The European Parliament has voted against a proposed Takeovers Directive, which would have required companies to win the support of their shareholders before fighting hostile takeover bids. The Directive had been negotiated over a 12 year period and its rejection is viewed by the European Commission as a severe blow to the EU’s ambition to make Europe the most competitive economy in the world by 2010.

Following the vote on Wednesday, Internal Market Commissioner Frits Bolkestein commented:

"I am very disappointed that the European Parliament has not been able to ratify the agreement approved by its delegation last month, despite the tremendous efforts made by the Commission and the Council to meet the Parliament's concern…

"Financial markets, investors and European companies have been waiting eagerly for this Directive. Fourteen out of fifteen Member States clearly wanted the Directive. It is tragic to see how Europe's broader interests can be frustrated by certain narrow interests."

Bolkestein attributed the failure of the Directive to a reversal of support by Germany. The parliament vote was split evenly. According to Bolkstein, the Directive was intended:

"to ensure an adequate level of protection for minority shareholders throughout the Union when control of a company changed hands. It would also have ensured that employee representatives received full and prompt information on the implications of a takeover bid and that they could inform shareholders of their views on the bid."

Opponents to the Directive argued that the failure to eliminate special shares and those carrying multiple voting rights meant that it would not have improved the current takeover situation.

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