Google Analytics vs. GDPR – is that even possible?

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:

  1. 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

  2. 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=”&lt;script&gt;” title=”&lt;script&gt;” />

  1. 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;
  2. integrate a data protection declaration in accordance with the law within the meaning of Art. 12, 13 GDPR;
  3. 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

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.

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:

Harsh “Unfair Competition” Rules in Germany

The German Habit of sending out Cease and Desist Letters to Competitors

When you start trading in Germany you may be in for unpleasant surprises. The first letter your German subsidiary receives may likely be a formal cease and desist notice sent by your competitor’s lawyers. Why? Because under German unfair competition laws, every business has the right to formally demand competitors to fully comply with any and all German laws. And there are many such laws and regulations, some of which a British entrepreneur or even a British lawyer would never expect to exist.

Thus, everyone who considers starting business activities in Germany should read the German Act Against Unfair Competition (Gesetz gegen den unlauteren Wettbewerb, UWG). Read it, shake your head, then read it again.

Some examples:

  • Every website and all stationary (letters, emails etc) must quote the complete business details including full business address, commercial register number, name(s) of director(s) and more. For details see section 5 UWG on incomplete information about a business trading in Germany.
  • Your website must have a so called “Impressum” which contains all relevant company information. Pursuant to section 5 Telemediengesetz the customer must be able to find the entire information about the offering company “easily” and “quickly”.
  • Websites must comply with German consumer protection laws and data protection laws; sounds harmless but the requirements are so complex that even most German companies are in breach of some aspects of these regulations.
  • Advertising material must specify its publisher.
  • All information on websites and advertising material must be truthful. You think that is understood and no problem? Well, here is an example for a typical mistake: We often represent British businesses which establish a German subsidiary and then make advertising statements like “25 years of experience” because the British parent company has been doing business for 25 years and they think they are allowed to make such statements for the entire group. They are not! Two weeks later, the German subisiary (a newly formed GmbH) is being served a number of cease and desist letters by German lawyers demanding to stop making this false and misleading statement, because the German subsidiary (which has made that statement in their ads) does not have 25 years of experience.
  • Another classic mistake is making an incorrect or incomplete price quotation on a website or on any advertisement material. Any mentioning of a price must clearly specify the final amount, the German VAT and any information about delivery costs. If not, this constitutes an infringement of section 1 II Preisangabenverordnung (PAngV) and in turn an infringement of the competition regulations (sections 3 and 3a UWG). Again you may think: How hard can this be? Well, take a look for yourself. It tells you a lot about German law that the regulation about how prices for goods and services must be presented is 8 pages long, see here.

Why are German Competitors (and their Lawyers) so aggressive?

These cease and desist letters (Aufforderung zur Abgabe einer strafbewehrten Unterlassungserklärung) are more than a mere nuisance because it is a peculiarity under German law that the recipient of such a lawyer’s letter must bear the competitor’s lawyers legal fees. Without any prior warning! The first letter you receive already triggers costs for you. Depending on the concrete breach these costs range from a few hundred to a few thousand Euros. And if you are unlucky, you will receive cease and desist letters from various german competitors with regard to the same breach.

Thus, German business lawyers are very interested in representing German businesses in that field, because with each such cease and desist letter they stand a good chance of earning a few thousand Euros. Their clients, your German competitors, are also keen of sending out such cease and desist letters, because it makes life difficult and expensive for new competing businesses, Ideally, this is a way for an established German business to prevent the market entry by a new company.

Do not ignore Cease and Desist Letters!

We note that British clients doing business in Germany tend to ignore such letters from competitor’s lawyers. This is a big and costly mistake, because if you to not acknowledge the breach and make a formal promise to the competitor to remedy the breach, then the competitor has the right to immediately sue your company. The competitor will apply to a German court by way of an Unterlassungsklage (action for an injunction). In most cases, the claimant will apply for an accelerated proceeding and ask for a preliminary injunction (einstweilige Unterlassungsverfügung), which – in obvious cases or if the British defendant does not properly respond – is usually granted by the German courts.

Then it becomes really dangerous, because if your company continues the breach (e.g. the website still infringes German laws or regulations) then very harsh penalties kick in. Depending on the size of your business (turnover in Germany), the number and duration of the breaches and other factors, the German court may order your company to pay a penalty (Ordnungsgeld) of up to 250,000 Euro.

Thus, in case you have been served an Unterlassungsaufforderung (cease and desist letter), you should immediately remedy the breach, then contact a German business lawyer and discuss what your options are. In most cases, if you have actually been in breach of German laws or regulations, you will have to (teeth-grindingly) acknowledge this breach (by sending them an Unterlassungserklärung) and to pay the opponent’s legal fees. In most cases, however, there is a chance to negogiate about the other side’s legal fees.

Such a formal acknowledgement (strafbewehrte Unterlassungserklärung) prevents the competitor from suing you. However, such an acknowledgment letter is only valid if it contains a promise to pay a contractual fine (Vertragsstrafeversprechen) in case you breach the same regulation again. Without such a promise to pay a fine the acknowledgement letter is worthless and you still rund the risk of being sued.

We certainly hope that we have not killed your desire to start trading in Germany. However, when you take up business activities in Germany, you should expect to be closely monitored by your German competitors. Thus, do not give them a chance to torture you with costly cease and desist letters.

By the way: It is not just competitors who may be observing you. German consumer protection groups (Verbraucherschutzorganisationen) also have the right to send out cease and desist notices.

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:

Experts on German-British and German-American Legal Matters

Since 2003, the German business and corporate law firm Graf Partners LLP specialises in British-German and US-German legal cases. Our German business and corporate lawyers are native speaker level 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, with a focus on German-American and German-English commercial, corporate and also 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.

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.

 

Forensic Accountant for Business Litigation in Germany

You need to understand German company accounts?

In order to win a business or corporate law suit, understanding the numbers is often equally important as knowing the legal aspects of the case. The same is true if you plan to acquire a German business. Thus, the German-British litigation lawyers as well as the M&A experts at Graf & Partners (www.grafegal.com) regularly team up with German forensic accountant Hermann Werle.

Hermann obtained his degree in business administration from Regensburg UAS in 1982. Throughout his 25 year career he then worked as inhouse accountant, head of controlling, CFO and company director / CEO for renowned German and international companies and was involved in a number of mergers including Mallinckrodt, Sherwood Davis & Geck and U.S.-Surgical. Thus, Hermann gained a wealth of professional experience in various industrial sectors. While his core competence is finance, he also has practical experience in HR, IT, purchasing, warehousing and distribution.

In 2014, Hermann set up his own financial consultancy firm and provides professional advice to German and international firms, often in collaboration with the German and British litigation lawyers of Graf & Partners. His main focus is on the areas:

  • forensic accounting in cross-border litigation cases and
  • German-British and German-American merger & acquisition deals (financial due diligence)

We have worked with Hermann Werle on dozens of business litigation cases as well as international mergers. Our German as well as our international clients have always been extremely impressed by his skills, in particular his ability to break down and explain the most complex situations to non-accountants, i.e. to litigation lawyers and judges.

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

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

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Experts on German-British and German-American Legal Matters

Since 2003, the German business and corporate law firm Graf Partners LLP specialises in British-German and US-German legal cases. Our German business and corporate lawyers are native speaker level 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, with a focus on German-American and German-English commercial, corporate and also 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.

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.

Careful with M&A Asset Deals in Germany

Pitfalls of German Contract Law (Part 3):  Many Asset Deal Purchase Agreements must be in Notarial Form to be Valid in Germany

German Law requires certain transactions to be recorded before a Civil Law Notary in order for these agreements to be valid and enforceable. The list ranges from pre-nuptial and marriage agreements, to any real estate related transaction, to the formation of German companies and stock corporations.

One aspect is, however, sometimes overlooked even by German corporate lawyers. Namely, the fact that even assets deals may have to be recorded before a German notary if the selling party in this M&A asset deal transfers its entire business operation (Geschäftsbetrieb) or a defined branch of its business, i.e. an entire sector of the business operation (Teilgeschäftsbetrieb).

The relevant statute is sec. 311 b para. 3 German Civil Code which states:

Section 311b BGB:

Contracts on plots of land, assets and an estate

(1) A contract by which one party agrees to transfer or acquire ownership of a plot of land must be recorded by a notary. A contract not entered into in this form becomes valid with all its contents if a declaration of conveyance and registration in the Land Register are effected.

(2) A contract by which one party agrees to transfer his future property or a fraction of his future property or to charge it with a usufruct is void.

(3) A contract by which one party agrees to transfer his present property or a fraction of his present property or to charge it with a usufruct must be recorded by a notary.

 

If, therefore a German company (GmbH) or corporation (AG) sells its assets and the agreement contains – which is often the case – a so called “catch all assets clause”, then the entire agreement must be recorded by a German Civil Law Notary, even if the assets do not consist of real estate (plots of land etc).

The statute does, however, usually not apply if the seller is a sole trader oder a partnership, i.e. a German Gesellschaft bürgerlichen Recht (GBR), a German Offene Handelsgesellschaft (OHG) or a German Kommanditgesellsachaft (KG), but the details are tricky.

If this formal requirement of German law is not observed in a German M&A assed deal, the entire agreement is null and void (nichtig) which may be found out even many years later. In which case, obviously, all hell breaks loose. This aspect should therefore not be taken lightly.

If the parties wish to avoid the involvement of a German Notary in the transaction, they can either do without a catch all clause or they can agree on English or US law to apply to the asset deal which may, however, create other legal problems. Please note that if the deal includes the transfer of German real property (immoveables in Germany), then the involvement of a German notary is necessary no matter what. The same is true if the shares of a German Limited Liability Company are to be sold and transferred.

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

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Experts on German-British and German-American Legal Matters

Since 2003, the German business and corporate law firm Graf Partners LLP specialises in British-German and US-German legal cases. Our German business and corporate lawyers are native speaker level 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, with a focus on German-American and German-English commercial, corporate and also 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.

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.

Checklist for forming a UK Limited Company

If you do business on an international level, you should carefully choose the ideal company form to use. Should, for instance, your business depend upon attracting German customers and/or suppliers, the best choice may not be an English limited liability company, because such a company does not have the best reputation in Germany. In this case, you might want to opt for a German GmbH (for details on how to establish a German limited liability company see here). Vice versa, if you are a German entrepreneur doing business in the UK, you might want to consider establishing an English limited liability company. Here is a brief checklist on what to consider when establishing such an English company.

A company is registered by filing the necessary documents and paying the required fee at Companies House. The company is brought into existence when the Registrar of Companies (Registrar) issues the certificate of incorporation.

The prospective owners of the company can either:

  • register a new company with documents that are specifically tailored to their requirements (a tailor-made company); or
  • buy a company that has already been incorporated but has not yet traded (a shelf company).

To form a private company limited by shares, form IN01 (Application to register a company) must be completed and filed with the Registrar of Companies. In order to complete the registration process, could you please answer the following questions:

  • What is the proposed company name?
  • Country of registered office and intended address of the company’s registered office? If you do not intend to have an actual office, please let us know as we can recommend a service agency who can do this on your behalf.
  • How do you want the company to be governed? There are standard articles of association, however, for example, if you would like the shareholders to have more say than the directors, please let us know as the articles will have to be amended/drafted to reflect this.
  • Details of first directors and secretary (if any) including title, full name and former names, date of birth, country or state of residence, nationality, occupation, service and residential addresses.
  • Are any service contracts to be entered into with the directors? Are there any other contracts or arrangements with any director or person connected with a director?
  • What is the share capital? I.e. how many shares and at what price do you want the shares to be? We would always suggest using 1GBP per 1 share.
  • Statement of initial significant control. From 30 June 2016, newly incorporated companies must file a statement of initial significant control at Companies House as part of the application for registration (sections 9(4)(d) and 12A, CA 2006). This statement must identify any subscriber who qualifies as a registrable person with significant control (PSC) (or registrable relevant legal entity) and that information must be used to populate the company’s PSC register. The details must be submitted on Form IN01. If there are no persons with significant control, a statement to this effect must be made on Form IN01.
  • If there is more than one shareholder, do you want to have a shareholder’s agreement?

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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, the USA 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.

Pursuing Legal Action in Germany?

You found the German law firm perfectly equipped to address your legal needs in Germany

Since 2003, German law firm Graf & Partners specialises in providing legal advice and litigation services to British and American clients. The majority of our clients come from Britain, the USA or other English speaking countries and are in need of pursuing a legal matter in Germany. If you need a competent and trustworthy attorney anywhere in Germany, our experienced contract lawyers and bilingual litigators will be happy to assist.

The firm’s managing partner Bernhard Schmeilzl and several other lawyers in our litigation team have studied and worked in the USA and/or Britain. As a result, Graft & Partners have established a unique and impressive international legal practice, which focuses specifically on British-German and German-American legal cases and issues. Our Anglo-German lawyer team is headed by British and Canadian citizen Elissa Jelowicki, a qualified English solicitor, and Registered European Lawyer, admitted to the Munich Bar Association. Therefore, foreign clients and instructing lawyers from the UK and America are able to discuss their specific case with a native English speaker, who also knows the English legal system.

Our German and British litigation lawyers appear before German law Courts throughout the country and are also experienced in (Commercial) Arbitration and Alternative Dispute Resolution. We provide specialist legal advice, support and forensic services in all commercial and civil law matters, ranging from contract disputes, corporate litigation and employment, to damage claims and contentious probate. In addition, our family law experts deal with international divorces and child custody matters. In relation to other legal areas, e.g. criminal law or tax, we will be happy to recommend qualified German lawyers from other chambers, who are also fluent in English.

On a regular basis, we speak on German-American and British-German legal issues at lawyer conventions and at in-house events of international companies and law firms. See here for some of the topics we have spoken on recently:

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

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Call the 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.

Bernhard Schmeilzl_crop1Managing 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. 

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.

Pitfalls of German Law (Part 2)

Be careful when suing a German Kommanditgesellschaft (KG), an Offene Handelsgesellschaft (OHG) or a Gesellschaft bürgerlichen Rechts (GBR)

The single most common mistake foreign claimants and their non-German litigation lawyers make when taking a German business to court is that they only sue the partnership itself and not the personally liable partners (persönlich haftende Gesellschafter).

To avoid any misunderstanding: This post deals with German partnerships (Personengesellschaften) as debtors, not with German limited liability companies (GmbH) or German corporations (Aktiengesellschaft). If the debtor is a German company, then – normally – only the company itself can be sued, not the company’s shareholders. There may be special circumstances when a director of even a shareholder may be personally liable for a company debt (piercing the company veil, in German: Durchgriffshaftung), but this is the exception to the rule.

The situation is entirely different with German partnerships, which come in four different shapes and forms:

  • Kommanditgesellschaft (KG), mostly in the form of a GmbH & Co KG
  • Offene Handelsgesellschaft (OHG)
  • Gesellschaft bürgerlichen Rechts (GbR), also called BGB-Gesellschaft
  • Partnerschaftsgesellschaft (PartG)

What these German partnerships have in common is that there is at least one partner who is liable for all business debts with his entire personal property (Privatvermögen). The relevant statute is section 128 German Commercial Code (§ 128 Handelsgesetzbuch). With regard to the OHG and the GbR all partners are fully liable. With regard to the Kommanditgesellschaft (KG) there are two kinds of partners: fully liable partners (Komplementäre) and limited partners (Kommanditisten), who are only liable up to the amount they have invested.

Now, if you (or your client) have a claim against such a German KG, OHG, GbR or PartG, the biggest mistake you can make is to sue only the partnership itself. This is because with a court order against the partnership you can only enforce your claim against the partnership, i.e. the business assets of said partnership. In many cases, however, it is likely that there are no longer any business assets to go after as the partnership is doing poorly or has even folded.

In these circumstances, you will naturally want to go after the personally liable partners of the partnership. And, you can. But only if you have listed them as joint and several co-debtors (Gesamtschuldner) in your lawsuit against the partnership.

If you (or your litigation lawyer) have not done this, then the court order cannot be enforced against the partners. You will have to start a new lawsuit all over again. In some cases, you may of course face limitation problems by then (German limitation periods are explained here).

Thus, whether you sue the German partnership in Germany or abroad, you must ensure that you do not only list the partnership itself as a defendant but also every personally liable partner which you may want to enforce the court order against at a later stage. Psychologically, this puts much more presure on the defendants and thus increases the chances of payment or a favourable settlement agreement. By the way: the lawsuit costs are not increased by co-suing the partners. So there is no reason whatsoever not to include them in your court claim.

See here for other “Pitfalls of German Law“.

More information on litigation and legal fees in Germany is available in 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, the USA 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.

Pitfalls of German Contract Law and German Company Regulations (Part 1)

Foreign Contract Lawyers beware of surprising German Laws and Directives!

The German Civil Code (Bürgerliches Gesetzbuch, BGB, available in English), the German Commercial Code (Handelsgesetzbuch, HGB, partly available in English), the German Act on Corporations (Aktiengesetz, AktG) and the Act on Limited Liability Companies (GmbHG, available in English) are all full of surprising regulations which can essentially void any agreement or deed drafted by a naive (in the nicest sense) British or US lawyer who is unfamiliar with the specifics of codified German Civil and Commercial Law. Therefore, this article is to make you aware of some of the dangerous pitfalls that you can face when entering into a German agreement. In this post we explain some peculiarities of German contract law which, if not known, can cost non-German in-house lawyers their job and can create liability risks for any foreign contract lawyer.

Some examples? Sure: Did you know, for instance, that giving notice under German law is usually only legally effective, if an original wet ink copy of the letter of termination (written notice) is handed to the employee, tenant, business partner etc? Providing notice by email, fax or orally, has not effect. Or, did you know that under German family law rules, contracts entered into by one spouse are not valid unless and until the other spouse provides his or her consent? Or have you heard about the German legal principle that a unilateral confirmation of contract letter (kaufmännisches Bestätigungsschreiben) sent from one merchant to the other becomes a binding contract if the confirmation letter is not immediately rejected by the recipient of the letter? You may agree, that this is probably rather helpful information if you are dealing with a German contractual partner or if you are the legal counsel of the non-German contractual party.

Don’t be tricked by German Law(yers)!

The following clarifies some statutes and German legal principles any British Solicitor, American Attorney-at-Law and non-German businessman should know before engaging in business in good old Germany:

This statute baffles not only many foreign lawyers (especially from Common Law jurisdictions), but is also often unknown to young German contract lawyers. Section 174 BGB is contained in the “general section” (allgemeiner Teil) of the German Civil Code, which means it applies to all areas of German civil law. In practice, the statute’s somewhat cryptic wording means that if someone acts as attorney, proxy agent or delegate for somebody else, the attorney must present the original, i.e. the wet ink copy of the power of attorney document signed by the constituent (principal). A simple copy, a fax or a scan are not sufficient. The consequences of breaching this law are particularly severe in the area of “unilateral legal acts” (einseitiges Rechtsgeschäft), i.e. if the attorney gives written notice to someone on behalf of the individual or company, or if the attorney sends out a demand note, a dunning letter or a cease and desist letter. All these legal actions have no effect if the attorney does not enclose an original (wet ink) power of representation document (and thus, if not, the recipient can and in most circumstances rejects the letter). Naturally, such notices and legal actions are often made by lawyers for their clients. Thus, the client will not be amused if it turns out that the lawyer’s written notice to the unwanted employee is ineffective for lack of an original power of attorney document. Or if the termination of an agreement is rendered to be too late because the notice period has been missed due to an invalid letter of termination. In our firm, we have have had numerous cases where an agreement, which could only be terminated every 5 years, prolonged for such a period, because a lawyer or another representative of one contractual party tried to terminate the said German agreement without presenting an original POA.

So, what to do as a lawyer? Well, best is to obtain an original POA from the client and enclose it in the letter. If this is not practical or would take too long, then an easy trick to circumvent section 174 German Civil Code is to ask the client to inform the opponent in Germany directly about the fact that the lawyer has been instructed to act on the client’s behalf (see the last sentence of the statute: “Rejection is excluded if the principal notified the other of the authorisation”). For this, strangely, German law does not require written form, so an email or fax from principal to opponent is sufficient. The law is not always entirely logical!

This brief statute appears quite harmless, but can have disastrous effects for one or even both contractual parties if overlooked during negotiations. Simply put, this statute means that an agent (anyone authorised by someone else to act on his behalf, in German a Vertreter) can and may not – at the same time – act (i) in his or her own name or (ii) as agent for another party. May sound cryptic, but does often happen in practice, as you can see from these examples: (1) A managing director of a German company wishes to invest in the company or wishes to buy an asset of said company for himself. (2) A managing director of a company is asked by an investor to represent the investor at a meeting.

Believe it or not: Regardless of which marital property regime you live in, under German law one spouse cannot enter into contracts without the express consent of the other spouse if the contract covers the vast majority of one’s fortune. Sounds cryptic again? Well, here is an everyday example: A husband owns property which is worth more than 80 or 90% of his entire fortune. If he wishes to sell this property, the deed of sale is not valid unless the other spouse co-signs the notarial deed providing their consent to the same. The same is true if one spouse tries to sell a business or another asset which constitutes the majority of that spouse’s fortune.

As a purchaser of German property or of the shares of a German company owned by that spouse you would probably like to know if that asset makes up the vast majority of that person’s wealth and you would want to make sure that the spouse does agree to the transaction. Otherwise, the deal could explode years later.

  • Contradicting General Terms (AGB), no “last shot doctrine”

In contrast to most Common Law jurisdictions, German Civil Law does not apply the last shot doctrine when it comes to general terms and conditions. Instead, if parties reject each other’s general terms, then neither terms apply to the extent they contradict each other. Instead, the default statutory provisions apply. This can lead to significantly different results depending on whether German or British or US law applies to a business transaction.

  • Confirmation letter between merchants (“kaufmännisches Bestätigungsschreiben”)

Another speciality of German commercial law is the so called “kaufmännisches Bestätigungsschreiben”, i.e. the confirmation letter between merchants. This legal principle of German law means that if merchants orally discuss a deal or transaction, and one party does confirm what that party believes the oral agreement was, then the content of the confirmation letter becomes legally binding unless the other party rejects the content of the confirmation letter without undue delay (ohne schuldhaftes Zögern), which in practice means 2-5 business days. Thus, if you are doing business with Germans, do not ignore letters you receive from the German business partner, even if you think that what they “confirm” in that letter is nonsense. A binding contract can come into existence without you ever signing a piece of paper or expressly re-confirming the terms.

  • How expensive are German lawyers? What is the Rechtsanwaltsvergütungsgesetz (RVG)? Fee agreement clauses of German lawyers with their clients

Clients and lawyers from outside Germany usually assume that legal fees need to be agreed on when they hire a German legal counsel and – until they sign a fee agreement – they do not enter into any financial obligations. You could not be more wrong. Because, to the surprise of many non-German clients, lawyer fees are regulated by statutory provisions. These fees can be significantly higher or lower compared to hourly rates in Common Law jurisdictions, because the German lawyer fees do depend on the value of the legal dispute, not so much on the amount of time spent on the case. So, if you hire a German lawyer because a debtor does not pay a debt worth EUR 500,000, the German lawyer writes one short letter and the debtor immediately pays, then the German lawyer has earned legal fees of approximately EUR 5,000 in spite of having only spent 30 minutes on the case. If the debt is only EUR 5,000 and the lawyer has to write numerous letters, make dozens of phone calls until the debtor pays, then the German lawyer earns only EUR 350, in spite of having spent 3-5 hours on the case. The thinking behind this German lawyer fee table is that the wealthier German clients shall pay higher fees and shall thus subsidize the legal costs of clients who claim only small amounts. In theory, on average it will level out for German lawyers. In practice, however, qualified German lawyers, especially experts in international law, will not accept a case unless the client is willing to pay hourly fees comparable to those in Britain and larger cities in the USA. More on the issue of German legal fees and lawyer remuneration here.

To be continued ……

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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.

Bernhard Schmeilzl_crop1Managing 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.

Buying a German Company

If you consider buying or merging with a German company or stock corporation (see checklist here), we can either structure and manage the entire acquisition process for you or merely assist with specific tasks like due diligence (e.g. financial, legal, business, IT) or contract negotiation. Our team of lawyers, financial and business experts has extensive experience with international M&A projects in various industry sectors. We will always keep matters as simple and straight forward as possible.

If the potential buyer does not want to be identified, we can provide trustworthy professionals that act as trustees and acquire the company shares on the buyer‘s behalf. Fully compliant, of course, with all laws and regulations of Germany and the European Union. For non-legal work, we do recommend the service provider Friendly Germans Ltd. The British-German Consultancy Firm.

More on German company law is available in these posts:

Establish a German Limited Company (GmbH): FAQ and Checklist
What is a GmbH? The German Limited Liability Company explained
Checklist: Formation of a German Company. And then what?
Buying a German Company: A quick Checklist
How to read a German Company Register Extract
Company Forms in Germany: An Overview
Brexit as a Business Opportunity for British SME’s

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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 business and corporate matters, including the representation of clients in M&A transactions. If you wish us to advise or represent you please call German business lawyer Bernhard Schmeilzl, LL.M. (Leicester) or Munich based English solicitor Elissa Jelowicki on +49 941 463 7070. For non-legal work, we do recommend the service provider Friendly Germans Ltd. The British-German Consultancy Firm.