Here is the reason why there is no VATS in TES. No locational damage, nothing to target.
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Right, no locational damage, no need for VATS.
However the big question is: why no locational damage!
VATS doesn't make sense to me in an Elder Scrolls game. The technology doesn't exist. It could be tied to magic somehow, but that seems hokey.
But I see no reason why locational damage can't be in an Elder Scrolls game.
An arrow in the head should not do as much damage as an arrow in the knee!