Winter is coming

Volkswagen shareholders get their day in court

Musterverfahren gegen Volkswagen AG
No cashback guarantees. Source: DPA

A crucial Dieselgate lawsuit against Volkswagen started on Monday morning in Braunschweig, a short drive from the carmaker’s headquarters in Wolfsburg. In the vital test case, more than 2,000 shareholders – many of them powerful investment funds – claim that VW concealed risks associated with falsified emissions data, causing them to lose €9 billion ($10.4 billion) when the company’s stock price tanked.

In 2015, VW’s elaborate cheating on emissions tests for diesels unraveled in the United States. The shareholders argue they bought shares earlier at what amounted to inflated prices, since the company knew about the falsification and the associated risks, but deliberately concealed them. The judgment of the court is binding on all litigants, but will not apply to other Dieselgate victims.

The main plaintiff is Deka Investment, the asset management fund of Germany’s Sparkasse network of savings banks, with other shareholders co-suing as part of the same suit. Deka’s legal team is led by Andreas Tilp, who in the past has taken similar cases against Deutsche Telekom and the property bank Hypo Real Estate. He argues that the rot dates back to 2008, when VW discovered its diesel engines would not pass US environmental regulations, but chose to conceal this fact.

The fatal decision

According to Mr. Tilp, that led VW down the path of falsification, namely building illegal “defeat device” software designed to convince testers that emissions were far lower than they really were. That facade began to crumble in 2014, when the International Council on Clean Transportation, an environmental nonprofit, reported that VW emissions were far higher than the company admitted.

Volkswagen frames the case differently. Its legal team wants to avoid the trial turning into a tribunal on the entire scandal and argues the suit addresses a single issue: whether the automotive giant abided by laws to report all relevant information to shareholders and the capital markets. VW says its management team did everything it could to correctly inform stockholders, given its knowledge at the time.

VW points out that when the Dieselgate scandal broke, US environmental authorities had never fined any company more than $100 million, a relatively insignificant sum for a company with annual revenues of over €200 billion, and an amount considered too small to impact the share price.

Punishments radically increased

Once the extent of VW’s actions became clear, the US authorities radically changed the scale of their penalties, with the Environmental Protection Agency imposing a fine of $4.3 billion on the German company. The company claims that when the new risk became clear, in September 2015, it communicated this appropriately to shareholders.

Even if the plaintiffs manage to show that VW informed shareholders inadequately or too late, they must also clear another hurdle – showing that senior management acted deliberately to conceal relevant information. This will raise the question of who knew what about the emission manipulation scandal, and when. However, it is not expected that senior VW figures will appear at the trial: Most would, in any case, invoke their right to refuse to testify.

It falls to Braunschweig’s Higher Regional Court to make sense of the competing claims. One thing all agree on is that a decision will not be quick, with judgment not expected to be handed down until next year.

Laura De La Motte is an editor at the Handelsblatt finance desk and a specialist banking correspondent. Frank Drost is a Handelsblatt Editor in Berlin, covering financial supervision and banks. To contact the author:,

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