Recent Legal Developments in the Mobility Sector

McDermott Will & Emery

The mobility and automotive industry continues to undergo dynamic change. As the market evolves, so does the legal framework for the industry. Dr. Sebastian Keding, Dr. Heiko Kermer, Max Küttner and David G. Schäfer provide an overview of some of the recent legal developments in the market.

I. Extension of Motor Vehicle Block Exemption Regulation

The European Commission extended the duration of the Motor Vehicle Block Exemption Regulation („MVBER“) for another five years alongside updating the supplementary guidelines. The update provides helpful guidance for companies assessing their business practices. In particular, the updated supplementary guidance further details the assessment of handling data generated by vehicles. Subject to various conditions, the MVBER exempts vertical agreements in the motor vehicle sector from the prohibition of agreements that restrict competition. Importantly, the exemption under the MVBER only applies when the agreement contains no “hardcore” restrictions.

Click here for further details.

Relevant for: Legal counsel in general.

II. German Federal Court of Justice ruling on zero floor

The German Federal Court of Justice (Bundesgerichtshof, „BGH“) ruled on 9 May 2023 that if the lender and borrower agree in a loan agreement on a variable interest rate consisting of a reference rate plus a margin, the sum of these two components cannot become negative even if the parties have not explicitly agreed on a zero floor for such a case. Otherwise, the lender would have to pay „negative interest“ to the borrower. According to the BGH, such an interpretation would i.a. deviate from the legal principle that interest payments represent the borrower’s remuneration for the temporary transfer of the loan amount.

Click here for further details (available only in German).

Relevant for: Captives, finance providers.

III. European Court of Justice ruling on VAT treatment of sale of cars sold for parts

On 17 May 2023, the European Court of Justice (“ECJ”) ruled on the application of the profit margin scheme to the taxation of end-of-life motor vehicles which are intended to be sold for parts (Articles 311(1), 313(1), 314, 315 of the VAT Directive).

With this ruling, the ECJ continues to develop its case law on the conditions under which the so-called profit margin scheme (Article 311 et seq. of Council Directive No 2006/112/EC of 28 November 2006 on the Common System of Value Added Tax) can be applied to trade in permanently decommissioned motor vehicles (car wrecks) or individual parts recovered therefrom. According to its previous case law, the ECJ considered the application of the margin scheme (subject to the further conditions to be met for this – cf. Art. 311 et seq. of Council Directive No 2006/112/EC of 28 November 2006) to be possible at least if individual used parts were removed from such permanently decommissioned motor vehicles by the reseller and these used parts were resold (cf. ECJ judgment of 18 January 2017, C-471/15, Sjelle Autogenbrug). In its most recent judgment of May 2023, the ECJ has now extended the scope of application of the margin scheme in principle to such cases in which the permanently immobilized motor vehicles (car wrecks) were sold as such for ‘cannibalization’ – i.e. as a whole and without prior removal of still usable used parts. The ECJ states that taxation according to the margin scheme does not necessarily require that there is an identity between the purchased and the sold item. However, a prerequisite in these latter cases is that the permanently immobilized motor vehicles still contain parts that have retained the functions they had when new so that they can be used again in their current condition or after repair, and that it is also established that these vehicles have remained in their economic cycle due to such reuse of the parts. To be distinguished from this – and thus not amenable to the margin scheme – remain, on the other hand, cases in which the permanently immobilized motor vehicles are in fact sold in order to be simply scrapped or transformed into another object (cf. ECJ judgment of 11.7.2018, C-154/17, E LATS).

Click here for the ruling.

Relevant for: Dealers, vehicle platforms.

IV. Court finds T&C obligation requiring lessees to check rental vehicle condition to be invalid

A decision by the Regional Court (Landgericht) of Frankfurt am Main highlights that consumer organizations can successfully sue mobility providers if they use invalid provisions in their general terms and conditions with end customers. The defendant, a mobility provider, required in its general terms and conditions that the lessee i.a. check the tire pressure and the operating fluids before starting the journey. The court considered this to be an unjustified deviation from the German legal princple that it is the lessor’s duty to provide the lessee with the rental object in a condition suitable for its contractual use. Another obligation imposed on the lessees, this time to use the vehicle in accordance with the manuals, the vehicle documents, and the manufacturer’s specifications was also found to be invalid by the court.The court ruling can still be appealed.

Click here for the text of the court ruling (available only in German).

Relevant for: Subscription and mobility provider.

V. Unilateral determination of dealer compensation by the manufacturer found legally valid in the court ruling

The Higher Regional Court (Oberlandesgericht) of Frankfurt am Main ruled that a car manufacturer using a quantitatively selective distribution system may under certain conditions unilaterally determine and announce dealer remuneration (consisting of basic margins and bonus payments). The court ruled that although car dealers are in a dependent relationship with car manufacturers and the manufacturer‘s unilateral determination of dealer remuneration is a hindrance to the dealers, it is not unfair in the context of a balancing of interests between the parties.

Click here for the text of the court ruling (available only in German):

Relevant for: Dealers, OEMs.

VI. Extension of liability insurance requirement for certain vehicles

The German Federal Ministry of Justice has published a first draft of a law to implement EU Directive 2021/2118 on motor vehicle third-party liability insurance. The current draft would, among other things, require self-propelled machines such as excavators, harvesters, and sweepers with a high speed between 6 and 20 km/h to be insured when used on public roads. They were previously exempted.

Click here for further details (available only in German).

Relevant for: Insurers, full-service equipment providers.

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DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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