Case law Developments in PIL

Another Twist to “Dieselgate”: Who is Allowed to Sue VW at its Seat?

The Diesel scandal has produced a wave of litigation word-wide. We are still waiting for the CJEU’s decision on whether claims can be brought in Austria by Austrian purchasers (Case C-343/19). The Advocate General’s opinion in this case has been the subject of an earlier post on this blog.

One of the important issues in the case pending before the CJEU is whether claimants can be expected to sue Volkswagen (VW) at its seat.  VW has its seat in Wolfsburg; thus, the competent court for such claims would be the Regional Court (Landgericht) of Braunschweig (Brunswick). The Braunschweig Regional Court has, however, now introduced a new hurdle for claimants who want to sue VW at its seat.

The Court at VW’s Seat Has Spoken

On 30 April 2020, the Regional Court of Braunschweig gave judgment (docket no 11 O 3092/19) on a case concerning a German debt collection company that had brought a “collective action” based on a number of claims against VW assigned to it by Swiss purchasers who bought cars fitted with the illicit software. The debt collection company was licensed under the German Act on Out-of-Court Legal Services (Rechtsdienstleistungsgesetz – RDG).

The Regional Court dismissed the action on the basis that the company could not dispose of the authorisation necessary under the RDG to pursue the claim, despite being licensed in Germany. It specifically found that neither the company nor its employees had any knowledge of Swiss law. Such expertise was however indispensable for the present case because the Regional Court of Braunschweig assumed that the claims assigned to the company would be governed by Swiss law.

An Overly Simplistic Conflict-of-Laws Analysis

The Regional Court derived the applicability of Swiss law from Article 4(1) of the Rome II Regulation. The court concluded that the place where the damage occurred, which is decisive under this rule, was Switzerland because the purchasers had paid for the cars from Swiss bank accounts.

The Regional Court seems to refer in this respect to the CJEU judgment in Kolassa, which – in the context of international jurisdiction – had considered the place where a bank account is managed as relevant for the localisation of financial loss. However, this judgment concerned the specific situation of prospectus liability, not the sale of cars. It cannot be considered as establishing a general rule, as the CJEU has clarified in its later judgment in Universal Music.

The localisation of loss in the ‘Dieselgate’ cases is much more difficult and intricate, as the Advocate General has pointed out in its conclusions in Case C-343/19. The fact that the cars have been paid from Swiss bank accounts alone will not suffice to establish the applicability of Swiss law. Other circumstances will have to be considered, such as the place of domicile of the purchasers, or the place where they use their cars (see the comment on the AG’s conclusions here).

An Undue Restriction of Access to Justice 

More problematic still is that the Regional Court Braunschweig denied the debt collection company standing to sue VW in Germany on the grounds that it lacks sufficient knowledge of Swiss law. This argument relies on a very restrictive interpretation of German law, which requires debt collection companies to have only general legal expertise; not specific expertise in foreign law. Moreover, the ruling ignores the fact that debt collection companies may instruct experts on Swiss law to advise on certain points of the legal case. Indeed, the court will probably have to do the same were it to try the case, because it also lacks the necessary knowledge of Swiss law (see sec. 293 of the German Code of Civil Procedure).

The judgment raises an unacceptable barrier for the enforcement of foreign claims against VW in Germany. Victims whose claims are based on foreign law cannot use German debt collection companies to advance their claims, as the latter have been found not have the required expertise in foreign law. But they also cannot go via foreign debt collection companies, as these do not have the necessary German license and can only provide “temporarily and occasionally” legal services in this country (sec. 15 German Act on Out-of-Court Legal Services). To instruct a German lawyer will be too burdensome as the purchaser would have to shoulder the litigation risk of losing the case.

It is Now Up to the CJEU

The Regional Court of Braunschweig has set up an additional obstacle for foreign claims in the Diesel scandal. This makes it much more difficult to sue VW at its seat. It is hard not to form the impression that the Regional Court was looking for an efficient way to rid itself of an unattractive case. The case illustrates the difficulties foreign claimants face when bringing an action at VW’s seat. Hopefully, the CJEU will take note of this when it decides whether car purchasers may bring actions against VW abroad.

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