The EU's highest court overturned a 47-year-old law that protected Volkswagen AG from a takeover, allowing Porsche AG to gain control of the region's largest carmaker.

Volkswagen, based in Wolfsburg, Germany, has been shielded since 1960 by a law that limits investors' voting rights. Porsche, the maker of the 911 sports car, has amassed a 31 percent stake in Volkswagen over the past two years and said last month it wants to "significantly" increase the holding. Germany "failed to demonstrate why such a position has to be maintained in order to protect the general interests of minority shareholders," the European Court of Justice in Luxembourg ruled yesterday.

The decision cannot be appealed. The ruling may bring Porsche chief executive Officer Wendelin Wiedeking a step closer to expanding the automotive empire of the Piech and Porsche families. Volkswagen stock has doubled this year on speculation Porsche will pursue a takeover. The shares fell 5.9 per cent yesterday to €169.73.

"The battle for effective control is over," prompting investors to sell the stock, said Adam Jonas, an analyst at Morgan Stanley in London.

"Volkswagen will closely study the ruling, and the possible consequences," the carmaker said. - (Bloomberg)