Parties or Nations?
Callaghan, H. and M. Höpner, APSA 2004
2
2. History of the EU takeover directive
First efforts to harmonize takeover rules across EU member states date back to the
early 1970s. In 1974, Robert Pennington, special advisor to the European Commission,
presented a report on "Takeover offers and other offers" accompanied by a draft directive
which, like later drafts, was strongly influenced by the UK City Code. Due to limited
interest in the member states, many of which had very little experience with hostile
takeovers, the project was abandoned after several years of discussion (Berglöf &
Burkart, 2003).
In the mid-1980s, the drive towards completion of the internal market and a surge
in large scale controversial takeover battles brought the issue back onto the agenda. The
Thatcher government in particular felt that it was “time to remove unnecessary barriers to
takeovers and extend the benefits of open and efficient markets throughout the
Community” and saw a British “duty to carry the flame of free markets to the Continent
before its industry disintegrat[ed] from the malaise which Britain [had] experienced in the
1970s.”
1
A draft directive presented by the European Commission in 1989 was dropped
after three years of negotiation in the Council of Ministers. Strong resistance came
especially from the German government, which opposed the very principle of
Community legislation on takeovers. Both chambers of the German parliament
recommended rejecting the 1989 draft directive on the grounds that there was “no need
for regulation”. In complete contrast to the British position, Kohl's center-right
government strongly opposed the neutrality rule, the mandatory bid rule and the one -
share-one- vote principle. But Germany was far from isolated in its opposition to the
directive. Among others, the British government also withdrew its support, albeit for very
different reasons. The British feared that a switch from their traditional non-statutory
system to a law-based system enforced by courts would increase tactical litigation and
thereby delay the conclusion of deals.
2
1
John Redwood and Lord Young, cited in Milner & Rodgers (1989)
2
Apprehension about the effects of EC legislation on the flexibility of the British takeover panel made
Britain a leading member of an awkward alliance against all draft takeover directives until an opt-out
clause in 1999 enabled the takeover panel to retain its role as the regulator of UK takeovers.
Convention