Group actions after the ECJ’s ASG 2 ruling

The ruling of the European Court of Justice (ECJ) of 28 January 2025 in the ‘ASG 2’ case (Az. C-253/23) has attracted a great deal of attention within a very short time. It concerns the question of whether the law of the Member States can prohibit the bundled assertion of antitrust damages actions by way of a transfer of rights to a single legal vehicle charged with enforcing them (‘assignment model’) or whether such a prohibition is precluded by the EU law principle of effectiveness. This article critically analyses the judgment and contextualises it within the German system of collective redress.

Key Takeaways:

1. The principle of effectiveness under EU law requires collective redress instruments only if EU-law-based claims cannot otherwise be asserted.
2. The restrictions of German law on the provision of legal services for group actions do by themselves violate EU law.
3. Collective redress requires differentiated solutions that strike the right balance between claimants‘ and defendants‘ interests

What is the ASG 2 ruling of the ECJ about?

The ECJ addressed the question under which conditions national law must allow group actions for the enforcement of antitrust damages claims. The judgment clarifies that EU law's principle of effectiveness requires this only if there is practically no other possibility for those affected by cartels to assert their alleged claims in court.

Background to the case

Where a high volume of damages is split between a large number of parties, each individual party will often refrain from enforcing their rights out of rational disinterest if their individual claim is too small. To prevent this perceived enforcement deficit, German and European legislators have been trying for some time to reduce the threshold for asserting meritorious, but low-value, claims, including by increasingly introducing mechanisms reminiscent of a class action.

• Following the introduction of the Capital Markets Model Case Act in 2005, 2018 saw the introduction of the Model Declaratory Action and 2023 brought the Redress Action. These mechanisms bring tension between claimants‘ and defendants‘ interests because, while lowering the threshold for meritorious claims, they also lower the threshold for unmeritorious claims brought in hope of a quick settlement under the pressure of high-volume litigation.
• Prior to these formalised mechanisms, legal practice had developed a workaround by means of a transfer of rights to claims management firms, who bring actions on their own behalf in exchange for a share of the proceeds. These claim management firms are typically funded by litigation funders.

While in the past there was a heavy debate on whether these claims management firms were exceeding the remits of their permitted activities under the German Act on Out-of-Court Legal Services and engaging in activities reserved to legal professionals, the jurisprudence of the Federal Court of Justice increasingly tended towards a permissive view.

Nonetheless, as regards competition law, the inferior courts frequently continued to class such a transfer of rights as incompatible with the rules on the provision of legal services, at least as regards “stand-alone” actions where there had not been a finding of a competition law infringement by the competition authorities. The argument typically ran that these cases necessitated extensive engagement with the facts and therefore did not constitute purely claims management, but required genuine legal advice. As a result, the Düsseldorf Regional Court held that such models violated the Act on Out-of-Court Legal Services. In a case concerning the claims management vehicle “ASG” against the State of North Rhine-Westphalia arising from the round timber cartel, the Regional Court therefore referred to the ECJ for a preliminary ruling on whether EU law precluded this interpretation of the German rules on legal services. The Düsseldorf Regional Court posited that a transfer of rights to a claims management firm was the only way for the 32 claimants to enforce their claims for cartel damages.

Key ratio

After a number of procedural issues, the ECJ found on the merits that:

• Art. 101 TFEU precludes a national rule that prevents possible victims of cartel damages from transferring stand-alone claims to a claims management firm that then proceeds to enforce them.
• However, this will only apply if domestic law does not provide for any other possibility for victims of competition law to effectively enforce their damages claims.
• EU law will therefore only be violated where it would be either impossible or excessively difficult for the claimants to enforce their claims without the possibility of a transfer of rights to a claims management firm.

Requirement of full assessment of the facts of the case

The ECJ’s ruling was based on the Düsseldorf Regional Court’s premise that German domestic law did not provide for alternatives to the claims management firm for collective enforcement and that individual claims would have been practically impossible or excessively difficult The ECJ explicitly did not review whether this was the case, nor could it, given the procedure under the Art. 267 TFEU mechanism. AG Szpunar’s opinion in particular raised significant doubt as to whether this premise was correct as regards the claimants in the initial proceedings.

The ECJ therefore requires that the domestic courts perform a full assessment of the case.

• The ECJ explicitly highlights that the mere fact that cartel damages claims are complex and potentially costly by itself does not mean that the enforcement of meritorious claims is impossible or excessively difficult.
• Moreover, when performing the „impossible or excessively difficult“ test, the courts should have regard to the fact that claimants benefit from a wide range of evidential presumptions, particularly regarding quantum of damages.
• The Redress Action introduced in October 2023, which applies to claims by consumers and small companies for damages for breach of competition law, further simplifies the enforcement of damages claims.
• In other scenarios, the courts will have to assess whether the general mechanisms of civil procedural law, including simply bringing a claim together with other claimants and eg jointly funding expert evidence, may suffice to enable claimants to bring claims.

Notably, the ECJ also explicitly highlights a limitation to the principle of the effectiveness of EU law: Even if the domestic courts do reach the conclusion that only a claims management firm can effectively enforce the claims, they would still need to assess whether the domestic limitations on the provision of legal services are justified in the interest of the good administration of justice and the rights of individuals. This will eg be the case where the provisions in question aim to secure the quality of legal services, prevent conflicts of interests and ensure that such providers do not take a disproportionate share of any damages awarded.

Practical consequences

Collective enforcement of claims continues to elude simple answers. Once more, the ECJ has underlined that the question of how to organise their domestic legal system is first and foremost a question for the Member States, who also have a wide margin of appreciation as regards the provision of mechanisms for collective enforcement. Unless rights granted by EU law are rendered ineffective because their enforcement is impossible or excessively difficult, Member States are not required by EU law to permit class-action-like mechanisms. The ECJ explicitly left open the question on whether this was the case in ASG 2, and indeed on the facts of the case it seems difficult to claim that the claimants had no other means of enforcing their claims.

This article provides a non-binding overview of the covered topic and does not constitute legal advice. For further information or personal consultation, our contacts are happy to assist you.

• Prof. Dr. Ben Steinbrück
• Sebastian Gröss
• Dr. Justin Krahé