Bentham Europe has filed a second complaint in German courts seeking damages of up to EUR2bn on behalf of Volkswagen shareholders who have suffered losses resulting from the car giant's use of 'defeat device' software to cheat emissions tests.
The filing comes a year after Volkswagen's public disclosure that such devices were in use, which sent its share price down by 38% over the following two days.
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Over the course of the last six months, shareholders from across the world have registered to join Bentham's litigation. New claimants now include four of the top 10 global asset managers, sovereign wealth funds, hedge funds, and asset management arms of banks, drawn from 15 countries. Many UK pension funds are now participating in the action.
The Bentham complaint relates to the share price fall experienced by Volkswagen AG in the week commencing 21 September 2015, after it disclosed a long-running practice of installing defeat device software in its diesel vehicles, exposing it to substantial potential fines in the United States and elsewhere and to the costs of forced vehicle recalls. The Bentham case alleges that VW senior management both knew about the existence of the defeat device software and failed to inform shareholders of the issue in a manner consistent with its obligations to capital market investors.
Jeremy Marshall, chief investment officer of Bentham Europe, said: "Shareholders were misled by Volkswagen and there is significant anger across the investor base about the scale of the emissions scandal and the serious failure of corporate governance that it represents. Volkswagen will now face many of its largest shareholders in court. The breadth of shareholders in our action, with more than 80 investors accounting for approaching 20% of the free float now registered, demonstrates that Volkswagen must engage on this issue. We expect Volkswagen to apply similar standards to the treatment of its shareholders as those applied to its customers, compensating them for the substantial losses they have incurred as result of this wide-ranging scandal."
Kieran Quinn, chair of the Greater Manchester Pension Fund, one of the UK funds that has joined the Bentham action, said: "Playing our role in litigation is one way that we can fulfil our fiduciary duty to maximise the Fund's returns but we also hope that there will be lessons learned from the VW scandal to raise corporate governance standards more generally."
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By GlobalDataRelated proceedings are also under way in the US, where the California State Teachers' Pension Fund, an early joiner of the Bentham action, has obtained a wide-ranging disclosure order against Volkswagen's subsidiary, Volkswagen Group of America, forcing it to release internal documents relating to Volkswagen's development and deployment of emissions control defeat devices. It is expected that these documents will help answer the central questions raised in the German proceedings. Volkswagen has challenged that order and the issue will be determined in a US court over the next two months.
The German action will be heard in the Braunschweig District Court (Landgericht Braunschweig) in Lower Saxony and will be pursued through the German Capital Markets Model Case Act 2012, known as 'KapMuG'.
The next step in the German proceedings will be for the court to select a model claimant. Bentham expects that the court will make its decision before the end of the year.
