GER: BGH on Claim Assignments in Loan Agreements

May 19, 2023 Benn-Ibler Rechtsanwälte

According to the German Federal Supreme Court (Bundesgerichtshof, hereinafter BGH), an assignment-by-way-of-security of all claims against a vehicle manufacturer which was agreed to in a General Terms and Conditions form goes against buyers’ right to sue. Such assignments are too broad and must therefore be regarded as invalid. Consequently, buyers of diesel vehicles can take action against vehicle manufacturers for the installation of inadmissible defeat devices even if such vehicles were financed through loans that have not yet been fully repaid.

The plaintiff had sued the defendant vehicle manufacturer for damages because the manufacturer had installed illegal defeat devices on their vehicles. The purchase was largely financed by a loan which had not yet been fully repaid. This loan agreement was based on the lender’s GTAs where, under the heading of ‘Collaterals’, the agreement said: ‘The borrower assigns to the lender as collateral all current and future claims of the lender arising from this business relationship until repayment of the loan as well as all conditional and limited claims irrespective of the legal grounds on which they are based.’

Action for tortious conduct because the manufacturer had placed vehicles with defeat devices on the market was unsuccessful in the first two instances. The court had ruled that as a result of having assiged all claims against the vehicle manufacturer, the plaintiff was not entitled to file a lawsuit. However, the BGH has now overturned the judgement of the lower court and referred the case back for a new decision.

Contrary to the view of the lower court, the BGH considers assignment clauses contained in financing agreement forms to be invalid because they are too broad. Therefore, plaintiff do have the right to sue.

According to the BGH, an assignment clause used in financing-agreement forms must be understood in such a way that, with the exception of any warranty claims from the purchase contract, all claims by plaintiffs in connection with the purchase are covered. This would include claims which a borrower (as a consumer) accrues in connection with unravelling the financing agreement after revocation. The assignment clause without the possibility of evaluation therefore does not stand up to a review of its content because it deviates from mandatory provisions in favour of plaintiffs as consumers. The fact that the plaintiff had not yet revoked the loan agreement but was taking action against the vehicle manufacturer in tort was irrelevant.

Press Release No. 71/2023 BGH, VIa ZR 1517/22 (24.04.2023)