The Implementation of the Representative Action Directive (EU 2020/1828) in Germany

Disputant Prof. Dr. Choong-soo HAN(Hanyang University)(1) I am very pleased to engage in a discussion about the presenter's presentation, whichcontains profound insights from their extensive research on collective redress. I am deeply
thankful for the detailed explanation provided regarding Germany's newly enacted
Consumer Rights Enforcement Act (CREA). It is highly impressive that the CREA has
introduced a mechanism allowing Qualified Entities, who act as plaintiffs, to claim the total
damages on behalf of victim groups. This leads to the necessity of a distribution procedureand raises questions about the timing of victims' opt-in. Additionally, permitting third-party
funding is a significant development, though the prescribed limit raises doubts about thesystem's accessibility. I recall that in any country, business associations have often
obstructed the essential functions of such collective redress mechanisms by setting up
stringent safeguards against the abuse of collective redress. I am concerned that inGermany's recent legislation, there may be an excessive focus on preventing misuse,potentially making it challenging to achieve its original objectives. I would like to briefly
introduce the current status of Korea's unique US-type class action and pose a single
question to the presenter.
(2) Since 2005, Korea has allowed a US opt-out style of class action exclusively in securitiesrelated cases. Due to strong opposition from business associations, this approach wasrestricted to specific fields such as securities-related cases. To address concerns of abuse,various safeguards were put in place, including qualifications for plaintiff representatives,court oversight of attorney fees, and the requirement of court permission for filing a classaction. There was no provision regarding third-party funding. As of 2023, approximately 15cases have been reported, although the exact number is uncertain due to significant
overlap among plaintiffs. Among these cases, three have recently completed distribution
reports.
(3) Class actions brought by victims against institutions such as the Royal Bank of Canada
were concluded in just nine years, ending in 2019. Similarly, a class action against Deutsche
Bank AG also concluded in seven years, with a distribution report submitted on May 23,
2019. In the Deutsche Bank AG case, a total of approximately KRW 10 billion (US$ 760,000)
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was distributed among 455 victims based on the extent of their damages, with theremaining balance of approximately KRW 40 million (US$ 30,000) returned to the defendant.
The total cost of the distribution process was around KRW 16 million (US$ 12,000), withKRW 11 million (US$ 8,400) paid to the distribution administrator (typically the plaintiff's
attorney). The fee arrangement disclosed to the court by attorneys at the commencementof the proceedings was a success fee of 15% without an initial fee, but the court approved
this amount considering factors such as the duration of the case.
(4) There have been very few securities-related class actions filed in Korea over the past
23 years. Most Koreans do not believe that this is because the Korean securities market isparticularly healthy. Rather, Korean lawyers are not interested in securities-related classactions, and this lack of interest is shared by individuals who wish to become representativeplaintiffs. The United States' class action system, which is widely perceived as primarily
benefiting lawyers, is rejected, leading to the introduction of stringent safeguards in civil
litigation, including a court approval process for the filing of lawsuits, court oversight ofthe qualifications of parties and representatives, and reasonable attorney fees. In Korea,
except for securities-related cases, collective redress, in the form of representative actions(Verbandsklage), is permitted only for injunction claims in areas such as consumer
protection and personal information privacy. However, even in these areas, representative
actions have not been particularly effective. While there have been attempts to expand thescope of US-style class action, discussions mainly focus on simplifying the approval process,minimizing court intervention, actively introducing third-party funding, and implementing
a cy-près mechanism allowing the donation of judgment awards to public interestorganizations.
(5) The presenter appears to have a somewhat pessimistic view of the CREA. In both Koreaand Germany, representative actions filed by consumer groups or similar entities have longplayed a role as a form of collective redress. However, it is unclear which method among
those adopted by the CREA will effectively serve as collective redress. For example, isallowing third-party funding alone sufficient, or is more needed? Additionally, I would liketo hear the presenter's opinion on whether an opt-in style representative action can playa fundamental role similar to the US class action. In Korea, for instance, many victims of
the VW diesel scandal chose to file a class action in a US federal district court rather than
filing a domestic lawsuit, highlighting doubts about the competitiveness of opt-in style
representative actions.
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