Mass claims across borders: a deep dive into the Netherlands, England & Wales, and Germany

As flagged in an earlier article about the continuing rise of consumer claims in the EU, the enactment of the Representative Actions Directive (“RAD”) in December 2020 meant that each EU Member State had to create a regime for bringing collective redress actions on behalf of groups of claimants against infringements by traders of specific EU laws. Most Member States have complied since (see our Tracker for more detail).

As a Directive the RAD will have varying effects across Member States. The RAD contains minimum requirements and it only requires the domestic implementation of an opt-in mechanism, although individual jurisdictions may choose to go a step further and introduce opt-out mechanisms. Under the Directive, so-called "Qualified Entities" (QEs) may bring a collective redress action on behalf of groups of claimants harmed by unlawful practices which breach specific EU laws. Nevertheless, the most significant impact of the Directive is that it allows claimant groups to seek injunctive measures but also redress measures. Or, in other words: compensation and similar remedies, which should make it much easier and more effective for consumers across the EU to seek compensation; something that was often not possible in many Member States. As a general trend, the Directive will encourage more class actions in the years to come, as it provides the first EU wide harmonised framework for class actions, it improves the access to compensation and due process for consumers, and establishes safeguards against exploitative litigation.

However, class-action regimes across Europe are still not created equal. This is primarily because, as mentioned above, some Member States already have well-developed class action regimes and others are or remain underdeveloped. Despite such harmonisation efforts, involved parties – whether they be plaintiff groups, litigation funders, or corporations faced with a mass claim – may still encounter vast differences within not only the EU, but also the United Kingdom (specifically England & Wales) which still plays a major role within the broader European economy and often remains the jurisdiction of choice for commercial contracts.

Find out more about the collective redress action regime in each of our selected jurisdictions below:

• The Netherlands: WAMCA (Act for the Settlement of Mass Damages in Collective Actions)

• England & Wales: Recent judgments which may affect the appetite for mass claims in the English courts and what next for litigation funding

• Germany: – the response to ‘Dieselgate’ and implementation of the RAD

The Netherlands: WAMCA (Act for the Settlement of Mass Damages in Collective Actions)

The Netherlands has historically been at the forefront of developments in collective redress in comparison to both the UK and other EU Member States.

The Netherlands has had a class action procedure since 1994, but victims were made to seek damages before the civil court individually, where the burden of proof was on their part. This also created pressure on the judicial system, which was overwhelmed with individual cases. The Dutch legislator sought to partially remedy this by introducing a new regime in 2005 (the Collective Settlement of Mass Damages Act, or ‘WCAM’), that allowed courts to declare settlements universally binding for all victims, regardless of their participation in the settlement (Dutch Civil Code, Article 7:908). Still, there was neither a collective compensation scheme nor a relief of pressure on the judicial system.

Fifteen years later, this was remedied through the introduction of the new Act for the Settlement of Mass Damages in Collective Action (‘WAMCA’) which enables civil courts to award compensation in collective redress action cases and is considered a major improvement over its predecessors. The WAMCA not only allows for the awarding of direct and collective damages to claimants, but furthermore provides for an opt-in mechanism for foreign claimants (i.e., potential claimants need to actively sign up to take part) and specifically an opt-out mechanism for Dutch class action members (i.e., nobody needs to sign up, everybody who falls within the scope of the claim is entitled to join the action). The WAMCA also includes a series of admissibility requirements which must be met by the representative bodies to qualify for a class action.

The WAMCA is today considered amongst the most highly sophisticated collective redress regimes within the EU, and even after the enactment of the RAD stands out from other EU regimes. This development can be mainly attributed to two key aspects of the WAMCA: (1) simplicity and (2) finality. Not only did the WAMCA simplify initiating mass claims for breach of contract or tort, but it also offers a comprehensive collective compensation scheme for potential large claimant groups with nuanced opt-in and opt-out features. This makes the WAMCA attractive for both plaintiffs and defendants. Plaintiff groups are, on the one hand, forced to work together and can more easily pool their resources. It also facilitates raising collective funding from third parties, such as litigation financiers. On the other hand, defendants effectively know where they stand in terms of exposure after the proceedings have come to a close.

The WAMCA therefore offers efficient adjudication of claims involving large groups of claimants by ensuring that all stakeholders are bound by the outcome of a single judicial procedure, instead of each plaintiff having to start individual proceedings. This is mainly achieved through the system of so-called ‘special interest groups’ and the ‘opt-out’ mechanism for Netherlands-based class members:

• Claimants do not litigate individually but through special purpose vehicles known as ‘special interest groups’ or ‘representative bodies’, who usually decide to incorporate themselves as a non-profit foundation. These special interest groups represent the joint interests of the claimants and advocate on their behalf before the court. If there are multiple special interest groups, the court appoints one as the ‘exclusive representative’ in the proceedings. This exclusive representative then acts as the leading claimant who performs (i) all procedural steps, (ii) serves as the coordinating (primary) point of contact for both the court and the defendant, and (iii) manages the interests of the other special interest groups and their constituencies as well as any injured parties not affiliated with a particular special interest group. In most cases, the court will only appoint one exclusive representative, although the WAMCA allows for appointing multiple co-representatives which is subject to the discretion of the court.
  
  
• The outcome of WAMCA-proceedings is also automatically binding for all Netherlands-based injured parties who fall within scope of the claim, unless they actively choose to opt-out from the proceedings or a settlement. This applies not only to actual members of the special interest group(s) who actively choose to become involved in the collective redress action, but also to injured parties that did not make such a decision and whom might not even be aware of the proceedings’ existence; if they fall within the scope of the group as defined by the court (referred to as the ‘narrowly defined group’), they are bound by the outcome of the WAMCA-proceedings, unless they opt-out in time. Foreign injured parties that fall within the scope of the narrowly defined group still need to actively sign-up to the action (‘opt-in') to be bound by the proceedings’ outcome.

This system has several advantages. The opt-out mechanism increases the likelihood of finality: the vast majority of claimants are unlikely to opt out. This, in turn, significantly reduces the likelihood of a flood of cases being brought by late adopters. In other words, the WAMCA is designed to achieve as much finality as possible around a particular type of claim against a particular defendant. This not only reduces the pressure on the judicial system, but also limits the ongoing uncertainty for defendants, who will effectively know where they stand once the legal proceedings initiated by some of the first movers have been concluded. It also concentrates the litigation between claimants and defendants in a single court case, allowing claimants to pool their resources and effectively reduce the overall cost of litigation.

In addition to providing a single point of contact for the defendant and the courts, the special interest groups also provide for a central fundraising vehicle that can raise capital necessary to cover the significant costs of litigation; costs that individual claimants might otherwise not be able to pay. This promise of efficient collective redress has attracted many litigation funders who advance the costs for the litigation in exchange for a percentage of the recovery (if any), who find the notion of efficient adjudication for large groups of claimants an attractive proposition.

Disadvantages: ‘admissibility limbo’?

Despite its obvious advantages, the WAMCA is far from perfect in practice. As we noted in an earlier contribution, the WAMCA has since its enactment in 2020 led to the filing of 96 collective claims that to date has resulted in just one substantive judgment concerning mass damages. Critics attribute this slow turnover rate to the strict admissibility requirements the WAMCA imposes on special interest groups, as well as formalities that provide ample opportunity to raise procedural hurdles:

1. Following the service of a writ of summons to a defendant, the special interest group must register the writ of summons in a central register for WAMCA-claims. This registration triggers a three-month standstill period to allow other potential special interest groups to also file a claim, which period can be extended for a further three months. The proceedings are then effectively suspended.
   
2. After the mandatory standstill period has ended, the defendant has six weeks to submit a statement of defence. The defendant may choose to limit its defence initially to procedural admissibility arguments, which may cause significant additional delays:
   
   1. First, special interest groups must meet strict requirements. They must demonstrate proper governance, oversight, and transparency. They must also prove financial resources sufficient to cover legal costs, as well as experience and expertise in handling collective actions. The claim itself must have a so-called ‘close connection to the Dutch legal system’, and the special interest groups are expected to disclose any external litigation funding. The Dutch legislator considered it critical that the special interest groups retain control over the litigation. As a result, litigation funders are not allowed to influence the essential decisions in the litigation. In addition, litigation funders are not allowed to receive funding from competitors of the defendant or from entities dependent on the defendant. Failure to meet these strict criteria may result in inadmissibility, underscoring the importance of solid preparation and compliance with the Dutch Claims Code, which requires written funding agreements. These strict requirements provide defendants with numerous potential technical defences, that must first be resolved before the proceedings can proceed to the substantive phase. The admissibility debate can take up a lot of time, especially if several special interest groups have filed a claim: the court must then assess and rule on the admissibility of each group with all parties having the right to submit arguments on this point.
      
   2. The WAMCA is only available to mass claims that are ‘sufficiently similar’ (also referred to as the ‘indivisibility’ or 'bundlability’ requirement). In other words, the underlying claims of the special interest group's constituency must be sufficiently similar to allow them to be bundled into one claim so that they may be suitable for mass adjudication. This has proved a rather a big hurdle for plaintiffs over the last few years and resulted in the inadmissibility of a major consumer claim against TikTok for alleged privacy violations. The court found that the plaintiffs were primarily seeking compensation for non-pecuniary damages, which by their nature vary widely from person to person. As such, the claims were not, in the court's view, suitable for mass adjudication. This decision has not gone unchallenged and is currently under appeal, and it will be interesting to see if it will be upheld.
      
   3. As we described earlier, the court selects and appoints one ‘exclusive representative’ from the group of admissible special interest groups (if there are several) following the admissibility decision to act on behalf of all claimants in the proceedings. This can be a mere formality if all admissible special interest groups agree on who should act as the exclusive representative, but this is not a likely scenario. Each special interest group usually represents a particular type of claimant and is likely to try to argue why it should be appointed as the exclusive representative to ensure that it maximises its influence on the strategy and direction of the litigation. This may lead to conflicts between the different groups of claimants and is likely to cause further delays. After the appointment of an exclusive representative, the court will decide on the length of an opt-out period (and opt-in period, if applicable) which again suspends the proceedings for a duration subject to the court's discretion.
      
3. After the admissibility phase, the court sets a mandatory negotiation period during which the parties must explore settlement options. This again suspends the proceedings for a period determined by the court.
   
4. If no settlement is reached, the parties finally move on to the ‘substantive phase’, in which the defendant is given the opportunity to submit the grounds for its substantive defence if it has not already done so, and the court examines the case on its merits.

Although the WAMCA promises judicial efficiency, it can therefore take a long time (sometimes several years) for a case to reach the substantive phase, let alone for an actual judgment on the merits to be reached. This favours defendants (especially companies that find themselves involved in claims that they consider to be unjustified and frivolous).

There are also increasing signs in the market that plaintiff groups are finding it more difficult to fund such cases in the future, as investors start to become more hesitant about the risk of being stuck in ‘procedural limbo’, which they may be unwilling or unable to afford if there is no foreseeable prospect for success in the short to medium term. Others have noted that the difficulty of attracting litigation funders without a guarantee that ‘their’ special interest group will be appointed as the exclusive representative and thus be in the driving seat of the litigation.

The WAMCA remains a frontrunner within Europe

However, as we noted in our earlier article, the advantages of the WAMCA still vastly outweigh its disadvantages. The strict admissibility requirements are also widely seen as necessary to prevent frivolous claims which could all too easily have a significant impact on the business and reputation of companies, which could potentially impact the economic viability of the Netherlands as an attractive place to do business.

Furthermore, the WAMCA is still relatively new, and the majority of the registered cases were filed quite soon after its enactment; these cases have experienced teething problems that are unlikely to be experienced by future cases. Both litigants and courts are gaining more experience with the WAMCA and the increasing number of judgments are shaping and clarifying the admissibility aspects of the WAMCA. Future claimants will therefore be better prepared. Indeed, as we noted before, the first substantive judgment was issued in less than 2,5 years after the claim was filed. That is quite fast, considering the mandatory standstill periods prescribed and clearly demonstrates that the WAMCA is an appropriate vehicle for the efficient handling of mass claims; particularly for larger commercial claims involving a clearly identifiable group of claimants, with very similar claims, and clearly definable damages. Examples include cases dealing with highly standardised or ‘boiler plate’ contracts, in sectors such as energy, banking, mortgages, insurance, credit, and transport. It is in such cases that the WAMCA's key features of simplicity and finality become apparent and we have already seen the first signs of a market shift towards an increase in such cases being initiated (please see our earlier contribution) across a wide variety of sectors.

However, the WAMCA lends itself to more than just large commercial claims and is suitable for a wide variety of cases. A large portion of cases registered in the central register of WAMCA-claims deal with the (alleged) infringement of intangible rights, including landmark claims against tech companies such as those brought on behalf of children against TikTok for privacy and data protection violations, claims against Google and X (Twitter), and ongoing cases with Meta, Apple, Oracle and Salesforce. Further cases involve a foundation fighting for female rights which issued a claim for damages for defective breast implants – including the distress and harm the implants have caused, and a claim by a non-profit organisation fighting counterfeit trade against a Chinese e-commerce platform selling counterfeit products. This broad applicability remains one of the key reasons the WAMCA so far remains a frontrunner within Europe.

England & Wales - Consumer collective actions: Some very recent significant judgments which may affect the appetite for mass claims in the English courts and what next for litigation funding

Mass claims, or collective redress mechanisms, are a pivotal part of the English legal framework, providing a way for multiple claimants to address harm collectively. These mechanisms aim to balance the need for efficiency in handling large-scale disputes with ensuring access to justice. However, the development of mass claims in English law remains constrained by legislative, procedural, and funding challenges. In this part of the deeper dive, we look at the most popular mechanisms for consumer collective redress in the English legal system and consider two recent judgments which highlight some of the current issues which those bringing collective actions in the jurisdiction need to consider.

There are three main types of consumer collective action in English law. The table below summarises the main elements of each:

Data Privacy class actions: Defining whether the class has the ‘same interest’ under CPR 19.8

Although claims using CPR 19.8's representative action mechanism have increased, the English courts have strictly interpreted the 'same interest' requirement, leading to some claims being struck out. In Lloyd v Google [2021] UKSC 50, the UK Supreme Court ruled that loss of control damages are unavailable under the Data Protection Act 1998 in this type of claim as the ‘same interest test’ requires proof of individual circumstances and so cannot fall within the definition of each claimant having the same interest.

In order to circumvent these issues, the class representative in Prismall v Google [2024] EWCA Civ 1516, decided to bring his claim in the tort of Misuse of Private Information (MPI) and confine the damages to those of a nominal claimant which the parties called ‘the lowest common denominator’ whose claim represented the “irreducible minimum scenario” of a claimant in the class. As with Lloyd v Google this approach was also unsuccessful, with the Court of Appeal ruling on 11 December 2024 that Prismall did not have a realistic prospect of establishing the tort of MPI because it could not be established that everyone in the class had the ‘same interest’ as an individualised assessment of the tort needed to be made in each case.

Prismall, as class representative, brought the claim on behalf of approximately 1.6 million patients, after their medical records were transferred without specific consent from the Royal Free hospital to DeepMind Technologies who were developing an app designed to assist in detecting and diagnosing kidney disease. Prismall alleged that the transfer of the data was a misuse of the patients' private information and that the class should receive damages for the loss of control of their own data. The court's judgment focused on whether the class of claimants had the "same interest" as required under CPR 19.8. The court held that the class did not have the "same interest" because not all members could establish the ingredients of a claim for misuse of private information, specifically the establishment a reasonable expectation of privacy in the data transferred. The court found that the lowest common denominator claimant did not have a realistic prospect of success because the claim could not meet the threshold of seriousness required for misuse of private information. For example, a claimant may have placed their medical information in the public domain, may not have provided the doctor with any private medical information and suffered no upset or concern because of the transfer of data. It was also clear from both social media and press reports that some members of the class had put their medical history in the public domain therefore invalidating any claims to privacy. This contributed to the conclusion that the class did not have the "same interest". The Court of Appeal concluded that the representative action could not proceed. As a result, the appeal was dismissed, and the claim was struck out. While Mr Prismall could appeal the ruling, the decision is consistent with previous UK Supreme Court decisions in this area and therefore, for the time being it appears that collective actions in the data privacy arena will be very hard to get off the ground.

First Opt-out collective action to go to trial is a ‘win’ for the Defendant

The judgment in the first opt-out collective action under a CPO to go to trial in the CAT was handed down on 19 December 2024 with the Tribunal deciding in favour of the defendant against the class representative. The claim, Justin Le Patourel v BT Group PLC 1381/7/7/21, was brought by the class representative on behalf of 3.7 million BT customers and was valued at more than £1.3 billion. The claim alleged that BT had abused its dominant position as it had inflated prices in respect of certain services predominantly used by its elderly or vulnerable customers. BT decided to reduce these prices following a review by Ofcom, the UK telecoms regulator, into these services. Mr Le Patrouel brought the claim as a result.

The Tribunal found that while the prices were excessive, they were not unfair and in a judgment over 300 pages in length, the Tribunal rejected the claim. Whilst the Tribunal used the evidence from the Ofcom review, it also had access to other evidence which significantly swayed its decision. This is important as a large number of the claims issued under CPO’s have been brought as a result of the findings of Regulators.

In addition, while it is expected that Mr Le Patourel will appeal the ruling, the decision could have wider impact as it could affect the type of claims which funders are prepared to consider funding in the short term, especially those with a novel element to them.

Funding for collective actions:

Under English law, litigation may be financed by a third party. Litigation Funding Agreements (LFAs) are contracts between litigation funders and claimants, allowing the funder to recoup a portion of the proceeds recovered by the claimants if the litigation is successful. This method of financing litigation is becoming increasingly prevalent, particularly in the context of class actions.

In a landmark decision with significant ramifications for third-party funders and parties pursuing collective (class) actions before the CAT, the Supreme Court in R (on the application of PACCAR Inc and others) (Appellants) v Competition Appeal Tribunal and others (Respondents) [2023] UKSC 28, determined that an LFA constitutes a Damages-Based Agreement (DBA). Consequently, because the LFA did not adhere to the statutory requirements for DBAs, it was deemed unenforceable for funding collective proceedings in the CAT.

Numerous funding arrangements underpinning active claims before the CAT are structured in this manner; this presents significant issues, as the Competition Act 1998 prohibits the use of DBAs in opt-out competition class actions. Consequently, this ruling has provided CAT defendants with substantial leverage, while simultaneously creating considerable difficulties for funders who are now urgently seeking to renegotiate the terms of their funding agreements. Although this development is unlikely to be fatal to the financing of competition class actions, it is expected to incite further challenges to funding arrangements, given the prevailing uncertainty regarding what constitutes a DBA. There are currently a number of claims in the CAT in which the defendants are challenging the validity of LFAs agreed between funders and class representatives including Alex Neill v Sony Corporation. The previous UK government, under Rishi Sunak, was intending to legislate to reverse the PACAAR decision, however the draft Bill did not make it through the legislative process in the time allotted prior to the general election. There has been no indication from the new government that it will take a similar course.

In addition to this uncertainty, a settlement has been agreed in the Merricks v Mastercard class action under the CPO mechanism. At the time of writing the settlement is mired in controversy with the funder of the claim alleging that the settlement is too low for each class member and was agreed without consulting it. The settlement agreement will be subject to approval by the CAT in the new year which will decide whether the funder’s allegations have merit. If the settlement is approved this will be a much lower return to the funder than it was expecting. Commentators are suggesting that this result could have ramifications for future lending by funders in this arena as funders may restrict the types of claims they choose to support to ensure a greater return on their investment, with the possibility that some claimants may have to choose other jurisdictions to bring their claims where funding agreements may be easier to come by.

The Future

The recent judgments in Prismall and Le Patrouel have not found in favour of claimants and those who would like to see more mass claims in the English courts. They could be interpreted as a system trying to set its own parameters, to ensure that only meritorious claims are taking up the courts resources and making their way to trial. Litigation funders will also be taking note, considering future funding agreements and perhaps taking a more conservative view as to which claims will benefit from their help as they digest the rulings in Prismall, Le Patrouel and PACAAR and the settlement in Merricks. However, there are still a large number of mass claims which are proceeding through the courts, whether by way of GLO, representative action or CPO, and there have been settlements in favour of consumers. It all points to the fact that the system is working, albeit that tweaks still need to be made to it.

Germany – the response to ‘Dieselgate’

Germany, historically, has not been known as a friendly jurisdiction for collective redress actions. Despite collective redress actions in very specific areas of law, such as actions under the German Capital Investors Model Proceedings Act (Kapitalanlagemustergesetz, KapMuG), which allows aggrieved investors to assert claims for damages by permitting collective-action suits based on false, misleading or omitted public capital market information, such as annual financial statements or stock exchange prospectuses, German companies were only faced with mass claims litigation when (thousands of) individual lawsuits were brought against them.

New collective redress action introduced in response to “Dieselgate”

This landscape began to change with the Volkswagen Group emissions scandal known as “Dieselgate”. Volkswagen and the courts were flooded with hundreds of thousands of individual claims from affected consumers, the vast majority of which were based on the same set of facts, albeit on slightly different legal grounds. Against this background, the German legislature in November 2018 introduced the model declaratory action (Musterfeststellungsklage). Its main purpose was to provide binding clarification of important legal or factual issues for a group of affected consumers and to relieve the pressure on the judiciary.

Under the model declaratory action, certain QEs may bring a declaratory judgment action on behalf of a class of consumers. These QEs must meet strict screening and approval criteria to prevent abuse. They are either qualified consumer organisations in the fields of environmental protection, consumer protection, data protection and health protection, among others, or qualified entities from other member states of the European Union. If the court issues a declaratory judgment, the resulting findings will be binding on all consumers who have joined the proceedings. However, this does not result in direct compensation for consumers. As the name of the model declaratory action implies, the aim is to obtain a declaration that a certain legal behaviour of the defendant company violates consumer rights, not to obtain damages for individual consumers. Consequently, it is then necessary for the consumer to file an individual follow-up action for damages based on the declaratory judgment. This may result in the defendant companies being confronted with a multitude of individual actions filed in parallel in courts throughout Germany following the issuance of a model declaratory judgment.

The German Redress Action as more efficient legal protection for consumers

The landscape changed again with the implementation of the RAD into German law. In October 2023, the Consumer Rights Enforcement Act (Verbraucherrechtedurchsetzungsgesetz, VDuG) was enacted in Germany, introducing a novel collective redress procedure: the redress action. The model declaratory action and the redress action are united by the fact that both can only be brought by QEs. An individual consumer cannot set itself up as the representative of a large number of consumers (i.e., the “class”). The new redress action provides for a one-step procedure that allows consumers to claim compensation or other remedies directly from the defendant company in the form of payment, subsequent service such as repair,replacement, price reduction, termination of the contract or reimbursement of the price paid. This is a significant innovation that provides a much quicker and more efficient solution for consumers. The lengthy process via the initial collective determination that a company has violated consumer rights and the individual action that must then be brought by the individual consumer is now no longer necessary. The redress action therefore represents a significant expansion of the previous model declaratory action. The areas of application are likely to be diverse: highly standardised contracts (where the question of the validity of specific contractual clauses arises), for example in the banking, insurance or energy sector, could be put to the test by means of a redress action. The redress action can also be used to sanction violations of data protection regulations, misleading advertising or poor product quality.

To initiate the redress action, at least 50 affected consumers must come together. Once this threshold is reached, other affected consumers can register their claims in the collective redress action register of the Federal Office of Justice (so-called “opt-in”). Additionally, small companies with fewer than 10 employees and an annual turnover or annual balance sheet of less than EUR 2 million may assert their rights via the redress action.

The procedure of the redress action provides for three phases: Decision on the merits, evaluation of settlement and final redress judgment. The court issues a decision on the merits if it considers the redress action to be well-founded on the facts. After passing the decision on the merits, the parties are requested to submit a written settlement proposal to implement the decision on the merits. If the remedial proceedings are not terminated by an effective settlement, the court shall finally decide by final redress judgment. If the redress action does not itself quantify a collective total amount, it is intended that the court will freely determine the amount of the collective total amount, considering all the circumstances. The implementation of the final redress judgment shall be carried out by an administrator appointed separately for this purpose. The administrator sets up an implementation fund and organises the distribution of the total amount awarded by the court to the consumers who have registered a claim.

One of the most notable aspects of the redress action is the simplification of the claims procedure. The new legislation gives consumers a longer period to register their claims in the collective redress action register and allows them to determine until two months after the (last) oral hearing whether to join the collective. This mitigates the risk for consumers by allowing them to await an assessment of the likelihood of success before committing themselves. Unlike the opt-out system, the opt-in system requires consumers to join the collective redress action. This means that consumers must take an active role in order to benefit from collective redress. Affected consumers who previously opted-in may resign from the redress action at any point in time –without being barred from filing an individual action on the same issue. Likewise, consumers who for whatever reason decided against opting-in in the first place may file individual cases instead. As a result, a large number of individual mass actions are still possible in addition to the collective redress action. This has the effect of limiting the scope and success of the redress available under the new system compared to an opt-out system. In the Dutch WAMCA, for example, consumers who meet the criteria of the claim are automatically included unless they explicitly opt out. This opt-out mechanism therefore adds as much finality as possible, since the vast majority of claimants are unlikely to opt out.

Prior to the enactment of the VDuG, the issue of litigation funding was widely and quite controversially discussed. The possibility of litigation funding exists but is limited to a profit share of 10 % of the compensation or remedy to be provided by the defendant company. In order to make third-party funding more transparent, all agreements between the consumer association and the litigation funder must be disclosed when the lawsuit is filed. This is intended to increase transparency and reduce the risk of abuse. However, it makes litigation funding less attractive.

While the redress action has the potential to improve the efficiency and fairness of consumer claim resolution, the question of how courts will determine damages without considering individual cases remains a significant challenge. The legislation stipulates that claims must be "essentially of the same nature", thus allowing for the bundling of claims. However, this may raise concerns about the potential impact of individual differences on the outcome of proceedings.

Future Outlook: Work in Progress

The model declaratory action was already considered as a promising instrument. However, in terms of increasing efficiency for consumers, defendants and the judiciary, the model declaratory action has stopped halfway. Unsurprisingly, since its introduction in November 2018, the number of model declaratory actions filed has remained relatively low, with only 32 cases being initiated in six years. This may also be due to the fact that the declaration of wrongdoing on the part of the defendant is not particularly pragmatic for the aggrieved consumers and, above all, does not lead to an expedient remedy of the consequences of the legal wrong.

The redress action at the heart of the VDuG has yet to effect a change in this regard. The introduction of the redress action in Germany represents a significant step towards a more consumer-oriented form of collective litigation. While it draws on the precedent of US class actions, its approach is more in line with the principles of European legal practice. Nevertheless, the effectiveness of the redress action remains uncertain. Since its introduction, only five out of 15 expected cases have been registered in the collective redress action register. These five cases include actions against, inter alia, energy and telecommunications providers to recover allegedly unlawful price increases. According to a representative of the Federation of German Consumer Organizations, these five cases cover around 175.000 consumers which proves the effectiveness of the redress action. 175.000 consumers being bundled in a collective redress action means 175.000 fewer individual lawsuits.

Courts, companies and also the legal profession seem to agree that even with the introduction of the redress action, there is still room for improvement in terms of efficiency. It is therefore unlikely that Germany will soon be a frontrunner in collective redress actions in Europe.

If you would like more information about Collective Redress in your jurisdiction please reach out to the authors: Evelyn Tjon-En-Fa, Arent van Gent, Susanne Lutz & Louise Lanzkron