The Airdeal ruling: German Federal Court of Justice strengthens collective redress in Germany
In a ground-breaking ruling of July 13, 2021, In re Airdeal, the German Federal Court of Justice, the Bundesgerichtshof (BGH), upheld a mass claims collection or ‘Sammelklage-Inkasso’ model that was primarily directed at enforcing group claims in court, rather than out of court. The ruling should be a game-changer for collective redress in Germany, not only, but in particular, for cartel damages claims. With this ruling, the BGH anticipated the forthcoming reform law of the German Legal Services Act, the Rechtsdienstleistungsgesetz (RDG), due to enter into force later the year.
What was the case about?
The ruling relates to a case concerning a mass claims structure that was set up in the aftermath of the Air Berlin insolvency in 2017 to help enforce air passenger claims (“Airdeal”). In this particular case, the claimant, a limited liability company registered as a legal services provider for debt collections, or ‘Inkassodienstleister’, collected claims by way of assignment from Air Berlin customers whose flights were cancelled as a result of the insolvency.
Grouping together multiple Air Berlin customer claims, the claimant then sued the former executive director of Air Berlin for repayment of the flight costs on the ground of the alleged late filing of the insolvency.
Both the German First-Instance District Court and the Court of Appeal dismissed these claims, based, inter alia, on an assumed violation of the German Legal Services Act, the Rechtsdienstleistungsgesetz (RDG). On appeal, the BGH overruled the second-instance judgment and sent the case back to the Court of Appeal. In reviewing the disputed mass claims collection model from different legal angles, the BGH ruled that the model set up by the claimant was in line with the German RDG in all respects.
Mass claims collection model covered by debt collection permit
The BGH Airdeal ruling determined that a debt collector who plans to go to court right away to enforce claims, acts within the boundaries of its debt collection permit under the German RDG regardless of whether individual or group claims are involved.
Noting that the permissibility of mass claims collection models has been highly debated in German jurisprudence, the BGH followed the more liberal stance, rejecting the prevailing view to date among German first-instance courts that have ruled against such cases. Notably, the BGH ruling placed the freedom to conduct business in Article 12 of the German Basic Law (Grundgesetz) at the center of its reasoning, and confirmed that a narrow reading of “out-of-court legal services,” permitted under the collection permit, was not justified as this would have disproportionately curtailed the debt collectors’ fundamental freedom to conduct business.
Importantly, the BGH did not see a considerably heightened risk of unqualified legal services springing from the mass claims collection model, given that any registered legal services provider is required to submit certain professional legal qualifications to the registration authority, and that qualified attorneys-at-law are legally required to be involved when the case goes to court.
Mass claims collection model does not create conflicts of interest
The BGH went on in its Airdeal decision to clarify that the mass claims collection model does not create conflicts of interest. The BGH emphasized that the interests of the debt collector and its customers, as well as the interests of the individual customers within the group claim, are in principle aligned because they all share a common interest in achieving the most effective enforcement possible.
The BGH stressed that the advantages of group enforcements outweigh any residual risks related to varying degrees of enforcement chances posed by claims bundled together in a group settlement. The residual risk may be that claims with weaker enforcement chances might negatively impact claims with stronger enforcement chances, however the advantages include the sharing of cost risks and enhanced bargaining power.
The BGH also held that the more parallel the claims, the lower the risk. By contrast, the more diverse the claims, the higher the risk. Nonetheless, residual risks may be avoided by forming groups of sufficiently similar claims.
Any remaining differences in this sense would, according to the BGH, be negligible and therefore not justify invalidating the assignment of the customers’ claims to the debt collector.
The BGH decision is in line with forthcoming RDG reform
In many respects the BGH in Airdeal – however, without referring to it with a single word – anticipated the forthcoming reform of the RDG, which already has passed the parliamentary stages and is due to enter into force on October 1, 2021.
In the explanatory memorandum to the reform law, the federal legislator, referring to a long-standing case law, has confirmed that debt collectors are entitled to enforce claims also in court, as long as they are represented by a qualified attorney-at-law. According to the legislator, the permissibility of judicial enforcement by a debt collector is exclusively a matter to be dealt with under the code of civil procedure, but not by the RDG. Defining the scope of what debt collectors are allowed to do in terms of judicial enforcement, the BGH in Airdeal likewise drew heavily on settled case law as well as on the applicable rules in the code of civil procedure, as opposed to the RDG.
Furthermore, the legislator has made it clear in the explanatory memorandum that the bundling of claims may in fact, in the interest of a cost-efficient and effective enforcement, be reasonable, even if the claims in question are thus treated in a somewhat generalized, as opposed to individualized, manner. According to the legislator, the individual prospects of the claim holder do not necessarily have to be at the center of the debt collectors’ considerations and enforcement efforts. Rather, the reform law explicitly provides for an obligation on part of the debt collector to inform consumers about potential risks associated with the bundling of claims for enforcement purposes. In the legislator’s concept, individuals (even consumers) shall be allowed to deliberately decide in favor of mass claims enforcement, and against individual consideration and treatment of their claims. This corresponds to the BGH’s line of argument in Airdeal according to which the advantages of group enforcements outweigh any risks potentially posed by claims bundled together.
Relevance of the Airdeal decision for cartel damages claims
Even though the BGH decision concerned a somewhat special scenario (enforcement of claims against the former executive director of an insolvent company), its relevance goes far beyond the collection of claims in connection with insolvent companies. In recent years, litigation vehicles (or rather: enforcement vehicles) covering a wide range of areas have been set up in Germany and other European countries, ranging from tenancy-related claims to cases in connection with the Diesel emissions scandal, to enforcement of cartel damages claims.
Cartel damages claims have often been the frontrunner cases when it comes to shaping the legal landscape for collective redress in Germany. Many leading cases, such as the well known CDC (“Cartel Damages Claims”) cases before the Court of Appeal Düsseldorf and the European Court of Justice concerned cartel damages claims.
While cartel damages cases have considerably gained traction over the past years in Germany, enforcing cartel damages is still an intricate undertaking requiring significant staying power and deep pockets – which does not apply to all cartel victims. For want of a true class action in Germany, the average cartel victim will still find itself in a David vs Goliath situation when fighting a phalanx of cartelists. For many, if consumers or companies, joining a mass claims structure such as the one in Airdeal may be the only viable option realistically to enforce their claims.
In light of this, it comes as no surprise that many smaller and mid-size cartel victims, whose damages amounts often do not justify bringing individual actions, have recently availed themselves of the opportunities that collective enforcement vehicles offer them. As stated above, however, such mass claims structures have mostly been critically viewed by the German first-instance courts to date, and the claims have in part been dismissed based on an assumed violation of the German RDG. In view of the recent Airdeal judgment, the prospects of cartel victims to enforce their damages claims through mass claims models in Germany should have lightened up considerably. Even if not immediately relevant in that case, by its Airdeal ruling the BGH has bolstered the enforcement chances in Germany of cartel victims and private enforcement in competition cases more generally.
The importance of the BGH’s ruling for collective redress in Germany cannot be overstated. It is not only a victory for legal services providers, such as debt collectors, but also significantly improves enforcement opportunities for consumers and companies alike. This applies not only, but in particular, to cartel damages cases.
 BGH Judgment, July 13, 2021, II ZR 84/20.
 BT-Drucks. 19/27673.
 German Legal Services Act (Rechtsdienstleistungsgesetz/RDG), Sections 10 (1), sentence 1 no. 1; 2 (2) sentence 1.
 BGH, Judgment, July 13, 2021, II ZR 84/20, Paras. 12 et seq.
 German Legal Services Act (Rechtsdienstleistungsgesetz/RDG), Section 4; BGH, Judgment, July 13, 2021, II ZR 84/20, paras. 45 et seq.
 BT-Drucks. 19/27673.
 BT-Drucks. 19/27673, p. 61.
 BGH, Judgment, July 13, 2021, II ZR 84/20, paras. 18 et seq.
 BT-Drucks. 19/27673, pp. 61-62.
 See Section 13f (1), no. 3 (d) of the reform law.
 BT-Drucks. 19/27673, p. 47.
 See above.
 Court of Appeal Düsseldorf, Judgment, February 18, 2015, VI-U (Kart) 3/14 – CDC cement.
 European Court of Justice, Judgment, May 21, 2015, case C-352/13 – CDC hydrogen peroxide.
 District Court Munich I, 37 O 18934/17 – trucks; District Court Hanover, 18 O 50/16 – sugar; District Court Stuttgart, 30 O 176/19 – roundwood.
 District Court Munich I, Judgment, February 7, 2020, 37 O 18934/17 – trucks; District Court Hanover, Judgment, May 4, 2020, 18 O 50/16 – sugar.
*Alex Petrasincu is Managing Partner in Düsseldorf and Berlin and Manuel Knebelsberger is Counsel in Düsseldorf.