Volkswagen Loses EU Top Court Ruling in Diesel Scandal

Volkswagen AG’s use of technology that helped it bypass diesel engine pollution tests breached European Union rules, the bloc’s top court said in the latest round of a scandal that’s cost the world’s largest automaker more than 30 billion euros ($36.7 billion).

Installing a so-called defeat device can’t be justified by the fact that “it contributes to preventing the ageing or clogging up of the engine,” the EU Court of Justice ruled Thursday. Decisions by the Luxembourg-based EU judges are binding.

Such software “must allow the engine to be protected against sudden and exceptional damage” and “only those immediate risks of damage which give rise to a specific hazard when the vehicle is driven” could justify its use, the court said.

The ruling might have broader ramifications beyond VW because engine functions known as thermal windows -- that lower pollution controls when temperatures are low to protect components -- are used across the industry.

Multiple automakers may now face record recalls and lawsuits, Claus Goldenstein, a German consumer lawyer, said in a statement. National courts must review the legality of the technologies used by individual manufacturers and are bound to consider the “consumer-friendly” EU court ruling, he said.

The ruling comes as VW continues to be targeted in a wave of investor lawsuits on top of claims by drivers whose cars may have lost value after the manipulation was exposed by U.S. regulators in September 2015.

VW had no immediate comment on the EU court ruling.

A U.K. court, in one of the biggest class-action suits filed in that country, ruled in April that VW used a defeat device. The decision allows 91,000 customers to proceed with a class action against the carmaker.

The EU judges in a separate case ruled in July that VW owners affected by the scandal can sue the carmaker over diesel-emission manipulation anywhere in the 27-nation bloc, opening up the possibility of claims anywhere where a car owner lives.

The case is: C-693/18, CLCV and Others.

©2020 Bloomberg L.P.

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