Daily Briefing

VW investors get their day in court

main 0204217766 DPA – investors law suit against VW Volkswagen Dieselgate damages shareholder losses compensation inform timely emissions diesel
Source: DPA

And they’re off, the men in black robes with their attendant clerks and hacks and flacks, in a huge courtroom in Brunswick. In what is being billed as potentially the greatest German corporate case ever, more than a thousand shareholders yesterday accused VW of defrauding them in the Dieselgate scandal. Everything suggests that this drama will be long and drawn-out, but also juicy in revelations – and extremely awkward for VW’s top brass, as they await the various criminal investigations going on separately.

The investors are demanding €9 billion in total (more than $10 billion). Their lead attorney, Andreas Tilp, argued yesterday that VW should have started divulging as early as 2008 that it had a problem with its emissions technology, and that it certainly, absolutely, incontrovertibly should have disclosed on or before September 18, 2015, that the United States Environmental Protection Agency had the company in its sights. That’s the day the EPA published its “notice of violation”, in effect bringing VW’s cheating to light and sending the share price into the basement. Some €25 billion in market value evaporated in an instant. But VW only informed investors on September 22, 2015. By that time, shareholders had lost their shirts.

Christian Jäde, the presiding judge, yesterday opined that claims before 2012 probably fall under a statute of limitations. And although VW was clearly up to no good, he suggested, the only question relevant to the case was whether executives knowingly kept shareholders in the dark. VW argues that its bosses, even after hearing about the legal trouble in America, could not have guessed that fines would run into the billions. Dieter Pötsch, the CFO at the time, was expecting a puny slap on the hand of about $150 million, VW’s lawyers claim. Pötsch, who is now chairman of the supervisory board, will have some explaining to do.


One aspect of the case that makes it especially worth watching is its legal format, which is fairly new. Germany does not have US-style class actions, in which a plaintiff sues on behalf of a group of people, even a huge group, who are in the same situation and will share the damages if they win. In Germany, by contrast, plaintiffs traditionally had to sue individually. Small investors typically didn’t bother. And in big cases, the many suits clogged up the court system.

That’s what happened in 2004 when about 17,000 plaintiffs deluged a court in Frankfurt. They were mad at Telekom, the telephone utility, which had published a questionable prospectus before its IPO in 1996. The litigants had bought the shares and made losses. Because the case was so big, legislators penned a law with the nickname Lex Telekom. The resulting format is a bit like a class action in that one plaintiff, representing a group, can set a legal precedent to establish certain findings (for example, who at VW knew what and when). It is unlike an American class action in that all the other litigants, using that precedent, must then still bring their own suits to get their individually assessed damages.

In the VW case, the representative plaintiff is Deka Investment, a fund manager for Germany’s savings banks. The other litigants represent investors ranging from a German regional government to a pension fund for Californian teachers. Some will ask for damages of €1.2 billion, others for €370. In this new format, their chance of collecting is better – but not that much better. The Telekom case, believe it or not, is still not decided. READ MORE


main Syria02_51271364 DPA – Local Committee of Arbeen alleged poisonous gas attack in Arbeen town in Damascus
Source: DPA

For over seven decades, postwar Germany has been enjoying the following division of labor: America is the protector and does the military dirty work as world cop, occasionally supported by Britain and France. Germany, meanwhile, sends money and medicine and then lectures its allies during TV talk shows with a raised finger when the wrong people accidentally get shot.

The Americans have long been fed up with this arrangement. Long before Trump, they started demanding that Germany better pay more for its army and participate – with live ammo – in wars that are necessary for Western interests or values. The German political elite has slowly begun accepting this logic, even if the German public feigns horror at the mere notion.

The question has now returned, quite literally, because America has formally inquired whether Germany, alongside Britain and France, would take part in airstrikes against Bashar Al-Assad, the Syrian tyrant, if he gases men, women and children in Idlib. That he has no scruples about using chemical weapons, Assad has amply proven (see picture above). That he may be about to do so again is conceivable. For days, his forces, supported by his Russian and Iranian allies, have been massing to pound the last major rebel stronghold into submission. America wants to know: If Assad breaks the rules of civilization, will Germany do more than talk?

It is a sign of the changing times that many of Germany’s politicians, from the center-right Christian Democrats to the liberal Free Democrats and the center-left Greens, are now saying that they can envision a military role in such a hypothetical strike. Ursula von der Leyen, the defense minister, is even looking into what that role might be. Not so the Social Democrats, the junior partner in Angela Merkel’s coalition. Their boss, Andrea Nahles, has already ruled out participating. Rest assured: The Social Democrats will be all over those talk shows to give moral lectures to the world when it’s all over. READ MORE

Andreas Kluth is Handelsblatt Global’s Editor-in-Chief. To contact him: kluth@handelsblatt.com

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