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Exhaust gas scandal compensation - manufacturer liability and immorality

dr Christian Andrelang, LL.M.
Specialist lawyer for international business law
Specialist lawyer for commercial and corporate law

Since the emissions scandal became public in September 2015, the higher courts have now been asked to what extent the manufacturers of emissions-manipulated vehicles are liable to the buyers, even though the injured buyers did not buy the vehicles directly from the manufacturer. However, it is not easy to claim damages from the emissions scandal against the manufacturers for immorality.

Emissions scandal compensation – what is it about?

The manipulation of software in the context of the emissions scandal is regularly viewed as a material defect, which entitles the buyer to demand subsequent performance from the seller in the form of repair or new delivery and, if this fails, to withdraw from the contract, i.e. to demand repayment of the purchase price against the return of the vehicle , and to demand compensation. The seller of the manipulated vehicle is usually the authorized dealer, but not the manufacturer. Since the buyer has not concluded a purchase contract with the manufacturer, he cannot assert any claims for material defects. He only has this against the authorized dealers.

However, demanding compensation from the manufacturer because of the emissions scandal is charming because the requirements for liability for defects (purchase contract and a deadline for subsequent performance) do not have to be met. Liability of the manufacturers will therefore come into consideration primarily due to immorality. Obtaining a type approval by fraudulent means by concealing the switch-off device with regard to exhaust gas recirculation during normal driving and the fraud seen here are likely to constitute fraudulent deception and therefore immorality. This is not seriously disputed.

In addition to immorality, other requirements must be met for compensation for damages in the respective emissions scandal. On the one hand, the immorality must be committed intentionally in the sense of consciously causing harm. The question here is which people in a company are responsible for the intention. On the other hand, it will have to be discussed to what extent the publication of the emissions scandal and in particular the creation of an information website by VW for diesel engines of the EA189 series leads to the buyer's knowledge of the manipulation. If the buyer had knowledge of the shutdown device and bought such a vehicle anyway, the manufacturer's fraudulent deception would not have been causal. Demanding compensation from the manufacturer based on the previous court decisions on the emissions scandal requires careful consideration of these decisions.

Emissions scandal compensation – what’s new?

However, the Braunschweig Higher Regional Court, the higher regional court responsible for VW, denied direct liability of the manufacturers in a decision dated November 2, 2017: If the buyer bought the vehicle some time after the so-called emissions scandal became known in September 2015 and he did not provide substantiated evidence can explain why, despite all the reporting, he did not want to know that his car also had engine control software that recognized the test cycle and then changed the exhaust gas recirculation, the alleged damaging act is not immoral. Based on all life experience, it can be assumed that the purchaser knew about the use of an impermissible defeat device in the car in question when concluding the purchase contract.

It would not be possible to demand compensation from the manufacturers for the emissions scandal after this decision, especially since various lower courts have taken up this legal opinion and denied liability for immoral fraudulent deception. The buyer was virtually unable to escape the emissions scandal. If he still buys a manipulated vehicle knowing about the emissions scandal, this purchase decision was no longer based on deception and an error based on this. Based on his knowledge, the buyer was not wrong. If knowledge of the emissions scandal removes the basis for compensation, there is no room for liability on the part of the manufacturer.

Decision of the Braunschweig Higher Regional Court – What does that mean?

The decision of the Braunschweig Higher Regional Court has been criticized - rightly so. At first glance, this legal opinion would remove the legal basis for all manufacturer liability. The buyer would always have to prove why, despite media reporting, he had no knowledge that the vehicle he had specifically purchased contained a software-manipulated diesel engine from the EA189 series. He will not be able to provide this proof.

However, anyone who still wants to make a claim against the manufacturer, for example because their claims against the authorized dealer as a seller no longer exist, either because the statute of limitations has expired or because a deadline has not been set for supplementary performance, should not be discouraged. The fact that VW's top management was not informed by at least one person about the essential facts of the shutdown device is probably beyond the realm of possibility, since the number of manipulated vehicles alone is in the millions and therefore requires planned and systematic development and production.

The decision of the Braunschweig Higher Regional Court is also likely to overlook the fact that every purchase decision requires the manufacturer to be unaware of the manipulation software. This obligation to provide information arises precisely from immoral actions. In this case, the buyer is in favor of the fact that he would have behaved in accordance with the information, i.e. would not have bought the specific vehicle, if he had been informed about the manipulation software. The case law of the Braunschweig Higher Regional Court is therefore unlikely to be valid for a purchase before the publication of the emissions scandal in September 2015. For a purchase after that, it depends on whether the buyer had such knowledge for the specific vehicle he purchased - not in general - or not and whether he was aware of the scope of the manipulation and its consequence - the revocation of the road registration. The burden of proof for this lies with the manufacturer. However, this argument does not yet correspond to the prevailing case law in order to be able to successfully enforce compensation and related claims in the emissions scandal.

Emissions scandal compensation – what is important to you now?

Victims who also or only want to take action against VW or other manufacturers should also pay close attention to how the Federal Court of Justice decides on this issue. It would probably be premature to assume that a lawsuit has little chance of success from the outset, even though it always depends on the specific individual case. Generalizations are forbidden. The decisive factor for compensation in the emissions scandal can be the question of whether the buyer purchased the manipulated vehicle from an authorized dealer or from other third parties, such as independent used dealers.
In addition, it should be mentioned that, as part of their liability for immoral fraudulent deception, manufacturers will regularly demand that the buyer hand over the use of the goods to the extent that he has driven the manipulated vehicle. It is true that some lower courts have partially granted such compensation for use. However, it is questionable whether the higher regional courts or even the Federal Court of Justice will confirm this, since the more the buyer drives the vehicle with confidence in its legal registration, the more the fraudulent manufacturers will be relieved. This cannot be right.
The buyer's knowledge of the manipulation of the vehicle he specifically purchased is also important for the question of whether his claims are time-barred.

Anwalt Gesellschaftsrecht und Handelsrecht

dr Andrelang, LL. M

Specialist lawyer for international business law

Specialist lawyer for commercial and corporate law


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