In 2015 news broke that Volkswagen had been manipulating emissions tests for millions of vehicles manufactured worldwide. Since then, we have seen numerous regulatory and criminal investigations culminating in substantial penalties and reputational damage for the company. Things aren’t yet showing signs of calming down for VW; during 2019 several shareholder groups commenced litigation, most notably in the UK and Germany.
In the UK, in the biggest class action of its kind so far in the jurisdiction, more than 90,000 people have filed a collective claim accusing VW of installing “defeat devices” in their vehicles. The devices themselves are likely to be the focus of the action - in essence, VW don’t deny the devices were fitted, they deny that the devices breached any law.
In Germany, a consumer rights class action has commenced seeking more than EUR9bn in damages on behalf of around 470,000 car owners. This is one of the first actions of its kind in the country following the introduction of new legislation in 2018 permitting collective redress for consumers. The process will follow a declaratory model where, if there is a finding against VW, each consumer would then make a separate application for compensation.
VW has already settled a multi-million dollar class actions in Australia and the US. Together with German consumer rights’ groups, VW has announced a willingness to seek a “pragmatic solution” for claimants, but it remains to be seen whether settlement will be achieved. There is, as we write, no public indication of similar hopes for a settlement in the UK.
Whilst scrutiny of the company continues, so it does for the directors embroiled in the scandal. 2019 saw former CEO Martin Winterkorn charged in Germany with fraud, embezzlement and violating competition laws. It is alleged that he knew about the use of the illegal software in the USA by May 2014 and in Europe by September 2015. D&O insurers funding the defence costs of directors will no doubt be concerned to see widespread consumer legislation, which is likely to increase public pressure for individuals to be held to account. Although insurers will continue to ask questions about who knew what and when, any negative findings against directors are likely to trigger conduct exclusions and allow potential recoupment of costs spend; and concerns as to whether there was a fair presentation of risk at inception will remain relevant as more information comes to light about the scandal.