From September 2023, consumer protection associations will have a new legal instrument at their disposal to obtain collective redress against businesses on behalf of consumers. With the remedial action, it will be possible for associations to sue for performance, but also for damages, contract termination, price reduction, or purchase price reimbursement in cases involving at least 50 consumers. In this article, we offer a brief overview of the consequences of the new regulation to provide our clients with the necessary clarity regarding their legal options for action. As a multidisciplinary law firm whose practice focuses on German civil and contract law, we represent consumers who wish to avail themselves of the remedy action. Our legal experts will advise whether a remedial action might be appropriate in your case and work closely with you to find the best possible solution to your concerns. We will accompany you from filing the action until the end of the process and support you in and out of court to assert your rights and interests.

Aim and Content of the New Law Implementing the Representative Actions Directive

The German Bundestag has already passed the Act on Implementing of the Representative Actions Directive (Gesetz zur Umsetzung der Verbandsklagenrichtlinie – VRUG) on 7 July 2023, and thus amendments for class actions by associations in favour of consumers and small businesses were adopted. The planned law transposes the EU Representative Actions Directive 2020/1828 into German law. However, the actual entry into force of the law is scheduled for September 2023 at the earliest due to the required participation of the German Bundesrat.

The primary aim of the new law is to facilitate the filing of class actions by qualified consumer associations. Thus, the enforcement of the claims of consumers and small businesses is to be simplified.

Scope of Application of the Remedial Action

According to Section 1 (1) of the Consumer Rights Enforcement Act (Verbraucherrechtsdurchsetzungsgesetz, VDuG), the scope of application of the remedial action extends to all civil disputes concerning claims and legal relationships of many consumers against entrepreneurs. The new law thus expands the scope of application: It does not extend exclusively to consumer protection provisions (as previously required by the Directive) but also, for example, to general German tort law. This can be particularly interesting for product liability cases, data protection claims for damages or investment cases. Here, the remedial action could provide relief.

Another notable feature is the categorisation between consumer and entrepreneur. The entrepreneurial status should only be affirmed if the company employs more than ten employees and has an annual turnover of more than 2 million euros. Companies with fewer employees and a lower annual turnover are referred to as small companies and are treated like consumers in their legal positions. According to Section 1(2) VDuG, such small companies can join the representative action in the same way as entrepreneurs.

Requirements for Bringing an Action for Remedy

Legal Standing

There must first be legal standing to bring an action for a remedy. According to Section 2(1)(1) VDuG, it is not consumers themselves who have legal standing, but qualified (domestic) consumer associations that are registered in the list under Section 4 of the Act on Injunctions for Consumer Rights and Other Infringements (Gesetzes über Unterlassungsklagen bei Verbraucherrechts- und anderen Verstößen, UKlaG)) and which do not obtain more than five per cent of their financial resources through contributions from businesses. A minimum registration period of one year applies. This means that it is possible for consumer associations to be founded for the sole purpose of taking legal action. Furthermore, associations from EU member states are entitled to sue in Germany under Section 2(1)(2) VDuG.

In addition to the legal standing requirement, the plaintiff must prove they are directly affected. For this purpose, it is sufficient that the plaintiff comprehensibly demonstrates that they are affected (Section 4 (1) VDuG).

Similarity of the Claims

Furthermore, the claims asserted with the action for remedy must be essentially similar according to Section 15 (1) sentence 1 VDuG. When claims are essentially similar, they must always be considered on a case-by-case basis. In principle, Section 15 (1) sentence 2 sets out the requirements: Accordingly, similarity is always to be affirmed if

  • the claims are based on the same facts OR
  • are based on a series of essentially comparable facts AND
  • the claims involve essentially the same issues of fact and law.

Procedure of the Action

The action for remedy is divided into four phases. First, the court examines whether the claims asserted by the consumer associations are justified on the merits. If this is the case, the interlocutory judgment is issued. The interlocutory judgment standardises the conditions for entitlement and the proof of entitlement to be provided by the consumer.

Exceptionally, a regular final judgment for payment may be issued instead of a basic remedy judgment to minimise the duration of the proceedings. However, this is only permissible if the plaintiff seeks compensation to named consumers.

The settlement phase follows if the basic remedy judgment has been issued. In the settlement phase, an attempt is made to reach an amicable agreement between the consumer and the business. Depending on whether a settlement could be achieved or not, either the extension of the proceedings into a third phase or the conclusion of a settlement follows.

If no amicable settlement can be reached, the court decides in this third phase, which claims the plaintiff is entitled to. This decision is referred to as an "interlocutory judgment".

The remedial judgment is followed by the fourth phase of the remedial action, the implementation proceedings. The implementation proceedings regulate how the company must pay its benefits into "implementation funds". A court-appointed clerk will check which entitlements the registered consumers are entitled to and then, if necessary, distribute the total amount to the entitled consumers.

Difference to the Model Declaratory Action

Since 2018, there has been the possibility of filing a model declaratory action in Germany. The model declaratory action does allow consumers to file a collective action. However, unlike the remedial action, the model declaratory action only establishes in court which facts or legal issues are present. Each consumer must then assert the individual claim again in court.

In the remedial action, this additional requirement would be omitted. If the plaintiff wins the case, this leads to direct compensation without going to court again. However, the plaintiff still has the right to choose whether to bring a model declaratory or remedial action. Therefore, the model declaratory action and the remedial action will continue to exist side by side.

Schlun & Elseven: Our Legal Assistance in a Remedial Action

As a multidisciplinary law firm, we offer numerous services to consumers seeking redress, tailored to your needs. Our legal experts will advise you on whether a remedy action might be appropriate in your case and work closely with you to find the best possible solution to your concerns. We will accompany you from filing the action to the end of the process and will always be at your side, both in and out of court.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.