Depends on country, university and professor. In Germany, the general rule is that grading on a curve isn't allowed or at least strongly discouraged. There was a short while when such a system was acceptable, called ECTS grades (not to be confused with ECTS credits), but that was done away with in a year or so. Currently, grades are based on the lecture contents and the expectation of the lecturer for the progress a student should make. Lecturers are relatively free to do whatever they please within those bounds. If a test ends in everybody failing, tough luck, maybe next time. If that unfortunate event does repeat too often, the dean might get involved, but can't do a lot more than talk to the lecturer.