Carmakers may face new wave of claims after EU's top court rules on engine device

In a dispute stemming from the aftermath of the diesel scandal that hit Volkswagen, the European Court of Justice said there was no exemption for the use of software that changes pollutant gas emissions in cars based on the outside temperature. File photo

Volkswagen and other carmakers risk violating EU rules — while facing more consumer claims — after Europe's top court said the use of IT meant to protect car components from damage at certain temperatures could be illegal.

In a dispute stemming from the aftermath of the diesel scandal that hit the German car giant, the European Court of Justice said there was no exemption for the use of software that changes pollutant gas emissions in cars based on the outside temperature. The ruling opens the door to potential lawsuits for compensation over sales contracts for affected cars.

“Software in diesel vehicles which reduces the effectiveness of the emission control system at normal temperatures during most of the year constitutes a prohibited defeat device,” the EU court said. 

“Since such a vehicle default is not minor, rescission of the sale contract in respect of the vehicle is not, in principle, precluded,” the court ruled.

The EU’s top court in 2020 issued a key ruling in a dispute following from the diesel scandal that had engulfed VW, which said the use of so-called defeat devices — which helped the carmaker bypass diesel engine pollution tests — can’t be justified under EU  rules. 

The ruling raised questions for carmakers more broadly about the use of other software, because engine functions known as thermal windows — that lower pollution controls when temperatures are low to protect components — are used across the industry.

VW has insisted its use of thermal windows is in line with EU rules, given their goal is to shield the car’s engine from sudden and unpredictable damage. Despite Thursday’s ruling, it continues to argue that such software remains legal.

Following the criteria laid out by the EU court, “the thermal windows used in cars by VW remain permissible”, VW said in a statement. “The effects of the ruling on VW are therefore minor” and civil damages claims “will continue to be unsuccessful”.

VW argues that the exhaust gas recirculation in its EA189 vehicles is active “most of the year”, because it is only switched off if the outside temperature falls below 10 degrees. The court argued that the device at issue in its case switches off the cleaning mechanism at temperatures below 15 degrees, making it illegal because it doesn’t work “most of the year”.

A number of consumer claims in Austria by people seeking to cancel their sales contracts led to three courts deciding to ask EU judges for more clarity on whether such software also qualified as a defeat device, or whether there were exceptions for its use.

“This puts a stop to arguments by diesel producers and also the German authorities that these thermal windows serve to protect engines and are legal,” said Peter Kolba, chairman of Austrian consumer association VSV. The group will continue to encourage “risk-free claims for damages against the diesel manufacturers in German courts,” he said.

The Austrian association says it has some 600 lawsuits pending in Germany and has supported Austrian car owners to join a group action of the German consumer organization against Mercedes-Benz. 

Bloomberg