LUXEMBOURG (CN) — The European Union’s highest court ruled Thursday that Volkswagen must face a lawsuit over defective cars sold during the automaker’s emissions scandal in Austrian national court, even though it is based in Germany.
The European Court of Justice found that, despite EU regulations requiring companies to be sued where they are headquartered, in certain circumstances they can be sued in the place where the damage occurred.
The Austria-based consumer rights group VKI — short for a name that translates to the Association for Consumer Information — filed a complaint against Volkswagen in 2018 in an Austrian court on behalf of 574 people who had purchased cars with defective software aimed at cheating emissions tests. The nonprofit group represents consumers against companies in court.
The Klagenfurt Regional Court was unsure if it had jurisdiction in the case, as Volkswagen is based in Germany, so it referred the case to the Luxembourg-based Court of Justice, the EU’s highest court. Under the so-called Brussels Regime, which determines legal jurisdiction in the EU, companies generally must be sued in the country where they are headquartered.
“Where a manufacturer in a member state has unlawfully equipped its vehicles with software that manipulates data relating to exhaust gas emissions before those vehicles are purchased from a third party in another member state, the place where the damage occurs is in that latter member state,” the five-judge panel found.
The Brussels Regime does allow for certain lawsuits to be filed in locations other than the headquarters, the justices found.
“Jurisdiction in matters relating to tort, delict or quasi-delict is available to direct victims only if they assert initial damage and not mere consequential damage,” the ruling states.
Tort, delict or quasi-delict refer to civil law cases where a person suffers an injury or damages and is eligible for financial compensation from the offending entity. In this case, the people who purchased the vehicles experienced their “damage,” namely a substantial drop in the value of their vehicle, in Austria.
A magistrate for the court held in a nonbinding opinion earlier this year that: “It is also possible for that person to be sued in another member state, specifically, in the courts for the place where the damage arose.” Though not required, rulings from the Court of Justice often follow the same legal reasoning as advisory opinions.
VKI said it was happy with Thursday’s decision.
"Five years after the scandal became known, it is high time that Austrian victims were adequately compensated,” Ulrike Wolf of VKI said in a statement.
A representative for Volkswagen was not immediately available for comment.
In September 2015, the U.S. Environmental Protection Agency announced that it was recalling nearly half a million Volkswagen cars sold in the United States because the company had used the cars’ software to evade emission standards.
An investigation revealed that Volkswagen had intentionally programmed its diesel engines to activate emissions controls only during laboratory testing in order to meet regulatory standards. When the cars were used normally, they emitted nearly 40 times the permitted amount of nitrous oxide.
This was done in 11 million cars worldwide. The scandal is commonly known as Dieselgate.
The case will now return to the Austrian court for a final ruling.
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