VW car owners in EU face hard quest for compensation over scandal
Carmaker is resisting calls for US-style remedies in Europe after emissions affair
When Volkswagen pleaded guilty this month to criminal charges in the US over the German carmaker’s diesel emissions scandal, the company’s great hope was that it would be able to move on and focus on an ambitious strategy to become a leader in electric vehicles by 2025.
But in Europe, where almost 9m of the 11m VW diesel cars equipped with test-cheating software were sold, consumer litigation is just beginning.
Tens of thousands of VW car owners are demanding compensation — and thereby to be treated in the same manner as their counterparts in North America, where the scandal has cost the company more than $20bn. The latest part of this European effort will take place on Monday, when a London-based court holds a preliminary hearing on a case brought on behalf of more than 20,000 UK owners of VW cars.
However, having offered compensation and vehicle buybacks to US car owners caught up in the emissions affair, VW is strongly resisting calls by the European Commission and some other EU politicians for similar steps in Europe. And differences between US and EU legal systems mean the company is unlikely in Europe to face anything like the $21bn of scandal-related expenses it has run up in North America.
In the US, the case against VW was close to overwhelming. In September 2015 VW admitted it had installed illegal software dubbed a defeat device in about 500,000 diesel cars, which served to understate emissions of harmful nitrogen oxides in official tests.
The Washington-based Environmental Protection Agency sued VW, while hundreds of legal complaints by aggrieved US car owners were turned into one large case that amounted to a de facto class action lawsuit. A court in California overseeing this civil litigation demanded VW get the affected vehicles off the road as soon as possible, and because the company had no viable fix for them it was forced to offer a car buyback to about 480,000 owners of 2 litre diesel vehicles. In addition, car owners were offered at least $5,100 each.
But in Europe the legal position is far more nuanced. VW is in the peculiar position of having admitted to installing cheat software in almost 9m diesel cars — while at the same time maintaining the technology did not violate EU laws.
The problem for any lawyer fighting for damages is that, even though VW’s cheat software falls within the colloquial meaning of an illegal defeat device — anything intended to circumvent a vehicle emissions test — it is less clear the technology breaches the EU’s technical definition.
The applicable EU laws contained in a 2007 regulation defining illegal defeat devices refer to any element of design which alters “any part of the emission control system . . . [during] normal vehicle operation and use”.
One person familiar with VW’s legal strategy, who declined to be identified, said the company’s software was an “inter-engine measure”.
In other words, the technology affected NOx discharges before they reached the emission control system. Furthermore, the software was activated in test conditions in a laboratory, not during “normal” use on the road.
Meanwhile, while VW concedes its diesel cars could not pass strict US NOx emissions tests without cheating, the company argues that its European vehicles could in fact pass EU equivalents, which are less onerous.
Notwithstanding VW’s defence, Germany’s federal motor transport authority, or KBA, said in December 2015 the company’s software did constitute an illegal defeat device.
However, unlike the EPA, the KBA has not sued VW. And whereas the EPA rejected multiple proposals by VW to fix its US diesel cars, last month the KBA granted approval for VW to make changes to the near 9m vehicles in Europe affected by the affair, saying they would then would meet all EU requirements without harming performance.
Several lawyers acting on behalf of VW car owners in Europe reject the KBA’s authority to take this action. However, in contrast to the US, class action lawsuits are not part of German law, so while thousands of European car owners are suing VW, they are doing so on a case-by-case basis.
As VW’s home market, Germany is the EU country with the largest number of car owners affected by the scandal: a total of 2.4m.
But VW feels confident it can see off most of the German cases. German courts have already decided on more than 100 cases and, according to the company, they have sided with VW in roughly three-quarters of them. In each case where VW loses, it appeals. The incentive for individual consumers to sue is therefore small.
Ralph Sauer, partner at German law firm Dr Stoll & Sauer, has filed 1,200 cases on behalf of VW car owners in various German cities. He has more than 8,000 in the pipeline.
“VW is fighting every claim individually,” says Mr Sauer. “If they start to offer a big deal like they did in the US, they fear 2.4m people will want the same thing.”
In the UK, the law firms Harcus Sinclair and Slater & Gordon have applied on behalf of 24,000 British owners of VW cars for a so-called group litigation order, which has similarities to a US class action suit.
London’s high court will hear the application on Monday, but even if compensation is later awarded, VW is not expected to run up a similar bill to what it did with individual US car owners.
Indeed, VW has rejected the case for paying compensation in Europe. Chief executive Matthias Müller told German media last year that paying out some “arbitrary” amount in Europe could cause irreparable damage to VW given the number of cars involved.
VW says it will fix the software problem, and it can cite data — for instance from Dat Group, which compiles used car sales information — showing that the value of its European diesel vehicles have not fallen following the affair.
“To have compensation . . . you need a loss, and there is no evidence of a loss,” Paul Willis, head of VW in the UK, told the British parliament last year.