Porsche, Volkswagen’s biggest shareholder, is likely to take boardroom control of the car-maker after sources close to Lower Saxony, the federal state that is the second-largest stakeholder, signalled a retreat over the reelection of Ferdinand Piech, the chairman and descendent from the Porsche family.

It is expected that Mr Piech will be elected by the board for a further term, despite the previous objections from Christian Wulff, Lower Saxony’s Premier. Last year it had been expected that Mr Wulff and Wendelin Wiedeking, Porsche’s chief executive, would clear the way for a neutral candidate to be elected chairman.

But since then Porsche has increased its stake from 22 per cent to 27.4 per cent. The sports car maker has so far ruled out a move to 30 per cent, which would give it full control of VW.

The move came as the European Court of Justice was yesterday told that German legislation blocking a takeover of VW by a foreign company contravenes European Union law.

Porsche and VW have been increasing their interdependence. Analysts view VW’s contribution to Porsche’s income through its stake as increasingly important and VW is a key supplier to the luxury marque.

The source close to Lower Saxony said that the boardroom tussle should end for the sake of VW: “If the largest shareholder proposes Piech for reelection, it won’t fail because of Lower Saxony. It would not be right if the two largest shareholders openly fought with each other.”

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