GERMANY Law and Practice Contributed by: Thomas Lennarz, Peter Wende and Christian Piroutek, CMS
ings), the model declaratory action is more formal and centralised. However, it is also less consumer-friend- ly – given that assignment models can lead directly to enforceable judgments, whereas the declaratory action requires a second round of litigation. The redress action was designed to address the inef- ficiencies of the model declaratory action. Like the model declaratory action, it can only be initiated by a qualified entity, and consumers or small businesses must opt in by registering with the claim register. The key distinction lies in the relief available. Whereas the model declaratory action is limited to declaratory find- ings, the redress action allows courts to order actual remedies on behalf of consumers and small business- es. These remedies may include damages, contract rescission, price reductions, repair, reimbursement, or ‒ in more complex cases ‒ a collective lump sum payment to be distributed among participants. The proceedings are structured in two main phases. If the court considers the action justified, it issues a basic redress judgment that defines eligibility criteria and evidentiary requirements for the claimants. Following this, the parties are encouraged to settle; if no set- tlement is reached, the court issues a final redress judgment and orders implementation proceedings. Implementation is overseen by a court-appointed administrator, who creates and manages an imple- mentation fund, verifies the claims of individual con- sumers, and distributes compensation accordingly. Compared with the model declaratory action, the redress action is more efficient and consumer-friend- ly, as it removes the need for subsequent individual proceedings. 3.3 Standing In Germany, standing to bring collective redress pro- ceedings is limited to qualified entities. Individual con- sumers or businesses cannot initiate such actions on behalf of a group; instead, they may only participate by opting in through the official claim register once a case has been filed. This approach reflects the legisla- tor’s intention to ensure that group litigation is handled by independent and experienced organisations rather than by private individuals.
Qualified entities are typically consumer protection organisations recognised under the Injunctions Act and registered with the Federal Office of Justice. To qualify, these organisations must meet certain criteria ‒ most notably, the requirement that no more than 5% of their financial resources come from business dona- tions. This safeguard is designed to prevent conflicts of interest and abusive litigation. Following the implementation of the EU Representa- tive Actions Directive in 2023, entities from other EU member states can also bring redress actions in Ger- many, provided they are listed in the EU-wide register of qualified entities. This makes it possible for cross- border consumer associations to litigate in Germany on behalf of consumers or micro-enterprises harmed by practices with an impact on the German market. Participation in these proceedings is open not only to consumers but also to micro-enterprises, defined as businesses with fewer than ten employees and an annual turnover or balance sheet not exceeding EUR2 million. This extension was a significant change compared with the earlier model declaratory action, which excluded small businesses. The reform recog- nises that micro-enterprises can face economic and psychological pressures similar to those of individual consumers. Under the declaratory action, small busi- nesses were excluded from joining via the claims register ‒ a limitation criticised during the Volkswagen proceedings because it prevented commercial vehicle owners from participating. 3.4 Class Members, Size and Mechanism – Opting In or Out In Germany, there is no automatic “class” as under- stood in common law jurisdictions. Instead, group membership is established through an opt-in sys- tem. Consumers and, in the case of redress actions, also micro-enterprises must proactively register their claims in the public claim register maintained by the Federal Office of Justice. Registration is possible until three weeks after the conclusion of the oral hearing in the relevant collective action. Only those who register within this period are bound by the judgment and eli- gible for relief, while those who do not register remain entirely unaffected by the outcome.
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