Indebted Estate: How do avoid inheriting your German Relatives’ Debts

Posted on July 3, 2018 by Bernhard Schmeilzl

Make sure to renounce (disclaim) an Inheritance from Germany if you fear that the Decedent had severe Debts

For English lawyers it is a rather shocking concept: The relatives of a deceased person or the beneficiaries mentioned in a Will can be fully personally liable for the debts of the deceased. Without any limitation.For details see here.

Hard to understand from the perspective of Common Law jurisdictions, but this is exactly what the German legal concept of “universal succession” (Gesamtrechtsnachfolge) means: The heir steps into the shoes of the decedent. The entire estate passes onto the heirs / beneficiaries. A personal representative is not necessary (Details on German succession rules here).

Of course, no German wishes to inherit debts. Thus, German statutory succession law does provide for a solution: the so called “Erbausschlagung”, i.e. renouncement of the German inheritance.

To avoid an estate in debt passing on to the heirs who then become liable for it, said heirs (whether under testate or intestate succession rules) can make a formal declaration of renouncement (Erklärung der Erbausschlagung). After such valid renouncement, which must be made within a specific deadline, that person is no longer considered to be an “heir”. Of course, this also means that the person who has renounced the inheritance has also lost all other claims. Thus, the renunciation of an inheritance it is an all or nothing approach.

In cases where it is unclear whether the estate is really over-indebted, it may be the wiser approach to apply to the German court for the appointment of an official estate administrator (Nachlassverwalter) under sec. 1975 German Civil Code. This official estate administrator takes possession of the estate, pays all debts and hands over the residuary estate – if any – to the heirs. Of course minus his fees and costs.

Which German Probate Court do I need to contact for renunciation or the appointment of an estate administrator?

According to German probate court procedure regulations (Sec. 343 FamFG), the renouncement must be made at the probate court (“Nachlassgericht”) competent for issuing the grant. In most cases, this is the court in the district where the deceased had his or her last habitual residence in Germany.

In case a German citizen passes away without having had a residence in Germany, the principal probate registry in Berlin is competent for the proceedings:

Amtsgericht Schöneberg – Abteilung Nachlassgericht, Ringstraße 9, 12203 Berlin, Germany

If a non-German national passes away who did not have a residence in Germany, the court where the assets are located is competent. In case there are assets in multiple parts of Germany, the court which is is approached first becomes competent for all assets in Germany.

Formal Requirements and Deadlines

The acceptance and renouncement of a German inheritance is governed by sec. 1942 to 1966 BGB (German Civil Code). The heirs must declare their renouncement to the competent German probate court within six weeks after being notified about the death and their entitlement as heirs.

This deadline is extended to six months if (i) the heir was outside of Germany at the time of death (irrespective of his/her actual habitual residence) or (ii) if the deceased had his sole residence outside of Germany.

If an heir (regardless of whether appointed as such in a will or whether an heir under intestacy rules) does not validly renounce within the legal deadline, that person is legally deemed to have accepted the inheritance. Then it becomes really difficult to avoid liability for debts of the deceased.

The renouncement has to be recorded at the competent German probate court. Alternatively, it can be given in writing as long as the signature is certified by a public servant (“öffentlich beglaubigt”). The certification can be carried out by a German notary public (“Notar”) or at a German embassy (German Mission) abroad, in the UK this is possible in London and Edinburgh.

The required wording of such a renouncement (disclaimer) of a German inheritance is explained here.

Please note that the formal declaration of renouncement only becomes effective once it is received by the competent German probate court and not already when your signature is being certified, for instance at a German Mission abroad. This must be kept in mind when making the appointment, i.e. there must be sufficient time for sending the original document to the German probate court (a fax or email transmission is not sufficient).

It is not possible to make a conditional renouncement or to renounce only with regard to parts of the estate.

How to renounce on behalf of a minor

In case a parent renounces, then the right of inheritance usually passes on to his/her child or children. In these cases, the right of inheritance has to be renounced for the children as well. In certain situations, the family court’s approval is required and must be submitted to the competent probate court within the above mentioned deadline. The family court’s approval is, however, not required if the minor (only) becomes an heir because the parent who legally represents the minor has already renounced the inheritance. In other words: The law assumes that the parent had good reason to renounce for himself. Thus, is is assumed that the renunciation is also in the best interest of the child. If, however, the child is directly appointed as an heir in a will, then the parent needs the court’s consent to declare a renouncement on behalf of the child.

Certification procedure at a German Embassy abroad

For a certification your identity has to be established by presenting your valid passport or state ID card (Personalausweis). You must also provide a current proof of address (e.g. council tax bill or utility bill). And you need to bring with you the renunciation declaration, i.e. the wording explained above.

After certification of your signatures you will need to send the form to the competent German probate court (see above section “competent court”). Further correspondence regarding receipt and validity of the renouncement has to be carried out directly between yourself (or your legal counsel) and the German probate court. Please keep in mind that the court language will be German only.

Court Fees

A renouncement usually involves two separate fees, one charged by the German Mission for certification, another for the probate court proceedings. The fee payable cash at the German Foreign Mission is the equivalent of 20 Euros in Pounds Sterling according to the day’s exchange rate. The probate court’s fee will depend on the value of the estate.

For more information on German-British probate matters and international will preparation see the below posts by the international succession law experts of Graf & Partners LLP:

Or simply click on the “German Probate” section in the right column of this blog.

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The law firm Graf & Partners and its German-English litigation department GP Chambers was established in 2003 and has many years of experience with British-German and US-German probate matters, including the representation of clients in contentious probate matters. We are experts ininternational succession matters, probate and inheritance law. If you wish us to advise or represent you in a German or cross border inheritance case please contact German solicitor Bernhard Schmeilzl, LL.M. (Leicester) at +49 941 463 7070.

Austrian Probate: How to Access Assets in Austria?

Posted on July 2, 2018 by Bernhard Schmeilzl

British Testator owned a Bank Account in Austria: Will an English Grant be accepted in Austria?

No, unfortunately, it will not. If a British person who owns assets in Austria dies, the personal representative needs to obtain a separate Austrian grant of probate. The English grant is rather worthless in Austria, just as an Austrian (or German or French etc) grant of probate is not being accepted within the United Kingdom, because the UK has opted out of the EU Succession Regulation (even before Brexit).

What kind of Austrian grant needs to be obtained depends on the circumstances of the case:

If the decedent was an Austrian national –OR– if the decedent was habiltually resident in Austria –OR– if he/she did own property (immoveables) there, then the comprehensive Austrian Probate Procedure is unavoidable, the so called “Verlassenschaftsverfahren”. This involves significant paperwork and the executor(s) / beneficiaries must go through an Austrian notary public (Notar).
If the decedent did not live in Austria and owned exclusively moveable assets there (e.g. an Austrian bank account), then a simpler and quicker probate procedure is possible under Austrian law, the so called “Ausfolgungsverfahren” (delivery procedure). This is similar to “re-sealing” a foreign grant. It still requires an Austrian court order, the submission of original documents and certified translations, but the overall procedure is much quicker and simpler.

If, for instance, a deceased British citizen owned a bank account in Austria but his/her main estate was located within the UK, then the executor or administrator of the UK estate can use the English grant (i.e. grant of probate or letter of administration) and apply to the competent Austrian probate court to be accepted by court order (Gerichtsbeschluss) as the “entitled person” (berechtigte Person) with regard to the moveable assets in Austria; see section 150 Austrian Ausserstreitgesetz and sec. 10 EU Succession Regulation.

This means, however, that the probate application in Austria cannot be made until the English grant has been issued. In practice, these Austrian bank accounts or other moveable assets cannot be accessed quickly. And even after the English grant has been issued, there are quite some formal requirements which need to be dealt with. Because even for this simplified venue of an Austrian probate application, the court needs to be provided with the following documents:

An original copy of the English Grant (ideally the “yellow” copy so the Austrian court definitely believes that it is an original; otherwise an apostille would be necessary)
An original copy of the death certificate (or a legalised, i.e. apostilled copy of the same)
Official proof of the decendents nationality.
All executors mentioned in the English grant will have to sign the application
The English Grant and the death certificate will need to be officially translated by an Austrian, court admitted, translator. Whether the English will (if such a will exists) must also be translated depends on the court.

The Austrian probate court fees and the fees of the Austrian civil law notary (who will be instructed by the Austrian probate court to contact the bank) will depend on the value of the bank account. As in Germany, there are statutory fee tables in Austria which determine the legal costs of a probate case.

We saved the best news for last: As complicated as the Austrian probate procedure may be, there is no inheritance tax in Austria. None whatsoever.

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For more information on German-British and Austrian-British probate matters and international will preparation see the below posts by the international succession law experts of Graf & Partners LLP:

Director’s Duties and Liabilities under German Law

Posted on June 22, 2018 by Bernhard Schmeilzl

What are the Duties of Directors of German Companies (GmbH) and Corporations (Aktiengesellschaft)?

Obviously, pretty much all over the world, company directors and CEO’s have a general duty to be loyal, diligent and conscientious in managing the affairs of their company. This is also the case under German law. Directors and CEOs have to bear in mind what is best for the business and act accordingly. In this regard, German courts do apply an objective standard that does not, as a rule, depend on the specific knowledge, education, experience and abilities of the individual director. In other words: If someone takes on the job of a company director, he or she must be up to the requirements. In practice this means, that – depending on the size of the company – the director must hire and supervise qualified staff or outside consultants.

According to German case law, a company director has wide-ranging discretionary powers with regard to how to manage the company. This includes the power to take entrepreneurial decisions, even daring ones (entrepreneurial risk). Always provided, however, that the director carefully assesses the related risks before making such decisions. Under German law, actions (or inactivity) outside the limits of reasonable entrepreneurial conduct or violation of specific director’s duties may result in personal liability of the company director. The major difference between the director of a German Gesellschaft mit beschränkter Haftung (GmbH) and the CEO of a German Aktiengesellschaft is that the GmbH director must always obey the instructions of the shareholders. A vote of the shareholders (Gesellschafterbeschluss) is binding on the company director. In contrast, a CEO (Vorstand) of a German Aktiengesellschaft has much more leeway. The CEO (or the board of executors) manages the corporation as they themselves deem is best:

Section German 76 para. 1 German Stock Corporation Act states:
Management of the stock corporation: The management board is to manage the affairs of the company on its own responsibility.

For example, directors (CEO’s) have an obligation under the German Stock Corporation Act (Aktiengesetz) to protect the company from financial penalties, losses and other financial harm. In their function as trustees of the company’s assets, company directors owe strict fiduciary duties. The Stock Corporation Act also provides for a number of specific duties, including those relating to the maintenance of registered share capital, bookkeeping, and the organization of the company. Finally, directors are also subject to numerous reporting requirements (including a duty to keep the securities market informed and updated) as well as strict confidentiality obligations.

Directors’ Liabilities under German Law

As a rule, only the company is liable towards outside parties, not the individual director or CEO. In other words: Third parties can rarely sue a company director directly for damages or compensation. The company is responsible for the (illegal or damaging) actions or omissions of their dirctors and CEOs. As a consequence, if a director causes financial damage by deliberately or negligently breaching their duty, the company can (and in most cases must) take internal recourse (Regress) against the director / CEO. A simple majority at the annual general meeting can force the company to seek internal recourse against a director. In such recourse proceedings (Regressanspruch), the director must prove that he or she has obeserved the relevant standard of care (Sorgfalt eines ordentlichen Geschäftsführers). The company only needs to demonstrate that it has suffered damages as a result of the actions of the director.

In exceptional circumstances, creditors of the company may bring a direct claim against a director. German statutory law permits bringing direct actions against a director where:

a company is unable to satisfy a claim arising from a violation of a duty by a director;
a company becomes insolvent and a director delayed the initiation of insolvency proceedings causing damage to the creditor; or
he is liable under tort law for a serious breach of duty or for a violation of legal provisions that protect certain individuals of groups of people, such as criminal provisions concerning fraudulent or false representation of the company’s affairs.

In German courts, successful direct claims have been brought against directors based on tort law where, for example, directors have deliberately published incorrect inside information. German court decisions of the last 10 to 15 years show a tendency by the courts to expand the scope of direct tort liability of directors.

For more on German business and corporate law see these posts:

More information on litigation and legal fees in Germany is available in these posts:

Prosecuted in Germany?

Posted on June 11, 2018 by Bernhard Schmeilzl

German defense lawyer Alexander Greithaner specialises in international criminal cases and represents foreign clients in all areas of criminal law. Due to his international family background he is fluent in English, Spanish and, of course, German.

First things first: If accused of a crime or misdemeanor in Germany, never make any kind of statement to the German police, German customs (Zoll) or any other German prosecution authority. This piece of advice sounds commonplace but many clients have already made some kind of statement before contacting a German defense lawyer. This is never helpful!

You need to be aware of the legal situation and the risks first. Then you can discuss with your defense lawyer whether it makes sense to make a statement or not. This is even more important in international criminal cases. While criminal statutes are still mostly national law, globalisation nevertheless has also impacted criminal law and prosecution proceedings. Criminal prosecutors nowadays frequently collaborate with their colleagues in other countries, in particular with regard to organised crime or international taxation issues. For this reason, an “international criminal law” has developed in recent years, which companies and private individuals are confronted with. Thus, a defense lawyer should no longer only think within the box of his or her own national jurisdiction.

Since it is no longer uncommon for German investigative authorities to cooperate with foreign colleagues, this often leads to complete uncertainty for the private individuals and companies concerned, as they are even less familiar with foreign legislation than with the already complicated national regulations, which makes the use of a specialised criminal lawyer indispensable. As a non-German defendant, you need a defense lawyer who does not only know his own legal system but also has a corresponding understanding of international and European legal regulations.

German Lawyer with Mexican roots: Alex Greithaner is fluent in Spanish, English and, of course, German

German defense lawyer Alexander Greithaner works exclusively in the field of criminal law. His main area of expertise is “white collar crime” (i.e. business, corporate, compliance, tax), but he also deals with narcotics law cases, alleged traffic violations and in certain constellations he also defends clients against the accusation of a sexual offence. He is also versant in the law of international extradition proceedings.

His excellent knowledge of English and Spanish enables him to offer his clients comprehensive and cross-border advice in all areas of criminal law on an international level.

If you are accused of any crime in Germany, you should always demand to speak to an English speaking German lawyer. In the south of Germany you may call criminal defense attorney Alexander Greithaner on 0049-941-30794890 or in case of an emergency on the mobile phone number 0049-160-94403335. For other parts of Germany we can recommend qualified criminal defence attorneys.

Basic information on law enforcement and criminal prosecution in Germany: The German Criminal Code (in English language) and the Code of Criminal Procedure are available here. German judge Joachimski here compares the practical aspects of US and German criminal procedure and here is a very informative essay on the German criminal procedure produced by the NZ Law Commision (download here: GERMAN CRIMINAL PROCEDURE – german_criminal_procedure).

For more information about German law, in particular civil litigation in Germany see these posts:

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The law firm Graf & Partners was established in 2003 and has many years of experience with British-German and US-German legal matters.The Anglo-German litigation lawyer team of GP Chambers is well equipped to advise and represent clients from the UK and other English speaking countries. If you wish us to advise or represent you in a German or cross border case, or if you need an expert report on German law, please call +49 941 463 7070 in order to contact German lawyer Bernhard Schmeilzl, LL.M. (Leicester), managing partner and head of the litigation department. Bernhard is also frequently asked by British and US Courts and Tribunals or by legal counsels to provide expert reports and legal opinions on German law.

How to deal with Estates in Austria

Posted on June 11, 2018 by Bernhard Schmeilzl

Probate Proceedings in Austria are very different from those in Germany

If a decedent who was not resident in Austria owned any assets in Austria at the time of his or her death, this Austrian Estate can only be accessed after going through formal Austrian Probate.

Neither an English Grant of Probate nor a German Certificate of Inheritance will enable the executors or beneficiaries to access the Austrian assets, because Austrian banks, brokers, insurance companies and other institutions will ask for a Grant of Probate (“Einantwortungsbeschluss”) issued by the comptenent Austrian Probate Court. In fact, the situation in Austria is considerably more complicated and costly compared to Probate proceedings in Germany or in the United Kingdom. This is due to the fact that Austrian Probate Courts take a much more active role in the administration of an Austrian estate. This generates significant and sometimes unavoidable probate court costs.

Now, what needs to be done if there are Austrian assets?

Under Austrian law, the following rules apply to estates in Austria of persons resident abroad at the time of their death:

Upon the testator´s death, the estate falls to the jurisdiction of the Austrian Probate Court (Verlassenschaftsgericht). The decedent’s assets in Austria are automatically sequestered, i.e. only persons authorised by the Austrian Probate Court (Verlassenschaftsgericht) can deal with them. In contrast to Germany, Austria does not accept any trans-mortal powers of attorney, i.e. any powers of attorney given by the deceased authorising third parties to operate his/her bank accounts or stocks dossiers etc expire on the decedent’s death.

Which local probate registry shall have jurisdiction is determined by whether the decedent owned real estate (immoveables) in Austria or, if not, where the majority of the moveable assets are (e.g. bank accounts).

The Austrian Probate Court will request the following documents (originals or certified copies) to be submitted:

the death certificate
official proof of the testator´s nationality at the time of death, unless this fact is stated in the death certificate,
the documents required to establish the hereditary succession, i.e. the will, birth certificate, marriage certificate etc.

If the decedent was a foreign (i.e. non Austrian) national on the day of death, and if agreements on mutual equal treatment exist between his/her country of origin and Austria, the probate proceedings will be conducted by the competent courts or other authorities of the decedent’s country of origin on the day of his/her death provided that the assets representing the estate are movable property only. In these cases, simplified court proceedings are available, known as the delivery procedure. (“Ausfolgungsverfahren”). More on this re-sealing procedure in this post.

Such delivery procedure only requires a decree issued by the competent foreign court regarding the beneficiary entitlement to the inheritance (i.e. names of the entitled persons or of the executor) to be submitted to the Austrian court together with the additional documents listed above.

If the beneficiaries or executors are resident outside Austria, it is usually necessary to entrust the probate or delivery proceedings to either an Austrian Notary Public or to a German speaking probate lawyer.

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The German-British probate expert Bernhard Schmeilzl specialises in international wills and estate planning for British-German and British-Austrian families since 2001. He knows the typical problems that arise when an English will lands on the desk of a German or Austrian probate registrar or vice versa. Most succession lawyers only know the rules and practical operations of their own jurisdiction. The probate experts at Graf & Partners, however, apply for hundreds of grants each year in England, Germany and Austria, acting either as probate lawyers for personal representatives or acting as executors themselves.

These combined 20+ years of practical experience in non-contentious as well as contentious probate matters in Germany, Austria and the UK make the lawyers of Graf & Partners sought-after lecturers and speakers.

German solicitor Schmeilzl regularly conducts legal seminars and practical workshops on international wills and estate planning as well as on how to obtain probate in Germany, Austria and England. Popular topics for such inhouse seminars for British and German law firms are:

The law firm Graf & Partners and its German-English litigation department GP Chambers was established in 2003 and has many years of experience with British-German and US-German probate matters, including the representation of clients in contentious probate matters. If you wish us to advise or represent you in a German or cross border inheritance case please contact German solicitor Bernhard Schmeilzl, LL.M. (Leicester) at +49 941 463 7070.

Google Analytics vs. GDPR – is that even possible?

Posted on May 20, 2018 by Bernhard Schmeilzl

We are currently receiving many inquiries from uncertain clients regarding the new General Data Protection Regulation (GDPR). During an initial analysis of the homepage, it immediately becomes apparent that most clients use an analysis tool – mostly Google Analytics or Matomo (formerly Piwik). Such tools are useful and indispensable for good online marketing.

But now the question arises: to what extent can these tools still be used to be compliant with the GDPR?

Admittedly, we believe that the GDPR and in particular the German implementation of this has gone far beyond the target. This creates enormous uncertainty in most companies and regular business operations are hardly possible without fear of violating any GDPR standard. But back to the actual topic: Is the tracking of user data of a website still permissible from the point of view of the basic data protection regulation?

Basically no! At least not without a few special adjustments. This is also confirmed by the position of the Conference of Independent Data Protection Authorities of the Federal Government. The statement of the German authorities can be found here:

https://www.ldi.nrw.de/mainmenu_Datenschutz/submenu_Technik/Inhalt/TechnikundOrganisation/Inhalt/Zur-Anwendbarkeit-des-TMG-fuer-nicht-oeffentliche-Stellen-ab-dem-25_-Mai-2018/Positionsbestimmung-TMG.pdf

But now to the real thing: How did I implement Google Analytics in compliance with the law? This requires a look at the provisions in accordance with Art. 6 para. 1 lit. f GDPR. You should therefore follow these steps:

sign a Data Processing Agreement (DPA) with Google. You can find this contract here:

http://static.googleusercontent.com/media/www.google.de/de/de/analytics/terms/de.pdf
accept the addendum for data processing with Google. You may have wondered what the “Data Processing Supplement” option in your Google Analytics account settings is for. This is appropriate here for GDPR. Once you enable this feature, your site visitors’ interests will be protected. It is also important that you enter the following information manually:
1. The person responsible (i.e. the legal person responsible for data processing),
2. A contact (i.e. a person/contact to whom the communications relating to the data processing conditions can be sent,
3. a data protection officer (if to be appointed),
4. an EEA Representative (but this is only important for companies that are not in the European Union).

3. install an easy way for your website users to opt-out.

You can use the following two Java scripts:

first, implement the JavaScript alert:

<a onclick=”alert(‘Google Analytics has been disabled);” href=”javascript:gaOptout()”>deactivate Google Analytics</a>

For the upper code to work, the following code must be installed globally on the website:

<img src=”data:image/gif;base64,R0lGODlhAQABAIAAAAAAAP///yH5BAEAAAAALAAAAAABAAEAAAIBR AA7″ data-wp- preserve=”%3Cscript%20type%3D%22text%2Fjavascript%22%3E%0A%2F%2F%20Set%20to%20th e%20same%20value%20as%20the%20web%20property%20used%20on%20the%20site%0Avar%2 0gaProperty%20%3D%20’UA-XXXX- Y’%3B%0A%0A%2F%2F%20Disable%20tracking%20if%20the%20opt- out%20cookie%20exists.%0Avar%20disableStr%20%3D%20’ga-disable- ‘%20%2B%20gaProperty%3B%0Aif%20(document.cookie.indexOf(disableStr%20%2B%20’%3Dtrue ‘)%20%3E%20- 1)%20%7B%0A%20%20window%5BdisableStr%5D%20%3D%20true%3B%0A%7D%0A%0A%2F%2F %20Opt- out%20function%0Afunction%20gaOptout()%20%7B%0A%20%20document.cookie%20%3D%20di sableStr%20%2B%20’%3Dtrue%3B%20expires%3DThu%2C%2031%20Dec%202099%2023%3A59% 3A59%20UTC%3B%20path%3D%2F’%3B%0A%20%20window%5BdisableStr%5D%20%3D%20true %3B%0A%7D%0A%3C%2Fscript%3E” data-mce-resize=”false” data-mce-placeholder=”1″ class=”mce-object” width=”20″ height=”20″ alt=”<script>” title=”<script>” />

implement IP anonymization – this will nullify the last two blocks of the IP (e.g. 108.138.0.0) so that it is no longer possible to identify the respective website visitor;

integrate a data protection declaration in accordance with the law within the meaning of Art. 12, 13 GDPR;

don’t activate the user ID.

We hope that with this short explanation we could take away the horror of the GDPR in relation to Google Analytics (as well as further analysis tools).

If you have any questions about GDPR, do not hesitate to contact German lawyer Stephan Hendel who specialises in data protection and IT law. Having a Canadian family background, Stephan is fluent in English and is well aware of the different business mentalities of Anglo-American as well as German entrepreneurs. Our German and international clients appreciate Stephan’s pragmatic hands on approach.

Within the Cross-Channel-Lawyer network, Stephan is the expert for all legal matters surrounding IT, cyber law, data protection issues and compliance with German law.

For more on German business and corporate law see these posts:

Data Protection and German Businesses: New GDPR 2018 will cause a Flood of Lawsuits

Posted on May 6, 2018 by Bernhard Schmeilzl

Company Managers and British Parent Companies of German Subsidiaries better take this issue very seriously, because the German version of the GDPR is much stricter than the GDPR rules as applied in the UK.

So if you are running a business in Germany, you should ensure that your German company is in full compliance. For instance in accounting and human resources. Because the German business mentality is to torture competitors with costly cease and desist letters (more here).

Germans are Data Protection Extremists

When it comes to data protection in a company, it is often overlooked that sensitive personal data is also processed in areas that do not immediately spring to mind, like accounting for instance. While other legal regulations in accounting prescribe processing or long-term storage, this is usually not the case in controlling.

With regard to the requirements of the EU Data Protection Regulation (GDPR), in particular with regard to all data processing in accounting and controlling should be checked and, if necessary, adjusted. An adaptation could be achieved, for example, by pseudonymization (removal of all directly identifiable features) or anonymization (removal of all personal data).

These are presented as examples in this article:

(1) Data protection for personal data

The data protection regulations apply when personal data is processed. This means (according to Art. 4 para. 1 GDPR) all information relating to an identified or identifiable natural person (…). In accounting, such data is regularly found in Accounts Payable and Accounts Receivable. If the accounting department also takes over the data management of the employees and carries out payroll accounting, “special categories of personal data” are even processed.

(2) Sensitive data due to processing or quantity

However, even if no data of employees is processed in accounting or controlling, personal data may still be available there, which can have an impact on those affected if they are viewed by unauthorized persons. This is obvious, for example, for notes on (negative) payment behavior (creditworthiness index).

Sometimes the context (the accompanying circumstances) of the processing is also sufficient, even if no financial or health data is stored for it. As very descriptive examples these would be e.g. the debtor evaluation of a specialist with the special field for cosmetic operations or in addition, the customer file of an erotic dispatch.

(3) Risks in practice

In accounting it is often the case that personal data is exported, e.g. for various evaluations from the hopefully well secured accounting programs. Often these “Excel files” are then sent by e-mail without further protection. Even if this alone often violates data protection regulations, it also increases the risk that third parties can view the data. In the case of e-mails, for example, an inadvertently wrong recipient is sufficient.

(4) Pseudonymization: identification via detours possible

Apart from a secure form of transmission, pseudonymisation offers a further advantage.

possibility of reducing the risk of data misuse for those affected. For this purpose, all personal data are essentially removed – with the exception of one value – that enable a person to be clearly identified. The remaining data may not directly identify the person concerned. Only by consulting another file or another document may the person be identifiable.

(5) Conclusion

Pseudonymisation and anonymisation offer two suitable ways of reducing data protection risks. Particularly with regard to evaluations, it is worth checking to pseudonymize short-term evaluations, for which detailed checks may still be necessary, and then to summarize and further process this data anonymously after a specified time interval.

Within the Cross-Channel-Lawyer network, Stephan is the expert for all legal matters surrounding IT, cyber law, data protection issues and compliance with German law.

For more on German business and corporate law see these posts:

We have no “Mike Wright” – Fraudsters use our firm’s name

Posted on April 23, 2018 by Bernhard Schmeilzl

Sooner or later, every international law firm faces the problem of their name being used for spam mails or fraud attempts. Currently, i.e. April 2018, it seems to be our turn. Some idiots have sent out thousands of emails claiming to be “Grafpartners-Solicitors”. These spam emails look like this and come with an attachment:

Please do not open the attachment and also do not respond to them, since we have nothing to do with this. While there are a few “real” solicitors by the name of Michael (or Mike) Wright out there, there is no Graf & Partner solicitor by that name. Nor is this our real domain or email address. Unfortunately, these days, there is not much one can do against such online fraudsters.

If in doubt whether an email was indeed sent by us, you are welcome to call our office to verify.

Post-Contractual Non-Compete Clauses in German Employment Agreements

Posted on March 21, 2018 by Bernhard Schmeilzl

… and how to get rid of them

Many employers want to prevent their employees to work for competitors when the employment ends. Under German labor law, this can be achieved by putting a post-contractual non-compete clause (nachvertragliches Wettbewerbsverbot) in the employment contract. The typical standard wording for such a non compete clause would be this:

The Employee shall not, for a period of 24 months following the end of the employment and within the territory ….., directly or indirectly, with or without remuneration, render services for a competing enterprise either as managing director, employee, or consultant, which are essentially similar to the services which the Employee has rendered to the Employer during the 24 months prior to the termination of the employment. The Employee may not establish any participation in a competing enterprise either, if such participation exceeds 5 % of the capital of such enterprise or enter into competition with the Employer as being self-employed. Competing enterprises are considered those which supply ………

Under German law, there are strict limits on how far an employer can go with such a non-compete obligation because the employee shall not be unreasonably restricted in finding a new job. Therefore, the maximum period is 24 months. If the non-compete period contained in the employment agreement is longer, the entire clause will be considered excessive and thus void. Also, the territory to which the non-compete obligation applies should be limited to what is absolutely necessary to protect the employers business interests. Defining the territory as “all of Germany” or “the European Union” or even “all over the world”, is extremely dangerous and probably also unnecessary.

Also, and this is often completely overlooked or even knowingly ignored by US or British employers, any such post-contractual non-compete obligation of a (former) employee is only binding and enforceable, if the employer pays the employee a financial compensation, the so called “Karenzentschädigung“.

This compensation must be paid during the entire non-compete period and must amount to at least 50% of the latest salary of the employee (including any bonus payments and gratuities).

A typical wording for this section of the employment agreement would thus be:

During the non-compete period the Employer shall pay to the Employee a compensation of … , i.e. 50% of the Employee’s last contractual salary. The statutory legal provisions, in particular secs. 74 et seq. HGB (German Commercial Code) shall apply.

In order to give the non-compete clause teeth, i.e. make the employee care about any breach, the contract should contain a penalty clause. Here, again, there are limits on what an employer can put in the contract and still expect it to be enforced by German courts.

What if the employer changes his mind about the non-compete clause?

Sometimes an employer no longer sees the need to bind an employee by a post contractual non-compete clause. Either because he does not feel that the employee could hurt him by working for a competitor. Or because he simply does not want to pay the Karenzentschädigung.

In such a case, there are two ways to go about this:

(i) The employer can waive the rights resulting from this clause (“auf das Wettbewerbsverbot verzichten”). This must be done in writing and BEFORE the employment has ended. However, the bad news is that the waiver does not come into effect with immediate effect. Instead, the non-compete clause stands for another 12 months. In other words: If the employer notifies the employee (in writing) that the employer no longer wishes the non-compete obligation to apply, this waiver only becomes valid after 12 months have expired. This means that if a contract contains a 24 month non-compete period and the employer declares to waive sied clause immediately before he terminates the employment, then the non-compete period is effectively reduced from 24 to 12 months, but the employer does not get rid of it entirely.

Another example: If the employer notifies the employee in January 2018 that he waives the non-compete clause and then terminates the employment 12 months later, then the employer does not have to pay any Karenzentschädigung.

(ii) The other option is that both parties amicably agree to lift the non-compete clause. The employee will of course only agree to this if he or she has already received an interesting job offer that he or she would otherwise be prevented from accepting due to the non-compete clause.

More on German Labour Law, Employment Agreements, Contract Drafting and Employment related Litigation in Germany is available in the posts below and in the brochure “Living and Working in Europe”

Experts on German-British and German-American Legal Matters

Since 2003, the German law firm Graf Partners LLP with its headquarters in Munich specialises in British-German and US-German legal cases. Our German lawyers are fluent in English, have many years of practical experience with clients from Britiain and the USA and are part of a well established network of law, tax and accounting firms.

Managing partner Bernhard Schmeilzl was admitted as German Rechtsanwalt (attorney at law) to the Munich Bar in 2001 and specialises in international cases ever since, especially German-American and German-English commercial and probate cases. In addition to obtaining his German legal exams with distinction, he also graduated from the English University of Leicester where he obtained his Master of Laws degree in EU Commercial Law in 2003. But do not mistake Bernhard for a German lawyer who focuses merely on German-British legal matters.

In 2014, Graf Partners LLP has set up the international litigation department GP Chambers which focuses on providing professional litigation services to British and US-American clients, both on a commercial and a private client level. The Graf Partners litigation lawyers regularly appear before German law Courts throughout the country and provide specialist legal advice, support and advocacy services in all commercial and civil law matters, ranging from contract disputes, corporate litigation and employment, to damage claims, divorces and contentious probate. If you wish us to advise or represent you in a German or cross border case, or if you need an expert report on German law, please call +49 941 463 7070.

If your Parent or Child passes away while having been resident in Germany…

Posted on March 6, 2018 by Bernhard Schmeilzl

… then German Succession Rules do apply to the Estate!

Since August 2015, all EU members (except for UK, Ireland and Denmark) apply the same basic rule: The national succession laws of that country shall apply in which the decedent had his or her last habitual residence (EU Succession Regulation, EU 650/2012).

Thus, if your parent or your child has been permanently living in – for instance – Germany, France or Spain and sadly dies while having been resident there, then the national succession rules of Germany, France or Spain will govern the administration of the entire estate as well as the formal probate proceedings.

This can create some surprising results for everyone involved. Intestacy rules, for example, vary from country to country. And, even more astonishing for English relatives and their lawyers, many European countries know a concept of “forced inheritance” or “statutory share rules”.

Under French law, a fixed proportion of the estate (of at least one half) is inherited by the child or children of the deceased, irrespective of the testator’s wishes as expressed in his or her will (“forced inheritance”). In Germany, the situation is similar: the surviving spouse, children and even the parents of the deceased are entitled to make a significant financial claim against the heir(s), the so called Pflichtteilsanspruch (details here).

Not every British or Irish national who lives in Germany (or France etc) is aware of this. And even if they are aware, then some of these national succession laws are mandatory and indispensable. Thus the term “forced inheritance”. For the surviving spouses, children or parents of a British or Irish national who passed away in Europe, this means that they may be entitled to an interest in the estate even if they were disinherited. In other words: German or French succession laws grant the close relatives certain rights they would not expect to have under English laws.

There are, however, also unpleasant surprises and risks: Under German as well as French laws, for instance, the heirs inherit their share of the property of the deceased directly on death and also assume personal responsibility for the debts of the deceased (even if they are at first unaware of such debts) and the tax on inheritance.

In all international inheritance cases, the relatives of the deceased should thus obtain information on the local succession laws and probate rules to avoid risks of personal liability and to find out whether they are entitled to a forced inheritance.

For more information on probate as well as gift & inheritance tax in Germany, Austria and Switzerland see the below posts by the international succession law experts of Graf & Partners LLP:

Or simply click on the “German Probate” section in the right column of this blog.

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The law firm Graf & Partners was established in 2003 and has many years of experience with British-German and US-German probate matters. If you wish us to advise or represent you in a German or cross border inheritance case please contact German solicitor Bernhard Schmeilzl, LL.M. (Leicester) at +49 941 463 7070.