Background: Subject matter of the main proceedings and questions referred to the ECJ

The background of the ECJ's judgements of 14 July 2022 in cases C-128/20, C-134/20 and C-145/20 are requests for preliminary rulings by the Austrian Supreme Court, the Regional Court Eisenstadt and the Regional Court Klagenfurt in civil proceedings.  The main proceedings concerned applications for annulment of sales contracts from buyers of certain vehicles equipped with Euro 5 diesel engines of the type EA 189.  The vehicles originally contained a software which operated the exhaust gas recirculation ("EGR") system in two modes.  Following an order from the German Federal Motor Transport Authority (Kraftfahrt-Bundesamt – "KBA") the vehicles received a software update which deactivated the "switch system" but regulated the EGR rate in such a way that a low emission mode is ensured only when the outside temperature is between 15 and 33 C and the driving altitude is less than 1.000 metres and that, outside the thermal window, the EGR rate decreases in a linear way down to zero, meaning that NOx emissions increase beyond the limit values laid down in Regulation (EC) No 715/2007.  KBA granted an approval for the software update and did not withdraw the type-approvals of the respective vehicles.  Against this background, the referring courts asked the ECJ several questions concerning the legality of the thermal window under Regulation (EC) No 715/2007 and the rights of buyers of vehicles equipped with inadmissible defeat devices under Directive 1999/44/EC.

Summary of the ECJ's Judgements in cases C-128/20, C-134/20 and C-145/20

First of all, and not surprisingly, the ECJ ruled that a device which ensures compliance with relevant emission limits only within the thermal window constitutes a "defeat device" within the meaning of Article 3(10) of Regulation (EC) No 715/2007.  In this respect, the ECJ particularly reiterated and further substantiated its view that the concept of "normal operation and use" within the meaning of Article 3(10) of Regulation (EC) No 715/2007 does not refer to the applicable type-approval test conditions but real driving conditions, such as are usually present in the territory of the EU.  The ECJ also pointed out that it is common ground that ambient temperatures below 15 C and driving on roads at an altitude above 1.000 metres are to be considered normal within the territory of the EU.  Thus, the ECJ considered the thermal window to reduce the effectiveness of the emission control system under conditions of normal operation and use.

Furthermore, the ECJ ruled that the use of the thermal window "cannot fall within the exception under Article 5(2)(a) of Regulation (EC) No 715/2007 solely because it contributes to the protection of parts such as the exhaust gas recirculation valve, the exhaust gas recirculation cooler and the diesel particulate filter […]".  Rather, a justification of the use of the thermal window under Article 5(2)(a) of Regulation (EC) No 715/2007 requires that "it is established that it strictly meets the need to avoid immediate risks of damage or accident to the engine, caused by a malfunction of one of those parts, of such a serious nature as to give rise to a specific hazard when a vehicle fitted with that device is driven."  In this respect, the ECJ reiterated that that the mere protection against clogging up and ageing of the engine is generally not sufficient to justify the use of a defeat device under Article 5(2)(a) of Regulation (EC) No 715/2007.  Moreover, the ECJ found that a defeat device could, in any case, not fall within the exception provided for in Article 5(2)(a) of Regulation No 715/2007 if it operated during most of the year under normal driving conditions.  Also, the ECJ ruled that "the fact that a defeat device [...] was installed after a vehicle was put into service, in the course of a repair […], is irrelevant for the purposes of assessing whether the use of that device is prohibited under Article 5(2) of that directive."

Regarding the potential rights of buyers under Directive 1999/44/EC, the ECJ ruled that a vehicle equipped with an inadmissible defeat device "does not show the quality which is normal in goods of the same type and which the consumer can reasonably expect […], although it is covered by a valid EC type-approval and may, consequently, be used on the road".  Also, such a lack of conformity "is not to be classified as 'minor', even if, assuming that the consumer was aware of the existence and operation of that device, that consumer would nevertheless still have purchased that vehicle."

Assessment and outlook

Most importantly, the ECJ did therefore not generally declare the use of all thermal windows inadmissible under all circumstances.  In particular, the ECJ did not say that the exception under Article 5(2)(a) of Regulation (EC) No 715/2007 is generally not applicable to thermal windows.  The ECJ did, however, set two strict requirements for the justification of the use of thermal windows under Article 5(2)(a) of Regulation (EC) No 715/2007.

• First, it seems that both requirements under Article 5(2)(a) of Regulation (EC) No 715/2007 must be fulfilled, i.e. the thermal window must be required for the protection of the engine against damage or accident and for the safe operation of the vehicle.

• Second, the thermal window may not operate during most of the year, even if it is required for engine protection and the safe operation of the vehicle.

That said, the ECJ has still not conclusively clarified all questions regarding the interpretation of Article 5(2)(a) of Regulation (EC) No 715/2007 in connection with thermal windows.  In particular, the ECJ has not clarified under what circumstances a thermal window may be considered to operate during "most of the year" and could therefore not fall within the exception under Article 5(2)(a) of Regulation (EC) No 715/2007.  Thus, it remains to be seen how EU authorities and courts will apply these requirements in practice.

Also, the finding of the ECJ that an inadmissible defeat device generally constitutes a lack of conformity of the respective vehicle which is not to be classified as minor under Directive 1999/44/EC generally means that buyers of such vehicles may generally have a right of rescission of the respective sales contracts.  However, the concrete rights of buyers will always depend on the exact circumstances of the case and the provisions of the national implementing laws of the Member States applicable to the sales contract in question.

In any case, other important requests for preliminary rulings are still pending before the ECJ.  In particular, it may have a considerable impact on emissions litigation whether the ECJ will follow the opinion of Advocate General Rantos of 2 June 2022 in case C-100/21.  In this opinion, Advocate General Rantos expressed the view that "Articles 18(1), 26(1) and 46 of Directive 2007/46/EC […], must be interpreted as protecting the interests of an individual purchaser of a motor vehicle, in particular the interest in not acquiring a vehicle which is equipped with an unlawful defeat device, within the meaning of Article 5(2) of Regulation (EC) No 715/2007".  Hence, "Directive 2007/46/EC […], must be interpreted as requiring Member States to provide that a purchaser of a vehicle has a right to compensation from the vehicle manufacturer where that vehicle is equipped with an unlawful defeat device, within the meaning of Article 5(2) of Regulation (EC) No 715/2007."

Our Hogan Lovells SOAR practice will closely monitor the reactions of EU authorities and courts to the judgements of the ECJ in cases C-128/20, C-134/20 and C-145/20 as well as developments in other cases such as case C-100/21.

Authored by Patrick Ayad, Melanie Schub, and Corbinian Schwaab.