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Prevent risk of abuse through class actions

The introduction of collective redress instruments should be expressly rejected due to the high risk of abuse for companies. The BDI firmly rejects the introduction of collective redress instruments in the form of class or group actions. The system of individual legal prosecution and enforcement is well developed in Germany and in the EU.

High level of protection in Germany

In the area of access to the law, Germany is among the leading countries worldwide. The Rule of Law Index 2015 places Germany in fifth place under the heading of Civil Justice: This factor measures whether “civil justice systems are accessible and affordable, free of discrimination, corruption, and improper influence by public officials. It examines whether court proceedings are conducted without unreasonable delays, and if decisions are enforced effectively. It also measures the accessibility, impartiality, and effectiveness of alternative dispute resolution mechanisms.”

The decision as to whether a complaint should be lodged and how the process is to be conducted is left to each individual petitioner and not automatically reassigned to a group or an organisation. This is also an expression of the fundamental right to be heard. In addition, the principles of individual responsibility and of individual legal protection apply. Objectives which go beyond compensation for injury and which serve, for instance, for deterrence and prevention should be enforced exclusively by the State. That is why there is official supervision in areas such as antitrust law, unfair competition and data protection law. The special protection of such public goods is entrusted to special authorities with special powers to act in their own right. Moreover, authorities can also impose monetary fines. In parallel, ombudsmen and arbitration bodies outside the judicial system ensure appropriate solutions to conflicts and behaviour in conformity with the rules.

Avoid US-style system

In particular, the BDI opposes the introduction of class actions insofar as these are likely to go hand in hand with non-specific mass claims, fishing expeditions, no-win-no-fee deals, punitive damages and surrender of the loser-pays-principle; it is absolutely essential to avoid such excesses as those encountered in the US legal system. Furthermore, the BDI warns against the creation of a litigation industry. Because only a small portion of the amounts awarded reaches those who have actually suffered; the lion’s share goes to law firms which represent the petitioners in court.

Major risk for companies

Over and above this, collective actions generally constitute a major burden and a major risk for the companies responding to complaints because of the associated risk of abuse. This leads to:

  • reputational losses
  • overhasty Settlements
  • a large macroeconomic cost, for instance amounting to damage at the level of $ 260 billion a year in the USA (cf. Institute for legal reform (2014). Economic Consequences – The Real costs of U.S. Securities Class Action Litigation.)

In brief: four reasons to reject the introduction of collective redress

  • Substantive reshaping of recognised and proven civil justice principles
  • Great potential for abuse
  • Danger of US-style legal situations encouraged by a “litigation industry”
  • Serious consequences, e. g. through fishing expeditions, no-win-no-fee deals, punitive damages