BGH Diesel Ruling: Damages for Negligence

What the BGH diesel ruling decided

In the BGH diesel ruling of 26 June 2023 (VIa ZR 335/21, decided together with VIa ZR 533/21 and VIa ZR 1031/22), the Federal Court of Justice held that buyers of diesel vehicles fitted with a prohibited defeat device can claim damages from the manufacturer not only for intentional immoral conduct, but also for negligence. The legal basis is § 823(2) of the German Civil Code (BGB) in conjunction with §§ 6(1) and 27(1) of the EC Vehicle Approval Ordinance (EG-FGV), which the court now treats as provisions protecting individual buyers.

Where the manufacturer acted negligently but not intentionally, the buyer cannot return the car for a refund, but is entitled to a "difference damage" (Differenzschaden) of at least 5% and at most 15% of the purchase price, as announced in the court's press release No. 100/2023.

The decision followed the CJEU's judgment of 21 March 2023 in QB v Mercedes-Benz Group (C-100/21), which held that EU type-approval law protects the interests of individual purchasers, so that a buyer whose reasonable expectation that the vehicle complies with Regulation (EC) No 715/2007 is disappointed can claim damages from the manufacturer that issued the certificate of conformity.

The BGH diesel ruling translated that guidance into German damages law. It has shaped thousands of pending cases and holds lessons for product-related mass claims beyond the automotive sector.

The three cases

In VIa ZR 335/21, the claimant had bought a used VW Passat Alltrack 2.0 TDI with an EA 288 engine, type-approved under Euro 6, in November 2017. Exhaust gas recirculation in the vehicle depended on temperature (a so-called "thermal window"), and the vehicle had a driving curve detection function. The claimant sought to return the car against reimbursement of the price.

The other cases concerned an Audi SQ5 with a heating strategy that the Federal Motor Transport Authority had already found to be an impermissible defeat device before the purchase, and a Mercedes-Benz C 220 d with temperature-controlled exhaust gas recirculation and a coolant temperature control. The lower courts had dismissed the claims, mainly because they found no intentional immoral conduct under § 826 BGB.

Holdings of the BGH diesel ruling

The BGH set aside the appeal judgments and remanded the cases for further findings. Its key holdings were as follows. First, a manufacturer's liability under §§ 826, 31 BGB for intentional immoral damage is not excluded by the binding effect of the EC type approval. Second, following the CJEU, §§ 6(1) and 27(1) EG-FGV, which require a valid certificate of conformity, protect the buyer's interest in not concluding a disadvantageous contract, so a breach can found a claim under § 823(2) BGB.

Third, the buyer always suffers damage if the vehicle contains an impermissible defeat device, because the availability of the vehicle is in question in view of possible operating restrictions, and it is presumed that the buyer would not have bought it at the agreed price.

Fourth, the buyer must plead and prove the existence of a defeat device, while the manufacturer must plead and prove that an established defeat device was exceptionally permitted under Article 5(2) of Regulation (EC) No 715/2007. Fifth, if an impermissible defeat device is established, the manufacturer must prove that it neither acted intentionally nor negligently failed to recognise the non-compliance when issuing the certificate of conformity; it may invoke an unavoidable mistake of law under the general principles.

Sixth, the difference damage must be an effective sanction and proportionate: courts must award between 5% and 15% of the purchase price, without expert evidence on whether damage exists, and determine the amount within that range in their discretion.

Remedies and the calculation of difference damage

The BGH maintained its earlier case law that "large" damages, meaning the return of the vehicle against a refund of the purchase price minus compensation for use, are only available for intentional immoral conduct under § 826 BGB.

For negligent breaches, the buyer keeps the car and receives compensation for the difference between the price paid and the value of the vehicle with the defect. To make that practical in mass proceedings, the court set a range of 5% to 15% of the purchase price and held that courts may estimate the amount within it under § 287 of the Code of Civil Procedure, taking into account the probability of operating restrictions and the extent of the breach.

The court added that the buyer must accept a deduction of advantages from the estimated amount, according to the principles of benefit adjustment (Vorteilsausgleichung) that the BGH had developed for small damages under §§ 826, 31 BGB. This makes the calculation in individual cases more complex, but the 5% to 15% range gives a clear framework that has allowed many cases to be resolved.

Lessons for product-related mass claims

The BGH diesel ruling is a case study in how mass claims develop in Germany. Several features are transferable to other sectors. First, EU product regulation that protects individual buyers can found claims under § 823(2) BGB, with presumptions that favour claimants. Second, standardised damages ranges make claims attractive for legal tech providers and litigation funders, who can bundle large numbers of similar claims. Third, the combination of individual claims, model declaratory proceedings and, since 2023, redress actions by qualified consumer associations under the Consumer Rights Enforcement Act (VDuG) gives claimants several procedural options.

The courts' handling of the diesel cases also shows the strain such claims put on the justice system: the BGH set up an auxiliary civil senate, the VIa Civil Senate, specifically to deal with them, and later introduced a lead-judgment procedure for mass proceedings. For companies, the lesson is that a regulatory problem affecting many products can lead to years of litigation, with costs that depend heavily on how quickly the legal framework is clarified. Early strategy decisions, such as whether to settle, offer updates or contest liability, have long-term consequences.

Exposure along the supply chain

The BGH diesel ruling concerns the liability of the vehicle manufacturer that issued the certificate of conformity. Suppliers of engines, control units and software are not directly liable to buyers on this basis, but they face recourse claims from manufacturers, and in some cases they have been involved in investigations by authorities. Supply contracts in the automotive sector typically allocate responsibility for compliance with regulatory requirements, cooperation in regulatory proceedings and indemnities for third-party claims. After the diesel cases, manufacturers have tightened these clauses, particularly for software functions that influence emissions or safety, and suppliers have sought caps and clearer specifications of who decides on calibration.

The same logic applies in other regulated industries. Where a component supplier's design choices determine whether a product complies with type-approval or conformity requirements, contracts should specify who is responsible for the regulatory interpretation, how changes are approved and how costs of recalls, updates and claims are shared. Our note on automotive supply chain disputes covers related questions.

Managing mass litigation after the BGH diesel ruling

For companies facing large numbers of similar claims, the BGH diesel ruling illustrates the importance of a coordinated defence. Typical measures include a central database of claims and arguments, consistent expert evidence on technical questions, early identification of test cases that can be taken to the BGH, and a settlement strategy for cases where liability is likely. Because the difference damage is standardised within a range, settlement values can be calculated more predictably than under the earlier approach of large damages, which required individual calculations of benefits of use.

Companies should also consider the reputational and regulatory dimension. Public statements, cooperation with authorities and offers to customers, such as software updates or goodwill payments, can influence both the number of claims and the courts' assessment of fault. Insurance coverage, including directors and officers insurance for claims against management, should be reviewed early, and notifications to insurers made in time.

Later developments

Since the June 2023 judgments, the BGH has continued to refine the framework in further decisions, for example on the exoneration of manufacturers and the calculation of damages in individual constellations. Lower courts apply the difference damage concept in large numbers of cases. Manufacturers have defended many claims by showing that particular emission strategies were permissible or that they did not act negligently, while claimants have succeeded where impermissible devices were established. The case law is therefore highly fact-specific, and outcomes depend on the engine type and the authority's findings.

Limitation and timing of claims

Timing matters in mass claims. Claims in tort are subject to the regular three-year limitation period, which starts at the end of the year in which the claimant became aware, or should have become aware without gross negligence, of the circumstances giving rise to the claim and the identity of the debtor. In the diesel cases, courts had to decide when buyers could be expected to know about defeat devices in their vehicles, which often depended on public reporting and recall orders for specific engine types.

How limitation applies to claims based on the negligence route recognised in 2023 has itself been argued in many cases. Companies defending mass claims should therefore examine limitation carefully for each group of claimants and document when information about the relevant issue became publicly available.

How TRW & Co helps

We advise manufacturers, suppliers and other companies on product-related mass claims, from regulatory compliance and risk assessment to defence strategy in individual and collective proceedings. We assess the effect of EU product regulation on civil liability, coordinate defence in large numbers of cases and advise on settlements. Our work connects with our collective actions and automotive and mobility practices; see also our notes on redress actions under the VDuG and the BGH scraping ruling. Please contact us to discuss your exposure. This briefing is general information and not legal advice.