Dieselgate: Foundation for Consumer Protection suit not considered on its merits

Background

In the aftermath of the Volkswagen (VW) emissions scandal, the Foundation for Consumer Protection (SKS), a foundation under Swiss private law, has filed multiple lawsuits with the Zurich Commercial Court against VW and its general importer for Switzerland.

In a first suit, SKS sought a declaration from the Commercial Court that the conduct of VW and its general importer was unfair and unlawful under the Federal Act against Unfair Competition. However, due to lack of interest in a declaratory judgment, the Commercial Court decided not to admit the action. This decision was confirmed by the Federal Supreme Court in February 2019.(1)

In their decisions on this first suit, the Commercial Court and the Federal Supreme Court rejected in particular SKS’s argument that a declaratory judgment would facilitate further lawsuits by consumers, as Swiss law would not provide for so-called ‘model declaratory proceedings’ (Musterfeststellungsklage). The courts held that instead, the alleged damages (eg, decrease in value, costs for increased wear and tear, additional fuel costs and poor resalability) were to be asserted by way of an action for damages by the affected consumers.

SKS subsequently acquired claims from approximately 6,000 consumers and non-consumers and accumulated these claims in a single lawsuit. However, the Commercial Court decided not to consider the merits of this case either. The Federal Supreme Court has now confirmed the Commercial Court’s decision.(2)

Decision

The Federal Supreme Court based its decision mainly on formal grounds. More specifically, it confirmed the lower court’s opinion that SKS’s legal action was not covered by the foundation’s purpose.

The purpose of the foundation – which is determined by the founder in the foundation deed and can be adapted only within narrow boundaries – is decisive for the assessment of the foundation’s capacity to act and to take legal action. The Federal Supreme Court held that in the case of SKS, the main purpose of the foundation is limited to political and advisory activities that benefit all consumers. However, in the present case, SKS did, according to the courts, not represent its own interests (ie, as a directly affected party) or the interests of all consumers, but rather a multitude of individual interests. As only the claims enforced would be decided, even a decision in favour of the claim would have had no direct effect for consumers as a whole. Accordingly, SKS lacked the capacity to take legal action in this regard which resulted in the lack of a process requirement.

Comment

Albeit that SKS’s complaint remained unconsidered on its merits primarily for formal reasons, the aforementioned decisions once again highlight the perceived difficulties in collective redress in Switzerland. In particular, the courts have reiterated that concepts for the collective enforcement of legal claims known in other legal systems, such as class actions or model declaratory proceedings, are generally not provided for in the Swiss legal system. Moreover, in its recent decision the Federal Supreme Court highlighted that neither the provisions invoked by SKS under the Federal Act against Unfair Competition nor those of the Cartel Act or the Civil Procedure Code permit associations and other organisations of national or regional importance to bring a group action in their own name (Verbandsklage) to enforce claims for damages of individual consumers. While certain stakeholders consider the existing system of collective redress in Switzerland to be sufficient, it seems possible that the unsuccessful outcome of the SKS lawsuits could revive the debate on the strengthening of collective redress in the Swiss legal system, particularly in the context of the ongoing revision of the Civil Procedure Code. In the longer term, this could also lead to a facilitation of collective redress in civil antitrust law, which is currently extremely challenging.

Endnotes

(1) DFT 4A_483/2018 of 8 February 2019.

(2) DTF 4A_43/2020 of 16 July 2020.

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