Scheiße: Volkswagen’s American Reckoning
The VW scandal is bad. Really, really bad. For those who don’t already know, the Volkswagen auto group admitted in September after a series of independent tests to willfully developing and installing software to defeat diesel emissions standards tests. They currently face civil suits from the US Environmental Protection Agency, class-action law suits from VW car owners, and potential criminal suits from the US Department of Justice. They suffered a 35% drop in stock value, and now face upwards of $18 billion in fines. Volkswagen AG, which encompasses their global operations beyond just Volkswagen Group of America, and its executives face protracted, costly, and retributive legal action at the hands of the United States court system.
But how can an American court dictate punishment for an international company? If, as the CEO of VW Group of America claimed at a congressional hearing on Thursday, the software was developed and installed by the German branch of VW, how can those responsible face the American justice system?
Extraterritorial jurisdiction, or the legal projections of a state beyond its borders, allows for laws and legal rulings to apply to multi-national entities like VW. However, jurisdiction takes several forms, and US courts don’t necessarily have all forms of jurisdiction when it comes to seeking justice for VW’s actions. Prescriptive jurisdiction, the most basic form of jurisdiction, is the state’s ability to create and define laws. It answers the question of whether or not American laws should apply to the international Volkswagen group. Adjudicative jurisdiction is the courts’ ability to hear and make rulings on cases, and indicates whether or not VW can actually be tried in American courts. Finally, enforcement jurisdiction determines whether or not American law enforcement can physically apprehend and punish German VW executives.
In regards to prescriptive and adjudicative jurisdiction, Volkswagen is clearly in violation of American courts. By operating in the United States, Volkswagen and its subsidiaries are subject to the Clean Air Act (CAA), which they openly disregarded by installing their emission defeat devices. Accordingly, the CAA serves as the basis for the EPA’s civil suit against VW for their violations in the United States, and also provides justification for a criminal suit from the Department of Justice. These suits focus mostly on the operations of the company as a whole, meant to extract a monetary punishment from VW. However, there are other investigations to determine the legal liability of individual executives. On top of the criminal prosecutions against the company authorized by the CAA, the FBI and DOJ are beginning probes into criminal charges for individuals lying to the EPA and Congress.
The news only gets worse for Volkswagen’s leadership. The Yates Memo, written by Deputy Attorney General Sally Yates just a few weeks before VW’s scandal broke, underlined the importance of prosecuting corporate executives. It expanded the requirements of executives to be considered as cooperating with law enforcement and called for an immediate focus on individual responsibility in corporate suits. While criminal probes into VW are currently limited to executives in the American subsidiary, Volkswagen officials at all levels could be found criminally liable in the ongoing investigations. This looks increasingly likely considering American VW CEO Michael Horn’s shifted blame onto the German engineering team at his congressional hearing on Thursday. While it will be difficult to effectively pursue charges that high up the chain of command, it looks likely that American prosecutors will at least attempt to build a case against the German VW leadership.
America’s enforcement jurisdiction in pursuing that leadership, however, is significantly more limited than its adjudicative jurisdiction. American law enforcement do not have jurisdiction to apprehend a German citizen while overseas, as that would be a flagrant violation of German sovereignty. American law enforcement officers can conduct an investigation into the operations of VW globally, but that means little if they cannot apprehend German nationals. Though those German nationals could be criminally liable in the US, they would not have broken any laws by violating America’s CAA, which has much more stringent requirements for environmental protection and much less stringent requirements for individual criminal responsibility. Despite the Yates Memo’s insistence on pursuing corporate executives, the individuals truly responsible for this scandal may be beyond the reach of America’s court system.
Extraterritorial application of legal systems can get complicated, to say the least, but Volkswagen and its subsidiaries will face fairly effective prosecution eventually. Unlike the prosecution of BP executives after the Deepwater Horizon spill, more executives will at least be personally indicted for the blatant flaunting America’s legal system. While the leadership may inevitably be let off the hook, the massive fines and financial repercussions of their mistake will serve as a warning to other multinational corporations.