Collective Redress In Germany

Traditionally, collective actions have not been part of the civil law litigation landscape. However, the landscape for collective redress in Europe has evolved over the last few years and collective action mechanisms have become more available throughout the region.

While the international financial crisis and the connected individual losses can be regarded as a starting point for the increased demand for collective actions in Europe, other factors have contributed to the establishment and the design of such collective redress mechanisms.

In Germany, the most prominent is the "Dieselgate" scandal. In September 2015, the United States Environmental Protection Agency found that Volkswagen had intentionally programmed diesel engines to activate emissions controls only during laboratory emissions testing. A (German) consumer lobby has been pressing for the availability of collective redress. In addition, plaintiff firms have geared up, and new firms (particularly from the U.S.) have entered the market together with litigation funders. As lawyers in Germany may, in general and subject to narrow exceptions, not operate under a contingent fee basis, litigation funding (or third-party funding) has become an increasingly popular way for plaintiffs and their law firms to obtain the money they need to pursue claims. Litigation funding has not been commonly used across Europe, but this is beginning to change as international litigation funders are entering the market and new funders are setting up shop throughout Europe. Another driving force for the establishment of collective redress mechanisms has been the introduction of the new European data protection regime on 25 May 2018, when the General Data Protection Regulation (GDPR) took effect across EU Member States. Following this, individual data subjects may bring claims against companies and their directors and officers in the event of a data protection breach. The European collective redress mechanism is specifically drafted to apply, inter alia, to claims under GDPR.

Against this backdrop, there has been a rising call for collective redress mechanisms in Germany and across Europe. However, a major concern in many jurisdictions has been to avoid a mass litigation business model for a plaintiffs' bar of the sort that can be found in the U.S. Legislators in Europe, and especially in Germany, bearing this concern in mind, have drafted the available collective redress mechanisms accordingly so as to...