There is no horizontal collective redress mechanism in the German legal system beyond traditional civil procedure tools (stay, joinder, assignment). A sectoral mechanism simplifying mass compensation exists only for investor claims (test case proceedings followed by individual damages claims). Injunctive collective redress is provided for in competition and consumer law. Collective redress in cartel damages cases has been sought via assignment of claims to one entity, acting as claimant.
The German Code of Civil Procedure (ZPO) focuses on two party claims and only contains rules on joinder of parties and stay or consolidation of proceedings. These are not specifically tailored to collective actions. Another 'traditional' method to pool individual claims against the same defendant is their assignment to a specific body that brings a lawsuit based on the bundled claims. This method has been tested in high value antitrust claims, but would in principle be available across sectors.
German law provides for sectoral collective redress mechanisms for competition law, consumer protection and investor claims which take a variety of forms. Mechanisms in consumer and competition law are mainly limited to representative actions claiming injunctions against anticompetitive behaviour or the violation of consumer law provisions or the skimming off of profits. Although consumer associations can also collect individual consumers' (damages) claims and bring these to court, collective proceedings are not so frequent due to the high financial risk and lack of incentives for the associations. Associations would rather bring single test cases which have a certain authority on similar claims brought in court, but no binding effect.
A proper collective redress regime exists only for mass investor claims. Practical needs led to the introduction of test case proceedings under the Capital Market Model Claims Act (KapMuG). In cases involving identical issues of law or fact (e.g. wrong statements in a prospectus), the potential liability of the issuer of a financial product is decided upon in a test case while the other claims are stayed. The test case findings have binding effect on the individual cases. Whilst investor claims are ultimately aimed at compensation of damages, the KapMuG proceedings as such are limited to a declaratory judgment on certain preliminary questions. The amount of damages is to be determined in each individual case, once the test case has been successfully heard. Cases under the KapMuG require a minimum of 10 claimants to get model case proceedings started. Since 2012, the KapMuG proceedings have been supplemented by an opt-out settlement system.
As to costs, Germany follows the 'loser pays' principle. Depending on the sector, specific rules allow for splitting (KapMuG) or reimbursement of costs (UWG). Contingency fees for lawyers are not generally excluded but only permissible under exceptional circumstances, e.g. if the victim lacks financial means and can only pursue his claim with a contingency fees arrangement.
Ongoing reform plans to introduce a general collective redress mechanism based on the model of KapMuG test case proceedings have been supported by associations but remain yet without any concrete legislative results.
1. Code of Civil Procedure (Zivilprozessordnung(ZPO)) in its version of 5. December 2005 (BGBl. I p. 3202; 2006 I p. 431; 2007 I S. 1781), last amendment 10 October 2013 (BGBl. I p. 3786).
2. Capital Markets Model Claims Act (Kapitalanleger-Musterverfahrensgesetz(KapMuG) in its version of 19 October 2012 (BGBl. I p. 2182), last amendment 4 July 2013 (BGBl. I p. 1981).
3. In June 2017 it was reported that no common position on the collective action mechanism proposed by the German Ministry of Justice could yet be found.
BIICL has recently worked with the German public body, the Gesellschaft fur internationale Zusammenarbeit (GIZ) on a collective redress project....