Porsche is set to tighten its control over Volkswagen after a senior adviser to the European Court of Justice ruled that the so-called VW law protecting Europe's largest auto group from takeovers is illegal.

Dámaso Ruiz-Jarabo, the ECJ advocate general, gave comprehensive backing to the European commission's complaint that the 50-year-old law limiting voting rights at VW to a maximum 20% and guaranteeing the state up to four seats on the supervisory board breached EU treaty rules on the free movement of capital.

Porsche, which owns 27.4% of VW, hailed his opinion as paving the way for the court to follow suit this year and reaffirmed that it had its own board's approval to raise its stake to 29.9% - just short of the 30% threshold triggering a full takeover bid. The ECJ normally follows the advocate general's opinion.

Some analysts believe that Wendelin Wiedeking, Porsche's chief executive, and his board could launch a full-scale bid once the law is scrapped, pointing to the exit of key overseas investors in VW. Last month shareholders endorsed plans to increase the group's capital by 50% or €8.75bn (£5.9bn) through a rights issue, giving Porsche the fire power to increase its control and ward off any foreign takeover.

Shares in VW, which have almost doubled in the past year, rose again as investors bet that the ECJ would open up the group's capital structure this year.