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Group Action in Germany?

This preview highlights the current approach in mass litigation cases in Germany, with a focus on representative action models for securities litigation. It delves into the Deutsche Telekom case, German Civil Procedural Code implications, the aims of lawmakers, and plans for expanding these models to include consumer litigation. The analysis covers the challenges, effects, and potential impacts on the legal system, consumer protection, and capital markets. The text also discusses proposed laws for consumer litigation and outlines the future outlook for these representative actions in the German legal landscape.

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Group Action in Germany?

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  1. Group Action in Germany? Representative Action in Security Litigation and Plans to expand this Model

  2. Preview • Current Approach in mass litigation cases • Aims of law maker • Representative Action Model for Securities Litigation • Plans to expand for consumer litigation including Tort and Product Liability

  3. Current Approach Deutsche Telekom Case • more than 14.000 claimants, 2.200 court cases • venue in Frankfurt only • overall value est. € 100 million • more than 750 plaintiff lawyers • case: • overstatement of property valuation in IPO prospectus • misrepresentation of voice stream acquisition and UMTS auction in prospectus …

  4. … German Civil Procedural Code (ZPO) • designed for pursuit of single claims, bilateral disputes • no mass litigation feature Claimants • assign claims to SPV (assignment at risk of nullity) • instruct one lawyer • enter into representative action agreements • with all models having little effect on practicability …

  5. … Effect • costs of litigation exceed value of individual claim, no use of evidence from parallel proceedings • no unified venue for tort claims: Risk of conflicting judgements • many claims not pursued: effect on standard in product safety? Effect on standard in capital market information? • workload for courts …

  6. … Constitutional regime: due process • right of claimant and defendant to have individual case heard • day in court • no binding effect of parallel cases

  7. Aims of lawmaker • to enhance effectiveness of court system for mass litigation • to reduce workload of courts • to improve • effectiveness of capital markets • consumer protection • influence of EU Commission (White Book), German Lawyers Association (DAV; Dt. Juristentag)

  8. Representative Action Model for Securities Litigation • approved draft law • draft introduced in April 2004 • critique for limitation to securities litigation • approved by parliament on 16 June 2005 • publication expected soon • general election in autumn should not have any effect …

  9. … Scope • misstatement of information for capital markets in stock exchange prospectus, statements in general shareholder meetings of listed companies, financial accounts, ad-hoc-announcements …

  10. … Defendants • company • management • supervisory board • auditors Venue • exclusive venue at registered office of issuer • for lawsuit against all defendants …

  11. … Procedure

  12. … Funding • no contingency fee • legal aid • no extra court or attorney fees • cost of evidence are shared by all parties • no advance fee for court appointed expert …

  13. … Potential effect on practise • no reduction of number of individual claims • incentive for more litigation resulting from cost reduction • limited reduction of workload of courts • no extra fees / costs for lead case …

  14. Proposal for Consumer Litigation • draft law on „Action of Associations, Representative and Group Action“ • dated 17 January 2005 • introduced by Ministry of agriculture and consumer protection • scope: product liability, consumer protection • no immediate future: discontinuity of parliament after general election

  15. Outlook • draft representative action for security litigation likely to become effective prior to general election • immediate effect on Telekom case • some general progress on effectiveness • draft consumer litigation statute: • currently no future • tendency to extend representative type action beyond security litigation, security representative action law regarded as test law, limited in time for 5 years

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