German law to promote mass action precedents passes government hurdle

On 9 November 2023, the German Bundestag debated the draft law and referred it to the responsible Legal Affairs Committee. The German legislative process still requires several further steps until the law comes into force.

Under the new law, the Federal Court of Justice (FCJ) may select a suitable case from the pending appeals in a mass action that offers the broadest possible spectrum of open legal questions and deliver a ‘precedential decision’. Its rulings under the procedure would not establish formal binding precedent but rather provide authoritative guidance to lower courts on how to interpret issues likely to come up in other cases. Its powers to issue such rulings would apply even if the underlying case is settled by the parties or otherwise withdrawn before the FCJ.

Where the FCJ takes forward a precedential decision, the lower courts may be permitted to suspend any pending parallel proceedings before them until the FCJ’s decision is available. However, the parties to those proceedings must agree to any suspension.

“The precedential decision serves … as a guideline and orientation for the courts and the public,” the Federal Ministry of Justice (BMJ) said in a statement. “This ensures faster legal certainty for those affected and legal practitioners, relieves the burden on the courts by avoiding further lawsuits or appeals on the same legal issue and does not incur any additional costs.”

The BMJ said the new law comes amidst a sharp increase in the number of mass action cases being filed in Germany. The precedential ruling allows the FCJ to ease the burden on the lower courts in Germany, which currently are “repeatedly burdened with new proceedings on similar facts” because appeal proceedings can be terminated before precedents can be set by the Federal Court of Justice.

Johanna Weißbach of Pinsent Masons, who specialises in defending businesses against mass claims, said: “To a certain extent, the introduction of the precedential ruling takes the strategic sovereignty over their appeal proceedings out of the hands of the parties: it may be in the interest of a party to prevent a reasoned decision of the Federal Court of Justice by withdrawing the appeal, acknowledging or settling the claim before a decision is handed down.”

“The procedural laws on appeal proceedings were already amended a few years ago and the possibilities for a withdrawal and acknowledgement have been limited to avoid this scenario. The new precedential ruling would now go even further – the Federal Court of Justice could decide on legal issues even after the actual appeal proceedings are ended and thus provide guidance to lower instances. The principle of party disposition that applies in German civil proceedings actually provides for something different, namely that the parties control the course of the proceedings,” she said.

The law has been drafted to allow the FCJ to issue a precedential ruling even if an appeal is no longer pending. This is intended to prevent what the German Judges’ Association has termed “flight into withdrawal of the appeal” – where defendants seek to avoid an unfavourable ruling by withdrawing their appeal.