Due to globalization and increased international operation of businesses, a growing number of legal issues relate to more than one jurisdiction. In such a cross border scenario, companies or foreign lawyers usually depend on legal assistance by lawyers with qualification in the jurisdiction(s) in question.
The firm advises on German law, including German conflict of laws, i.e. private international law from a German law perspective, and selected areas of EU-Law.
In 2008 alone, I represented clients in multi-jurisdictional matters relating to the laws of the USA, England, Italy, Afghanistan, Pakistan, Austria, Spain, UAE (Dubai), the Netherlands, Belgium and the Russian Federation. Generally this required cooperation with lawyers qualified in the law of the respective jurisdiction.
On a pre-litigation basis this usually relates to a legal analysis or a second legal opinion as to the question in which country court proceedings should be lodged. This includes issues of jurisdiction, service of process, applicable law issues and/or money judgment enforcement and related issues, e.g. a comparison of legal costs / court fees. Additional aspects apply, e.g. as a rule of thumb, litigation costs in Germany are lower than for instance in the USA or England. However, there is nothing such as a pre-trial discovery as in the US or a request for documents in the UK. Hence, litigation costs should be weighed against the evidence at hand.
On a litigation stage sometimes parallel or related litigation in different countries is pending. This usually requires close cooperation with lawyers from the respective jurisdiction and adjustment of the proceedings.
Post litigation services usually relate to enforcement of a foreign judgment or arbitration award. It is highly advisable to clarify such issues before starting proceedings, e.g. in order to know whether a judgment or arbitration award will be recognized (and is thus enforceable) in the respective foreign country at all, or whether punitive damages or a judgment by default can be enforced in a foreign country.
Out of court advice
Non-litigation services provided by the firm include contract drafting or contract review with business partners abroad, including M & A transactions, joint ventures or the drafting of international / German or European-wide General Terms and Conditions.
Additional exposure to liability risks in cross border transactions
Cross border transactions usually increase the number of applicable regulations and potential liability risks. In international business transactions particularities exist and lack of knowledge or ignorance of such particularities may lead to significant liability risks.
Qualified legal advice prior to an international investment, acquisition, supply relationship or business relationship is highly recommended. Especially in cross border transactions unforeseen situations may occur, formal requirements or legal rules (and thereby liability risks and the risk of loss) gain in importance which are unheard to the foreign actor so far.
International contract law, commercial law, enforcement abroad
Apart from the core of each business relationship (the agreement as such) additional requirements must be observed, such as export controls. A choice of law and an (enforceable) clause providing for jurisdiction (in the alternative arbitration or mediation) should form part of the agreement.
Sometimes companies use "self made" respectively unprofessional translations of their domestic General Terms and Conditions in international transactions, probably unaware that domestic law of the contract partner may require compliance with form requirements e.g. in order to agree on jurisdiction or to agree on a security interest. Some provisions may also be unenforceable under the ordre public of another country.
The purchase price or other remuneration should be secured e.g. by Letter of Credit / Comfort Letter / Guarantee or Security Interest, because enforcement of an (unsecured) claim in a foreign country may not only be insecure but also time and cost intensive.
The delivery terms (usually INCOTERMS) should be stipulated. As the case may be international transportation laws may be of importance, e.g. the FIATA Rules for Freight Forwarding Services in multimodal transportation.
International Distribution Law
Controversies frequently arise in case of termination of the agency or distribution agreement. Depending on the applicable law, an agent or distributor may be entitled to indemnification in case of termination of the agreement. In an international setting the parties may validly waive indemnification payment under certain circumstances. Additional national rules and regulations may be of importance.
Aside from the termination of the agency or distribution agreement, in particularly non-competition clauses (covenant not to compete) frequently give rise to dispute. Under German law, an agent may generally not compete during the term of the agency agreement. Frequently the parties modify the statutory obligation not to compete by agreement.
The parties may even stipulate a (reasonable) post-contractual covenant not to compete. However in order to be enforceable certain restrictions apply, inter alia, the obligation to make compensation payments.
Additionally the principal may wish to protect trade secrets, intellectual property rights, know how or customer relations by specific contract provisions.
Under German law compliance with contractual obligations can generally be safeguarded by a penalty clause or by a liquidated damages clause.
International / cross border Corporate Law
International corporate law can be described in a nutshell as follows: "When you are in Rome, do as the Romans do". Once the applicable national corporate law is determined, corporate law issues will be generally resolved in accordance with the national law.
Sometimes additional issues arise, e.g. which country's bankruptcy / insolvency law applies or which law applies with regard to liability of the directors / board members.
International / cross border Mergers & Acquisitions (M & A)
When selling or purchasing a business or a stake in a business, shareholders and/or directors of small and medium sized companies may not always be familiar with the course and settled rules in cross border transactions. Lack of language skills and different business cultures may complicate the transaction.
Some routine courses in common law countries such as conducting a due diligence, signing a letter of intent (LOI) or a memorandum of understanding may not be subject to settled law in Germany. Additionally, common provisions in a US or UK share purchase or asset deal transactions, e.g., extensive guarantees, put und call options, tag and drag or good leaver - bad leaver provisions may be subject to different court opinions or even unenforceable under German law. Finally the transfer of shares is sometimes subject to additional formal requirements and instruction of a notary is required.
International products liability/ Breach of warranty
In a typical scenario, a German company received a defective product from a foreign supplier. The product had been installed in the own product, and sold to a foreign buyer where damages occurred due to the defective part. As the case may be, a product recall and/or notification to the appropriate authority may be required. In addition, this raises complex questions as to liability in the international chain of supply, consequential / incidental damages, indemnification, handling costs and the like.
Oliver Reinhardt, LL.M.
Lawyer / Germany
- Please note, the foregoing statements are general in nature and do not constitute legal advise, there are omissions and there may be errors, new legislation passed or different court holdings. Additionally, each case is different and you may therefore not rely on the following statements. If you need or seek legal advice, please consult a lawyer -