Capital Markets Model Case Proceedings (KapMuG)

What the capital markets model case procedure is

The capital markets model case procedure (Kapitalanleger-Musterverfahren) is Germany's mechanism for resolving common questions in mass investor litigation. Where many investors sue an issuer, its managers or other parties over the same allegedly false, misleading or omitted capital market information, a Higher Regional Court (Oberlandesgericht, OLG) decides the shared factual and legal issues once, in a model case decision that binds the courts hearing the individual actions. The Capital Markets Model Case Act (Kapitalanleger-Musterverfahrensgesetz, KapMuG) was introduced in 2005, reformed in 2012 and comprehensively revised again in 2024; the current version applies to model case applications filed on or after 20 July 2024.

A model case is not a class action. Each investor must have filed an individual action, or registered a claim, to benefit. The model case decision answers specified "declaratory objectives" (Feststellungsziele), such as whether a prospectus was incorrect or whether ad hoc information was published too late; the individual courts then apply those findings to causation, damage and other individual issues. For listed companies, the KapMuG is the procedural backdrop to almost every serious allegation of disclosure failure in Germany.

Scope: which claims fall under a capital markets model case

Under § 1(1) KapMuG the Act applies to civil disputes in which one of the following is claimed:

• damages for false, misleading or omitted public capital market information;
• damages for the use of false or misleading public capital market information, or for failing to point out that such information is false or misleading;
• performance of a contract based on an offer under the Securities Acquisition and Takeover Act (Wertpapiererwerbs- und Übernahmegesetz, WpÜG);
• since the 2024 reform, damages claims under Article 75(8) of the Markets in Crypto-Assets Regulation (MiCA) against crypto-asset service providers.

"Public capital market information" means information on facts, circumstances, key figures and other company data intended for a large number of investors and concerning an issuer of securities or a provider of other investment products (§ 1(2)). Typical examples are securities prospectuses, investment product information, ad hoc disclosures under Article 17 of the Market Abuse Regulation (MAR), financial reports and offer documents. Claims arising from misstatements in annual reports or from delayed insider information disclosure are therefore core KapMuG territory; see our insight on ad hoc disclosure under MAR.

How a capital markets model case starts and proceeds

Model case application and referral

Either the claimant or the defendant in a pending first-instance action can file a model case application with the trial court, specifying the declaratory objectives, the capital market information concerned, the supporting facts and evidence, and why the decision matters beyond the individual case (§ 2 KapMuG). The court rejects inadmissible applications by unappealable order (§ 3), for example where the case will not turn on the declaratory objectives or where the application is made to delay proceedings. Admissible applications are published in the model case register, which interrupts the original action insofar as it depends on the objectives (§ 6).

If at least nine further applications concerning the same facts are published within six months of the first, the court that received the first application refers the matter to the competent OLG (§ 7(1)) — in other words, ten applications in total are needed. If the quorum is not reached, the court rejects the application and the individual action continues (§ 7(5)).

Opening of the model case and the lead claimant

The 2024 reform introduced a separate opening decision. The OLG opens the model case by unappealable order where hearing the objectives in a model case is appropriate; it may restructure the subject matter and reword the objectives (§ 9(1)). The opening order also designates the lead claimant (Musterkläger), chosen at the court's discretion from the claimants of interrupted cases, taking into account suitability, any agreement among claimants and the size of the claim (§ 9(3)).

The opening decision should be made within four months of publication of the referral (§ 9(5)). Trial courts then stay all dependent actions (§ 10), and the other claimants become interested parties (Beigeladene) with their own procedural rights (§ 11(4)).

Registration without suing

Investors who have not sued can register their claim with the OLG within six months of the opening order; they must be represented by a lawyer and specify the basis and amount of the claim (§ 13 KapMuG). Registration suspends limitation under § 204(1) no. 6a of the Civil Code (Bürgerliches Gesetzbuch, BGB). Registered investors do not become parties and must still sue later to obtain a judgment, but registration is a low-cost way to preserve a claim while the common issues are decided.

Evidence, decision and settlement in the capital markets model case

A major change in 2024 is the court's power to order disclosure. On the lead claimant's application, the OLG orders a defendant or a third party to produce evidence in its possession that is needed for the claimant's case, if the claimant shows a plausible claim and identifies the evidence as precisely as reasonably possible (§ 17 KapMuG). Defendants have a mirror right against the claimant side. Orders must be proportionate, taking into account fishing for irrelevant facts and the protection of trade secrets (§ 17(3)). For listed companies this marks a step towards targeted document production in disclosure disputes.

After an oral hearing, the OLG issues the model case decision (Musterentscheid) by order (§ 19). It binds the trial courts in all stayed actions and has effect for and against all participants, regardless of whether they pleaded every fact themselves (§ 25(1)). Interested parties can only argue that the lead claimant conducted the case badly in narrow circumstances (§ 25(3)). An appeal on points of law to the Federal Court of Justice (Bundesgerichtshof, BGH) is available and the matter is deemed to be of fundamental significance (§ 23(1)).

Costs are decided by the trial courts in the individual actions, not by the OLG (§ 19(2)). The model case costs count as costs of the first instance of each original action, and the defendant's model case costs are apportioned according to the ratio of each claim to the total amount claimed in the stayed actions (§ 27 KapMuG).

This allocation makes participation as an interested party comparatively inexpensive for smaller claimants, while the lead claimant bears the heavier workload. Investors should therefore check whether their legal expenses insurance or a funder will cover the model case phase, and defendants should note that the cost risk is spread across many individual judgments.

Settlement is possible at any stage. A court-approved settlement becomes effective only if fewer than 30% of the interested parties opt out within one month of service (§§ 21(3), 22(2)). This threshold gives defendants a degree of certainty: a settlement that a large minority rejects fails entirely.

Strategy for issuers, directors and investors

For issuers and their management

Disclosure failures typically lead to parallel tracks: BaFin investigations, criminal proceedings, internal investigations, D&O claims and investor litigation. The KapMuG bundles the investor track but makes it slow; model cases have historically taken many years. Issuers should:

1. secure documents and privilege early, because evidence orders under § 17 KapMuG now make internal material more accessible;
2. align the defence across individual actions, so that inconsistent positions do not reach the OLG;
3. consider using the defendant's own right to apply for a model case to centralise litigation;
4. involve D&O insurers from the outset and track notification deadlines;
5. assess settlement windows around the opening order and the evidence phase.

See our page on capital markets for the regulatory side of disclosure obligations.

For institutional and private investors

Investors must decide whether to sue individually, register under § 13 or rely on other routes. Institutional investors with significant losses often sue to obtain party status and influence, while smaller holders may register to stop limitation running. Limitation periods for prospectus and MAR claims can be short; see our insight on limitation periods. Investors also need to plan for causation: in many cases German law requires proof that the misinformation influenced the investment decision or the price paid, which remains an individual issue after the model case.

KapMuG and the VDuG redress action

The KapMuG and the Consumer Rights Enforcement Act (Verbraucherrechtedurchsetzungsgesetz, VDuG) can coexist. A redress action or model declaratory action under the VDuG is not inadmissible merely because a KapMuG model case has been opened on the same facts (§ 1(3) VDuG). In practice, the KapMuG remains the main route for capital markets claims, because it is open to all investors including institutions, while VDuG actions are reserved for consumers and very small businesses and require a qualified entity. Our insight on redress actions under the VDuG compares the procedures, and our collective actions page sets out the wider landscape.

The 2024 version of the KapMuG is no longer limited in time; instead, the Act is to be evaluated five years after it entered into force (§ 31). Its digital elements — electronic case files at the OLG and register publications — are intended to make proceedings with thousands of participants manageable.

How TRW & Co helps with capital markets model case proceedings

We advise issuers, directors, banks and other defendants on capital markets model case proceedings and the related individual actions, as well as institutional investors considering whether to sue or register. Our work covers model case applications and responses, submissions on the opening order and lead claimant, evidence requests and trade-secret protection under § 17 KapMuG, coordination with BaFin and criminal proceedings, D&O insurance and settlement strategy. We work alongside our commercial litigation and capital markets colleagues so that disclosure, regulatory and litigation positions remain consistent. To discuss a capital markets model case or a potential investor claim, contact us.