European Union: Collective Actions On The Rise In Germany And Europe – Dieselgate As Game Changer?

Last Updated: 13 September 2017
Article by Henning Schaloske

For many years, the pros and cons of collective redress have been intensively discussed in Germany and Europe, with the debate often influenced by fears of US-style class actions and litigation industry. However, this focus risks failing to take into account that many European legal systems, including Germany, still lack an efficient mechanism to enable litigants, and consumers in particular, to enforce their rights in an efficient manner. 2017 might, however, become a turning point.

In the past, the European Commission has conducted various initiatives, with a particular focus on consumer and competition law. As part of this, in June 2013, the European Commission published a Recommendation on Collective Redress inviting the European member states to implement collective redress mechanisms to ensure effective access to justice. The European Commission also announced it would re-assess the state of play, based on the yearly reports of the member states, and evaluate whether further measures to strengthen collective redress in the European Union are needed. The European Commission is currently undertaking this work.

Looking at the European member states, the landscape of collective redress has evolved over the last few years. Many countries offer some form of collective action mechanism including Spain, Belgium, Austria, Italy, Poland and others. For example, in France, certain consumer associations can bring a Common Representative Action for damages and there is also a Consumer Class Action mechanism available. In the UK, the options include Representative Proceedings, Group Litigation Orders and, in the competition sphere, class actions. Following the US Supreme Court's ruling in Morrison v National Australia Bank (see our article on page 8), there has been renewed interest in these procedures, including in particular, the WCAM collective settlement procedure in The Netherlands.

This trend is at least partly also reflected in Germany. While Germany does not have class or group actions, certain forms of collective redress are available, including for example the ability for (consumer) associations and other organisations to bring certain claims under consumer and competition law, including test cases, representative actions and skimming-off procedures. However, the practical relevance remains rather limited. The best known mechanism is the Capital Market Model Claims Act Procedure (KapMuG procedure), introduced in 2005, which was implemented in the wake of damage claims brought by investors against Deutsche Telekom AG following its second public offering in 1999 and third public offering in 2001. The KapMuG proceedings in relation to the 1999 offering have just recently been resolved by a decision of the German Federal Court of Justice confirming the Higher Regional Court Frankfurt's finding that the underlying prospectus gives no basis for liability. By contrast, the much larger proceedings concerning the 2001 offering, involving around 17,000 shareholders, are still ongoing and, in a decision in late 2016, the Higher Regional Court Frankfurt found that Deutsche Telekom AG is responsible for faults in the respective prospectus. However, this finding does not determine that the shareholders are entitled to damages. In the KapMuG proceedings, the courts only determine common factual and legal questions with a binding effect for those plaintiffs participating in the collective action. Accordingly it remains to be determined in the individual disputes whether the individual shareholders can claim damages and whether the hurdles of establishing causation and loss can be met in each individual case.

It remains to be seen whether the Volkswagen Dieselgate scandal will become a game changer for Germany. KapMug proceedings have recently been commenced before the Higher Regional Court Braunschweig, encompassing around 1,500 plaintiffs pursuing claims of about EUR 1.9 billion. In total, shareholder claims for roughly EUR 8.8 billion are pending with the Braunschweig courts. However, compared to the US, it is still perceived as an uphill battle for consumers to enforce their potential rights in Germany. This recognition has led to the production by the Department of Justice, at the end of 2016, of an (unpublished) draft proposal for introducing a model declaratory action. This action was supposed to allow for a model claim similar to the KapMuG procedure, to be brought by certain associations on behalf of consumers who could electronically register, and with the option of a collective settlement unless 30 per cent of the claimants opt out. Over the past few months, this proposal has faced political opposition, and it is clear that the proposals will not become law before the general elections in September 2017. Given the high thresholds for individual consumers to pursue claims for damages, it appears probable that this discussion has only been postponed rather than shelved.

While the German legislator is still deliberating the need for reform and the European Commission continues to assess the need for further measures in the European member states, the Volkswagen scandal also shows, however, that plaintiffs will not necessarily wait for legislative action. In fact, in the wake of the Volkswagen case, the organisation of plaintiff lawyers has reached a completely new level, with US and domestic firms cooperating closely, litigation funders entering the scene and private initiatives stepping in where the legislator has not yet taken action. In particular, the platform has attracted much attention, seeking car owners as potential claimants to pursue their claims against a success fee of 35 per cent. Whilst it remains to be seen whether the actions against Volkswagen will prove successful or whether the platform can build up enough pressure to incentivise settlement discussions, it is quite clear that the new litigation industry has come to stay and has the potential to quite fundamentally change the playing field.

Winners and losers in the end of Parliament wash-up

Rebecca Lowe, Senior Associate, London Theresa May's decision to call a snap general election was a surprise to most. Several pieces of key legislation relating to tax avoidance and tax evasion were in the process of being considered by Parliament when the election was announced. In the close of Parliament wash-up period the failure to prevent the facilitation of tax evasion provisions were passed but the legislation relating to penalties for enablers of tax avoidance schemes have, for now at least, been shelved.

Criminal Finances Act 2017 – failure to prevent the facilitation of tax evasion

The Criminal Finances Act 2017, received royal assent on 27 April 2017, and makes provision for a number of important changes to the Proceeds of Crime Act 2002 and the laws governing money laundering. Of particular importance to tax advisors and promoters of financial products, Part 3 of the Criminal Finances Act also introduced a new corporate offence of failure to prevent the facilitation of tax evasion in the UK or overseas.

Broadly, facilitation of tax evasion involves knowingly assisting another person (such as a client) by aiding, abetting, counselling or procuring them to commit a UK tax evasion offence. A professional firm could be found liable of the corporate offence if, for example, a partner, employee or agent, is found to have been involved in criminally facilitating tax evasion.

This offence was first announced in 2015 and is aimed at forcing boards and senior management to take positive pre-emptive measures to prevent their staff from facilitating tax evasion. The potentially unlimited fine in the event of a conviction should certainly focus the minds of most boards. It is a strict liability offence but there is a defence, based on section 7 Bribery Act 2010, if a corporate body can demonstrate that it put in place prevention procedures which were "reasonable in all the circumstances" to prevent the facilitation of tax evasion offences. Draft guidance was published in October 2016 to assist relevant bodies to devise reasonable prevention procedures (such as undertaking risk assessments and training staff). Finalised guidance is expected imminently (subject to the general election). The government has now issued the commencement regulation SI 2017/739 which brings the Criminal Finances Act 2017 corporate offences for failing to prevent tax evasion into force from 30 September 2017.

In the meantime, professional firms will no doubt wish to consider the draft guidance and review their existing procedures to ensure that they have appropriate systems in place when the provisions come into force.

Finance Act 2017 – enablers of tax avoidance measures dropped

The first draft of the Finance Bill 2017, introduced to Parliament on 20 March 2017, targeted those who profit from enabling abusive tax arrangements, with two anti-avoidance measures namely:

  • Penalties for "enablers" of defeated tax avoidance and changes to the penalties for taxpayers using defeated tax avoidance (at section 125 and Schedule 27 of that Bill); and
  • The requirement to correct past off-shore non-compliance (at section 128 and schedule 29 of that Bill).

"Enablers" of tax avoidance include a manager, a marketer or a financial enabler. Penalties for enablers are up to 100% of the fee charged.

These provisions followed the Government's consultation in 2016. Our note on the consultation can be found at: penalties-for-enablers-of-tax-avoidance-consultation document. However, these and other more controversial measures in the Finance Bill were removed, in order that the Bill could be passed before Parliament was dissolved, and a drastically shorter version received royal assent on 27 April 2017. This is welcome, as it is important that these sections receive sufficient Parliamentary scrutiny. The Government has announced on 13 July 2017, that the second 2017 Finance Bill will be introduced in the Autumn and will legislate for the policies already announced including tax enabler penalties.

Government statement available at

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.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

Henning Schaloske
In association with
Related Topics
Related Articles
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of

To Use you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.


The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.


Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions