[JURIST] German Justice Minister Brigitte Zypries [official profile; personal website, in German] Thursday deflected the European Commission's criticism of proposed legislation that would preserve the power of the German state of Lower Saxony [official website] to block major business decisions at automaker Volkswagen AG [corporate website]. The law, known as the "VW law," is aimed at protecting Volkswagen from hostile takeovers; Lower Saxony is Volkswagen AG's second-largest shareholder. Zypries expressed confidence that the draft law will meet the scrutiny of the European Court of Justice (ECJ) [official website]. On Tuesday, the German Cabinet [official website] approved [press release, in German] the latest version of the draft amendments [PDF, in German] to the VW law. The Federal Ministry of Justice [official website, in German] first circulated [JURIST report] a draft of the law in January. Business Week has more.

The EC initially challenged the law in 2005. In February 2007, Advocate General Damaso Ruiz-Jarabo of the ECJ advised the court that the law should be repealed [JURIST report], saying the law restricts the free movement of capital [PDF, press release] and "strengthens the position of the Federal Government and the land, preventing any intervention in the management of the company." The ECJ ruled [JURIST report] in October 2007 that a previous version of the law was illegal because it limited "the free movement of capital" and discouraged foreign direct investment in Germany. The EC has filed similar suits or threatened to file suit against Spain and its energy companies; Italy and highway company Autosrade SpA; and Poland for intervening in Italy's UniCredit SpA business in Poland.