Introduction of a leading decision procedure at the Federal Court of Justice: Liberation or a gateway for tactical gameplay?

It is no secret that the civil courts have, for many years, been swamped by the large number of actions brought in certain sectors. These so called "mass actions" have a huge impact on the efficiency of the judiciary and on the attractiveness of Germany as a venue for disputes. Against this background, the Federal Government approved a draft bill for the introduction of a so-called leading decision procedure (Leitentscheidungsverfahren) at the Federal Court of Justice ("BGH") on 16 August 2023 ("Government Draft").¹ The aim is to allow mass actions to be dealt with more quickly by allowing the BGH to provide guidance at an early stage by making a so-called 'leading decision'. The proposed legislation would give the BGH the opportunity to express its views on points of law which are central to mass actions even if – as is often the case in practice – litigation tactics result in the withdrawal of an appeal on points of law or the agreement on a settlement. The hope is that if the points of law central to the mass actions are clarified early on at supreme court level, this should lead to greater legal certainty and help avoid further actions, and, at the very least, allow the trial courts to decide quickly. But will the new measures achieve this? 

The draft legislation is yet another step taken by the Federal Government in the hope of relieving the German courts of some of the burden resulting from mass actions. It was only in July 2023 that the Bundestag (belatedly) passed the Act implementing the EU Directive on representative actions, the (Verbandsklagenrichtlinien-umsetzungsgesetz - "VRUG")² introducing the collective action for redress (Abhilfeklage), the first type of collective action for performance, in addition to the collective action for declaratory relief which has been available since 2018 in the form of the model declaratory action (Musterfeststellungsklage). Besides the effective enforcement of consumer rights, the declared purpose of the VRUG is to relieve the courts by allowing a number of actions brought en masse to be bundled into one representative action.

The current proposal is aimed at supplementing the VRUG by introducing a so-called leading decision procedure at the BGH, so that actions brought by individual plaintiffs can be decided more quickly and effectively as well. It is the massive numbers of precisely these individual cases that place such an enormous burden on the resources of the courts. Each individual court has to deal with various legal arguments when deciding on the relevant questions of law. The trial courts concerned often reach differing decisions on the questions of law on which the outcome depends. The parties often prefer to prevent the BGH from making decisions to clarify the situation, often for tactical reasons and most of all concerns about the negative impact such a decision the highest court might have on the broad mass of cases.

The introduction of the leading decision procedure is aimed at countering this trend:

The leading decision procedure 

The introduction of sec. 552b ZPO-Government Draft is intended to allow the BGH to determine that an appeal on points of law (Revisionsverfahren) in a case which raises questions of law that are "of significance for a multitude of other proceedings" shall be a so-called leading case. The order making such a determination cannot be issued until the court has received the answer to the appeal on points of law or one month has passed since the reasoning for it was served, and only as long as it is (still) pending. The order must also include a description of the facts of the case and the legal questions of law that have significance for a large number of other proceedings. 

The order does not have an initial effect on the appeal proceedings in question. However, the order does provide the trial courts with the possibility of ruling that proceedings in cases whose outcome depends on at least one of the questions of law concerned in the leading decision procedure pending before the BGH shall be suspended until the end of the leading decision procedure pursuant to sec. 148 para. 4 ZPO-Government Draft. However, the power to suspend proceedings applies only if all parties to the respective dispute agree. 

If a decision is reached by the BGH, i.e. if the proceedings are not terminated otherwise, no special features apply and a "normal" judgment in the appeal on points of law is given. If, however, the appeal on points of law is terminated otherwise, e.g. due to a withdrawal of the appeal or a settlement, without the BGH having given a reasoned opinion, the BGH will nevertheless proceed to issue a so-called leading decision in the form of an order pursuant to sec. 565 of the ZPO-Government Draft. 

This order contains, first, a determination that the appeal on points of law has ended; it does not, however, have any formal binding effect on the parties to the dispute and does not have any effects on the case on which it was originally based. Rather, it serves as a kind of "obiter dictum" to communicate and provide the public and the trial courts with an explanation showing how the appeal on points of law decision would have been decided. This is intended to make it easier for trial courts to make a decision in similar proceedings (mass actions) and to expedite the decision-making process. Accordingly, the leading decision has to be published without delay, as must all decisions in which the public has or may have an interest.³

Impact of the leading decision procedure on mass actions? 

It remains to be seen whether the leading decision procedure which the government plans to introduce will actually alleviate the workload facing trial courts and result in mass actions being dealt with more quickly. 

Considering that the BGH will only be able to designate cases for leading decision procedures where an appeal on points of law is already pending, it is to be feared that the parties considering whether to "risk" a clarifying decision by the BGH will simply bring their considerations forward to the stage of a normal appeal. It thus appears likely that parties involved in mass proceedings, motivated by concerns about a negative leading decision to their detriment, will either refrain completely from filing an appeal on points of law or else work towards reaching an amicable settlement even in cases where the prospects of success appear favorable. It is also possible that filing a notice of appeal on points of law or the reasoning for such an appeal might be seen as reason enough to bring about a settlement and the related withdrawal of the appeal on points of law before the expiry of the one month period following service of the reasoning envisaged in sec. 552b ZPO-Government Draft (i.e. before the BGH can make the order designating the case for the leading decision procedure). 

It is therefore questionable whether the leading decision procedure will, in practice, have a significant impact on the ability to cope with mass actions. The more likely outcome would appear to be that litigation tactics, efforts to reach a settlement even in cases where the specific facts are favorable (but where an unfavorable decision on the fundamental question of law is to be expected), and the negotiating skills of those representing the parties will play more of a central role during the regular appeal stage. The result of this, however, would at best be a de facto reduction of the number of instances to just two, thus relieving the workload facing the BGH (and not that of the trial courts) – which is not what the Federal Government intended. 

A sustained reduction of the workload facing the trial courts appears doubtful given that, firstly, the BGH will be free to decide whether a pending appeal on points of law is to be designated for a leading decision procedure at all, and, secondly, that the consent of the parties will be required for a stay of proceedings pursuant to sec. 148 para. 4 ZPO-Government Draft. The currently low rate of acceptance of appeals against the non-admission of appeals by the BGH gives little reason to expect that the Federal Court will see a need for action in connection with all the points of law which one or more of the parties argue could be "of significance for a multitude of other proceedings". An additional factor is that the BGH's decision is likely to take some time, depending on the complexity of the situation and the scope of the relevant questions of law. It is also to be expected that for strategic reasons, parties will prefer to initially go ahead with proceedings before the trial courts instead of waiting for a preliminary ruling which might turn out to be unfavorable. There is, therefore, little sign that the new measures will have a truly liberating effect.

_{1 Government Draft for an Act on the introduction of a so-called leading decision procedure (Leitentscheidungsverfahren) at the Federal Court of Justice dated 16 August 2023.
2 See, Sonja Hoffmann, Alexandra Diehl and Carolin Kühner in our Client Alert, "Adoption of the Act implementing the EU Directive on representative actions - a belated compromise" („Verabschiedung des Gesetzes zur Umsetzung der Verbandsklagenrichtlinie – ein verspäteter Kompromiss?") of 08 August 2023.
3 Government Draft, page 13.}

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