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German court rules against Volkswagen in 'dieselgate' scandal

The logo of German car maker Volkswagen
The logo of German car maker Volkswagen

A top German court has ruled against Volkswagen over its "dieselgate" emissions scandal, paving the way for car owners to receive compensation from the automotive giant.

The Federal Court of Justice passed a ruling on Monday that would force Volkswagen to reimburse a customer in full for the cost of a car in a case that could set a vital precedent for other owners to receive compensation.

The case brought by Herbert Gilbert, who paid €31,500 for a Volkswagen Sharan, is a fresh blow for the German carmaker, which has struggled since the scandal first came to light in 2015.

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Volkswagen admitted to manipulating the engines of 11 million diesel cars built between 2009 and 2015 with software that helped the company cheat tests designed to measure emissions.

The US Environmental Protection Agency first discovered the unlawful “defeat devices” that allowed the cars to detect when they were being tested and adjust emissions of harmful nitrogen oxide pollutants to pass critical regulatory standards.

City Intelligence newsletter (SUBSCRIBER) Article
City Intelligence newsletter (SUBSCRIBER) Article

To date, the scandal has cost the company more than 30bn euros following hefty fines, and damage to its reputation after criminal charges were issued by German prosecutors.

The ruling from Germany’s highest court for civil disputes could pave the way for affected customers to return their vehicles for a lump sum. Currently, there are around 60,000 related lawsuits against Volkswagen in lower German courts.

It comes as the carmaker faced a major blow last month in the UK, after the High Court sided with lawyers representing more than 91,000 customers fighting Volkswagen.

The victory marked a preliminary step for UK customers hoping to receive a payout from the German firm, which could be expensive. Volkswagen is considering an appeal of the judgment.

Volkswagen said the ruling will "bring closure for the diesel proceedings in Germany" and that it is now seeking to bring the pending proceedings to a "prompt conclusion" in agreement with the plaintiffs.

In a statement, a Volkswagen spokesperson said: "We will offer the plaintiffs a pragmatic and simple solution with one-off payments. How high these payments will be depends on the individual case. Waiting for a verdict would have considerable disadvantages for both sides.

"A ruling means that the plaintiff would ultimately have to return his vehicle to Volkswagen. However, many people want to keep their vehicle because it works well and do not wish to purchase a new vehicle. Moreover, a judgment takes time, questions of detail can be contentious, and the needed lawyers’ support in this context represents costs and effort."

It added that there are important issues still to be addressed, including whether there are grounds for a claim in case of a purchase of a vehicles after September 2015.