In the latest development in the wake of the Dieselgate scandal, the Court of Justice of the European Union (CJEU) recently confirmed that consumers who purchased diesel vehicles fitted with software which reduces the effectiveness of the emission control system at normal temperatures may be entitled to rescind the purchase. Such software was classified by the CJEU as a defeat device which is prohibited in terms of EU law.
EU law makes provision for harmonised rules for the emission type-approval of vehicles and for robust testing methods with respect to pollutant emissions. It also prohibits car manufacturers from using defeat devices that reduce the effectiveness of emission control systems, except under strict conditions such as to protect an engine against damage or accident and for safe operation of the vehicle.
Defeat devices are namely mechanisms or software that can change vehicle emissions levels, at times used by manufacturers to mask the true pollution levels of their vehicles.
The facts of this case were briefly as follows. Purchasers of Volkswagen vehicles requested the Austrian courts to annul sales contracts which they concluded between 2011 and 2013. These vehicles were fitted with software that reduces the recirculation of a vehicle’s pollutant gases according to, among other things, the temperature detected.
Such software ensured compliance with the limits laid down at EU level for emissions of nitrogen oxide (NO) only when the outside temperature is between 15°C and 33°C (‘the temperature window’). Outside of that window, the rate of exhaust gas recirculation (EGR) reduces in a linear way down to zero, which leads to those limits being exceeded.
The temperature window resulted from a software update in the vehicles at issue carried out by Volkswagen with a view to replacing software prohibited under EU law. The German Federal Office for Motor Vehicles had authorised that update, having concluded that it did not constitute a prohibited defeat device. The national court seized of the case filed a preliminary reference before the CJEU, requesting guidance on the lawfulness of such a temperature window and the rights available to consumers, in terms of applicable EU law.
The CJEU noted that the case revolved around a device which ensures compliance with the NO emission limits only in the temperature window. It observed that ambient temperatures below 15°C are to be considered as normal within EU territory and emission limits laid down at EU level must be observed even where those temperatures are significantly below 15°C. Accordingly, software such as that at issue reduces the effectiveness of the emission control system under conditions of normal use.
The mere fact that the device contributes to protecting separate engine parts, such as the diesel particulate filter, does not make it lawful. The latter may be upheld only if it could be established that the device strictly meets the need to avoid immediate risks of damage or accident to the engine, caused by a malfunction of one of those parts, of such a serious nature as to give rise to a specific hazard when a vehicle fitted with that device is driven.
The mere fact that the device contributes to protecting separate engine parts, such as the diesel particulate filter, does not make it lawful
The court went on to observe that such a ‘need’ may be said to subsist only where, at the time of the EC type-approval of that device or of the vehicle equipped with it, there was no other technical solution available to avoid such risks. The CJEU then left it in the hands of the national court to verify whether that is the case for the defeat device with which the vehicles in question are equipped.
By way of further guidance, the CJEU emphasised that the sole aim of protecting the engine against clogging up and ageing does not justify the installation of a defeat device. Indeed, even if there were such a need, the defeat device is prohibited if, under normal driving conditions, it operates during most of the year since that would mean that the exception applies more often than the prohibition. This would result in a disproportionate infringement of the principle to limit NO emissions.
Furthermore, the fact that a defeat device was installed after a vehicle was put into service is irrelevant for the purposes of assessing whether the use of that device is prohibited, the court affirmed.
The court then delved into the relevant applicable EU consumer laws. The EU directive regulating the rights of consumers who purchase goods that are not in conformity with the sale contract, applicable at the relevant time, provided that the consumer is entitled to request the seller to repair the goods or to replace them, unless this is impossible or disproportionate.
It is only if the consumer is entitled to neither repair nor replacement, or if the seller fails to provide one of such remedies within a reasonable time or without significant inconvenience to the consumer, that the latter may require an adequate reduction of the price or the rescission of the contract. Rescission is precluded if the goods’ lack of conformity is minor.
The CJEU observed that a vehicle which is fitted with a prohibited defeat device is not of the same quality as goods of the same type, which the consumer can reasonably expect. Therefore, it is not in conformity with the contract of sale. This, despite the fact that it is covered by a valid EC type-approval and may, therefore, be used on the road.
The court emphasised that such a lack of conformity cannot be classified as ‘minor’. This is so even if it can be proven that the consumer was aware of the existence and operation of the device and would have nonetheless purchased the vehicle. This means that, if applicable, depending on the particular facts of each case, the consumer cannot be denied the right to rescind the contract.
The repercussions emanating from the Dieselgate scandal are far from over. This judgment and others before it and, possibly others yet to come, serve to reinforce the rights of purchasers of vehicles impacted by this scandal with the consequence that it could indeed be classified as one of the costliest corporate scandals to date.