Germany updates

Arbitration & ADR

Court rules on New York Convention's more-favourable right provision
  • Germany
  • 08 September 2011

The Federal Supreme Court recently confirmed that foreign arbitration agreements which do not adhere to the formal requirements of Article II(2) of the New York Convention may still be valid under the less strict criteria of Section 1031 of the Code of Civil Procedure.

Supreme Court changes jurisdiction on preclusion in enforcement proceedings
  • Germany
  • 23 June 2011

The Federal Supreme Court has changed its jurisdiction on preclusion in enforcement proceedings relating to international arbitral awards. The court held that a debtor is not required to exhaust all available remedies at the (foreign) seat of arbitration to preserve its right to argue in enforcement proceedings in Germany that no valid arbitration agreement exists.

DIS establishes new ADR rules
  • Germany
  • 17 February 2011

Together with its conciliation rules of 2002, Germany's foremost arbitration institution has now established a comprehensive set of administered ADR procedures to respond to the growing demand for the timely and cost-effective (although not necessarily final and binding) resolution of disputes. This update provides an insight into which procedures might advantageously be applied in different situations.

Court confirms low criteria for preliminary awards enforcement and execution
  • Germany
  • 16 September 2010

The Frankfurt Higher Regional Court has frozen assets on the basis of an ex parte application for preliminary enforcement of a foreign arbitral award. The decision was made under Section 1063(3) of the Code of Civil Procedure's preliminary enforcement provision, which allows successful claimants in arbitration to obtain securing measures like asset freezes even before exequatur of the arbitral award is granted.

German courts no longer enforce foreign judgments confirming arbitral awards
  • Germany
  • 15 April 2010

The Federal Supreme Court ended the German practice of permitting claimants to seek the enforcement of foreign judgments confirming arbitral awards. Overturning a 25-year-old ruling, the court no longer offers claimants a choice between the enforcement of the original arbitral award and the recognition of its exequatur from jurisdictions following the procedural merger doctrine.


Asset Finance

Government Insurance Programmes for War Risks: A Domestic Perspective
  • Germany
  • 23 March 2005

Aviation insurers have plans completely to exclude war risks from their insurance policies. This would have a significant impact not only on airlines, but also on financing banks, which would have to decide whether to withdraw from the airline financing business altogether or take the risk of financing partially uninsured aircraft, thereby assuming such risk.

New Rules for the Taxation of Ship Funds
  • Germany
  • 18 February 2004

As a result of tax benefits available under German tax law and high returns on investment, German ship funds have enjoyed increasing popularity in recent years, attracting a considerable amount of private equity from private investors. However, new rules on the tax treatment of such funds may make it more difficult to structure such funds in a tax-efficient way.


Aviation

Forwarder's Standard Terms Qualify as Waiver under Montreal Convention
  • Germany
  • 19 September 2007

In a recent case a cargo insurer took recourse against its insured's freight forwarder for damages for loss of cargo during transportation by air. The defendant argued that its liability was limited to Article 22 of the Montreal Convention. The plaintiff stated that the defendant's liability was unlimited as the defendant had waived the limitation of liability by including the standard terms in the contract.

VAT on Aircraft Sales
  • Germany
  • 13 December 2006

The sale of an aircraft which is located in Germany at the time of transfer of title generally falls under the scope of the Value Added Tax Act. The application of the act does not necessarily imply that the sale triggers value added tax (VAT), as the act provides for an exemption. This update sets out the preconditions for the application of the VAT exemption and reviews the input VAT refund procedure.

Germany and the Cape Town Convention
  • Germany
  • 09 August 2006

Despite being an active participant in the drafting of the Cape Town Convention and Protocol, Germany is yet to proceed to ratification. This is partly because a number of changes to the existing German legal system will be required in order to conform to the convention and protocol. This update sets out the most significant changes required before ratification by Germany can proceed.

Transfer of Title of Aircraft
  • Germany
  • 05 April 2006

The delivery of aircraft which are located in Germany at the time of transfer of title frequently raises questions as regards due procedure under German law. The transfer of title of aircraft in Germany must be approached with prudence, caution and, most importantly, a sense of practicality. German choice of law provisions on the rights to aircraft are mandatory and cannot be derogated from.

Air Traffic Protocol Poses Problems for Owners and Operators
  • Germany
  • 03 August 2005

The revised protocol of Eurocontrol, Europe's organization for the safety of air navigation, is due to be considered for ratification in the next session of the German Parliament. It is intended to give Eurocontrol the legal means to fulfil its tasks, mainly in the area of route charge recovery. This may be a legitimate aim, but the measures proposed have raised concerns among aircraft owners and financiers.


Banking & Financial Services

Negative interest on existing cash deposits imposed by change in terms and conditions unlawful
  • Germany
  • 16 February 2018

The Tubingen Regional Court recently held that negative interest on a consumer's existing cash deposits imposed by a German bank by unilaterally changing the bank's general terms and conditions was unlawful. According to the court, the defendant bank violated the rules of the general terms and conditions regime because it did not differentiate between existing deposits and newly deposited cash.

EAPO regulation: initial experiences with German courts
  • Germany
  • 05 January 2018

As of January 2018, the EU regulation which established a new European Account Preservation Order (EAPO) procedure will have been effective and in force for one year. In Germany, the most important conclusion which can be drawn from the past year is that the German courts are adopting EAPOs. However, as the procedure is still fairly new to the courts, it has taken time and effort on the part of creditors.

Are arrangement and processing fee clauses in commercial loan agreements invalid?
  • Germany
  • 08 September 2017

The Federal Court of Justice recently issued two rulings declaring that processing fee clauses in standardised commercial loan agreements are invalid as they unreasonably disadvantage borrowers. Previously, the majority of lower German court rulings had upheld the validity of such clauses in commercial loan agreements. Going forward, lenders have a number of options to deal with the issues raised in these new court decisions.

Alternative Investment Fund Managers Directive – implications for banks
  • Germany
  • 23 August 2013

The act implementing the EU Alternative Investment Fund Managers Directive recently entered into force. The directive requires that a depositary be appointed for each alternative investment fund, which will open new business opportunities for depositary banks. The field of acting as a depositary has also been opened to entities not qualifying as credit institutions, which may counteract business opportunities for depositary banks.

Revision of minimum requirements for risk management
  • Germany
  • 15 February 2013

The Federal Financial Supervisory Authority (BaFin) recently published a revised version of its Circular on Minimum Requirements for Risk Management for banks and financial services institutions. The circular sets forth BaFin's interpretation of the Banking Act provisions regarding risk management, which are based on Pillar II of Basel II. The circular will be subject to continual updates in the future.


Competition & Antitrust

Selective distribution: legality of third-party platform bans confirmed
  • Germany
  • 26 July 2018

The Frankfurt Higher Regional Court recently implemented the European Court of Justice's (ECJ's) sailing instruction and decided in favour of the luxury cosmetics manufacturer Coty on third-party platform bans in selective distribution. The judgment comes after the ECJ – in an abstract manner – declared third-party platform bans in the selective distribution of luxury goods permissible under competition law.

Federal Court of Justice resolves dispute on limitation periods in cartel damages claims
  • Germany
  • 28 June 2018

Litigants may now seek cartel damages for a longer period as the Federal Court of Justice has affirmed the suspension of the statute of limitations for antitrust claims before 1 July 2005. The court's judgment creates legal certainty and increases Germany's attractiveness as a jurisdiction for plaintiffs in cartel damages cases. It is also a major setback for defendants in cases concerning cement, truck and sugar cartels (among others), which will face even bigger damages claims.

Federal Court of Justice rules on price comparison tool ban
  • Germany
  • 29 March 2018

The Federal Court of Justice recently held that absolute prohibitions to participate in online price comparison tools imposed on distributors in selective distribution systems amount to a hardcore restriction under Article 4c of the EU Block Exemption Regulation on Vertical Restraints. A closer look at the German decision reveals some doubts as to its compatibility with two European Court of Justice decisions.

Court avoids decision on per se illegality of restrictions of competition by object
  • Germany
  • 15 February 2018

A recent Celle Regional Court decision on a clear resale price maintenance case has been heavily debated because the court held that restrictions of competition by object can be compatible with Article 101(1) of the Treaty on the Functioning of the European Union if they have no potentially significant effects on competition. The Federal Supreme Court has since overruled the decision, leaving it open as to whether the potential effects on competition must be considered in such cases.

Ninth amendment of Act Against Restraints of Competition
  • Germany
  • 15 June 2017

The Federal Parliament recently adopted the ninth amendment to the Act Against Restraints of Competition. The agreed amendments take account of the ongoing digitalisation of the economy and also intend to close legal gaps in the liability for violations of competition law. However, one of the main aims of the proposed reform is to implement the EU Directive on Antitrust Damages Actions, increasing the efficiency of competition enforcement.