Germany has not traditionally had class or representative actions in the same sense as other jurisdictions such as the United States. Today, however, there are a few mechanisms for initiating group actions - claims brought by a large number of individuals. These mechanisms allow similar or identical claims to be dealt with in a single proceeding, making the judicial process more efficient.
1) Capital investor model proceedings (Kapitalanleger-Musterverfahren)
The German Capital Investor Model Case Act (Kapitalanleger-Musterverfahrensgesetz, KapMuG) was first introduced in 2005. This is a mechanism for investors to pursue claims for damages relating to potential misinformation on the capital market, in particular false, misleading or omitted capital market information. Under the KapMuG, if a minimum number of similar cases against a single defendant (usually ten within a six-month period) are pending before different regional courts (Landgericht), a model case may be brought before the Higher Regional Court (Oberlandesgericht) in order to resolve common questions of fact and law in a uniform and binding manner. For this purpose, the Higher Regional Court selects a model investor at its reasonable discretion and the model proceedings are made public. At this point, other investors with similar claims may register to formally join the model proceedings. Such registration suspends the statute of limitation of the investors' claims until completion of the model proceedings, without the investor actually having to file a lawsuit itself. Ultimately, the findings of the model case then serve as a guideline for the registered investors' individual cases.
2) Model declaratory judgment action (Musterfeststellungsklage)
Introduced in 2018, the model declaratory judgment action allows certain qualified institutions, typically consumer protection organisations (Verbraucherschutzbund), to file a lawsuit on behalf of numerous (at least 50) affected consumers against a single defendant, typically a business. The subject-matter of the action can be various things, e.g. product defects, unlawful price increase clauses or handling fees. Again, the initiation of the model procedure is published and other consumers can register up to a certain point, even retroactively after proceedings have already begun. The limitation period for the registered consumers' individual claims is - again - suspended. The purpose of this model action is to identify common factual or legal issues for a large number of consumers. Therefore, no direct payment to consumers can be achieved in this model action, but only the determination that consumers are entitled to a certain claim. The findings of the model judgement will be binding on any subsequent actions brought by registered consumers against the defendant.
As can be seen, both the capital investor model proceedings and the model declaratory judgment action are not "class actions" in the classical sense, but they serve a similar purpose by bringing together several related claims to address mass grievances in a collective fashion. In this way, individual claims can be processed in a legally uniform and process-efficient manner.
3) New: Redress action (Abhilfeklage)
Since 13 October 2023, the German Law on the Enforcement of Consumer Rights (Verbraucherrechtedurchsetzungsgesetz, VDuG), which implements the European Directive on Representative Actions (EU Directive 2020/1828), has made it possible to combine substantially similar claims of a large number of consumers in a single action. In essence, this type of action concerns all civil disputes between a large number of consumers and a business and will be particularly important in data protection, product liability, antitrust and investment cases. Unlike the "pre"-actions mentioned above, qualified entities such as consumer organisations can now bring collective actions for damages brought by at least 50 consumers (and even small businesses) directly against a business. The VDuG foresees different options of redress actions, of which the following standard model is likely to be the most relevant: First, the question is clarified, whether the affected consumers have a valid claim by a first remedial judgment (Abhilfegrundurteil). Second, the parties are invited to reach an agreement (settlement phase). If the parties do not reach an agreement, the court will finally decide the matter by means of a second remedial judgment (Abhilfeendurteil), which sets out a collective total amount of damages. A special administrator then enforces this judgement, establishes an implementation fund from the amount to be paid by the defendant and organises its distribution to the registered consumers.
Has the Directive been implemented in this jurisdiction?
Yes
Is the jurisdiction allowing for an opt-in or opt-out model?
Opt-in model
Brief description of major class action cases in Germany:
The following cases concern either the capital investor model proceedings or the model declaratory judgment action. Naturally, there is no case law yet on the new redress action. However, the Federation of German Consumer Organisations (Verbraucherzentrale Bundesverband) has already announced in the Frankfurter Allgemeine Zeitung, a major German newspaper, that it will use the new redress system to take action against energy suppliers, telecommunications providers and financial service providers, and that it will do so "swiftly".
Cases of KapMuG-proceedings:
- Deutsche Telekom AG: The first proceedings in Germany under the KapMuG were against Deutsche Telekom AG for alleged prospectus inaccuracies in the DT3 IPO. In 2012, the Frankfurt Higher Regional Court (OLG Frankfurt) was unable to find any prospectus errors in a model decision. In 2014, the German Federal Supreme Court (BGH) ruled in the appeal proceedings that the prospectus was in fact defective and referred the proceedings back to OLG Frankfurt for a new hearing. Most recently, after 20 years of litigation, Telekom AG made a settlement offer to the claimants, which was to be substantiated by mid-2022. The original model claimant unfortunately had passed away in the meantime.
- Hypo Real Estate Holding AG: Hypo Real Estate Holding AG (the parent company of Hypo Real Estate Group) has been the subject to a large number of claims for damages, including claims for breach of duty to inform the capital market in 2007 and 2008. The Munich Higher Regional Court (OLG München) issued a model decision in response to a submission order by the Munich Regional Court (LG München), in which it found, inter alia, breaches of information duties in connection with press releases in 2007, the effects of the US real estate crisis from 2007 and an ad hoc announcement in 2008. In 2014, the OLG München ruled that Hypo Real Estate Holding AG had failed to inform investors of its difficult situation in 2007. In 2020, the BGH partially confirmed OLG Munich's decision in the appeal proceedings and otherwise referred it back to the second instance for a further hearing. In mid-2022, the model claimant and Hypo Real Estate Holding AG reached a settlement of EUR 190 million in favour of the investors.
- Volkswagen AG: The next significant case under the KapMuG started in September 2018 before the Higher Regional Court Braunschweig (OLG Braunschweig) on behalf of more than 1,600 individual claims against Volkswagen AG due to investor share price losses in connection with the emissions scandal (the infamous Dieselgate). The proceedings are currently still ongoing; There are also parallel proceedings against Porsche SE.
- Ernst & Young (EY): At the beginning of 2022, the starting signal was given for shareholder lawsuits against the auditors Ernst & Young (EY) in the Wirecard scandal, because they apparently failed to uncover the missing USD 2.1 billion at Wirecard AG. The background to this is that the insolvent Wirecard AG and the responsible members of its management board will only be able to compensate a small part, if any, of the share price losses suffered by the aggrieved investors. Therefore, an attempt will be made to hold EY liable instead. The Bavarian Supreme Court (Bayerisches Oberstes Landesgericht) will hear the case. The deadline for registration of investors who wanted to join the proceedings expired recently in mid-September.
Cases of model declaratory judgment action (Musterfeststellungsklage):
- Volkswagen AG: Following the introduction of the model action for a declaratory judgement on 1 November 2018, the Federation of German Consumer Organisations (Verbraucherzentrale Bundesverband) immediately filed a lawsuit against Volkswagen AG on the same day before the OLG Braunschweig on the grounds of Dieselgate. As a cooperation partner, the German Automobile Club (ADAC) supported the model case, the aim of which was to determine whether buyers of diesel vehicles with a certain type of engine were entitled to compensation. More than 400,000 consumers joined the action. The case ended with a settlement between the parties in 2020. More than 240,000 consumers accepted this offer and Volkswagen AG had to pay out a total of approximately EUR 750 million in compensation.
- Mercedes-Benz bank: In 2019, the Association for the Protection of Bank Customers (Schutzgemeinschaft für Bankkunden) brought an action against Mercedes-Benz bank before the Stuttgart Higher Regional Court (OLG Stuttgart) on the grounds of non-transparent cancellation information in loan agreements for car financing. Barely three months after the action was filed, OLG Stuttgart dismissed the action as inadmissible, its decision was confirmed by the BGH in 2020.
