The European Commission is taking action against seven EU member states for their failure to catch—or punish—car manufacturers cheating in emissions tests.

On 8 December the EU’s executive body sent letters of formal notice to the Czech Republic, Greece and Lithuania for failing to establish penalties systems to deter car manufacturers from violating emissions legislation.

Meanwhile, Germany, Luxembourg, Spain, and the United Kingdom have been rapped for not applying their national provisions on penalties despite Volkswagen’s admission in September 2015 that it used defeat device software on 11 million cars to cheat on checks for harmful nitrogen oxide (NOx) emissions.

Germany and the United Kingdom are also being penalised for refusing to disclose to the Commission all the technical information relating to NOx emissions in their investigations, which is against EU law.

Within the European Union, national approval authorities are responsible for checking that a car model meets all EU standards before it can be sold in the Single Market. Furthermore, under Article 46 of Directive 2007/46 and, more specifically, Article 13 of Regulation (EC) 715/2007, EU countries must have “effective, proportionate, and dissuasive” penalties systems in place to stop car manufacturers from breaking the law. Where such a breach of law takes place—for example, by using defeat devices to reduce the effectiveness of emission control systems—these penalties must be applied.

Unfortunately, it turns out that the national regulators in charge of vehicle testing left it up to car manufacturers to be honest rather than take action or carry out effective oversight themselves. Consequently, the Commission says that it is following national authorities’ policing and enforcement of EU rules in the automobile sector “very closely” and has also said that more direct EU oversight may be a future possibility.

“For the future, the Commission has tabled proposals to introduce greater European oversight and to make the type approval system more robust. We expect the European Parliament and Council to reach an agreement swiftly.”

Elz?bieta Bien´kowska, EU Commissioner, Internal Market, Industry, Entrepreneurship, and SMEs

It has already proposed a regulation on the approval and market surveillance of motor vehicles that would ensure greater quality and independence of vehicle testing, more surveillance of cars already in circulation, and greater European oversight, including the possibility for the Commission to directly impose fines on car manufacturers or technical services which fail to comply with the rules.

“Abiding by the law is first and foremost the duty of car manufacturers,” said Elz?bieta Bien´kowska, EU Commissioner for the Internal Market, Industry, Entrepreneurship, and SMEs. “But national authorities across the EU must ensure that car manufacturers actually comply ... For the future, the Commission has tabled proposals to introduce greater European oversight and to make the type approval system more robust. We expect the European Parliament and Council to reach an agreement swiftly,” she added.

Following VW’s admission last year, the Commission requested member states to conduct investigations into whether defeat devices are present in vehicles in their countries. So far, the Commission has only received final reports from the United Kingdom and Germany. France and Italy have submitted preliminary reports. The Commission is still waiting for the other 24 EU countries to submit reports, and says it is “in contact” with 14 of them.

The scale of inaction could be higher than previously thought. One of the key problems is that currently the national vehicle approval authorities are unsure about the wording and meaning of some of the relevant EU regulations and what levels of emissions are “acceptable” or “prohibited.”

The road to penalising EU member states

There is a long way to go before formal sanctions against EU members takes place: in most circumstances countries take action and achieve a settlement before the Commission has to step in again.
A letter of formal notice is a first step in an infringement procedure and constitutes an official request for information—nothing more. Member States then have two months to respond to the Commission’s concerns. If the Commission concludes that the country is failing to fulfil its obligations under EU law, it may send a “reasoned opinion”—effectively, a formal request for it to comply, again with a two-month notice period.
If the country still does not comply, the Commission may decide to refer the matter to the Court of Justice (though examples of this are rare) and ask it to impose penalties. If the Court finds that a country has breached EU law, it must take action to comply.
EU member states can face financial penalties if they are referred to the Court for a second time for failing to comply with its first judgment. Penalties can take the form of a lump sum and/or a daily payment, which can vary massively in size depending on the country’s ability to pay (so larger EU states are more likely to be hit harder).
According to the most recent annual report from the Commission on Monitoring the application of European Union law released in July, in 2015 the Commission closed 474 infringements after sending letters of formal notice; 183 cases after sending reasoned opinions; and 12 cases after deciding to refer the case to the Court (but before submitting the application). Most cases involve infringements relating to transport, environment and tax policies.
Furthermore, the Commission has a good record of winning its legal battles. In 2015 the Court ruled in its favour for 18 out of the 25 judgments given. Also, the Court imposed three penalty payments—the toughest sanction available. Italy received two (one constituted a lump sum payment of €20m, plus a penalty of €120,000 for each day of non-compliance; the other was a €30m lump sum payment and a €12m payment for each half-year of non-compliance) and Greece received the other (a €10m lump sum payment, plus a penalty of € 3.64m for each half-year of non-compliance).
—Neil Hodge

There is also some confusion about whether evidence about the level of emissions during “cold” and “hot” starts on the vehicles is conclusive and how long the engines should run to give a definitive picture of emissions levels.

Furthermore, different national approval authorities seem to determine and give weight to evidence in different ways. While Germany’s national vehicle approval body, the KBA, found that there was conclusive evidence that the exhaust gas recirculation of five “light-duty” Fiat models had been manipulated by using illegal defeat devices, Italy did not consider this proof.

More worryingly, while defeat devices were first banned within the EU in 1998, and again in 2007, their use is exempted when it is necessary to use them to protect the engine from severe damage and safety-related issues.

VW has repeatedly said that its software wasn’t a defeat device as defined by European law. And this is the crux of the problem. Indeed, the KBA has found that nearly all car manufacturers it examined used a loophole in regulations that allowed them to greatly reduce emissions controls if the outside temperature was too cold in order to protect the engine. It also found that this so-called “thermal window” was so broadly defined that most manufacturers were able to legally produce higher noxious tailpipe emissions than generally allowed.

Hence, car manufacturers have continued to use defeat devices. And once installed, the temptation to use them illegally has proved too good an opportunity to miss in order to shift units.

Another problem is that it also appears that some EU countries’ vehicle approval bodies took it on trust that car manufacturers would not flout the rules, leading to speculation that oversight has been lax.

On 20 October 2016, Alexander Dobrindt, Germany’s Federal Minister of Transport and Infrastructure, told a European Parliament committee hearing on car emission levels that “there was, until the end of September 2015, no reason to believe that a manufacturer would use an illegal defeat device in violation of the regulation.”

He added: “Moreover, there was also no indication that carmakers would make unlawful use of defeat device derogations.”

It would appear that the Commission is unlikely to tolerate such admissions in future and that it will be looking at the possibility of more thorough checks and potentially more proactive investigations. Furthermore, the emissions scandal is likely to rumble on for some time: earlier this month a report by the Commission’s Joint Research Center cites elevated emissions on models from Ford Motor Co., Citroe¨n, and Audi, suggesting that some cars may still be cheating emissions tests, as well as acknowledging that the rules around testing are flawed.