"Dieselgate" VW's before the CJEU: No smoke without special tort jurisdiction under the Brussels I Regulation?

The important recent decision in Verein für Konsumenteninformation ("VKI") v Volkswagen AG (C-343/19) (9 July 2020) (see here) involved an action brought in Austria by an Austrian consumer organisation (VKI) who had taken assignments of claims by disgruntled Austrian purchasers of German-made Volkswagens that had been equipped in Germany with a "defeat device" to manipulate emissions figures; a "feature" which has done so-much for public confidence in the VW brand.

The CJEU confirmed in their judgment that the Austrian court had jurisdiction over VW, as the special jurisdiction rule for matters relating to tort, delict or quasi-delict that is now found in Art. 7(2) of the Brussels I (Recast) Regulation (1215/2012) must be interpreted as meaning that where a car manufacturer in a Member State has unlawfully equipped its vehicles with software that manipulates data relating to exhaust gas emissions before those vehicles are purchased from a third party in another Member State, "the place where the damage occurs" for the purposes of Art. 7(2) is in the Member State where the purchase actually took place.

Special jurisdiction under Art. 7(2)

As is well-known, Art.7(2) permits the exercise of special jurisdiction "in matters relating to tort, delict or quasi-delict, in the courts for the place where the harmful event occurred or may occur". It is long established that the concept of the "place where the harmful event occurred" is intended to cover both the place where the damage occurred and the place of the event giving rise to it, with the result that the defendant may be sued, at the option of the applicant, in the courts for either of those places (see e.g. Zuid-Chemie (C‑189/08), Tibor-Trans, (C‑451/18).

On the facts, of this case, it was clear that the place of the event giving rise to the damage was in Germany, where the motor vehicles were equipped with software that manipulates data relating to exhaust gas emissions. But where was the place where the damage occurred?

The Austrian court's concerns

The referring Austrian court had doubted they had jurisdiction under Art. 7(2), because according to the settled case-law of the CJEU, the concept of the "place where the harmful event occurred" cannot be construed so extensively as to encompass every place where the adverse consequences of an event, which has already caused damage actually occurring elsewhere, can be felt. Consequently, that concept cannot be construed as including the place where the victim claims to have suffered financial damage following initial damage arising and suffered by him in another State (see e.g. Marinari (C‑364/93), Tibor-Trans (C‑451/18)). Of course, the CJEU had also ruled that damage which is no more than the indirect consequence of the harm initially suffered by other persons who were the direct victims of damage which occurred at a place different from that where the indirect victim subsequently suffered harm cannot establish jurisdiction under that provision (see, to that effect, Dumez France and Tracoba (C‑220/88).

The Austrian court had been concerned that the mere purchase of the vehicles from car dealers established in Austria, and the delivery of those vehicles in Austria, was not sufficient to establish the jurisdiction under Art. 7(2). The court considered that the software that made it possible to manipulate data relating to the exhaust gas emissions of the vehicles concerned gave rise to initial damage, whereas the damage asserted by the VKI in the form of a reduction in the value of those vehicles constituted consequential damage resulting from the fact that those vehicles had a material defect. The Austrian court was also uncertain whether jurisdiction for purely financial damage arising from a tortious act can be conferred under Art. 7(2).

The Austrian court also noted that, in the light of the CJEU's judgment in Universal Music International Holding (C‑12/15), certain aspects of the case militated in favour of Germany being the place where the damage at issue occurred. Even if the damage occurred, when vehicles equipped with software that manipulates data relating to exhaust gas emissions were purchased and delivered in Austria, all of the claims for compensation relate, in the light of the facts, to one and the same thing: namely the wrongful acts of which Volkswagen is accused, which took place at the registered office of that company, and thus in Germany. From the standpoint of the efficacious conduct of proceedings, in particular because of the proximity to the subject matter of the dispute and the ease of taking evidence, the Austrian court took the view that the German courts would be objectively better placed to clarify where liability for the alleged damage lies. Moreover, conferring jurisdiction on the courts of the place where the vehicles in question were purchased and delivered to end customers, including purchasers of used vehicles, would not necessarily meet the requirement that jurisdiction be predictable.

The judgment of the CJEU

The CJEU were not troubled by the Austrian court's concerns.

The Court began by noting that in order to determine "the place where the damage occurred, on the facts of the case it was clear that the harmful consequences only arose after the vehicle in question was purchased in another Member State, i.e. Austria.

The damage claimed by VKI took the form of a loss in value of the vehicles in question stemming from the difference between the price paid by the purchaser for such a vehicle and its actual value owing to the installation of software that manipulates data relating to exhaust gas emissions. Consequently, while those vehicles became defective as soon as that software had been installed, the damage asserted occurred only when those vehicles were purchased, as they were acquired for a price higher than their actual value.

The Court also declared that such damage, which did not exist before the purchase of the vehicle by the final purchaser who considers himself adversely affected, constitutes initial damage within the meaning of the Court's settled case-law, and not an indirect consequence of the harm initially suffered by other persons within the meaning of the cases such as Dumez France.

The Court rejected the Austrian court's concerns that a claim for damages seeking compensation for the reduction in the value of the vehicles (estimated at 30% of their purchase price) constituted purely financial damage. In the CJEU's eyes, the claims concerned material damage resulting from a loss in value of each vehicle concerned, which stemming from the fact that, with the disclosure that software which manipulates data relating to exhaust gas emissions was installed, the purchaser received a vehicle which was defective and, accordingly, has a lower value. The CJEU said (at para. 35):

It must therefore be concluded that, where vehicles equipped by their manufacturer with software that manipulates data relating to exhaust gas emissions are sold, the damage suffered by the final purchaser is neither indirect nor purely financial and occurs when such a vehicle is purchased from a third party.

The CJEU also decided that such an interpretation met the objective of predictability of the rules governing jurisdiction that underpin the Brussels regime, noting (at para 37) that:

By knowingly contravening the statutory requirements imposed on it, such a manufacturer must anticipate that damage will occur at the place where the vehicle in question has been purchased by a person who could legitimately expect that the vehicle was compliant with those requirements and who subsequently realises that the vehicle is defective and of lower value.

The Court considered their interpretation was consistent with the objectives of proximity and of the sound administration of justice, as in order to determine the amount of the damage suffered, the national court may be required to assess the market conditions in the Member State where that vehicle was purchased. The courts of that Member State are likely to have best access to the evidence needed to carry out those assessments.

Finally, the Court also considered their interpretation satisfied the "requirement of consistency" laid down in recital 7 of the Rome II Regulation, in so far as, in accordance with art. 6(1) thereof, the place where the damage occurs in a case involving an act of unfair competition is the place where 'competitive relations or the collective interests of consumers are, or are likely to be, affected'. As the Court noted an act, such as that at issue in the main proceedings, which, by being likely to affect the collective interests of consumers as a group, constitutes an act of unfair competition (Verein für Konsumenteninformation, (C‑191/15), may affect those interests in any Member State within the territory of which the defective product is purchased by consumers. Thus, under the Rome II Regulation, the place where the damage occurs is the place in which such a product is purchased (see, by analogy, Tibor-Trans, (C‑451/18).

Conclusion

The CJEU's clear and sensible decision is to be welcomed, and is likely to feature prominently in future jurisdiction debates regarding claims against manufacturers by EU consumers.