Mercedes 2015 Annual Report Download - page 240

E | CONSOLIDATED FINANCIAL STATEMENTS | NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 247
29. Legal proceedings
Various legal proceedings, claims and governmental investiga-
tions (legal proceedings) are pending against Daimler AG
and its subsidiaries on a wide range of topics, including vehicle
safety, emissions, fuel economy, financial services, dealer,
supplier and other contractual relationships, intellectual property
rights, product warranties, environmental matters, antitrust
matters and shareholder matters. Legal proceedings relating
to products deal with claims on account of alleged vehicle
defects. Some of these claims are asserted by way of class
action suits. If the outcome of such legal proceedings is
detrimental to Daimler, the Group may be required to pay
substantial compensatory and punitive damages or to undertake
service actions, recall campaigns or other costly actions.
In mid-January 2011, the European Commission carried out
anti-trust investigations of European commercial vehicle
manufacturers, including Daimler AG. If antitrust infringements
are discovered, the European Commission can impose con-
siderable fines depending on the gravity of the infringement.
In November 2014, the European Commission served Daimler
with its statement of objections which, from the European
Commission’s perspective, further explains and legally evaluates
the relevant facts. Resulting from knowledge gained from
access to essential documents of the European Commission’s
file, Daimler AG, in December 2014, decided to increase
provisions by €600 million. Daimler is taking the Commission’s
investigation very seriously. The Company is cooperating
with the authorities but will at the same time – while stating the
Company’s legal view – safeguard its rights in the further
proceedings and is also reviewing all of its procedural options.
In accordance with IAS 37.92, the Group does not provide
further information on this antitrust investigation and the asso-
ciated risk for the Group, especially with regard to the
measures taken in this context, in order not to impair the
outcome of the proceedings.
The Federal Republic of Germany initiated arbitration proceed-
ings against Daimler Financial Services AG, Deutsche Telekom
AG and Toll Collect GbR and submitted its statement of claims
in August 2005. It seeks damages, contractual penalties
and the transfer of intellectual property rights to Toll Collect
GmbH. In particular, the Federal Republic of Germany
is claiming
– lost revenue of €3.33 billion for the period September 1, 2003
through December 31, 2004 plus interest at 5% per annum
above the respective base rate since submission of claims
(an amount of €2 billion as at the date of September 29, 2014),
– and contractual penalties of approximately €1.65 billion
through July 31, 2005 plus interest at 5% per annum above
the respective base rate since submission of claims (an amount
of €225 million as at the date of September 29, 2014),
– plus refinancing costs of €196 million.
Since, among other things, some of the contractual penalties
are dependent on time and further claims for contractual
penalties have been asserted by the Federal Republic of Germany,
the amount claimed as contractual penalties may increase.
The defendants submitted their response to the statement of
claims on June 30, 2006. The Federal Republic of Germany
delivered its reply to the arbitrators on February 15, 2007, and
the defendants delivered their rebuttal on October 1, 2007
(see also Note 30). The arbitrators held the first hearing
on June 16 and 17, 2008. Additional briefs from the claimant
and the defendants have been filed since then. A hearing
of witnesses and experts took place between December 6
and 14, 2010. The parties submitted further written statements
on July 15 and November 15, 2011. After the Tribunal’s President
resigned for personal reasons as of March 30, 2012, the new
President was determined by the Administrative Court in Berlin
as of October 29, 2012. The arbitrators held further hearings
in May and October 2014 as well as in June 2015. In accordance
with IAS 37.92, no further information is disclosed regarding
the arbitration proceedings and the related risks to the Company,
in particular regarding the measures taken by the Company,
in order to prevent negative effects on the proceedings.
Daimler believes the claims of the Federal Republic of Germany
are without merit and will continue to defend itself vigorously.
The Group recognizes provisions in connection with pending
or threatened proceedings to the extent a loss is probable and
can be reasonably estimated. Such provisions are reflected
in the Group’s consolidated financial statements and are based
on estimates. Risks resulting from legal proceedings, however,
sometimes cannot be assessed reliably or only to a limited extent.
Consequently, provisions accrued for some legal proceedings
may turn out to be insufficient once such proceedings have
ended. Daimler may also become liable for payments in
legal proceedings no provisions were established for. Although
the final resolution of any such proceedings could materially
affect Daimler’s operating results and cash flows for a particular
reporting period, Daimler believes that it should not exert
a sustained influence on the Group’s financial position.