It has given the country two months to answer its concerns of face a final warning which could lead to the courts.
In October 2007 the European Court of Justice ordered the revocation of the 1960 law which granted the German state of Lower Saxony, a shareholder in VW, powers to veto a takeover through a vote.
Rival carmaker Porsche is interested in gaining a majority control in Volkswagen and has held a 31 percent stake over the past two years.
Porsche said the Volkswagen law is outdated and the German carmaker should be open to takeovers by other manufacturers.
German Justice Minister Brigitte Zypries said Berlin had already crafted a new draft bill in January, which she hoped would comply with the EU's legal requirements.
It took away an old cap on any large shareholder's voting rights at 20 percent, but it kept a veto power.