious revival of overbroad interpretation resembling early judgments on the freedom of movement of goods (e.g., Dassonville).