Crossley & Ors v Volkswagen Aktiengesellschaft & Ors

A vehicle software function is a prohibited defeat device where it senses parameters associated with a prescribed emissions test, changes the operation of an emissions-control component, and thereby reduces the effectiveness of emissions control in conditions reasonably expected during normal vehicle use. The relevant comparison is ordinarily with the vehicle’s test-compliant operation, not merely with another mode of operation on the road. The reduction may be assessed by reference to the particular pollutant controlled by the modulated component; a holistic balancing of different pollutants is unnecessary. A final decision by the competent type-approval authority, including a necessary finding that a defeat device exists, binds other Member State courts within the harmonised type-approval system where the decision is operative and appealable.

The claim formed part of group litigation by owners and lessees of vehicles using Volkswagen’s EA 189 diesel engine. The trial concerned two preliminary issues: whether the engine software contained a prohibited defeat device under Article 3(10) of Regulation (EC) No 715/2007, and whether the High Court was bound by decisions of the German Federal Motor Transport Authority (KBA), or by a communication from the UK Vehicle Certification Agency (VCA).

The KBA had required Volkswagen to remove prohibited defeat devices and restore conformity. Volkswagen had not appealed. The VCA had communicated that the relevant Skoda and SEAT vehicles were non-conforming because of the prohibited use of a defeat device. The central questions were whether the software fell within the statutory definition and whether the KBA and VCA materials constituted binding decisions.

1. Defeat device. The software was an element of design which sensed temperature, speed and other parameters, altered the operation of the exhaust gas recirculation system, and reduced the effectiveness of the emissions-control system. Exhaust gas recirculation formed part of that system even though it operated principally in or around the combustion chamber rather than in the exhaust pipe. The distinction between reducing emissions and preventing them from arising was artificial and inconsistent with the purpose of the legislation.
2. Comparator. The statutory reference to normal vehicle operation described the conditions in which the reduction occurred. The relevant comparison was with the vehicle’s operation without the offending modulation, which here meant the test-compliant Mode 1. Mode 1 was designed to operate during the type-approval test and was not a realistic alternative mode during ordinary road use. The test was presumptive evidence of compliance and its deliberate subversion defeated the purpose of the type-approval regime.
3. Particular pollutant. Article 3(10) did not require an overall balancing of all pollutants. The test imposed separate limits for relevant emissions. The increased NOx emissions resulting from the lower EGR rate were sufficient to establish a reduction in the effectiveness of the emissions-control system.
4. Landscape argument. The legislative history of heavy-duty vehicle provisions, including irrational emissions-control strategies, did not justify a different interpretation for light-duty vehicles. The legislative development was too varied and uncertain to support a redundancy argument.
5. KBA Letters. Under German law, the reference in the operative part of the KBA Letters to prohibited defeat devices was a binding finding, not merely a preliminary issue in the reasoning. The decisions were final and Volkswagen had possessed a right and sufficient legal interest to appeal. The harmonised and centralised EU type-approval regime, together with the duty of sincere co-operation, required that operative findings of the competent authority bind other Member State courts. Volkswagen’s collateral challenge was therefore an abuse of process.
6. VCA Letter. The VCA communication was not a formal decision or order addressed to Skoda, did not state remedies, and principally recorded a proposed voluntary action plan. It did not bind the Court and did not make a collateral challenge abusive.
7. Disposition. Issue 1 was answered yes in relation to the KBA Letters and no in relation to the VCA Letter. Issue 2 was answered yes.

First-instance determination of two preliminary issues in group litigation. No appeal history was stated in the judgment.