Collective Redress in the EU and Germany – A New Deal for Effective Access to Justice for Consumers?

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Collective Redress in the EU and Germany –

A New Deal for Effective Access to Justice for Consumers?

Svenja Siercks svenja.siercks@hotmail.de Student no. 12357863 LLM European Private Law Supervisor Betül Kas Submission Final Version 22 July 2019 14427 words

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Abstract

Collective redress in consumer law has been subject to controversy in the EU for over 20 years. The Dieselgate scandal was a decisive driver for legislative initiatives in the EU and Germany. It is the legislators’ intended aim to facilitate access to justice for consumers inter alia in mass harm situations. To what extent effective access to justice is accomplished will be evaluated throughout this thesis. Effective access to justice is a multi-layered concept which provides a concise criterion only in consolidation of CJEU case law, academic literature and the legislator’s expressed intention.

The implications of the criterion “access to justice” for collective actions in consumer law are varied. The overcoming of consumer disincentives and the alignment of party capabilities vis-à-vis traders are two examples. Collectivizing civil procedures is, in principle, beneficial for this purpose. But the reorganisation of civil procedure in a collective manner also entails disadvantages. This refers e.g. to consumers compromising their fundamental judicial rights. The Proposal for a Directive on representative action for the protection of the collective interests of consumers contains, in its current state, a minimum level of providing access to justice. As a comparison with the German act on collective redress demonstrates, this minimum standard is to some extent sufficient to effectuate future reform with respect to the German measure. Apart from this, the extensively criticized legislative efforts remain rather limited in providing access to justice.

Beyond the minimum standard, the principles of effectiveness and effective judicial protection provide essential tools for future developments of collective redress and potential upgrading of existing mechanisms in the MS. Through the introduction of harmonization in the field of collective actions in consumer law, the principle of effective judicial protection, anchored in Article 47 of the EU Charter of Fundamental Rights, gains an extended scope of application. This establishes more extensive opportunities for the CJEU and facilitates an assessment of the different interests at stake. By illustrating the opposing interests and rationales involved in the discussion on effective access to justice from a consumer law perspective, this thesis aims to provide guidance for current and future debates on collective redress.

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List of Abbreviations

CRM Collective Redress Mechanism

QE Qualified Entity

EU European Union

MS Member States

TEU Treaty on European Union

TFEU Treaty on the Functioning of the European Union CFR Charter of Fundamental Rights of the European Union ECHR European Convention on Human Rights

CJEU Court of Justice of the European Union

BGH German Federal Court of Justice (Bundesgerichtshof)

VW Volkswagen

AG Stock Company (Aktiengesellschaft)

GmbH Limited Liability Company (Gesellschaft mit beschränkter Haftung) GG German Basic Law (Grundgesetz)

MDP Model Declaratory Procedure ADR Alternative Dispute Resolution CRD Consumer Rights Directive

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KapMuG German Capital Markets Test Case Act (Gesetz über Musterverfahren in kapitalmarktrechtlichen Streitigkeiten) BGB German Civil Code (Bürgerliches Gesetzbuch)

UKlaG German Injunctions Act (Gesetz über Unterlassungsklagen bei Verbraucherrechts- und anderen Verstößen)

UWG German Act against Unfair Competition (Gesetz gegen den unlauteren Wettbewerb)

GWB German Act against Restrictions of Competition (Gesetz gegen Wettbewerbsbeschränkungen)

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1 Introductory Chapter

1.1 Collective Redress in Consumer Law and the Dieselgate Scandal

To the present day, collective compensatory action instruments in the area of consumer law are not unified at the European level. Especially in Germany, only little attention was paid to CRM’s in the past. The Volkswagen car emissions’ scandal (so-called Dieselgate) in 2015 was a main driver that revived the discussion on collective action instruments in case of mass harm situations. The many claims of harmed consumers resulted in a flood of single cases brought before German lower courts.1_{The respective judgements differ widely. The spectrum includes} the denial of any claims in the majority of cases, rescission of the contract and the grant of repair or replacement.2_{Hence, there is still a lot of legal uncertainty resulting from Dieselgate.} Consequently, the German Bundestag adopted a legislative proposal for collective action in shape of a model declaratory procedure (MDP, Musterfeststellungsklage) on 14th_{June 2018,} which entered into force on 1st_{November 2018.}3_{At European level, the Commission responded} to such mass harm situations in April 2018 within the framework of the New Deal for Consumers, which includes inter alia a proposal for a Directive on CRM’s.4

In light of the developments in the EU and Germany, the aim of this thesis is to evaluate to what extent the aforementioned legislative efforts offer effective access to justice for consumers in mass harm situations and whether they are, therefore, capable of closing the “enforcement gap as regards the weaknesses of the techniques for claims aggregation”.5_{Further, the aim is to} provide guidance for current and future debates. This involves the illustration of interests that are at stake from a consumer law perspective and which are to be included in a balancing exercise with competing interests. The access to justice-criterion reflects both the European Commission’s explanation accompanying the Proposal and the German Federal Ministry of Justice and Consumer Protection’s approach as laid down in the explanatory memorandum to the German legislative draft.6_{The large number of consumers affected by Dieselgate,}7_the

1_{Riehm/Lindner, p. 39.}

2_{Ibid.; For the recent decision by the Court of Appeal Braunschweig denying any claims see judgement from 19}

February 2019 – 7 U 134/17; For a critical assessment of the role of the Court of Appeal Braunschweig, also in regard to the pending MDP: Heese, NZV, p. 274f.

3_{MDP, BGBI. I p. 1151f.}

4_{Proposal COM(2018) 184 final of 11 April 2018.} 5_{Cafaggi, p. 237.}

6_{Discussion draft MDP, p. 9.}

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judicial proceeding of the first MDP in Germany in connection with Dieselgate8_{as well as the} current state of the legislative procedure at EU level render this research question highly relevant. Beyond the dimension of Dieselgate, the examination against the access to justice-criterion allows for an interesting assessment of the legislative measures within the general context of the justiciability of consumer rights.

This introductory chapter will define the meaning of the term “collective redress” in order to clarify the scope of the thesis, introduce the reader to the methodology employed to assess the European and German legislative efforts and briefly sketch the outline of the thesis.

1.2 Meaning of the Term “Collective Redress”

The term “collective redress” does not refer to a legally defined concept. According to the European Commission’s conclusion of the Consultation Paper 2009, it encompasses three major techniques: litigation, ADR9_{and regulatory measures.}10_{The term as used by the} Commission in the Proposal refers to private litigation. Within the area of private litigation, yet again the terminologies differ across jurisdictions11_{– from “class actions”}12_{to “group} litigation”13_{. It is, however, beyond the scope of this paper to explore the innumerable variations} of concepts and definitions. The German legislator decided for “model declaratory action”, while the European New Deal uses the term “representative actions for the protection of the collective interests of consumers”. Despite the different terminologies, both policies focus on compensatory redress. For the purpose of this thesis, the term “collective redress” is understood as encompassing both compensatory collective redress and injunctive collective redress14_{in the} area of private litigation, while the emphasis of this thesis will be on compensatory aspects.

8_{Legal action was taken by the Federation of German Consumer Organisations (Verbraucherzentrale}

Bundesverband, “vzbv”) on 01 November 2018 < https://www.vzbv.de/pressemitteilung/nach-software-manipulation-vzbv-klagt-gegen-volkswagen>; So far, over 400.000 consumers registered, state: 17 May 2019 < https://www.verbraucherzentrale.de/wissen/vertraege-reklamation/kundenrechte/musterklage-gegen-vw-so-machen-sie-mit-29738>; Consumers can register up until the day before the initial hearing which is scheduled for 30September 2019 <https://www.vzbv.de/pressemitteilung/klage-gegen-vw-startet-die-erste-runde>; The links have been last accessed on 22 May 2019.

9_{Since 2013: ADR Directive.}

10_{Consultation Paper 2009; Hodges 2014, p. 84.} 11_{Money-Kyrle/Hodges, p. 477.}

12_{In Denmark and Poland.} 13_{In the UK.}

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1.3 Approach and Methodology

The primary approach of this thesis is an evaluative and advisory one. In addition, descriptive and explanatory research will be adopted to support the thesis’s primary approach. The choice of methods in the different chapters is motivated by their respective goals.

The first three chapters serve to set the scene by contextualising the criterion of “effective access to justice” and by identifying and analysing the developments that led to the current legal framework of collective actions in consumer law from an internal perspective. Descriptive and explanatory research is particularly useful for this aim. The introduction to the latter initiatives entails also a brief overview on CRM’s in other EU MS. This will contribute to an accurate placement of the MDP within the setting of various MS’s approaches. Further, this illustrates the diversity of (non-) existing mechanisms that the European legislator is confronted with. The elaborations on effective access to justice in the light of the EU’s legal principles, the CJEU case law and the academic literature will serve as a point of reference for the evaluation of the legislative initiatives in the EU and Germany.

In the following two chapters, the perspective shifts to an external one throughout the comparison of the German and the European approach and their evaluation against the criterion of “effective access to justice” for consumers. The comparison and the subsequent evaluation will be set out in two separate chapters in order to provide for a structured, coherent and objective analysis. The comparison of the German and European approach will be conducted in a simultaneous manner along specified sub-categories. The sub-categories of the objects of comparison were selected on the basis of the functional-institutional method.15_Further information about their selection and their interrelation with the criterion of access to justice is provided in the respective sections of Chapter 4. The findings of the comparison will be thereafter evaluated against the criterion of “effective access to justice” for consumers in order to identify potential shortcomings of the CRM’s. For the German approach, this entails in particular whether potential weaknesses could be resolved through the implementation of the Commission’s proposed Directive. The reference to the principle of effectiveness and Art. 47 CFR further allows for illustration of relevant rationales, their balancing and potential future development.

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1.4 Outline

In Chapter 2, the developments leading to the status quo in Germany and the EU will be outlined briefly. A short overview on CRM’s in other EU MS will be given as well. In the subsequent Chapter 3, the criterion of effective access to justice will be defined and its implications for collective actions in consumer law assessed. This is accomplished by a discussion of the principle of the procedural autonomy of the MS, the principle of effectiveness and the fundamental right to effective judicial protection.

Chapter 4 then engages in a comparison between the German and European approach. Upon completion of this analysis, the focus will be narrowed to those objects of comparison most relevant in terms of access to justice for the remainder of this thesis. In Chapter 5, it will be evaluated to what extent the approaches guarantee effective access to justice. The final Chapter 6 concludes the thesis by providing a comprehensive summary of the previous chapters and by linking them to the answer to the research question.

2 Setting the Scene: Development of Collective Redress Mechanisms

in Germany and the European Union

An overview of the history facilitates a reasoned discussion of the system of compensatory collective redress in Germany and the EU. To coherently display the respective developments, a brief presentation of the (partly) opposing rationales on national and supranational level involved in the discussion on the introduction of collective redress will follow. Whether and to what extent those rationales were taken into account in the legislative efforts will be examined at a later stage.16_{The interests and concerns underlying the development of CRM’s in Germany} and the EU demonstrate similarities as well as differences. On the one hand, both national and European legislators face increasing “digitalisation and globalisation of goods and services”17_, which result in rising occurrence of mass harm situations and the potential need of new mechanisms of claims aggregation. On the other hand, both legislators share concerns in regard to the U.S. model of class actions and an emerging claims industry.18_{However, certain national}

16_{Chapter 5.} 17_{Briad, p. 190.}

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and supranational features result in different reasons for the previous reluctance towards representative actions.

2.1 Germany

Traditionally, injunctive measures present the prevailing collective instrument under German law.19_{Compensatory measures like skimming off profits in the area of competition law and} subrogatory measures by consumer authorities are considered to remain largely ineffective in practice.20_{Until the entry into force of the MDP, the German legal system provided a procedural} framework for collective compensatory model action only for capital market litigation.21 Accordingly, compensatory collective redress was still considered new legal territory in Germany during the time of the legislative process of the act in 2017/2018. Time pressure existed in particular because of the possible claims in connection with Dieselgate and their potential expiry of the limitation period by the end of 2018.22_{It is noteworthy that the new act} is not a product of the current legislative efforts at EU level. Rather, the enactment is the result of the implementation of the Commission’s Recommendation23_{from 2013.}24

Next to the scarce legal landscape in relation to compensatory collective redress, policy implications such as the protection of (national) economic interests bear important consequences for the examination of the German reluctance towards collective redress. Returning to the implications of Dieselgate, the holding of shares in the VW AG by Lower Saxony inherently confronts the German government with a conflict of interests.25_{On the one} hand, there is the government’s self-interest in the profitable performance of the VW AG and its engagement with stakeholder needs. On the other hand, the government is faced with the obligation to take consumer policy as public interest into account.26

19_{Krausbeck, p. 287; e.g. § 8 UWG, § 33 GWB and §§ 1, 2 UKlaG.} 20_{Krausbeck, p. 287.}

21_{KapMuG 2012.}

22_{Lutz, BeckOK ZPO, § 606, para. 1.} 23_{Recommendation COM 2013.}

24_{Discussion draft MDP; The implementation period, however, expired in June 2015, no. 38 of Recommendation}

COM 2013.

25 _Lower _Saxony _owns _11,8 _% _of _VW _AG, _state: ₃₁ _December ₂₀₁₈

<https://www.volkswagenag.com/de/InvestorRelations/shares/shareholder-structure.html>, last accessed 12 April 2019.

26_{EU Law: Art. 4(3) TEU, Art. 169 TFEU; Hatje, EU-Kommentar, Art. 4 TEU, para. 59; Stumpf, EU-Kommentar,}

Art. 169 TFEU, para. 31; There is no explicit equivalent in the German constitution, but the obligation stems from safeguarding the principle of private autonomy anchored in Art. 2(1) GG, Di Fabio, GG-Kommentar, Art. 2(1) GG, para. 107.

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2.2 European Union

Similar protective interests play a role at EU level when multinational companies like VW are at stake. The EU legislator is confronted with additional considerations. While the EU shares the German concern of abusive litigation, it also needs to respect the principle of proportionality as well as the different legal traditions of the MS.27_{The US class action model is believed to be} incompatible with the approaches to litigation in most MS.28_{This refers e.g. to the costly and} lengthy pre-trial discovery procedure, which class actions are based on.29_{The extent of} procuring evidence under US law excessively exceeds the possibilities of collecting evidence in the MS.30_{Further, the US-approach meets the concern of being counterproductive for} achieving the ultimate goal of the internal market.31_{This refers especially to punitive damages} which are used to secure business-compliance under US law.32_{In the EU, there is the fear of} the potential risk of misuse that could generate negative economic consequences and would be detrimental to businesses after all.33_{Instead, the EU pursues a clear separation between} compliance and compensation in the area of consumer law.34_{It seeks compliance through} injunctions and not through compensation.

Based on those rationales, collective action in the EU has taken various diversions over the past years.

2.2.1 Consumer Policy Strategy 2007-2013

Soft law instruments characterize the legislative period within the Commission’s EU Consumer Policy Strategy for 2007-2013.35_{In 2008, the Commission published a Green Paper on} Consumer Collective Redress36_{presenting four options ranging from taking no action to the} introduction of a pan-European compensatory CRM. In response to the Green paper, Germany in particular took a strong opposition to any action.37_{After a Joint Information Note on a}

27_{Briad, p. 190.} 28_{Wrbka, p. 107.}

29_{Stuyck, Cafaggi/Micklitz 2009, p. 81; Stadler 2008, p. 5.}

30_{Stadler 2008, p. 5; in US law see Rule 26 (b) (1) FRCP; see e.g. the German approach in § 143 ZPO, limited}

to disputed, relevant facts.

31_{Wrbka, p. 107.} 32_{Ibid., p. 115.}

33_{Ibid., especially so-called “Blackmail settlements”.} 34_{Ibid.: Compliance is safeguarded through e.g. injunctions.} 35_{Consumer Policy Strategy 2007-2013.}

36_{Green Paper.}

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Coherent European Approach to Collective Redress38_{by the EU Commissioners for Justice,} Competition and Consumer Policy in 2010, a public consultation39_{in 2011 revealed great} differences between various forms of collective redress in the MS and major resistance of the business sector.40_{Building upon the public consultation, the Commission issued its} Recommendation in 2013 suggesting non-binding principles. Thereby, it was attempted to strike a balance between the aim of access to justice for consumers on the one hand and the prevention of abusive litigation on the other.41

2.2.2 Consumer Agenda 2014-2020

The subsequent steps took place within the framework of the 2014-2020 EU Consumer Policy focussing on consumer empowerment inter alia through collective redress.42_{Following the} Fitness Check43_{in 2017 and the Commission’s Report}44_{from January 2018 on the} implementation of the Recommendation, the Commission launched its New Deal45_for Consumers on 11 April 2018 including a proposal46_{for a Directive on representative actions} for consumers, repealing the Injunctions Directive47_{from 2009. The legal basis is Article 114} TFEU in conjunction with Article 169 TFEU.48_{Thus, next to assuring a high level of consumer} protection, the Commission aims to improve market integration which is hampered by diverging dispute resolution schemes in the MS.49_{With its proposal, the Commission aims to} address shortcomings of the current Injunctions Directive, which up to now provides for a European minimum standard for injunctive actions. A list of obstacles to effective consumer protection were identified: its limited scope, unsatisfactory effects of injunction decisions on compensation for victims and the cost and length of the procedure.50_{A more in-depth} assessment of the Commission’s ambition will follow in Chapter 5.1.

38_{Joint Information Note.} 39_{Consultation Paper 2011.}

40_{See for example reply by the German DIHK 27 April 2011.} 41_{Recommendation COM 2013.}

42_{Consumer Agenda 2014-2020.} 43_{Fitness Check.}

44_{Collective Redress Report.} 45_{New Deal.}

46_Proposal.

47_{Injunctions Directive.} 48_{Proposal, p. 6.} 49_{Ibid.; Benöhr, p. 192.}

50_{Proposal, p. 2; Lack of deterrent effects for traders was another identified shortcoming hampering effectiveness,}

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2.3 Other Member States

An exemplary illustration of varying approaches in different MS will allow for a brief overview on the spectrum of CRM’s across the European legal landscape.

2.3.1 Private and Public Enforcement

As a starting point, MS follow different traditions with respect to the enforcement of consumer law.51_{While enforcement in the Nordic countries and the UK predominantly takes place in the} sphere of administrative law via ombudsmen and government agencies,52_{other MS traditionally} follow a private enforcement scheme.53_{Hence, the design of collective redress largely depends} on a MS’ vision on public and private enforcement in consumer law. The legal systems in many MS provide for a mix of both including ADR schemes.54_{The composition of the enforcement} scheme depends on the respective national arrangement.55

2.3.2 Compensatory Collective Redress Mechanisms

When concentrating on compensatory collective redress, a recent study56_{reveals great disparity} between MS. Several MS do not provide for proper compensatory redress mechanisms at all.57 Those MS whose legal systems stipulate compensatory collective redress can be categorized into those who confine redress to designated legal areas58_{whereas other states have mechanisms} available in broad areas of law.59

Although this diversity may prove beneficial for practical experience and regulatory competition between MS, it has led to a great variety of different instruments and diverging levels of consumer protection. The different legal traditions in respect to private and public enforcement present one underlying reason. Additionally, the lack of binding intervention by the European legislator allowed MS to progress with their policies on collective redress during

51_{Stadler 2014, p. 83.}

52_{Ibid.; E.g. the UK Financial Ombudsman Service (FOS) established by the Financial Services and Markets Act}

2000.

53_{E.g. in Germany, Austria, Italy and the Netherlands representative action relies heavily on consumer}

organisations.

54_{Cafaggi/Micklitz 2008, p. 5.} 55_{Hodges 2014, p. 70.}

56_{Study on collective redress in the EU 2018.}

57_{Ibid., p. 18: Estonia, Romania, Luxembourg, Austria and Germany (before the enactment of the MDP).} 58_{Ibid., p. 19: Belgium, Italy and Spain.}

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the past years. This lack of harmonisation is partly based on the unclear competence of the EU, the principle of subsidiarity and the principle of procedural autonomy enjoyed by the MS.60

3 Effective Access to Justice and its Implications for Collective

Actions in Consumer Law

The following sections set out the different components entailed in the criterion “effective access to justice” and their respective implications for collective actions in mass harm situations of consumers. This is a necessary prerequisite for their evaluation as, although both legislators state it as their declared aim, they fail to provide an accurate legal definition of the term. From a national perspective, the MDP is to be measured against the fundamental rights to justice enshrined in Art. 103 GG and the general principle of judicial guarantee in Art. 19(4) s 1 GG. This chapter, however, refrains from exemplifying their significance.61

Instead, the focus will be on the European yardstick, anchored in Art. 6 and 13 ECHR and Art. 47 CFR.62_{According to the CJEU, effective judicial protection deriving from Art. 6 and 13} ECHR is a general principle of EU law which underlies the constitutional traditions common to the MS.63_{With the entrenchment in Art. 47 CFR, the right to effective judicial protection} and the entailed right to access to justice was codified as a European fundamental right.64_{It is} enforceable against EU institutions and MS when implementing EU law.65_{This supranational} perspective provides criteria for effective access to justice for the Proposal as well as the MDP. Regarding the latter, the European yardstick is only applicable when substantive EU law is at stake. The German case of Dieselgate, however, seems to be immune until now since the currently pending MDP concerns a tort law claim against the VW AG.66_{Yet, this claim does} not derive from the implemented European consumer acquis. The legal situation could change, however, with the adoption of the Proposal and its implementation into German law. The complementation of the acquis, which is currently primarily characterized by its substantive

60_{Cafaggi/Micklitz 2008, p. 2; Stuyck, Cafaggi/Micklitz 2009, p. 69; Art. 5(2) TEU.}

61_{See for this purpose the general contributions by e.g. Voßkuhle/Kaiser, p. 312f.; Zuck, p. 1132.} 62_{Mak, p. 238.}

63_{Case 222/84, Johnston, para. 18; Grabenwarter/Pabel, § 24, para. 3.} 64_{Benöhr, p. 177.}

65_{Art. 51(1) CFR; Mak, p. 239; Voßkuhle/Kaiser, p. 314.}

66_{Based on immorality, (§ 826 German Civil Code (BGB)), the currently pending MDP against VW AG}

<https://www.bundesjustizamt.de/DE/Themen/Buergerdienste/Klageregister/Klagen/201802/KlagRE_2_2018_n ode.html#doc12200748bodyText4>, last accessed 22 May 2019.

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consumer law provisions, with a procedural CRM could establish an extended scope of application for Art. 47 CFR.67

3.1 The Principle of Procedural Autonomy of the MS

In light of the absence of EU procedural rules governing the enforcement of rights derived from EU law, the principle of procedural autonomy of the MS grants national courts to resort to their own national procedural rules when realizing their duty68_{of enforcing EU law.}69_{The concept} of procedural autonomy is, however, not granted limitless. A first restriction lays in the fact that the autonomy of the MS only persists to the extent that no harmonization measures have been adopted at EU level.70_{Therefore, the introduction of a European CRM would preclude,} according to its scope, the reference to the principle of procedural autonomy of the MS.

3.2 The Principle of Effectiveness

Beyond that, effectiveness and equivalence as general principles of EU law mark the boundaries of the procedural autonomy enjoyed by the MS.71_{In respect of the principle of effectiveness,} the MS ought to ensure that national rules must not render the exercise of EU law practically impossible or excessively difficult.72_{It levies a primarily negative duty on MS to refrain from} rendering the exercise of EU law ineffective.73_{The CJEU oftentimes refers to the principle to} the extent that the EU did not harmonize the respective procedure in question, deriving its procedural competence from the substantive provisions at stake.74_{The principle is further} applicable when there are specific procedural provisions in an EU instrument at stake.75_The complementation of the acquis, which is primarily characterized by its substantive consumer law provisions, with a procedural CRM therefore extends the scope of application of the effectiveness principle. In respect of the judicial enforcement of EU law, the principle of

67_{Restricted, however, by the proposed Directive’s scope, Art. 2(1) Proposal: Infringements of traders of EU}

(consumer) law; Regarding Dieselgate, the CRD and its provisions on non-conformity could be relevant, see Nemeth/Morais Carvalho, p. 35; Loos, p. 122f. on the proposed provisions on penalties in inter alia the CRD.

68_{This duty derives from Art. 4 TEU.}

69_{Introduced in Case 33-76}_,_{Rewe; Trstenjak/Beysen, p. 98.} 70_{Case 33-76}_,_{Rewe, para. 5; Wallermann, p. 1; Flynn, p. 246.}

71_{E.g. Case C-415/11, Aziz, para. 50; The principle of equivalence is not relevant for the scope of this thesis.} 72_{Van Duin, p. 1; Reich, euvr 2014, p. 65.}

73_{Reich, VuR 2012, p. 327.}

74_{Kas/Micklitz I 2018, p. 214; E.g. Case C-483/16 Sziber, para. 35.}

75_{See Art. 7(2) Directive on Unfair Terms in Consumer Contracts on injunctions and thereto Case C-472/10,}

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effectiveness can be considered an expression of the general principle of effective judicial protection.76

3.3 The Added Value of Article 47 CFR

Art. 47 CFR77_{as the constitutional anchor for effective access to justice confirms, extends and} counters the principle of effectiveness.78_{The fundamental right to an effective remedy and a} fair trial imposes a positive duty on MS towards individuals to safeguard effective judicial protection.79_{The right to an effective remedy comprises substantive}80_{and procedural}81_aspects whose delimitation is not always clear-cut as their allocation varies according to national law.82 Next to those observations concerning the scope of Art. 47 CFR, the question on direct and indirect effect, that usually arises when applying fundamental rights to a private law setting, is not at stake with view to the encompassing nature of Art. 47 CFR.83

The role of Art. 47 CFR in terms of collective redress has not been clarified by the CJEU yet. Despite the fact that Art. 47 CFR does not expressively stipulate the collective enforcement of consumer law84_{, representative action may facilitate the exercise by consumers of their rights} deriving from Art. 47 CFR.85_{This applies in particular to situations in which consumers are} deterred from seeking redress in court due to e.g. the risk of costly litigation.86_{However, the} role of Art. 47 CFR must not be overextended in this regard. While Art. 47 CFR does allow for the upgrading of existing national remedies, new ones cannot be created solely on the basis of Art. 47 CFR.87_{This also applies to the right to a collective remedy. Instead, a right deriving} from EU law is the necessary gateway in order for Art. 47 CFR to take effect. Such a right to a

76_{Art. 3 and 6 ECHR, Art. 47 CFR; AG Kokott, Case C-320/08, Alassini, para. 42.} 77_{As part of EU primary law Art. 6 TEU, complemented by Art. 19 (1) TEU.}

78_{Reich, VuR 2012, p. 327; See e.g. AG Trstenjak in Case C-472/10,} _{Invitel, para. 60, although not explicitly}

stating Art. 47 CFR, refers to the right to be heard; See Section 3.3.1 on the aspect of Art. 47 CFR as countering the principle of effectiveness.

79_{Reich VuR 2012 p 327; more cautiously affirmative van Duin, p. 14/15.}

80_{E.g. compensation, restitution etc, see Reich, VuR 2012, p. 123; disagreeing van Duin, p. 5 who asserts that}

‘remedy’ should be understood in a purely procedural way.

81_{E.g. standing, limitation periods, see Reich, VuR 2012, p. 123.}

82_{Reich, VuR 2012, p. 123 who refers to the interpretation of national remedies in light of effectiveness as}

“upgrading“.

83_{See Mak, p. 242 who claims that in regard to Art. 47 CFR, the distinction between vertical and horizontal}

dimension is largely redundant.

84_{E.g. Reich, euvr 2014, p. 78.} 85_{Proposal, p. 12.}

86_Ibid.

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collective remedy could potentially be provided by the envisaged Directive on representative actions in consumer law.88

In this regard, there is a close link between Art. 47 CFR and the principle of effectiveness. On one hand, the introduction of harmonization in the field of collective actions in consumer law affects the applicability of both. Beyond that, the encounter of the two facilitates the judicial development of effective procedures in private law matters.89_{Hence, their interplay may also} potentially influence CRM’s in the future.

3.3.1 CJEU Case Law

Due to a lack of case law, the role of Art. 47 CFR for compensatory collective redress in consumer law is unclear. Its function has, however, been exemplified by the CJEU in other procedural areas. Noteworthy are in this regard cases deriving from the field of ADR. ADR, in contrast to the adversary-justice approach of the measures subject to this thesis, is based on the method of consensual dispute resolution.90_{Despite this difference, cases like Alassini and} Menini allow for some predictions on the impact of the aforementioned interplay on collective redress in consumer law.

Foremost, conclusions on the interaction of effectiveness and effective judicial protection can be derived from Alassini. The case concerned the compatibility of the national mandatory condition of attempting out-of-court settlements with EU law requirements for access to justice. Art. 47 CFR allowed the CJEU to deviate from the technical application of the effectiveness principle.91_{Rather, Art. 47 CFR enabled the court to balance the competing interests at stake:} the private interest of access to justice on the one hand and the public interest of quick and cheap dispute resolution for the purpose of procedural economy on the other.92_{The balancing} led the CJEU to the conclusion that the barrier to access to justice, that indeed existed, was, however, justified.93_{It can be concluded from Alassini as a direct consequence that Art 47 CFR} supports alternative dispute settlements as an effective form of access to justice.94_{As laid down}

88_{See Micklitz/Reich, p.128 who considered a clear referencing to Art. 47 CFR already as desirable in regard to}

Invitel and the erga omnes effect of injunctions under the Directive on Unfair Terms in Consumer Contracts.

89_{Mak, p. 241.} 90_{Mattei, p. 3.} 91_{Mak, p. 252.}

92_{Case C-320/08, Alassini, paras. 62-66; Mak, p. 246.} 93_{Case C-320/08, Alassini, paras. 63-66.}

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by the CJEU, this is subject to the following conditions: the ADR’s result is not binding upon the parties, the settlement procedure does not cause substantial delay in bringing legal proceedings, the limitation period is suspended and it does not generate costs for the parties, it is not solely accessible by electronic means and allows for interim measures in situations of urgency.95_{Alassini is regarded as suggesting a strengthened position of out-of-court settlement} procedures in the EU.96_{Referring to Art .47 CFR and Alassini, the CJEU reasoned similarly in} the Menini case.97

The cases imply that Art. 47 CFR is subject to interpretation and that the practical implementation of securing effective judicial protection proceeds at judicial level.98_Further, failures to comply with Art. 47 CFR through errors or omissions at legislative level may be corrected at judicial level.99

3.3.2 Limits and Possibilities of the Principle of Effectiveness and Art. 47 CFR

As the above considerations have shown, “effectiveness” has different functions. The interface of its negative side (principle of effectiveness) and its positive side (Art. 47 CFR) provides for a legislative and judicial yardstick for shaping enforcement mechanisms at EU and MS level.100 This combined reading will be referred to as the effectiveness approach.

The effectiveness approach provides an additional assessment layer to evaluate the European Proposal and the German MDP in terms of access to justice. Seemingly, “effectiveness” does not as much concern the existence of collective action per se, but rather the specific design. It accelerates the process of predicting possibilities and limits of CRM’s by widening the perspective beyond the mere level of secondary legislation. For this reason, the aforementioned reflections will be revived throughout the evaluation in Chapter 5.

The impact of the principle of effectiveness and effective judicial protection is not limited to judicial enforcement mechanisms. In fact, their effects stretch to the interplay of the so-called three pillars of European collective redress.101_{Next to judicial enforcement, they include}

95_{Case C-320/08, Alassini, para. 67.} 96_{Micklitz/Kas 2014 II, p. 251.}

97_{Case C-75/16,}_{Menini, para. 55; Kas/Micklitz 2018 II, p. 297.} 98_{Van Duin 2018, p. 17.}

99_Ibid.

100_{Art. 51 (1) CFR addresses the EU institutions and MS; Cafaggi, p. 252.} 101_{Cafaggi, p. 257.}

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administrative enforcement and ADR.102_{These mechanisms can overlap and the relation} between e.g. injunctions and compensation often lacks clear regulation.103_{Although solely the} judicial enforcement sphere is relevant for this thesis, a short glance at the Proposal’s (non-) added value in that respect will be provided at the end of Chapter 5.

3.4 Effective Access to Justice for Consumers in Mass Harm Situations

It can be concluded from this overview that none of the illustrated conceptions offer a clear-cut frame for the assessment of effective access to justice through collective redress in consumer law on their own. In seeking further clarification on the implications of access to justice for CRM’s, the following sections refer to literature and the Fitness Check.

3.4.1 Access to Justice

The term “access to justice” does not refer to a fixed concept. Broadly, it entails two elements: accessibility of a judicial system in a technical sense and value-oriented concepts such as fairness and equality.104_{The latter, however, are beyond the scope of this thesis. Potential} barriers regarding the former were identified in the legal scholarship as lying inter alia in the costs of litigation and party capability.105_{Party capability entails aspects like financial} resources, competence to pursue a claim and the distinction between so-called one-shot litigants and repeat player litigants.106_{On grounds of those categories, consumers as the weaker party} often are at a disadvantage vis-à-vis their professional counterparts.

3.4.1.1 Mass Harm v Small Damages

Debates on access to justice through collective action instruments have to take two different kinds of situations into account: mass harm litigation and small damages cases. In so-called small damage cases, consumers refrain from asserting their claims due to only small individual damages on the consumer’s side whereas profits for the trader may be immense.107_{In the access} to justice context, the question is how to compensate for the consumer’s rational apathy.108_As identified by Cappelletti and Garth in their ‘second wave’ of the access to justice-movement,

102_{Cafaggi, p. 239.} 103_{Cafaggi, p. 256.}

104_{See Wrbka, p. 6 who distinguishes between value and non-value-oriented justice.} 105_{Cappelletti et al 1978, p. 10-18.}

106_{Ibid., p. 14-18.}

107_{Cafaggi/Micklitz 2009, p. 307.} 108_Ibid.

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the problem of consumers suffering similar damages caused by the same entrepreneurial behavior requires measures that go beyond the mere strengthening of the individual’s ability to enforce their individual rights.109

3.4.1.2 Access to Justice in Mass Harm Situations

The phenomena of mass harm situations, which shall be the focus of this thesis, however, poses additional challenges to providing access to justice. Next to (psychological) disincentives and financial risks for consumers, such measures need to take into account procedural economy considerations. The situation of a large number of plaintiffs claiming damages poses a great challenge for the capacity of a civil justice system.110_{CRM’s are useful tools to reduce the} burden for courts, prevent contradicting decisions and to shorten procedures.111_{However, the} approach of streamlining procedures poses the risk of sacrificing fundamental guarantees of consumers in civil procedure.112_{For this reason, tools for claims aggregation ideally strike a} balance between the opposing rationales. Therefore, CRM’s are considered as providing access to justice to the extent that they address the aforementioned barriers which consumers face in mass harm situations without depriving them of their procedural guarantees.

Apart from the mere procedural account of access to justice, the streamlining of procedures may require a corresponding simplification of substantive rules.113_{The substantive dimension,} however, is not part of the research subject.

3.4.2 Evaluation Concept

The aforementioned procedural account of access to justice is reflected in Art. 47 CFR’s demand of providing an effective remedy.114_{The MS’ compliance with the European} (minimum-) standard of what constitutes an effective remedy is, amongst others, ensured by the principle of effectiveness. In combination with the characteristics deduced from the literature, read together with the shortcomings in the Injunctions Directive as identified in the Commission’s Fitness Check 2017, those considerations will be employed as criteria for

109_{Cappelletti et al 1978, p. 35/36, who categorise the collective consumer interest as “diffuse interests” in contrast}

to the “first wave”: Legal aid for the poor.

110_{Cafaggi/Micklitz 2009, p. 307.} 111_{Weinland, p. 5.}

112_{Cappelletti et al 1978, p. 123, especially the right to be heard.}

113_{Ibid., p. 118/119, referred to as “legal simplification” in the third wave.} 114_{Section 3.3.}

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evaluating the MDP and the Proposal.115_{Taking into account the specifics of mass harm} situations, they include: (1) compensatory and deterrent effects, (2) cost and length of the procedure, (3) alignment of party capability and (4) procedural economy. Taken together, those criteria will be referred to as the ‘Evaluation Criteria’. In spite of the fact that the criteria overlap to a certain extent, they justify their autonomy with the different angles they serve. Criteria (1) and (2) serve the consumer’s perspective, criterion (3) takes the disparity in consumer-trader relations into account whereas criterion (4) emphasizes the public interest of procedural economy. It is appropriate to apply the European yardstick also to the MDP since the MDP will be measured against the Proposal in case of the latter’s adoption.116

Secondly, where CRM’s create barriers to access to justice instead of resolving them, the effectiveness considerations from sections 3.2-3.4 will be employed. It is, in this regard, not the aim of this thesis to provide a clear-cut solution. Rather, the illustration of interests to be included in the balancing exercise intends to facilitate an outlook on future developments of collective redress.

Hence, access to justice can be considered as being effective when it enables consumers to seek compensatory redress in a collective action while not being deprived of their procedural guarantees. At the same time, the mechanism deters traders from engaging in infringements. Further, an effective CRM provides equality of arms by balancing party capabilities, stipulates shorter procedures and is available at lower costs. It meets procedural economy concerns by relieving courts and preventing contradicting decisions.

4 Comparison between the German and European Approach

Objects of the subsequent comparison are the German declaratory model act as of 12 July 2018 (MDP), the Proposal as published by the Commission on 11 April 2018 (the Proposal) as well as the position adopted by the EP on 26 March 2019 (the Resolution).117_{The latter two will be} treated separately as the European legislative process does not entail the adoption by the EP to change the Commission’s Proposal in its original version. Rather, the Commission is authorised

115_{Fitness Check, p. 101-106.} 116_{Art. 288(3) TFEU.}

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to alter its Proposal at any time of the procedure as long as the Council has not acted yet.118_In light of the absence of the Councils position119_{so far and according to the current status of the} procedure, it is expected that the Commission will amend the Proposal according to the amendments adopted by the EP.120_{However, for the purpose of feasibility, the reference to a} single European measure refers to the Commission’s Proposal as of 11 April 2018 throughout this thesis.121_{The EP’s amendments will be highlighted as far as they pose essential alterations} to the Commission’s approach.

The different states of the measures already illustrate one major difference: the Proposal constitutes the beginning of the European legislative procedure whereas the MDP presents the final result of a complete legislative process, ultimately striking a compromise between stakeholder interests and public interests on the one hand, and between legislative institutions and lobbyists.

The sequence of objects to be compared follows the order of examining admissibility and substance of legal proceedings. The selection, however, takes the peculiarities of compensatory collective redress measures and the varying degrees of the criteria’s relevance in terms of access to justice into account. For the sake of completeness, aim and scope will be touched upon briefly. Yet, the subsequent comparison focuses on the type of proceedings, standing, consumer participation, binding effect, suspension of the limitation period and collective settlements. Broadly speaking, the choice of objects reflects access to justice considerations while taking into account the protection interests of (absent) group members in representative actions. The object’s individual relevance for access to justice for consumers will be indicated at the beginning of the respective sections.

4.1 Aim and Scope

With the declaratory model act, the German legislator aims to overcome the rational disinterest of consumers by way of claims aggregation.122_{For this purpose, the government enacted an} entirely new statute, which is now implemented in §§ 606 – 614 ZPO. The Commission’s

118_{Art. 293(2) TFEU.}

119_{On request, the General Secretariat of the Council stated via e-mail on 26}th_{May 2019 that the Council aims to}

reach an agreement among MS by the end of 2019, see Appendix.

120_{Schoo, EU-Kommentar, Art 294 TFEU, para. 29; state: 02 May 2019.} 121_{State: 02 May 2019.}

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objective of the Proposal is to offer an effective enforcement system for the protection of collective consumer interests affected by domestic and cross-border infringements of Union law.123_{In contrast to the German approach, the Proposal ties in with the current Injunctions} Directive by amending its shortcomings and ultimately repealing it.124_{In terms of similarities,} both documents provide tools irrespective of whether consumers are victims in mass harm situations or whether they face scattered, low-value damages. In regard to differences, the German explanation references the aggregation of individual consumer interests whereas the Commission places strong emphasis on the collective consumer interest. Apparently, the latter comprises the protection of diverse interests and goes beyond the mere protection of the individual consumer interest.

With respect to their personal scope, the measures commonly require consumer characteristics on the claimant side and trader characteristics on the defendant side.125_{The German declaratory} model act does not demand further conditions concerning its substantive application. Conversely, the material scope of the European Proposal is, although granted flexibility through the possibility of amending the list,126_{set out in an exhaustive list in Annex I, which the} Proposal refers to in Article 2 paragraph 1. The list currently covers 59 Directives and Regulations, including inter alia the Directive on Unfair Terms in Consumer Contracts, the Unfair Commercial Practices Directive and the Consumer Rights Directive.127_{Additionally to} measures relating to consumer law in a narrow sense, the Proposal covers for example data protection and environmental matters.128_{In its resolution, the EP extended the list to 65} Directives.129

The approaches therefore commonly foster a wide-ranging approach, which is subject, however, to restrictions under the Commission’s Proposal.

123_{Proposal, p. 1; Recital (5) and Art. 16 Proposal: The Proposal establishes a cross-border procedure while this}

is not the concern of the MDP.

124_{Section 2.2.2.}

125_{§§ 606(1) ZPO, § 29(2) ZPO and Art. 2(1) Proposal.} 126_{Recital (6) Proposal.}

127_{(2), (11) and (35) of Annex I to the Proposal.}

128_{(8), (25) and (26) of Annex I to the Proposal; see also Augenhofer, EuZW 2019, p. 6.} 129_{Amend. 103-108 Resolution.}

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4.2 Type of Proceedings

The type of proceedings and the target of claims are linked to several of the Evaluation Criteria enlisted above. The ultimate result of an envisaged proceeding is directly influential upon the potential compensatory effect of CRM’s. If, for example, a proceeding concludes with the issuance of injunctive relief or a declaratory order, compensation may well be the indirect result of such proceeding. In such a case, however, intermediate steps are necessary for consumers in order to obtain compensation. In the same vein, this affects cost and length of the procedure. Further, the frequency in which a court is engaged with the same facts of a case impacts procedural economy.

The German approach establishes a two-stage procedure whereby the MDP is only concerned with the first stage. The subject matter of the proceedings is therefore limited to declaratory claims according to § 606(1) ZPO. It should be considered that not all requirements necessary for a successful damages claim are suitable for model declaratory action.130_{This applies for} example to the requirement of causation between the unlawful act and the damage.131 Subsequently, in a second step, consumers registered in the declaratory proceedings are themselves responsible for taking legal action to enforce their compensatory claim. At this second stage, they carry the procedural risk individually.

Such a two-staged procedure is not alien to the Commission’s approach; the Proposal, however, employs the regulatory technique of rule and exception. Article 6(1) of the Proposal stipulates a one-stage procedure for redress measures as a general rule. A prerequisite is the issuance of a previous injunctive order, which may be subject to the same procedure.132_{Article 6(2) then} provides an exception from the former by allowing MS to authorize a court or administrative body to issue a declaratory decision instead. This approach is intended to comprise situations in which the quantification of individual redress is complex due to the features of the individual harm suffered by consumers.133_{Consequently, consumers would be referred to take action} individually, similarly to the German measure. A counter-exception is finally laid down in Article 6(3). Declaratory proceedings are deemed inadmissible in cases of an identifiable group

130_{Weinland, p. 34.} 131_Ibid.

132_{Art. 5(3) Proposal.} 133_{Art. 6(2) Proposal}

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of consumers who suffered comparable harm in relation to a period of time or purchase as well as in low-value cases.134

However, the EP’s Resolution dissolves this system of rule and exception by deleting the respective paragraphs 2 and 3.135_{Hence, MS are deterred from introducing declaratory} orders.136_{Further, the EP eliminated the precondition that a compensatory order should be} based on an injunctive order.137_{In doing so, it further strengthened the enforcement of} compensatory redress orders.138

4.3 Standing

The question on who is authorized to bring a claim bears consequences for access to justice in different facets. If standing is outsourced from the group of affected consumers and attributed to a superordinate entity, the risk of costly litigation is carried by the representative. Hence, this resolves a major disincentive for consumers in initiating legal action.139_{Despite larger financial} resources, the representative might also have bundled competences at their disposal to pursue a claim. As a result, representation can constitute a mean to align party capability vis-à-vis traders. In a second step, the answer to the follow-up question on who exactly the representative of consumer interests should be, entails considerations potentially rendering access to justice less effective. The subsequent elaboration is the expression of a compromise the legislators aimed to strike between offering access to justice and countering abusive litigation.

To counter abusive litigation, both measures stipulate that representative actions can be brought by QE’s only.140_{Hence, consumers themselves are not parties to the proceedings, which Article} 3(4) of the Proposal explicitly clarifies. Further, the two acts impose several requirements as to the nature of those entities and their funding.

134_{Recitals (19) and (20) Proposal.} 135_{Amend. 62-64 Resolution.}

136_{In line with the request in BEUC position paper, p. 4.} 137_{Amend. 57 Resolution.}

138_{Lühmann, p. 572.}

139_{E.g. Recital (9) Green Paper.}

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4.3.1 Qualified Entities

§ 606(1) ZPO defines QE’s according to the meaning set out in the German Injunctions Act.141 Additionally, it requires compliance with several conditions in a cumulative manner. In order to be qualified, the entity must encompass at least ten associations or 350 natural persons.142_It should further exhibit a registration period in the German or European register for at least four years and should verify the representation of consumer interests in a non-commercial matter while not striving for the generation of profits by filing declaratory actions.143_{The MDP,} therefore, goes beyond the requirements applicable to entities initiating injunctive proceedings under German law.

In contrast, the eligibility of entities as provided by the Proposal is oriented much closer towards the qualification required under the Injunctions Directive.144_{Whereas maintaining a central} litigation register and the registration of QE’s therein for at least four years are crucial aspects in the German act, the Proposal allows for ad hoc organisations and, thereby, waives the obligation of registering with the European Commission.145_{This is contrasted by the text} adopted by the EP, which excludes such a possibility.146

In order to prevent a commercial litigation industry from arising as well as to safeguard the integrity of entities, the Proposal and the MDP commonly require the representation of consumer interests in a non-commercial manner and proscribe litigating for the purpose of realising profits.147

4.3.2 Funding

The above-mentioned considerations also determine the regulation of the entities’ funding. Both measures have in common that transparency on funding is considered to be a crucial method to thwart abusive litigation.148

141_{§ 3(1) s. 1 no. 1 UKlaG.} 142_{§ 606(1) ZPO.} 143_Ibid. 144_{Augenhofer, EuZW 2019, p. 9.} 145_{Art. 4(2) Proposal.} 146_{Amend. 40 Resolution.}

147_{Recital (4), Art. 4(1) Proposal as well as § 606(1) ZPO.}

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The German legislator decided to treat third party funding as a matter of admissibility.149_Thus, entities that receive more than 5% of their resources from businesses are excluded from bringing an action. The purpose is to avoid a collision of consumer and business interests.150 Furthermore, the undue influence of businesses on an entity as well as the instrumentalization of collective declaratory proceedings to the detriment of competitors shall be prevented.151_The entities face a duty to disclose their funding only when there is serious doubt concerning the fulfilment of the requirements.152_{However, predominantly publicly funded consumer} authorities are exempted from this duty.153

In contrast, the Proposal stipulates a general duty of disclosure.154_{Hence, it in principle allows} for third party funding as long as the entity fulfils the obligation of general disclosure regarding its financial resources.155_{Additionally and in accordance with the MDP provisions, the} respective company shall neither influence the proceedings nor take undue influence on competitors by providing financing for a collective action.156_{Similar to the German approach,} the action is inadmissible in case of failure to comply.157

In this connection, the Resolution seeks to leave less discretion to the MS by clearly categorising the issue of funding as a matter of admissibility.158_{More importantly however, the} EP resolved to eliminate the Commission’s prohibition on third-party funding and to equip MS with the decision-making.159_{In line with the German approach, the Resolution clarifies that the} disclosure regime serves the purpose of demonstrating the absence of conflict of interest.160

4.4 Minimum Number of Consumers affected and Type of Consumer Participation

As consumers are not themselves parties to the proceedings, the question on the type of their participation by either the technique of opt-in or opt-out demonstrates a key element in the

149_{§ 606(1) s. 2 no. 5, (3) no. 1 ZPO.} 150_{Governmental Draft MDP, p. 24.} 151_Ibid. 152_{§ 606(1) s. 3 ZPO.} 153_{§ 606(1) s. 4 ZPO.} 154_{Art. 7(1) Proposal.} 155_Ibid.

156_{Art. 7(2) (a) (b) Proposal.} 157_{Art. 7(3) Proposal.} 158_{Amend. 68-73 Resolution.} 159_{Amend. 70 Resolution.} 160_{Amend. 69 Resolution.}

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debate on collective redress.161_{The implications for effective access to justice are extensive.} An opt-out regime is particularly useful to overcome the consumer’s apathy and therefore to help as many consumers as possible to get their rights vindicated. This advantage, however, may come at the price of fundamental procedural guarantees such as the right to judicial hearing.162_{In contrast, the opposite scenario applies to an opt-in solution. Before describing} and comparing the approaches chosen on European and German level, the partly interrelated subject of the number of consumers affected will be touched upon.

The requirement of consumer (interest) impairment is dealt with quite differently in the respective acts. In this regard, the collective consumer interest presents a central element in the European Proposal, which it defines as the interests of a number of consumers.163_{The Proposal} remains very vague in this regard, not specifying the sum of affected consumers. Oppositely, the MDP determines the specific number of at least 50 consumers who must have registered with the litigation register within two months after the filed action is published, by the day before the initial hearing at the latest.164_{The German legislator established this requirement as} prerequisite for the admissibility of the collective action.165

While the MDP obeys the opt-in regime, the Proposal leaves the issue of whether the claimant requires the consumers’ mandate in principle to the MS.166_{Article 6(3) of the Proposal,} however, stipulates an exception for cases concerning an identifiable group of consumers and low-value cases. For such cases, for which the Proposal intends to exclude the availability of declaratory decisions, the Commission decided to impose an opt-out regime.167_{It justifies its} choice with expediency and efficiency reasons as well as considerations of disproportionality in low-value cases in the event of potentially distributing very small amounts back to consumers.168

However, the imposition of an opt-out regime was dropped by the EP coherently with the abolition of the rigid exclusion in regard to declaratory orders.169_{Consequently, the Resolution} leaves the decision on the requirement of the consumer’s mandate entirely to the MS.

161_{E.g. pro opt-in: Habbe/Gieseler, p. 229, pro opt-out: Basedow, p. 614.} 162_{Weinland, p. 99.}

163_{Art. 5 and 3 no. 3 Proposal.} 164_{§§ 606(3) no. 3, 608(2) s. 1 ZPO.} 165_Ibid. 166_{Art. 6(1) Proposal.} 167_{Art. 6(3) Proposal.} 168_{Recitals (20), (21) Proposal.} 169_{Amend. 64 Resolution.}

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4.5 Binding effect

The binding force of final decisions is essential in regard to legal certainty and procedural economy. At the same time, the binding effect comprises risks for the judicial guarantees of the parties affected by a representative action. As litigation is not carried out by consumers themselves, they submit to the competence of QE’s and the corresponding outcome of litigation. Further, the criterion of binding effect is closely related to the question of the type of consumer participation. A mechanism, which follows the opt-out regime and stipulates the force of a final decision as binding upon a group of consumers who suffered damages from the same entrepreneurial behaviour, could be highly problematic in light of the fundamental right to judicial hearing.170

Due to the different types of proceedings, the binding effect of judicial decisions concerns different relations respectively, which the measures take into account in varied forms. The MDP stipulates the binding character of final decisions in a two-folded manner. Within the ensuing individual claim for performance, the declaratory decision generates binding effect towards the respective court as well as the registered consumer.171

Similarly, the European approach employs a twofold meaning of binding effect. However, the latter affects, next to different courts and administrative authorities, also decisions from other MS.172_{Likewise, the Proposal follows a path similar to the MDP by deeming final decisions} irrefutable in subsequent procedures.173_{But the Proposal goes further in stipulating binding} effects. The assessment of an infringement is not only supposed to be binding upon the parties and consumers involved. Rather, the establishment of an infringement is deemed irrefutable towards that same trader for the same infringing conduct.

Conversely, the EP established that final decisions should only be considered as evidence in subsequent procedures.174_{Further, the amended Article 10(2a) treats final decisions as} rebuttable assumptions in the relationship between MS.175_{Hence, the EP’s adoption watered} down the binding nature of decisions as originally recognised by the Commission and remains below the standard set out in § 613 ZPO.

170_{Art. 6 ECHR; Art. 103(1) GG.} 171_{§ 613 ZPO.}

172_{Art. 10(2) Proposal.} 173_{Art. 10(1) Proposal.} 174_{Amend. 83 Resolution.} 175_{Amend. 85 Resolution.}

Collective Redress in the EU and Germany – A New Deal for Effective Access to Justice for Consumers?