Get the best of both worlds: a professional German judge in a non-public civil proceeding

Parties to civil litigation often fear the public nature of a lawsuit, be it in the USA or in Germany. This is especially true for commercial and corporate cases as well as any litigation involving celebrities. The parties do not want their competitors and the public to learn about confidential business matters or — in case of celebrities — their private lives.

Therefore, many businesses and high profile individuals use arbitration clauses in their contracts to avoid ending up in a court room ful of reporters. However, arbitration is usually significantly more expensive compared to a “normal” German court case, because the arbitrators are high profile lawyers from big law firms who charge hourly rates north of EUR 500 easily. This is particularly trie in Germany where the statutory court fees are comparatively low (see here).

Furthermore, picking the right arbitrator(s) is difficult and time consuming. The parties need to agree on a competent lawyer who is available in the near future and who’s law office does not have a conflict of interest.

Mediation / Arbitration at German High Courts

In many cases, the ideal solution to this may be to opt for a German “Güterichterverfahren“, an open mediation / arbitration proceeding which takes place before a German high court judge (Güterichter) and to which the basic principles of the German civil procedure rules do apply. However, such a Güteverfahren is entirely confidential and the parties are free to define the scope of the dispute, i.e. they can include additional matters to achieve an overall solution. The German mediation / arbitration hearings in the Güterichterverfahren usually take place at the German court house but behind closed doors. There are official hearing minutes (Protokoll) but they are only available to the parties, not to the public.

What are the advantages of German high court arbitration?

German civil law judges actively encourage the parties to a legal dispute to consider such a court arbitration proceeding, even if a “normal” civil lawsuit has already been filed, see section 278 para. 5 German Civil Procedure Code. The advantages of this German high court arbitration are:

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Avoid the #1 Litigation Blunder: Incomplete or incorrectly spelled Company Names of German Defendants

In corporate litigation, there can be no “close enough” approach when it comes to the designation of the Plaintiff or Defendant. A litigation lawyer who sues a German company must be dead-on with all factual information about the parties. The name of each company, corporation or partnership involved in the German civil procedure must be absolutely precise, complete and up to date.

Otherwise, under German civil procedure rules, you may lose the lawsuit. Simply because you have sued the wrong defendant. The German civil procedure buzzwords for this problem are “falscher Beklagter” and “fehlende Passivlegitimation”.

Even if the (incorrectly designated) defendant remains entirely passive throughout the German civil lawsuit, i.e. the Defendant does not object to anything and your client is thus awarded a German default judgment (Versäumnisurteil), the client’s joy about the German court judgment will most likely be short-lived, since chances are that the client will soon learn that the judgment is unenforceable.

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Checklist: Effective Defense against a Civil Action in Germany

In this post, we explain how to best react and defend your case when you find yourself at the receiving end of a German civil lawsuit. More specifically, how to avoid making major blunders right at the early stages of German civil proceedings.

Rule 1: Do not ignore letters from a German civil court

This piece of advice appears obvious but, in our experience, it nevertheless happens quite often: Many clients tend to either fully ignore such legal correspondence or to at least delay dealing with the matter until important procedural deadlines have already expired. Such deadlines, for example for the submission of a formal reply and for the application to dismiss the case, are set by the German civil court in the very first court order. These initial deadlines set by the German court are so called “Notfristen” which means that they cannot be extended and you can not be reinstated if you miss to adhere to them.

Thus, whatever you will eventually decide to do about the lawsuit, you must first ensure that you fully understand what the letter from the court (or from the opponent’s lawyer) says and what the relevant time limits are. Such initial letters from a German civil court typically inform you about the fact that you have been sued in Germany and for what. They usually also contain either a specific calendar date or a period of time (e.g. two weeks from the date of service of the letter) within which you need to respond to the court.

At this stage of the proceedings you should:

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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?

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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.

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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

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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.

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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.

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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. 

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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.

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