The German Parliament (Bundestag) has approved the reform of the Kapitalanleger-Musterverfahrensgesetz (KapMuG), a law regulating a form of class action to claim damages for false or misleading capital market information, extending the scope of application to rating agencies and auditors.
Information included in ratings and auditors’ reports concerning an issuer of securities or a provider of other assets can be public capital market information within the meaning of the KapMuG, according to recommendations in a report by the Legal Affairs Committee falling under the scope of the reformed rules.
In future, rating agencies and auditors will come into investors’ greater focus and will also have to defend themselves against class action proceedings, law firm Noerr said.
Overall, collective protection rights for consumers are strengthened through the reform, while ensuring legal certainty for investors and effective law enforcement, the Social Democratic Party (SPD) parliamentary group said.
The new rules on bundling proceedings running in parallel aim to speed up proceedings, giving further power to higher regional courts (Oberlandesgerichte) – which will have the power in the future to open proceedings by means of an unappealable decision (opening decision) if deeming questions relating to the proceedings relevant.
Higher regional courts will also have the power to remodel the content of a dispute, and redefine the questions relevant in the cases, according to the text laid out by the Legal Affairs Committee of the German Parliament.
Moreover, for the first time, the law is valid for an unlimited period of time. The law currently in place on class actions expires on 31 August, under the so-called ‘sunset clause’.
The new regulation also touches upon information asymmetry between the parties involved.
In future, at the request of one of the parties, the higher regional court can order that the opposing party or third parties submit evidence in their possession that is necessary for the case, Noerr said.
“This is a real milestone in the context of enforcing claims under capital market law, providing a special guarantee for the effective clarification of such claims in a much shorter time and increases the pressure to reach an agreement more quickly,” said TILP managing director Peter Gundermann.
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