Historically, Germany has followed the model of representative actions, giving qualified entities the right to bring collective actions, mainly for injunctive relief.

Under the Act on Injunctive Relief (Unterlassungsklagengesetz) qualified entities can bring actions against businesses that use unfair general terms and conditions (section 1) and businesses that violate consumer protection law (section 2). In the latter case, the available remedy also covers eliminating the source of the violation of consumer rights. Qualified entities can also bring representative actions under the Unfair Competition Act (Gesetz gegen den unlauteren Wettbewerb) for injunctive relief, damages and skimming-off of profits (sections 8-10). In the event of a violation of antitrust law, qualified entities can also bring representative actions for injunctive relief and skimming-off of profits under the Act against Restraints of Competition (Gesetz gegen Wettbewerbsbeschränkungen) (section 34, 34a).

The Capital Investors Model Proceedings Act (Kapitalanlegermusterverfahrensgesetz) provides a means of collective redress for investors who have suffered damage from receiving misleading capital market information. It is a well-established means of bundling individual capital market litigation and deciding on overarching issues but does not constitute a representative action as it is derived from individual proceedings and not brought by qualified entities.

In 2018, the model declaratory action (Musterfeststellungsklage) was introduced, which is based on a pre-judgment opt-in mechanism. It allows qualified entities to obtain a judgment on preliminary factual and legal questions that is binding on the courts in subsequent individual proceedings brought by consumers against the same business.

The current regime of representative actions remains largely untouched by the implementation of the Representative Actions Directive ("RAD"). The most significant change in Germany’s system of representative actions is the introduction of the action for redress measures, which enables qualified entities to sue directly for performance as required by Article 9 RAD and which is implemented in line with a concept already in place for the model declaratory action. The new mechanism is thus a judicial and not administrative procedure. The provisions on the action for redress measures and the declaratory model action are now part of the new Consumer Rights Enforcement Act (Verbraucherrechtedurchsetzungsgesetz). The new representative action for redress measures has three sub-types:

1. a) Single-stage proceedings with consumers listed by name

Qualified entities have the option to claim performance (e.g. payment) directly to consumers identified by name. The court thus decides on the individual claims of the consumers. A judgment granting the claims can be enforced by the qualified entity for the benefit of the consumers. As the qualified entity will usually not know all affected consumers by name and because collecting the names very often requires significant resources, it is unlikely that this sub-type will be used by claimants.

1. b) Multi-stage proceedings with preliminary and final redress judgment as well as implementation proceedings

Qualified entities can also claim for the payment of a “collective total” to a trustee who will verify whether consumers are entitled to claim under a preliminary redress judgment and then distribute the funds awarded to consumers accordingly. This sub-type of the action for redress measure can be divided into different phases:

1. aa) In phase 1 of the judicial proceedings for redress, a qualified entity files an action for redress measures. Consumers can register their alleged claims with an electronic register established and run by the Federal Office of Justice. The court examines the merits of the claim and either dismisses the action or renders a preliminary judgment on redress. The purpose of the preliminary judgment is to determine (i) the amount payable to consumers who have registered their claims, (ii) the criteria a consumer has to fulfill in order to be able to claim under the judgment and (iii) the evidence the consumer has to provide in the implementation proceedings. If the amounts payable to eligible consumers are identical, e.g. in the event of set statutory compensation, the court quantifies the amount. If the amounts payable to consumers differ, the court has to specify a common method for calculating the amount.

In phase 2 of the judicial proceedings, the court asks the parties to submit a written settlement proposal. This is intended to give the parties the opportunity to, for instance, agree on proceedings that are simpler and possibly less costly than the implementation proceedings applicable by law. A valid settlement requires approval by the court. Without a settlement, the proceedings continue and enter phase 3.

In phase 3 of the judicial proceedings, the court determines the collective total in a final judgment on redress. At this stage of the proceedings, the court does not examine the specific claims of consumers but determines the amount payable by the defendant to a trustee who will subsequently examine the claims and make payments to eligible consumers. To this end, the court has to determine the amount all registered consumers are entitled to claim from the defendant. According to the explanatory notes, in appropriate cases, the court may assume that the claims of all registered consumers have merit. The reason why such an approach is deemed permissible is that funds not distributed to consumers are repaid to the defendant. Likewise, if the collective total is too low, the claimant may request a decision by the court to have the defendant make an additional payment to the trustee.

If the amount payable to each consumer is quantified in the preliminary redress judgment, it will often suffice for the court to multiply this amount by the number of consumers who have validly registered their claims. If the court has specified a common method for calculating the amount in the preliminary redress judgment, calculating the collective total will often be more complex. The court is entitled to estimate the collective total pursuant to section 287 of the German Code of Civil Procedure and take evidence to do so.

1. bb) The final judgment is followed by the implementation proceedings. The court appoints an independent trustee who sets up an implementation fund into which the defendant pays the collective total determined in the final redress judgment. The trustee then examines the individual consumer claims and determines whether the consumer claim and evidence provided satisfy the requirements established in the preliminary redress judgment. The trustee then renders a decision which can be challenged before the court. If it becomes apparent that the collective total will be insufficient to fulfill every consumer´s claim, the claimant may request an increase in the collective total. If the final amount available is too low, the funds will be disbursed on a pro-rata basis.
2. cc) Consumers may sue the defendant individually if the trustee rejects the claim as a whole or in part. The defendant may commence individual actions to request repayment of the amount disbursed. Such an action may only be brought in relation to individual defenses the defendant could not be heard within the collective proceeding. The claim expires if the defendant does not notify the consumer within nine months after the payment of its intention to request repayment.
3. c) Multi-stage proceedings with final judgment and implementation proceedings

If a settlement is highly unlikely, the parties may request a judgment that combines the preliminary and final redress judgments. The judgment is then followed by the implementation proceedings and potentially individual actions (see b)).

Representative actions for redress and declaratory measures are available for claims of consumers and small businesses (fewer than ten employees and annual turnover or balance sheet of less than EUR 2 million) against businesses in relation to civil law matters. The German implementation of the RAD thus goes beyond the material scope of the RAD which only covers claims by consumers arising in the areas designated in Annex 1. The action for redress measures covers any kind of performance that is provided by the applicable substantive law (e.g. payment, repair or replacement of a product).

The general rules of the German Code of Civil Procedure apply. The losing party must thus bear the costs. These costs include the lawyers’ fees of both parties, court fees and any additional costs (e.g. for experts) if applicable. However, the cost risk is limited by a statutory cap on the value of the dispute which is the reference point for the calculation of lawyers’ and court fees. The cap for actions for redress is EUR 300,000 and for actions for declaratory relief EUR 250,000. This is intended to minimize the risk of litigation costs. Court fees for collective action for redress thus are capped at EUR 8,139 for the first instance and EUR 13,565 for an appeal; a claimant’s adverse cost risk amounts to around EUR 7,000 and another EUR 10,500 for an appeal.

Additional costs are the costs incurred by the qualified entity due to its obligation to inform on the proceedings, and its results are also part of the costs that have to be borne by the losing party (cf. question 10 b)).

Finally, the defendant always bears the costs of the implementation proceedings, in particular the costs for the trustee.

Actions under the new regime can be brought as of 13 October 2023 also with regard to infringements prior to this date. However, there are special rules on suspending the statute of limitation for claims brought by way of actions for injunctive and redress measures. Such actions are only suspending the statute of limitation for claims arising from infringements that occurred after 12 October 2023. As a consequence, an action for redress measures can be dismissed solely on the ground that the claims registered by consumers become time-barred while the action is still pending if those claims arose from an infringement that took place before 13 October 2023.

The opt-in model applies. Affected consumers can register their claims until three weeks after the closing of the oral hearing. This is in any event still before the court renders a judgment.

In case of a settlement, registered consumers may opt out up to a month after the announcement of the settlement in the electronic database. The opt-out declaration must be submitted to the Federal Office of Justice (Bundesamt für Justiz). Opting out of the settlement does not affect the validity of a consumer’s registration. In other words, the registered consumer still profits, for example, from the suspension of the statute of limitations caused by the filing of the representative action and is free to pursue his or her claims individually.

Entities entitled to file an action under the Consumer Rights Enforcement Act are certified consumer associations that do not receive more than 5% of their financial resources through contributions from companies and that are listed pursuant to section 4 of the Act on Injunctive Relief. The list is published by the Federal Office of Justice and available online.

The decision on whether the additional requirements set forth in section 4 of the Act on Injunctive Relief are being met lies with the Federal Ministry of Justice. It is, however, irrefutably presumed that consumer advice centres as well as other consumer associations fulfil these requirements if they are predominantly supported by public funds.

Other entities entitled to file an action are qualified entities from other Member States of the European Union. These are to be listed in the register of the European Commission in accordance with Article 5(1)(4) RAD.

The representative action for redress measures is only admissible if the qualified entity demonstrates in a comprehensive manner that at least 50 consumers (or small businesses) could be affected by the action and the claims asserted are essentially similar. The requirement of sufficient similarity is met (i) if the claims are based on the same set of facts or a series of essentially similar sets of facts and (ii) if essentially the same factual and legal questions have to be decided by the court. In practice, courts have discretion in this regard and it is likely that courts will engage in a case-by-case assessment.

There is no separate decision on the certification of the claim. If the requirements set out above are not met, the action is inadmissible and will be dismissed. However, in practice, the parties also submit their arguments on the merits before the court indicates whether it considers the action to be admissible.

Third-party litigation funding of actions for declaratory or redress measures is possible but subject to strict conditions.

It is mandatory for the claimant disclose to in the statement of claim the sources used for funding the action as well as the financing agreement.

Section 4(2) of the Consumer Rights Enforcement Act states that litigation funding is inadmissible if it is provided by a third party that is a competitor of the defendant (no.1), is dependent on the defendant (no.2); has been promised an economic share of more than 10% of the performance to be rendered by the defendant (no. 3), or can be expected to influence the litigation of the qualified entity, including the settlement phase (cf. question 1 b)), to the detriment of consumers (no.4). These rules serve to implement Article 10(1)(2) RAD but exceed its requirements. The admissibility requirements for litigation funding ensure that conflicts of interest are avoided.

The parties may reach a settlement with effect for all consumers registered in the electronic database. The settlement is subject to approval by the court. The court approves the settlement by order if it considers it to be an appropriate settlement, taking into account the facts of the case, the state of the dispute and the interests of the consumer.

If an individual consumer refuses to be bound by the approved settlement, that consumer may withdraw from the settlement within a period of one month after its announcement.

Obligations to provide public information are largely incumbent on the Federal Ministry of Justice and the qualified entities.

a) The Federal Office of Justice maintains an electronic database (Verbandsklageregister) which includes the following information:

1. the parties,
2. court and file number,
3. the claimant’s request for redress including the similarity of the claims asserted by the consumers,
4. statement of facts of the case submitted by the claimant,
5. date of publication,
6. the consumer’s right to register the asserted claims,
7. court decisions,
8. court-approved settlements, the right to withdraw from the settlement,
9. court decisions,
10. filing of an appeal,
11. legal force of decisions,
12. decision on opening an implementation proceeding,
13. decision on the termination of an implementation proceeding,
14. opening of insolvency proceedings,
15. the obligation of the Federal Office of Justice to provide a registered consumer with a written excerpt of the data contained in the electronic database concerning the rights of the consumer(s).

A judicial vetting of the information is not required. The court must forward the information concerning nos. 1-4 and nos. 7-14 without delay (unverzüglich) to the Federal Office of Justice. Without delay means without culpable and undue delay according to section 121(1) of the German Civil Code.

b) Pursuant to section 12 of the Consumer Rights Enforcement Act, qualified entities must provide the following information on their websites:

1. representative actions it intends to file,
2. representative actions it has already filed, and
3. the procedural status of the action(s)

Additionally, the qualified entity must disclose the fact that consumers will only be covered by the effects of a representative action if they effectively opt-in.

Any unappealable decisions, judgments or settlements terminating a proceeding must be published on the websites in anonymous form for at least six months.

There are no special rules despite a penalty provision that allows courts to impose a fine of up to EUR 250,000 if a party does not comply with a court order for disclosure. Under the general rules, the court may, for instance, order a party or a third party to present documents or other records in accordance with the general rules of the German Code of Civil Procedure (sections 142-144 of the German Code of Civil Procedure). According to section 142 of the German Code of Civil Procedure, the court may, at its own discretion, order a party or a third party to disclose documents that are in his or her possession.

Cross-border representative actions require no further specific features of procedure. The qualified entity must, however, fulfill the criteria as set out above (cf. question no. 6).

No cy près remedies are available. The amount of the collective total not distributed to consumers is repaid to the defendant at the end of the implementation proceedings.

Not applicable.