Draft Bill on the Introduction of a Leading Decision Procedure before the Federal Court of Justice

In the ubiquitous phenomenon of so-called mass disputes, the individual actions often raise legal questions that are relevant for the majority of the other proceedings. The sum of the individual actions, although similar in nature, place a heavy burden on German courts because they must deal with every case individually. Mass disputes therefore tie up enormous capacities, including those of companies. To reduce the burden on the judiciary, the German Federal Government responds with a bill of legislative changes to the German Code of Civil Procedure (“ZPO”) by introducing a so-called “leading decision procedure” at the Federal Court of Justice (“BGH”). The German Parliament (“Bundestag”) discussed this bill in a first reading on November 9, 2023 and referred it to the German Committee on Legal Affairs (“Rechtsausschuss”).

I.

The bill introduces a new procedure that allows the BGH under certain conditions to decide about legal questions, even if the parties already settled the legal dispute before an appeal decision is issued. The aim is to avoid that especially companies consider to prevent a decision of the BGH to their detriment by reaching a settlement beforehand to avoid that such impacts the outcome of the other proceedings.

Moreover, by introducing such procedure, the courts of lower instances are supposed to be relieved from individual actions which – based on the leading decision – do not have any prospects of success. Also, the courts of lower instances could decide more quickly if the BGH already decided the relevant legal questions in a leading decision.

II.

In order to attain this objective, the bill provides that the BGH can declare an appeal proceeding (“Revisionsverfahren”) as a leading decision procedure. This implies that the parties must first follow through the entire stages of appeal before the BGH can designate a proceeding as a “leading decision procedure”. Also, the BGH can only designate the appeal proceeding to be a leading decision procedure at a very late stage of the proceeding, namely after the receipt of the reply to the grounds of appeal or after one month has passed since the service of the grounds of appeal.

The BGH decides at its sole discretion which appeal proceeding it chooses for a leading decision procedure. The bill provides that it can select any appeal proceeding which addresses a wide range of legal questions that are relevant for a ”large number of other proceedings”. However, unlike the German Act on representative actions (“VDuG”), the bill does not define the term “large number of other proceedings”. It is therefore conceivable that not only mass actions comparable to the Diesel scandal are suitable for a leading decision procedure. Rather, the bill suggests that also insolvency-related appeal proceedings are suitable.

If the BGH has declared an appeal proceeding to be a leading decision procedure and the parties do not terminate the appeal proceeding otherwise, a regular appeal decision is issued with substantive reasons. There are no differences to a regular appeal proceeding.

However, if the BGH does not decide on the merits of the case because the parties have terminated the proceeding after the decision on the leading decision procedure has been made (e.g., by way of settlement), the BGH can still issue a leading decision without an oral hearing. In this case, the BGH does not decide on the merits of the case itself. The leading decision does therefore not bind the parties to the appeal proceeding. However, the leading decision contains a reasoning how the BGH would have decided the legal question(s) based on the facts of the case.

Ultimately, the bill provides that the courts may, with the consent of the parties, suspend the proceeding if the decision on the dispute depends on legal questions which are subject to a leading decision procedure. This regulation shall also serve as a tool to reduce the workload of the courts of lower instances.

III.

By introducing the bill, the Federal Government aims that at least a certain number of procedures are settled without the need to first follow through the entire stages of appeal (BT-Drs. 20/8762, p. 18).

Critics of the bill rightly argue that the introduction of a leading decision procedure is not a suitable tool to relieve the courts of lower instances. After all, it takes years before a case reaches the BGH. An acceleration is therefore not to be expected. The courts of lower instances would therefore continue to be heavily burdened until a leading decision is finally issued.

In response to the criticism, the German Association of Judges suggest in its statement an alternative by introducing a preliminary ruling procedure. In such procedure the courts of lower instances shall be able to submit a case to the BGH that depends on legal questions that have not yet been clarified by the BGH and which are relevant to a significant number of similar disputes. In consequence, the BGH could answer relevant legal questions at a very early stage in a preliminary ruling procedure which would indeed contribute relieving the burden on the judiciary.

IV.

The reform discussions demonstrate that the legislator’s focus is on mass disputes, which reflects their increasing importance in legal practice.

Considering the bill, there is still room for litigation tactics. However, companies are well advised to consider tactical procedural steps at an early stage of the proceeding (e.g., consider not to file an appeal to the BGH on points of law). But even if the appeal to the BGH was already filed, it can still consider to settle the case to avoid a leading decision to the company’s detriment. This, however, requires a swift analysis of the reply to the grounds of appeal to be able to react before the BGH declares the appeal proceeding as a leading decision procedure according to in sec. 552b ZPO-draft.

But even if the BGH issues a leading decision, it should be recalled that the leading decision only clarifies legal issues in relation to a specific set of facts. It is therefore of upmost importance to focus on, analyze and highlight the differences between the facts of the leading decision and in the other cases to avoid the application of the leading decision.

We will keep you updated on the status and further developments within the legislative process.