Collective Redress & Class Actions 2024 Comparisons

Representative or collective actions are not traditionally recognised in Germany. German law generally presupposes the violation of one's own subjective rights (principle of individual rights protection) for the opening of legal recourse and the admissibility of an action. It is a fundamental principle of German civil procedural law that only the parties to civil proceedings are bound by the outcome of such proceedings. While the general rules of civil procedure allow groups of plaintiffs to combine their claims into a single action by way of joinder, there are no specific procedures for dealing with these combined claims.

In recent years, however, the legislature has created certain forms of collective actions in some areas.

Injunctions Act

The first form of collective redress has been the right of certain registered interest groups to bring an action for injunctive relief on behalf of their members and in the common interest, particularly in cases involving unfair business practices by companies towards consumers, invalid general terms and conditions or other practices that violate consumer protection law or copyright law. The Injunctions Act (Unterlassungsklagengesetz – UKlaG) was introduced in 2002 in the context of a major modernisation of the German law of obligations to strengthen consumer protection.

Model Proceedings in Capital Market Disputes

In the years that followed, parallel proceedings with essentially the same content became increasingly common, especially in capital markets law. During this time, more and more law firms specialised in this area and began to form a pool of plaintiff’s attorneys by professionally soliciting capital investors.

In 2005, the German legislature broke new procedural ground with the creation of a model procedure for the settlement of disputes concerning “mass damages” in the capital market (Capital Investors Model Proceedings Act, Kapitalanleger-Musterverfahrensgesetz – KapMuG). This was based on the empirical finding that incorrect ad hoc announcements, misrepresentations in stock exchange prospectuses and other “offences” on the capital market generally cause “scattered damages” for which the existing instruments of the Code of Civil Procedure were not suitable. The reform efforts were mainly triggered by the lawsuits in connection with the third IPO of Deutsche Telekom AG: In these lawsuits, a total of about 16,000 plaintiffs, represented by more than 600 attorneys, were pursuing claims based on allegedly false prospectus information against the company itself, the Federal Republic of Germany, several syndicate banks and against Telekom’s then CEO. The thousands of individual lawsuits formally “brought down” the 7th Chamber for Commercial Matters of the Frankfurt Regional Court, which had sole jurisdiction due to the provisions of the Stock Exchange Act at the time. The then newly introduced Capital Investors Model Proceedings Act provides that in case of false, misleading or incomplete capital market information, certain legal or factual issues relevant to many pending civil proceedings can be decided in model proceedings with binding effect for all pending lawsuits. The Act was reformed in 2012, mainly by broadening its scope of application. It applied until 31 August 2024 and was reformed as of 20 July 2024. It is now valid for an unlimited period but is to be evaluated in five years' time.

Since the Act came into force in 2005, 84 model proceedings had been registered as of September 2024, of which only a few have so far resulted in a decision on the merits. Recently, some more popular cases have emerged, including lawsuits dealing with Volkswagen AG and Mercedes-Benz Group investors’ share price losses in connection with the diesel emissions issue, the annual reports of the failed financial service provider Wirecard AG and following alleged breaches of Bayer AG of its potential disclosure obligations in relation to the financial risks caused by the acquisition of the US pharmaceutical company Monsanto.

Model Declaratory Action

In 2018, the legislature introduced a model declaratory action into the Code of Civil Procedure, combining elements of the Capital Investors Model Proceedings Act (KapMuG) and the Injunctions Act (UKlaG), to facilitate collective redress for consumers in cases of mass damages caused by large companies (Model Declaratory Action).

In the years before, it had become increasingly apparent that “scattered damages”, which affect many consumers, are not only found in the capital market sector but also in other business transactions, for example in the case of unlawful price clauses. In particular, the diesel emissions issue, in which various car manufacturers were accused of having carried out illegal manipulations to circumvent legally prescribed limits for car exhaust emissions, led to a large number of worldwide legal disputes. In Germany, this includes two types of civil lawsuits: on the one hand, actions brought by shareholders of car manufacturers who base their claims on capital investment regulations, and, on the other hand, by car buyers claiming damages based on liability for material defects and tort against the car manufacturers and car dealers. As a result, the courts were flooded with a large number of lawsuits. The lawsuits of the first type, filed by shareholders of car manufacturers, are being conducted as Model Proceedings in Capital Market Disputes. For the lawsuits of the second type, there was no possibility of collective redress until 2018, and this possibility was created with the Model Declaratory Action.

The Model Declaratory Action cannot be initiated by individual consumers, but only by certain qualified institutions – ie, consumer associations (Qualified Entity), subject to certain requirements. Once a Qualified Entity has filed such a claim, any individual consumer can decide to opt in and register their claim. The Model Declaratory Action ends with the determination of the (non-)existence of factual and legal conditions for the (non-)existence of a claim or legal relationship between the consumers and the defendant company. To obtain an enforceable judgment, each registered consumer must then bring an individual action in which they can benefit from the binding determinations of the model declaratory decision. 

On the day of the introduction of the Model Declaratory Action, the Federal Association of German Consumer Centres filed such an action against Volkswagen AG. The action ended in 2020 with a settlement, in which the parties negotiated compensation offers for more than 250,000 car buyers. In order to conclude the settlement, the car buyers could register on an online platform and submit the necessary documents. However, a large number of individual proceedings are still pending by car buyers who have not joined the Model Declaratory Action.

To date, the Model Declaratory Action has been used primarily in the diesel proceedings, in the banking, energy and telecommunications sectors and in tenancy law. As of September 2024, 35 cases have been registered.

The Model Declaratory Action has been met with considerable criticism. It is argued, for example, that the right of consumer associations to sue is alien to civil law, which is characterised by private autonomy, and that the variety and number of possible legal actions in a Model Declaratory Action would overburden Qualified Entities, both financially and organisationally.

Legal Tech Online Platforms

Online platforms offer another way of bundling claims by giving consumers the possibility to assign their claims against a company to a plaintiff vehicle, thus mimicking class actions aimed directly at obtaining damages. The legal tech platform is typically financed by a litigation funding company, which assumes the risk of bearing a significant portion of the legal costs in the event of defeat. If the lawsuit is successful, a commission is payable by the consumer, which can be up to 35% and is partly passed on to the litigation funder. If the lawsuit fails, the consumers do not have to pay anything.

This business model has been objected to by defendant companies on the grounds of violation of the Legal Services Act. In this regard, the Federal Court of Justice ruled in several decisions from 2021 to 2023 that this business model is permissible.

Consumer Rights Enforcement Act

Regardless of the criticism, the legislature is sticking to the Model Declaratory Action introduced in 2018 and has moved it from the Code of Civil Procedure to the new Consumer Rights Enforcement Act (Verbandsklagenrichtlinienumsetzungsgesetz – VRUG) which entered into force on 13 October 2023. The Model Declaratory Action is now joined by a new type of Representative Action introduced by the implementation of Directive (EU) 2020/1828 on representative actions for the protection of the collective interests of consumers and repealing Directive 2009/22/EC (the “Representative Actions Directive”). Under the Directive, Qualified Entities may bring Representative Actions for injunctions and redress on behalf of a group of consumers against infringements of Union law harmful to consumers’ collective interests. Due to the possibility to obtain enforceable judgments, it offers a higher level of consumer protection compared to the Model Declaratory Action of 2018. The new German Consumer Rights Enforcement Act (VRUG) implements the requirements of the directive and introduces this new Representative Action for performance or damages applying to all disputes between consumers and businesses (Redress Action).

The Redress Action could become particularly important in data protection damages claims, product liability cases, antitrust damages claims, capital investment cases and the enforcement of the Digital Markets Act. By September 2024, consumer organisations have filed five Redress Actions against energy suppliers, one telecommunications provider and one music and video streaming provider to challenge price increases.

Model Proceedings in Capital Market Disputes

The Capital Investors Model Proceedings Act (KapMuG) introduced in 2005 is not modelled on another country’s regime but was developed independently.

Model Declaratory Action

European policy issues are crucial for the development of collective actions in Germany. The Model Declaratory Action introduced in 2018 was motivated, among other things, by European legal acts, in particular the Commission Recommendation of 11 June 2013 regarding Common Principles on collective actions for injunctions and damages in the Member States concerning breaches of rights guaranteed by Union law (2013/396/EU) and the Commission Report on the implementation of that Recommendation, which are part of a comprehensive reorientation of European consumer protection (“New Deal for Consumers”).

Consumer Rights Enforcement Act/Redress Action

The strengthening of consumer protection will continue with the implementation of the European Representative Actions Directive (Directive (EU) 2020/1828). Here, a new chapter began in October 2023 with the introduction of a lawsuit by which Qualified Entities as representatives of affected consumers can sue companies directly for performance or damages.

With the Consumer Rights Enforcement Act (VRUG), which entered into force on 13 October 2023, Germany implemented the European Representative Actions Directive (Directive (EU) 2020/1828) and introduced a new type of Representative Action for performance or damages applying to all disputes between consumers and businesses (Redress Action).

The scope of application is thus much broader than required by the Directive and extends not only to consumer protection provisions but also, eg, to general tort law.

Companies with less than ten employees and an annual turnover or annual balance sheet of no more than EUR2 million (“small companies”) are treated the same as consumers and can now also join Redress Actions. In this respect, too, the Consumer Rights Enforcement Act (VRUG) goes beyond the Directive.

Since 13 October 2023, the Consumer Rights Enforcement Act (VRUG) has been the principal law governing collective redress. The Redress Action newly introduced by this Act complements the Model Declaratory Action from 2018, which has now been transferred to this Act.

Model Proceedings in Capital Market Disputes

The Capital Investors Model Proceedings Act (KapMuG), introduced in 2005 and reformed in 2012, was reformed again in 2024. The law as reformed in 2012 continues to apply to model proceedings arising from applications filed until 19 July 2024. The new law applies to model proceedings applications filed on or after 20 July 2024.

The various forms of collective redress under the VRUG and the KapMuG exist on an equal footing. Affected companies should be prepared to face a Redress (and possibly Model Declaratory) Action and Model Proceedings in Capital Market Disputes at the same time.

Injunctions Act

Under the Injunctions Act (UKlaG), qualified representative organisations may seek injunctive relief against companies that use unlawful general terms and conditions or otherwise violate consumer protection or copyright law.

Under the Consumer Rights Enforcement Act (VRUG), which entered into force on 13 October 2023, all matters that could be litigated in an individual civil lawsuit can be litigated in the new type of representative action for performance or damages (Redress Action). The Redress Action applies to all disputes between consumers and businesses.

This also applies to the Model Declaratory Action, as well as to all claims or legal relationships between a consumer and a business. There are no restrictions on the areas or applicable laws. 

Model Proceedings in Capital Market Disputes

Model Proceedings in Capital Market Disputes can be initiated for false, misleading or omitted public capital market information – eg, in annual financial statements or stock exchange prospectuses. Since 2012, proceedings may also be initiated if such information is used or if a required disclosure is omitted. This law may also be applied in the case of claims for performance under a contract based on an offer under the Securities Acquisition and Takeover Act. In 2024, the scope of application was extended again. It now also covers claims against custodians of crypto-assets as well as claims related to ratings for issuers or providers of investments and auditors' reports on the annual financial statements and consolidated financial statements of issuers of capital investments. It is therefore to be expected that rating agencies and auditors will also be the focus of model proceedings in the future.

There is no statutory definition of what constitutes a collective redress. The guiding principles of the German legislature can only be read indirectly from the laws dealing with collective redress and the legislative history. The Consumer Rights Enforcement Act (VRUG) provides that in civil disputes involving claims and legal relationships of a large number of consumers against a company, Representative Actions may be brought.

Court proceedings are initiated by filing a statement of claim. Since 2022, documents may only be filed via the special electronic attorney mailbox. The statement of claim must meet certain mandatory requirements, such as being written in German and signed, and setting out the facts on which the relief sought is based. It may refer to exhibits. It is at the discretion of the court to allow exhibits in a foreign language, provided that the court has sufficient command of the respective language. If a court does not permit foreign-language exhibits, the party relying on them must, at the request of the court, prepare translations in whole or at least of the relevant passages. There is no procedural rule requiring the plaintiff to include a legal analysis of the case, but this is common practice and advisable. Once the statement of claim has been filed, the plaintiff is required to make an advance payment of the full court costs. As long as this mandatory requirement is not fulfilled, the court will not serve the statement of claim on the defendant. While subsequent submissions may be served directly between the parties’ attorneys, the statement of claim can only be served by the court.

Redress Action/Model Declaratory Action

The new Redress Action and the Model Declaratory Action can only be brought by a Qualified Entity which has to plausibly set out in its statement of claim that at least 50 consumers are affected and that the consumer’s claims present substantially similar questions of law or fact. An action is inadmissible if it is financed by a third party who is a competitor of the defendant company or in any way dependent on the defendant company, who is promised an economic share in the compensation to be rendered by the defendant company of more than 10% or who can be expected to influence the conduct of the lawsuit by the Qualified Entity to the detriment of the consumers. The Qualified Entity plaintiff is obliged to disclose the origin of the funds to finance the Representative Action as well as any agreements with the third-party funder. In addition, the general requirements for bringing a civil action set out above apply. The Higher Regional Court in whose district the general place of jurisdiction of the defendant company is located has exclusive jurisdiction for these kinds of actions.

Once a Qualified Entity has filed such a Representative Action, another Qualified Entity may not bring another Representative Action against the same defendant company involving the same facts and claims or the same declaratory objectives.

Each individual consumer or small business entitled to sue (see 4.4 Class Members, Size and Mechanism (Opt In/Out)) can decide to opt in and register their claims in the internet-based Register of Representative Actions maintained at the Federal Office of Justice. This is possible until three weeks after the conclusion of the oral hearing. The registration, which is subject to certain requirements regarding the specific presentation of the claim, suspends the limitation period for the consumer’s claims and is without financial expense or litigation risk. In the registration procedure, no substantive examination of the claim is carried out.

If, prior to the notification of the Representative Action in the Register of Representative Actions, a consumer has brought an action against the defendant company relating to the claims, legal relations or declaratory objectives and the subject matter of the Representative Action and registers their claim, the origin proceedings are stayed pending the final decision or other settlement of the Representative Action or the effective withdrawal of the registration. During the pendency of the Representative Action, a registered consumer may not bring an action against the defendant company whose cause of action relates to the same facts, claims or declaratory objectives.

However, non-registered consumers are not prevented by a Representative Action involving the same facts, claims or declaratory objectives from bringing an individual action and continuing the proceedings during the term of the Representative Action.

Model Proceedings in Capital Market Disputes

The law on Model Proceedings in Capital Market Disputes permits plaintiffs or defendants to apply in their pending lawsuits for a collective action regarding common factual and legal issues before a Higher Regional Court. This means that first normal court proceedings must be initiated with the court of first instance, which is usually a regional court.

Insofar as model proceedings are desired in ongoing proceedings, the plaintiff or defendant requesting this must show that the decision in the model case may be of significance for other similar legal disputes over and above the individual legal dispute. If the court of origin deems the application for model proceedings to be admissible, it publishes the model proceedings application in the internet-based Model Proceedings in Capital Market Disputes Register (KapMuG Register) within three months of receipt of the application. The decision on the admissibility of the application for the model proceedings is unappealable. Upon the publication of the model proceedings application, the proceedings are stayed.

If there are at least nine further applications of the same kind within a period of six months, the court first seized must immediately issue a non-appealable order for reference to the Higher Regional Court (Reference Order). This order summarises the issues common to all proceedings (declaratory objectives) and contains a concise statement of the underlying identical facts of the applications and the stated means of evidence. The order shall be promptly published in the KapMuG Register. The publication of the Reference Order suspends the limitation period of other persons’ claims if they later register their claims in the model proceedings.

To achieve the objective of the 2024 reform of accelerating the model proceedings, the position of the Higher Regional Courts, before which the model proceedings are heard in the first instance, has been considerably strengthened. The Higher Regional Court shall only open model proceedings if it considers a hearing and decision on the declaratory objectives to be expedient. In addition, it will be responsible for formulating the declaratory objectives of the model proceedings in an unappealable order opening the proceedings (Opening Order). The Court is allowed to remain behind the requests formulated by the parties and to tailor the subject matter of the model proceedings in such a way that the model proceedings are conducted efficiently.

In addition, the Higher Regional Court selects, at its equitable discretion, a model plaintiff from one of the stayed proceedings. The selection shall take into account the suitability of the plaintiff to conduct the model proceedings in an appropriate manner, taking into account the interests of the other plaintiffs, an agreement of several plaintiffs on one model plaintiff and the amount of the claim, insofar as it is affected by the declaratory objectives of the model proceedings.

The Opening Order – or the order rejecting the opening of the model proceedings – shall be published in the KapMuG Register without undue delay. After the publication of the Opening Order, the courts of the initial proceedings shall officially suspend any stayed proceedings if the decision in the legal dispute before them is likely to depend on the declaratory objectives of the model proceedings. The plaintiffs in the suspended initial proceedings must accept the model proceedings in the position in which they are at the time of the suspension.

Each participant in the model proceedings can request that the model proceedings be extended to include further declaration objectives. The Higher Regional Court decides on these applications by means of a non-appealable order (Extension Order), which is also to be published in the KapMuG Register without delay.

Persons who have not yet brought an action for the same claim are entitled to file an application within six months of the publication of the Opening Order. The applicant must be represented by a lawyer.

Redress Action

The Redress Action proceedings are structured in three phases. First, the judicial redress procedure is carried out between the Qualified Entity, ie, the consumer association, and the defendant company. This phase encompasses the basic redress judgment on the merits of the case, a settlement evaluation phase and, if no settlement can be reached between the Qualified Entity and the defendant company, the final redress judgment including the total compensation amount. This is followed by the implementation phase, where compensation is distributed by a court-appointed administrator who decides on eligibility and the individual amount of compensation for each registered consumer. The administrator’s decision is subject to judicial review. Finally, any potential follow-on proceedings are carried out – eg, if the administrator has refused to fulfil a claim asserted by a consumer in full or in part in the implementation phase, or if the defendant company raises objections, provided that this claim or this objection could not have been raised during the previous phases.

Model Declaratory Action

The Model Declaratory Action proceedings are structured in two phases. First, the Model Declaratory Action is conducted between the Qualified Entity, ie, the consumer association, and the defendant company. Consumers who opted in are not involved in the conduct of the action, which is solely conducted by the Qualified Entity. In the proceedings, all factual and legal questions relevant to all claims of the consumers concerned can be examined and clarified – eg, whether the defendant company has acted unlawfully or not. The consumer association and the defendant company can reach a (court) settlement in favour of the registered consumers and thereby end the proceedings. If no settlement is reached, the Model Declaratory Action does not end with an enforceable judgment, but with the judicial declaratory of the (non-)existence of factual and legal conditions for the (non-)existence of a claim or legal relationship between the consumers and the defendant company. This model declaratory decision may be appealed to the Federal Court of Justice. To obtain an enforceable judgment, each individual consumer must then bring in a second phase an individual action in which they can benefit from the binding determinations of the model declaratory decision. All other aspects of the individual cases, eg, causal connection or amount of damage, are decided by the courts of the respective individual proceedings.

Model Proceedings in Capital Market Disputes

In the Model Proceedings in Capital Market Disputes, the proceedings are conducted between the model plaintiff and the defendant companies. All other plaintiffs do not become direct parties to the model proceedings and are barred from pursuing their individual claims while the model proceedings are pending. They have a type of third-party standing and may file briefs in the model proceedings but are not allowed to contradict the model plaintiff’s submissions. In practice, most plaintiffs remain passive in the model proceedings phase. Based on the model plaintiff’s and the defendant(s)’ submissions, the Higher Regional Court will rule on the common issues of fact or law set out in the Opening Order. The Model Order can be appealed to the Federal Court of Justice. When the Model Order is final and res judicata, it binds the courts in all individual actions stayed due to the model proceedings.

Redress Action/Model Declaratory Action

The new Redress Action and the Model Declaratory Action can only be brought by Qualified Entities – ie, qualified consumer associations which (i) have been registered in the list pursuant to the Injunctions Act or in the list of the European Commission pursuant to Article 5(1) sentence 4 of Directive (EU) 2020/1828 of the European Parliament and of the Council of 25 November 2020 on representative actions for the protection of the collective interests of and repealing Directive 2009/22/EC (OJ L 409, 4.12.2020, p. 1, and (ii) do not receive more than 5% of their financial resources from private companies. If there are serious doubts as to whether this condition is met, the court shall require the plaintiff to disclose its financial resources. It is irrefutably presumed that consumer centres and other consumer associations that are predominantly funded with public funds fulfil this requirement.

Model Proceedings in Capital Market Disputes

Under the Capital Investors Model Proceedings Act (KapMuG), applications for model proceedings can be brought by capital investors who are entitled to bring securities actions – ie, private individuals and institutional investors as well as the defendant companies. Groups, interest groups or qualified entities are not entitled to file applications under the Act. If model proceedings are initiated, the Higher Regional Court responsible for the model proceedings selects a model plaintiff from the list.

Both the new Redress Action and the Model Declaratory Action are generally based on an “opt-in” mechanism. Consumers and small businesses (ie, companies with less than 50 employees and an annual turnover of no more than EUR10 million), who are often affected in the same way as consumers, can only benefit from these actions if they opt in by registering their claims in the Register of Representative Actions up to three weeks after the conclusion of the oral hearing. Until that time, it is also possible for registered consumers to withdraw their registration. Another opt-out element in these Representative Actions is the ability of registered consumers to opt out of a collective settlement within one month after the announcement of the settlement in the Register of Representative Actions.

If the Model Declaratory Action is successful, consumers may have to do another “opt-in” by bringing an individual action to enforce their individual claims endorsing the findings of the model decision. This is not required in the Redress Action.

Model Proceedings in Capital Market Disputes

The Model Proceedings in Capital Market Disputes combine elements of “opt-in” and “opt-out”. Once the Opening Order of the Higher Regional Court is published, all actions brought by individual plaintiffs whose decision is likely to depend on the declaratory objectives of the model proceedings are stayed. All plaintiffs in the stayed individual actions – including those who have not applied for model proceedings – are bound by the Model Order. Affected plaintiffs are granted the right to withdraw, and thereby essentially waive their claims, within one month of the stay of their actions. For all model proceedings initiated after 20 July 2024, it is also possible for the plaintiffs to withdraw their claims if the claim concerns the declaratory objectives and facts of a later filed Redress Action and if the plaintiffs can register their claims in that Redress Action.

Once the common issues have been decided, the individual actions are resumed to adjudicate the remaining individual issues of fact or law.

The Capital Investors Model Proceedings Act (KapMuG) enables the model plaintiff to negotiate a settlement with the defendant(s) in the model proceedings (see 4.12 Settlement and ADR Mechanisms), which is, after approval by the Higher Regional Court, binding on all parties in the stayed individual actions, provided that no more than 30% of the plaintiffs opt out.

General Requirements for Joining a Civil Action

In German procedural law, it is traditionally possible for several persons to be on the plaintiff’s side and assert their individual claims in a joint action. A particular risk of this approach is the danger of a separation of proceedings. The court can order that several claims asserted in one action be heard in separate proceedings if this is justified for objective reasons – eg, if the court finds that the assessment of causality requires individual proceedings.

Another option for bundling claims is the assignment of individual claims to one plaintiff vehicle.

If a new plaintiff wishes to join a pending lawsuit, the existing plaintiff, and possibly also the defendant, must declare their consent to the joining. Subsequent participation in an action as a defendant is only possible if the plaintiff expressly sues the other defendant. 

A person who is not a party to the original lawsuit may intervene in the proceedings to support the position of one of the parties whose success or defeat will legally affect the interests of the intervener. Such a third-party intervention can be filed at any stage of the proceedings before the judgment becomes final. An intervener does not become a formal party to the proceedings but may act only in the interest of the party whom it assists. The intervener is not legally bound by the judgment. However, in a subsequent action between the intervener and the party it supports, the intervener is largely prohibited from arguing that the judgment is incorrect.

Redress Action/Model Declaratory Action

It is permissible for several Qualified Entities to sue jointly against one or more companies. For subsequent participation in the action the general requirements set out above apply. Third-party intervention is not possible in the relationship between the parties to the Representative Action and the registered consumers or such consumers who assert to have a claim against the defendant company or to be claimed against by it or to have a legal relationship with it.

Model Proceedings in Capital Market Disputes

According to the Federal Court of Justice, the Model Proceedings in Capital Market Disputes before the Higher Regional Court – and on appeal the Federal Court of Justice – are not capable of intervention. However, this principle does not change the fact that interventions are possible in the origin proceedings so that an intervention can be made there. The intervening parties in the origin proceedings are then also not prevented from exercising their rights in the model proceedings within the statutory framework.

The court and the parties are under an obligation to conduct the proceedings as expediently as possible and to limit the number of hearings to a minimum. Therefore, generally only one hearing takes place if no taking of evidence is necessary. If evidentiary proceedings are necessary, these usually take place on a separate date.

Based on the introduction of the case and the discussion with the parties and their attorneys, the court will usually try to settle the case. This applies at every stage of the proceedings.

German procedural law does not expressly provide for case management hearings. In practice, the court mainly structures the proceedings through written court orders, in which the court sets deadlines for written pleadings and prepares the oral hearing. The court also has the option of ordering an early first hearing in which it discusses the case with the parties at an early stage and, on basis of these discussions, can decide on the further course of action.

In mass proceedings that are not bundled in a model case, courts are often willing to co-ordinate the management of numerous parallel cases with the litigants – eg, by agreeing on filing deadlines and schedules or focusing on cases that are considered representative. While these selected cases only lead to persuasive precedents that are technically non-binding, experience has shown that such an approach by a court can be very efficient.

German civil trials, particularly in complex cases, are usually extensively prepared by written submissions of the parties. Hence, a first hearing can, on average, be expected after six to 12 months. However, the scheduling of hearings also depends on the workload of the court and varies significantly between courts. 

In proceedings under the Capital Investors Model Proceedings Act (KapMuG), a hearing of the Higher Regional Court may only occur after a considerably longer period of time, and also the total length of the proceedings has been far longer so far. In the Telekom case, which led to the introduction of the KapMuG in 2005 (see 1.1 History and Policy Drivers of the Legislative Regime), the model decision was issued in 2012. After a successful appeal decided by the Federal Court of Justice in 2014, the case was referred back to the Higher Regional Court for a new hearing and was concluded with a settlement in 2021. The proceedings against Volkswagen AG for the share price losses of shareholders in connection with the diesel emissions issue, with a current amount in dispute of approximately EUR4.4 billion, began in 2018 on behalf of approximately 1,600 individual lawsuits (see 1.1 History and Policy Drivers of the Legislative Regime). Here, the extensive taking of evidence started in September 2023, which, inter alia, provides for the examination of 86 witnesses. The primary aim of the 2024 reform was therefore to significantly speed up the KapMuG-proceedings. This is supposed to be achieved primarily by strengthening the powers of the Higher Regional Courts to structure the proceedings and by the innovation that when model proceedings are initiated, not all initial proceedings have to be suspended, as was the case until July 2024, so that fewer parties will have to be heard in the actual model proceedings.

Courts have a legal obligation to expedite the proceedings. German procedural law does not provide for a general form of “early judgment”, but specific types of judgments are available that are comparable to the concept of early judgment.

If a court is convinced that liability and at least some damage has been incurred, it can make an interlocutory judgment based on the claim, leaving the quantification of the claim open. Such judgments often motivate the parties to settle the amount of damages. A court may also issue an interlocutory judgment on certain contentious procedural issues. Such judgments are at the sole discretion of the court. A court may also, at its discretion, decide on only part of the claims or counterclaims when this part is ripe for a final decision before a decision can be made on the remaining parts.

Early judgments can also be declaratory in nature and cover basic legal issues underlying the dispute – eg, if a plaintiff claiming complex damages as a shareholder of a company is a shareholder at all. The court must decide on such an application of a party.

A special form of this judgment under reservation is the judgment in summary proceedings based on documentary evidence or on a bill of exchange. In these proceedings, the parties may rely only on documents and party testimony for evidence. All other means of evidence are excluded, and counteractions are not permitted. However, even after a judgment under reservation has been rendered, the proceedings remain pending and the defendant may raise objections and submit evidence at a later stage of the proceedings, without the limitations of the evidentiary means. Such expeditious proceedings therefore entail a risk for the plaintiff that the judgment under reservation will be set aside at a later stage. If the plaintiff has enforced the judgment under reservation, it is liable to the defendant for all damages resulting from such enforcement on a no-fault basis.

In mass proceedings that are not bundled in a model case, courts may opt to focus on cases that are considered representative and formally or de facto suspend the other proceedings until a final decision is rendered in the selected cases.

There is no general rule for the funding of these actions. The lawsuits can be financed by the plaintiffs themselves. Consumer lawsuits are often also financed by legal expenses insurance, which many Germans have taken out. This insurance covers court costs, the insured person’s own attorney’s fees and also the legally reimbursable opponent’s costs if the insured person loses the case.

A party may also apply to the court for legal aid if they are unable to pay all or part of the costs of the proceedings due to their personal or economic circumstances, provided that the intended legal action has a reasonable chance of success and does not appear frivolous. The legal aid, if granted, covers the court costs and the plaintiff’s own attorney’s fees, but not the costs of the opponent, which the plaintiff must bear if they lose.

Third-party litigation funding, whereby a private or commercial third party advances the funds required for litigation and bears the risk of an adverse cost order in return for a fixed percentage of any judgment or settlement, is becoming increasingly common. There are no legal regulations that deal directly with such funding. Its framework derives from statutes such as the Legal Services Act, the Federal Lawyers’ Act and the Lawyers’ Fees Act. It emerges from them – eg, that the funder is prohibited from providing legal advice to their client. In general, the funder concludes the financing agreement with their client and the client instructs an attorney so that the funder and the attorney have no contractual relationship with each other. Third-party funding can cover all fees and expenses, including costs of legal representations and court fees. In addition, the agreements can include any costs of the opponent to be borne by the funded party if it loses the case. There is no limit on the amount a third-party funder can provide. De facto, however, some litigation funders only provide funding above a certain minimum amount in dispute.

One particular variant of third-party financing, used primarily by legal technology companies such as online platforms and service providers that do not finance legal disputes in the conventional sense, involves having their customer’s claims assigned to them and then asserting them in court in their own name and at their own risk (see 1.1 History and Policy Drivers of the Legislative Regime). In the event of success, the customers receive a certain percentage of the sum awarded.

Generally, there is no obligation to disclose a funding arrangement in court. However, this is different with the new Redress Action and the Model Declaratory Action. The new law allows third-party funding for the Redress Action and the Model Declaratory Action but sets rather strict requirements. If the requirements are not met, the Representative Action will be dismissed. The Qualified Entity plaintiff is obliged to disclose the origin of the funds to finance the Representative Action as well as any agreements with the third-party funder who must not be a competitor of, or in any way dependent on, the defendant company. In addition, the third-party funder’s share must not exceed 10% of the compensation awarded. It is likely that these rules will discourage litigation funders, at least for less substantial claims.

Another type of funding, contingency fee arrangements where part of the proceeds is transferred to the attorney, are still rare in Germany. A contingency fee in litigation was prohibited until recently and may now only be agreed on a case-by case basis if the client’s financial circumstances do not permit litigation without a contingency fee agreement.

Costs

As a rule, the party losing the case must bear all the costs of the proceedings. If both parties lose parts of the dispute, the costs will be allocated between the parties in proportion to win and loss.

In principle, the costs of the court and the attorneys are strictly linked to the amount in dispute. In relation to this amount, statutory law provides for specific fixed rates. A party can agree much higher billing rates with its attorney, which is common in complex commercial matters. However, in litigation, the winning party can only demand payment from the losing party of the sums calculated based on the fixed statutory rates. Upon request, the judicial officer orders interest on the reimbursable costs at a rate of five percentage points above the base rate from the date on which the cost application is submitted.

The cost risks for Qualified Entity plaintiffs in Redress Actions and Model Declaratory Actions are limited: the amount in dispute, on the basis of which the court costs and statutory lawyers’ fees are calculated, is capped at EUR300,000 (Redress Action) respectively EUR250,000 (Model Declaratory Action), regardless of the actual economic importance of the case. With an amount in dispute of EUR300,000, this currently means court costs of EUR8,139.00 and, in terms of attorneys’ fees, a statutory fee for the conduct of the proceedings of EUR3,571.10, a statutory fee for the oral hearing(s) of EUR3,296.40 and, in the event of a settlement, a statutory settlement fee of EUR2,747.00. In the individual proceedings of the individual consumer, which follow the Model Declaratory Action, there is no restriction with respect to the amount in dispute, and the normal cost regulations apply.

In proceedings under the Capital Investors Model Proceedings Act (KapMuG), the costs incurred by the model plaintiff and the defendants in the model proceedings are part of all stayed individual actions. The final judgment in each individual proceedings contains a decision on the costs of both the respective individual proceedings and the respective proportion of the model proceedings.

Pre-trial and Trial Disclosure

The concept of pre-trial and trial disclosure does not exist in German civil cases. Each party usually bears the burden of proof for the facts on which the party’s claim or defence is based. In certain circumstances the burden of proof lies with the other party. Each party decides for itself which facts and documents are submitted to the court. No rule obliges a party to disclose all available information that might be relevant to the case. However, the information provided to the court must be true and correct.

Before filing a statement of claim, a plaintiff usually must collect most of the relevant facts for its case. Generally, the preparation of a case starts with a review of all available documents and interviews with persons who have direct knowledge of the facts. In complex cases, a party can also consult a certified expert to clarify technical or commercial issues relevant to the case.

Other sources of information are public registers. Germany provides for multiple public registers that can be consulted on request – eg, the Commercial Register, the Debtor Register, the Register of Associations, the Land Register, the Register of Residents and the public announcements in insolvency matters. In addition, any citizen may by law require that information held by a public authority be disclosed. Such a request is only rejected if the public interest does not permit disclosure – eg, to protect secret information.

Although the German law does not provide for pre-trial disclosure tools, there are some disclosure obligations to which a party may be subject – eg, if the opposing party is in possession of a certain relevant document.

German substantive law or contractual agreements may also grant a party a legal claim against the opposing party for disclosure of certain information that is not otherwise available. Such a claim may be asserted in court. A special form of such proceedings is the action by stages. Such an action is divided into two phases: first, the court decides on the claim for disclosure of information, and second, on the request related to this information – eg, a payment claim.

In very limited circumstances, a court may also order a third party to provide a particular document in its possession. The third party may object to the court’s order on the grounds that the order imposes an unreasonable burden on it. A third party may also be subject to substantive or contractual claims for disclosure of information – eg, an insurer of a party.

The 2024 reform of the Model Proceedings in Capital Market Disputes provides that the Higher Regional Court may, at the request of one of the parties, order the other party or third parties to submit evidence in their possession that is necessary for the model proceedings. The only exception to this is if a third party has the right to refuse to give evidence. This concept, which is historically alien to German civil procedural law, was originally introduced into German antitrust law in 2021 on the basis of European requirements, and has now been transferred by the German legislator to the capital market disputes procedure. If the (third) party is a company, the evidence may also be used in criminal or regulatory offence proceedings. In the case of an individual, this is only the case if this person consents to the use. Since the protection against self-incrimination does not apply to companies, they must bear in mind when submitting evidence that it can be used against them in criminal or regulatory offence proceedings.

Privilege

German law recognises the concept of attorney-client privilege. Attorneys may not testify before authorities in relation to their mandates without the prior consent of their client. The fact that an attorney refuses to testify does not allow the courts to draw conclusions. The attorney-client privilege also covers work products, including attorneys’ files and correspondence between an attorney and their client. Disclosure of client information without consent is a criminal offence. In-house counsel admitted to the bar may also invoke legal privilege.

Redress Action

The new Redress Action provides a way for qualified institutions to obtain a decision obliging the defendant company to provide remedy to consumers in the form of monetary compensation, repair, replacement, price reduction, termination of the contract, or a refund of the price paid.

Should damages be claimed, whether arising out of contract, tort or other statutory actions, the regulations of the Civil Code apply. The Civil Code understands damage as an involuntary loss of property. If such loss occurs, the damaged party can, in principle, demand the natural restoration of the status before the harmful conduct/event. In theory, monetary relief for a loss is treated as an exception to this principle of natural restoration. However, if damage occurs to a person/an object, the injured party may alternatively claim the amount of money necessary for the restoration. Furthermore, if the restoration of the status prior to the occurrence of the harmful conduct/event is not possible or sufficient, the injured party may immediately claim the sum of money necessary for the restoration. The common practice is financial compensation for loss or damage.

In addition, an injured party may claim compensation for future losses due to loss of profit. The courts apply strict rules regarding the substantiation of the profits that would have accrued in the absence of the harmful conduct/event.

Under the general concept of damages under German law, damages must always be compensatory and generally compensate for all losses. However, certain laws set limits on recoverable damages; for instance, the German Product Liability Act (ProdHaftG) limits liability arising from one defective product to EUR85 million.

Punitive damages that add a penalty element are generally not awarded under German substantive law due to the principle of restoring the situation prior to the harmful conduct/event. However, punitive damages are awarded if the parties to the dispute agreed on a contractual penalty. Such punitive damages are well known in competition law.

Model Declaratory Action

The Model Declaratory Action does not determine remedies but, by way of a declaratory judgment, determines liability and the existence or non-existence of claims or rights, as well as of legal relationships. The individual plaintiff’s remedy will then be determined in separate follow-up proceedings in which the plaintiff can benefit from the binding determinations of the model declaratory decision.

Model Proceedings in Capital Market Disputes

The Model Proceedings in Capital Markets Disputes are not about remedies, but only about deciding common questions of fact or law. In actions under the Capital Investors Model Proceedings Act (KapMuG), various forms of statutory claims are usually asserted, eg, prospectus liability, breach of advisory contracts or tort, where damages are primarily sought.

German law normally permits the settlement of claims between the parties without court approval. Settlements reached while litigation is pending and recorded by the judge terminate the proceedings and are enforceable in lieu of a judgment.

Model Proceedings in Capital Market Disputes

The revised Capital Investors Model Proceedings Act (KapMuG) of 2012 introduced the possibility of a “collective settlement”, which facilitates the conclusion of a settlement in model proceedings. Before the amendment of the Act, each plaintiff in a particular model case had to expressly consent to a settlement. However, unanimous consent is difficult to achieve in model proceedings with numerous plaintiffs. Since the amendment, it has been possible for the model plaintiff to negotiate a settlement with the defendant(s) which, once approved by the Higher Regional Court, is binding on all parties unless at least 30% of the plaintiffs choose to opt out.

Redress Action/Model Declaratory Action

The new Redress Action and the Model Declaratory Action provide for a similar collective settlement procedure. The Qualified Entity plaintiff – ie, consumer association, and the defendant company can reach a (court) settlement in favour of the registered consumers and thereby end the proceedings. The collective settlement can only bind registered consumers who do not opt out, which is possible within one month after the announcement of the settlement in the Register of Representative Actions.

Since consumers can opt in until three weeks after the conclusion of the oral proceedings, it will regularly be very difficult for defendant companies to conduct meaningful settlement negotiations prior to the basic redress judgment because there is no certainty as to which and how many persons have joined the Representative Action.

Redress Action

The new Redress Action can be concluded with a judgment for affirmative relief – eg, performance, payment, omission, or compensation, depending on which relief the plaintiffs have sought.

This judgment is binding on a court called upon to rule on a dispute between a registered consumer and the defendant company to the extent that its decision relates to the facts and claim of the Redress Action.

Model Declaratory Action

The Model Declaratory Action does not end with an enforceable judgment but with the determination of the (non-)existence of factual and legal conditions for the (non-)existence of a claim or legal relationship between the consumers and a defendant company. To obtain an enforceable judgment, each registered consumer must then bring an individual action in which they can benefit from the binding determinations of the model declaratory decision. The judgment obtained in these individual proceedings can be appealed on points of law and is enforceable under the normal enforcement conditions that apply in Germany.

A model declaratory judgment has no effect for consumers who are not registered in the Register of Representative Actions.

Model Proceedings in Capital Market Disputes

The Model Proceedings in Capital Market Disputes also do not end with an enforceable judgment but with a Model Order of the Higher Regional Court. The issues established in this Model Order – possibly confirmed on appeal by the Federal Court of Justice (BGH) – are binding for the parties in the individual proceedings. All other aspects of the respective cases – eg, causal connection or amount of damage, are decided by the courts of the individual proceedings. The judgment obtained in these individual proceedings can be appealed on grounds that were not the subject of the model proceedings and is enforceable under the normal enforcement conditions in Germany.

The legal market is currently being driven primarily by the rapid development in the areas of legal technology (Legal Tech) and Artificial Intelligence (AI). Legal Tech has found its way into everyday legal work, and AI will be used more and more very quickly. In the next few years, we can expect numerous innovations in the field of AI, which will put pressure on established standard procedure, and it will very likely also change the structure of law firms and the work of the courts. A change in the legal market has already become apparent in recent years, in which Legal Tech companies, in particular, have created technical possibilities for handling mass actions, and third-party litigation funders have come increasingly into play. Digitalisation is therefore a huge topic in this area, and it remains to be seen how the German legislature and the German courts will continue to deal with this rapid development.

Digitalisation

Several mass proceedings in recent years, as well as the COVID-19 pandemic, have challenged the traditional practice of individual paper file processing in court and face-to-face hearings in the courtroom. The digitalisation of the judiciary is therefore at the forefront of the reform discussions. For example, a draft bill from June 2024 envisages that an online litigation tool for small claims with similar facts will soon be tested at several pilot local courts, in which the parties and the court will only come together online. The pilot courts include the local courts where the largest number of passenger rights lawsuits are pending. The trial is set to run for a period of ten years, with evaluations to be carried out after four and eight years. In addition, in a “real-world laboratory” (Reallabor) in 2023/24, some regional courts tested the possibility of recording the facts of a case in a structured manner in a basic online document that is completed by both parties. The final report of the University of Regensburg, which accompanied this project, concluded that the project had provided initial positive indications for the use of an basic online document, whereby further studies are considered necessary to further explore the usefulness of this new way of presenting a case in civil proceedings.

Video Hearings

In Juli 2024, a law came into force that aims to strengthen video hearings in civil and other proceedings.

In addition, new rules for cross-border video hearings in civil proceedings have been in force since 1 October 2024. German courts can now connect parties and their representatives by video conference for court hearings within the EU and hear them without the need for a letter rogatory. This is made possible by a new regulation in Article 5 of the EU Digitisation Regulation, which Germany is the first member state to apply. The new regulation does not cover the examination of witnesses, nor does it apply to the hearing of experts in a video conference. In these cases, the legal assistance route under the EU Evidence Taking Regulation must still be followed – ie, authorisation from the other member state must be obtained. On the day the new law came into force, the Federal Court of Justice already determined the first leading case in the so-called scraping complex (claims in connection with a data protection incident at Facebook). This will have an impact on thousands of cases related to this issue that are currently pending before numerous courts in Germany. The legal questions to be answered are highly relevant in practice – not only for scraping, but also for other proceedings for GDPR damages. Among other things, the Federal Court of Justice will have to clarify the conditions under which a violation of Article 82 GDPR exists in such cases and whether and under what conditions a possible loss of control of personal data can be suitable to establish non-pecuniary damage. The Federal Court of Justice will also comment on how the damage in such a case is to be assessed and what requirements are to be met for substantiating a claim for damages under Article 82(1) GDPR.

Lead Decision Proceedings

Since October 2024, the Federal Court of Justice may decide on fundamental legal questions in the form of a leading decision even if the parties withdraw the appeal or the appeal proceedings are settled in another way. The leading decision, which has no formal binding effect, is to serve as a guideline and orientation for the courts of instance and the public as to what the decision of the legal questions would have been. This law is intended to strengthen legal certainty and to relieve the courts of further mass individual actions.

Commercial Courts

From 1 January 2025, Commercial Courts specialising in commercial disputes will be introduced in Germany. These will be able to rule as a court of first instance on certain legal disputes with an amount in dispute of EUR500,000 or more. The Commercial Courts have subject-matter jurisdiction for civil disputes between companies (with the exception of industrial property rights, copyright and claims under the law on unfair competition). For disputes between consumers, they have jurisdiction only if the legal dispute is related to the acquisition of a company or shares in a company, as well as for disputes between a company and members of the management or supervisory board. At these Commercial Courts, it will be possible to conduct commercial disputes comprehensively in English, as is already the case at some (Higher) Regional Courts. Due to the specialised nature of the Commercial Courts, it is to be expected that these courts will only hear collective redress cases in exceptional circumstances.

Protection of Business Secrets in Civil Proceedings

The new law contains a regulation on the protection of secrets that affects all courts (ie, not only Commercial Courts or other English-speaking panels) and is therefore also directly relevant to collective redress cases. From 2025, all courts will be able to classify business secrets as confidential upon request. Subsequently, Sections 16 to 20 of the Trade Secrets Protection Act (Geschäftsgeheimnisschutzgesetz) shall apply accordingly. As in trade secret litigation, all parties to the proceedings are then obliged, from the time the action is pending, to treat as confidential any information classified as requiring confidentiality, and not to use or disclose it outside the court proceedings unless they had also acquired knowledge of it outside the proceedings. This obligation generally continues to apply even after the proceedings. In the event of a breach, the court may impose a fine of up to EUR100,000 or a prison sentence of up to six months and enforce it immediately. In addition, the court may, upon request, restrict access to procedural documents and information to a certain number of reliable persons and otherwise exclude the public, particularly during the oral proceedings.

Modernisation of Civil Procedure

Further reforms are being intensively discussed at various levels, including by a working group on the “Modernisation of Civil Procedure” commissioned by the Federal Court of Justice and the Higher Regional Courts.

ESG has arrived in the field of collective actions at the latest since the diesel proceedings. There is an emerging trend that companies will increasingly be held accountable for ESG violations in the coming years.

Private companies are already facing climate lawsuits. There have been a few lawsuits mainly against car manufacturers aimed at compelling these companies to comply with certain standards or to refrain from certain actions. These claims have been unsuccessful so far, with some of the claims still on appeal.

Plaintiffs also sue for monetary payments to themselves. In a first widely reported case, a Peruvian farmer – supported by an environmental organisation – is seeking a declaration that the energy supply company RWE – in accordance with its share of global CO₂ emissions – must bear 0.47% of the costs for any protective measures against the possible flooding of a dam due to global warming. After the court of first instance dismissed the claim, essentially on the grounds that the impairment was not adequately causally attributable to RWE, the Higher Regional Court stated in 2017 that it considered a civil claim against the energy company RWE to be possible in principle and decided to enter into the taking of evidence. The evidence-taking was delayed due to the COVID-19 pandemic and is still ongoing.

Not only industrial groups, but also the financial sector, are becoming the focus of attention. The problem goes far beyond greenwashing, which has already led to financial services companies being investigated by financial regulators.

A further increase in ESG related claims is to be expected in the future, in particular against the background of several EU directives under the EU’s European Green Deal, such as the Directive on Corporate Sustainability Due Diligence (2024/1760 - CS3D), which provides for civil liability for companies that fail to meet certain due diligence requirements and must be transposed into German law by summer 2026. In March 2024, the Directive (EU) 2024/825 on empowering consumers for the green transition (EmpCo) came into force. This directive must be transposed into German law by March 2026, and is to be complemented by the EUDirective on substantiation and communication of explicit environmental claims (Green Claims Directive), which is still in the legislative process.

Litigation funders are increasingly receiving requests from the ESG sector. This is mainly due to the fact that activist investors, who also see their role as monitoring the companies they hold in the form of shares and holding them accountable, if necessary, as well as consumer or environmental protection organisations are increasingly willing to enforce their rights in court, and often rely on third-party funding to do so. The new Redress Action, which gives environmental associations the right to sue for performance and payment, will most likely lead to an increase in ESG claims, taking into account the legislative initiatives to restrict greenwashing and the increasing possibility of third-party litigation funding.