Dispute Resolution – Litigation – Arbitration Proceedings20.08.2024 Newsletter
Mass litigation as opposed to individual lawsuits: opportunities and risks of collectively enforcing claims
In 2018, the German legislator introduced a model declaratory action for the first time – prompted by the wave of lawsuits in the wake of the diesel scandal. Since then, mass actions have become an integral part of the German litigation landscape.
Mass actions refer to both a large number of simultaneous or temporally coordinated individual actions to enforce similar or identical claims of a multitude of claimants (usually consumers) against the same defendant as well as class actions, for example
- collective actions (model declaratory actions or redress actions) by consumer protection organisations in civil disputes under the German Consumer Rights Enforcement Act (Verbraucherrechtedurchsetzungsgesetz, VDuG),
- model proceedings in capital market disputes under the German Capital Markets Model Case Act (Kapitalanleger-Musterverfahrensgesetz, KapMuG) or
- the assignment of claims to a litigation vehicle, i.e. usually to a company that asserts the claims of several claimants in a bundled manner and receives a success fee if the claim is awarded.
In this way, claimants can also pursue minor claims that would not be worth enforcing by individual lawsuit. Mass actions are a cross-industry risk: current prominent examples include lawsuits against Vodafone and the streaming services Amazon Prime and DAZN.
Companies would therefore be well advised to prepare themselves for class action proceedings. On the one hand, companies should take precautions to minimise the risk of being sued themselves. If mass action proceedings cannot be averted, then a structured defence is essential. Companies that have a large customer base and offer their services to end consumers are especially exposed. In the retail and consumer goods sector, for example, manufacturers who mass-produce and market goods of the same type are potential defendants. In general, there is a high risk of legal action in cases where contracts and prices are adjusted during ongoing contractual relationships as well as in the event of breaches of competition and data protection law. At best, the risk can be reduced or even contained by taking preventative measures.
On the other hand, mass actions provide opportunities for aggrieved companies and investors to assert individual claims in a bundled manner. This should lead to greater legal certainty and relieve the burden on the judiciary. Aggrieved parties may be able to benefit from the size of the proceedings and receive support as a group from litigation funders if they see potential for a favourable outcome.
In our series of articles on mass proceedings, we will be informing you over the next few weeks about the peculiarities of different types of mass actions and discuss how you can manage the associated risks and utilise the opportunities.
Oppenhoff’s Litigation & Arbitration team helps you to avoid conflicts by carefully drafting contracts and clearly defining rights and obligations.
Where disputes are unavoidable, the team represents your interests before the state courts and arbitration tribunals - with convincing arguments and customised litigation tactics.
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