Law and contracts
Vehicle deliveries in 2024 took place in a challenging economic environment. Nevertheless, operating difficulties in regional and long-distance transport continued to occur as a result of delayed vehicle deliveries and vehicle defects. In regional transport, this results in breaches of contract or non-performance vis-à-vis the contracting organizations. The result is higher expenses, penalty payments and lower revenues from fares. Any resulting compensation claims are asserted against the manufacturers.
Infrastructure disruption and missed punctuality targets increase the risk of provisions for train cancellations (services not rendered) and contractual penalties (services not provided in the required quality) set out in transport contracts, as well as possible liability for damages on the part of DB InfraGO, such as in respect of TOCs.
In addition, risks, in particular from warranty and other liability provisions, may also arise from other contractual relationships. This relates, for example, to the sale of companies, real estate or other material assets.
Provisions have been recognized for existing legal and contractual risks based on an assessment of their probability of occurrence.
Risks also result from lawsuits due to noise emissions from rail operations. To address supposedly unreasonable annoyances, residents are demanding active noise protection measures, financial compensation for passive noise protection measures and damage compensation payments.
Compliance with current laws, company directives and recognized regulatory standards is the duty and obligation of every DB Group employee. The compliance organization is aimed at ensuring compliant conduct.
With its very high procurement volume and about 20,000 suppliers, DB Group is one of the largest purchasers in Germany. Large-scale capital expenditures mean that the infrastructure business units in particular are exposed to a significant risk of becoming the target and victim of corruption, cartel agreements or fraud. As a provider of grants, the Federal Government places high compliance demands on DB Group in the form of its anti-corruption guidelines.
Opportunities arise from the discovery of cartels that operated in the past and the enforcement of claims for damages against cartel members. DB Group is pursuing claims for damages in more than ten cases. These include cartels in trucks, cars (known as the car cartel and emissions scandal), tracks, air freight, elevators and escalators, prestressing of steel, and girocard. In more than ten other cases, DB Group is still investigating whether any damage has been caused. DB Group has been using an innovative cartel screening tool since the beginning of 2022. In that time, the tool has identified conspicuous patterns in pricing or bidding behavior and can provide valuable information on illegal supplier agreements. We are in discussions with various competition authorities and the OECD on this new approach to antitrust prevention and detection.
Following the sale of several US companies in 2007 by DB US Holding Corp., the purchaser at the time, National Indemnity Company (NICO), demanded payment of an adjustment (reduction) of the purchase price of USD 45 million agreed in the underlying purchase agreement and arising upon the occurrence of certain circumstances. DB US Holding Corp. initially contested the existence of this claim. The arbitration proceedings initiated by NICO in July 2023 against DB US Holding Corp. to enforce its claim for immediate payment of the full purchase price adjustment were terminated by way of a settlement and payment of the claimed adjustment amount by DB US Holding Corp. The payment was made using the provisions recognized for this risk at DB US Holding Corp.
There are also risks associated with ongoing proceedings (national authorities or the European Commission) against companies in DB Group or the Federal Republic of Germany, the outcome and the potential consequences of which are not yet foreseeable. Due to the approval requirements of the European Commission’s state aid investigation into DB Cargo, there are significant risks to the continued existence of DB Cargo AG, resulting in financial risks for DB Group. The initiated transformation of DB Cargo is a necessary basis for compliance with the conditions imposed by the European Commission. If the restructuring plan cannot be adhered to, further support for DB Cargo AG by DB Group would probably only be possible in return for more far-reaching conditions, including the extensive dismantling of DB Cargo AG, which would place a substantial financial burden on DB Group. Risks at DB Cargo can lead to liquidity bottlenecks at DB Cargo AG and consequently to effects on DB Cargo’s operating business, among other things. These risks arise in particular from a delay in the ramp-up of transformation measures, economic developments and the market environment, a reduction in train-path price support and reduced transport volumes due to trade conflicts.