In German law there are different ways to achieve a suspension of the limitation period. If the opposing side is not prepared to enter into negotiations on the claim or to waive the statute of limitations, the main options are to bring an action or to have summary proceedings for a payment order instituted. For some time now, an interesting alternative has been the institution of conciliation proceedings before a conciliation authority that is established or recognised by the Land administration of justice (Landesjustizverwaltung). This is because the related costs are often low and the requirements for substantiating the asserted claim have been regarded as less strict than in the case of bringing an action. Based on the statutory suspension of expiration, according to which the claim does not become time-barred until at least 6 months after the conciliation proceedings have been concluded, the creditor can in this way buy a few months' time before it has to reach a final decision on whether to assert the claim in court. However, the Federal Court of Justice has now decided that applications for conciliation can only suspend the limitation period if strict requirements are complied with. If these requirements are disregarded in practice, the asserted claim could become time-barred. This is therefore very important for practical purposes.
Advantages of conciliation proceedings in product liability law
In product liability cases claimholders often have an interest in a suspension of their claims. This is because class actions, which are known from other countries, are not provided for by German law. However, there are often legal disputes that are based on the same product defect, which means that the outcome of such disputes - even if they are not legally binding - frequently provides at least an indication of the opportunities and risks associated with an assertion of one's own claim in court. Moreover, there are often investigations or even criminal proceedings that are not concluded within the statutory limitation period. If the creditor wishes to take into account the findings of such investigations when deciding on whether to bring an action, it must have the limitation period for its claim suspended. The creditor can in some instances also benefit from the suspension of the limitation period in international product liability cases. For example, if the creditor has the option of asserting its claim in different countries, it makes sense to first await the outcome of parallel cases in those countries.
Decisions of the Federal Court of Justice
By means of two decisions from 2015 (judgment of 18 June 2015 - III ZR 198/14 and judgment of 28 October 2015 - IV ZR 526/14), the Federal Court of Justice significantly diminished the appeal of instituting conciliation proceedings for the purpose of suspending the limitation period. Firstly, the requirements for substantiating the claim were specified in detail and tightened. Secondly, it found that the claimholder cannot always rely on conciliation proceedings to suspend the limitation period.
Strict substantiation requirements
A suspension of the limitation period requires that the claim which is the subject matter of the conciliation proceedings is sufficiently individualised before the period expires. This is the only way for the intention to take legal action to become sufficiently clear and, therefore, for the warning function to be fulfilled by the filing of an application for conciliation.
In this connection the Federal Court of Justice has now decided that the requirements for a petition for a payment order are to essentially be applied to the application for conciliation. In German law, such petition is the direct basis for a court-issued enforceable order for payment of a debt. On the other hand, in conciliation proceedings the application is not strictly binding, meaning that the application for conciliation does not have to be so specific that it is enforceable. According to the Federal Court of Justice, the asserted claim must, however, be so precisely substan-tiated that the respondent can place it and review its subject matter. In this connection, the description must at least be specific enough to allow the conciliation authority seized of the matter, as a third party, to assess the asserted claim and to prepare a settlement proposal. The manner and extent of the individualisation depend on the circumstances of the individual case.
For product liability cases, this means: The facts in the application for conciliation must not be too succinctly worded. At least the product concerned, the existence and the type of a product defect, the damage incurred and the causal connection between the two, as well as the specific request (at least of a certain magnitude), must be described in detail. In addition, it is generally necessary to specify the product more closely by including the serial number or other features that allow the manufacturer to place the product within certain production periods. In many cases this information is not easy to obtain, especially within a short period of time.
No suspension of limitation period
Nevertheless, the substantiation requirements established by the Federal Court of Justice can often be satisfied in practice, at least after an appropriate review of the case and with sufficient advance notice. On the other hand, the situation is different with the additional requirements established by the Federal Court of Justice which cannot be satisfied by the creditor on its own:
In its decision of 28 October 2015, the Federal Court of Justice states that a suspension of the limitation period by instituting conciliation proceedings is not possible if, before such proceedings are instituted, the respondent has refused to negotiate on an out-of-court settlement and the applicant must therefore assume that the conciliation proceedings cannot be successfully conducted. The Federal Court of Justice maintained that, in such a case in which conciliation proceedings were only being instituted to suspend the limitation period, the filing of the application for conciliation was unlawful. It stated that the consequence of this was that the applicant could not rely on the suspension of the limitation period in such a case. Therefore, the claim can become time-barred in spite of the institution of conciliation proceedings and, as a result, no longer be asserted.
For practical purposes, this means: If it is necessary to buy as much time as possible prior to the decision on whether to file an action, it can make sense in the future to first wait until just before the limitation period expires and, without first contacting the opposing side, to file an application for conciliation that satisfies the substantiation requirements established by the Federal Court of Justice. This makes it possible to avoid a situation in which the opposing side can, when contacted in advance, already categorically refuse to consider an amicable settlement, thereby depriving the claimholder of its possibility to suspend the limitation period by filing an application for concilia-tion. The creditor can then still attempt to conduct negotiations on the claim within the scope of the conciliation proceedings or during the 6-month suspension of expiration after the conclusion of the such proceedings. Should the opposing side refuse, the creditor has still bought itself time equivalent to at least the duration of the conciliation proceedings plus the duration of the suspension of expiration. This is generally a period of at least 8 months.