The Federal Ministry of Justice has now published the draft bill of the Representative Actions Directive Implementation Act (“Verbandsklagenrichtlinienumsetzungsgesetzes” – VRUG). This is to transpose the European Directive (EU) 2020/1828 on representative actions for the protection of the collective interests of consumers and repealing Directive 2009/22/EC into German law. Since this should actually have been done by 25.12.2022, the Federal Republic of Germany is already “behind schedule” with this project.
A. Redress measures
The core of the VRUG is the new Act on the Bundled Enforcement of Consumer Rights (“Verbraucherrechtedurchsetzungsgesetz”, VDuG). It will regulate collective actions in the future, including the completely new redress measures, which for the first time enables collective actions for performance. This means that the claims bundled in the collective action could in future be enforced in a single proceeding; the individual actions still required under a model declaratory action procedure would thus no longer be necessary.
Qualified consumer associations and qualified entities from other EU Member States are entitled to bring actions. They can bring similar claims by a large number of consumers (at least 50 consumers must be affected) against businesses, whereby small businesses (with less than 50 employees and no more than EUR 10 million annual turnover) can also be included in the group of creditors. The subject of a representative action can be all civil disputes, so that the scope of the German law clearly goes beyond the pure consumer protection that is the focus of European law. The VDuG also contains an obligation for the body entitled to bring an action to publish information on planned and ongoing representative actions on its website. This will foreseeably lead to a broader impact of such a lawsuits and thus to an even more effective bundling of claims.
In the first instance, the Higher Regional Courts (Oberlandesgerichte) are responsible for actions by associations, so that there will only be two instances here with the Federal Supreme Court (BGH).
A significant innovation is that the action for redress can be used to sue directly for payment to the affected consumers. In particular, it will be possible to apply for payment of a collective total amount. In this respect, it is therefore a “real” class action that will directly lead to the enforcement of claims of the participating consumers.
It is also worth mentioning for the concrete proceedings that the disclosure of evidence (in particular the submission of documents) can be enforced by the court in the future. Here, in future, administrative fines of up to EUR 250,000 can be imposed, if a corresponding court order is disregarded, if necessary also several times. Such coercion in civil proceedings (which are actually subject to the principle of production of evidence) did not exist until now and makes the action for redress even more dangerous from the point of view of the defendant company.
Consumers can file their claims until the end of the day before the start of the first hearing for entry in the register of collective actions (opt in model). Thus, defendant companies will have certainty about the number of bundled claims at least after that date.
In the proceedings (if no settlement is reached beforehand), a so-called remedial basic judgement is to be issued. This should, if the action is successful, already determine the amounts to which the consumers are entitled. Afterwards, the court invites the parties to submit a settlement proposal. If no agreement is reached, a final remedial judgement is then issued. This may, in particular, include an order to the defendant entrepreneur to pay a collective total amount for the attention of a custodian – to be appointed by the court. The custodian has the task of administering the collective total amount paid by the company, if any, and to pay it to the entitled consumers.
B. Model declaratory action
The already existing model declaratory action will be retained and integrated into the VDuG. In the future, the VDuG will regulate all actions brought by associations.
C. Selected Further Changes
The new regulation of representative actions requires numerous consequential amendments in other laws, which will be bundled in the VRUG.
In particular, a new Sec. 204a is to be added to the German Civil Code (BGB). This regulates the scope of the suspension of the statute of limitations of a representative action.
It is also worth mentioning in this context that in the future, within the framework of Sec. 10 UWG, a skimming of profits under competition law will be possible not only in the case of intent, but already in the case of gross negligence.
With the redress action, a “real” class action is introduced in Germany for the first time, which leads to a conviction of the defendant company for performance and to the direct satisfaction of consumer claims in a single proceeding. Flanked by online information obligations and de facto disclosure obligations regarding evidence, this is likely to be an attractive instrument from the plaintiff’s point of view for the collective enforcement of such claims. In the future, companies will have to be prepared to be confronted not only with a relatively small number of individual lawsuits but also with class actions in which numerous claims are bundled. From a company’s point of view, it will therefore be more important than ever to optimise their product law and other compliance processes and to comply with the applicable law in order to avoid becoming the target of such class actions.
Do you have any questions about this news, or would you like to discuss it with the author? Please contact: Dr. Florian Niermeier