GERMANY Law and Practice Contributed by: Tanja Pfitzner, Fabian von Schlabrendorff and Niklas-Arne Hecht, Pfitzner Legal
tain qualified entities. Once a qualified entity has filed such a claim, each individual consumer can decide to opt in and apply for registration. Con- sumers who opted in are not directly involved in the conduct of the action. The model declaratory action does not end with an enforceable judg- ment, but with the determination of the (non-) existence of factual and legal conditions for the (non-)existence of a claim or legal relationship between a consumer and a company. To obtain an enforceable judgment, each individual con- sumer must then bring an individual action in which they can benefit from the binding determi- nations of the model declaratory decision. Consumer Rights Enforcement Act With Directive (EU) 2020/1828 on representa- tive actions for the protection of the collective interests of consumers and repealing Directive 2009/22/EC (the “Representative Actions Direc- tive”), the EU had taken a further step towards cross-border consumer participation in civil actions. Under the directive, qualified entities may bring representative actions for injunctions and redress on behalf of a group of consum- ers against infringements of European Union law harmful to consumers’ collective interests. Due to the possibility to obtain enforceable judg- ments, it offers a higher level of consumer pro- tection compared to the German model declara- tory action of 2018. The German Consumer Rights Enforcement Act, which entered into force on 13 October 2023, implements the requirements of the Directive and, in addition to moving the Model Declaratory Action to this Act, introduces a new type of Rep- resentative Action for performance or damages applying to all disputes between consumers and businesses (“Redress Action”). All matters that could be litigated in an individual civil lawsuit can now be litigated in these Representative
Actions. These actions can only be brought by a qualified entity which has to show in its state- ment of claim that at least 50 consumers are affected and that the consumer’s claims present substantially similar questions of law or fact. The opt-in principle applies to these Representative Actions – ie, once a qualified entity has filed such a claim, each individual consumer or small busi- ness entitled to sue (ie, companies with less than 50 employees and an annual turnover of no more than EUR10 million) can decide to opt in and apply for registration. This is possible until three weeks after the conclusion of the oral hearing in the first instance. The Redress Action proceedings are structured in three phases: First, the judicial redress pro- cedure is carried out, which encompasses the basic redress judgment on the merits of the case, a settlement evaluation phase and, if no settle- ment can be reached, the final redress judgment including the total compensation amount. This is followed by the implementation phase, in which the compensation is distributed by an adminis- trator appointed by the court who decides on eligibility and the individual amount of damages. The administrator’s decision is subject to judicial review. Finally, any potential follow-on proceed- ings are carried out, eg, if the administrator has refused to fulfil a claim asserted by a consumer in full or in part in the implementation phase, or if the defendant company raises objections, pro- vided that this claim or this objection could not have been raised during the previous phases. 3.8 Requirements for Cost Estimate German attorneys are required, under the rules of professional conduct, to inform their clients of the estimated costs that may arise during legal proceedings. The standard of advice is that the client must be able to decide, on an informed
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