ECJ confirms consumers’ right to compensation in ‘Dieselgate’

In the QB/Mercedes-Benz judgment of 21 March 2023, the European Court of Justice (“ECJ”) confirmed that consumers who purchased a vehicle with an ‘unlawful defeat device’ have a right to compensation from vehicle manufacturers. The judgment is the most recent in a line of rulings coming out of the ‘Dieselgate’ or ‘Emissionsgate’ scandal about devices installed in vehicles with diesel engines by vehicle manufacturers such as Volkswagen and Mercedes-Benz to manipulate emissions.  

Factual background of ‘Dieselgate’ 

Vehicle manufacturers need approval from motor transport authorities in order to sell vehicles on the European market. In order to secure approval, manufacturers need to prove that their vehicles comply with European emissions reduction regulations. The vehicles at issue were equipped with software intended to distort the results of emissions tests, known as defeat devices. The software would, for example, switch between two modes. One mode would be used for regulatory approval tests (producing lower emissions in order to obtain approval) and the second would be used for real-world operation of the vehicle. After it surfaced that the vehicles contained these devices, the manufacturers carried out an update to ‘repair’ the issue. Volkswagen updated the software in such a way that the emissions reduction software would be deactivated in more ‘difficult’ driving conditions: when the outside temperature was below 15 degrees Celsius and above 33 degrees, and when the driving altitude was above 1,000 meters. The vehicles with the updated software were approved by the German Motor Transport Authority (Kraftfahrt-Bundesamt, “KBA”).  

Earlier ECJ judgments 

As context, we briefly summarize the most relevant earlier Dieselgate judgments:  

• In CLCV/X, the ECJ ruled that the defeat devices were unlawful under European regulations. Use of the devices could not be justified by the exception to the prohibition related to the need to protect the engine against damage or accident and for safe operation of the vehicle.¹ 
• In GSMB/Auto Krainer, the ECJ ruled that the updated software also qualified as an illegal defeat device, as the effectiveness of the emission control system was reduced below the permissible level under normal driving conditions in the European Union. The ECJ explained that temperatures below 15 degrees and altitudes above 1000 meters are to be considered normal within the territory of the European Union.²  
• In DS/Porsche, the ECJ ruled that the presence of an illegal defeat device cannot be considered a “minor lack of conformity” under the applicable Consumer Rights Directive, even if the consumer would still have purchased the vehicle had he or she known about the device. The interpretation of ‘minor’ is important because consumers are not entitled to rescind purchases with a minor lack of conformity.³ The Court ruled that the concept is objective and does not contain a subjective element.  A specific consumer’s views on the relevance of the defeat device are therefore irrelevant.  

The ruling in QB/Mercedes-Benz 

The question put before the ECJ by a German court in QB/Mercedes-Benz was whether the European regulations on emissions reductions had, in addition to the protection of public interests, the objective to protect the specific interests of individual purchasers of vehicles vis-à-vis the vehicle manufacturers. This question of ‘relativity’ is relevant in various EU countries (including Germany and the Netherlands) as a condition for tortious liability.  

The ECJ ruled that the European regulations on emission reductions and defeat devices had the object to also protect the specific interests of individual purchasers of vehicles. This because the regulations provide a direct link between the car manufacturers and the individual purchaser intended to guarantee to the consumer that the vehicle complies with the relevant EU legislation.⁴ The judgment also confirmed that purchasers of vehicles with an unlawful defeat device have a right to compensation from the manufacturer under European law. The member states can define the compensatory rules, but such rules need to comply with the principle of effectiveness of European law.  

Relevance for consumer claims  

The further clarity provided by the ECJ is a welcome development for the consumers who purchased diesel vehicles with an illegal defeat device, and who are pursuing their claims in one of the many on-going collective and individual cases across Europe.  

In the Netherlands, the District Court of Amsterdam already ruled in 2021 in the Car Claim collective action case that purchasers of new Volkswagen, Audi, Seat and Skoda vehicles with an illegal defeat device had the right of a price reduction of EUR 3,000, and the purchasers of second-hand vehicles a reduction of EUR 1,500.⁵ However, the court did not actually award damages to the affected consumers, as the Dutch Collective Damages Act (WAMCA) was not applicable in temporal scope. Currently, various collective damages actions are pending before the Dutch courts to obtain compensations for the victims of Dieselgate.⁶  

As an aside, we observe that in the 2021 judgment, the Amsterdam court did not award compensation for the harm suffered after the software update was carried out by the vehicle manufacturers. The court found that the software update could not be unlawful, because it was approved by the KBA, even though it could very well be that the KBA’s assessment was incorrect. This finding appears to be incorrect in the light of the ECJ’s judgment in GSMB/Auto Krainer, in which the ECJ ruled that the software update was unlawful, and found the KBA’s approval irrelevant.