European takeover code sunk by German MEPs

The European Parliament dramatically killed plans to introduce a common and legally binding code to govern takeovers in 15 member countries yesterday. It had been expected to rubber-stamp the draft directive issued by the EU's executive, the European Commission, after 12 painstaking years of negotiation.

In a sensational about-turn, the legislation was rejected after the vote on approving the directive was tied 273-all. A simple majority had been needed to implement the directives.

The defeat followed a last-minute rear-guard action by German MEPs who were alarmed that the directive would outlaw so-called "poison pill" defences against bids and expose German companies to hostile takeovers.

The EC's Internal Market Commissioner Frits Bolkestein said he was "very disappointed" that the legislation failed: "Twelve years of work have been wasted by today's decision. It's tragic to see how Europe's broader interests can be frustrated by certain narrow interests."

But the German Chancellor Gerhard Schroder welcomed the vote, saying Germany would now press ahead with its own rules.

It was only the second time that MEPs have blocked a proposal recommended by the EC's machinery. The defeat was also a setback for the EU's wider financial market reforms.

The Liberal Democrat MEP Pat Cox last night called on the Commission to present a redrafted proposal "at the earliest opportunity". But Labour colleagues said it could take years to redraft legislation from scratch, so early hope of an EU-wide takeover code looked dead.