On July 14, 2022, in DS v Porsche Inter Auto GmbH & Co. KG, Volkswagen AG (Case C-145/20), the CJEU ruled on the non-conformity of a vehicle which, though EC type-approved, had an emissions’ regulating systems which did not comply with the regulation aimed at guaranteeing a high level of protection of the environment and at improving air quality within the EU.
In 2013, a consumer bought in Austria a Volkswagen car, Euro 5 generation from a Volkswagen independent authorised dealer. The software operating the exhaust gas recirculation (EGR) worked in two modes (‘switch system’): the first one was activated exclusively in the laboratory, during the approval test; the second mode was activated under normal driving conditions. The switch system was not disclosed to the German authority which granted the type-approval, regulated under Regulation No. 715/2007 on type-approval of motor vehicles with respect to emissions from light passenger and commercial vehicles (Euro 5 and Euro 6). Receiving a type-approval certifies that a type of vehicle ‘(…) satisfies the relevant administrative provisions and technical requirements’ (Article 3(5) Directive 2007/46 establishing a framework for the approval of motor vehicles). Had the authority been aware of the system, the approval would have not been granted. However, the consumer would have nevertheless purchased the vehicle.
In 2015, the German authority ordered the producer (Volkswagen) the withdrawal of the switch system in order for it to be in compliance with Regulation No. 715/2007. In 2016, the same authority considered the software update carried out by the producer to be sufficient in order to restore conformity, thus not withdrawing or revoking the type-approval previously granted. The software update consisted in the following: the emission-reducing mode was activated under normal driving condition, ‘only when the external temperature was between 15 and 33 °C (‘the temperature window’)’ (para 34). In light of this, the consumer brought an action before the Regional Court of Linz requesting either the reimbursement of the price upon returning the vehicle, or a reduction of the price paid, or – finally – to have the seller and producer declare they are ‘liable for damages as a result of the presence of a prohibited defeat device [i.e., the updated software with the temperature window function] within the meaning of Article 5(2) of Regulation No 715/2007’ (para 35). Both the Regional Court of Linz, and the Higher Regional Court of Linz dismissed the action. The consumer appealed the decisions on a point of law before the Supreme Court of Austria which referred the case to the CJEU in 2020.
Contrary to the courts of first and second instance, the Supreme Court considered the switch system to be a ‘defeat device’ thus in breach of Articles 3(10) and 5(2) of Regulation No 715/2007. Pursuant to Article 3(10) a ‘“defeat device” means any element of design which senses temperature (…) for the purpose of activating (…) the operation of any part of the emission control system, that reduces the effectiveness of the emission control system under conditions which may reasonably be expected to be encountered in normal vehicle operation and use’. Pursuant to Article 5(2), then, the use of defeat devices is prohibited, save for three exceptions related to technical matters. One of these exceptions (letter a)) is that the device’s existence ‘is justified in terms of protecting the engine against damage or accident and for safe operation of the vehicle’. Further, the Supreme Court considered in any case the vehicle to be defective under Austrian Law in that the defeat device had not been disclosed to the German authority in charge of the type-approval.
The CJEU ruling is divided into three parts.
1) To the question whether a car (that is authorised to go on the road because it has received the EC type-approval) can be considered in conformity to the contract (pursuant to Article 2(2)d of Directive 1999/44 on certain aspects of the sale of consumer goods and associated guarantees), the CJEU ruled as follows.
According to Directive 2007/46, with the EC type-approval Member States certify ‘that a type of vehicle (…) satisfies the relevant administrative provisions and technical requirements’ laid down in said Directive (Article 3(5)). Only the vehicles which comply with the Directive may be sold, registered or put into service within the EU (Article 4(3)). Manufacturers must demonstrate compliance with the type-approval (Article 4(1) Regulation No. 715/2007) and must deliver a certificate of conformity to the consumer, together with the vehicle (Article 18(1) Directive 2007/46). In light of this, it is evident that a consumer who receives such certificate can reasonably expect compliance with Regulation No. 715/2007 and that, failing that compliance, Article 2(2)(d) shall be interpreted as meaning that the vehicle ‘does not show the quality and performance which are normal in goods of the same type and which the consumer can reasonably expect, given the nature of the goods’ (para 55). The fact that the EC type-approval has been granted does not change this outcome, in that, pursuant to Directive 2007/46, once an unlawful element of a vehicle has been discovered after approval, the latter can be withdrawn from the authority or a new type-approval can be granted after consultation of the Member State with the manufacturer.
2) Asked whether the defeat device was in place for safety reasons and thus whether it may be considered an exception to the prohibition laid down in Article 5(2) of Regulation No. 715/2007, the CJEU then observed the following.
The defeat device ‘which guarantees (…) compliance with the emission limits (…) only in the temperature window (…) can be justified under that provision only where it is established that that device strictly meets the need to avoid immediate risks of damage or accident to the engine, caused by a malfunction of a component of the EGR system, of such a serious nature as to give rise to a specific hazard when a vehicle fitted with that device is driven’ (para 81). The CJEU thus excluded the application of Article 5(2)(a) to all switch systems operating in a temperature window, otherwise allowing the constant derogation to the prohibition. It observed that ‘a defeat device which, under normal driving conditions, operated during most of the year in order to protect the engine from damage or accident and ensure the safe operation of the vehicle could not fall within the exception provided for in Article 5(2)(a)’ (para 81).
3) Finally, the referring court asked whether the defeat device may be considered a minor lack of conformity within the meaning of Article 3(6) of Directive 1999/44 which would have not stopped the consumer from purchasing the car.
The CJEU noted that because Directive 1999/44 does not define what a minor lack of conformity is, this shall be determined by referring to ‘everyday language, while also taking into account the context in which it occurs’ (para 88). A lack of conformity shall thus be, first of all, of ‘minor importance’ (para 89). Secondly, as regards the context: provided that a vehicle with such defeat device cannot be approved and cannot comply with the emission limits laid down in Regulation No. 715/2007, it is clear that the presence of the device ‘cannot be regarded as being a minor lack of conformity within the meaning of Article 3(6) of Directive 1999/44’ (para 96).
The CJEU thus found that the vehicle, though having received the EC type-approval and hence being authorised to be used on the road, was not in conformity with the contract in that the system to control emissions did not comply with the rules on the guarantee of environmental protection and improvement of air quality in the EU. Provided that the lack of conformity was not of minor importance, the consumer is in principle entitled to any of the four legal remedies: repair or replacement of the car, the reduction of the price paid or even the rescission of the contract. The evaluation is left to the national court.
