Worldwide: Product Liability And Recall

Last Updated: 31 March 2017
Article by Clyde & Co LLP

Liability for defective products

Following the publication of an Evaluation and Fitness Check Roadmap in September 2016, a European Commission consultation seeks views on the application and performance of Directive 85/374 on the liability for defective products. The Directive, in force since 1985, seeks to harmonise the law of member states relating to defective products, imposing strict liability on the producers of defective products.

The purpose of the consultation is to determine whether the Directive is still fit for purpose. To that end, the Commission has posed three online questionnaires seeking, respectively, the views of producers, consumers and public authorities. In particular, the consultation asks:

  • "whether and to what extent the Product Liability Directive meets its objectives of guaranteeing at EU level the liability without fault of the producer for damage caused by a defective product;
  • whether it still corresponds to stakeholders' needs;
  • if the Product Liability Directive is fit-for-purpose with regards to new technological developments such as the Internet of Things and autonomous systems."

VW: An update on consumer claims

VW faces numerous legal actions relating to the emissions scandal. In addition to several regulatory and criminal actions being pursued by governments in various jurisdictions, VW faces claims from consumers, dealers, finance houses and investors. Below is a brief update on the status of some of the consumer class actions that have been filed:

United States

In February 2016, attorneys on behalf of consumers filed proposed class action suits in the District Court in California alleging VW engaged in widespread fraud in marketing its vehicles. Several class actions were consolidated and, on 25 October 2016, a California judge gave final approval for a USD 14.7 billion settlement with consumers and the federal government. Car owners will be able to either sell their cars back to VW at a price pre-scandal or obtain a free fix from VW. In addition, owners will also be able to claim compensation of between USD 5,000 and USD 10,000. In December 2016 an agreement in principle was reached regarding 3 litre engine vehicles. This deal was approved by the courts in February 2017.

Comments are to be submitted by 26 April 2017.

United Kingdom

Claimant law firm, Harcus Sinclair has applied for a group litigation order (GLO) to bring a case on behalf of c.10,000 British VW car owners. Other firms have been invited to join the action. The Claimants have alleged that:

  1. the VW Group misled consumers by claiming that the affected vehicles complied with manufacturing and testing regulations;
  2. the vehicles were fitted with a software algorithm that artificially lowered the level of NOx emissions during environmental testing; and
  3. as a result of this deceit, consumers who purchased an affected vehicle are entitled to compensation for their loss.

It is alleged that the VW Group committed the tort of deceit (which is a type of fraudulent misrepresentation), and breached the Consumer Credit Act 1974 (where financing was provided by VW for the car purchase). Claims will likely include financial losses due to the affected cars depreciating in value and/or incurring higher running costs than those advertised. The GLO application has been adjourned until October 2017: Another claimant law firm, Leigh Day, intends to seek a separate GLO for consumers claiming under the Consumer Protection from Unfair Trading Regulations 2008 (CPUT), which makes it unlawful for businesses to engage in various kinds of "prohibited practice". Consumers would not need to prove that they have suffered financial loss.

Belgium

In June 2016, the consumer organisation, Test-Aankoop/ Test-Achat started a collective action on behalf of over 7000 consumers against VW and the Belgian distributor, alleging fraudulent practices and demanding full refunds without return of the vehicles. Only vehicles purchased after 1 September 2014 (when the relevant law to bring a class action came in force) can be included in the claim. In January 2017, the Court decided to postpone the pleadings on the admissibility of the collective action brought by Test-Achats against Volkswagen.

Ireland

Law firms are representing hundreds of clients and have filed several claims for breach of contract under the Sale of Goods and Supply of Services Act. The claims state that they have suffered loss, damage, inconvenience and expense. The claimants also demand an assessment of vehicles before and after the refit.

Canada

Class actions were filed in the Ontario Superior Court and the Superior Court of Quebec alleging that VW wrongfully fixed admissions tests and misled consumers into buying certain VW vehicles. It argued that "by manufacturing, testing, distributing and selling affected vehicles with defeat devices that allowed for improper levels of emission, VW violated the common law and legislative standards, was negligent, defrauded its customers, and engaged in unfair competition." On 19 December 2016 it was announced that VW Canada had reached a $2.1bn settlement deal with drivers in both actions where they will receive compensation and be able to sell their cars back to VW or opt for a repair. The Courts are expected to issue final approval of the settlement in March 2017.

France

We understand that several actions have been attempted. In October 2015, French consumer association CLCV filed a claim for 'aggravated fraud' and disloyal commercial practices but progress has been slow. CLCV also is advising consumers how to bring their own individual claims.

Italy

Italian consumer protection organisation Altroconsumo has succeeded in getting an appeals court in Venice to accept a class action suit against VW. We understand that it is seeking a 15% refund of the affected vehicles.

Spain

The Consumers and Users Organisation (OCU) filed a class action on 22 July 2016 with Madrid's Commercial Court against the Volkswagen-Audi S.A. Group demanding monetary compensation for consumers. The group represents more than 6,500 affected consumers and is seeking repairs and compensation of at least EUR 2,000.

Germany

On 3 January 2017, an internet-based consumer rights group, Myright, brought an action in Germany seeking the repurchase of affected vehicles, rejecting that VW's fix (approved by Germany's federal motor authority, KBA) is sufficient. Myright has filed the case on behalf of a single person but claims that, if successful, it should apply to the owners of all affected cars.

Australia

On 30 October 2015, claimant law firms commenced a class action in the Federal Court of Australia under Australia Consumer Law on the basis that the vehicles purchased by the class were not fit for purpose or free from defects. The class action is seeking a full refund of the purchase price or the diminished value of the vehicle. The proceedings began on 27 November 2015 and a case management hearing took place in December 2016, in which it was decided that the class actions would be scheduled for a stage one trial in the Federal Court of Australia commencing on Aus tralia 30 October 2017.

Product Liability And Recall

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