The Declaratory Model Action – A new civil procedure to strengthen consumer rights!?
On November 01,2018, the Law on the Establishment of a Civil Procedure for Declaratory Model Actions entered into force, which implements one of the major legal policy issues of the Federal Government supported by the Grand Coalition in the field of civil procedure law. The purpose of the Declaratory Model Actions is to improve consumer rights, since in the Grand Coalition’s view, in an "economic life shaped by standardized mass transactions" misconduct by a given company can lead to a large number of victims.
1. Classification of the model declaration action
The purpose of the new model declaratory action (Musterfeststellungsklage) is to facilitate the judicial enforcement of claims by affected consumers against businesses. This is achieved the possibility of clarifying key conditions for business liability in a single procedure for a large number of affected consumers. The model declaratory action is an independent type of court action limited to ordinary (civil) jurisdiction which cannot be applied in other branches of jurisdiction, such as labor disputes.
2. Scope and admissibility
The scope of the application for a model declaratory action is limited to proceedings between consumers and businesses. Plaintiffs can only be so-called qualified institutions (qualifizierte Einrichtungen) representing the interests of consumers. In terms of content, a model declaratory judgement action is directed at determining the existence or non-existence of factual and legal prerequisites for consumer claims directed against entrepreneurs or legal relations between consumers and entrepreneurs (declaratory judgement objectives, Feststellungsziele). Entrepreneurs therefore cannot bring an action for a declaratory judgement themselves.
3. Conditions of admissibility
Qualified institutions eligible to initiation actions are, in particular, associations within the meaning of Sec. 3 para. 1 of the German Act on Injunctions for Consumer Law and Other Infringements (Unterlassungsklagengesetz - UKlaG), insofar as they pursue or safeguard the interests of consumers on the basis of their articles of association and provided that these interests are not safeguarded for commercial purposes. In addition, the association must have been registered for at least four years on the list of qualified institutions maintained by the German Federal Ministry of Justice and Consumer Protection (Bundesministerium der Justiz und für Verbraucherschutz, BMJV) or in the corresponding register of the European Commission and must have at least (i) ten associations active in the same field of activity or (ii) 350 natural persons as members.
In order to prevent abuse of the new model declaratory action, the classification of an association as a qualified institution is subject to strict requirements, which must be proven by the institution in the course of the proceedings. The fact that these requirements have decisive relevance in practice is shown in the decision of the Higher Regional Court Braunschweig (OLG Braunschweig) of December 12, 2018, Ref. 4 MK 2/18: Here the court refused to acknowledged the "Schutzgemeinschaft für Bankkunden e.V." as a qualified institution, as the association had not succeeded in providing the necessary proof. Consequently, the proceedings applied for were not made public and were therefore not conducted as a model declaratory action.
The model declaratory action must concern declaratory judgement objectives, which affect at least ten consumers. Further, at least 50 consumers must accede to the model declaratory action within two months after the public announcement of the action by filing claims or respective legal relations.
4. Implications for consumers
The filing of claims and legal relations is free of charge for the consumers who accede to the action. With the registration the limitation of the possible individual claim of the consumer is suspended.
In principle, the competent court – in the first instance the locally competent higher regional court – decides by judgment on the declaratory judgment objectives pursued by the action. With the judgment, the questions underlying the proceedings are decided, i.e. the court determines whether the relevant prerequisites for a claim are generally met or whether the alleged legal relations generally exist. The judgement is binding for all subsequent proceedings between the consumers registered in the model declaratory action and the defendant entrepreneur concerned with regard to all positive as well as negative findings.
As an alternative, it is possible to enter into a settlement, which is also binding on consumers who have acceded to the action. However, a waiver to the detriment of the acceded consumers cannot be declared.
However, a judgment or settlement in the context of a model declaratory action does not determine whether the specific claims or legal relations asserted by the acceded consumers actually exist in the individual case. Each consumer must enforce these individually and, if necessary, bring a separate action.
The model declaratory action only makes it easier for consumers to enforce their rights by clarifying individual, central and general legal issues with binding effect. The actual enforcement of the consumer's individual claim still requires a separate procedure. The respective consumer must continue to present and prove individual damages and other prerequisites for a claim - insofar as these were not the subject of the action for the declaratory judgment.
It may be the case that the introduction of the new type of procedure now creates consumers’ expectations which may not be met in the individual procedure, since the consumers concerned are still not spared the task of enforcing their own claims. It therefore remains questionable whether the objective desired by the legislator, namely the lowering of the threshold for consumer legal remedy, will actually be achieved. The hurdle for the consumer to accede to a model declaratory action may be a low one – actually bringing forward its own claims is a completely different one and in case of doubt still significantly higher. At the same time, the solution that has now been enacted can be viewed as good compromise which considerably simplifies enforcement of consumer rights while not disregarding the interests of the affected companies and thereby potentially avoiding the negative effects of class actions as prevalent in other jurisdictions.