Tag: Class action

In our initial blog-post on this topic (“Things are getting serious for compaines: New class action in Germany“), we have already provided information on the first draft by the German Federal Government. Below we summarize the most important proposals of the Bundesrat on this proposal and the Federal Government’s response to them.

A. Proposals on the Consumer Rights Enforcement Act (VDuG)

The Bundesrat proposes that for collective actions (i.e., both for model declaratory actions and for the new redress actions to be introduced), the provisions applicable to proceedings before Regional Courts (Landgerichte – LG) are to be applied mutatis mutandis to the proceedings before the the Higher Regional Courts (Oberlandesgerichte – OLG) having jurisdiction at first instance in such collective actions. The Federal Government agrees with this proposal. The – at least clarifying – regulation appears appropriate, since the Higher Regional Court acts here in the first instance and therefore acts as a full factual instance (and not as an appellate instance with the fundamental restriction to the correction of errors of law).

Another proposal of the Bundesrat could lead to a noticeable expansion of the scope of application of the new collective action. So far, a collective action is only admissible if the claims sued for are of the same kind, Sec. 15 VDuG. This requires that the claims are based on the same facts (or a series of comparable facts) and that the same factual and legal issues are relevant to the decision. On the one hand, the Bundesrat would like to expand this by stipulating that it should only be a matter of “essentially” the same questions of fact and law. On the other hand, individual objections and defenses – in particular the statute of limitations defense – should not, according to the wishes of the Bundesrat, stand in the way of such similarity. This would not be so far-fetched without the suggested clarification, especially for the statute of limitations defense, since it often depends here on the individual knowledge or possibility of knowledge by the individual creditor. The Federal Government would like to examine this suggestion in the further legislative process.

The Bundesrat would also like to extend the scope of application of the coercive measures against the entrepreneur provided for in the draft law if the entrepreneur fails to fulfill claims of a consumer beyond a payment in response to a corresponding request by the administrator. Up to now, only non-personal acts of the entrepreneur can be enforced with the coercive measures of a penalty payment or, alternatively, compulsory detention. The Bundesrat would like to extend this remedy to personal acts. Since the Federal Government has agreed to this proposal, it is likely that the extended possibility of coercive measures will also be included in the final law.

Furthermore, the Bundesrat asks that the two-week period for objections by the contractor to the final invoice, which has been provided for in the draft to date, shall be extended. The Federal Government will examine this proposal. Since the deadline for the contractor, especially when hundreds or even thousands of individual claims are bundled in a collective action, appears very short and at the same time the legal consequence of missing this deadline – the fiction of the final invoice as accepted – is drastic, this proposal of the Bundesrat is certainly appropriate.

Furthermore, the Bundesrat would like the point in time up to which consumers can register their claims in the association action procedure to be moved back significantly. The current draft provides that claims can be filed up to two months after the first hearing. However, the Bundesrat would like consumers to be able to file claims until the end of the last oral hearing. The Bundesrat is expressly concerned here with relieving the burden on the judiciary. It hopes for a bundling effect of such a collective action, which would also be more attractive for consumers because they could make their decision to file a claim later and thus on a more reliable basis of information. The Federal Government does not see any need for adjustment at this point. This is because it is only through the filing of the claim that the court and the parties learn which individual claims (and thus also which total volume) form the basis of the specific collective action.

B. Further proposed amendments

Furthermore, the Bundesrat is in favor of an extended possibility of suspending individual actions against the background of an ongoing collective action. The Federal Government does not wish to follow this proposal either; it expressly wants to give each consumer the choice between collective legal protection in the form of a collective action or individual legal protection. This is to be welcomed.

Finally, the Bundesrat has proposed that the simple filing of a collective action should in itself bring about the statute of limitations for all claims affected by this action. The Federal Government was certainly right to reject this far-reaching proposal. It is certainly appropriate that only an opt-in by the respective consumer to the collective action should lead to a suspension of the statute of limitations for his claims. Only in this way his individual claim will also become the subject of the collective action.

C. Conclusion

The Bundesrat has proposed numerous and significant changes to the scope of a collective action and the associated benefits for consumers. The Federal Government has taken up only some of these amendments, but has rejected any that go too far.

BT-Drs. 20/6878 is available HERE.

Do you have any questions about this news, or would you like to discuss it with the author? Please contact: Dr. Florian Niermeier

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.

Conclusion

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