WOLFSBURG, Germany: The German government has received a two-month deadline from the  European Commission to revise the so-called "Volkswagen Law", a statute that gives the region of Lower Saxony a 20% stake in the auto company and an effective takeover blocking mechanism.

When VW was privatised in 1960, Lower Saxony received the 20% holding plus veto rights, but in 2007 the European Court of Justice ruled that this restricts the free movement of capital, one of the founding principles of the European Union.

Germany's government accordingly drafted a new law modifying the existing structure, but this was  rejected by EC officials as it "does not modify the provision establishing a 20% blocking minority."

Despite the protests of thousands of Volkswagen employees and German chancellor Angela Merkel, the EC demands that further amendments be made, failing which it will take legal action.

A statement from the Commission reads: "In the absence of a satisfactory reply from Germany within two months of receiving the reasoned opinion, the Commission may decide to refer the matter to the European Court of Justice."

Data sourced from Deutsche Welle (Germany); additional content by WARC staff