Schwarzbuch VW: Duty of risk management

How FIFA, Microsoft, WPs, BP and the Mafia are sued under the same law and pilloried through American glasses, Dr. Johannes Fiala and Dipl.-Math. Peter A. Schramm explain in a multi-part article.


The first part was about the “Racketeer Influenced and Corrupt Organizations Act”, a US federal law that makes this kind of jurisdiction possible. In the second part the Directors and Officers insurance is examined. The third part focused on the issue of premeditation – despite confession. In the fourth, risk management is a top priority:

Since May 1, 1998, the “Law on Control and Transparency in the Corporate Sector” (KonTraG) has already required the managing directors of at least medium-sized GmbHs to manage risk. The “Schwarzbuch VW” plant, for example, provided neuralgic potential for misguided development, provided that one really wanted to avoid personal (internal) liability under German law even as a board member.

The declaration of not having known anything as a managing director therefore does not lead to the objective of the release from liability – a daily newspaper commented on the conviction (LG Munich I, judgement of 10.12.2013, file no. 5HK O 1387/10) of a financial director to, among other things, 15 million euros in damages with the title “Organised irresponsibility”: However, it would be more accurate to speak of unorganised responsibility which ended with a suicide of the executive board.

The fact that a supplier of software for exhaust gas regulation is said to have warned of illegal use as early as 2007 (“for test purposes only”) – and that only this year the revision is said to have brought to the attention of the supervisory board a warning from its own company, known since 2011, of “illegal practices in connection with exhaust gas values”. These would be indications of organisational failures in communication that could endanger the existence of the company.

There are plenty of busybodies and worriers in large companies. They are characterized by the fact that you are not sure of your own case, do not pursue it further, and leave it at a one-time report. It is an absolutely useful test to determine the seriousness of their concerns by showing them that they are not being taken seriously. Whoever makes a serious effort will not be deterred by this and will not let the matter rest on itself. In any case, it would be nonsensical to pursue every such report with intensity.


Marketing instead of legal advice?

Certainly, it is more trustworthy for VW if someone is deliberately responsible for it, which has now been eliminated, than if it came out that VW exports everywhere, although VW was perhaps only unaware of the legal risks involved. Some companies had to impose a travel ban on their employees afterwards because arrest or extradition abroad would have been expected.

Should one tell the shareholders that one has gotten into this completely unsuspectingly and that this can happen everywhere again and again – maybe even worse? It is better to present the culprit – let him resign, and do the same with other “responsible persons”. What remains is a cleaned up company that can be trusted.


Rectification of the diesel conspiracy?

A Canadian professor of chemistry (without VW shares) commented on the industry’s announcement to “improve” diesel pollutants with the words “you can forget” – and justified this with the fact that it would mean years of development work and the advantages of the diesel engine would then fall by the wayside. The energy expert Franz Alt refers to the WHO and in Europe alone hundreds of thousands of deaths from particulate matter, including those with previous brain shrinkage and heart disease in humans.


Permitted exhaust gas manipulation in the EU – Not permitted in the USA?

A board member of the automotive industry recently stated: “We basically adhere to the legal requirements and have not carried out any manipulations on our vehicles” – and further: “A Defeat Device, i.e. a function that unacceptably limits the effectiveness of the exhaust aftertreatment, is not used for [Marke].

No Defeat Defice is therefore an aggregate and software which only limits the exhaust gas cleaning as permitted.

According to the statement of the Federal Government, however, the demarcation can hardly be brought under control. It is ultimately a legal question as to when such a technique is permitted. Presumably, as a German car manufacturer in the USA, one was subject to a legal error – but perhaps it is also a mistake to believe that one has done something forbidden. The claim to have only permissibly restricted exhaust emission control is not just a technical statement, but a legal opinion or a declaration of intent to comply with the laws as they are understood.


Destruction of existence due to legal errors of the management?

The existence of entire industries is based on the belief that any shaky legal assessment on which one depends would hold. In the past, the Federal Court of Justice (BGH) had then examined an “existence-destroying intervention” – today the appropriate term is then “intentional immoral damage”. The Federal Court of Justice (BGH) has repeatedly ruled, to the detriment of the management, and also in criminal proceedings, that the highest requirements, which can hardly be fulfilled, must be placed on legally erroneous expert opinions by lawyers if they are to serve as an excuse in the end.

And in addition, the management must also be aware of all financial risks at all times, especially those that cannot be read from the balance sheet (BGH, judgement by default of 1906.2012, ref. II ZR 243/11). This of course includes uninsured and uninsurable risks, such as intent and the RICO Act. Only to the extent that one can bear the risks oneself due to one’s own capital resources, insurance coverage is therefore not required.


by Dr. Johannes Fiala and Dipl.-Math. Peter A. Schramm


by courtesy of (published on 30.06.2017)





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Dr. Johannes Fiala Dr. Johannes Fiala

Dr. Johannes Fiala has been working for more than 25 years as a lawyer and attorney with his own law firm in Munich. He is intensively involved in real estate, financial law, tax and insurance law. The numerous stages of his professional career enable him to provide his clients with comprehensive advice and to act as a lawyer in the event of disputes.
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