Germany’s new coalition wants to accelerate mass proceedings through judicial reform

Out-Law News | 02 Dec 2021 | 2:53 pm | 2 min. read

Small businesses in Germany could soon join consumers in mass proceedings against large businesses, under plans to make the judicial system faster and more effective.

Almost two months after the election, Germany's prospective new government has published a coalition agreement (PDF/1.12 MB - in German language) outlining the plans of the three coalition partners for the next four years.

The coalition agreement between the Social Democrats, the Greens and the Free Democrats provides for changes in legal policy that are intended to speed up mass proceedings and expand the collective actions regime.

The three parties stated: "We will modernise existing instruments [...] and examine the need for more. We will implement the EU Directive on collective redress in a user-friendly manner and in further development of the declaratory model action, and we will also open up this possibility of legal action to small enterprises. We are sticking to the tried and tested requirements for associations entitled to sue."

"With this, the new coalition confirms that it wants to further develop the existing regulations on the German declaratory model action, but does not want to introduce a completely new instrument for representative action," said Christian Schmidt, expert on court proceedings at Pinsent Masons. "Overall, it is clear that consumer protection is likely to take a higher priority in collective redress in the future."

The EU directive on representative actions for the protection of the collective interests of consumers introduces a new collective actions regime in the EU from 2023 onwards, but still has to be transposed into German law. The harmonised model for collective actions is intended to better protect consumers in the member states in the case of mass harm events. Even small claims, which individual consumers would not sue for, but which in turn affect a large number of consumers in the same way, are to be better pursued.

The directive provides that qualified entities - such as consumer associations - have the possibility to sue businesses for injunctive relief or damages on behalf of consumers. Each EU member state is required to designate at least one qualified and financially supported body that is authorised to represent consumer interests in representative action proceedings.

In Germany, collective actions are already possible since the declaratory model action was introduced at the end of 2018. However, the German concept of the declaratory model action differs in some respects from the principles outlined by the EU. While the German declaratory model action is merely aimed at establishing the merits of a claim which must then be sued for by the individual affected parties, the European class action provides for genuine actions for performance. If a class action is successful, companies can be obliged to pay compensation to injured consumers or to provide for repair, replacement, price reduction, contract termination or reimbursement of the price paid.

Experts believe that a reform of Germany’s judicial system is urgently needed, and not only to enforce the EU on representative actions: It was only in mid-November that the German Conference of Justice Ministers called on the federal minister of justice to launch a reform package to relieve the courts, which are increasingly overburdened by mass litigation.

As reported by the Frankfurter Allgemeine Zeitung (German-language article), nine presiding judges at the Augsburg Regional Court also wrote to the Munich Higher Regional Court, pointing out that the increasing number of mass proceedings was leading to overwork and affecting mental health and motivation.

The new coalition also wants to ensure that court proceedings become faster and more efficient: For example, it shall become possible to conduct hearings online. The taking of evidence is to be "audio-visually documented" and "more specialised adjudicating bodies are to be used". In addition, small claims are to be "more easily enforced in court in citizen-friendly digital procedures". The new coalition also wants to introduce English-speaking specialised chambers for international commercial and economic disputes.

"Further digitalisation and the accompanying increase in efficiency in the courts is beneficial for all litigants," said Schmidt. "The pandemic has already acted as a catalyst here and has shown that the targeted use of technology makes more sustainable and speedy proceedings possible."