The mechanism most closely resembling a class action in German law is the so-called Model Case Procedure (Musterfeststellungsverfahren), which allows to prejudge the circumstances at issue for many cases collectively in order to simplify the subsequent pursuit of claims by entitled persons on their own. At present, this procedure is in force in its two forms: the proceedings commenced at the request and in the scope of the protection of investors’ rights on the capital market and the separate institution of an action in a scope of consumers’ rights protection introduced to the German Code of Civil Procedure in 2018.
Historically, a motion for a model case is was a legal measure introduced in 2005 (Musterfeststellungsantrag), prescribed for capital market disputes, and subject to the regulations included in the German Capital Markets Model Case Act (Kapitalanleger-Musterverfahrens-Gesetz, KapMuG) since 2012. The procedure provided for in the KapMuG consists in the fact that one of the parties to the individual proceedings that have already been initiated before the court may file a motion for a particular prejudicial question –of which the significance exceeds the result of a single litigation – to be prejudged in a Model Judgement (Musterentscheidung) to the needs of all collaterally ongoing proceedings. Participants of other proceedings (in which an equivalent prejudicial question appears) may apply to the special register where the motion is published.
When the statute’s conditions of admissibility of the proceedings are met, the court which received the first of motions issues a decision in which it formulates a legal problem on its own and presents it for examination to the appropriate Higher National Court (Oberlandesgericht) within the Model proceedings. All individual proceedings, the results of which depend on the ruling on the question covered by the decision are suspended as long as the Model proceedings continues regardless of whether the motion for commencing the Model proceedings was filed in the given proceedings or not. The Higher National Court chooses one of all claimants of the suspended individual proceedings in the name of which the Model proceedings is ongoing and it publishes the commencing of the procedure in a proper register. The other claimants obtain a status near to the participants but they are not a party to the Model proceedings. All entities which act as defendants in individual cases become defendants in the Model proceedings.
Thus, the provisions of KapMuG provides for the combination of opt-in and opt-out models. The claimants in “related” cases have the right to withdraw their actions if they do not want the judgement issued in the Model proceedings to determine the manner of examining their own claims, however they may do so no later than one month from receiving the decision on the suspension of their individual cases as a result of the commencement of the Model proceedings.
Investors who did not decide to commence the proceedings in their own name may submit their claims to the register within six months from publication of the commencement of the Model proceedings and through a professional proxy. Although they do not act in the Model proceedings, the limitation period of their claims connected with the subject of Model proceedings does not run during the Model proceedings.
The second type of Model proceedings is associated with the legal measure in the shape of the claim for a model case (Musterfeststellungsklage) which was introduced into the German legal system together with an amendment of the German Code of the Civil Procedure (ZPO) and which came into force on 1st November 2018. This specific form of claim is prescribed for the totality of disputes between consumers and entrepreneurs. It is regulated in paragraphs 606-615 of ZPO and the most important issues of this institution were implemented by the Act of 12th July 2018 on Introducing the Civil Model proceedings (Gesetz zur Einführung einer zivilprozessualen Musterfestsellungsklage).
The code’s type of class action is based on a representative claim and not on an institution of a model claimant. This means that directly interested consumers are not allowed to submit a claim but in order to make it specialised, a social organization’s (WOS) initiative is necessary. The WOS acts in directly interested consumers’ interests. As opposed to the KapMuG, the claim may aim to the binding establishment of not only legal but factual issues as well. Also in this case the claim brought by WOS is provided to the general public through a special register, to which consumers next submit their claims. Consumers do not have to be represented by a professional proxy when submitting a claim. At the same time submitting a claim has a stronger effect than in case of a similar institution prescribed in the KapMuG. This is so not only because of the suspension of the limitation period of claims against entrepreneur but – in first order – the binding effect of the judgement issued in the Model proceedings expands to all registered consumers. Consumers can submit a claim only to the end of the day before the first court hearing in the Model proceedings. The possibility of withdrawing a claim is limited in time as well – it may be withdrawn till the end of the day in which the first court hearing took place.
The German law provides for other types of proceedings as well, which although they are approximate to the class action, their aim is not to facilitate pursuing individual claims (e.g. compensation claims). This is primarily about proceedings regarding omissions and the removals of violations which may be initiated by social organisations. They are stipulated in the Act Relating to Actions for Injunctions in the Case of Breaches of Consumer Protection (Unterlassungsklagengesetz, UKlaG) and in the Act against Unfair Competition (Gesetz gegen Unlauteren Wettbewerb, UWG).
In turn, in corporate law, proceedings regarding establishing contested values (Spruchverfahren) prescribed in Act on Public Corporation (AktG), unique for the German legal order, plays a significant practical role. These proceedings are provided for the situation of a dispute over payoffs for shareholders due to structural transitions of public corporation, e.g. its transformation (resolutions on fusion, division or change of the legal form) or buy-out of minor shareholders’ shares (squeeze out). The judgement on establishing contested values is binding not only on the parties of the proceedings but on all shareholders covered by the transformation or any other structural changes. When it comes to the personal data protection law, on 24th February 2016 the Act on Improving Standards for the Civil Enforcement of Provisions Protecting the Rights of Consumers in the Field of Personal Data Protection (Gesetz zur Verbesserung der zivilrechtlichen Durchsetzung von verbraucherschützenden Vorschriften des Datenschutzrechts) came into force. This Act granted social organisations the right to bring representative actions in cases regarding data protection law cases connected with collecting, processing and using information about consumers, for commercial purposes.
The motion for the model case prescribed in the KapMuG is permissible only in cases related to capital markets. First and foremost, this pertains to actions for compensation on the grounds of false or misleading information or, possibly, forbearing to provide information related to capital markets, or in relation to claims for the performance of an agreement concluded in the prospectus mode.
The principal condition of admissibility of the commencement of the proceedings is to prove that the resolution of the issues mentioned in the motion has its prejudicial meaning for more than one case. Negative premises, impeding initiation of the standard procedure included, among others, an action to delay the procedure and failure to indicate the means of evidence suitable for proving the issues covered by the application.. Filing a formally correct motion does not automatically lead to the issuance of the resolution on the acceptance of the issue for consideration and the suspension of the individual proceedings. This effect has its place only if nine further motions related to the same issue are registered within the period of six months from the date of the motion’s publication.
When it comes to the claim for a model case implemented in 2018, its conditions of admissibility are regulated significantly differently. The claim has to be filed by a specialised social organisation which has to make plausible that the resolution on at least ten consumers’ rights is dependent on the prejudgment of the issues indicated in the motion. There are five statute conditions which have to be met cumulatively by a social organisation to file a claim:
Similarly to the KapMuG, filing a claim by a proper entity (WOS) does not lead to the commencement of the group proceedings automatically. At least 50 consumers have to file their claims (or contested legal issues) to the special register within a period of two months from the date of the claim’s publication in this register. Registrations are not substantively examined.
Both for KapMuG and Code regulations, the proceedings ends up with judgement or settlement. In case of the KapMuG, the judgement is binding only on the parties to the individual proceedings suspended for the time of model proceedings (independently of the fact if the motion for a model case was filed during the proceedings or not). There is not binding effect on those investors who limited their activity to submitted their claims to the register without commencing a separate procedure.
When it comes to the Code regulation, the judgement is binding on entrepreneurs acting as defendants and on all consumers who submitted their claims to the register. Although the regulation introduced in 2018 prescribes the binding effect of the judgement ending the model proceedings only to consumers, the legislator provided for a mechanism, the aim of which is to indirectly ease seeking the claims connected with consumers’ rights infringement by small businessmen. Non-consumers whose claims (e.g. recourse claims by a retailer) depend on the outcome of the model proceedings against the trader may be suspended for the duration of the establishing proceedings. model proceedings Despite the lack of formal binding, the legislator hopes that after resuming the proceedings, the courts will be guided in these cases by the decision made in the model proceedings. model proceedings
When it comes to the KapMuG, the settlement is negotiated by the model claimant and all defendants – and then it is approved by the court. The approved settlement is delivered to all those who act as claimants in the suspended proceedings. They may come out of the settlement within one month. The settlement becomes binding if the declaration of coming out of the settlement is filed by less than 30% of all of the entitled persons. There is an analogous mechanism prescribed in the code regulation of the model proceedings for consumers disputes, however in this case the settlement is negotiated by the specialised social organisation.
By means of a representative action initiated under the UKlaG, authorized social organisations, such as consumer organisations and chambers of commerce, may request the issuance of an injunction preventing the further infringement of consumer rights. On the other hand, on the grounds of the UWG, organisations of this type may seek the return of profits obtained as a result of intentional infringement of the UWG by a given entity.
Upon the issuance of the decision on staying a given case, the court instructs the claimant that the costs of proceedings in the KapMuG procedure are proportionally included within the costs of litigation, with the exception of cases in which the statement of claims is withdrawn within one month of the date on which the decision was served. The costs of the proceedings in the KapMuG procedure are decided by the court which is leading the case.
When it comes to the code regulation of the model proceedings, the consumers do not bear the costs of the proceedings in any extent. The full process risk encumbers the WOS which initiates the proceedings against entrepreneur. The German legislator does not provide for any special regulation in terms of financing the proceedings by WOS. The only facilitation for such an organisation is a special solution prescribed in the German statute on court costs, under which the court fee for the claim for the model establishing is not estimated in relation to the real value of the object of the dispute but is charged at the maximum value of EUR 250,000.
The initial experiences regarding applying the KapMuG are assessed negatively. Cases which in 2005 were incentives to introducing an institution of model proceedings to the German legal system are still ongoing. In the case against Telekom AG (which is still conducted) the model claimant died in 2016 and it was decided that the proceedings would be fictitiously led in his name – such an opportunity was explicitly prescribed by the legislator.
However, the discussed institution is employed in cases of big stock market scandals regularly. In 2017 Volkswagen AG’s shareholders commenced group proceedings based on KapMuG, regarding the lack of revealing information on abnormalities connected with the diesel scandal in the appropriate time.
The discussion on introducing the general regulation regarding group proceedings built up as a result of Volkswagen’s diesel scandal. The lack of the appropriate provisions became one of the crucial issues of the TV debate between candidates for the German chancellor in 2017 and then one of the main elements of the coalition agreement. Works on the statute were hasty essentially because of the willingness to make it easier for consumers who were harmed by the diesel scandal to commence the proceedings before their damages claims were barred by limitation (which term expired with the end of 2018 by virtue of the German regulations). On the day the statute introducing group proceedings to the German Civil Code entered into force, i.e. on 1st November 2018, the Federal Association of Consumers’ Organisations (Verbraucherzentrale Bundesverband) brought an action against Volkswagen AG seeking to establish a model for the damages suffered by consumers as a result of the diesel scandal.