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German Ministry of Justice publishes draft law on precedents in mass litigation cases

In order to relieve the judicial system and speed up proceedings, the German Ministry of Justice plans to introduce a new procedure for establishing precedents  for mass actions at the highest German court.

Mass actions involve a large number of individual lawsuits in identical or similar cases, such as invalid contract clauses that affect a large number of consumers.

The number of such mass litigation cases has been growing in recent years. The German government’s plan would mean that courts of instance dealing with similar cases would be guided by precedents set in rulings issued at an early stage by the highest court in Germany, the Federal Court of Justice (FCJ). This would speed up cases in the lower courts and avoid a situation where all cases go through several instances.

The Federal Ministry of Justice has published a draft law on the introduction of a  precedential ruling at the  Federal Court of Justice (13-page PDF in German language/268 KB).

In the event of a mass action the FCJ may select a suitable case from the pending appeals that offers the broadest possible spectrum of open legal questions and deliver a decision.

The lower courts may suspend the parallel proceedings pending before them until the FCJ’s decision is available. However, the parties need to agree to the suspension.

The FCJ's ruling is not formally binding as a precedent and does not affect the specific appeal proceedings on which the ruling is based. However, it should serve as a guideline for the lower courts and the public and so provide more clarity and legal certainty. Parties to litigation would also have a stronger incentive to refrain from suing and to reach an out of court settlement.

According to the draft law, it will even be possible to issue a precedential ruling if an appeal is no longer pending before the FCJ. This is intended to prevent defendants from avoiding an unfavourable ruling by withdrawing their appeal - a strategy that the German Judges' Association last year described as "flight into withdrawal of the appeal".

With the draft law, the Federal Ministry of Justice is responding to numerous calls from the judiciary and the public. The German Association of Judges and the Ministers of Justice of the Federal States repeatedly demanded the introduction of a mechanism allowing the FCJ to provide early guidance.

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