Translation costs in international litigation can exceed court and lawyer fees
In a legal dispute between an American or British business on the one side and a German business on the other side, the first things lawyers usually look at are jurisdiction, venue and applicable law. The party that finds itself having a “home game”, i.e. the party litigating at their local court, usually feels they have a strategic advantage. And indeed, if a lawsuit takes place in one’s own country and the applicable law is the law one’s own employees, inhouse counsels and go-to litigation lawyers already on retainer are familiar with, this makes matters easier.
However, there is one aspect which is often overlooked when international contracts are drafted. That’s the issue of procedural language, i.e. the simple question: What is the language of the civil court the parties have chosen? This post explains why the procedural language of the competent court is just as important as applicable law and jurisdiction itself.
Court language can be a huge cost factor
Let’s assume I represent a German company which manufactures high tech equipment and exports the same to the USA through a distributor in California. When the contract was negotiated a few years ago, my German client managed to get the US distributor to accept the jurisdiction of German state courts and German law to apply in case of a legal dispute between the parties. Sounds great, right? So, where is the problem for the German plaintiff?
Under German Succession Law, close Relatives can always claim a Share in the Estate, even if they were explicitly disinherited
For American and British estate and probate lawyers, German inheritance laws (Erbrecht), i.e. the statutory rules of succession and probate as laid out in the 5th Book of the German Civil Code, are full of surprises. Pleasant or unpleasant, as the case may be.
One of the more unpleasant examples is the fact that under German succession law, an heir can become fully liable for all of the deceased’s debts. This unfortunate result occurs automatically, i.e. by statutory German law, if he or she does not formally renounce the inheritance within a certain deadline (for details see the post: Indebted German Estate: How to avoid inheriting your German Relatives’ Debts).
This post, however, deals with happier news, at least from the perspective of the respective beneficiaries. Testators, who do not wish to leave their wealth to their offspring, their spouse or their parents, are less amused by the restrictions imposed on them by German inheritance law.
German children always inherit. Even if they were disinherited!
German succession law grants a statutory, indefeasible compulsory share (Pflichtteil) in the deceased’s estate to certain close relatives of the deceased. This means they are entitled to a portion of the estate, even if they have been explicitly cut out of the testator’s last will and testament.
Relatives who are entitled to claim this “German forced share” are:
- the descendants (children, grandchildren etc);
- the surviving spouse; and
- the parents of the deceased, but only if the testator leaves no surviving children.
This compulsory share, which is similar to an elective share of a spouse in certain US states, is regulated in section 2303 German Civil Code:
Person entitled to a compulsory share of the estate; amount of the share
(1) If a descendant of the testator is excluded by disposition mortis causa from succession, he may demand his compulsory share from the heir. The compulsory share is one-half of the value of the share of the inheritance on intestacy.
(2) The parents and spouse of the testator have the same right if they have been excluded from succession by disposition mortis causa. The provision of section 1371 remains unaffected.
Threatening someone to press criminal charges in Germany: Smart strategy or criminal offense?
Does German law permit claimants (or their lawyers) to threaten a debtor with pressing criminal charges against the debtor in case he or she refuses to pay a civil claim? Will a German lawyer have to face disciplinary sanctions when putting undue pressure on the opponent or their legal counsel?
All of this depends entirely on the circumstances of the case and the nature of the threat which is being used. This post explains if and to what extent the parties to a civil dispute in Germany are permitted to threaten each other with initiating criminal prosecution (Strafverfolgung) if the other side does not acknowledge the civil claim in dispute.
Legitimate use of pressure or criminal behaviour?
If you have a civil claim against someone, let’s say a contractual payment claim against a trustee, and you are convinced that your claim can also be based on tort, e.g. embezzlement or fraud, then it is perfectly legitimate under German law to threaten the debtor with a statement like:
“Unless you make full payment until the end of the week, I will not only sue you in civil court but will also press criminal charges against you for embezzlement.”
Under German law, in the above circumstances, a threat to press criminal charges constitutes neither coercion (Nötigung, see section 240 German Criminal Code) nor extortion / blackmailing (Erpressung, section 253 German Criminal Code) because there is a direct link between the actual claim and the criminal charges. The German criminal courts call this requirement of a direct connection “innerer Zusammenhang”.
German Civil Court Case Files are not Public Records
U.S. lawyers do naturally assume that court files are public records and can be easily accessed and inspected by the public. Not so in Germany! As with, for instance, land registry information (see here), Germany is rather secretive when it comes to legal documents. Under German law, there is no general right to access court records in order to inspect and to copy the same. Instead, the written elements of a German civil lawsuit (lawyer’s statements, witness statements, expert opinions etc.) are considered to be a private and confidential matter, what is called “vertraulich” in German.
Are German court hearings open to the public?
Pursuant to section 169 German Courts Constitution Act, the court hearings themselves are in principle open to the public, except for family law cases, non-contentious probate proceedings and other sensitive matters. Audio and television recordings or transmissions during court hearings are, however, strictly prohibited in Germany. When you see TV coverage relating to a German trial (be it a civil trial or a criminal court), the footage you may see on TV is made before the judge opens the proceedings. Once the German court is in session, no recordings must be made and no pictures must be taken.
How to obtain a German judgment many months earlier than by way of a “standard” lawsuit
In certain situations, the German Code of Civil Procedure (Zivilprozessordnung) allows the plaintiff to file a fast track civil lawsuit, the so called “Urkunden-, Wechsel- und Scheckprozess”. The standard expression used by German lawyers is “Urkundsprozess”, which translates into “deed claim proceedings”.
These special “deed claim proceedings” (besondere Verfahrensarten) in a German civil court must not be confused with temporary restraining orders or preliminary injunctions (einstweilige Verfügungen, einstweilige Anordnungen), which are also available in Germany but have very different requirements, inter alia urgency (Dringlichkeit).
What is an Urkundsprozess?
In order to file a German “deed claim proceeding”, the plaintiff must not demonstrate any urgency at all. Instead, the deed claim lawsuit route is available to any plaintiff who is able to substantiate his or her claim by providing to the court specific documents, inter alia deeds (Urkunden), checks (Schecks), promise to pay notes (Schuldscheine), acceptance bills etc.
These special Urkundsprozess proceedings are regulated by s. 592 et seqq. German Civil Procedure Rules. In order to be able to opt for this procedural route, the plaintiff must be able to prove the claim entirely bydocumentary evidence (Urkundenbweis). In other words: The Plaintiff must produce one or more documents, in the original, which fully prove the claim. There must be no need for additional evidence. If, for instance, the plaintiff needs to call a witness for certain facts in order to prove the claim, then the fast track proceedings are not available and the plaintiff must file a “normal” civil procedure case.
Lawyer being a necessary witness is not grounds for disqualification under German CPR
Can a trial lawyer in a civil lawsuit act as a witness for his or her own client? At first glance, the whole idea of lawyer testimony in his or her own lawsuit goes against the grain of what seems the right allocation of roles and responsibilities in a civil lawsuit.
However, what if the party’s lawyer is the only person who can give testimony about a specific fact. Must the client then drop that trial lawyer in order to be able to call him or her as a witness? This post explains the differences in civil procedure rules of Germany, the USA and other common law jurisdictions with regard to the issue of advocates acting as witnesses in the same trial.
What is the situation for U.S. trial lawyers?
The American Bar Association (ABA) Model Rule 3.7 prohibits a U.S. lawyer to act as advocate at a trial in which that same lawyer is likely to be a necessary witness. There are some exceptions to that rule, but the principle stands. Most states in the USA have adopted identical or similar rules for trial lawyers. The idea behind this rule is that the jury shall not be confused or prejudiced by a lawyer being also called as witnesses during trial. As a rule, the roles of acting as an advocate for one party and at the same time being a witness shall not be combined.
At which Court to file a civil or commercial lawsuit in Germany
In case you need to litigate in Germany, one of the first tasks is to know your way around German Civil Courts (ordentliche Gerichte). The below chart shows you at one glance which is the correct civil court for your claim against a German defendant, how many judges will hear your case and what your options for appeal are should you lose the lawsuit.
Finding the right German court or tribunal for your specific legal matter is tricky, because Germany has installed various specialised courts for certain areas of law, inter alia:
- Arbeitsgerichte (Labour Courts), dealing with all employment related disputes in Germany (more on the official website of the German Federal Labor Court);
- Verwaltungsgerichte (Administrative Courts), having jurisdiction over matters of public and administrative law like construction permits, planning permissions, municipal law etc. (more on the official website of the German Federal Administrative Court); and
- Finanzgerichte (Fiscal Courts), the courts deciding on German tax issues, in particular on objections by citizens against German tax bills issued by the Finanzamt (German tax office); more on the official website of the Federal Fiscal Court of Germany.
Chances are, however, that your case will not be heard by any of the specialized German courts listed above, because you will most likely want to make a civil or commercial claim against a German defendant. Or you may be involved in German probate matters (be it a contentious probate case or merely an application for a German grant) or a German family law case (divorce, child custody, alimony or child support etc).
Statutes and regulations you should be aware of in case you plan to file a lawsuit in Germany
German civil law is based on the tradition of Roman law and is characterized by its codified system of legal provisions, i.e. statutes (Gesetze). This means that pretty much everything is written down in black letter law, including the rules concerning German Civil Litigation.
This is true for both the substantive laws (e.g. German Civil Code, German Commercial Code etc.) as well as the forensic procedural rules (Code of Civil Procedure, Labor Court Procedure Rules, Procedure Rules for Family Matters and Non-contentious Jurisdiction etc). More information on German law and the German legal system in general can be found in the official brochure “Law – Made in Germany”, published by the German government in cooperation with the German bar association (Bundesrechtsanwaltskammer). It is essentially a marketing brochure by German jurists, praising the advantages of the codified German legal system in comparison to the “not so easy to understand” common law system with its thousands of (sometimes medieval) precedents.
German Law Online
On the official German government website Gesetze im Internet, provided by the Justice Department (Justizministerium), you are able to access all German laws (Gesetze) and regulations (Verordnungen) relevant in the context of civil and commercial law claims and how to litigate in Germany. In addition to federal legislations available on Gesetze im Internet, you can research the various laws and regulations of the 16 individual German states (Bundesländer) on this website here: Justiz.de/bundeslandesrecht
The most essential German federal laws and procedural codes are even available in English language, see this list. While I am not always entirely happy with the quality of the translation and the English terminology used for certain German technical legal terms, these German statutes in English language will at least give you a basic understanding of the respective German law.
Short guide to contentious probate procedure under German law
German succession laws as well as probate procedure are very different from those of Common Law jurisdictions. This is mainly due to the fact that German inheritance law does not know a personal representative. Instead, all rights and obligations of the decedent are automatically transferred onto the heir (successor) or the community of heirs, if more than one. My separate blog Cross Channel Lawyers explains the details of German inheritance law, German non-contentious probate, contentious probate (i.e. the rules on how to challenge a will), as well as German gift tax law in dozens of posts (see here).
Non-contentious German Probate (Erbscheinverfahren)
If no one does challenge a will, the standard approach to obtaining German probate is the non-contentious probate procedure, the so called Erbscheinsverfahren (section 2353 German Civil Code). This non-contentious probate (more) takes place at the German Amtsgericht (Circuit Court) in the city or district where the decedent had his or her last place of residence. The rules of procedure for this standard, i.e. non-contentious probate, are those of the FamFG, which is short for “Gesetz über das Verfahren in Familiensachen und in den Angelegenheiten der freiwilligen Gerichtsbarkeit”, i.e. the German Act on Proceedings in Family Matters and in Matters of non-contentious Jurisdiction. More on the various German procedure rules in the post: German Statutes relating to Civil Litigation
U.S. Plaintiffs must post security for the other party’s legal costs when suing in Germany
The German Code of Civil Procedure (Zivilprozessordnung) rules in section 110, that any claimant (plaintiff) from outside the European Union (EU) or the European Economic Area (EEA) who initiates a civil lawsuit in Germany, must not only pay in the court fees (details here), but must also provide security (Sicherheitsleistung) for the legal fees of the defendant. Depending on the value of the lawsuit, these costs can be steep. The idea behind this is, of course, that a foreign claimant shall not be able to file a lawsuit against someone in Germany and then, later, after having lost the case, dodge the defendant’s legal cost refund claim.
Who must post security for costs in German civil litigation cases?
According to section 110 para. (1) ZPO, plaintiffs who do not have their habitual residence (or business seat in case of the plaintiff is a company or corporation) within an EU or EEA member state, must provide a security deposit — if the German defendant in the lawsuit so demands. Sometimes the German defendant’s lawyer is not even aware of this statute, especially if the defendant’s lawyer does not carry out much international work. But if the defendant is represented by a German counsel worth his or her salt, that request for the plaintiff to provide security will be the first thing the defendant’s lawyer will submit to the court.
What are the rules regarding pre-action conduct before litigation in Germany?
Let’s be blunt: There aren’t any! The German Code of Civil Procedure (Zivilprozessordnung, ZPO) does not impose any specific pre-action requirements on the parties or their legal counsels. In Germany, there is neither a pre-action protocol to adhere to, nor any pre-trial discovery. Read more on German Civil Procedure Rules in the post German Laws relating to Civil Litigation.
Thus, if you wish to do so, you can basically shoot from the hip and file a German civil or commercial lawsuit against someone without even giving them prior warning that such a lawsuit is coming their way. One reason why this “let’s sue first and discuss later” approach is quite common in Germany is that legal costs are relatively low when compared to litigation costs in the USA or Britain.
A short warning letter is still recommended
In real life, of course, such ambush lawsuits are not the rule. In most cases, the parties do write back and forth about a claim before someone files a lawsuit. However, if a claimant does not expect the defendant to constructively participate in such pre-trial discussions or if statute of limitation deadlines are closing in, the claimant can skip this stage and immediately file a petition (Klage) with the German civil court in order to put pressure on the defendant.
Pros and Cons of Settling a Civil or Commercial Lawsuit under German Law
German litigation lawyers as well as German judges love it when the parties of a civil dispute enter into a settlement agreement (called “Vergleichsvereinbarung” or simply ”Vergleich“). Why? Because German civil procedure rules and other laws concerning German civil litigation (see this post) provide financial incentives for lawyers if they find a way to resolve the dispute amicably, i.e. if the lawsuit is ended without the need for a judgment or other formal order by a German court.
With regard to the German judge, the motivation to promote a settlement is obvious: If the parties settle, the judge does not need to spend many working hours hearing witnesses, examining documents and writing a judgment.
German Law encourages Settlements
Section 278 German Code of Civil Procedure explicitly rules that the court shall at all stages of the civil lawsuit “work towards an amicable resolution of the dispute”. The original German wording of the relevant statute is:
„Das Gericht soll in jeder Lage des Verfahrens auf eine gütliche Beilegung des Rechtsstreits oder einzelner Streitpunkte bedacht sein.“
This means that a German judge in a civil litigation matter shall proactively attempt to induce the parties to reach such amicable resolution by way of a court recorded settlement agreement (gerichtlicher Vergleich); details are explained below.
Everything you should know before hiring a trial (or any other) lawyer in Germany
First of all: German civil law is a codified system (more here). This means that pretty much everything you can think of as being relevant for a client-lawyer relationship is regulated by black letter law anyway. Thus, if you need a German lawyer (their official German title is Rechtsanwalt) quickly, feel free to just hire him or her by fax, email or even on the phone.
The Merits of Codification
In Germany, there is no need for written client-attorney engagement contracts, fee agreements or extensive “know your client” paperwork (especially not in private client business). Why? Because the obligations of a German lawyer towards his or her client are clearly laid down in various federal statutes of German law.
Final Judgments issued by United States Courts in Civil Law and Commercial Law Matters can be recognised and eventually also enforced in Germany
It is, however, a somewhat tedious procedure and there are a number of exceptions to this principle. This post explains how the domestication of United States court orders in Germany works and provides a practical guideline for U.S. lawyers and their clients who have obtained a U.S. court order against a German defendant or a debtor who owns assets in Germany. In short: this is how you enforce a U.S. judgment in Germany.
No International Treaties
Between the USA and Germany there exist no bi-lateral or multilateral international treaties with regard to the mutual recognition and enforcement of foreign court orders. Thus, when it comes to the domestication of U.S. judgments in Germany (and vice versa), the respective national laws apply. We must therefore look at the relevant German laws which regulate if, when and how foreign (i.e. non-German) court orders and judgments can be recognized and enforced within Germany.
