In Germany, investors who have suffered losses need a great deal of patience to enforce their claims under capital markets law – if they are successful at all. The proceedings by 16,000 investors against Deutsche Telekom over its third share offering of shares which took place in 2000, followed soon after by a collapse in price, was only resolved in 2022. That was via a settlement.

Cases concerning false, misleading or omitted public capital market information related to various car manufacturers were the diesel scandal, and Porsche's failed attempt to take over Volkswagen in 2008/2009. Wirecard also has a large number of aggrieved investors with claims.

Long waiting times for investors and large piles of files should become a thing of the past. On 13 June, the Bundestag approved reform of the Capital Markets Model Case Act (KapMuG). The Bundesrat still has to decide on the draft law before the amended KapMuG can come into force. The draft is on the agenda of the federal state chamber on 5 July. There is plenty to suggest that the Bundesrat will pass the law.

The Capital Markets Model Case Act came into force in 2005. It was a novelty in German law that had been in the making for a long time. The law was aimed at claims arising from false, misleading or omitted public capital markets information. KapMuG was intended to create a viable way for investors and the courts to avoid having to conduct mass lawsuits with identical claims in countless individual proceedings. In the Telekom case, the pleadings were transported by truck to the Regional Court of Frankfurt am Main. In contrast to the American class action lawsuit, in Germany all proceedings are not lumped together, but remain individual and are decided individually. However, questions of fact and law for several individual lawsuits before the regional court are to be clarified jointly by the higher regional court (OLG) as a higher instance with a model plaintiff for all. All other proceedings are suspended in the meantime. Following this model decision, the case is returned to the regional court, which now also rules in the other proceedings on the basis of the model decision. The prerequisite for the test case is that at least ten parties to individual proceedings with identical questions of fact and law apply for a test case.

The amendment was necessary for several reasons. At the end of August, KapMuG would have expired without replacement due to time limits. The Bundestag has now cancelled the time limit and made the KapMuG permanent. However, the law is to be evaluated after five years. The federal government also wanted to eliminate the shortcomings that still existed after the first amendment in 2012. This was because proceedings were not noticeably shortened.

The federal government has upheld the concept of the model procedure. Despite its previous shortcomings, it has „generally proven itself in practice as an instrument for dealing with a large number of concurrent lawsuits related to capital market law“, according to the draft from the Ministry of Justice. In future, however, the higher regional courts are to be given more freedom and will be able to formulate the objectives of the model case themselves. This will allow the higher regional court to determine the subject matter of the test case in such a way that it allows for efficient proceedings and at the same time allows as many proceedings as possible to be bundled together. Until now, the regional courts have formulated the so-called declaratory objectives in the model case and submitted them to the Higher Regional Court. Until now, this has resulted in a lengthy legal back-and-forth through several instances up to the Federal Court of Justice by the plaintiffs.

Further changes concern the decision on the model case application, the content of the referral order, the opening order and the model claimant. There are also new regulations on the submission of evidence. All of this should lead to more streamlined proceedings. The period within which an action becomes a model action has been shortened. Model case applications must be published in the register of actions within three months. Previously, this was six months. The courts are to be helped by digital file management without piles of paper, although this is generally being introduced in the judiciary.

Another new feature is that the scope of the law has been extended to include crypto trading. During parliamentary deliberations in the Bundestag, the Legal Affairs Committee introduced numerous other amendments on the final stage. Just one day before the decision in the plenary session, the parliamentary coalition also included basic investment information sheets from crowdfunding service providers. The committee also included ratings and audit opinions for issuers or asset investment providers in the KapMuG as so-called standard examples of public capital market information. In this way, the concerns of the federal states have also been addressed, which now make the green light for the KapMuG reform in the Bundesrat likely.

The draft bill was approved with the votes of the coalition. The CDU/CSU, Left Party and BSW voted against. The AfD abstained. Whether the procedures for aggrieved investors will now be shorter, and they will get their money back faster, remains to be seen in practice. There are still doubts among the experts who spoke at the public hearing in the Bundestag, and among the opposition.

The CDU/CSU in the Bundestag was critical that the law had a time limit but is now permanent. The parliamentary group had formulated its own motion, which naturally did not find a majority. In it, it called on the federal government to submit a draft bill that would keep the KapMuG in force for a further five years in order to develop a „new, harmonised legal situation“ during this time. In the plenary debate, rapporteur Martin Plum (CDU) said that he doubted that the KapMuG slow horse would become significantly faster as a result of the amendment. The reform would only treat symptoms and not the causes. The BSW group supported the time limit, but expressed considerable reservations about the other changes.

At the hearing, the German Banking Industry Committee (DK) also spoke out against the time limit. The considerable changes brought about by the reform would have to be evaluated for effectiveness. Above all, however, DK representative Sven Kalisz pointed out the inconsistency between KapMuG and the Consumer Rights Enforcement Act (VDuG) for class actions in collective proceedings. Several experts shared Kalisz's concern to create a standardised legal framework for mass proceedings in the future, which would replace the KapMuG and VDuG. However, based on experience with the KapMuG, this is only likely to succeed in the very long term.