Court Reopens Negotiations on Emissions Fraud Settlements

The legal saga surrounding the emissions scandal continues as the German Federal Court has ordered a re-evaluation of previously settled liability agreements involving former Volkswagen executives Martin Winterkorn and Rupert Stadler. This decision brings back to the forefront the legal battles that have plagued the automotive giant since the scandal first broke.

In a striking turn of events, a majority of shareholders had approved liability settlements during a Volkswagen annual general meeting in July 2021. However, these agreements are now under scrutiny following a ruling by the Federal Court (Bundesgerichtshof, BGH), which found that significant legal violations occurred during the approval process.

These settlements were originally designed to address potential claims for damages linked to the emissions cheating scandal, which saw Volkswagen accused of manipulating diesel engine tests. The settlements amounted to approximately EUR288 million, with Winterkorn contributing EUR11.2 million and Stadler EUR4.18 million to the agreements.

Despite the initial approval of these settlements, investor protection associations contested their validity, leading to a series of legal challenges. The Hanover District Court initially dismissed these claims, but the Higher Regional Court in Celle later upheld the decision. The case eventually reached the BGH, where a recent ruling concluded that the approval of the settlement related to the directors and officers (D&O) insurance agreement was void due to procedural errors, including missing information in the meeting notice.

As a result, the BGH has referred the case back to the Higher Regional Court for further deliberation regarding the liability settlements with the former executives. This development has prompted Volkswagen to engage in discussions with involved parties, including D&O insurers, about the implications of the court's decision and potential next steps.

A spokesperson for Volkswagen indicated that the company intends to pursue re-negotiation of the settlements, emphasizing that the reasons which justified the original agreements remain valid today. Furthermore, the spokesperson noted that preliminary arrangements have been made with insurers to defer any claims for recoupment during this ongoing process.

As the legal proceedings resume, stakeholders in the automotive industry will be closely monitoring the situation, given the extensive ramifications the emissions scandal has had on Volkswagen and the broader market. The outcome of these renewed negotiations could potentially reshape the landscape of corporate liability in similar future cases.