320 BMW Group Report 2024 To Our Stakeholders Combined Management Report Group Financial Statements Responsibility Statement and Auditor’s Report Remuneration Report Other Information Notes to the Group Financial Statements Further disclosures pursuant to IAS 37.86 cannot be provided at present. In several recent judgements, the European Court of Justice has ruled on emission control systems in diesel vehicles and has sig- nificantly tightened requirements pertaining to the justification of these systems. As a result of these judgements by the European Court of Justice, the interpretation of regulatory requirements for emission control systems is evolving. This is reflected, amongst other things, by the fact that established administrative practices of type approval authorities are being questioned from numerous sides. This development leads to a reassessment of civil pro- ceedings pending in Germany due to the emissions performance of BMW and MINI diesel vehicles. According to the previous es- tablished case law of German national courts, damage claims could only be asserted on the basis of intentional damage in- flicted in a manner offending common decency. In its judgements from 2023 linked to proceedings against other manufacturers and taking into account the case law of the European Court of Justice, the German Federal Court of Justice has ruled that a manufacturer can also be held liable for negligent breach of EU homologation standards and on the basis of a far-reaching re- versal of the burden of proof to the detriment of the manufac- turer. An increase in the effort and complexity of the defence in individual cases, an increasing number of new court proceedings, increased legal risks and increased financial expenditure are still to be expected. Further disclosures pursuant to IAS 37.86 can- not be provided at present. In addition, the Kraftfahrt-Bundesamt (KBA) determined in Feb- ruary 2024 that two functionalities of the emission control sys- tem of the BMW vehicle model X3 with 2.0 litre diesel engine (EU5), built between September 2010 and March 2014 do not comply with legal requirements. The KBA views these function- alities as prohibited defeat devices. The BMW Group has filed a timely objection against this decision. Corrective measures are currently being carried out after coordination with the responsible type approval authorities. Furthermore, the BMW Group is conducting an internal investi- gation, supported by external legal advisers and technical ex- perts, considering all relevant legal and factual aspects, to deter- mine whether and to what extent functionalities of the emission control systems of this and other past diesel vehicle models com- ply with legal requirements and is in dialogue with responsible authorities in this regard. In this context, the Munich public pros- ecutor’s office has opened an investigation against unknown (“Ermittlungsverfahren gegen Unbekannt”) in July 2024 and conducted searches. Also, against the background of the devel- opment in case law referred to above, it is possible that these and further authorities, including type approval and law enforce- ment authorities, and courts find fault with functionalities of the emission control systems or deem them as non-compliant with legal requirements. The investigation is complex and will still take some time to complete. At this stage, it is not possible to make any disclosures pursuant to IAS 37.86 with regard to the results of the aforesaid investigation and the internal investigation and possible measures to be taken as well as possible effects, includ- ing administrative and court proceedings, and any financial risks that may be related thereto. Furthermore, several BMW Group entities have been facing a number of diesel emissions-related court claims in England and Wales since November 2021 as well as in Scotland since March 2023. In November 2023, the High Court approved a group litigation regarding the proceeding in England and Wales. In addition to the BMW Group, several other OEMs are facing similar proceedings in the same court. In March 2024, the court selected the proceedings against five OEMs as lead proceedings; BMW Group is not among them. In Scotland, the court also ap- proved the combination of relevant claims in group proceedings. In the course of 2024, the sued BMW Group entities filed their defences in the two proceedings. Given that proceedings are still at an early stage, the probability, amount or timing of any liability cannot be determined at present. Further disclosures pursuant to IAS 37.86 cannot be provided at present. In the United Kingdom, motor finance customers file complaints and civil lawsuits regarding commissions paid to motor dealers, inter alia against BMW Financial Services (GB) Ltd., Farnborough (BMW FS UK). In three cases not involving BMW FS UK but brought against other lenders, the UK Court of Appeal (CoA) handed down a single judgement on 25 October 2024. The CoA concluded that motor dealers owe both a disinterested duty and an ad hoc fiduciary duty to their customers (as borrowers) and therefore are obligated to disclose the amount and nature of any commission payments received and obtain informed customer consent for such payments. Where the payment of commission is not adequately disclosed, it is deemed "secret" and treated as a civil bribe, which constitutes a breach of a motor dealer's fidu- ciary duty. While the motor dealer is responsible for disclosing the commission and obtaining informed consent, the CoA held that where there is no disclosure of commission, the lender is also di- rectly liable to the customer on the basis that the lender knew or should have known that the commission payment was a civil bribe. In the case of a partial disclosure of commission, the lender is liable as an accessory to a claim for breach of fiduciary duty against the motor dealer. As this ruling appears to conflict with known market practice, it could have far reaching consequences for the UK finance sector and potentially impact all of BMW FS UK's finance products involving a commission paid to a motor dealer. Accordingly, an application for permission to appeal the judgment to the UK Supreme Court was made by the lenders in- volved in the CoA cases with the written support of BMW FS UK, various trade bodies, and the Financial Conduct Authority. That application has been granted and due to the significance for the UK finance sector, the expedited appeal is set to take place in April 2025. An appropriate contingent liability is recognised and reflected as litigation risk in the preceding table.