EUROPEAN Union regulators launched legal proceedings yesterday against Germany over the role of public authorities in the running of the auto giant Volkswagen AG.

The European Commission wants Germany to scrap plans to maintain a rule under which "significant decisions" require the approval of shareholders representing 80 percent of Volkswagen's stock, plus one share. That effectively gives blocking rights to the state of Lower Saxony, which holds just over 20 percent of VW.

The European Court of Justice last year overturned the law that was enacted to protect Europe's largest auto maker from a hostile takeover.

It ruled the law limited the "free movement of capital."

The EU says a new draft law by the German government will allow the public authorities to maintain their blocking minority.