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Volkswagen scandal: Top German court rules automaker must pay 'dieselgate' compensation


Germany's top civil court has ruled against Volkswagen in the first case brought by a car owner against the automaker for emissions test cheating. The ruling sets a precedent for thousands more cases.

The Federal Court of Justice on Monday ruled against German automaker Volkswagen in the country's first case brought by a car owner over the company's emissions test cheating. 

The court said that people who had purchased an VW automobile equipped with software that manipulated emissions tests are entitled to financial compensation. They can return the vehicle and receive partial financial reimbursement from the automaker.

The car's mileage will be taken into account when calculating reimbursement, the court said.

"The behavior of the defendants is to be deemed unethical," said presiding judge Stephan Seiters in the Court's judgement.

The ruling paves the way for thousands more  German Volkswagen owners whose vehicles were fitted with devices designed to manipulate emissions tests to claim compensation. 

Volkswagen promised "appropriate offers" to those affected. "[The company] now aims to soon bring these cases to a close in agreement with the plaintiffs," VW said in a statement.

What is the Volkswagen scandal? 

In September 2015, Volkswagen admitted to the United States Environmental Protection Agency that it had installed software in 11 million vehicles worldwide that allowed it to cheat emissions tests. American scientists had uncovered software installed in VW vehicles that could detect emissions test scenarios and would change the vehicle's performance accordingly to improve results.

The scandal, dubbed "Dieselgate," led to a crisis in confidence for the entire automobile industry after similar workarounds were later discovered at other companies. VW has been tied up in litigation ever since.
Dieselgate: A timeline
The disaster unfolds — September 2015
About two weeks after Volkswagen admitted behind closed doors to US environmental regulators that it had installed cheating software in some 11 million of its diesel vehicles worldwide, the Environmental Protection Agency shared that information with the public. It was September 18, 2015. The ensuing crisis would eventually take a few unexpected turns.
Dieselgate: A timeline
The boss must go, long live the boss — September 2015
Volkswagen's then-CEO Martin Winterkorn (above) had little choice but to step down several days after news of the scandal broke. In September 2015, he tendered his resignation, but retained his other posts within the Volkswagen Group. Winterkorn's successor was Matthias Müller. Until taking the reins at VW, Müller had been the chairman at Porsche, a VW subsidiary.
Dieselgate: A timeline
Raiding headquarters — October 2015
Regulators in the US weren't the only ones investigating VW. Authorities in Lower Saxony, the German state in which VW is based, were also scrutinizing the company. On October 8 2015, state prosecutors raided VW's headquarters along with several other corporate locations.
Dieselgate: A timeline
Hell breaks loose — January 2016
On January 4, 2016, the US government filed a lawsuit against VW in Detroit, accusing the German automaker of fraud and violations of American climate protection regulations. The lawsuit sought up to $46 billion for violations of the Clean Air Act.
Dieselgate: A timeline
Quit or forced out? — March 2016
In March 2016, the head of VW in the US, Michael Horn, resigned. In the initial days and weeks after the scandal broke, he was the one US authorities turned to for information. He issued an official apology on behalf of the automaker, asking for the public's forgiveness.
Dieselgate: A timeline
Settlement — October 2016
On October 25 2016, a US judge approved a final settlement that would have VW pay $15.3 billion. In addition, affected cars would be retrofitted with better, non-deceptive hardware and software, or else VW would buy them back completely from customers.
Dieselgate: A timeline
Imitators — July 2017
When dieselgate first emerged in 2015, analysts said it was likely other car makers were also cheating tests. But it wasn't until 2017 that other companies were targeted in probes. In July, German authorities launched investigations into luxury car makers Porsche and Daimler for allegedly cheating emissions tests. Others, such as Audi and Chrysler, have also been hit by similar allegations.
Dieselgate: A timeline
Public still supportive — December 2017
Despite dieselgate, VW has managed to keep the emissions scandal from utterly tarnishing its image. According to several polls, between 55 to 67 percent of Germans continue to trust the automaker. In the US, polls show that roughly 50 percent still believe the German company produces worthwhile vehicles.
Dieselgate: A timeline
Fuming over monkeys — January 2018
In late January, however, VW suffered another heavy blow over reports that the company experimented on monkeys and made the animals inhale diesel fumes. To make matters worse, a separate experiment that had humans inhale relatively harmless nitrogen dioxide was revealed at the same time. Some media wrongly interpreted this to mean humans were also inhaling toxic fumes.
Dieselgate: A timeline
Canadian court demands millions — January 2020
Years after the scandal that caused Volkswagen to pay CAN$2.4 billion (US$1.83 billion), a court in Toronto order a further fine of CAN$196.5 million. Volkswagen pleaded guilty of violating in environmental laws. Prosecutor Tom Lemon noted that the fine was "26 times the highest fine ever for a Canadian environmental offence."
Author: Dirk Kaufmann, Elliot Douglas

What verdicts have already been issued?

To avoid a class-action lawsuit, Volkswagen Group recently agreed to pay damages to 235,000 car owners in Germany. The company is to pay out up to €830 million ($905 milllion) under the agreement. 

VW had previously settled for $25 billion in the US and other countries in 2016, and until recently had failed to settle with German car owners. 

Last fall the automaker agreed to pay out AU$127 million ($83 million, €76 million) as a settlement for multiple class-action lawsuits it faced from Australian customers. In January, a Canadian court ordered VW to pay fines of nearly CAN$2 million ($1.4 million, €1.3 million) on top of the CAN$2.4 billion it had already paid, a sum "26 times the highest fine ever for a Canadian environmental offence."

Courts have also ordered other carmakers involved in the scandal to pay fines and to recall thousands of vehicles believed to be equipped with emissions-cheating software.

German prosecutors had also brought charges against top VW executives over the scandal. Volkswagen chief executive Herbert Diess and supervisory board chief Hans Dieter Poetsch in May agreed to an out-of-court settlement of €9 million. It is not clear if the offer to drop the market manipulation case will be extended to former VW CEO Martin Winterkorn, who ran the company from 2007 to 2015 and stepped down after the scandal came to light.

What happens next?

Some 60,000 individual cases against VW are currently pending across Germany, according to VW. Lower German courts follow decisions taken by the higher court, meaning the ruling greatly increases the chances of car owners winning their individual suits, which could result in a payout from the carmaker. 

Those who participated in the class-action suit settled earlier this year waived the right to further litigation on the matter, VW said. 

In July, the court will take up further cases linked to the scandal. These include suits against the car dealers who sold the Volkswagen as well as against other car makers.