Op-Ed: “VKI v VW and the diesel scandal: final buyers may bring tortious claims before the courts for the place where the vehicle was purchased” by Enrique Vallines
1. In Verein für Konsumenteninformation v Volkswagen (C‑343/19) the CJEU was confronted with the interpretation of Article 7(2) of the Brussels I Regulation 1215/2012, in the context of the Volkswagen (VW) emissions scandal. As it is well known, the scandal originated by VW’s installation in its diesel vehicles of software that manipulated data relating to exhaust gas emissions.
A consumer organisation, Verein für Konsumenteninformation (VKI), filed a claim for damages against VW in Austria, before the Landesgericht Klagenfurt (Regional Court Klagenfurt). VKI was acting on behalf of 574 consumers who had purchased VW diesel vehicles in the Klagenfurt area sometime before the US Environmental Protection Agency made the scandal public on 18 September 2015.
The claim was based on tortious liability. The wrongful act was, of course, the installation by VW of the manipulating software in the purchased vehicles. The damage consisted of the loss of value of the vehicles in question, stemming from the difference between the prices paid by the purchasers at the time of the sale and the actual values of the vehicles after the existence of the manipulating software was made public.
The Landesgericht Klagenfurt stayed the proceedings and sent a request for a preliminary ruling to the CJEU. In short, the question to the CJEU was whether, in light of the specific circumstances of the case, the Landesgericht Klagenfurt qualified as a ‘court for the place where the harmful event occurred’ under Article 7(2) of the Brussels I Regulation 1215/2012.
The CJEU’s judgment is, at times, not too easy to understand. What follows is an explanation of what the reasoning of the judgment is (or at least, appears to be), with a brief overall assessment of its potential implications.
2. When considering the question, the CJEU starts by recalling that the notion of ‘place where the harmful event occurred’ covers both the ‘place of the event giving rise to the damage’ and ‘the place where the damage occurred’, with the result that the defendant may be sued, through the choice of the applicant, in the courts for either of those places.
In the case at hand, it is clear for the CJEU that the place of the event giving rise to the damage is located in Germany, for it was there where the vehicles were equipped with the manipulating software. Hence, the question then was whether the Landesgericht Klagenfurt was the court for the place where the damage occurred, provided that the conclusion of the sale contracts, the payment of the purchase prices and the transfer or delivery of the vehicles took place within the area of jurisdiction of the referring court.
3. That said, there were two main issues in discussion, both regarding the nature of the damage at stake and the influence of that nature on the application of Article 7(2) of the Brussels I Regulation 1215/2012. First, it was disputed whether the damage was ‘initial’ or, on the contrary, it was merely ‘consequential’. Second, it was not clear whether the damage was ‘purely financial’ or not.
Should the damage not be ‘initial’ but ‘consequential’, the jurisdiction of the Landesgericht Klagenfurt as a court for the place where the damage occurred could not be established (Tibor-Trans, C‑451/18, paragraph 28, and Marinari, C‑364/93, paragraphs 14-15). And, assuming that the damage was ‘initial’, should it also be ‘purely financial’, the jurisdiction of the Landesgericht Klagenfurt could only be regarded if there are ‘specific circumstances’ that contribute to attributing jurisdiction to that court, especially in terms of due regard to the principles of predictability and proximity referred to in recitals 15 and 16 of the Brussels I Regulation 1215/2012 (Löber, C‑304/17, paragraphs 31-36, Universal, C-12/15, paragraphs 38-40).
4. Contrary to what had been suggested by the referring court, the CJEU states that the alleged damage was ‘initial’. Indeed, the view of the Landesgericht Klagenfurt was that the ‘initial’ damage had only been inflicted on the first purchasers (the dealers or importers who acquired the vehicles from VW in the first place) and that, accordingly, any damage that might have been incurred by all subsequent purchasers would have to be qualified as mere ‘consequential’ damage. However, the CJEU rejects this argument by highlighting that the damage ‘did not exist before the purchase of the vehicle by the final purchaser’ and, therefore, ‘constitutes initial damage’. It may be added that these laconic assertions of the CJEU may perhaps be inspired by the Opinion of AG Campos Sánchez-Bordona:
“The damage they [the victims] allege does not follow on from earlier damage sustained by other individuals before them. The loss of value of the vehicles did not become a reality until the manipulation of the engines was made public. In some instances, the applicants may be end users who obtained the vehicle from another, previous buyer; however, the latter did not experience any loss because, at that time, the damage was latent and was not disclosed until later when it affected the then owner. Therefore, it is not possible to describe the damage as being passed on from the original buyers to successive buyers”.
5. Once the ‘initial’ character of the damage has been recognised, the jurisdiction of the court for the place where the damage occurred may be established under Article 7(2) of the Brussels I Regulation 1215/2012. Since, using the CJEU’s words, such initial damage ‘did not exist before the purchase’, it would appear reasonable to say that that the court for the place where the damage occurred is the court for the place where the purchase took place, the Landesgericht Klagenfurt in the case at hand.
Yet, the referring court had indicated that the damage is of ‘purely financial’ nature (an opinion shared by the AG, who argued that the vehicles were simply a physical symbol of a damage which was ‘intangible’ in essence); and, for this reason, according to the case law in Universal or Löber, it would be doubtful whether the mere purchase of the vehicles in Austria is a sufficient ground to establish the jurisdiction of the Austrian courts under Article 7(2). In particular, the Landesgericht Klagenfurt looks at ‘other specific circumstances in the attribution of jurisdiction to courts’ and concludes that, in light of the principles of proximity and predictability, Article 7(2) could not confer jurisdiction on the Austrian courts:
‘All the claims always relate to the same wrongdoing […], which took place in Germany. […] From the standpoint of efficacious conduct of the proceedings, in particular of the proximity to the subject matter of the dispute and the ease of taking evidence, the German courts would therefore also be objectively better placed in the present case to clarify where the responsibility for the alleged damage lies. If […] the question of jurisdiction is based on the place of purchase and transfer of the vehicles to the end customers, including purchasers of used cars, the defendant also harbours doubts as to the possibility of foreseeing which court will have jurisdiction’ [Emphasis added].
The CJEU rejected these arguments. Primarily, the CJEU notes that the alleged damage has a connection with a tangible asset, namely the manipulated vehicles. For this reason, ‘rather than purely financial damage, the present case concerns material damage resulting from a loss of value of each vehicle concerned’.
The fact that the CJEU characterises the damage as not ‘purely financial’ but ‘material’ would allow ‘other specific circumstances’ to be overlooked, and to conclude that, in the case at hand, Article 7(2) attributed jurisdiction to the Landesgericht Klagenfurt as a court for the place where the damage occurred.
However, the CJEU decides to strengthen this conclusion by responding to the proximity and predictability concerns expressed by the referring court. In particular, the CJEU stresses that VW could have predicted the jurisdiction of the Austrian courts, because if the manufacturer sells its vehicles in Austria it may reasonably expect to be sued in Austria; and, additionally, that there is a sufficient degree of proximity between the dispute and the Austrian courts because information regarding the vehicle market conditions in Austria might be needed to determine the amount of damage and Austrian courts are likely to have the best access to such information.
6. Ultimately, the CJEU argues that the jurisdiction of the Landesgericht Klagenfurt will also be confirmed by reasons of ‘consistency’ between Article 7(2) of the Brussels I Regulation 1215/2012 and Article 6(1) of the Rome II Regulation 864/2007, in line with what is required by Recital (7) of this latter Regulation. Specifically, in a somewhat obtuse manner, the CJEU appears to contend that VW’s tortious conduct would qualify as an act of unfair competition that is likely to affect the collective interests of consumers as a group; that the likely affection to those collective interests will essentially correspond to the loss of value of the vehicles taking place at moment and at the place where the vehicles were purchased by the final purchasers; and, accordingly, that the place where the vehicles were purchased should consistently be the place determining both jurisdiction and the applicable substantive law.
The argument is not only obtuse, but also surprising: to the best of my knowledge, the issue of consistency between the Brussels I Regulation 1215/2012 and the Rome II Regulation 864/2007 has not been raised in the proceedings. And it is puzzling too. On the one hand, because the law does not always require that the place determining jurisdiction and the place determining the applicable substantive law are the same. And, on the other hand, because one cannot really figure out why, in a case where unfair competition had not been mentioned, the court looked at Article 6(1) of the Rome II Regulation where it could have probably been more reasonable to look at Article 5(1), which deals with product liability.
7. In an overall assessment, Verein für Konsumenteninformation v Volkswagen (C‑343/19) appears to me to be a lost opportunity in terms of development of the law. The CJEU might have taken the case as a good excuse to refine its case law on the interpretation of Article 7(2) of the Brussels I Regulation 1215/2012 in order to clarify to what extent the ‘other specific circumstances in the attribution of jurisdiction to courts’ referred to in Löber and Universal should influence the jurisdiction of the court for the place where the damage occurred. Instead, the CJEU puts forward a number of arguments – often not in a very understandable manner – which simply tries to reiterate the existing jurisprudence on the matter.
The implications of the judgment are probably simply practical and limited to the great number of cases linked to the Diesel scandal: it is now clear that, under Article 7(2) of the Brussels I Regulation 1215/2012, final buyers may bring their tortious claims before the courts for the place where the vehicle was purchased.
Enrique Vallines is Professor of Procedural Law at the Complutense University of Madrid, Senior Research Fellow at the Max Planck Institute Luxembourg for Procedural Law and Researcher in the Project ‘Towards a converging civil procedure with Europe’ funded by the Spanish Ministry for Science