The new leading decision procedure in Germany’s Federal Court of Justice: Higher efficiency in handling mass proceedings?

Selection from pending appeal proceedings

Under the Act, the FCJ may in future designate a pending appeal (anhängiges Revisionsverfahren) as a “leading decision procedure”. According to section 552b sentence 1 German Code of Civil Procedure, as amended, the FCJ is to select from several similar appeal proceedings the one that raises the broadest range of open legal issues. The Act does not provide any specific requirements as to when the required “large number of other cases” is deemed to have been reached. This means that the selection of the leading decision procedure is apparently at the FCJ’s discretion.

However, the decision which appeal proceedings are to be selected can be made, at the earliest, after the response to the statement of grounds of appeal (Revisionserwiderung) has been received or, one month after the statement of grounds of appeal (Revisionsbegründung) has been served. This is to ensure that the interests of both parties are taken into consideration. The selection decision is to contain a presentation of the underlying facts and the legal issues requiring clarification (section 552b sentence 2 German Code of Civil Procedure, as amended) and is to be published without undue delay, for example on the FCJ’s website or by a press release.

Consequence of leading decision procedure

After publication of the selection decision, the lower-instance courts may suspend the pending parallel proceedings for a maximum period of one year, or longer if there are good reasons to do so (section 148 (4) German Code of Civil Procedure, as amended). The suspension of the proceedings requires only that the parties be consulted; their explicit consent is not required. However, proceedings must not be suspended if any of the parties object to the suspension and provides good reasons for doing so, such as an impending insolvency. Here, the German legislator has clearly decided to shift, to a certain degree, the control over the proceedings from the parties to the lower-instance courts.

Besides the declaration that proceedings have been terminated (operative part), the leading decision is to contain a statement of reasons explaining the considerations for the relevant legal issues and is to be published without undue delay. Once the leading decision has been published, the lower-instance courts resume the suspended parallel proceedings, taking the leading decision into account. 

For the parties to the selected appeal proceedings, the leading decision procedure marks a novelty. While the parties can still reach a settlement or withdraw the appeal also following the selection decision, the leading decision cannot be circumvented by terminating the proceedings. 

Parties' restricted autonomy

Previously, the parties to civil proceedings were free to determine if, and to what extent, a civil court should take action and decide on the scope of the judicial review and the duration of the respective proceedings. Under the “principle of party disposition” (“Dispositionsmaxime”), which is a central element of German civil procedural law, it was possible, in particular, to avoid the FCJ commenting on specific legal issues by terminating the proceedings by a settlement or by withdrawing the appeal. Under the new Act, the FCJ can now decide on the issues set out in the selection decision without a hearing even if the selected proceedings have since been removed from the court's review by a settlement (section 565 German Code of Civil Procedure, as amended).

Scope of leading decision

The “leading decision” is neither formally binding nor does it have any direct effect on the selected appeal proceedings. It is to serve as a guide and orientation to lower-instance courts and the public, showing how the FCJ assesses the relevant legal issues and can be deemed to be an expert opinion issued by the FCJ. As the leading decision is addressed to the public, it can also not be compared to a “notice” (“nachgelagerter Hinweis”) according to section 139 (2) sentence 1 German Code of Civil Procedure, since the latter is explicitly addressed to the parties to a lawsuit.

In this respect, the German leading decision procedure differs from common law jurisdictions, where lower-instance courts and parties to proceedings may be formally bound by the contents of the leading decision in line with the “doctrine of precedent”.

However, the leading decision will have a de facto binding effect, which is likely to be only slightly less binding than a formal one. Since lower-instance courts are generally keen to render “appeal-proof” decisions, they will tend to follow the leading decision. It is precisely this relevance of highest-court rulings that the legislator had in mind when it introduced the leading decision procedure.

Improved efficiency of civil actions in mass proceedings

It remains to be seen if the new provisions will actually improve efficiency in mass proceedings. First-ly, it is argued that the leading decision procedure sets in too late, as several similar proceedings first have to reach the appeal stage. This alone can take several years. Until that time, the lower-instance courts would continue facing the same flood of proceedings. 

Secondly, it is to be expected that the parties to the proceedings may simply shift tactics such as “escaping the appeal” by either withdrawing it, failing to lodge the appeal or a settlement terminating the proceedings is reached in a lower court. This would rather diminish the chances of obtaining high-est-court clarification of relevant legal issues.

Moreover, the very possibility of a leading decision procedure would prevent amicable agreements between the parties. This is because as soon as one of the parties is involved in several comparable proceedings, as is often the case in mass proceedings, there could be a strong incentive for that party to further pursue the concrete appeal proceedings to at least retain the possibility of influencing the court's decision-making in a hearing. 

Finally, one may ask whether already the possibility of a leading decision procedure may cause lower-instance courts to handle proceedings pending before them ‘with the handbrake on’ in anticipation of a leading decision. This would certainly not serve the parties or the intended procedural efficiency. 

Conclusion

With the new leading decision procedure, the legislator has once again addressed the challenges faced by courts in handling mass proceedings following the introduction of the model declaratory action (Musterfeststellungsklage) and the German Consumer Rights Enforcement Act. The focus is now on countering tactical considerations aimed at avoiding possible legal precedents that could be unfavourable to companies, thus enabling landmark decisions for a large number of cases. The FCJ has already made use of this new instrument on the day it came into force in a data protection matter (Federal Labour Court, 31 October 2024 – VI ZR 10/24). In the longer term, it will show whether procedural alternatives, such as the introduction of a preliminary ruling procedure (Vorabentschei-dungsverfahren) at the FCJ, are more promising.