Order of 14 June 2007

Order of the First Chamber of the Second Senate of 14 June 2007
pursuant to § 93b in conjunction with § 93a of the Federal Constitutional Court Act (Bundesverfassungsgerichtsgesetz – BVerfGG) in the version promulgated on 11 August 1993 (Federal Law Gazette (Bundesgesetzblatt – BGBl I) p. 1473)
– 2 BvR 2247-2249/06 –

in the proceedings on the constitutional complaint

of D … AG,
represented by its board of directors …

RULING:

The constitutional complaints are consolidated for joint adjudication.

The constitutional complaints are not admitted for decision.

This disposes of the motions for temporary injunctions.

GROUNDS:

The constitutional complaints concern the service of statements of claim in American class actions on the complainant in Germany through mutual assistance channels pursuant to the Convention on the Service Abroad of Judicial and Extrajudicial Documents in Civil or Commercial Matters (Hague Service Convention) of 15 November 1965 (Federal Law Gazette 1977 II p. 1452).

I.

1. The complainant is an automobile manufacturer, which operates worldwide; its registered office is in Germany and it has subsidiaries in among other places the United States of America and Canada. The lawsuits against the automobile manufacturers and dealers are based on the allegation that in violation of competition law they made agreements preventing the import of motor vehicles from Canada to the United States for the purpose of keeping the price level in the United States automobile market high. It is alleged that the purchasers of motor vehicles in the United States suffered financial damage as a result thereof. In response to the alleged violations of competition law, numerous class-action lawsuits were filed against the same defendants in the United States.

In the case of three of these actions, the plaintiffs requested the President of the Freiburg Local Court as the Central Authority for Baden-Württemberg pursuant to Article 2 of the Hague Service Convention to serve the statements of claim on the complainant pursuant to Article 5 of the Hague Service Convention. In contrast to the position under German law, in essence the only purpose of the service of a pleading in the United States is to put the other side on notice of the lawsuit (so-called notice pleading); it is not yet necessary to specifically delimit the issues in dispute. Under German law, proper service is, however, a requirement for subsequent recognition of a foreign judgement pursuant to § 328.1.2 of the Code of Civil Procedure (Zivilprozessordnung – ZPO ).

2. a) The President of the Freiburg Local Court made orders for service in his decision of 23 July 2003 and two other decisions of 25 November 2003 whereby he requested the President of the Stuttgart Local Court as the Competent Authority to arrange for service to be made; however, the complainant did not take receipt of the statements of claim.

b) The complainant challenged the orders of service in its applications to the competent Higher Regional Court for judicial decision pursuant to § 23 of the Introductory Act to the Judiciary Act (Einführungsgesetz zum Gerichtsverfassungsgesetz – EGGVG ). To substantiate its challenge the complainant asserted that the service of the statements of claim should not have been ordered because the objectives of the class actions obviously violated the essential principles of a free state governed by the rule of law and therefore service should be refused pursuant to Article 13.1 of the Hague Service Convention. The complainant alleged that since it was not even active itself in the American market, its inclusion in the class actions obviously only served the purpose of increasing the willingness of the defendant to settle by ensuring that there were as many defendants as possible and that the potential damages amount was as high as possible. The complainant asserted that in spite of the lack of a basis for their claims, the plaintiffs were committing an abuse of law by using the rules on costs to exert pressure in order to force the complainant to participate in a settlement.

3. a) The Higher Regional Court rejected the applications as unfounded in orders of 14 September 2006 whose terms were identical. In the Court’s opinion, a request for service pursuant to Article 13.1 of the Hague Service Convention could only be refused if the state addressed deemed that compliance would infringe its sovereignty or security; thus in the Court’s view a prohibition of service on the basis that this would be a breach of general public policy is precisely what the provision does not allow. Furthermore, the Court was of the opinion that following the basic decision to accede to the Hague Service Convention proceedings before foreign courts should in principle be encouraged and other legal systems and legal views should be respected even if they did not correspond to the German understanding of the law. In its view refusal of service could only be considered if the objective sought to be achieved through the service of a statement of claim obviously violated essential principles of a free state governed by the rule of law. According to the Court, this was not, however, the case here since it had not been obvious from the outset that the action had no substantive base and that it was being used in abuse of law to make a market participant compliant by exposing it to media pressure and the risk that the action might be decided against it.

b) The complainant’s complaints pursuant to § 29.2 of the Introductory Act to the Judiciary Act and § 29a of the Act on the Matters of Non-Contentious Jurisdiction (Gesetz über die Angelegenheiten der freiwilligen Gerichtsbarkeit – FGG ) against the orders in which it alleged that it did not receive a hearing were rejected by the Higher Regional Court as unfounded whereas its extraordinary complaints based on obvious illegality, which were raised in addition, were rejected by the Court as inadmissible; in relation to the latter complaints, the complainant insisted on a decision by the Federal Court of Justice (Bundesgerichtshof ). The Federal Court of Justice dismissed the complaints as inadmissible in its orders of 28 March 2007.

II.

The complainant alleges a violation of its fundamental rights and its rights equivalent to fundamental rights under Article 2.1 of the Basic Law (Grundgesetz ) in conjunction with the rule of law as well as under Articles 14.1, 12.1 and 103.1 of the Basic Law.

1. It asserts that a violation of Article 2.1 of the Basic Law in conjunction with the rule of law arises from the fact that the subject-matter of the domestic service are statements of claims in actions which were brought before the American courts without any basis and only for non-legal purposes. The actions were brought against the complainant with the obviously improper intention of forcing it to reach a settlement by exploiting the weak position of defendants in American civil litigation and by increasing media pressure. According to the complainant, the service of such statements of claim on the basis of Article 13 of the Hague Service Convention should be rejected for constitutional reasons.

2. The complainant alleges that the challenged decisions also violate Article 14.1 of the Basic Law since the service of a statement of claim is already an encroachment on the asset base of its company due to the burden of costs associated with proceedings and due to the expected size of the claims asserted. In addition, the complainant maintains that not just the assets it had already acquired, but also its gainful activity were affected so that there was also a violation of Article 12.1 of the Basic Law.

3. Furthermore, in the complainant’s opinion the Higher Regional Court’s orders of 14 September 2006 violated its right to a hearing in court and this violation was not remedied as a result of the decision made on the complaint alleging it did not receive a hearing.

III.

The constitutional complaints that were consolidated for joint adjudication are not to be admitted for decision since the requirements for admission pursuant to § 93a.2 of the Federal Constitutional Court Act are not satisfied. The constitutional complaints do not have any fundamental significance, and there are no indications that they should be admitted in order to enforce the rights in § 90.1 of the Federal Constitutional Court Act because they are unfounded.

The decisions of German state bodies which effectuate domestic service of foreign statements of claim may violate Article 2.1 of the Basic Law in conjunction with the rule of law principle if the objective pursued by the statement of claims violates essential principles of a free state governed by the rule of law. However, the class actions in this case do not satisfy this requirement.

1. a) The Hague Service Convention regulates the cooperation between the Contracting States in relation to the service of documents in civil proceedings. The Convention serves to harmonise private-law systems so as to simplify in this way intergovernmental judicial assistance. The core element of the Convention is the basic obligation of the Contracting States to comply with requests for service. This is intended to ensure that judicial and extrajudicial documents that have to be served abroad are brought to the notice of the addressee in sufficient time (see Decisions of the Federal Constitutional Court (Entscheidungen des Bundesverfassungsgerichts – BVerfGE) 91, 335 (339-340)). If a request for service in a civil or commercial matter within the meaning of the Convention is made, service may only be rejected on the basis of the reservation clause in Article 13.1 of the Hague Service Convention.

b) There is no doubt as to the constitutionality of the Hague Service Convention. The Convention serves important general interests which are suitable for justifying an encroachment on the general freedom of action (see BVerfGE 91, 335 (339 et seq.); order of the First Chamber of the Second Senate of the Federal Constitutional Court (Bundesverfassungsgericht ) of 24 January 2007 – 2 BvR 1133/04 –, JURIS). The German state does not protect its citizens who engage in international legal transactions from their responsibilities in a foreign legal system. On the contrary, the state supports the enforcement of foreign claims to jurisdiction.

However, the promotion in the course of judicial assistance of foreign measures which are in conflict with the constitutional order is subject to the limits imposed by the Basic Law. Article 13.1 of the Hague Service Convention takes such limits into account; it states:

“Where a request for service complies with the terms of the present Convention, the State addressed may refuse to comply therewith only if it deems that compliance would infringe its sovereignty or security. It may not refuse to comply solely on the ground that, under its internal law, it claims exclusive jurisdiction over the subject-matter of the action or that its internal law would not permit the action upon which the application is based. The Central Authority shall, in case of refusal, promptly inform the applicant and state the reasons for the refusal.”

The fact that service may only be refused on this basis under narrow circumstances is justified by the interest in quick and effective judicial assistance in the case of service by the courts and is in principle constitutionally unobjectionable (see BVerfGE 91, 335 (340); order of the First Chamber of the Second Senate of the Federal Constitutional Court of 24 January 2007 – 2 BvR 1133/04 –, JURIS). This is because it would be contrary to the principle that foreign legal views and systems must in principle be respected, even when they do not conform with the German view in an individual case, if foreign actions were generally measured according to the standards of the German legal system, and as a result, relief could not be granted where the action was based on a legal institution unknown to German law (see BVerfGE 108, 238 (247-248)).

c) In spite of this basic decision in favour of the service of foreign statements of claims, the reservation clause in Article 13.1 of the Hague Service Convention is not, however, devoid of content: According to the case-law of the Federal Constitutional Court, a limit might be reached where the objective pursued by the action “obviously violates essential principles of a free state governed by the rule of law” (BVerfGE 91, 335 (343); 108, 238 (247)). It is true that the First Senate of the Federal Constitutional Court has decided that the mere possibility of imposing punitive damages does not amount to a violation of essential rule of law principles (BVerfGE 91, 335 (343-344)). If, however, damages claims appear from the outset to violate the abuse of law principle, the possibility that the service of a statement of claim may be incompatible with the essential principles of a free state governed by the rule of law is no longer excluded. In such a case, it is possible that a German state body could through its application and interpretation of the reservation clause in Article 13.1 of the Hague Service Convention fundamentally misjudge and disproportionately limit the rights of a complainant. The standard which applies in this case is Article 2.1 of the Basic Law in conjunction with the rule of law. However, the Federal Constitutional Court has not yet conclusively determined whether the responsible state body may for constitutional reasons refuse service of a statement of claim whose purpose conflicts with essential principles of a free state governed by the rule of law (see BVerfGE 91, 335 (343); 108, 238 (248-249)).

2. This question is also not significant for the decision in the present proceedings because there is no violation of essential principles of a free state governed by the rule of law. It is indeed true from the point of view of the German legal system that a defendant is subject to added burdens in an American class-action lawsuit. If, however, from the German perspective a plaintiff exploits the weaker position of a defendant to enforce his or her own rights, this alone will not be sufficient to substantiate an allegation that the plaintiff has committed an abuse of law; instead the objective and the specific circumstances of the legal action must indicate that there has been an obvious abuse of law – this is missing in the present case.

a) It is a characteristic of class actions that a multitude of parties who may have been injured can be joined in one class without having to be actively involved in litigation. This makes it theoretically possible to form a large number of classes in the case of violations of competition law or where large losses occur and thus file class-action law suits before various courts. According to information from the complainant, pre-trial discovery was ordered in some of the class actions. This procedure occurs prior to the actual trial and serves the discovery and securing of evidence; in essence it lies in the hands of the parties who are comprehensively obliged to provide the documents requested (see Hopt/Kulms/von Hein , Rechtshilfe und Rechtsstaat, 2006, pp. 92-93). Consequently, pre-trial discovery in large proceedings; for this reason it is often regarded as such a large burden by defendants that they would prefer to settle than to have litigation continue even where there is considerable doubt as to the validity of the claim against them (see Schack , Einführung in das US-amerikanische Zivilprozessrecht, 3rd ed. 2003, p. 46).

The plaintiffs claim treble damages in their action, which means that the damages calculated as compensation should be tripled and thus augmented by punitive damages; however, no specific figures have yet been named in the class actions. Furthermore, the class actions seek to make the defendants jointly and severally liable. In this connection, every defendant is at risk of being liable for the entire amount of damage irrespective of how much he or she contributed to its cause (see Hay , US-Amerikanisches Recht, 3rd ed. 2005, marginal no. 407); this further increases the attraction of a settlement.

In addition, general principles prevent the winning side from demanding reimbursement of its out-of-court costs from the losing side (see on this Hopt/Kulms/von Hein , Rechtshilfe und Rechtsstaat, 2006, pp. 93-94; Schack , Einführung in das US-amerikanische Zivilprozessrecht, 3rd ed. 2003, pp. 7 et seq.); the court costs themselves are likely to be relatively low. Where actions are based solely on allegations and the plaintiff hopes to find specific evidence to support them in the course of pre-trial discovery, there is no risk of having to pay all of the costs, which would be a negative incentive to his or her bringing an action.

Although defendants in American civil litigation undoubtedly have ways of defending themselves that may, of course, differ in their effectiveness, nonetheless all of these peculiarities lead to added burdens for defendants in the case of class actions, which form the basis for the present constitutional complaints.

b) Nevertheless, the legal institutions described are not capable – either singularly or jointly – of substantiating the allegation that the actions based on them are incompatible with essential principles of a free state governed by the rule of law.

The Federal Constitutional Court has already in part expressed in its case-law its opinion on the legal institutions described: Thus the First Senate of the Federal Constitutional Court decided that an American action for punitive damages did not violate essential principles of a free state governed by the rule of law (BVerfGE 91, 335 (343 et seq.)). Subjecting an opponent to pre-trial discovery may come close to a “fishing expedition” (see Hay , US-Amerikanisches Recht, 3rd ed. 2005, marginal note 189); however, the mere possibility of doing this in connection with service of a statement of claim is not a violation of the essential principles of the German legal system (see already the order of the First Chamber of the Second Senate of the Federal Constitutional Court of 24 January 2007 – 2 BvR 1133/04 –, JURIS). In addition, prior to a specific taking of evidence from the complainant, additional decisions by German state bodies are required; the rights of the complainant have to be respected in the course of making such decisions (see the Hague Convention on the Taking of Evidence Abroad in Civil or Commercial Matters of 18 March 1970, Federal Law Gazette 1977 II pp. 1452 et seq.).

The fact that the complainant will not be reimbursed for its extra-judicial costs (primarily its legal costs), even if the American action later proves to be unsuccessful, does not as such establish a violation of essential rule-of-law principles (see the order of the First Chamber of the Second Senate of the Federal Constitutional Court of 24 January 2007 – 2 BvR 1133/04 –, JURIS). This is instead the consequence of a business decision to subject oneself to a foreign legal system by engaging employees at a subsidiary abroad. The risk of a court decision that is different substantively and procedurally from German law is a risk that a businessperson must bear if he or she engages in cross-boarder economic transactions. The decision not to reimburse the winning party for his or her costs is based on legal-policy considerations, which although different to the German provisions, are not in principle in breach of the laws of a state governed by the rule of law (see also Decisions of the Federal Court of Justice in Civil Matters (Entscheidungen des Bundesgerichtshofes in Zivilsachen – BGHZ) 118, 312 (325-326)).

The institution of joint and several liability – viewed on its own – also does not violate essential principles of a free state governed by the rule of law. It may well be that this institution further increases the pressure to settle, but it does not establish liability without the defendant contributing to the cause of the damage. In addition, joint and several liability for all of the damage arising from a tort committed jointly is not foreign also to German law.

In addition, the legal-policy decision – which must in principle be respected by the German courts – to allow class-action lawsuits in the case of a tort involving a multitude of injured parties without requiring the individual members of the class to be actively involved, does not establish a violation of essential principles of a free state governed by the rule of law provided that unconditionally required rights of defence are guaranteed also in the class action proceedings. Consequently, service cannot be refused in every class action from the outset. Article 13.1 of the Hague Service Convention expressly prohibits refusing compliance with a request for service only on the grounds that the state addressed would not permit the action upon which the application is based.

c) This restriction on the reservation at the international-law level is compatible with the Basic Law: In view of the Hague Service Convention, the German legal system has in respect of civil litigation opened itself to the law of the state making the request. The German public authorities will act on behalf of the foreign authorities making the request in order to support domestic proceedings pending in a foreign jurisdiction beyond the boundaries of national sovereignty. This also includes in principle the service of statements of claim lodged in proceedings which are unknown to the German legal system (BVerfGE 108, 238 (248)). Where from the point of view of the German legal system legal institutions are susceptible to abuse, it is always necessary to ask in the case of a specific statement of claim whose service is sought if the action has an obviously abusive character. Only under these circumstances can violations against essential principles of a free state governed by the rule of law exist which can oblige German state institutions to reject the request under constitutional law and entitle it to do so under international law.

This delineation has at the same time the advantage that it takes into account, in addition to the fundamental-rights concerns of the defendant in the foreign action, the constitutional objective of avoiding as far as possible violations of international law by the Federal Republic of Germany (see BVerfGE 111, 307 (317-318); 112, 1 (25-26)). Compliance with international-law limits by German state institutions when interpreting and applying Article 13 of the Hague Service Convention is not an end in itself; instead only such compliance ensures that the Hague Service Convention is also adhered to by other Contracting States in the interests of the service recipients. Thus it helps to avoid resort to other methods of service which would make the legal position of German defendants considerably more burdensome (see on this Hopt/Kulms/von Hein , Rechtshilfe und Rechtsstaat, 2006, pp. 155 et seq.).

d) The abusive character of the actions is not obvious from the outset in this case. Indications of the commission of an abuse of law can usually be seen in the fact that there is obviously no basis for the amount of the claim lodged; it can also be seen in the fact that the defendant obviously has nothing to do with the conduct complained of or in the fact that significant (including media) pressure has been built up in order to compel the defendant to conclude what is actually an unfair settlement (see in this respect also BVerfGE 108, 238 (248)).

It is not initially obvious that there is no basis for the amount of the claim. The plaintiffs have not yet asserted a specific amount of damages, but have expected until now damages to be in the millions; the complainant itself expects significantly higher claims. In such a case, it cannot be the task of the German state bodies which receive requests for service to independently ascertain the potential amount of damages and to compare it to the loss occurrence or even the financial strength of the recipient of service. Where the amount of damages claimed is not specified, the only possibility is a review of the evidence to see whether the claim for an unspecified amount appears from the outset to be groundless.

This is not the case here. The plaintiffs assert that as a result of a cartel agreement, the import of vehicles from Canada and thus a price reduction in the American market were prevented. This accusation does not from the outset lack legal substance. This does not necessarily mean that the accusation would withstand a detailed factual and legal examination; under constitutional law German institutions cannot be expected to undertake such an examination in service proceedings. Instead the purpose of service is to allow such an examination by the American courts.

Nor is it obvious that the complainant could not have been involved, as it alleges, in the challenged cartel agreement. The complainant submits on this point that it was not active itself on the American market and that only its subsidiaries, which have also been sued, were active. This, however, does not exclude from the outset the possibility that the complainant itself was involved in an agreement, that it exercised influence on its subsidiaries or that it acted in any other way giving rise to liability; none of this can be resolved without further clarification of the facts or without examining under American competition law whether there was conduct which gave rise to liability.

Whether or not specific examination by a foreign court meets constitutional standards is a question for recognition proceedings. It is true that refusal to recognise a judgment pursuant to § 328.1.4 of the German Code of Procedure (Zivilprozessordnung – ZPO ) can only protect against execution against domestic assets; execution against foreign assets is, however, a matter which from the start the German legal system cannot protect against under international law and need not protect against under constitutional law.

3. The challenged decisions also do not violate the complainant’s fundamental rights under Articles 12.1 and 14.1 of the Basic Law.

A violation of Article 12.1 of the Basic Law is not apparent because service of a statement of claim does not regulate the practice of an occupation or a profession. Nor is there a violation of Article 14.1 of the Basic Law since the act of serving the statement of claim does not presently and directly affect legal values protected by Article 14.1 of the Basic Law. The service of a statement of claim – irrespective of whether or not the statement of claim is domestic or foreign – involves the recipient in proceedings before a court; it does not, however, decide on the outcome of proceedings (in respect of both see the order of the First Chamber of the Second Senate of the Federal Constitutional Court of 24 January 2007 – 2 BvR 1133/04 –, JURIS).

IV.

Non-admission of the constitutional complaints for decision disposes of the motions for temporary injunctions.

The giving of additional reasons is dispensed with pursuant to § 93d.1 sentence 3 of the Federal Constitutional Court Act.

No appeal may be made against this decision.