Update – procedure for precedents at German Federal Court of Justice

Germany’s Federal Ministry of Justice prepared a draft bill on introducing a procedure for precedents at the Federal Court of Justice (Bundesgerichtshof) in collaboration with a working party consisting of federal and state representatives. This was followed by a bill prepared by the German government which differed just slightly from the original bill.

The bill sets out that in future the Federal Court of Justice will be able to select one or more cases it regards as being suitable from among the appeal cases currently pending before it and designate them as precedents. Appeal proceedings on points of law are intended to be suitable as precedents if the appeal raises legal questions involving a decision important to a large number of other proceedings. Click here for Noerr’s previous article on this topic.

At the time, we criticised the fact that while the aim of obtaining faster decisions by the highest court may be correct, the intended procedure for precedents is unlikely to solve the existing problems. Although the ministerial draft stresses several times that it is only one element in combatting waves of lawsuits, the draft still seems to fall short. You can find our detailed analysis of why the Ministry’s draft will not lead to efficient procedures for precedents here.

In its opinion dated 29 September 2023 (Bundestag Document 375/23), the German upper house of parliament, the Federal Council (Bundesrat), is now taking the same line. It finds that the rules planned up to now can only be a starting point and that they will only have a minor effect in practice in their current planned form. It remarks that the draft act fails to properly satisfy the need called for by the Federal Council for “Measures to deal with mass actions before the civil courts and to ensure a functioning judiciary” (Bundestag Document 342/22).

I. Federal Council levels fundamental criticism at planned procedure for precedents

The Federal Council says that it is particularly questionable that to be considered as a precedent, a legal action first has to pass through the typical, time-consuming stages in the various courts. It reasons that this will not lead to any significant reduction in the workloads of the lower courts.

Moreover, it anticipates that the Federal Court of Justice will wait until a large number of appeals have been received before deciding which appeal proceedings are suitable as precedents, adding that that this will also result in delays.

Besides this, the Federal Council would like to strike the planned provision in section 148(4) of the government’s new draft German Code of Civil Procedure (Zivilprozessordnung, ZPO) stating that a stay of proceedings which depend on legal issues that are the subject of precedent proceedings pending before the Federal Court of Justice requires the consent of the parties. It points out that the bill will fail to relieve the workload of the lower courts if it makes a potential stay, which the court can order at its own discretion, contingent on the consent of both parties. It believes that at least one of the parties will oppose the stay for tactical reasons.

II. Federal Council sees need for workable overall strategy

The Federal Council believes that it is necessary to deal with mass actions within the framework of an overall strategy going beyond the procedure for precedents.

For this reason, it maintains that it ought to be possible to present the key legal issues to the Federal Court of Justice from the first instance as well. This could be ensured by having supplementary rules (it does not specify which rules exactly) for the procedure for precedents or by adopting other approaches such as references for a preliminary ruling, it states. We also called for this back in June of this year (see here).

This would have to incorporate effective solutions for condensing the taking of evidence and enabling the courts to establish structures for the parties to present their arguments in individual cases and in a condensed manner.

III. Well-meaning but poorly implemented

We already concluded in June of this year that while the aim of rapidly resolving the key legal questions arising in a large number of individual claims may be correct, the Ministry’s bill falls short of the mark.

It remains to be seen whether the Federal Council’s criticism will be heeded or fall on deaf ears. Until then, the lower instance courts will have to continue to tackle the phenomenon of mass actions with the tools available to them.