Tuesday, November 25, 2008

Collective Action - conference at the Federal Minstry of Justice

The German Federal Minstry of Justice published an interesting press-announcement (available here, but only in German) today to inform about a conference about "Collective action in Germany".

In light of an initative that the EU commission started regarding the same subject, the Ministry explains, amongst other points, that an "opt-out" solution requiring a potential claimant to act so that he or she would NOT automatically be a party to an action would be in contradiction to the constitutional right to be heard in court. A claimant must be given a choice whether to participate in an action or not ("opt-in" solution).

The press announcement further explains the various forms of collactive action currently existing in Germany:

Skimming of profits: In small cases costs and risks are disproportionate for individual claimants. Thus they usually refrain from enforcing their rights. In order to deter business models that count on this effect German competition and anti-monopoly laws have been amended in 2005 to enable a skimming of profits. If a company deliberately breaks competition or anti-monopoly laws the resulting profits can be "skimmed-off" and transferred to the state. Consumer protection organisations, chambers of trade and industry as well as other professional bodies are entitled to start a respective action.

"Einziehungsklage": When losses reach a certain amount, claimants are more likely to attempt to enforce their rights if the attached costs and risks are not disproportionate. To enable this a special kind of "opt-in" collective action, the so-called "Einziehungsklage" for consumer organisations has been introduced into German law in 2002. By way of this procedure a consumer organisation can be entitled to raise the claims of several consumers in its own name. This reduces costs and risks whilst querulatory claims are avoided at the same time.
"Kapitalanleger-Musterverfahrensgesetz" (KapMuG): Large product liability, prospectus liability or personal injury cases with several victims form a third category. In such cases the claimants are usually determined to enforce their rights. Courts, however, need the instruments to deal with large. multi-party cases in an efficient, quick and uniform way. For securities law the so called "Kapitalanleger-Musterverfahrensgesetz" (KapMuG - investor test-case procedure act) was introduced in 2005. The KapMuG opens the possibility of hearing a test-case for claims alleging incorrect, misleading or omitted information in relation to securities. If legal or factual questions are identical in at least ten cases, then they can be decided on the basis of a test case decided by the Higher Regional Court. The judgement in the test case is a binding precedent for all similar cases. The KapMuG has a sunset-clause with effect of 1. November 2010. Until then, legislators will evaluate, whether the test case procedure should be implemented as a general rule within the civil procedure law.

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