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Under the "Volkswagen Law" any shareholder in VW could not exercise more than 20% of voting rights, even if their stake in the firm was bigger.

The European Court of Justice said the law discouraged foreign investors from taking a stake in Volkswagen.

Porsche, which owns 31% of VW, declined to say whether it would now move to take control of its compatriot.

'No decision'

While some analysts have long believed that Porsche wants to take full control of VW, the luxury carmaker said following the court verdict that there was currently "no decision on how we will proceed".

We regret that the court did not recognise our good arguments about protecting Germany as a business location German Justice Ministry Porsche set to take control of VW

A Porsche spokesman added that any decision regarding its stake in VW would be made by its board members, but that it was not yet known if any decision will be made at their next meeting on 12 November.

For the time being, Porsche chief executive Wendelin Wiedeking said his company was "naturally very interested in being able to fully exert our voting rights" in VW.

Porsche has already said that it has secured enough options to let it "significantly" raise its stake in VW.

Law change

The European Court of Justice also rejected the right of the German government to appoint members to the VW board.

The federal government has said that it will move quickly to change the law.

"We regret that the court did not recognise our good arguments about protecting Germany as a business location," a Justice Ministry spokesman said.