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In the wake of the European Parliament’s decision July 4 to throw out a long-proposed Pan-European takeover law, the European Union’s executive agency is already hatching plans for a new legislative package. The European Commissioner for the Single Market, Frits Bolkestein, who leads the European Commission’s department responsible for the legislation, is already discussing with staff ways to propose a new takeover directive, said one Commission source who spoke under condition of anonymity. “Bolkestein doesn’t want to stop here,” the official said July 5. “He’s definitely of the mind that the Commission should take up the issue again.” Publicly, the top-level EU official cast doubts on whether his agency would have another go at the so-called takeover directive, which would have harmonized basic rules on takeovers across the 15-country bloc and established minimum rights for shareholders. Shortly after the vote last Wednesday, Bolkestein pointed out that Parliament’s continued resistance would halt any new Commission plans. “I, at the moment, am not in a mind to change my position on the whole matter,” he said. “On the other hand, it would not do to reintroduce exactly the same thing to Parliament.” NO MAJORITY The directive was tossed out only because the European Parliament in Strasbourg, France, remained evenly divided, with the final tally deadlocked at 273 apiece — one vote shy of the required simple majority. But the European Parliament’s division is certainly a key consideration for any efforts to restart the laborious lawmaking process. Crucial differences on two key issues led to the directive’s downfall. Members of the European Parliament, or MEPs, who voted against the legislation were concerned about one provision that required target companies in a takeover to secure shareholder consent before enacting defensive measures. German MEPs, fearing their nation’s companies would be put at a disadvantage to companies in other states with provisions for more possible defenses, successfully lobbied for Parliament to reject the directive on this point. European trade unionists, concerned with the rights of workers in any takeover disputes, also lobbied against the proposed law. The directive called for workers to be informed on bids. Trade unionists demanded that workers be fully consulted in the decision-making for accepting offers. Technically, the EU’s executive agency, the European Commission, must initiate relaunch attempts. Only the Commission can draw proposals that form the basis of many EU laws. LONG ROAD AHEAD The Commission’s 20-member board is expected to examine the situation and discuss possible tentative next steps at its next weekly meeting Wednesday. But progress in officially hatching another law right away is unlikely. Progress will be slowed by the European Parliament’s ongoing objections to the corporate and labor provisions that the Commission and all EU member states, except Germany, agree on. Behind the scenes in Brussels, however, preliminary staff work has already begun. The 15 different national takeover laws, meanwhile, will remain in place. After 12 years of legislative haggling, the final text was a watered-down, badly worded version of what had originally been very ambitious objectives. But not everyone feels last week’s defeat will have wide-reaching implications. “The proposed takeover directive was flawed and would have had a limited impact on Europe, so the impact of its loss should not be exaggerated,” said M&A lawyer Richard Godden, a partner at Linklaters & Alliance in London. “Nonetheless, it represents a missed opportunity to make progress on raising the standards and create a level playing field across Europe.” Some MEPs have called for Bolkestein to initiate steps to “fast-track” any new legislation. But as one Commission official pointed out, divisions on such crucial points will stall the director for now. “I think Bolkestein is dreaming if he thinks we can get anywhere right away with a new directive,” said the official, requesting anonymity. “It will be another 10 years before another one is in place.” Copyright (c)2001 TDD, LLC. All rights reserved.

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