The European Commission has delayed indefinitely the threat of legal action in its attempt to get the German government to rescind the 1960 legislation which protects Volkswagen from hostile takeovers.

The German government, whose Chancellor Gerhard Schroeder is a former Prime Minister of Lower Saxony and hence VW board member, had not signalled any willingness to amend the law to suit the EC's aim to clear any obstructions to the free movement of capital within the EU. The State of Lower Saxony has an 18% stake in VW and voting rights in respect of takeover bids. In European law it is open to the EC to issue one further warning to Germany before taking the government to the European Court; it has declined to do so for the time being.