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International Law

International Law and legal communication

A purchase or delivery contract (hereinafter referred to as a “purchase contract”) is international if, for example, buyers and sellers are located in different countries and the products/goods are delivered to another country. Take the following situation as an example: a German salesman sells machines to a French corporation and delivers the goods direct to the polish branch office of the French company. The German seller has to know in which court shall he, for instance, file a payment claim (German, French or Polish?); and even when the court of law is established, the law that will be applied to this case is not defined (German, French, Polish or United Convention on Contracts for the International Sale of Goods). 

On a case-by-case basis, a foreign law process can be advantageous, but every situation has to be considered individually. Without a previous legal consultation and a competent legal expertise, the decision to choose a foreign legislation can become really risky and expensive. It is important to find a German specialist for foreign and international law in order to be correctly advised throughout all the legal process; this kind of legal consultation is normally much more expensive than a general advice on German Law. Nevertheless, it is to consider that the process will take place in another language and this means that additional translation and interpreting expenses will occur; not to mention the involved travelling costs.

The competent court will decide which legislation shall apply; but firstly is fundamental to determine which court is actually competent.

Jurisdiction of German courts in EU-Law

The competent court shall be determined:

  • By the contract agreements or
  • According to international civil procedure law.

The European Civil Procedure Law (EuGVO) applies within the European borders. In accordance with the EuGVO each contracting party can be sued at the place where

  • The company has set up  the head office or
  • The goods have been delivered (place of performance)

The German seller can only sue in a foreign country, if the expected products have not been successfully delivered to Germany. A business partner can sue the German seller in case he has delivered abroad. In this case there is no opportunity for the German seller to have his process been lead directly in Germany.

The German buyer can sue in Germany (place of fulfilment), if delivery took place in Germany. He can also be sued only in Germany. The reason why the regulation is nevertheless a disadvantage for the German buyer can be founded in the section of International Private Law (below).

In case the delivery take place directly in a third country, each of the contractual partners may also sue the other party before this foreign country.

Legal relations outside the EU

Relations between Germany and the non-EU countries are characterized by numerous bilateral and multilateral agreements. Both the agreements and the completely different legal practices can lead to very different results.

In many cases these stipulations can help:

  • In the application of the German Law
  • In the application/exclusion of a UN-Purchasing Law
  • In an arbitration clause (enforcement clause).

The agreements of a German Court of justice only benefit the German seller. These regulations are not considering the German buyer.

Applicable rights

UN-Purchasing Law

If both contracting parties have their branches in countries members of the UN Convention (CISG= Contracts for the International Sale of Goods), then the UN-Purchasing Law shall apply to all of them. Companies with several branches should consider that the one that have had the closest relationship to the contract and its fulfilment shall be decisive.

UN-Purchasing Law applies only for the sale/purchase of goods in exchange of money.

UN-Purchasing Law does not apply to:

  • Auctions sales,
  • Purchase Agreements on real estate, ships, securities, electrical energy
  • Service Agreements
  • Supply of goods´ contracts

The implementation of UN-Purchasing Law can be excluded and regulated in the contract.

UN-Purchasing Law applies if your contractual partner is located in a country member of the UN Convention (CISG). The current states member of the UN-CSIG can be found under “External links”. Many non-EU countries have also joined the agreement.

UN-Purchase Law, however, regulates only the core of the purchase agreements, such as the condition of the contract, the obligations of buyer and seller, warranties etc.

Certain general matters of the contract are not regulated by the UN-Purchasing Law, but are ruled by the domestic applicable law (representation, appeal, transfer of ownership, effectiveness of general terms and conditions, etc.).

International Private Law (IPR)

International private law (IPR) is a national law which regulates each country; therefore are international private rights of various countries very different.  The IPR regulates the rights applicable to a contract.

According to the German IPR:

  • The rights of the sellers are applicable,
  • Decisive is where the seller has his headquarters
  • In case of sale by another establishment, the law applicable at the place of such branch should apply
  • If the seller is a member of the UN-CISG, then the applicable provision of the UN Sales Convention shall be applicable to the contracts with the national law of the seller

The regulation of the German IPR is disadvantageous for German buyers because it leads to the application of the law of the foreign seller.

Checklist for German sellers

  • Arrange as much deliveries as possible in Germany ( for instance, German subsidiaries, business partners;
  • Arrange a (additional) place of jurisdiction;
  • Arrange that German Law will apply to your contracts.

The exclusion of the UN-Purchasing Law leads the German seller to the German Sales law-in this case is therefore advantageous.

In case the German seller has the opportunity to sue in Germany (agreement, place of performance), he must be faster than his business partners. If the contracting partner has been quicker and filed claim before a foreign court, then the process is usually not in Germany.

Checklist for German buyers

  • Arrange as much deliveries as possible in Germany ( for instance, German subsidiaries, business partners;
  • Agree on the validity of German Law.

If the business partner does not reside in a member state of the UN Convention and does not agree with the validity of German Law, it may be advantageous to agree on the UN-Purchasing Law in order to avoid serious legal uncertainties.

Further precaution in International Law

If contracts are dictated by foreign contracting parties, in case of doubts, only an insurance against certain liability risks can be helpful.

If you have been sued abroad, it is advisable to consult one of our specialists in international and foreign law, at your earliest convenience. Our German specialists always have partner-offices abroad and this can be really helpful especially in case of enforcement, because not all the judgments can be discussed in every country.

What topics can we handle for you?

  • international contracts
  • cross-border transactions
  • inclusion of national representatives who are well acquainted with a national jurisdiction
  • cross-border claims collection and international court proceedings

The increasing internationality of goods and services is leading to an increasing number of cross-border activities and contacts.

International Law and International Jurisdiction / application of law

In the case of a dispute before a German court it is necessary to clarify in advance which law is going to be applied to the dispute, by the competent court. These matters of international jurisdiction and international law regard the international private law. It does not directly regulate the situation, but at least determines which of the legal orders concerned is going to regulate the facts. At the same time, it establishes the limits of the applicability of a foreign law. Foreign law is not applicable in this case, in particular, if it violates fundamental German legal principles, such as fundamental rights.

International Private Law, Commercial and Corporate Law

In addition to all those matters regarding international private law, international law also deals with various legal instruments of the European Union (international jurisdiction of the courts as well as the recognition and enforcement of decisions). Nowadays, the trade relations between German companies are not particularly limited and a “worldwide” commerce is possible. Corporate law participations, joint ventures and other matters of international commercial and corporate law facilitate the practical implementation of economic activities. Private international law is formed from the entire private law (contract law, commercial law, corporate law, inheritance law, naming right, personal right, etc.).

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© German lawyer Michael Horak 2002-2017

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