Will the Supreme Court Set a Precedent in the Volkswagen Emissions Scandal?

If the fine payable by Volkswagen is reduced – a fine termed to be insignificant by the NGT in the first place – it won't go far in exemplifying and deterring other offenders.

In 2015, the US Environmental Protection Agency discovered that 482,000 cars on the country roads were emitting up to 40x more toxic fumes than permitted. It was later found that Volkswagen had been using a “defeat device” to deceive emission tests, affecting 11 million of its cars around the world. The hidden damage due to these vehicles was about the same as all of the nitrogen oxide emissions from the UK’s power stations, vehicles, industry and agriculture.

The “defeat device” was a programme in the engine’s software that allowed the car to determine if it was being driven under test conditions, and only then pull out all the anti-pollution stops. For example, its “clean diesel” engines cut emissions by adjusting air-fuel ratios and exhaust flows, and at times by injecting a urea-based solution to render the emissions less harmful. In normal running conditions, however, these controls wouldn’t kick in.

The company has since recalled 482,000 cars in the US and halted sales of the affected Jetta, Beetle, Golf and Passat diesel models. American authorities have also exacted fines and penalties totalling $25 billion. In Canada, Volkswagen agreed to a $290-million settlement in January for the 3.0-litre cars it had sold. In South Korea as well, apart from paying record-high fines, the country charged eight local Volkswagen and Audi officials in criminal cases, with one now serving an 18-month prison term. However, in Europe, where the company has sold 8 million cars, Volkswagen is yet to pay a single euro in government penalties.

Also read: Asian Media Has Misled the Public on Air Pollution

Volkswagen is one of India’s top-ten car makers. After government authorities pulled it up for failing emission tests in 2015, the company announced it would recall 323,700 units across three of its brands, Audi, Skoda and Volkswagen, sold between 2008 and November 2015. On November 16, 2018, Justice Adarsh Goel, the chairperson of the National Green Tribunal (NGT), slapped Volkswagen with a 100-crore-rupee fine to be deposited with the Central Pollution Control Board.

The NGT also constituted a committee to recommend additional penalties. Its members were: Rashmi Urdhwareshe, director, Automotive Research Association of India; Nitin Labhsetwar, chief scientist at the National Environmental Engineering Research Institute; Ramakant Singh, director of the Ministry of Heavy Industries; and Prashant Gargava, member-secretary of the Central Pollution Control Board. In their report, they recommended “conservative damages” of Rs 171.34 crore.

Subsequently, multiple individuals filed a case against Volkswagen before the principal bench of the tribunal. On March 7, 2019, this bench imposed Volkwagen with a fine of Rs 500 crore, in keeping with the quantum of damage to the environment as well as Volkswagen’s valuation. The order recorded that the tests conducted found the nitrogen-oxide emissions to be 1.1- to 4.06-times higher than the BS IV standard and not 1.1- to 2.6-times higher as Volkswagen had submitted. The bench also observed the following:

… the Precautionary Principle and ‘Sustainable Development’ principle are part of Article 21 of the Constitution and Section 20 of the National Green Tribunal Act, 2010. ‘Polluter Pays’ principle does not mean polluter can pollute and pay for it. It would include environmental cost as well as direct cost to people. Environmental cost is not restricted to that which is immediately tangible but full cost for restoration of environmental degradation. If cheating devices leading to pollution are ignored only on account of absence of a procedural protocol, it will be against the said accepted principles of environmental jurisprudence.

The bench’s order cited a landmark Supreme Court judgment in the Vellore Citizens Welfare Forum case of 1996. Here, the apex court had observed that “the polluter pays principle extends absolute liability not only to compensate the victims of pollution but also the cost of restoring environmental degradation”. So, the principal bench held:

… the measure of damages has to be fixed taking into account not only the actual damage but also the magnitude and the capacity of the enterprise so that compensation has deterrent effect. Circumstances are also to be considered. This test has not been applied in the above report. As noted in the earlier order, the worth of the company is stated to be $75 billion. Thus, apart from actual damage by a conservative estimate, deterrent element has to be considered, specially in view of international unethical practice.

Finally, the bench also noted that the amount was still insignificant relative to Volkswagen’s scale of operations.

Nonetheless, with the NGT having stepped up, India joined a select group of countries around the world to have penalised Volkswagen for its “dieselgate” scandal.

However, the car maker challenged the NGT’s order before the Supreme Court. On May 6, 2019, the court stayed the NGT’s order and granted interim relief to Volkswagen, and directed that no coercive action should be taken against the company.

Also read: What Can You, the Individual, Do to Fight Air Pollution?

Considering the matter is now in the Supreme Court, there is much at stake for environmental jurisprudence in India.

Volkswagen claims the cars complied with Indian emission standards and that it couldn’t be expected to adhere to global norms in India. The NGT, on the other hand, has observed that polluting creating devices can’t be ignored just because procedural protocols don’t exist.

Over the past few decades, environmental jurisprudence in India has seen attempts to balance environmental conservation with economic development (Doon Valley quarrying case, 1989, where the Supreme Court directed authorities to stop mining in the Mussoorie hills), and a steady move towards ecocentrism, i.e. making the damage to the environment the central issue (Ganga river pollution, MC Mehta v. Union of India, 1985). Of course, it would be unfair to not mention the T.N. Godavarman case (1995), where the Supreme Court donned its policy-activist cap to define the word ‘forest’ following a two-decade-long struggle.

In a more recent judgment, on the Mumbai Coastal Road project, the Bombay high court held that the municipal corporation of Greater Mumbai could proceed with work only after obtaining an environmental clearance under the EIA Notification, and after the Maharashtra Coastal Zone Management Authority had obtained a permission under the Wildlife (Protection) Act, 1972. The court also observed:

We are dealing [with] an environmental issue and precautionary principle guides that all precautions envisaged by the Regulations to appraise proposals for projects or activities likely to impact environment have to be strictly followed.

With the German car-manufacturing company aiming to double its market share in India to 5%, and having announced an investment of more than a billion euros in India last year, it will be interesting to see whether the company will get away with its greed. Could it become more complacent? The decision-makers at Volkswagen, the brains behind the cheating devices, were clearly confident at the time of their scheme that they could dupe people on a global scale and get away unscathed.

If the Supreme Court reduces the fine amount – even though it is already at a number the NGT has deemed insignificant – how far will it go towards being a deterrent? Will Volkswagen still feel the pinch? The ideal decision should impact Volkswagen to the extent that it keeps itself or anyone else from cheating on emission tests. Indeed, we need decisions that do more than pay lip service. Whether the Supreme Court will stick to its conservative approach, remain passive or go green in the face of this corporate threat remains to be seen.

Veera Mahuli graduated from NALSAR University of Law, Hyderabad. She is a practising lawyer and is passionate about environmental issues.