Amendments to the Capital Investors Model Declaratory Action in Germany – a more efficient mechanism for aggrieved investors to pursue their damages claims?



For nearly two decades, the Capital Investors Model Declaratory Action (“Model Action”) was the only codified collective redress action in Germany. Germany codified a second collective redress mechanism in October 2023 by way of implementing the EU Collective Redress Directive. (For Deminor’s report on this Act on the Joint Enforcement of Consumer Rights – Remedial Action, please see here. And, for our recent assessment of the new mechanism’s practical viability for investment recovery proceedings, please see here.) However, the German parliament decided on 13 June 2024 that the Model Action is here to stay. This article presents and discusses key changes to the Model Action that have been enacted by Germany’s legislature and are expected to take effect in summer 2024.


The Model Action was first introduced in Germany in 2005 in response to thousands of individual claims for damages filed due to alleged prospectus deficiencies in an IPO from Deutsche Telekom. The sheer number of parallel claims filed placed an overwhelming burden on the civil courts at the time. The objective of implementing the Model Action was to expedite proceedings and prevent diverging decisions regarding overarching facts and legal issues, while still allowing the court of first instance to subsequently adjudicate the individual claim. To that end, the Model Action allows plaintiffs to collectively bring their claims to a higher regional court. The court then determines the overarching facts and legal issues at question in a uniform manner with binding effect for the courts of first instance.

Blick in senim den leeren Plenarsaal des Deutschen Bundestages

Pending Model Actions are living proof that a reform of the underlying Act on Model Case Proceedings in Disputes under Capital Markets Law (Capital Markets Model Case Act or “KapMuG”) was urgently needed. Model Actions turned out to be complicated, lengthy and costly. Initial amendments to the KapMuG in 2012 were insufficient to significantly enhance the efficiency of the mechanism. This was also identified by Germany’s ruling coalition in its coalition treaty in November 2021. (For Deminor’s report at the time, please see here.) As a result, new amendments are planned to enter into force before the end of August 2024. They will apply to all newly initiated proceedings but will not retroactively change the legal landscape for actions already pending.

Faster proceedings

The amendments aim to address the primary issue with the Model Actions: the inefficiency, length, and cost of the proceedings. Under the amendments, the higher regional courts continue to retain jurisdiction to decide overarching legal and factual issues by way of the Model Actions, but they will also have a stronger position to tailor the proceedings.

In the future, at the outset of a Model Action, the higher regional court will determine the appropriate objectives of the Model Action by issuing an opening order. The court will limit the action’s scope to the relevant issues. As a result, the higher regional court may reduce the matters in dispute and redefine the objectives of the Model Action.

Parallel proceedings and threshold for order to stay proceedings

The amendments modify the legal standard for when parallel proceedings are to be stayed while a Model Action is initiated. Once a court stays such a parallel action, the respective plaintiffs become “Beigeladene” (notified third parties with their own procedural rights, full court file access, and the right to submit pleadings and take an active role in the oral hearings) in the Model Action. The changes in the law are minimal, but the effects promise to be significant.

The current practice, as demanded by the Federal Court of Justice in a 2019 decision, had proven rather inefficient and had particularly disadvantaged international institutional investors seeking damages in Germany. That is because the court of first instance can currently only stay its parallel proceedings for damages in favor of a pending parallel Model Action where the decision of the proceedings for damages is fully dependent on the asserted declaratory objectives. The Federal Court of Justice has held in 2019, in contrast to many lower instance courts, that this examination of whether the outcome of the underlying dispute depends “on the asserted declaratory objectives” is based on a concrete standard – meaning that all other legal and factual issues about the potential claim, which are not subject to the Model Proceedings, such as that plaintiff’s legal identity, valid representation, and standing to sue, must all be fully solved before the court of first instance is able to stay its respective proceedings, allowing the plaintiff(s) to engage in the respective model action as “Beigeladene”. This has resulted in lengthy proceedings, including the taking of evidence, to determine, e.g., whether an investment fund is validly founded and represented, before the courts of first instance could stay their case and wait for the outcome of the Model Action.


This situation has created significant legal costs for plaintiffs and has essentially made it impossible for many non-German investment entities to actively participate in the Model Action because they were completely preoccupied with proving their own identity to the court. Sometimes, in the meantime, the Model Action would already have concluded.

The legislature has consciously decided not to adopt the Federal Court of Justice’s strict interpretation of these provisions and has instead explicitly loosened the requirement that the outcome of the Model Action must concretely have an influence on the first instance proceedings (applying a “but-for” test). The law has now clarified that the applied standard should not be a concrete one, but rather a relative one, allowing for a stay in a case where the outcome of the Model Action is expected to have an effect on the final decision. The KapMuG now states that the decision of the legal dispute must likely depend on the asserted declaratory objectives for the court of first instance to be able to order a stay. This standard is known in German civil procedure, albeit in a different context, and expresses the requirement of a prognosis decision by the first instance court based on an analysis of the probability of this outcome.

This amendment has been made in three crucial positions: As shown above, by means of the addition in section 10 of the KapMuG, it eases the way to a stay for first instance courts faced with an existing parallel Model Action. In parallel, through amendment in the general admissibility criteria (section 3 of the KapMuG), it also reduces the initial burden for plaintiffs who wish to initiate a new Model Action. It thereby permits the court of first instance to render an accelerated decision on the admissibility of a Model Action and may help reduce frontloading efforts. Under section 6 of the KapMuG, the court of first instance applies the same standard when staying the initial proceeding once it has determined that a new Model Action is admissible.

In practice, this means that a first instance court faced with an application by the plaintiff to stay its proceedings in favor of an initiated Model Action can grant the application in a situation where the defendant heavily disputes the plaintiff’s standing to sue and representation. The court does not have to answer such questions definitely, including taking of evidence, provided the court deems it more likely than not that the plaintiff will eventually be able to prove those issues. The court can then deal with those once the KapMuG Model Action has concluded when it resumes its individual case. We expect this amendment to significantly speed up the procedures in first instance.

Innenraum eines leeren Gerichtssaals

The balance of powers in this regard has been shifted in one further detail. In the future, only those proceedings in which an application has been made to conduct a Model Action or in which the respective plaintiff has specifically requested a stay are to be stayed. This limits the procedural rights of defendants, who until now could also request a stay of a proceeding once a Model Action had been initiated. While this change might allow certain proceedings to move forward more efficiently, it also enables parallel proceedings that could ultimately lead to diverging decisions on the same legal or factual issues. Furthermore, sophisticated plaintiffs with strong legal representation may even decide to determine on a case-by-case basis whether to participate in a pending Model Action or, if their own risk assessment indicates that their respective case is going very well so far, to pursue their own parallel proceedings without recourse to the Model Action at all. We expect this to stay a strategic option for limited practical constellations, though. In most cases, the question brought in front of the Court of Appeal for a binding model decision will significantly support the individual cases too.


Furthermore, the last-minute amendments to the KapMuG proposed by the Legal Subcommittee of the Bundestag introduce a new mechanism under which the higher regional court, upon request by either a model plaintiff or a model defendant, may order the respective adverse parties to the Model Action or even third parties to submit evidence relevant to the Model Action. This mechanism is modelled after and essentially mirrors the German implementation of the Cartel Damages Directive (Directive 2014/104/EU). Its scope is limited to a purely procedural power to issue an order, tailored to the distinctive procedural context of the Model Action.

This mechanism is a new and unusual phenomenon for German civil procedure law, which traditionally follows the general rule that there is no discovery and/or document production and that each party is responsible for procuring the documentation and evidence it needs to substantiate its claim/defense. It was designed to mitigate the inherent asymmetries in the information held by the parties to Model Actions. It was enacted by the legislature on the grounds that the bundling effect of a Model Action justifies the granting of extensive powers to the court, with the intention of ensuring the effective resolution of claims that are eligible to proceed as a Model Action. Its effect on Model Actions will depend on the way judges utilize this mechanism in the future, given that such a mechanism is not common in civil litigations conducted under German procedural law. The mechanism has the potential to significantly simplify proceedings for plaintiffs and alter the procedural balance between plaintiffs and defendants, as the evidentiary burden is generally on plaintiffs.

However, much will depend on how actively the courts are willing to make use of this possibility. In antitrust damages cases, we know that courts have been extremely reluctant to order such document production. We believe that this is precisely because they view the provision as a foreign “legal transplant” that is somewhat incompatible with traditional principles of German civil procedural law.


Model Actions continue to pertain solely to specific actions initiated by investors in relation to proceedings concerning damages resulting from false, misleading, or omitted public capital market information or claims pertaining to the German Securities Acquisition and Takeover Act. However, the scope of public capital market information has been expanded to additionally include crypto asset whitepapers under the Markets in Crypto-assets Regulation (Regulation (EU) No 2023/1114), also known as MiCAR. This enables investors to seek damages in relation to their investments in crypto assets.

Furthermore, the scope of encompassed public capital market information has been expanded to include ratings from rating agencies and financial auditors’ reports on annual and consolidated financial statements of investment issuers. This broadened scope may potentially enable investors to initiate Model Actions against auditors and rating agencies in the future.


Given the “new” character of collective redress actions in Germany, the underlying KapMuG has always included an automatic expiration date. While the date was extended on several occasions following its initial introduction, it was currently scheduled to expire at the end of August 2024. This reflected Germany’s skepticism with respect to collective redress actions. The amendments have now removed any automatic expiration date for the KapMuG. The legislature has determined that the KapMuG will be re-evaluated in five years. All indications are that Model Actions will remain in place and that Germany is gradually becoming accustomed to collective redress.

It remains to be seen whether the amendments will prove sufficient to provide an efficient mechanism for aggrieved investors. Pending Model Actions will not benefit from the amendments and will continue to take considerable time. In contrast, the higher regional courts now have powers under the KapMuG to significantly speed up new proceedings. However, the courts’ expanded powers must be weighed against the parties’ diminished procedural position. It is also possible that certain plaintiffs may be reluctant to pursue Model Actions if they perceive that their procedural weakness in determining the scope of the Model Action precludes them from resolving the overarching legal and factual issues at hand.

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