Question of the week: What does the new right to model lawsuits mean?

After years of discussion, the Bundestag yesterday voted in favor of a new law on the right to hear legal suit. This should make it possible for consumer advocates in the future to take on behalf of several citizens against companies in court. But while the government is hoping for consumer relief, criticism has already come from various quarters.

For years, consumer advocates have been calling for the introduction of so-called model lawsuits in Germany. While the policy so far refused, the call for class actions, especially in the wake of the diesel scandal was getting louder. After the Federal Cabinet had already passed a bill by Justice Minister Katharina Barley (SPD) in May, the Bundestag has now also approved.

The Model Probability Act is intended to help consumers enforce their rights against companies. So far those affected were more likely to be left to their own devices, and consumer organizations can now campaign for them with a class action lawsuit . The new law is due to enter into force on November 1, 2018, so that even damaged motorists of the Volkswagen scandal can benefit from the statute of limitations at the end of 2018. But what exactly changes with the new regulation and which pitfalls are there?

What changes will come with the law on the designation suit?

So far, consumers themselves are responsible for whether and how they act against banks, insurance companies or other companies that have betrayed or harmed them. If, for example, the new vacuum cleaner breaks down after one month, customers must contact the dealer directly. If he refuses to replace or refund the defective item, buyers either stay at their expense or go to court. Mostly this is time consuming, expensive and annoying.

With the law on the so-called “Musterfeststellungsklage” several victims can defend themselves against companies and service providers in the future , without having to lead a process themselves . In the future, this will be taken over by an association such as the Verbraucherzentrale.

How does a model suit work?

In a model claim, victims order a consumer protection association to act legally against a company on their behalf. In order for this to take the form of a class action, at least ten individuals are required to contact the association. They must have been damaged in the same way by a company, for example by an improper increase in the price of electricity.

The association examines these cases and then seeks an appeal to the Higher Regional Court. There a so-called complaint register is opened. In this at least 50 victims must register and join the lawsuit . Subsequently, the model finding action can be heard.

What are the advantages of model lawsuits?

The big advantage of a model lawsuit is that damaged consumers themselves do not have to go to court against a company. Thus, they do not face high costs if the claim is dismissed . This should be particularly pleasing to the approximately three million drivers who are affected by the diesel scandal and now want to claim their rights.

Pattern-finding suits are particularly useful when many consumers have been damaged by a company, but it comes to relatively little money. In these cases, it is not worthwhile for individuals to take action against the company on their own, as the time and costs of litigation exceed the value of the damage. This applies, for example, to bank charges, insurance matters or travel rights.

Why is there a criticism of the new law on the designation suit?

The disadvantage of a model suit is that it only makes a fundamental decision. Thus, the competent court only decides whether the person concerned is entitled to damages in general. Subsequently, the victims themselves have to sue the company again in order to receive their compensation. However, they should not do that without securing a legal expenses insurance. Because this protects against high legal fees and court costs. With an individual tariff comparison those interested find the offer, which fits best to their own wishes.

Another criticism of the law is that only selected associations such as tenant associations or consumer centers are allowed to file the model declaration actions. These must also meet certain criteria, for example, have at least 350 members. However, many institutions may find it difficult to meet the required conditions.