Federal Court Orders Re-examination of VW Settlement Disputes

The Federal Court of Justice (Bundesgerichtshof - BGH) has mandated a re-evaluation of legal disputes concerning Volkswagen's settlements with its former executives, Martin Winterkorn and Rupert Stadler, related to the diesel scandal. This decision follows the annual general meeting of Volkswagen in 2021, during which settlements for potential damages were approved.

Volkswagen had reached agreements in June 2021 with Winterkorn and Stadler, securing liability settlements as well as related coverage agreements with Directors and Officers (D&O) insurers. These D&O policies protect company leaders from liability claims, amounting to approximately EUR288 million in total. Specifically, Winterkorn contributed EUR11.2 million, while Stadler paid EUR4.1 million.

Despite the overwhelming approval of these settlements by the company's shareholders in July 2021, investor protection associations challenged the validity of these resolutions in court. Initial rulings by the District Court of Hanover dismissed their claims, a decision that was upheld by the Higher Regional Court of Celle. However, the case escalated to the BGH after the plaintiffs filed for revision.

In a recent ruling, the BGH found significant merit in the plaintiffs' arguments, stating that the approval of the D&O settlement was nullified due to a violation of legal provisions. The court pointed out that essential information was omitted from the agenda when convening the general meeting.

Consequently, the proceedings concerning the liability agreements with Winterkorn and Stadler have been referred back to the Higher Regional Court for further deliberation. Volkswagen has indicated that it is in discussions with all parties involved regarding the implications of the BGH's ruling and the subsequent steps to take.

A spokesperson for Volkswagen confirmed that the company has proactively agreed with the insurers to refrain from asserting any claim for recovery until the implications of the recent ruling are thoroughly assessed. The spokesperson added that the content of the liability agreements with the former executives has not been criticized by the BGH.

Volkswagen believes that the reasons which justified the agreements in 2021 remain applicable today. The company aims to finalize the settlements once again, indicating a commitment to resolving these legal matters efficiently.