How Culture, Economics and Politics Shape Collective Litigation
Edited by Deborah R. Hensler, Christopher Hodges and Ianika Tzankova
Chapter 13: Litigation without end? The Deutsche Telekom case and the German approach to private enforcement of securities law
When 15,000 plaintiffs sued Deutsche Telekom AG in 2001 and 2002 after a sharp decline in the company’s share price, this prospectus liability case became the biggest mass litigation in Germany. It also sparked new legislation: the Kapitalanleger-Musterverfahrensgesetz (KapMuG), the Capital Markets Model Case Act, which is the first collective litigation instrument in German civil procedure. It was developed by the German legislator as a mechanism to deal with the thousands of individual Telekom lawsuits. Due to this origin, the KapMuG focused on the treatment of individual cases instead of creating a more efficient ‘summarized’ aggregate procedure. The result was a decade-long litigation that is still going on as we go to press. With regard to its original goals of more efficient case handling and better access to justice, the KapMuG may have taken the wrong path. Beyond its legal relevance, the Telekom case must also be seen in a broader social and political context. It highlights the lack of confidence in the stock market within German society. Traditionally, German citizens did not participate much in the stock market but preferred low-yield investments such as bank savings accounts or life insurance. This started to change during the internet bubble in the late 1990s, but after Telekom’s share issue produced extreme losses for many small investors, the scepticism toward the stock market returned, possibly supported by a feeling that the legal system was either unable or unwilling to adequately protect small investors’ interests.
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