Porsche suffers court ruling setback in bid for control of VW

Luxury sports car maker Porsche suffered a setback Thursday in its battle for control of Volkswagen when a German court upheld the state of Lower Saxony's blocking minority over strategic VW decisions.

The court in northern Hanover ruled in favour of VW statutes that allow Lower Saxony, where VW is based and which owns around 20 percent of its shares, to effectively veto strategic decisions such as plant relocations.

Porsche owns 42.6 percent of VW and holds options on another 31.5 percent of its shares with the aim of securing eventual full control of the biggest European carmaker next year.

"We can't comprehend the court's decision," a Porsche spokesman told AFP, adding that it would appeal the ruling.

Porsche had sought to overturn the statutes, which have been condemned by a European court on the grounds that they contravene the free movement of capital throughout the 27-member European Union.

The European Commission threatened Germany on Thursday with fresh court action if Berlin did not modify within two months a law based on the statutes and which was initially drawn up in 1960 to shield Volkswagen from takeover.

"In the absence of a satisfactory reply from Germany within two months ... the commission may decide to refer the matter to the European Court of Justice," it said in a statement.