The arrest of Volkswagen’s former US compliance officer Oliver Schmidt last Sunday is yet another setback for the company in the United States following the 2015 emissions scandal. Currently, Volkswagen is involved in multiple litigation cases which look to become very costly. However, the situation is quite different in the US and Europe.
In the United States, Volkswagen was sued by consumers, the environmental watchdog and car dealers as a result of the emission scandal, and agreed to reimburse a massive 15, 4.7 and 1.2 billion USD respectively. Furthermore, the troubled German carmaker now faces being sued by investors, who lost up to 35 % of their investments in two trading days following the scandal.
The total revenue in North America was 35.38 billion euros in 2015, which shows the extent of the compensation to American customers, dealers, and environmental funds. The European counterparts however, do not appear to be as lucky.
The problem lies in the juridical system. US has a well established legal system for class actions with a lead plaintiff, which enables everyone affected to receive compensation if the case is won. This causes predictability and stability – something both companies and private persons usually prefer.
The EU does not have a unified system, and some countries are worse than others. In 2010, Spanish air controllers suddenly declared a strike without the necessary agreements between the different parties. This caused the government to declare state of emergency and threaten the strikers with imprisonment for grounding all flights in the country.
As a result, 75 thousand affected people wanted to file a class action but were prohibited to do so by Spanish law. Instead, they had to file individual cases in local courts. A new scandal arose as the outcome of these cases varied greatly – with some passenger compensated for flights, hotel, food etc., while others received some compensation, and others none.
The Supreme Court of Spain protected the local courts, stating that it was right to arrive at different outcomes as each case was an individual one and that conditions were different. This was bizarre as members within a single family were compensated differently or not at all.
In the case against Volkswagen, European investors are filing a class suit in the Netherlands through Stichting Volkswagen Investors’ Claim as this is the best alternative within the Union.
The automobile company paid enormous sums in US where they only have 1.5 % of the market, but are trying their best to avoid doing so in Europe, claiming that they have not wronged the continent’s parties. This raises the question: if they consider themselves innocent, why the payouts in the US?
Usually, companies wish to settle cases like these as soon as possible as it is bad for the stock price with legal uncertainties and class actions. Moreover, it is bad PR, and in October 2016, Volkswagen was already in their 14th month of decreasing sales.
It would be good for all parties to have a single EU market, with one single juridical system instead of facing cases in each individual country. Litigation lawyers are mediators and work to reach a settlement which is agreeable for both the wrongdoers and victims.
Volkswagen changed its Board of Directors and CEO Winterkorn, but is far from correcting the problem. They initially blamed the issue on “the unlawful behaviour of engineers and technicians involved in engine development” and the supervisory board wrote a press release stating that “Dr. Winterkorn had no knowledge of the manipulation of emissions data”. However, German newspapers reported that the car maker had been warned by employees and supplier Bosch.
The European Union has to unify and improve its juridical system in order to protect customers and investors – until then some investors will be more equal than others. Volkswagen will continue with its foul play as they understand that they are likely to get away with it – and this is why everyone who was a stockholder between September 20 and 21 2015 with connections to Europe should sign up for Stichting Volkswagen Investors’ Claim (which is free and overseen by non-profits World Federation of Investors and European organisation Better Finance).
Secretary General at World Federation of Young Investors
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