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Ruling in Volkswagen Dieselgate Scandal

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May 27, 2020

Why in news?

Germany’s Federal Court of Justice (BGH) ruled against car manufacturer Volkswagen, the first judgment in the dieselgate scandal.

What was the “dieselgate scandal”?

  • In 2015, the US Environmental Protection Agency (EPA) found that in over 590,000 diesel motor vehicles, Volkswagen had violated the Clean Air Act.
  • The vehicles were equipped with “defeat devices” in the form of a computer software.
  • This was designed to cheat on federal emissions tests.
  • A defeat device is one that bypasses or renders inoperative a vehicle’s emission control system.
  • Essentially, software of this kind is designed to detect when the vehicle is undergoing an emissions test.
  • It then turns on full emissions controls during the testing period.
  • In the course of normal driving, the effectiveness of such devices is reduced.

What did the EPA bring to light?

  • EPA's notice in September 2015 alleged that Volkswagen installed these devices in its 2009-2015 two-litre diesel vehicles.
  • It thereby was violating EPA’s emissions standards since these vehicles emit 40 times more pollution than the level permitted.
  • Some of the affected vehicles included Jetta (2009-2015), Beetle (2013-2015) and Passat (2012-2015) among others.
  • The major excess pollutant, in this case, was nitrogen oxides.
  • In November 2015, the EPA issued a separate notice of violation of the Clean Air Act to car manufacturers Audi, Porsche and Volkswagen.
  • This was for producing and selling certain 2014-2016 model 3-litre diesel cars and SUVs that included a software device for circumventing emissions standards.
  • These vehicles emitted nine times more pollution than the standards allowed.
  • Subsequently, Volkswagen informed the EPA that the defeat devices existed in all of its US three-litre diesel models since 2009.
  • On filing of a complaint, in 2017, Volkswagen pleaded guilty to three criminal offence and agreed to pay $2.8 billion as a criminal penalty.
  • Further, as separate civil resolutions of civil, environmental, customs and financial claims the company agreed to pay $1.5 billion.

What is the latest court ruling about?

  • Following the EPA allegation in 2015 in the U.S., regulatory investigations were carried out against Volkswagen in several countries.
  • These included South Korea, France, Italy, Germany, UK and Canada.
  • In September 2015, Volkswagen revealed that over 1.2 million vehicles in the UK were involved in the diesel emissions scandal.
  • Out of the 11 million affected vehicles worldwide, over 2.8 million were in Germany.
  • So, in 2019, the Federation of German Consumer Organisations (VZBV) brought forward a case against Volkswagen on behalf of consumers in the country.
  • Following this, the recent ruling by Germany’s Federal Court of Justice concerned a case involving petitioner Herbert Gilbert.
  • He bought a used Volkswagen Sharan in early 2014 for approximately €31,000.
  • In his case, Gilbert asked that the company pay him the full purchase price plus interest.
  • Whereas, the Volkswagen group maintained that consumers did not suffer any damage from the manipulated diesel cars.
  • The court however ruled that Gilbert be paid compensation to the tune of over €26,000, minus depreciation resulting from the kilometers he drove.
  • The judgment also requires that petitioners return their cars to the company.

Why is the ruling significant?

  • The ruling has set a crucial benchmark for over 60,000 such pending cases brought forward by German consumers.
  • The company, on the other hand, has maintained that they would offer these consumers a payment.
  • This would be less than what consumers can get through a court judgment.
  • However, if consumers settle with the company directly they get to keep their vehicles.
  • Several thousand consumers chose to settle with the company, due to which the recent ruling's impact will be limited.
  • However, significantly, in the reasoning of their judgment, the judges maintained that it should be assumed that the Board of Directors knew about the manipulation because of the scale of the fraud.

 

Source: Indian Express

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