On 15 February 2007, the Higher Regional Court of Stuttgart handed down the first model case decision in proceedings brought by several investigators who complained that Daimler Chrysler AG had not published the resignation of its CEO, Jürgen Schrempp, in time. The model case had been initiated on 03 July 2006, after ten investors had filed for a model case proceeding against Daimler Chrysler AG in the local court of first instance. The Higher Regional Court ruled that Daimler Chrysler had not breached its disclosure duties. The local court of first instance is bound by this decision and will now have to dismiss all of the investors’ claims. In this first model case proceeding the KapMuG has proven to be efficient because only one model case had to be tried.
The first case to put collective redress on the agenda in Germany started more than a decade ago in April 2001, when the first of many damages claims against the German telecommunications company Deutsche Telekom was filed. Due to the huge number of claimants, the federal government responded by enacting the “KapMuG” (Kapitalanleger-Musterverfahrensgesetz - Capital Markets Model Case Act). The Deutsche Telekom case is probably the most prominent example of collective shareholder action in Germany (and largely prompted the German legislator to pass the KapMuG Act). The background to this action is the issue/private placement of shares by Deutsche Telekom in 2000, which were acquired by thousands of private and institutional investors. During the course of the year 2000 the share price decreased rapidly. The investors sued Deutsche Telekom for damages and based their claims on, amongst other things, allegations that certain information in the issue prospectus was wrong. In 2012, the Higher Regional Court in the relevant KapMuG procedure held that the prospectus was not deficient and dismissed the KapMuG action. Upon appeal the German Federal Court of Justice (BGH) overruled this decision in October 2014 and remitted the matter back to the Higher Regional Court for further consideration in view of the decision of the German Federal Court of Justice, where it is now pending.
As a side note it should be noted that there are private associations in Germany who represent investors’ interests, such as the SdK (Schutzgemeinschaft der Kapitalanleger e.V.) or the SfA (Schutzvereinigung für Anleger e.V.). It is not, however, common practice for these associations to appear in court in their own name on behalf of the investors (although technically it is possible to claim another person’s right in a so-called representative action (Prozessstandschaft)). There are, however, some highly specialised law firms in Germany which deal with nothing other than acting for shareholders in lawsuits.
In a separate case in February 2007, the Dusseldorf Regional Court made an important interim judgment, declaring that a “bundled” damages claim against a cement cartel accused of anti-competitive conduct was admissible. The Court of Appeal in Dusseldorf upheld this judgment on 14 May 2008. 36 claimants had bundled their damages claims resulting from the infringements by assigning them to a Belgian company set up to pursue such claims. However, this damages claim was not a genuine class action, since 35 of the 36 applicants transferred their claims to one claimant. Defence lawyers argued that this type of assignment constituted an illegitimate case of representative action but the court ruled that the claimant legitimately invoked a distinct, acquired right. The case has now been remitted to Dusseldorf Regional Court to decide the substantive question of whether the damages claim has been proved.
Opinions remain sharply divided as to whether further steps should be taken to enable more collective redress actions in Germany, but the issue remains one that is debated at the highest levels. Indeed, the Federal Ministry of Justice hosted a conference on “Implementation of collective law in Germany” in November 2008 at which the former Minister of Justice, Brigitte Zypries, argued in favour of strengthening of consumer rights by enabling consumers to bring claims even in cases of minor damage. This view is supported by the Green Party, which submitted a proposition aiming to facilitate class actions under German law while shifting the burden of proof to corporations in cases of alleged illegal behaviour.
The Federation of German Consumer Organisations took the opportunity presented by International Consumer Day on 15 March 2011 to call for effective representative and class actions, arguing that demand and supply can only be harmonised if there is effective redress for unlawful conduct.
In the opposing camp, the president of the German Association of Chambers of Commerce and Industry has warned against creating additional and unpredictable burdens for businesses. This view would seem to be more aligned to the views of the German government. The current coalition agreement states: “We disapprove of the introduction of class actions nationally and on a European level”.
The EU Commission is developing a model for collective redress in the areas of competition law, consumer law and financial law and in June 2013 the Commission published its communication “Towards a European Horizontal Framework for Collective Redress” and its recommendation “on common principles for injunctive and compensatory collective redress mechanisms in the Member States concerning violations of rights granted under Union Law” (see next chapter).
However, for now there is more negative than positive feedback on this topic. This does not unexpected. The majority of the German legal community is rather sceptical about class actions. Many commentators believe that collective actions would not only be superfluous, but also detrimental. The EU Commission had discussed the introduction of collective actions as long ago as 2007, but stopped the project in 2009 in the light of strong resistance from France and Germany, in particular.
In June 2014, the opposition party “Die Grünen” (the German Green Party) even officially asked the federal government about its position with regard to class actions in Germany and whether the government agrees or disagrees with the opinion held by the EU Commission. According to Die Grünen, class actions would improve consumer rights, referring to examples such as compensation for flight delays or excessive electricity payments. According to this official question, class actions would make it easier for customers to file claims for damages against large corporations, levelling the economic imbalances between consumers and big corporations.
The federal government’s opinion is that the Code of Civil Procedure already contains appropriate instruments that provide the same (or almost the same) opportunities (known as objektive und subjektive Klagehäufung - objective and subjective application clustering). On this basis there have already been successful class actions in the recent past against banks, energy supply companies and insurers. The government is also currently examining whether, besides the present options for class actions, improvements in the law are needed. It also takes into account the published opinion of the German Federal Bar Association which states that the European Commission’s proposals ought to be improved in many respects: First, the jurisdiction questions and the proceeding provisions should be defined; second, it is not clear how class actions are to be funded, how the people would be informed about the possible class action and how to prevent possible abuse. Therefore, the German Federal Bar Association suggests that no further steps should be taken until the European Commission modifies the proposals.