German National Reports on the 21st International Congress of Comparative Law 9783161617508, 9783161617515, 3161617509

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Rechtsvergleichung und Rechtsvereinheitlichung herausgegeben von der

Gesellschaft für Rechtsvergleichung e.V.

84

German National Reports on the 21st International Congress of Comparative Law Edited by

Martin Schmidt-Kessel

Mohr Siebeck

Martin Schmidt-Kessel serves as General Secretary of the German Association of Comparative Law. He holds a Chair for German and European Consumer and Private Law and Comparative Law at the University of Bayreuth and heads there the Centre for Consumer Law. orcid.org/0000-0002-4980-6967

ISBN 978-3-16-161750-8 / eISBN 978-3-16-161751-5 DOI 10.1628/978-3-16-161751-5 ISSN 1861-5449 / eISSN 2569-426X (Rechtsvergleichung und Rechtsvereinheitlichung) The Deutsche Nationalbibliothek lists this publication in the Deutsche Nationalbiblio­ graphie; detailed bibliographic data are available at http://dnb.dnb.de. © 2022 Mohr Siebeck Tübingen, Germany. www.mohrsiebeck.com This book may not be reproduced, in whole or in part, in any form (beyond that permitted by copyright law) without the publisher’s written permission. This applies particularly to reproductions, translations and storage and processing in electronic systems. The book was typeset, printed on non-aging paper, and bound by Gulde Druck in Tübingen. Printed in Germany.

Preface by the Editor The 21st General Congress of Comparative Law will be organised from October 23 to 28 at the CEDEP – Centro de Estudios de Derecho, Economía y Política in Asunción (Paraguay). The Congress is the internationally leading forum for the discussion of comparative law subjects and takes place every four years. The line of congresses mirrors the development of comparative law and the cities in which they were organised – Fukuoka, Vienna, Washington D.C., Utrecht, Brisbane, Bristol, Athens, Caracas, Teheran or The Hague – denominate the rhythm of the whole discipline. The more than thirty sessions of the 21st Congress find their subjects in all legal disciplines, starting from legal theory and also dealing with classical questions of civil and commercial law, constitutional law and administrative law and criminal law. The German Association of Comparative Law by this book presents the German national reports delivered to the 21st Congress. The German comparative law academia therewith contributes to this congress on the variety topics presented by the International Academy of Comparative Law. At the Asunción Congress, the national reports will become part of the considerations and will support the General Rapporteurs appointed by the Academy for the respective sessions. One large focus of the topics of the 21st Congress is on questions of (legal) effects of rule of law, softlaw, legal pluralism and bioethics. This does not only concern methodological aspects of comparative law but also certain areas of law including procedural issues as administrative silence, access to justice, contractualisation of civil litigation, alternative dispute resolution and specialised commercial courts. Moreover, several sessions will deal with legal consequences of emergencies like wars or natural catastrophes including climate change. Another set of topics refers to choice and information with particular questions connected to protection of individuals and their autonomy (protection and autonomy of adults, freedom of speech, hate speech). The theme of “social enterprises” could probably subjoin thereto some additional ideas and approaches. Other reports refer to topics of trans-border application of the law (as extraterritorial application and localising the place of damage). Several contributions show how much the digitalisation of the legal orders, the economies and the societies has reached also comparative law and in particular how important cryptocurrencies, the streaming industry, artificial intellignce, autonomous vehicles and smart contracts are for national legal orders, harmonisation or unification of the law and for comparative law. In this respect, additional methodological ques-

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tions have to be dealt with, including on how to compare laws and legal disciplines still in statu nascendi im their national legal orders – possibly, a new kind of Constructive Comparative Law is emerging. The volume gives an overview over the state of discussions on the various topics within the German (legal) academia. The order of the reports presented in this book refers to the systematic order proposed by the International Academy of Comparative Law, while the internal structure of the reports in most cases is based on questionnaires sent out from the General Rapporteurs to the National Rapporteurs. Usually the National Rapporteurs have organised their reports along the list of questions in these questionnaires. The considerable number of publications concerning the Asunción Congress does not only consist of the several collections of national reports published on behalf of the several national associations of comparative law. Many General Rapporteurs will bring together all the national reports and the general report in a separate volume later on, to which I hereby refer. Furthermore, the International Academy of Comparative Law will publish all the general reports in an extra volume, to which I also would like to refer the reader – therefore, the General Reports written by German General Rapporteurs are not included in this volume. On this way, this book lost the national report by Patrick Leyens, on the “Liability of credit rating agencies”, because he subsequently became General Rapporteur for his section. Editing this book on behalf of the German Association of Comparative Law I am indebted to Ms. Judith Zölke, Ms. Joana Näger and Mr. Lukas Zühlsdorff and the whole team of my chair, who supported me in preparing the various papers collected in this book for publication. I also owe thanks to the whole team of our publisher, who helped to bring about this book in time. Bayreuth/Tröpolach, August 2022

Martin Schmidt-Kessel

Table of Contents Preface by the Editor . . . . . . . . . . . . . . . . . . . . . . . . . . . . . V Helmut Philipp Aust The Revival of the Rule of Law Issue . . . . . . . . . . . . . . . . . . . . 1 Olaf Meyer Soft Law – Its Place, Potential and Prospects . . . . . . . . . . . . . . . 29 Stefan Grundmann Globalisation et pluralisme juridique – Globalisation and Legal Pluralism. Orders of Pluralism and Rights . . . . . . . . . . . . . . . . . 53 Anna-Bettina Kaiser Global Threats and Global Emergencies: Legal Reactions . . . . . . . . 75 Christoph Benicke The Protection of the Adult and Respect for his/her Autonomy . . . . 97 Martin Ebers Civil Liability for Autonomous Vehicles . . . . . . . . . . . . . . . . . . 157 Ivo Bach The Impact of force majeure on Contractual Obligations . . . . . . . . 205 Ann-Kristin Mayrhofer / Beate Gsell The Financial Obstacles of the Access to the Judge . . . . . . . . . . . . 223 Felix Maultzsch / Stefan Klingbeil Contractualisation of Civil Litigation . . . . . . . . . . . . . . . . . . . 257 Birgit Weitemeyer The Social Enterprise: A New Form of the Business Enterprise? . . . . 289 Urs Peter Gruber Alternative Dispute Resolution Mechanisms in the Enforcement of Security Interests and Insolvency . . . . . . . . . . . . . . . . . . . . 315 Jens-Hinrich Binder Cryptocurrencies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 341

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Christina Möllnitz Legal Perspectives on the Streaming Industry . . . . . . . . . . . . . . . 377 Stephan Hobe The Legal Regulation of Drones . . . . . . . . . . . . . . . . . . . . . . 399 Eva Ellen Wagner Freedom of Speech and Regulation of Fake News . . . . . . . . . . . . 401 Nikolaus Marsch / Sofía María Fölsch Schroh Artificial Intelligence Accountability of Public Administration . . . . 443 Hermann Pünder / Jens Gerlach Administrative Silence . . . . . . . . . . . . . . . . . . . . . . . . . . . . 485 Hanno Kube Fiscal Policies to Mitigate Climate Change . . . . . . . . . . . . . . . . 515 Brian Valerius The Criminalisation of Hate Speech . . . . . . . . . . . . . . . . . . . . 543 Anne Schneider Limits of Freedom of Public Authorities with Respect to Obtaining Evidence at the Stage of Investigation . . . . . . . . . . . . . . . . . . . . 561 Sören Segger-Piening Extraterritorial Application of Statutes and Regulations . . . . . . . . . 591 Wolfgang Wurmnest / Benedikt Wössner Localising the Place of Damage in Private International Law . . . . . . 633 Thomas Riehm / Quirin Thomas Specialized Commercial Courts and Their Role in Cross-Border Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 673 Martin Fries Smart Contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 705 Bettina Weisser The Law and Bioethics of End-of-Life Decisions . . . . . . . . . . . . . 719

List of Contributors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 743

The Revival of the Rule of Law Issue1 Helmut Philipp Aust

I. Introduction The framing of a topic as one of a “revival” can be interpreted in different ways. With respect to the Rule of Law, it could point to an increasing awareness of its importance as well as to mounting challenges to the Rule of Law. This country report interprets the common theme in the latter sense. Arguably, our time is one in which the Rule of Law is no longer necessarily seen to be an “unqualified, universal good”.2 Attacks against the Rule of Law come from different corners. To some critical academics, the Rule of Law – and related notions like the Rechts­staat and the État de droit – are only a form of bourgeois camouflage, a veneer for protecting the interests of those who control the means of production in liberal-capitalist societies.3 Others seem to speak out against the Rule of Law – or act against its spirit – out of a sense of populist entitlement.4 A sentiment of “we the people” may challenge various forms of elite rule – and the Rule of Law seems to be perceived by some as just another form of rule which has allegedly become detached from democratic decisions.5 How these debates play out will depend on local context. Constitutional systems differ with respect to how they understand the Rule of Law, how it is conceptualized in the case law of courts and how the application of the Rule of Law is also embedded in a broader constitutional culture which is crucial especially for open-ended notions such as the Rule of Law. 6 1  I would like to thank Natalie Reglinski, Felix Schott and Viktoria Wollenberg for valuable assistance in the preparation of this report which was finalized in early January 2022. 2  Thompson, The Origin of the Black Act, 1975, 208; on this statement see Tamanaha, On the Rule of Law – History, Politics, Theory, 2004, 137–138. 3  For a reflection of the remaining emancipatory potential of the Rule of Law see Birken­ kötter, KJ 2021, 172 (with a cautious “yes” as answer). 4  Voßkuhle, NJW 2018, 3154; Frankenberg, Autoritarismus – Verfassungstheoretische Perspektiven, 2020, 255 ff.; Sajó, Ruling by Cheating – Governance in Illiberal Democracy, 2021, 247 ff. 5  Müller, Was ist Populismus? Ein Essay, 2016, 74 ff.; Vokßuhle, Demokratie und Populismus, in: Voßkuhle, Europa, Demokratie, Verfassungsgerichte, 2021, 219, 234; see also Krieger, EJIL 30 (2019), 971, 982. 6  Waldron, Law and Philosophy 21 (2002), 137.

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Approaching this topic from a German perspective might at first sight invite for some complacency. The idea of the Rechtsstaat seems to be almost unchallenged, an unqualified success story of German constitutional law. For a long time, German constitutional traditions were leaning more towards a Rule of Law-orientation that towards one of democracy.7 The Rechtsstaat as an idea and as a constitutional concept has thrived across a number of different regimes in German history since the 19th century – with the exception of the period of National-Socialist rule between 1933 and 1945 and, in different ways, the time between the end of the Second World War and 1990 in the Eastern part of Germany. Even today, the institutions of the Rechtsstaat seem to be remarkably stable in Germany.8 Yet, as this contribution will argue, any form of complacency could be misleading. A too self-assured German posture with respect to the Rule of Law derives in part from a tendency to externalize Rule of Law concerns. As a leading power in the EU and an apparently stable state, German actors in government, the judiciary, academia and civil society find it easy to criticise problematic trends of Rule of Law backsliding in Central and Eastern European countries. Rightly so, such forms of backsliding are identified as breaches of fundamental values of both EU primary law and of fundamental notions embodied in the European Convention on Human Rights.9 It is to be expected that a state like Germany takes an active role in dialogues about such developments.10 At the same time, many actors within Germany seem to be immune to criticism about deficiencies of the Rechtsstaat in Germany when it comes from the outside and, so to speak, “above”. A danger emanating from such isolationistic tendencies is to adopt a too inwards-looking gaze and to thereby risk the foundations for European standards pertaining to the Rule of Law. Recent internal debates about Rechtsstaatlichkeit in Germany confirm this finding, as it will be shown against the backdrop of debates about the legal parameters for the fight against the Covid-19 pandemic and recent legislative attempts to further “material justice” (materielle Gerechtigkeit) through reforms of criminal procedure. As always, the choice of examples is subjective but I hope that they help to shed some light on current Rule of Law debates in Germany. Accordingly, this country report will first provide some background to the Rule of Law debates in Germany, in particular its Rechtsstaat tradition (section 7  Gärditz, in: Herdegen/Masing/Poscher/Gärditz (eds.), Handbuch des Verfassungsrechts – Darstellung in transnationaler Perspektive, 2021, §  4 para.  23. 8  See the overall thrust of the assessment by the European Commission, 2020 Rule of Law Report, Country Chapter on the rule of law situation in Germany, COM(2020) 580 final / SWD(2020) 304 final of 30 September 2020. 9  See with respect to the EU Kulick, JZ 2020, 223 and with respect to the ECHR Nußber­ ger, JZ 2018, 845; on the latter see also the contributions in Aust/Demir-Gürsel (eds.), The European Court of Human Rights – Current Challenges in Historical Perspective, 2021. 10  Even a distinct legal debate about “rule of law transfers” is emanating in this context, see the contributions in Holterhus (ed.), The Law behind Rule of Law Transfers, 2019.

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II.). It will then discuss how from a German perspective many current challenges to the Rule of Law seem to unfold primarily elsewhere. I discuss this under the rubric of an externalization of the Rule of Law crisis (III.), Following that the two already mentioned select challenges of the Rechtsstaat within Germany are assessed (IV.). Concluding observations will wrap up the country report. At the outset, a brief remark on terminology is in order. The concept of the Rechtsstaat is not necessarily the same as the Rule of Law or the Etat de droit.11 This contribution will use German terminology in italics and will differentiate between three related, yet different notions. Building on a definitional approach developed by Philip Kunig, this contribution will refer to the Rechtsstaat as a general ideal type of constitutionalism, to Rechtsstaatlichkeit as a descriptive term in order to refer to various concrete rules pertaining to the Rechtsstaat as articulated by relevant constitutional documents (such as the Basic Law) and to the Rechtsstaatsprinzip in order to refer to the constitutional principle set forth by the Basic Law.12

II. Of Watergates and Capstones: Traditions of the Rule of Law in Germany The importance of the Rechtsstaatsprinzip in German constitutional law can only be understood against its historical tradition. As this country report is not primarily a historical contribution, it is, however, apt to first set out the current constitutional framework of this principle in the Basic Law (1.), before unearthing some of the most important lines in the development of the Rechtsstaat in constitutional thinking (2.). This section will finally assess how the current constitutional set-up has been lauded by many as the crowning achievement of the German Rechtsstaat tradition (3.). 1. The Starting Point: the Current Constitutional Set-up Given its central importance, the Rechtsstaat is mentioned surprisingly indirectly in the Basic Law. It is evoked most clearly in Article 28, para.  1 of the Basic Law, where the Rechtsstaat figures among the fundamental principles that also the organization of statehood on the level of the Länder has to observe. Similarly, a requirement to respect Rechtsstaatlichkeit was included in Article 23, para.  1 of the Basic Law in its post-1992 emanation as a structural require-

11  See also the succint overview in Bäcker, Rechtsstaat, in: Sellers/Kirste (eds.), Encylopedia of the Philosophy of Law and Social Philosophy, online edition, 2020, 1. 12  Kunig, Der Rechtsstaat, in: Badura/Dreier (eds.), FS 50 Jahre Bundesverfassungsgericht, vol. II, 2001, 421, 424.

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ment for the European Union to respect.13 And in the year 2000, Article 16, para.  2 of the Basic Law was amended to the effect that it now refers to Rechts­ staatlichkeit as a condition for the extradition of German nationals to other member states of the EU and international tribunals.14 None of the three provisions sets forth what Rechtsstaatlichkeit is supposed to mean. Instead, they presuppose what they aspire to regulate.15 The common approach in German constitutional law is to anchor the Rechts­ staat in Article 20 of the Basic Law which comprises a set of fundamental structural principles of the constitutional order.16 Alongside affirmations of the principles of democracy, republicanism, federalism as well as the social nature of the state established by the Basic Law, Article 20, para.  3 stipulates: “The legislature shall be bound by the constitutional order, the executive and the judiciary by law and justice.” In addition, the principle of the separation of powers as enunciated by Article 20, para.  2 is also seen to comprise important elements of the Rechtsstaatsprinzip: “All state authority is derived from the people. It shall be exercised by the people through elections and other votes and through specific legislative, executive and judicial bodies.”17 These dry formulations hardly convey a clear picture of what the Rechtsstaat is supposed to embody. Most scholarly conceptions formulate a wide-ranging list of components which are arguably covered by or connected with the principle of the Rechtsstaat. These contain the principle of legality (Vorrang des Ge­ setzes) as well as the requirement that certain infringements of individual rights require a statutory basis (Vorbehalt des Gesetzes). Also the requirement of legal certainty and the principle of proportionality as a general requirement for the exercise of public authority in Germany are usually included.18 13  See further Wollenschläger, in: Dreier (ed.), Grundgesetz-Kommentar, vol. II, 3rd edn., 2015, Art.  23 para.  74. 14 See further von Arnauld/Martini, in: Kotzur/Kämmerer (eds.), von Münch/Kunig – Grundgesetz-Kommentar, vol. I, 7th edn., 2021, Art.  16 paras. 66 ff. 15  Von Arnauld, Rechtsstaat, in: Depenheuer/Grabenwarter (eds.), Verfassungstheorie, 2010, §  21 para.  1; similarly Sajó (note 4), 237: “The RoL is a conceptual tool in search of its own content.” 16  This is reflected in the widespread practice of commentators of the Basic Law to deal with the Rechtsstaatsprinzip in the entries to Article 20, cf. for instance Sommermann, in: Huber/Voßkuhle (eds.), von Mangoldt/Klein/Starck – Grundgesetz-Kommentar, vol. II, 6th edn., 2018, Art.  20 paras. 226 ff.; Kotzur, in: Kotzur/Kämmerer (eds.), von Münch/Kunig – Grundgesetz-Kommentar, vol. I, 7th edn., 2021, Art.  20 paras. 137 ff. 17  On separation of powers as a condition for Rechtsstaatlichkeit see Grimm, JZ 2009, 596, 599; see also Schwerdtfeger, Krisengesetzgebung – Funktionsgerechte Organstruktur und Funktionsfähigkeit als Maßstäbe der Gewaltenteilung, 2018, 177; but see Möllers, Gewalten­ gliederung – Legitimation und Dogmatik im nationalen und internationalen Rechtsvergleich, 2005, in which the connection between separation of powers and the Rechtsstaatsprinzip only plays a fairly marginal role. 18  See, for instance, Jarass, in: Jarass/Pieroth, Grundgesetz-Kommentar, 16th edn., 2020, Art.  20 paras. 37 ff.; Sachs, in: Sachs (ed.), Grundgesetz-Kommentar, 9th edn., 2021, Art.  20 para.  74 ff.

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These lists, some of them numbering more than 140 sub-principles19, have led some scholars to question whether there is any coherent principle of the Rechts­ staat at all. Most famously, it was Philip Kunig who provocatively sounded the death knell for an overarching principle of the Rechtsstaat in 1986 as a matter of constitutional law de lege lata. Instead, he pleaded in favour of an approach which would focus on the individual constitutional rules as they stand.20 Important as this contribution was, it has not been successful in changing the mainstream view in German constitutional thinking which still emphasizes the Rechtsstaat as an overarching principle.21 Focusing only on individual guarantees of Rechtsstaatlichkeit would entail the risk of doing away with constitutional principles of a general nature in general.22 It is hence a question of methodological preferences and outlook; yet arguably with at least one important ramification, given that the constitutional principles set forth by Article 20 enjoy special constitutional protection under the so-called “eternity clause” of Article 79, para.  3 of the Basic Law.23 In concrete terms, this means that at least a certain core content of the Rechts­staats­ prinzip is not subject to constitutional amendment. In addition, affirming the general nature of the Rechtsstaatsprinzip also means that it can function as a residual constitutional provision, providing for argumentative support when dealing with unanticipated situations.24 Irrespective of this consequence of the doctrinal construction of the Rechts­ staatsprinzip, the “summative approach”, as it is described by Kunig, also risks cutting loose the Rechtsstaat from its origins in German constitutional history.25 Against the background of this rich tradition, it seems unlikely that the founding fathers and mothers of the Basic Law understood Rechtsstaatlichkeit as being encapsulated merely in discrete individual provisions of the Basic Law.26 19  Sobotta, Das Prinzip Rechtsstaat – Verfassungs- und verwaltungsrechtliche Aspekte, 1997, 253 ff. (with a list of 142 features of Rechtsstaatlichkeit under the Basic Law). 20  Kunig, Das Rechtsstaatsprinzip. Überlegungen zu seiner Bedeutung für das Verfassungsrecht der Bundesrepublik Deutschland, 1986; Kunig (note 12), 422–423. 21  See, for instance, Schmidt-Aßmann, Der Rechtsstaat, in: Isensee/Kirchhof (eds.), Handbuch des Staatsrechts, vol. I, 1987, 987 (990 ff.); Schulze-Fielitz, in: Dreier (ed.), Grundgesetz-Kommentar, vol. II, 3rd edn., 2015, Art.  20 (Rechtsstaat) para.  45; Nußberger, Das Tafelsilber des Verfassungsstaats – Rechtsstaatlichkeit als europäischer Grundwert, in: Heinig/ Schorkopf (eds.), 70 Jahre Grundgesetz – In welcher Verfassung ist die Bundesrepublik?, 2019, 191, 192; see however Bäcker, Gerechtigkeit im Rechtsstaat – Das Bundesverfassungsgericht an der Grenze des Grundgesetzes, 2015, 190–191. 22  Huber, Rechtsstaat, in: Herdegen/Masing/Poscher/Gärditz (eds.), Handbuch des Verfassungsrechts – Darstellung in transnationaler Perspektive, 2021, §  6 para.  15. 23  Sachs (note 18), Art.  20 para.  76. 24  Schulze-Fielitz (note 21), Art.  20 (Rechtsstaat) para.  45; Sachs (note 18), Art.  20 para.  76; see also Funke, AöR 141 (2016), 637, 641. 25  Schulze-Fielitz (note 21), Art.  20 (Rechtsstaat) para.  45. 26  See also Payandeh, Judikative Rechtserzeugung – Theorie, Dogmatik und Methode der Wirkung von Präjudizien, 2017, 189–190, 197.

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2. Traditions of the Rechtsstaat in German Constitutional Thinking A standard account of the history of the Rechtsstaat in German constitutional thinking is likely to describe a series of ever-expanding moves, where today’s material conception of the Rechtsstaat has developed out of previous, primarily formal conceptions which date back to the 19th century.27 There is a grain of truth to such narratives, but they are at the same time somewhat of an oversimplification.28 The idea of the Rechtsstaat took hold in German public law thinking in the first half of the 19th century.29 At the time, the notion embodied a formal dimension, but also a broader appeal to reason as a standard for measuring the exercise of governmental powers. To this extent, the idea of the Rechtsstaat was much more encompassing than just being a collection of formal guarantees. At least until the unsuccessful revolution of 1848 the Rechtsstaat was hence an aspirational symbol for a much broader overhaul of the system of government. It was mostly in the period of constitutional monarchies set in place at around and after the 1848 revolution that the very strong formal tradition of the Rechtsstaat took hold in German public law thinking. This tendency was accompanied by the lack of appeal of democratic thinking for many of the relevant actors at the time.30 The Rechtsstaat was a key concept for the 19th century Bürgertum, meant to preserve a sphere of economic and physical freedom from state interference.31 Accordingly, a strong tradition developed that infringements in life, liberty and property required an act of parliament, but that also all other forms of the exercise of governmental authority depended on respecting the rechtsstaatliche Form, i.e. formal guarantees such as certainty of the law and the protection of legitimate expectations. In constitutional systems which kept close checks on democratic empowerment, i.e. through systems of census suffrage and the ex27 

See, for instance, Will, Staatsrecht I, 2021, §  16 para.  6. For overviews on the historical development of the notion of the Rechtsstaat see Scheu­ ner, Die neuere Entwicklung des Rechtsstaats in Deutschland, reprinted in: Forsthoff (ed.), Rechtsstaatlichkeit und Sozialstaatlichkeit – Aufsätze und Essays, 1968, 461 ff. [1960]; Stolleis, Rechtsstaat, in: Erler/Kaufmann (eds.), Handwörterbuch zur Deutschen Rechtsgeschichte, vol. IV, 1990, 367 ff.; Hofmann, Geschichtlichkeit und Universalitätsanspruch des Rechts­ staats, Der Staat 34 (1995), 1, 4–12; Bäcker (note 21), 130 ff. 29 On earlier antecedents of the Rule of Law going back to antiquity see Thomalla, „Herrschaft des Gesetzes – nicht des Menschen”. Zur Ideengeschichte eines staatsphilosophischen Topos, 2019, 39 ff. 30  Grimm, Verfassung und Privatrecht im 19. Jahrhundert – Die Formationsphase, 2017, 196 [1979]; from the perspective of today’s constitutional order see Möllers, Demokratie, in: Herdegen/Masing/Poscher/Gärditz (eds.), Handbuch des Verfassungsrechts – Darstellung in transnationaler Perspektive, 2021, §  5 para.  106; Dreier, Verfassungskontroversen der Weimarer Republik, in: Dreier/Waldhoff (eds.), Weimars Verfassung – Eine Bilanz nach 100 Jahren, 2020, 9, 26. 31  Kunig (note 20), 22. 28 

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clusion of women from the vote, the Rechtsstaat was able to make an astonishing career as a defining feature of German constitutional thinking. It can be wondered to what extent a certain fixation on “governing orderly”, through well-defined channels of bureaucratic routines, helped to establish the Rechts­ staat as a notion of German public law par excellence.32 Read from the 20th and 21st centuries, this story is at times cut off from its beginnings – and hence the Rechtsstaat was imagined to have originated with its emphasis for the formal side of things. But especially in the light of the developments in the 20th century, it is important to remember the broader basis of original conceptions of the Rechtsstaat. It was by no means just bureaucracy with a better name, but as Ernst-Wolfgang Böckenförde highlighted in his influential essay on the historical evolution of the concept, a holistic concept which cannot be reduced to either a formal or a material side.33 To Böckenförde, the Rechts­ staat is essentially a Schleusenbegriff, a watergate-like concept, meant in the sense that while its meaning is open-textured, it contains a well-defined core and does not lose its distinct identity despite different political content being poured into the forms of the Rechtsstaat. Böckenförde magisterially traced how this holistic notion of the Rechtsstaat gave way to a more formal understanding in the 19th century and to remaining more or less stable until the end of the Wei­ mar era. In this regard, it can be questioned whether the Constitution of the Weimar Republic did not yield any major impulses for thinking about the Rechtsstaat, as it is at times held in the literature.34 The Weimar Constitution contained a wide-ranging set of social rights, which were not deemed to be enforceable as such but which indicated that the Rule of Law tradition could be combined with other forms of proactive state measures.35 It was during this phase that Hermann Heller coined the phrase of the “soziale Rechtsstaat”, even if this formulation was developed with a certain sense of scepticism on his part on the practical meaning of the social rights set forth by the Weimar Constitution.36 It was also during the Weimar time that Carl Schmitt formulated his highly influential 32  Mayer, Deutsches Verwaltungsrecht, Vol.  1, 3rd edn., 1924, 58 (Rechtsstaat as the „Staat des wohlgeordneten Verwaltungsrechts“); this position is influential until today: see, for instance, Meinel, Das Bundesverfassungsgericht in der Ära der großen Koalition: Zur Recht­ sprechung seit dem Lissabon-Urteil, Der Staat 60 (2021), 43, 46 (idea of the Rechtsstaat as an extrapolation of administrative law-oriented conceptions of legality). 33  Böckenförde, Entstehung und Wandel des Rechtsstaatsbegriffs, in: Böckenförde, Recht, Staat, Freiheit, 1991, 143, 148 [1969]. 34  Huber (note 22), para.  10. 35  See further Mangold, Gleichheitsrechte und soziale Grundrechte: Internationale und vergleichende Dimension, in: Kleinlein/Ohler (eds.), Weimar international – Kontext und Rezeption der Verfassung von 1919, 2020, 119, 126; Meinel, Sozialer Rechtsstaat und soziale Grundrechte: Verfassung und soziale Frage in Weimar, in: Dreier/Waldhoff (eds.), Weimars Verfassung – Eine Bilanz nach 100 Jahren, 2020, 197. 36  Heller, Rechtsstaat oder Diktatur?, in: Heller, Gesammelte Schriften, vol.  2 , 2nd edn.

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views on the relationship between the political and non-political parts of constitutional law in his 1928 treatise “Verfassungslehre”. To Schmitt, the Rechtsstaat embodied the non-political part of the Constitution in an almost ideal-typical way.37 Through this characterisation, Schmitt contributed considerably to the above-mentioned standard narrative of Rechtsstaatlichkeit being a primarily formal and non-political notion which, consequently, is supposed to stand in considerable tension with the idea of democracy.38 In the twelve years of National-Socialist rule, the Rechtsstaat was tested most severely and ultimately done away with.39 In the words of Jens Meierhenrich, the Rechtsstaat was both racialized and ultimately, if anything, replaced by a very idiosyncratic form of rule by law rather than anything resembling the Rule of Law.40 Attempts by National-Socialist jurists to salvage parts of the idea of the Rechtsstaat and adapt it to the requirements of the new regime can best be seen as initiatives aiming at winning over “bourgeois” jurists who had not yet made up their minds about the National-Socialist government.41 3. Culmination of a Tradition? The Rechtsstaat under the Basic Law After the civilizational breakdown of National-Socialist rule and the various forms of state crime it brought about, it seemed to be a given that a new system of government would need to be built around notions of the Rule of Law. Yet, it was not entirely clear what this was supposed to mean. Also in this regard, the way towards the adoption of the Basic Law in 1949 was not straightforward.42 What emerged as the new constitutional order was a blend of different influences, some stemming from long-established German legal traditions, some deriving from the impact of the occupying powers which communicated their preferences for the new constitutional order in various forms to those involved

1992, 443, 450 [1929]; on the slow reception of this phrase in the Federal Republic see Stolleis, Geschichte des öffentlichen Rechts in Deutschland, Vierter Band 1945–1990, 2012, 283. 37  Schmitt, Verfassungslehre, 1928, 125. 38  See further Hofmann, Legitimität gegen Legalität: der Weg der politischen Philosophie Carl Schmitts, 6th edn., 2020, 40. 39  For a thorough assessment of discourses on the Rechtsstaat in that time see Bäcker (note 21), 147–160. 40  Meierhenrich, Remnants of the Rechtsstaat – An Ethnography of Nazi Law, 2018; on the tension between Rule of Law and rule by law see Tamanaha (note 2), 92–93; on the racialization of the entire legal system Liebscher, Rasse im Recht – Recht gegen Rassismus – Genealogie einer ambivalenten rechtlichen Kategorie, 2021, 181. 41  Stolleis (note 28), 374; Stolleis, Geschichte des öffentlichen Rechts in Deutschland, Dritter Band 1914–1945, 1999, 330–338; see also von Arnauld (note 15), para.  8 who speaks of a “Gespensterdebatte”. 42  See further Hailbronner, Traditions and Transformations – The Rise of German Constitutionalism, 2015, 76 ff.; Rensmann, Wertordnung und Verfassung – Das Grundgesetz im Kontext grenzüberschreitender Konstitutionalisierung, 2007, 43–46.

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in the drafting of the new constitution.43 Eventually, the Basic Law committed itself to the notion of Rechtsstaatlichkeit, which is not entirely synonymous with related concepts of the Rule of Law or the Etat de droit, but overlaps with them in significant parts.44 Yet, it is also clear from the debates in the Parliamentary Council, the body which drafted the Basic Law, that Rechtsstaatlichkeit would not simply mean the return to a status quo ante, i.e. the time before the National Socialists came to power in 1933.45 At least two expansive moves enriched the concept: First of all, the strong role attributed to the protection of fundamental rights in Articles 1 to 19 of the Basic Law underlined that a purely formal understanding of the Rechtsstaat would no longer be apposite. Certainly, also the Weimar Constitution provided for fundamental rights. But their normative status and enforceability were greatly enhanced under the Basic Law. This occurred due to the introduction of a constitutional complaint procedure (activated from 1951 onwards)46 as well as by virtue of the guarantee of Article 19, para.  4 of the Basic Law. This latter provision stipulates that in the case of any violation of a person’s right by public authority, recourse to the courts is available – a guarantee dubbed the “capstone” of the Rule of Law in Germany (“Schlußstein im Gewölbe des Rechtsstaats”).47 Second, the concept of the Rechtsstaat was coupled with an emphasis on So­ zialstaatlichkeit, i.e. a social dimension of statehood. This latter development led to a considerable process of soul searching in the German public law scholarship, with more conservative voices lamenting a detrimental impact of this notion on established concepts of the liberal Rechtsstaat. Especially Ernst Forsthoff, a disciple of Carl Schmitt and himself not uncompromised after his early flirtations with National Socialism in 1933, detected a turn away from the bourgeois concept of the Rechtsstaat.48 In contrast, Wolfgang Abendroth, a constitutional law scholar with more socialist leanings, emphasized the interrelated nature of the Rechtsstaat and the Sozialstaat under the Basic Law.49 At the 43  For an overview see Hesse, Die Verfassungsentwicklung seit 1945, in: Benda/Maihofer/ Vogel (eds.), Handbuch des Verfassungsrechts, 2nd edn., 1994, §  3; for an English language overview of the conditions under which the Basic Law was formulated see also the “prologue” in Collings, Democracy’s Guardians – A History of the German Federal Constitutional Court, 1951–2001, 2015, xiv ff. 44  Schulze-Fielitz (note 21), Art.  20 (Rechtsstaat) para.  5; for a concise and thoughtful exploration of commonalities and differences see von Arnauld (note 15), paras. 12–16; for a monographic treatment see Heuschling, Etat de droit, Rechtsstaat, Rule of Law, 2002; furthermore Bleckmann, GYIL 20 (1977), 406. 45  Stolleis (note 36), 213–214; Bäcker (note 21), 161; see also in this context von Arnauld (note 15), para.  10. 46  See further Nußberger, JZ 2010, 533. 47  Thoma, Über die Grundrechte im Grundgesetz für die Bundesrepublik Deutschland, in: Wandersleb/Traumann (eds.), Recht-Staat-Wirtschaft, vol.  3, 1951, 9. 48  Forsthoff, VVDStRL 12 (1954), 8. 49  Abendroth, Zum Begriff des demokratischen und sozialen Rechtsstaats im Grundgesetz

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time, he seemed to be in the minority position and his writings are still much less part of the mainstream than Forsthoff’s.50 But, as a recent contribution by Constitutional Court Judge Astrid Wallrabenstein underlines, despite the neglect of Abendroth in the academic discourse, his position has ultimately won the day.51 Still today, the normative potential of the principle of the Sozialstaat is regarded with some scepticism in parts of the academic literature.52 Increasingly, however, the case law of the Constitutional Court has embraced it.53 Accordingly, it is no longer à jour to pretend that Rechtsstaat and Sozialstaat would be irreconcilable opposites and that a premium must be put on the Rechtsstaat.54 A similar story of rapprochement can be told for the relationship between the principles pertaining to democracy on the one hand and the Rechtsstaat on the other. Long-held to be in contradiction, it is today commonly held that under the constitutional order of the Basic Law one cannot be had without the other.55 As Christoph Möllers has formulated, the principle of democracy determines who gets to decide, the Rechtsstaatsprinzip is about the forms in which such decisions take place.56 At the same time, debates on the Rechtsstaat have gradually led to a certain fatigue with established concepts. For quite some time, the possibility to challenge all forms of public conduct before the courts was seen to be the ultimate success story of the Rechtsstaat in German constitutional law. From the 1990s der Bundesrepublik Deutschland, reprinted in: Forsthoff (ed.), Rechtsstaatlichkeit und Sozialstaatlichkeit – Aufsätze und Essays, 1968, 114 [1954]. 50 See further on the controversy between Forsthoff and Abendroth Stolleis (note 36), 280–281; Heinig, Der Sozialstaat im Dienst der Freiheit. Zur Formel vom „sozialen Staat“ in Art.  20 Abs.  1 GG, 2008, 22 ff.; Möllers, Der vermisste Leviathan – Staatstheorie in der Bundesrepublik, 2008, 40; Meinel, Der Jurist in der industriellen Gesellschaft – Ernst Forsthoff und seine Zeit, 2nd edn., 2012, 359 ff. 51  Wallrabenstein, in: Herdegen/Masing/Poscher/Gärditz (eds.), Handbuch des Verfassungsrechts – Darstellung in transnationaler Perspektive, 2021, §  7, para.  62; see also already Kunig (note 20), 29; see further Meinel, Verteilung als Verfassungsfrage. Zur Entwicklung einer Problemstellung, in: Boysen/Kaiser/Meinel (eds.), Verfassung und Verteilung – Beiträge zu einer Grundfrage des Verfassungsverständnisses, 2015, 19, 29; Volkmann, Grundzüge ­einer Verfassungslehre der Bundesrepublik Deutschland, 2013, 261–262. 52  See, for instance, Wittreck, in: Dreier (ed.), Grundgesetz-Kommentar, vol. II, 3rd edn., 2015, Art.  20 (Sozialstaat) para.  24; Heinig (note 50), 12 ff.; Schorkopf, JZ 2008, 20, 28 (with a call to focus on the dialectical development of Rechtsstaat and welfare legislation in the 19th century). 53  A landmark decision is BVerfGE 125, 175 – Hartz IV (2010) in which human dignity and the guarantee of Sozialstaatlichkeit are coupled in order to provide a ground for a fundamental right to minimum subsistence; for a comparative constitutional law perspective on the decision see Nolte/Aust, European exceptionalism?, Global Constitutionalism 2 (2013), 407, 425. 54  Wallrabenstein (note 51), para.   68; see also Calliess, Rechtsstaat und Umweltstaat: zugleich ein Beitrag zur Grundrechtsdogmatik in mehrpoligen Grundrechtsverhältnissen, 2001, 58–65. 55  Möllers (note 30), para.  87. 56  Möllers, VerwArch 90 (1999), 187, 201.

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onwards, this perspective was increasingly considered to contribute to a form of myopia with an excessive focus on formally defined forms of state action.57 In a nutshell, the argument was that through this fixation, German public law scholarship would lose out of sight how more informal means of governance would impact on individuals and society. New tools would be needed in order to embrace “the reality” of governing today. Departing from these assumptions, the so-called new school of administrative law (neue Verwaltungsrechtswissen­ schaft) attempted to liberate administrative law from an allegedly too narrow focus on examining the legality of administrative decisions before the courts.58 Instead, a new focus on “steering theory” and others forms of new public administration were considered to be opportune.59 But in the broader scheme of things, these debates do not seem to have shattered the standing of the Rechts­ staatsprinzip as a cornerstone of German constitutional thinking – and proponents of the Neue Verwaltungsrechtswissenschaft would rightly refute the claim that this was ever part of their mission. Accordingly, there is a widespread consensus that Rechtsstaatlichkeit is not just an expression of a long tradition in Germany, but remains a defining features of today’s constitutional order. 60

III. Externalizing the Rule of Law Crisis In light of this success story of the Rechtsstaat in Germany, it is perhaps no wonder that German constitutional law might be a relevant point of orientation for actors abroad. 61 From a German perspective, so much is expected at least with respect to German participation in the European Union. Article 23, para.  1 of the Basic Law posits that German membership in the EU is premised on respect for certain key constitutional values, Rechtsstaatlichkeit of the EU being 57  On the relationship between this discourse and skepticism towards the usefulness of the notion of the Rechtsstaat see Magen, Zwischen Reformzwang und Marktskepsis: Die Verwaltungsrechtswissenschaften in der Berliner Republik, in: Duve/Ruppert (eds.), Rechtswissenschaft in der Berliner Republik, 2018, 270, 274–275. 58  Programmatic in this regard Voßkuhle, Die Reform des Verwaltungsrechts als Projekt der Wissenschaft, Die Verwaltung 32 (1999), 45; see also Eifert, VVDStRL 67 (2008), 286; for critical explorations see the contributions in Burgi (ed.), Zur Lage der Verwaltungsrechtswissenschaft, Berlin 2017 = Die Verwaltung, Beiheft 12; especially Gärditz, Die “Neue Verwaltungsrechtswissenschaft” – Alter Wein in neuen Schläuchen?, Die Verwaltung, Beiheft 12 (2017), 105, 109–110. 59  Huber (note 22), para.  107; for critical remarks in this regard see Schaefer, Die Umgestaltung des Verwaltungsrechts – Kontroversen reformorientierter Verwaltungsrechtswissenschaft, 2016, 23 ff., 377 ff.; Augsberg, Die Lesbarkeit des Rechts – Texttheoretische Lektionen für eine postmoderne juristische Methodologie, 2009, 19; Gärditz (note 58), 110 (to whose text I owe the discovery of the critique by Ino Augsberg); Funke, JZ 2015, 369, 374–375. 60  See, for instance, Gärditz, Der Begriff der Regierung, in: Krüper/Pilniok (eds.), Die Organisationsverfassung der Regierung, 2021, 25 (30); Huber (note 22), para.  13. 61  See also the contributions in Holterhus (note 10).

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one of them. While early on it provided for some conceptual head-wringing whether this concept could be plausibly applied to the EU62 , this debate seems to have receded somewhat into the background.63 Despite not being a state, the EU commits itself to Rechtsstaatlichkeit and cognate concepts in Article 2 TEU, depending on the respective language version of the Treaty. For the purposes of this contribution, the theoretical debate whether the EU can be a Rechtsstaat is not that important either. From the perspective of both EU and German constitutional law, the multi-level dimension of governance is key: Expectations pertaining to the Rule of Law are shared between the EU and its member states and the latter also have an interest in the functioning of the Rule of Law in other member states, if only for the reason that the principle of mutual trust requires them to generally accept many judicial and other decisions taken in other EU member states.64 In the process of European integration, Re­ chtsstaatlichkeit can no longer be understood as a concept which has only domestic repercussions. It has become a notion of European constitutional law and membership in the EU requires respect for this key value of the Union.65 In recent years, the Rule of Law has become a focal point for debates on the future of European integration. To a certain extent, these debates seem to have displaced other notions and concepts which were of central importance for the future of the European integration process. If one traces major academic debates in Germany on the EU and its future, the 1990s were a decade in which the alleged democratic deficit of the EU stood centre stage. 66 The first decade of the 2000s then witnessed an intense debate about the possibilities and limits of a EU Constitution in the proper sense. 67 The last ten years have given way to various 62  It should be noted, however, that the concept of Rechtsstaatlichkeit figured already in early discourses on European integration, see Mangold, Gemeinschaftsrecht und deutsches Recht – Die Europäisierung der deutschen Rechtsordnung in historisch-empirischer Sicht, 2011, 37 with footnote 25, 161. 63  See further Calliess, in: Calliess/Ruffert (eds.), EUV/AEUV, 6th edn., 2022, Art.  2 EUV para.  26; von Bogdandy, Ways to Frame the European Rule of Law: Rechtsgemeinschaft, Trust, Revolution, and Kantian Peace, EuConst 14 (2018), 675. 64  Von Bogdandy (note 63), 686 ff.; Voßkuhle (note 4), 3155–3156; Nußberger (note 21), 199–200; Kulick (note 9); Wendel, Rechtsstaatlichkeitsaufsicht und gegenseitiges Vertrauen – Anmerkung zum Urteil des EuGH v. 25.7.2018, Rs. C-216/18 PPU (Minister for Justice and Equality gegen LM), EuR 54 (2019), 111; Payandeh, Das unionsverfassungsrechtliche Rechts­ staatsprinzip, JuS 2021, 481 (488). 65  Pech, The Rule of Law, in: Craig/de Búrca (eds.), The Evolution of EU Law, 3rd ed., 2021, 307, 318. 66  Böckenförde, Welchen Weg geht Europa?, 1997, 37 (speaking of democratic legitimacy in the EU as precarious). 67  Starting already in the 1990s with Grimm, JZ 1995, 581; Pernice, Multilevel Constitutionalism and the Treaty of Amsterdam: European Constitution-Making Revisited, CMLR 36 (1999), 703; Peters, Elemente der Theorie einer Verfassung Europas, 2001; Calliess, JZ 2004, 1033; in retrospect see the contributions on “Verfassung im Nationalstaat: Von der Gesamt­ ordnung zur europäischen Teilordnung?“ by Mayer and Heinig respectively: VVDStRL 75 (2016), 7 and 65.

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crisis discourses68 , ranging from the Euro crisis and the future of Greece as a member state participating in the Euro69 to the “migration crisis” of the years immediately following 201570 and the United Kingdom leaving the EU71. In each of these debates and discourses, much was at stake – be it whether the EU needed a better democratic grounding, whether the big jump towards the Constitutional Treaty should be taken, what the ever-elusive concept of solidarity means when weighed against “Northern” fixations on austerity and budgetary rigor and what future the Common European Asylum System might have. The Rule of Law Crisis is arguably different in nature. It is not a sectoral crisis, but one which affects the entire operation of the EU legal system in a cross-cutting manner.72 What started as attempts to “reform” the judicial system in Hungary and Poland and had at first sight probably rather indirect effects on the functioning of EU law has developed into a full-blown attack against core concepts of the primacy of EU law and the authority of the CJEU – attacks of a magnitude which are unprecedented in the history of European integration.73 This relates in particular to the decision of the Polish Constitutional Tribunal of 7 October 2021 in which the core constitutional concept of the primacy of the EU legal order was held to be unconstitutional.74 At the EU level, several steps were taken to respond to the developments in Poland and Hungary, in particular as the infamous Article 7 TEU procedure did not prove to be a viable approach due to the combined resistance on the part

68  For an overview see Calliess, NVwZ 2018, 1; as well as the contributions in Ludwigs/ Schmahl (eds.), Die EU zwischen Niedergang und Neugründung – Wege aus der Polykrise, 2020; Hailbronner, Beyond Legitimacy – Europe’s Crisis of Constitutional Democracy, in: Graber/Levinson/Tushnet (eds.), Constitutional Democracy in Crisis?, 2018, 277: “For anyone under the age of thirty-five, the European Union has been in a state of almost perpetual crisis.“ 69  See the contributions by Calliess and Schorkopf on “Finanzkrisen als Herausforderung der internationalen, europäischen und nationalen Rechtsetzung“ respectively: VVDStRL 71 (2012), 113 and 183. 70  See the contributions by Krajewski and Thym on migration law respectively: VVDStRL 76 (2017), 123 and 169. 71  See only Ruffert, JZ 2018, 1005; Thiele, EuR 2016, 281. 72  See also Pech (note 65), 318 (“unprecedented and critical challenge”); Schmidt, Verfassungsaufsicht in der Europäischen Union – Eine akteurszentrierte Analyse der Rechtsstaat­ lichkeitskrise in der Europäischen Union, 2021, 42. 73  See further on the background of the situation in Poland Sadurski, Constitutional Crisis in Poland, in: Graber/Levinson/Tushnet (eds.), Constitutional Democracy in Crisis?, 2018, 257 ff.; Sadurski, Poland’s Constitutional Breakdown, 2019; on the situation in Hungary see Halmai, A Coup against Constitutional Democracy: The Case of Hungary, in: Graber/ Levinson/Tushnet (eds.), Constitutional Democracy in Crisis?, 2018, 243 ff. 74  Assessment of the conformity of the Polish Constitution of selected provisions of the Treaty on the European Union, case no. K 3/21, available at https://trybunal.gov.pl/en/hear ings/judgments/art/11662-ocena-zgodnosci-z-konstytucja-rp-wybranych-przepisow-trak tatu-o-unii-europejskiej.

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of Poland and Hungary against triggering sanctions against either of them.75 Accordingly, the Commission started various infringement proceedings against the two states, giving rise to CJEU case law in which Article 19 TEU was re-interpreted with a constitutionalist mindset76 , highlighting the importance of the proper functioning of domestic judiciaries for the Gerichtsverbund77 that EU and national courts form together.78 In addition, legislation has been adopted which tries to introduce a conditionality mechanism for access to EU funds, requiring compliance with the core value of Rechtsstaatlichkeit as set forth by Article 2 TEU.79 At the time of writing, this legislation remains the subject of ongoing legislation before the CJEU.80 For the Rule of Law debates in Germany, these debates are to some extent external as they do not seem to concern Rechtsstaatlichkeit “at home”. In fact, German government officials continue to reclaim the authority of EU law and show themselves appropriately concerned about the developments in other EU member states. 81 It is met with a certain irritation, if not indignation, that in October 2021 the Polish Constitutional Tribunal relied in its reasoning on the German Constitutional Court’s PSPP ruling from May 2020 in which the ultra vires control mechanism formulated a long time ago was activated for the first time.82 From the start, the Constitutional Court was criticized for delivering a blueprint for courts in other member states how to disobey EU law and challenge the authority of the CJEU.83 In a remarkable turn to the general public, two of 75  For an overview see Pech/Scheppele, Illiberalism Within: Rule of Law Backsliding in the EU, Cambridge Yearbook of European Legal Studies 19 (2017), 3, 28. 76  See, for instance, CJEU, Case C-64/16 (Associação Sindical dos Juízes Portugueses), ECLI:EU:C:2018:117; CJEU, Case C-216/18 PPU (LM), ECLI:EU:C:2018:586. 77  This notion builds on Voßkuhle, NVwZ 2010, 1. 78  See further Schorkopf, German Law Journal 21 (2020), 956; Pech (note 65), 331 ff. 79  Regulation 2020/2092 (EU, Euratom) of the European Council and the Parliament on a general regime of conditionality for the protection of the Union budget, 22 December 2020, O.J, LI 433/1; on the possibilities for such a nexus between the Rule of Law and the budgetary interests of the EU see the study by Symann, Schutz der Rechtsstaatlichkeit durch europäi­ sches Haushaltsrecht – Plädoyer für einen neuen Sanktionsmechanismus, 2021. 80  See, for instance, the Opinion of Advocate General Campos Sánchez-Bordona of 2 December 2021, Case C-156/21, Hungary v European Parliament and Council of the European Union. 81  See, for instance, Press release by the Federal Foreign Office, 08.10.2021, available at https://www.auswaertiges-amt.de/de/newsroom/maas-polnisches-verfassungsgericht/24 88094. 82  BVerfGE 154, 17 – PSPP (2020). 83  Mayer, JZ 2020, 725 (732); Zimmermann, Karlsruhe gefährdet die europäische Integration, Frankfurter Allgemeine Zeitung, 15 July 2021, 6; Basedow et al., European Integration: Quo Vadis? A critical commentary on the PSPP judgment of the German Federal Constitutional Court of May 5, 2020, ICON 19 (2021), 188, 193; see for differentiated assessments Haltern, Revolutions, real contradictions, and the method of resolving them: The relationship between the Court of Justice of the European Union and the German Federal Constitutional

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the Constitutional Court judges involved in the PSPP judgment explained that in their view this criticism was unfair. In particular, the then President of the Constitutional Court, Andreas Voßkuhle, explained in various interviews with leading German newspapers, but also in later academic publications how the argumentation of the Constitutional Court could not be used to bolster attempts at undermining judicial independence in other member states. In essence, he argued that the German Constitutional Court wanted to instigate the CJEU to take its mandate of control more seriously.84 Accordingly, the act of defiance would have been undertaken with a view to enabling more judicial control of public authorities – and would run contrary to the intentions behind judicial reforms in other member States.85 This is certainly a plausible contextualization of too easy comparisons between the PSPP judgment and judicial disobedience with the CJEU in other jurisdictions. 86 However, as a former Judge of the First Senate, Johannes Masing, has argued in a recent high-profile contribution on the Federal Constitutional Court, the PSPP decision will inevitably impact the ability of the CJEU to hedge in problems of Rechtsstaatlichkeit in other EU member states. 87 The PSPP judgment and subsequent rhetoric of involved judges are infused with a “the Court can do no wrong” attitude which other actors in the European Re­ chtsprechungsverbund may find hard to stomach, as they come with a certain introverted attitude.88 It was probably out of a consideration not to appear as too lenient vis-à-vis a powerful state in the centre of the EU that the Commission started infringement proceedings against Germany in reaction to this Court, ICON 19 (2021), 208, 210 (admitting that the FCC “undermines the CJEU’s authority in difficult times”); Petersen/Chatziathanasiou, Primacy’s Twilight? On the Legal Consequences of the Ruling of the Federal Constitutional Court of 5 May 2020 for the Primacy of EU Law, Study requested by the AFCO Committee of the European Parliament, PE 692.276, April 2001, 60–61. 84  For a summary of his response to the critics see Voßkuhle, Applaus von der „falschen” Seite – Zur Folgenverantwortung von Verfassungsgerichten, in: Voßkuhle, Europa, Demokratie, Verfassungsgerichte, 2021, 334; for the interviews see: Di Lorenzo, Wefing, „Erfolg ist eher kalt“, Interview with Andreas Voßkuhle, DIE ZEIT of 14 May 2020, 6; Janisch, Kornelius, „Spieler auf Augenhöhe“, Interview mit Peter M. Huber, Süddeutsche Zeitung of 13 May 2020, 5; Müller, „Das EZB-Urteil war zwingend”, Interview with Peter M. Huber, Frankfurter Allgemeine Zeitung of 13 May 2020, 2. 85  This view also finds support in the literature, see Polzin, Pandora oder Montesquieu? Die ultra vires-Kontrolle von Völker- und Unionsrecht durch nationale Verfassungsgerichte, AöR 146 (2021), 1, 47–48. 86  See also Biernat, GLJ 21 (2020), 1104, 1114–1115. 87  Masing, Das Bundesverfassungsgericht, in: Herdegen/Masing/Poscher/Gärditz (eds.), Handbuch Verfassungsrecht, 2021, §  15 para.  169; a similar point was also made by the Polish Judge of the CJEU, see Grunert, “Polens Gesellschaft muss sich entscheiden”, Interview with Marek Safjan, Frankfurter Allgemeine Zeitung of 15 December 2021, 4. 88  Such an attitude in the Constitutional Court’s case law and the accompanying discourse was diagnosed before, see Schönberger, Der introvertierte Rechtsstaat als Krönung der Demokratie? Zur Entgrenzung von Art.  38 GG im Europaverfassungsrecht, JZ 2010, 1160.

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judgment.89 After the Commission considered the German government’s response satisfactory, these proceedings were discontinued.90 It is not entirely unironic that the German government has apparently committed itself to using all means at its disposal to prevent further cases of ultra vires control from arising – leading to the question how this can be brought about without itself undermining judicial independence in Germany.91 Just as some participants of the debate on the PSPP judgment seem to find it difficult to accept that Rechtsstaatlichkeit in Germany can be measured from the outside, this has also been the case in other situations. One recent example pertains to the reactions to a CJEU decision in May 2019 highlighting the lack of independence of the German prosecutorial offices.92 The decision concerned the requirement of independence of judicial authorities issuing arrest warrants in the context of the system of the Common European Arrest Warrant.93 Reactions to this decision ranged from describing it as a “stab into the heart” of the German Rechtsstaat 94 to the finding that the current organization of the German prosecutorial services would be part of nothing less than the constitutional identity of the German Federal Republic.95 There may be good reasons to be critical of the decision of the CJEU. Just as in other cases, its findings might be a consequence of a too one-dimensional fixation of “independence” which is not able to account for nuances in political and legal organizational cultures of the member states.96 But it is another question whether disagreements on this question should quasi-automatically trigger reactions which all too quickly brandish national constitutional identity.97 Just as in the PSPP case, context matters and some forms of discursive resistance to European influences should not be equated to judicial reforms in other EU 89  See further for remarks on the role of the equality between the member states Calliess, NVwZ 2020, 897, 904; Nußberger, JZ 2021, 965, 969–970; Walter, Wohin steuern die Ultra vires- und die Identitätskontrolle? Eine Zwischenbilanz anhand der Entscheidungen des Bundesverfassungsgerichts im PSPP-Verfahren, Integration 44 (2021), 211, 218. 90  See Press Release of the European Commission of 2 December 2021, available at https:// ec.europa.eu/commission/presscorner/detail/en/inf_21_6201?fbclid=IwAR1w6wbHhdc A5vxlqXTohUjxcgF7mJbpSBxTXjxaNWXpMJ0MIzb9Zyuwv7I. 91  See further Ruffert, Verfahren eingestellt, Problem gelöst?, Verfassungsblog of 7 December 2021, available at https://verfassungsblog.de/verfahren-eingestellt-problem-gelost/. 92  CJEU, Decision of 27 May 2019, ECLI:EU:C:2019:456. 93  Article 6(1), 2002/584/JHA: Council Framework Decision of 13 June 2002 on the European arrest warrant and the surrender procedures between Member States – Statements made by certain Member States on the adoption of the Framework Decision, O.J. L 190 , 18/07/2002 P. 0001 – 0020. 94  Eisele/Trentmann, NJW 2019, 2365. 95  Barczak, JZ 2020, 1125, 1127. 96 See Gärditz, GSZ 2019, 133; see also Gärditz, Neutrale Strafverfolgung und demokratische Strukturverantwortung, Verfassungsblog of 9 August 2020, available at https://verfas sungsblog.de/neutrale-strafverfolgung-und-demokratische-strukturverantwortung/. 97  For a differentiated analysis see Kluth, NVwZ 2019, 1175.

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member states. But the message is similar: at the centre of the EU, in the member state with a most distinguished tradition of Rechtsstaatlichkeit, it appears to be difficult to accept lessons from abroad – or for that matter from “above”.

IV. A Turn Inwards: Current Challenges of the Rule of Law in Germany A certain isolationist tendency is also discernible in primarily domestic debates about the Rechtsstaat. I would like to illustrate this diagnosis with respect to two distinct sets of issues, the debates on the constitutionality of measures against the Corona pandemic on the one hand (1.) and recent attempts to introduce new legislation in the field of criminal procedure with a view to “realizing material justice” (2.). These two examples should not deflect from the fact, however, that in comparison the idea of the Rechtsstaat is held in high esteem in academia, legal practice as well as politics (3.). 1. The fight against the Corona pandemic and the Rechtsstaat Across the globe, societies have been in the grip of the corona virus. Different states have adopted different regulatory techniques whose legality needs to be assessed against the backdrop of the respective constitutional frameworks98 , but also in the light of commitments these states have entered into in terms of international human rights law.99 If we focus on the legal debate about the pandemic in Germany, it can be noticed that a certain isolationist tendency that we have already diagnosed with respect to other Rule of Law-related issues, has played out here too. The international legal framework for the fight against the pandemic did not receive a lot of attention, neither among the general public (which is not surprising), nor in more academic circles.100 A domestic focus on the Basic Law and issues of fundamental rights protection and concerns about Rechts­ staatlichkeit took centre-stage.101 98  For an overall assessment from the first year of the pandemic see Heinig/Kingreen/Lep­ sius/Möllers/Volkmann/Wißmann, JZ 2020, 861; see also Thielbörger, Germany – Federalism in Action, in: Kettemann/Lachmayer (eds.), Pandemocracy in Europe – Power, Parliaments and People in Times of COVID-19, 2022, 91; Kaiser/Hensel, Federal Republic of Germany: Legal Response to Covid-19, Oxford Constitutional Law, 21 April 2021, available at https:// oxcon.ouplaw.com/view/10.1093/law-occ19/law-occ19-e2. 99  For an overview see Joseph, Journal of International Humanitarian Studies 11 (2020), 249. 100  For an international law perspective on the pandemic see Peters, Die Pandemie und das Völkerrecht, JöR N.F. 69 (2021), 685; specifically on the WHO von Bogdandy/Villareal, ZaöRV 80 (2020), 293; on the implications for EU law see Müller, VVDStRL 80 (2021), 105. 101  The range of contributions on fundamental rights issues of the fight against the pandemic is endless, see only Mangold, VVDStRL 80 (2021), 7; Edenharter, JöR N.F. 69 (2021), 555; Gärditz, NJW 2021, 2761; Leisner-Egensperger, NJW 2021, 2415.

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The regulatory framework in Germany has dynamically changed at different levels of the federal system throughout the pandemic.102 As this text is finalised in the first days of 2022 when the Omicron variant has just become prevalent, it should be mentioned that the pandemic is far from over and that further evolutions of the regulatory framework will be inevitable. Accordingly, this section is dealing very much with a moving target. It is fair to say that this was a general problem for constitutional law scholarship throughout the pandemic, especially as wide parts of the academic community appeared to be as unprepared for the pandemic as it was the case for the political branches.103 a) Different phases of the pandemic For the sake of orientation for international readers, different phases of the pandemic and the accompanying regulatory activities in Germany can be distinguished.104 After the first cases of Covid-19 appeared in Germany, the public authorities had recourse to the sweeping blanket clause in the Act for the Protection against infectious diseases (§  28 IfSG).105 This changed over time and more targeted clauses for fighting the Coronavirus were adopted. A central challenge for the fight against the pandemic was the coordination of legislative competences on the federal level and the implementation by the Länder who are responsible to implement federal legislation under Article 84 of the Basic Law.106 In theory, this model allows for a targeted form of implementation where the local context and evolution of the pandemic can be taken into account. This model also sets forth, however, a regime of limited supervisory powers of the federal level. Over time, and especially in the dire winter of 2020/2021, there was, however, a growing level of discontent with the way different Länder and their executives dodged responsibility and rather seemed to wait on political guidance from the 102  The most comprehensive – and in my view also commendably balanced and fair – assessment of the legal implications of the Corona measures can be found in Kersten/Rixen, Der Verfassungsstaat in der Corona-Krise, 2nd edn., 2021 (a first edition was published in 2020); more recently, two former Judges of the Federal Constitutional Court have published books which aim at a general public, see di Fabio, Coronabilanz – Lehrstunde der Demokratie, 2021 and Papier, Freiheit in Gefahr – Warum unsere Freiheitsrechte bedroht sind und wie wir sie schützen können, 2021. 103  Mention should be made, however, of an important monograph preceding the pandemic by Klafki, Risiko und Recht. Risiken und Katastrophen im Spannungsfeld von Effektivität, demokratischer Legitimation und rechtsstaatlichen Grundsätzen, 2017; a more positive picture of the degree of preparedness is given by Ruschemeier, JöR N.F. 69 (2021), 449, 451. 104  For a similar categorization of different phases see Kingreen, Der demokratische Rechtsstaat in der Corona-Pandemie, NJW 2021, 2766, 2767 ff. 105  Ruschemeier (note 103), 454; Kluckert, Verfassungs- und verwaltungsrechtliche Grund­ lagen des Infektionsschutzrechts, in: Kluckert (ed.), Das neue Infektionsschutzrecht, 2nd edn., 2021, §  2 paras. 80 ff. 106  On this particular aspect see Waldhoff, NJW 2021, 2772.

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federal level. Such forms of guidance were exercised throughout that winter through ever more frequent meetings of an informal body consisting of the Chancellor and the prime ministers of the Länder. Without a formal competence to decide on measures, this grouping nonetheless exercised considerably factual influence. Yet, it was not always successful in exerting a sufficient compliance pull to curb the steeply rising numbers of infections in early 2021.107 Against the backdrop of this somewhat inconclusive picture, the federal legislature finally stepped up and adopted far-reaching measures including a nightly curfew in April 2021, whose applicability depended on a certain number of registered infections in the respective area.108 This legislative move bypassed the level of implementation on the part of the Länder as the new legislation was considered to be self-executing, i.e. prohibiting certain forms of conduct without a requirement of further administrative action on the part of the Länder. These rules were passed as law with a strict sunset clause from the beginning, thereby ensuring that they would not be applicable beyond the 30th of June of 2021. Due to its overriding nature, this piece of legislation was dubbed the “federal emergency brake” (“Bundesnotbremse”).109 A further phase of the fight against the pandemic commenced in parallel to the interregnum between the outgoing Merkel government and the new “traffic light” coalition formed between the Social Democrats, the Green Party and the Liberals in the autumn of 2021. In particular the latter party had built their electoral campaign on opposition against alleged legislative and executive overreach in fighting the pandemic, without however questioning the existence and seriousness of the virus as such (as the right-wing “Alternative for Germany” has since the spring of 2020). The political constellation after the federal elections in September 2021 then pushed the new governing parties to ease the regulatory framework as the pandemic seemed to be under control. Soon the new government had to realize that this was premature which led to considerable legislative back and forth between October and December 2021.110 b) Selected concerns pertaining to Rechtsstaatlichkeit in the pandemic For the sake of this contribution, three points of particular relevance stand out:

107 

Kingreen (note 104), 2768. This model was suggested early on by Christoph Möllers in an interview, see Amann, „Rechtlich betrachtet braucht man für einen Lockdown keine Ministerpräsidenten – Interview mit Christoph Möllers“, Der Spiegel of 10 February 2021, available at https://www. spiegel.de/politik/deutschland/christoph-moellers-fuer-lockdown-braucht-angela-merkelaus-juristischer-sicht-keine-ministerpraesidentenkonferenz-a-f9424cc8-540f-4b34-a6c8-d83 9ff4fc102. 109  Kingreen (note 104), 2770. 110  For an initial assessment see Kießling, NVwZ 2021, 1801. 108 

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aa) Confusion over the legal sources of regulation First, the issue of Rechtsstaatlichkeit was discussed with respect to the forms of regulation with which the pandemic was fought. Especially in the beginning, there was considerable uncertainty about the relationship between legislation and various forms of executive lawmaking. Also in the purely executive realm, it took some time for the Länder to consolidate their regulatory reactions against the virus in the form of Rechtsverordnungen, i.e. the classic form of executive lawmaking under German public law. Prior to that, some local governments and even executives of the Länder resorted to Allgemeinverfügungen, i.e. a form of administrative acts addressed to a group of recipients.111 A particular concern in the literature pertained to possibilities under the IfSG to allow the Federal Minister for Health to dispense from statutory legislation (so-called “gesetzesvertretende Verordnung”).112 Conversely, there were also concerns that parliaments would encroach upon domains traditionally preserved for the executive.113 Both developments point to the potential undermining of a key concept of Rechtsstaatlichkeit under the Basic Law, i.e. a clear determination of different sources of law whose hierarchy is decided upon by the Constitution itself.114 bb) Certainty of the law A second concern about Rechtsstaatlichkeit related to the requisite certainty of legislation and regulation. The clarity of rules is a key requirement of the Re­ chtsstaatsprinzip in general and also finds more specific emanations with respect to the legislative framework for executive lawmaking under Article 80 of the Basic Law.115 In particular with respect to the frequently changing legal framework, concerns were voiced that it would have been increasingly difficult for individuals to orient their behaviour against the yardstick of the law.116 The frequent changes to the legislative framework also seem to stand in tension with an underlying premise of Rechtsstaatlichkeit. According to some and in line with early thinking on the matter in the 19th century, the Rechtsstaat would also embody a particularly rational form of governing, perhaps understood as an antidote to the vagaries that political decision-making can imply.117 111  Siegel, NVwZ 2020, 577; Ruschemeier (note 103), 455; Kluckert (note 105), §  2 paras. 191–195. 112  Kingreen (note 104), 2767 ff.; Kluckert (note 105), §  2 paras. 131 ff.; Rennert, DVBl. 2021, 1269, 1275 ff. 113  Wißmann, JöR N.F. 69 (2021), 619. 114  Dreier, DÖV 2021, 229, 235 ff. 115  Volkmann, NJW 2020, 3153, 3157–58. 116  Dreier (note 114), 237; Kingreen (note 104), 2771. 117  On this tradition see Böckenförde (note 33), 146; Stolleis (note 28), p.  371; on rationality and internal consistency of a legal system as requirements of Rechtsstaatlichkeit see O’Hara, Konsistenz und Konsens – Die Anforderungen des Grundgesetzes an die Folgerichtigkeit von Gesetzen, 2018, 53–65; from the perspective of today’s debate about the relationship between

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If looked at from this perspective, the regulatory reactions to the pandemic can indeed seem puzzling at first sight. Not only the legislative and executive legal framework changed ever so frequently, also the underlying science on whose recommendations many political decisions were based, seemed to be constantly changing. Do we hence see a betrayal of the idea of rationality at work here? I would tend to answer this question in the negative. Rather, some commentators seem to have had difficulties to adjust their legal and political sensorium to the fact that everyone has been constantly learning in a pandemic, including the natural scientists.118 As the scientific consensus on the virus only emerged slowly and had to process ever new twists in the pandemic, any expectation that legislation could translate scientific findings straightforwardly into the law in a coherent manner is misguided.119 But nonetheless there is an underlying problem here. If anything, the pandemic tests our expectations that law is supposed to be stable in order to allow for a point of orientation for citizens – an expectation that is then also operationalized under the requirements of certainty of the law. Even if individual rules are perfectly understandable, too frequent changes make it ever more difficult for the public to orient their behaviour towards the law. Here, I would indeed see a structural process at play which puts the Rechtsstaat to a severe test. At the same time, there is no easy answer to this problem. Incidentally, the swiftly changing legal framework has also created a dilemma for those who call for more parliamentary participation.120 Short-breathed amendments in ever briefer intervals will reduce confidence in parliamentary lawmaking processes.121 The added value of parliamentary deliberation is hard to realize under these circumstances. While it is therefore convincing to state that the governing of the pandemic cannot be left to executives alone, it is also potentially dangerous to involve the legislature in the day-to-day running of the pandemic. What is gained in terms of deliberation can easily be lost in terms of confidence in the stability of the legal order. expert rule and democracy see Münkler, Expertokratie – Zwischen Herrschaft kraft Wissens und politischem Dezisionismus, 2020, 222–225. 118  Questionable in this regard Murswiek, NVwZ-Extra 5/2021, 14 ff.; see also Murswiek, Wie wiegt man Corona?, Verfassungsblog of 16 March 2021, available at https://verfassungs blog.de/wie-wiegt-man-corona/. 119  For differentiated assessments see Ruschemeier (note 103), 458–459; Münkler, JöR N.F. 69 (2021), 535; Gärditz, JöR N.F. 69 (2021), 505. 120  This has been a primary concern of constitutional law scholarship throughout the Corona crisis, see for prominent contributions in this regard Heinig, Parlamentarismus in der Pandemie – Beobachtungen und Thesen, Verfassungsblog of 25 November 2020, available at https://verfassungsblog.de/parlamentarismus-in-der-pandemie/; Kingreen (note 104), 2766; Volkmann (note 115). 121 See also, mutatis mutandis, Barczak, Verallgemeinerung des Außergewöhnlichen – Generalisierungstendenzen einer vorsorgenden Sicherheitspolitik, ZRP 2021, 122, 125 (warning against legislative overreach, albeit not in connection with the pandemic).

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cc) The fight against the pandemic as a state of exception? A third concern relates to a broader assessment of the development of the constitutional system in pandemic times. Here, two competing schools of thought can be identified – even though a disclaimer is warranted from the outset that this characterization involves a fair degree of oversimplification. For one critical stream of voices, the Federal Republic has witnessed a major transformation of an unprecedented extent. These critical voices have diagnosed the coming into existence of a “state of exception” in all but its name.122 The “general rule of distribution” between the state and its citizens would have been upended when it comes to the question whether the exercise of freedom or its restriction needs to be justified.123 Quite a few of these critical voices also diagnose that the administrative courts as well as the Federal Constitutional Court would have exercised too much judicial self-restraint and would have given the executive and the legislative a degree of leeway which would have been inconceivable under the applicable standards before the pandemic. This latter criticism culminated in very critical reactions to two decisions that the Federal Constitutional Court passed on the so-called “federal emergency break” in November 2021.124 The most drastic comment came from Oliver Lepsius, an influential constitutional law scholar and public intellectual who diagnosed nothing less than a “reconstruction of the Rechtsstaat” in an op-ed piece for the Frankfurter Allgemeine Zeitung.125 122  This idea was introduced into the legal discourse early on by Volkmann, Der Ausnahmezustand, Verfassungsblog, 20 March 2020, available at https://verfassungsblog.de/der-ausnahmezustand/; Mayen, NVwZ 2020, 828; Rennert (note 112), 1269; tentatively in the early phases of the pandemic Kotzur, in: Kämmerer/Kotzur (eds.), von Münch/Kunig – GG-Kommentar, vol. I, 7th edn., 2021, Art.  20 paras. 174–176; debates on the adequateness of the state of exception as an analytical criterion coincided with the publication of important monographs on the topic which had been completed before the outbreak of the pandemic: Kaiser, Ausnahmeverfassungsrecht, 2020; Barczak, Der nervöse Staat. Ausnahmezustand und Resi­ lienz des Rechts in der Sicherheitsgesellschaft, 2020. To Anna-Bettina Kaiser, the pandemic did not warrant to speak of a state of exception, see Jestaedt/Kaiser, Kritik ja, Krise nein – Das Staatliche Pandemiemanagement im Lichte des Verfassungsrechts, Verfassungsblog of 31 March 2021, available at https://verfassungsblog.de/kritik-ja-verfassungskrise-nein/. 123  With reference to the “rechtsstaatliche Verteilungsregel“ formulated by Carl Schmitt in his Verfassungslehre (1928, 126 ff.): Mangold (note 101), 9; see also the drastic formulation of a “total prerogative for protection” (“totaler Schutzvorbehalt“) in Wißmann, JöR N.F. 69 (2021), 619, 620. 124  BVerfG, Decision of 19 November 2021, Cases 1 BvR 781/21 and others – Bundesnotbremse I; Decision of 19 November 2021, Cases 1 BvR 971/21 and 1 BvR 1069/21 – Bundesnotbremse II (not yet published). 125  Lepsius, Frankfurter Allgemeine Zeitung, 10 December 2021, 9; many considerations developed in this short piece build on a more fundamental critique in Lepsius, JöR N.F. 69 (2021), 705; for a rejoinder to the F.A.Z. article see Reimer, F.A.Z. Einspruch of 15 December 2021, available at https://www.faz.net/einspruch/exklusiv/einspruch-exklusiv-groteske-kri tik-an-karlsruhe-17686510.html.

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Unsurprisingly, this critical outlook on the constitutional implications of the fight against the pandemic is not shared in general.126 Whereas most scholarly contributions on the reaction against the pandemic are ready to acknowledge that not all exercises of governmental authority were lawful, few go so far as to diagnose a general redesign of the Rechtsstaat.127 Accordingly, a significant number of contributions reject the rhetoric of the Ausnahmezustand.128 What to make of these two perspectives? First of all, it is important to mention that it is not possible to divide the entire group of German constitutional law scholars neatly into one group or the other. There are many shades in-between and everything else would be a significant problem of its own. As Thorsten Kingreen has underlined, whether “the Rechtsstaat has worked as it should” is not a question which can easily be assessed from the perspective of constitutional law scholarship. Instead, legal scholars would tend to focus primarily on individual measures and their legality. But, as Kingreen also emphasises, they can be susceptible to analysing underlying trends and shifts.129 I would submit that a significant part of the constitutional law scholarship has attempted to do just that.130 However, I would caution against too sweeping generalizations in the second year of the pandemic. Also in comparative perspective, there seems to be a mismatch between the intensity of restrictions ordained for the fighting of the pandemic and the concerns about an undermining of fundamental rights and the Rechtsstaat in Germany. At times, the severity of some academic criticism has spilled over into a public discourse where some forms of protest can only be labelled as idiosyncratic (at best). To be sure, there is no responsibility of academic commentators for the abuse of their positions by other participants in a public debate.131 But it seems that a particular form of an overlegalized culture in Germany has generated an at times obsessive focus on whether individ126  It is at times insinuated that the state of exception thesis would be shared quasi unanimously among constitutional law scholars, see, e.g., Rennert (note 112), 1269. 127  For a particularly well-balanced assessment see Dreier (note 114); see also Schuppert, Die Corona-Krise als Augenöffner – Ein rechts- und damit zugleich kultursoziologischer Essay, JöR N.F. 69 (2021), 439, 444; Ruschemeier (note 103), 459 (with a particular emphasis on the precarious epistemic basis for governance in the pandemic). 128  Dreier (note 114), 229–230; Kaiser , RuP 57 (2021), 7; Gusy, DÖV 2021, 757; Kluckert (note 105), §  2 paras. 85–87. 129  Kingreen (note 104), 2767. 130  See also Ruschemeier (note 103), 452. 131  This was a categorical mistake by some political actors who blamed constitutional law scholars for contributing to a radicalization of protest, see Hirte, Auch Sachverständige tragen Verantwortung für die Gesellschaft und sind Teil der politischen Willensbildung, Verfassungsblog of 23 January 2021, available at https://verfassungsblog.de/auch-sachverstandigetragen-verantwortung-fur-die-gesellschaft-und-sind-teil-der-politischen-willensbildung/; Krings, Kritik ist kein Selbstzweck, Verfassungsblog of 2 April 2021, available at https://ver fassungsblog.de/kritik-ist-kein-selbstzweck/; for critique see Rixen, Heribert Hirte und die Wissenschaft, Verfassungsblog of 20 January 2021, https://verfassungsblog.de/heribert-hirteund-die-wissenschaft/.

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ual measures undertaken in the fight against the pandemic conform to ideals of the Rechtsstaat. The essence of a pandemic is its pervasiveness. This has inevitable consequences for the constitutional order. Admitting so much does not mean that a state of exception has taken hold. 2. A Lack of Rechtsstaatskultur: The Act for the Realization of Material Justice The second example for recent Rule of Law related discourses in Germany pertains to a less prominent issue.132 The example concerns the addition of an additional ground to reopen criminal proceedings even after an acquittal which has acquired force of law. Until late 2021, §  362 of the German Code on Criminal Procedure (StPO) only included four such grounds, which related to manifest deficiencies in the way in which a trial was conducted or concerned a credible confession of a person who had been acquitted. This state of the law goes back to the late 19th century and was unchanged for the most time since, with infamous exceptions in the time between 1933 and 1945 where National-Socialist legislation provided for the possibility to reopen cases where the “gesundes Volksempfinden” so required.133 It was before the background of this experience that the Basic Law introduced a special provision on the principle of ne bis in idem in Article 103, para.  3 which has to date been understood by most scholars in constitutional law to be a bar against introducing further grounds for reopening criminal court cases beyond the state of the law as it existed before the National Socialists came to power.134 Art.  103, para.  3 of the Basic Law is a particular emanation of the Rechtsstaatsprinzip135 , setting forth that the considerations of material justice must yield to the stability of the law, i.e. the legally protected expectation that a criminal case is closed once and for all if a charged individual has been acquitted.136 In the 19th legislative period of the Bundestag (2017–2021), a motion for a new ground for opening up closed cases pertaining to murder and a number of international crimes was introduced into parliament as a new §  362 No.  5 of the Code on Criminal Procedure.137 This initiative took place before the background of a 132  Some parts of this subsection were published previously as Aust, “Realizing Material Justice“: Ne Bis in Idem and the Rule of Law under Pressure in Germany?, Verfassungsblog of 3 January 2022, available at https://verfassungsblog.de/realizing-material-justice/. 133  On this historical dimension see Brade, AöR 146 (2021), 130, 136; Remmert, in: Dürig/ Herzog/Scholz, Grundgesetz-Kommentar, 85th instalment, 2018, Art.  103 Abs.  3 para.  18. 134  Nolte/Aust, in: Huber/Voßkuhle (eds.), von Mangoldt/Klein/Starck – GrundgesetzKommentar, vol. III, 7th edn., 2018, Art.  103 para.  178 with further references. 135  Schulze-Fielitz, in: Dreier (ed.), Grundgesetz-Kommentar, vol. III, 3rd edn., 2018, Art.  103 III, para.  37; Remmert (note 133), Art.  103 Abs.  3 para.  7; Kunig/Saliger, in: Kämme­ rer/Kotzur (eds.), von Münch/Kunig – Grundgesetz-Kommentar, vol. II, 7th edn., 2021, Art.  103 para.  63. 136  Schulze-Fielitz (note 135), Art.  103 III para.  35. 137  See BT-Drs. 19/30399 of 8 June 2021; BGBl. 2021 I, 5252.

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tragic murder of a 17-years old girl in 1981. New means of DNA analysis seem to confirm that a man who was tried but eventually acquitted in the 1980s was indeed the perpetrator. After the Bundestag passed this piece of legislation in the summer of 2021, it took a remarkable period of time before the Federal President Frank-Walter Steinmeier signed it into law on 22 December 2021, not without the unusual (but not unprecedented) step of voicing his concerns about the constitutionality of the act in a press statement.138 This contribution is not the right place to go into the doctrinal details of the constitutionality of the act of legislation.139 The proposed legislation was subject to numerous academic contributions and its conformity with the Basic Law were also the subject of an expert hearing in the Federal Parliament’s legal committee in which views differed on the matter.140 What is more relevant for the present report, is the justification and rhetoric with which this piece of legislation was accompanied. The draft bill was introduced into Parliament by the parliamentary groups of the Christian Democrats and the Social Democrats, at the time the parties forming the coalition government. Remarkably, the Federal Ministry of Justice refused to participate in the legislative process for the reason of constitutional doubts on the matter. The act was introduced into Parliament with the title “Gesetz zur Herstellung materieller Gerechtigkeit” – meaning that the Act was literally supposed to realize material justice. The explanation of the legislative initiative further sets out that “legal peace” (“Rechtsfrieden”) and the “sense of justice of the population” would suffer as much in the case of an unwarranted acquittal as in the case of a conviction which turns out to be unjustified. The argumentation culminates in various and repeated findings that acquittals would be “unbearable” (“unerträglich”) if the person acquitted would in reality be the perpetrator. As already convincingly argued by Björn Schiffbauer, it is this rhetoric of unbearableness and the quest for material justice which makes this seemingly innocuous piece of legislation damaging for the Rechtsstaat. It plays with the idea that material justice can be optimized with a simple twitch of the legislator. And what is worse, it insinuates that the previous legislative framework was unbearable and unjust.141 By labelling these arguments as attempts to optimize material justice and the Rechtsstaat, the legislation confuses Rechtsstaatlichkeit with 138  See Press Release of 22 December 2021, available at https://www.bundespraesident.de/ SharedDocs/Pressemitteilungen/DE/2021/12/211222-Gesetzesausfertigung-StPO-362.ht ml;jsessionid=C847971D70523779C8D8988B2A277DE4.1_cid323. 139  For critical statements see Aust/Schmidt, ZRP 2020, 251; Slogsnat, ZStW 133 (2021), 741; Brade (note 133); Eichhorn, KriPoz 6 (2021), 357; for criminal law scholars arguing in favour of the constitutionality see Kubiciel, GA 2021, 380; Hoven, JZ 2021, 1154. 140  For the expert statements by Aust, Buermeyer, Conen, Eisele, Gärditz, Kubiciel and Schädler see here: https://www.bundestag.de/dokumente/textarchiv/2021/kw25-pa-rechtwiederaufnahme-strafverfahren-847544. 141  Schiffbauer, NJW 2021, 2097.

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enforcement of the law, a category mistake which is, unfortunately, popular these days.142 This piece of legislation thereby gives us a snapshot of broader debates on the relationship between the Rechtsstaat and justice, between positive constitutional law and natural law in German academia. The early years of the Federal Republic witnessed a revival of natural law approaches, which were supposedly a reaction to the positivist inclinations of lawyers in the late Weimar era as well during National Socialism.143 Today, it is the prevailing view that this criticism of positivism was eventually misguided as, for instance, the rise of the National Socialists and their grip on the judiciary had nothing to do with positivism properly understood, but was instead based on an anti-positivistic turn to interpreting vague general provisions of the law in line with National Socialist ideology.144 The Gesetz zur Herstellung materieller Gerechtigkeit is blind towards history in a dual sense: It overlooks, first, that it builds unwittingly on role models from National Socialist time and, to make matters worse, then works with vocabulary inspired by Gustav Radbruch’s famous formula how to distinguish between law and non-law, justice and injustice in the transitional period after massive state crime.145 When writing about the continuing authority of law from the Nazi era, Radbruch coined the expression of unbearableness which, vague as it is, served to distinguish those situations where legal security and stability protected also legal decisions from the Nazi era from those where a correction would need to take place.146 Ultimately, this piece of legislation confuses law and justice. It portrays a misguided sense of the relationship between the Rechtsstaat and justice. It might be uncontroversial to hold that the aim of all state conduct in a Rechtsstaat is justice.147 But justice should not be an argument within the ordinary legal discourse. A Rechtsstaat proceduralizes claims for justice in the forms of the law.148 142  See also Möllers, Freiheitsgrade – Elemente einer liberalen politischen Mechanik, 3rd edn., 2021, 209; for a differentiated view see Nußberger (note 21), 195. 143  For a thorough assessment of this natural law revival see Foljanty, Recht oder Gesetz – Juristische Identität und Autorität in den Naturrechtsdebatten der Nachkriegszeit, 2013. 144  See the seminal contribution by Rüthers, Die unbegrenzte Auslegung – Zum Wandel der Privatrechtsordnung im Nationalsozialismus, 8th edn., 2017, especially at 98–99 on the limited explanatory value of positivism; see also Bäcker (note 21), 163, 166. 145  This point was already made in the expert hearing of the Federal Parliament’s Legal Committee expert hearing by Conen (note 140). 146  Radbruch, SJZ 1946, 105; see further Bäcker, Rechtssicherheit oder Gerechtigkeit – Von der Radbruchschen Formel zurück zum Primat der Rechtssicherheit, in: Schuhr (ed.), Rechtssicherheit durch Rechtswissenschaft, 2014, 34. 147  Huber (note 22), para.  66; see also Kunig (note 20), 362 with an emphasis on the procedural dimension. 148  Hesse, Der Rechtsstaat im Verfassungssystem des Grundgesetzes, in: Hesse et al. (eds.), Staatsverfassung und Kirchenordnung – Festgabe für Rudolf Smend zum 80. Geburtstag am 15. Januar 1962, 1962, 71, 77; see also Scheuner (note 28), 488; Sommermann, Jura 1999, 337;

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In the context of the principle of ne bis in idem, it is, in addition, the Basic Law itself which has made a decision on the appropriate balance between justice and legal security. The Gesetz zur Herstellung materieller Gerechtigkeit flies in the face of this premeditated balancing exercise area undertaken by the Constitution itself.149 The act and the public debate accompanying its creation reveal a lack of respect for the formal dimension of the Rechtsstaat. As opposed to the seemingly supreme goal of realizing material justice, the more formal dimensions of the Rechtsstaat seem to be of secondary importance to some actors.150 3. Interim conclusion This section of the contribution has presented two distinct examples of how concerns for Rechtsstaatlichkeit have recently been negotiated in Germany. Both do not paint overly hopeful pictures, but for contrasting reasons. In the latter example of the Gesetz zur Herstellung materieller Gerechtigkeit, we witness a lack of appreciation of the importance of the formal dimensions of the Rule of Law. The debate is particularly unfortunate as it illustrates how difficult it is to persuade large parts of the political and legal circles of the value that Rechtsstaatlichkeit has opposed to seemingly more important considerations of material justice. The picture is different with respect to the fight against the pandemic. Here, the debates revolving around the measures to fight the pandemic have partly portrayed an alarmist touch, at least in my view. The corona pandemic is the first test of this magnitude for the constitutional order of the Basic Law. Whereas there has been no shortage of other crises in the history of the Federal Republic, this is arguably the most wide-ranging one as it affects the lives of all citizens and residents alike.151 Restrictions are felt by everyone and the German public discourse has generated a particular focus on the restrictions on fundamental rights which were undertaken in order to fight the pandemic. This has led to sometimes strange and perpetually repeated language like the discourse on “privileges” for the vaccinated and the question when fundamental rights would be “given back” to the people. Even though this is layperson’s talk, it affects the perception of the Basic Law by wider parts of the population and may have nurtured frustration and discontent. Bäcker (note 21), 313; for a differentiated perspective see Reimer, Gerechtigkeit als Methodenfrage, 2020, 10–12; Kotzur, Rechtsstaat als Sammelbegriff – Versuch der Konturierung und Kontextualisierung, in: Rosenau/Kunig/Yildiz (eds.), Rechtsstaat und Strafrecht – Anforderungen und Anfechtungen, 2021, 9, 11. 149  I developed this point previously in Aust, Frankfurter Allgemeine Zeitung of 17 June 2021, 6; see also on the general point Schulze-Fielitz (note 135), para.  37. 150  Similar in a different context Huber (note 22), para.  67. 151  See on majority/minority dynamics and fundamental rights protection Meinel (note 32), 57.

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V. Concluding Observations Despite these two negative examples, the institutions of the Rechtsstaat have remained remarkably stable in Germany.152 So far, mainstream political parties have mostly not given in to populist tendencies which remain confined to the officials, members and voters of mostly one right-wing opposition party. There are only very few cases of outright non-compliance with court decisions by public authorities and where this happened, a stern and formally unusual reaction by the Federal Constitutional Court by press release has helped to settle the matter.153 In line with the mandate for rapporteurs, this country report has set out the current constitutional set-up, its history as well as some current challenges make for a German contribution to debates about “the revival of the Rule of Law issue”. Admittedly, this is a subjective assessment which comes with its own biases. In summary, this combined historical, conceptual and doctrinal contribution has sought to contribute to answering some of the lead questions that the World Congress wishes to study. The Rule of Law, understood in its German variant of the Rechtsstaatsprinzip, is an inherently dynamic notion. It comprises formal as well as material elements. Properly understood, it has an inherently international – and in the case of a EU member State like Germany also European – dimension. It seems to me that this latter aspect, the connection between “external” and “internal” Rule of Law debates is not always fully acknowledged. For a state which prides itself of its Basic Law and indeed celebrates “constitutional patriotism”, it seems to be a particular challenge to think through the external implications of internal constitutional debates. From a comparative perspective, this may seem like a minor problem when compared to the situation in other states. Accordingly, there is no need for neither alarmism nor complacency. A nuanced assessment of the state of health of the Rechtsstaat will in any case be helpful when it comes to the external dimension of Rechts­ staatspolitik, i.e. the attempts to contribute to transnational debates about the Rule of Law where a strong German position can easily become undermined by too much emphasis on one’s own virtues.

152  It is perhaps telling that a comparative volume on constitutional crises from 2018 does not include a country report/chapter on Germany, see Graber/Levinson/Tushnet (eds.), Constitutional Democracy in Crisis?, 2018. 153  See the Press Release of the Federal Constitutional Court: Einstweilige Anordnung: Stadt muss ihre Stadthalle der NPD für Wahlkampfveranstaltung überlassen, 26 March 2018, available at https://www.bundesverfassungsgericht.de/SharedDocs/Pressemitteilungen/DE/ 2018/bvg18-016.html;jsessionid=E8BB438CDB668A7B5A2B9138B13157D0.1_cid394; see further on this episode Nußberger (note 21), 197.

Soft Law – Its Place, Potential and Prospects Olaf Meyer

I. Introduction The notion of a privately made law – understood as any rule or body of rules from a non-state source that nonetheless has binding normative effect – has long been a feature of German law. It is therefore at first glance surprising that no German term for this phenomenon has ever established itself, instead there is frequent use of the anglicism “soft law”. The expression first appeared in public international law as an umbrella term for legally non-binding resolutions and memoranda of understanding.1 It has however since also found use in private law. The English term may however also be a sign that in this context it regularly concerns rules which transcend national borders and directly serve the facilitation of exchange with other nations. Uniform rules bring many advantages to trade.2 They avoid the uncertainties of private international law concerning the determination of the applicable law.3 They are also more responsive to the peculiarities of international cases than national codifications, which are generally tailored to domestic legal relations.4 And ultimately, they create a level playing field for the parties, on which – contrary to the solution via private international law – no side can benefit from a home advantage. Previous attempts at achieving uniformity of laws through state measures have often proven to be difficult, protracted, bureaucratic and altogether ever less promising.5 In a globalized world, in which around 200 independent states try to defend their respective interests, compromises even today can often only be reached with great difficulty. There are of course shining examples of uniform law by states such as the UN Convention on Contracts for the Interna1 

Heusel, „Weiches“ Völkerrecht, 1991; Basedow, in: FS Kronke, 2021, 659, 660. Kropholler, Internationales Einheitsrecht, 1975, 9 et seq.; Jarass, Privates Einheits­ recht, 2019, 41 et seq.; Berger, JZ 1999, 369 et seq.; Schwenzer, 58 Vill. L. Rev. 723 (2013). 3  Meyer, Principles of Contract Law und nationales Vertragsrecht, 2007, 36 et seq. 4  David, The International Unification of Private Law, in: International Encyclopedia of Comparative Law, Vol.  2, 1971, 5-15, 7 et seq.; Leible, ZVglRWiss 97 (1998), 286, 307 et seq.; ­Schnyder/Grolimund, in: FS Schlechtriem, 2003, 395, 396; Stein, Lex Mercatoria, 1995, 23 et seq. 5  Kötz, RabelsZ 50 (1986), 1 et seq.; Kronke, JZ 2001, 1149 et seq.; Bonell, AJCL 38 (1990), 865 et seq.; Basedow, RabelsZ 81 (2017), 1, 16 et seq. 2 See

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tional Sale of Goods (CISG) 6 or the New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards.7 However, most attempts to create uniform law by means of treaties between states have ultimately failed, such as the recently discussed idea of a world commercial code on the initiative of Switzerland. 8 It is therefore reasonable to conclude that the days of the international convention as the classic instrument of uniformity of laws between states are largely behind us. Uniformity of laws by private actors is not beset by these problems.9 When creating new rules, they are bound neither by bureaucratic processes of public international law nor by political vanities of individual states. However, in contrast to the state determined hard law, they lack mandatory application. The combination of the terms “soft” and “law” even appear contradictory at first glance, as law is traditionally understood as rules which we must abide by no matter what.10 The lack of state authority should however be weighed against the speed with which soft private rules can be created, and their substantive responsiveness to the needs of the parties, which is guaranteed by the technical expertise of the drafters. This contribution therefore focusses on internationally created soft law. This does not however mean that there cannot also be privately made rules which are only conceived for application within a given state. For the purposes of this report, the role of soft law in the German legal system shall be examined from three different perspectives: Part II. concerns the different theories in German legal scholarship to explain the applicability of privately made law. Part III. then illustrates the typical line of argument in legal practice to draw on soft law to resolve a specific legal dispute. These routes are in no way uniform, rather they can vary greatly according to the respective area of the law, and accordingly Part IV. examines three specific examples. Part V. summarises the findings.

6 

94 Member States (31.12.2021). 169 Member States (31.12.2021). 8  United Nations Commission on International Trade Law, Possible Future Work in the Area of International Contract Law: Proposal by Switzerland on Possible Future Work by UNCITRAL in the Area of International Contract Law, 45th Session, New York, 25 June-6 July 2012, A/CN.9/758, (‘Swiss Proposal’). Further: Meyer, in: Schwenzer/Spagnolo (eds.): Boundaries and Intersections: 5th Annual MAA Schlechtriem CISG Conference, 2014, 57 et seq. 9 Cf. Drobnig, in: FS Max-Planck-Institut, 2001, 745 et seq.; Mertens, RabelsZ 56 (1992), 219 et seq.; Köndgen, AcP 206 (2006), 477 et seq. 10  Schwarze, EuR 2011, 3. 7 

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II. Soft Law in German Legal Scholarship The applicable force of non-state law has been a subject of study by German scholars for many generations. The discussion however does not typically occur under the notion of “soft law”, rather under different terms, some of which are more expansive and also encompass state uniform law and case law of international courts, and others which are more narrowly defined and for example only concern certain categories of private rules. This makes a comparison of the theories difficult. They are not sharply delineated – indeed some authors draw on ideas from different areas. Further is the consideration that this is not a purely German legal problem, rather, the discussion is a global one, and therefore German scholars exchange ideas with their colleagues in other parts of the world. 1. The lex mercatoria The oldest German contributions to privately made law originate from the discussion on the existence of an autonomous law merchant. Long before the term “modern lex mercatoria“ established itself, in particular the law professor from Freiburg Hans Großmann-Doerth recorded in several contributions his observations on the formation of “autonomous law of world trade”.11 In his habilitation treatise of 1930 he contrasted state law with the contractual law of international sales and carved out the numerous respects in which the statutory law was replaced by private standard rules in everyday practice. He began his remarks with the clear thesis: “State law is the source of law which has the least significance for international sales… It is for international sales printed paper, nothing more”.12 The academic discussion picked up in the 1950s, as weighty voices in France and England began to give this self-made law of business a theoretical underpinning and thereby an independent existential basis outside of any state order.13 A significant proponent of this new teaching was a German emigrant: Clive Schmitthoff devoted a large proportion of his creative ability to investigating the new law merchant.14 He saw two sources of the new world commercial law, namely international legislation in the form of state treaties and model 11  Großmann-Doerth, JW 1929, 3447 et seq.; id., Selbstgeschaffenes Recht der Wirtschaft und staatliches Recht, Antrittsvorlesung vom 11. Mai 1933, see further Blaurock/Goldschmidt/Hollerbach (eds.), Das selbstgeschaffene Recht der Wirtschaft – Zum Gedenken an Hans Großmann-Doerth (1894–1944), 2005. 12  Großmann-Doerth, Das Recht des Überseekaufs, Band I, 1930, 40. 13  See most recently Toth, The Lex Mercatoria in Theory and Practice, 2017, 31 et seq. 14  Schmitthoff, in: Macdonald (ed.), Current Law and Social Problems, Vol.  2 , 1961, 129 et seq.; id., JBL 1968, 105 et seq.; id., 15 International Social Science Journal 1963, 259 et seq. On Schmitthoffs life and work cf. most recently the Monograph of Wulfert-Markert, Clive M. Schmitthoffs Konzeption eines transnationalen Welthandelsrechts, 2018.

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laws, and the unwritten international custom. Schmitthoff worked from England, but also published his findings in German.15 At the peak of the lex mercatoria debate in the 1980s and 1990s there followed a series of contributions from notable German legal scholars which reflected the whole spectrum of opinion. To present them all would be beyond the scope of this contribution. There were however both voices of support16 as well as opposition17. International renown was achieved by Klaus Peter Berger’s contributions on the creeping codification of the lex mercatoria.18 The central question in these discussions was mostly the theoretical categorization of these sources of rules of international commerce, i.e. whether they can exist autonomously outside of all state legal systems, or whether they are in effect there solely by the “grace” of state law, to the extent the state recognizes their applicability. There has, however, for the most part not been any deeper discussion of the specific substantive content of lex mercatoria. Once the arguments had been largely exchanged the discussion notably died down. This is certainly not least because the practical significance of an autonomous lex mercatoria is too low to adequately justify the academic resources devoted to it. 2. Transnational Law A second important strand of literature has amassed under the description “transnational law”. The term is very much in fashion: Not only are there countless publications, there are also for example Chairs of transnational law at universities, post graduate courses as well as academic journals on the subject. Of course, this is not an originally German concept either. The oldest German language source for the term is probably in the writings of Gutzwiller in the early 1930s.19 But it was when the public international lawyer and later judge at 15 

Schmitthoff, Das neue Recht des Welthandels, RabelsZ 28 (1964), 47 et seq. From the abundant literature e.g. Grundmann, in: Jickeli/Kotzur/Noack/Weber (eds.), Jahrbuch junger Zivilrechtswissenschaftler 1991, 43 et seq.; Kappus, IPRax 1993, 137 et seq.; Mertens, in: FS Odersky, 1996, 857 et seq.; Stein, Lex Mercatoria – Realität und Theorie, 1995; Berger, in: id. (ed.), The Practice of Transnational Law, 2001, 1 et seq.; id., in: Hartkamp/ Hesselink/Hondius (eds.), Towards a European Civil Code, 3. edn 2004, 43 et seq.; von Hoff­ mann, in: FS Kegel, 1987, 215 et seq.; Blaurock, ZEuP 1993, 247 et seq. 17 Vgl. von Bar, Osnabrücker rechtswissenschaftliche Abhandlungen 1985, 19, 28 et seq.; Herber, IHR 2003, 1 et seq.; Lorenz, Die Lex Mercatoria: Eine Internationale Rechtsquelle?, in: FS Neumayer, 1985, 407, 429; Sandrock, JZ 1996, 1, 8 et seq.; Spickhoff, Internationales Han­delsrecht vor Schiedsgerichten und staatlichen Gerichten, RabelsZ 56 (1992), 116 et seq.; Triebel/Petzold, RIW 1988, 245 et seq.; Schmidt, in: Murakami/Marutschke/Riesenhuber (eds.), Globalisierung und Recht. Beiträge Japans und Deutschlands zu einer internationalen Rechtsordnung im 21. Jahrhundert, 2007, 153 et seq.; von Breitenstein, in: FS Sandrock, 2000, 111 et seq. 18  Berger, The Creeping Codification of the New Lex Mercatoria, 2nd edn 2010. 19  Gutzwiller, Internationales Jahrbuch für Schiedsgerichtswesen 3 (1931), 123, 128 et passim. 16 

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33

the International Court of Justice in The Hague Philip Jessup chose the expression as the title for his Storrs Lectures at the University of Yale Law School in 195620 which gave the decisive push for the subsequent worldwide flood of publications. Already at the beginning of the 1980s one had the impression of a “transnational law explosion”.21 Yet the meaning of the term remains highly unclear to this day. What transnational law means, varies from author to author.22 Jessup for example used the term in a purely functional sense to describe all law for cross border cases, without thereby saying anything about the characteristics of such law. It is accordingly not the law here which is transnational, but the facts of the case it decides.23 Eugen Langen on the other hand, understands the term in his strongly legal-philosophical monograph, as those legal rules which different legal orders agree upon.24 His idea consists of resolving legal disputes neither by allowing a more or less arbitrary decision in favour of one of the national laws over the other through the operation of private international law, nor by entirely avoiding the national law via the lex mercatoria. Instead, the judgment should be based upon principles common to all legal orders involved.25 Langen’s analysis is thus admittedly largely based on state made law, privately made soft law does not assume a significant role for him. In recent times, however, transnational law theory has turned its attention to privately made soft law. The definition here relates not to the content of the rules, rather to their originators. Distinct from traditional international law, which is a treaty of public international law agreed “inter nationes”, transnational law is created by non-state communities, i.e. by business federations, NGOs or other networks of civil society.26 It is often equated with “law beyond the nation state”.27 There does however remain a variety of opinion on whether transnational law completely excludes state made law, or if it at least includes legal principles common to all legal orders.28 Numerous legal questions can then 20 

Jessup, Transnational Law, 1956. Baade, AJCL 31 (1983), 507. 22  On the different definitions of transnational law see e.g. Bamodu, 4 International Arbitration Law Review (2001), 6; Siehr, in: Holl/Klinke (eds.), Internationales Privatrecht – Internationales Wirtschaftsrecht, 1985, 108 et seq.; Spickhoff, RabelsZ 56 (1992), 121 et seq. 23  Calliess, Zeitschrift für Rechtssoziologie 23 (2002), 185, 188. 24  Langen, Transnationales Recht, 1981, 13. See also from the same author Transnational Commercial Law, 1973. 25  Langen, Transnational Commercial Law (fn.  24), 33. 26  Viellechner, in: Calliess (ed.), Transnationales Recht, 2014, 57, 69; Quack, in: Schuppert (ed.), Global Governance and the Role on Non-State Actors, 2006, 81 et seq.; Sieber, Rechtstheorie 41 (2010), 152, 163 et seq. 27  Calliess/Maurer, in: Calliess (ed.), Transnationales Recht, 2014, 1; Michaels/Jansen, AJCL 54 (2006), 843 et seq.; Michaels, 23 Maastricht Journal of European and Comparative Law (2016), 352 et seq. 28 Vgl. Teubner, JZ 2015, 506, 507. 21 

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be analysed from this perspective: The effect of transnational law on individual areas of the law,29 the process of making rules30 and of course the relation to state made law. 3. Sociological Approaches – The Global Bukowina A further school of thought is system theory, a complex socio-legal approach to explain the formation and organisation of self-contained societal systems. The approach of Gunther Teubner’s has achieved considerable attention also outside of Germany.31 His starting point is that state-made law cannot keep pace with the requirements of globalisation. Therefore, privately made global sub-orders begin to form, although not in a uniform pattern, but for their respective self-contained societal circles. In this analysis the lex mercatoria is but one such system, namely as the law of cross border commerce. Further similar independent systems emerged in other areas such as those of internet governance (lex electronica), sport (lex sportiva), financial markets (lex financiaria), and corporate organization (corporate governance) etc.32 The setting of rules within these systems occurs in an autopoietic fashion, i.e. rather like in a state, from within.33 Decisive factors for the emergence of an autonomous legal order are firstly the structural organization of the system, whereby for example strong business federations can assume the role of rule-setter; and secondly they need their own legal authority, which can enforce these rules with binding effect for its members. This function would be assumed by the international arbitral tribunals for the lex mercatoria, the special sport tribunals for sport, the arbitration instance of the ICANN for the law of internet domain names. For letter of credit-related disputes, the ICC now offers the socalled DOCDEX procedure, which regularly disposes of disputes which are only seldom subsequently brought to court.34 This approach can explain the autonomous effect of soft law by understanding the systems as autonomous bubbles uncoupled from state law. Accordingly there is no state monopoly on law making, and neither does privately made law 29  Calliess (ed.), Transnationales Recht, 2014; Zumbansen (ed.), The Oxford Handbook of Transnational Law. 30  Calliess/Zumbansen, Rough Consensus and Running Code – A Theory of Transnational Private Law, 2010. 31  Teubner, Rechtshistorisches Journal 15 (1996), 255 et seq.; Fischer-Lescano/Teubner, Regime-Kollisionen, Zur Fragmentierung des globalen Rechts, 2006. See also Weller, in: Gottschalk/Michaels/Rühl/von Hein (eds.), Conflict of Laws in a Globalized World, 2007, 242, 249 et seq. 32  Teubner, in: FS Hopt, 2010, 1449 et seq.; id., ZaöRV 2016, 661 et seq.; id., ZaöRV 2003, 1 et seq. Further Röthel, JZ 2007, 755 et seq. 33  Teubner, Recht als autopoietisches System, 1989. 34  Jäger/Haas, in: Schimansky/Bunte/Lwowski (eds.), Bankrechts-Handbuch, 5th edn 2017, §  120 no.  21.

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35

have to be traced back to some constitutionally compatible basic norm (“Grundnorm”) as per the monistic model of Hans Kelsen. Global law must rather be understood in a pluralistic sense, as a space with several actors, operating to a large extent independently of each other.35 4. Legal History Approaches The final mention goes to the works which attempt to explain the effect of privately made law from a historical perspective. Private law-making is by no means a child of recent history.36 On the contrary: The private law codifications of nation states in the 19th century replaced a practice that had been cultivated for hundreds of years previously of deciding legal cases according to the usus modernus pandectarum and local usages, without this ever having been so decreed by any political authority. Known works in this field include first of all the historical analysis by Stephan Meder of the ius non scriptum, which he understands not only as law passed down orally, but rather every form of law which is not passed top-down by a state.37 He includes customary law, rules created through private autonomy and also law derived from interpreting written law. Nils Jansen focussed on the process of creating binding authority in the past.38 Rudolf Meyer investigated the development of bona fides from the middle ages to the new lex mercatoria.39 There is of course a whole series of further historical works, which compare the lex mercatoria of the middle ages with current legal practice, from which they draw conclusions about the autonomous creation of legal rules.40

III. Soft Law in German Private Law In the practical application of soft law before German courts, the theoretical categorisation as a source of law mostly only plays a subordinate role. This is because here it regularly does not concern the autonomous application of soft law outside of the state legal order. In any case before state courts the Rome I Regulation does not permit the choice of a non-state law as the sole source of 35  On global legal pluralism see also Michaels, 51 Wayne L. Rev. (2005), 1209; id., in: Schiff Berman (ed.), Oxford Handbook of Global Legal Pluralism, 2020, 629 et seq. 36  On international commercial clauses on the eve of the codified private law cf. e.g. Röder, forum historiae juris 2006, available online at http://www.forhistiur.de/zitat/0610roeder.htm (last access January 2022). 37  Meder, Ius non scriptum – Traditionen privater Rechtssetzung, 2nd edn. 2009. 38  Jansen, The Making of Legal Authority – Non-legislative Codifications in Historical and Comparative Perspective, 2010. 39  Meyer, Bona fides und lex mercatoria in der europäischen Rechtstradition, 1994. 40  See e.g. Wieacker, in: FS Kötz, 1981, 575 et seq.

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law.41 The situation is different before arbitration tribunals, where German procedural law as the lex arbitri, following the example of Art.  28(1) Uncitral Model Law, permits the choice of “rules of law” in place of a national law (§  1051(1) ZPO). This of course also includes non-national rules.42 However, such choice seems to be rare in German arbitration practice.43 The decisive issue here moreover is the interaction between hard and soft law. According to Art.  20(3) GG (German Basic Law), the judiciary is bound by “statute and law”. The starting point for deciding every legal dispute therefore lies in state law. Sources of soft law can however also be drawn upon, if the state legal order appears open to such, i.e. when it opens a door through which soft standards can find their way into the hard law. The German legal order has several such openings, through which soft law can have effect. 1. Private Autonomy The simplest way to elevate soft law to a legal obligation is via private autonomy. The freedom to conclude contracts and determine their content is not directly stated in German law, but is silently necessarily implied in the BGB.44 If the parties to a contract have therefore agreed to integrate a certain text into their agreement, what is agreed thereby becomes part of the contract. By such means the parties can avail themselves of pre-formulated drafts by non-state organisations and give them contractual force. Such is the case for example where the contractual parties agree a body of rules of an international commerce organisation. An example is the standard forms of contracts of the Grain and Food Trade Association (GAFTA) on which it is estimated that 80 % of the world’s trade in grain is shipped. Also of great significance are the ORGALIME General Conditions for engineering industries and the model contract of the FIDIC for consulting engineers. In the area of industrial machinery and facilities the United Nations Economic Commission for Europe (UNECE) has passed numerous conditions of contract and supply. Yet the best-known producer of such rules is of course the International Chamber of Commerce (ICC) based in Paris. It is no coincidence that its date of founding in 1919 is in the period following the first world war, as cooperation based on trust between state delegates did not yet appear very promising in view 41  BeckOK BGB/Spickhoff, 60. ed. 1.8.2021, VO (EG) 593/2008 Art.  3 Rn.  11; Diedrich, RIW 2009, 378 et seq.; Leible/Wilke, in: FS Kronke, 2001, 297, 302. 42  BeckOK ZPO/Wilske/Markert, 42. edn 1.9.2021, ZPO §  1051 Rn.  4; MüKoBGB/Mar­ tiny, 8th edn 2021, Rome I Regulation Art.  3 no.  39; Wegen/Asbrand, RIW 2016, 557, 560. 43  Berger, ULR 2014, 519, 522. 44  Freedom of contract in Germany is regularly seen as emanating from the general freedom of action, which is constitutionally protected in Art.  2(1) GG (German Basic Law), see BVerfGE 89, 48, 61; 95, 267, 305 et seq.

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37

of the painful wounds of the war, and trade associations took it upon themselves to re-assert the building blocks of international commerce. To this day the ICC has published hundreds of legal texts, including a model term on force majeure and hardship,45 but also a model term on the contractual consequences of bribery.46 These rules are then made legally binding between the parties by means of a corresponding agreement. Indispensable nowadays in the area of international trade in goods are the Incoterms, a collection of definitions of 11 typical trade terms on the allocation of risks and responsibilities in the transport of goods. Already in 1936 the ICC published the first version of the Incoterms, to thereby create an international uniform understanding of the terms; since then several new versions have been published. They acquire their applicability by means of the parties incorporating them into their contract.47 The ICC even suggests a model formulation for doing so in the introduction to the Incoterms. The applicability of such model rules as part of the written contract is of course always subject to mandatory statutory law. This means that a contractual rule which contravenes mandatory statutory law is void and will not be applied. In this way mandatory state law limits the capacity of soft law to provide uniform legal solutions across states.48 As each state decides itself what its mandatory provisions are, uniformity of law can never be completely achieved by means of contractual agreements; mandatory provisions in the applicable law can always generate uncomfortable surprises. However, in the realm of commercial law, private autonomy extends especially far and – in contrast to consumer contract law or employment law – state law sets only few mandatory limits. If, however, one contractual party has unilaterally set the standard terms in question, without giving the other party a meaningful possibility of influence, then there is a standard terms test, and in German law according to §  310(1), 2nd sentence BGB also in relationships between businesses. This is where the subordination of soft law to mandatory statutory law is most clearly evident. The internationally uniform contractual rule is subject to the German §  307 BGB; according to which provisions in standard business terms are ineffective if, contrary to the requirement of good faith, they unreasonably disadvantage the other party to the contract. The rule in question is then not applied; however, the

45 

ICC Force Majeure and Hardship clauses 2020. ICC Anti-corruption Clause 2012, ICC Publication No.  740E. Further Meyer, Korruption und Vertrag, 2017, 238. 47 MüKoHGB/Maultzsch, 5th edn. 2021, HGB §   346 no.  126; EBJS/Fest, 4th edn. 2020, HGB §  346 no.  390. 48  Zahn/Ehrlich/Neumann, Zahlung und Zahlungssicherung im Außenhandel, 2010, no.  1/16; Jarass (fn.  2), 88. 46 

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contract otherwise remains valid. The gap thus arising is closed by statutory provisions (§  306 BGB). 2. Commercial Usage and Commercial Customary Law The incorporation of soft standards is more difficult where the parties have made no corresponding express agreement. It would only be possible to apply soft rules objectively if they have the quality of a commercial usage within the meaning of §  346 HGB (German Commercial Code). According to this provision commercial usages apply “between merchants”, i.e. primarily only between groups of persons more closely defined in §§  1 et seq. HGB. Between non-merchants, i.e. for example small business owners or freelance professionals such as lawyers, practices can be binding only in exceptional circumstances.49 A commercial usage establishes when a certain rule is voluntarily generally adhered to by the circles of people involved for a certain period of time.50 In contrast to many other legal orders51 the applicability of commercial usage in Germany is normative. This means that an agreement on applicability by the contractual parties is not necessary, not even a tacit agreement.52 Moreover, merchants are bound by usages applicable to them even if they had no idea of their existence, perhaps because they have only recently entered the business and have not yet been able to gather any experience. However, the parties can contractually exclude the applicability of a usage.53 Commercial usages serve above all the interpretation of legal relationships and the fleshing out of contractual agreements. In the hierarchy of legal rules they stand above dispositive statutory law, but are subject to mandatory law.54 Accordingly they cannot assert complete autonomy from state law. For example, a binding commercial usage could not develop if it was in clear contravention of German competition law. There is however also an advantage to characterizing a rule as a commercial usage as opposed to its mere inclusion in the contract by means of private autonomy. In contrast to purely model contractual rules, commercial usages are only subjected to a limited standard terms test.55 According to §  310(1), 2nd sentence 49  BGH, NJW 1952, 257; OLG Koblenz, NJW-RR 1988, 1306; Baumbach/Hopt/Leyens, 40th edn. 2021, HGB §  346 no.  3 et seq. 50  BGH, NJW 1994, 659, 660; BGH, NJW 2018, 1957, 1959; EBJS/Fest (fn.  47), HGB §  346 no.  5. 51  Cf. e.g. Art.  9 CISG, which follows a subjective model. 52  BGH, WM 2000, 1744, 1745; OLG Frankfurt, NJW-RR 1986, 911, 912; MüKoHGB/ Maultzsch (fn.  47), HGB §  346 no.  28. 53 Baumbach/Hopt/Leyens (fn.  49), HGB §  346 no.  8 . 54 MüKoHGB/Maultzsch (fn.   47), HGB §   346 no.   31; Baumbach/Hopt/Leyens (fn.  49), HGB §  346 no.  10. 55 MüKoHGB/Maultzsch (fn.  47), HGB §  346 no.  32; MüKoBGB/Basedow, 8th edn. 2019, BGB §  310 no.  17.

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Civil Code the standard terms test requires appropriate regard for customs and usages in commerce. This means that if a soft law has solidified into a commercial usage through enduring and widespread use by its addressees over a period of time, this itself is a strong indication of its substantive fairness and transparency.56 Whether a commercial usage exists is decided before a court, if necessary, with the aid of expert testimony. It is in the nature of a commercial usage that it can change at any time, sometimes very quickly, such as when technical developments cause radical change in commercial practice. This also means that commercial usages can usually not be fixed in writing. Each codification would only be a kind of snap-shot of the practice at the current moment and commercial practice could at a later point in time already have assumed new forms. An exception is the Tegernsee Customs in timber trade.57 These were developed by a commission of representatives of the German timber trade and regulate the domestic trade in round timber, sawn timber, wood-based materials and other semi-finished wood products. As for the Incoterms, while there is still some debate, the prevailing view in Germany is that they do not, at least in their entirety, represent commercial usages.58 As the ICC updates the rules on average every 10 years, the necessary enduring and consistent acceptance in practice can never occur. Nevertheless, some individual rules within the catalogue of obligations could correspond with a parallel commercial usage. This means that if the contractual parties have agreed, without further elaboration, supply “FOB Rotterdam”, then the respective current definition in the Incoterms does not already apply as a matter of commercial usage; this requires still at least an indication of a corresponding intention of the contractual parties. Commercial usages can harden over time into commercial customary law. This is the case where the involved groups of persons no longer merely follow the rule as a matter of societal convention, but rather because in the meantime a collective understanding has formed, that makes it legally binding (opinio iuris).59 As customary law the rule then applies directly just as statutory law, it is no longer subject to any judicial test of fairness, neither does it need to be proven with the aid of expert testimony, and generally it is also no longer subject to change. The distinction from usage is not razor sharp, but in any event the requirements for application as a matter of customary law are very much higher.

56  OLG Frankfurt a. M., NJW-RR 1988, 1485, 1486; MüKoHGB/Maultzsch (fn.  47), HGB §  346 no.  128; MüKoBGB/Basedow (fn.  55), BGB §  310 no.  19. 57  First version 1950, current version 1985, new version in preparation. 58 EBJS/Fest (fn.  47), HGB §  346 no.  391. 59 MüKoHGB/Maultzsch (fn.  47), HGB §  346 no.  20.

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3. Soft Law as a Basis for Statutory Law The legislator can take soft law as a basis for the formulation of new laws, which then apply directly as hard law. A special category of soft law form the so-called model laws, which are drafted by formulating agencies as a service to national and international legislators as a basis for their legislative initiatives through which an international uniformity of laws can be achieved. 60 Model laws, in contrast to international conventions, leave the legislator complete freedom in transposing the rules. A convention, insofar as it has not given its member states the possibility to lodge reservations over individual provisions, can only be ratified as a whole, whereas a model law merely represents a non-binding model. Accordingly states here have the option to transpose the model into national law in its entirety, to change individual rules as they see fit or even only to transpose a select few rules and otherwise take completely independent approaches. The model law therefore on the one hand leads to less uniformity of law than a convention, but it is precisely through this flexibility that it allows a greater number of states to at least orientate themselves on its rules, even those which would never have signed a convention with the same content. 61 The German legislator has not taken up many model laws to date. Germany has no special legislation for contracts concluded via modern means of communication and has therefore not implemented the Uncitral Model Law on Electronic Commerce (1996). For the same reason, Unidroit’s Model Franchise Disclosure Law (2002) has not been implemented. There was no need to implement the 1997 Uncitral Model Law on Cross-Border Insolvency, as foreign insolvency proceedings were already fully recognized in Germany at that point in time. However, in 2018 Uncitral adopted a new Model Law on Recognition and Enforcement of Insolvency-related Judgments, which goes further in recognizing foreign court decisions in insolvency proceedings; it remains to be seen if the German legislator picks up on this model law to update its current provisions. 62 The most successful model law in Germany is arguably the Uncitral Model Law on International Arbitration. They were completely incorporated into the German Civil Procedure Rules (§§  1025 et seq. ZPO) in 1998 with only few exceptions,63 as part of a reform programme to make Germany a more attractive location for international commercial arbitration.64 The German legislator consciously followed the model law’s aim of harmonisation, recognising the rules as

60  David (fn.  4), 5-212; Kronke (fn.  5), 1153; Schneider/Nietsch, in: FS Jayme II, 2004, 1361, 1362 f.; Basedow (fn.  5) 17 f. 61  Kropholler (fn.  2), 105 et seq. 62  Tashiro, in: Braun (ed.), Insolvenzordnung, 8th edn. 2020, Prior remark to §§  335–358 no.  22. 63  Schumacher, BB 1998, Beil. 2, 6 et seq. 64  As per the official justification for the legislation, BT-Drs. 13/5274.

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representing an international consensus, known and respected around the world. In many areas of the law, EU legislation is more dominant than autonomous legislation by the Member States. The question then becomes whether and to what extent the EU legislator is willing to consider soft law as a basis for the creation of regulations and directives. A very recent example is the Whistleblower Directive (Directive (EU) 2019/1937 of 23 October 2019 on the protection of persons who report breaches of Union law); recital 31 of which names as one of its influences the Council of Europe Recommendation on the Protection of Whistleblowers of 30 April 2014, a soft instrument. The model law can keep a form of independent significance for the statutory law upon which it is based, long after it has been enacted, namely for interpretation as evidence of the course of the legislative process. The model law can thereby inform about the political background of the law and about the intentions which the legislator pursued. 4. Soft Law as a Standard for Interpretation Even where soft law has not served as a model for a specific rule, it can be drawn upon as a standard when interpreting statutory law. It would then work as persuasive authority, which draws its force from the high regard it enjoys in relevant circles or from the reputation of its originator, comparable for example to the learned opinion a well-known professor. Likewise soft law can reveal much about widely held views in legal practice. Of course, this does not make it strictly binding; but it would be a good indication of success in legal proceedings, to know that the soft law rules are on one’s side. Potential cases for application are numerous, but the effect appears clearest in the context of open legal terms or general clauses, the precise meaning of which must be determined in the individual case. The unclarity of statutory norms makes their application in practice difficult and unforeseeable. If however the judge can orientate themself on objective standards, which enjoy high regard in practice, then this makes the standards by which the parties must conduct themselves more foreseeable and also increases acceptance of the judgment delivered. A well-known example for this quasi-binding effect of privately made rules comes from sport:65 If there is a skiing accident in which one participant is injured by another, the tort law claim to damages is determined by §  823(1) BGB. This requires that the injury was caused “intentionally or negligently”. What negligence means is defined in §  276(2) BGB: A person is negligent if they fail to 65  On the liability law relevance of extra-statutory rules of conduct in sport cf. Grunsky, Haftungsrechtliche Probleme der Sportregeln, 1979; Zimmermann, VersR 1980, 497; Loo­ schelders, JR 2000, 265.

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take the care necessary in the circumstances. What rules of conduct apply in the specific case of skiing is not provided further at statutory level. However, the international skiing federation FIS (Fédération Internationale de Ski), a private association based in Switzerland, has drafted the “Rules for the Conduct of Skiers and Snowboarders”, which represent a worldwide consensus on safe behaviour for skiing. German courts have often referred to these rules in tort cases in order to substantiate what constitutes “negligence” in within the meaning of §  823(1) BGB. 66 If a skier follows the FIS-rules, rarely will they be held to have violated the applicable standard of care. There is however disagreement as to the basis of application of the FIS rules. Prevailing opinion does not see them as strictly binding, rather merely as context specific rules of conduct. 67 Accordingly they merely represent a guideline for the judge, and could require modification in an individual case, for example if technical developments in skiing equipment require greater care by the skier. 68 But there are also voices which categorise the FIS rules as customary law.69 Customary law binds the judge just as statutory law, though of course subject to the requirement, that the FIS rules are also regarded as binding in skiing circles (opinio iuris).

IV. Specific Examples 1. UCP 600 The most successful model contract texts of the ICC certainly include as well as the Incoterms the Uniform Customs and Practices for Documentary Credits (UCP 600); these also enjoy high regard in German business.70 The UCP work so well that the German legislator has thus far not seen the need for additional statutory regulation of letter of credit operations. Interestingly, to this day there is no clear agreement in German scholarship as to the legal nature of the UCP. The prevailing view assumes that they are standard rules for contracts which can be agreed by the parties by exercise of their private autonomy. This starting point is uncontroversial in that the UCP apply if the parties have incorporated them into their contract.71 Art.  1 UCP itself requires as a condition for their 66  BGH, NJW 1972, 627, 628; OLG Brandenburg, NZV 2006, 662 et seq.; Tienes, NJOZ 2011, 1553 et seq.; Dambeck, DAR 2007, 677 et seq. 67  BGH, NJW 1972, 627; BGH, NJW 1987, 1947, 1949; OLG Düsseldorf, VersR 1990, 111; MüKoBGB/Wagner, 8th edn. 2020, BGB §  823 no.  802; Heinemeyer, DAR 2013, 685, 686 et seq.; Tienes (fn.  66), NJOZ 2011, 1553 et seq. 68  Heermann/Götze, NJW 2003, 3253 et seq. 69  OLG Hamm, NJW-RR 2001, 1537, 1538, OLG Stuttgart, NJW-RR 2010, 684, 685. 70  Schütze, Das Dokumentenakkreditiv im Internationalen Handelsverkehr, 5th edn 1999, no.  28; Liesecke, WM 1976, 258. 71  Lenz, EuZW 1991, 297, 298; Westphalen, IWRZ 2019, 251, 253.

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applicability that the text of the credit expressly indicates that it is subject to the rules. The UCP thus apply as standard terms. As pre-formulated contractual terms the UCP however are in principle subject to the standard terms test. At conclusion of contract, they are regularly presented by one side, and in this respect there is normally no room for negotiation, as otherwise the advantages of a uniform text would be lost to the bank.72 In the academic literature the validity of some of their rules is indeed disputed, in particular concerning the exclusion of liability in favour of the banks.73 Yet in practice thus far there appears to be no special problems, in any case none of the UCP terms have to date fallen foul of the standard terms test in German courts. If on the other hand the parties make no reference whatsoever to the UCP, then it would appear that they cannot objectively be said to be included in the agreement. In particular, according to the prevailing view, they do not apply in their entirety as customary commercial law.74 This is because the conventional definition of commercial custom requires a settled usage over a longer period of time. Just as the Incoterms, the UCP have of course been in use for a long time, but they are updated on average every ten years by the ICC and adapted to new conditions. For this reason, no long, unbroken practice can ever establish. The same argument, according to the prevailing view, also precludes their categorisation as a commercial usage in their entirety. There are opposing voices here, that advocate reference to the UCP in their entirety as usage.75 Others concede that at least individual aspects (such as for example the abstractness of letters of credit from the underlying transaction) do indeed have a long tradition.76 Admittedly this is a moot point in practice, as the standard terms of the bank always expressly refer to the UCP anyway.77 The view has also been expressed that the UCP are an expression of an independent international legal order, such as part of the lex mercatoria or as international customary law.78 The prevailing view rejects this reasoning for the same reason it rejects their categorisation as commercial usage.79

72  Westphalen (fn.  71) 252. Of a different view in this respect though see Schütze (fn.  70) no.  18. 73  Plett, DB 1987, 925, 927 as well as Westphalen, WM 1980, 178, 180 et seq. and id., RIW 1994, 453, 457. 74  Nielsen, ZIP 1984, 230; Westphalen (fn.  71) 253; Schütze (fn.  70) no.  15 et seq. 75  Even the BGH so said in an older, albeit isolated decision, AWD 1958, 57, 58. Further Zahn/Ehrlich/Haas (fn.  48) no.  1/17; Liesecke (fn.  70) 258; Wälzholz, WM 1994, 1457, 1458. 76  Westphalen (fn.  73), 178; Schütze (fn.  70) no.  16. 77  Plett (fn.  73), 925; Nielsen (fn.  74) 230. 78  Berger, in: FS Schütze, 1999, 103, 105. 79  Westphalen, RIW 1994, 453; Schütze (fn.   70), no.  12 et seq.; Jäger/Haas (fn.  34) §  120 no.  17 et seq.

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2. UNIDROIT Principles A second group of soft legal rules, whose effect in German law merits particular attention, are principles of law predominantly derived from comparative analysis. The inspiration for these bodies of rules were the US-American Restatements of Law, which do not assert any legal force for themselves either, but work solely as persuasive authority. The most well-known international restatement is the UNIDROIT Principles of International Commercial Contracts. The success of the UNIDROIT Principles later tempted many imitators.80 Often mentioned in the same breath as the UNIDROIT principles are the Principles of European Contract Law, which however in their approach were always conceived more as a model for the further development of European law than as directly applicable contract law. True to this understanding they later contributed to the most ambitious project of this kind by far, the Draft Common Frame of Reference (DFR), whose working group had its strategic headquarters in Osnabrück.81 The works however ultimately lost political support in Brussels and therefore remained an essentially academic text, and they have not left any notable traces in legal practice. Nevertheless, to this day the restatement of principles continues to be chosen as a working method, most recently for the area of reinsurance the Principles of Reinsurance Contract Law (PRICL 1.0) 2019, 82 and the continuing works of the Principles for a Data Economy, a common project of the European Law Institute (ELI) and the American Law Institute (ALI), as well as the ELI Principles for the COVID-19 Crisis. 83 For the latter instruments it is too early to assess their effects. The following remarks are therefore limited to the reception of the UNIDROIT Principles in Germany. Work on the Principles was followed with great interest in Germany.84 On publication of the first edition in 1994 there was also a wave of publications from Germany, mostly with a positive, curious underlying tone. Many PhD theses analysed aspects such as the different possibilities of their application.85 Adherents to the lex mercatoria doctrine saw here a contribution to the increasing significance of privately made law and to its creeping

80 

Overview in Wurmnest, ZEuP 2003, 714 et seq. Von Bar, in: FS Henrich, 2000, 1 et seq. 82  Heiss, ZEuP 2020, 999 et seq. 83  Twigg-Flesner, EuCML 2020, 89, 92. 84  See e.g. Berger, ZVglRWiss 194 (1995), 217 et seq.; Drobnig, in: Grundmann/Medicus/ Rolland (eds.), Europäisches Kaufgewährleistungsrecht, 2000, 49 et seq.; Wichard, RabelsZ 60 (1996), 269 et seq.; Michaels, RabelsZ 62 (1998), 580 et seq.; id., RabelsZ 73 (2009), 866 et seq. 85  Schilf, Allgemeine Vertragsgrundregeln als Vertragsstatut, 2005; Baumann, Einheitliche Regeln der Auslegung internationaler Handelsgeschäfte – Eine rechtsvergleichende Untersuchung der UNIDROIT Principles, der Principles of European Contract Law und des Uniform Commercial Code, 2004; Petz, Die UNIDROIT Prinzipien für internationale Handelsverträge, 2001; Meyer (fn.  3). 81 

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codification. From Germany, two commentaries on the UNIDOIT Principles were published. 86 The positive reception in German legal scholarship stands in contrast to the rather modest successes of the Principles in German legal practice. The primary means of giving a soft law instrument legally binding force is, as noted above, via a corresponding agreement by the parties. The Principles themselves also express this, when they hold in their preamble: “They shall be applied when the parties have agreed that their contract be governed by them.” The private international law applicable by the German courts however, the Rome I Regulation, does not allow, as already noted above, the choice of a non-state law. While this was contemplated in the creation of the regulation87 it was later excluded from the final draft. The parties could therefore in any event only integrate substantive parts of the Principles into their contract (so-called substantive choice of law).88 But they would then be subject to the tests of mandatory rules of the applicable state law. The situation is different for arbitral tribunals, where a choice of the Principles as the only applicable law would be possible according to the German view. 89 Such cases do not seem to arise often in practice, anecdotal remarks in the literature reveal the occasional choice of law at most.90 The UNIDROIT Principles are correctly not regarded as a commercial usage within the meaning of §  346 HGB.91 Not even the required widespread use in commercial circles is present. The rules are also too substantively general to be capable of characterisation as commercial usages. The Principles were more successful as an influence on German legislation. Indeed, since the publication of the first edition of the Principles, no legislator in the world in projects concerning contract law has been able to ignore the Principles; they exert great force as a regulatory proposal, representing what the international community agrees upon, a product of very careful comparative law analysis, and developed and advocated by a highly regarded international 86  Vogenauer (ed.), Commentary on the UNIDROIT Principles of International Commercial Contracts (PICC), 2nd edn. 2015; Brödermann, UNIDROIT Principles of International Commercial Contracts – An Article-by-Article Commentary, 2018. 87 Art.   3 (2) Proposal for a Regulation on the law applicable to contractual obligations (Rome I), COM(2005) 650 final provided: “The parties may also choose as the applicable law the principles and rules of the substantive law of contract recognized internationally or in the Community.” Cf. here Jud, JBl 2006, 695 et seq.; Heiss, in: Ferrari/Leible (eds.), Rome I Regulation, 2009, 1, 9 et seq.; Mankowski, IPRax 2006, 101, 102; Wagner, IPRax 2008, 377, 379 et seq. 88 IntVertragsR/Ferrari, 3rd edn. 2018, VO (EG) 593/2008 Art.  3 no.  19. 89  BeckOK ZPO/Wilske/Markert, 43rd edn. 1.12.2021, ZPO §  1051 no.  4; Drobnig, ULR 1998, 385, 389 f. 90 See Brödermann, IWRZ 2018, 246 et seq.; id., IWRZ 2019, 7 et seq. 91  Kröll/Hennecke, RIW 2001, 736, 741; Basedow, in: GS Lüderitz, 2000, 1, 5; Meyer (fn.  3), 328. From an international perspective most recently also Muñoz, Uniform Commercial Code Law Journal 50 (2021), 1 et seq. More openly Horn, in: Berger (ed.), The Practice of Transnational Law, 2001, 67, 77.

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organisation. In Germany it was the reform of the law of obligations in 2001 that completely upended the hitherto existing system of contract law in the BGB and barely left a stone unturned. The direct impetus for this reform was the transposition of the consumer sales directive, but the legislator took the opportunity, despite great time pressure, to overhaul the entire law of obligations. Of the various international sources drawn upon for inspiration, the CISG, the UNIDROIT Principles and the Principles of European Contract Law stand out. This is documented by many references to them in the legislative materials.92 At the same time the Max-Planck-Institute for Comparative and International Private Law in Hamburg held a conference examining the influence of the Principles in the German law of obligations.93 This leaves the question of whether German courts today refer to the Principles to interpret German law. This function as an interpretative aid for domestic law has been quite remarkable. It was not even envisioned in the original draft of the Principles, as it was simply thought improbable that there would be gaps in national legal orders which would be closed by external sources.94 It was even more surprising when, within the first years since their publication, this became one of the Principles’ primary functions in practice. This is so not only for arbitral tribunals; also the higher courts of various states have shown no hesitation in interpreting national law in light of the UNIDROIT Principles, to participate in the international development. The Unilex database95 contains corresponding examples from Australia, Italy, Lithuania, The Netherlands, Paraguay, Russia, Spain, the United Kingdom and many other countries. German courts unfortunately have been reserved in this respect, which is surprising given the role of the Principles in the reform of the law of obligations. There is one very fleeting reference to the Principles in justifying the contra proferentem rule in a judgment of the Frankfurt District Court from 2011;96 other courts remain completely silent. Yet in the commentaries and related literature to the BGB there are references to the UNIDROIT Principles to this day, though these tend to take the form of additional comparative information rather than an extensive analysis of their relationship to German law. The lack of success of the UNIDROIT Principles in practice relative to the Incoterms and the UCP 600 can be attributed to different causes. Firstly, the Principles do not originate from practitioners themselves, rather it is primarily the law of professors. UNIDROIT is indeed a highly regarded international organisation with a long tradition, but without the tightly interwoven network 92 

Cf. BT-Drucks. 14/6040, 129, 181 et seq. Basedow (ed.), Europäische Vertragsrechtsvereinheitlichung und deutsches Recht, 2000. 94  Baptista, Tulane Law Review 69 (1995), 1209, 1220; Drobnig, in: ICC, The UNIDROIT Principles for International Commercial Contracts: A New Lex Mercatoria?, 223, 228. 95 www.unilex.info. 96  LG Frankfurt, Judgment from 15th December 2011 – 2-13 O 302/10 –, juris. 93 

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with practice that the ICC has. The Principles thus do not directly emanate from practice and therefore also appear more attractive to professors than practitioners. Secondly, this is not specialist material, addressed to a relatively small circle of specialists. Both the Incoterms for transport of goods as well as the UCP for letters of credit are niche areas of the law, where comparatively small groups of experts communicate with each other. This presumably applies to an even greater degree in Germany than for example in England, where these areas feature more dominantly in legal education and also generally are covered more extensively in textbooks. In a small circle of experts it is easier to agree on standards. The Principles by contrast concern general contract law which is an extremely wide field with a correspondingly large number of interested parties. Following Teubner’s analysis, there is accordingly no closed “system”, in which a dominant rule could exert itself. 3. The Law of Corporate Governance A particularly perceptible interaction between hard and soft law underway at present is in the area of corporate law obligations of conduct. Here over recent years many sub-areas have emerged, with experiments in hybrid frameworks to explain the law of the ever more complex demands of good corporate management. This means that the legislator sometimes only provides a framework and leaves the fleshing out to flexible soft law, sometimes even with express reference thereto in its legislative rules. One prominent example is corporate governance: §  161 AktG (stock corporation act) demands that stock corporations comply with the recommendations laid out in the German Corporate Governance Code (“Deutscher Corporate Governance Kodex”, DCGK).97 While it remains possible for the corporation to deviate from the DCGK, it must explain each deviation and publish its decision permanently on its website (“comply or explain”). The Code thus relies on acceptance rather than compulsion. The legal nature of the DCGK is subject to much debate.98 The expert commission responsible for drafting the Code was initiated by the Ministry of Justice in 2001, i.e. by the executive branch of the government. The ministry, however, restricted itself to an examination of the process by which the code came into being, its substantive fairness and whether it breached applicable law.99 The rationale and the expediency of the recommendations on the other hand remain solely in the hands of the commission which from time to time releases updated versions.

97  See www.dcgk.de for the German version of the Code as well as for an English translation. 98  Summary in Hüffer/Koch, 15th edn. 2021, AktG §  161 no.  3. 99 Hölters/Weber/Hölters, 4th edn. 2022, AktG §  161 no.  3.

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As for responsibility for violations of the law by corporations, compliance has in recent years developed into an independent area of the law. The birth of modern compliance is said to be the Siemens scandal in 2008, in which the German technology giant came to the attention of American and finally German law enforcement authorities for involvement in systematic bribe payments in a number of countries and ultimately saw itself confronted with fines and damages claims running into billions. In consequence, the installation of compliance departments in all large corporations has had a fundamental effect on the way business is conducted. Avoidance of corruption was only the beginning, and many other areas of the law were quickly adopted also, from competition law to data protection to product safety.100 Compliance means not only adherence to the law – such a duty has of course always existed. Much more than that, appropriate organisational measures should ensure that violations of the law do not occur. This presents the question of how these practices are to be determined. The law here is vague, for example with reference to the business judgment rule (§  93 (1), 2nd sentence AktG). The legislator has left it to practice to flesh out these vague legal terms, and here numerous private regulatory proposals have emerged, such that there has even been talk of an “industry” of rule formation.101 The market is competitive, the various private rule makers are therefore in open competition with each other, and the promise of reward is great. To stay with the example of fighting corruption, in German criminal law it is an offence to pay a bribe.102 The details, such as the distinction from socially customary gifts as gestures of politeness, remain unregulated in statute and must be decided in the individual case after weighing all the circumstances. For many years there has been a flood of publications which attempt to articulate recommended courses of action or best practices. These include first of all the Codes of Conduct, which every large corporation has drafted for itself in recent years. On the level of business federations there are several initiatives underway, such as the Guidelines on Gifts and Hospitality from the ICC in 2014.103 Specifically in Germany there is the Kodex Medizinprodukte des Bundesverbandes Medizintechnologie104 (Medicinal Products Code of the National Federation of Medical Technology) or the Wertemanagement Bau des Bayerischen Bauindustrieverbandes (Ethical Management in Construction by the Bavarian Federa100 Hauschka/Moosmayer/Lösler (eds.), Corporate Compliance – Handbuch der Haf­ tungs­vermeidung im Unternehmen, 3rd edn. 2016. 101  Sampson, Global Crime 2010, 261 et seq. 102 The most important provisions are §§   331 et seq. StGB (Strafgesetzbuch, German Criminal Code) for the bribery of state employees, §  299 StGB for bribery in private affairs. 103 https://iccwbo.org/publication/icc-guidelines-on-gifts-and-hospitality. Thereto Sid­ hu/Eckstein, CCZ 2015, 34 et seq. 104  Dieners, Handbuch Compliance im Gesundheitswesen, 3rd edn. 2010, Chapter 4 no.  15.

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tion of Construction Industry),105 to name but two examples. As well as the business federations there are also rules from organisations of civil society, such as the internationally developed guidelines in the Business Principles for Countering Bribery by Transparency International.106 The most far-reaching rules to date, however, do not emanate from lawyers at all, rather from financial auditors, who enable companies to organise their business according to certain principles, and in some instances even provide corresponding certification.107 With the rise of compliance, the monitoring of adherence to commercial criminal law has de facto transferred from state to corporation, i.e. been privatized. Under this arrangement, businesses hope that if they follow best practices they can obtain some leniency, should violations of the law nevertheless occur. At least they can demonstrate with the measures that they have made all objectively required efforts to avoid such violations. However, as to the extent to which courts and enforcement authorities will in practice be prepared to limit or exclude liability on the basis of compliance measures taken, the jury is still out.108 An even younger area of the law than compliance is Corporate Social Responsibility (CSR).109 Because of the international structure of supply chains, it is difficult as a matter of jurisdiction for individual national legislators to hold their corporations liable for violations of the law committed by their suppliers overseas.110 Further, even with extra-territorial application of national laws, different national standards could potentially interfere with fair competition between the corporations; accordingly, there is a need for an international level playing field with the same rules for all. The European legislator has made a first regulatory proposal with the CSR directive.111 This places a duty on certain large businesses to report on the measures it has taken to ensure sustainable production.112 The appropriate measures themselves are not provided by hard law, but rather left to the businesses, which can avail themselves of the soft law 105 

Hess, in: FS Franke, 2009, 139 et seq.

106 https://www.transparency.org/files/content/publication/2015_BusinessPrinciples

Commentary_EN.pdf (last accessed January 2022). 107 Cf. the certification standard PS 980 „Grundsätze ordnungsmäßiger Prüfung von Compliance Management Systemen“ (“Principles for the orderly auditing of compliance management systems”) of the Institute of financial auditors (Institut der Wirtschaftsprüfer (IDW)) as well as at international level the Standards of the International Standardization Organization (ISO), in particular ISO standard 37001 for Anti-Bribery Management Systems, published in 2016. 108  On possible further developments Hauschka/Moosmayer/Lösler (fn.  100), §  1 no.  4 4 et seq. 109  Beckers, Enforcing Corporate Social Responsibility Codes, 2015; BeckOGK/Fleischer, 1.9.2021, AktG §  76 no.  42 et seq. 110  Krisch, in: Reinisch/Hobe/Kieninger/Peters (eds.), Unternehmensverantwortung und Internationales Recht, 2020, 11 et seq. 111  Directive 2014/95/EU of 22.10.2014. 112  Transposed in Germany in §§  289a et seq. German Commercial Code (Handelsgesetzbuch, HGB).

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bodies of rules. Some of these are listed in Recital 9 of the CSR directive, including the UN Guiding Principles on Business and Human Rights (Ruggie Principles), the OECD Guidelines for Multinational Enterprises and the ISO standard 26000. Other nascent regulatory works include the Global Standards for Sustainability Reporting of the International Sustainability Standards Board.113 The significance of privately made soft law has thus also overtaken state law in the area of CSR. The organisations involved in making the law even display a tendency to slowly extend the scope of their activity (“mission creep”).114 Soft standards of conduct cannot simply be ignored. They play an important role in filling the gaps in all kinds of legal situations, such as for civil liability for negligence of a company for violations of human rights. To this extent they have been called “soft law with hard sanctions”.115 The significance of the new area of the law in this respect is not limited to the articulation of rules of conduct; there are even separate legal enforcement mechanisms for them emerging outside of the state court system. These are, firstly, the OECD complaint procedure before the national contact points. In Germany a department in the business ministry has been constituted for this purpose, offering a neutral forum for the settlement of disputes arising from complaints of violations of the OECD principles.116 Further, since the end of 2019 there are the Hague Rules on Business and Human Rights Arbitration, an independent set of arbitration rules based on the Uncitral rules, but which concern the particularities of human rights proceedings.117 With such own fora for the enforcement of the soft bodies of rules one may prophecy that the whole area of CSR will further emancipate itself from state made hard law and establish itself as a powerfully effective area of privately set standards.

V. Conclusion Soft law already plays a large role in German law; its significance in coming years will likely increase further. This follows from globalisation, which makes a regulation of its social consequences through states – whether acting alone or through international law treaties – increasingly difficult. International commerce in goods only made a first step in this respect with the establishment of privately made rules (lex mercatoria). Since then, there have been private rules without direct statutory force in ever more areas of life.

113 

Sellhorn/Wagner, DB 2022, 1 et seq. Spießhofer, NZG 2018, 441, 443. 115  Spießhofer, AnwBl 2019, 408, 410; Huck/Kurkin, ZaöRV 2018, 375, 383. 116  Krajewski/Bozorgzad/Heß, ZaöRV 2016, 309, 317 et seq. 117  Gläßer/Kück, SchiedsVZ 2020, 124 et seq. 114 

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The relationship of these soft rules to state law is very different across all these areas. At times it is a struggle for complete autonomy like with the lex mercatoria, whose proponents specifically seek to create an order of contract law outside of any state law. In other areas we find more of a happy coexistence, such as with the UCP and other model contracts, which regulate aspects of a contractual relationship for which there is otherwise barely any statutory provision, and which in this sense fit well in the national legal order. In recent times we can even observe an increasing trend towards a smart mix of hard and soft rules, whereby the legislator consciously leaves the fleshing out of the mandatory framework it provides to private actors.

Globalisation et pluralisme juridique – Globalisation and Legal Pluralism Orders of Pluralism and Rights Stefan Grundmann

I. Introduction – Topic Diversity in the international sphere is a fact, legal pluralism is a normative order – and the latter holds true as well for global legal pluralism. In this respect, the delineation “in the international sphere” can refer to regional and to global contexts. Both are international and raise similar questions and issues, with the difference that regional contexts are typically regulated more densely and with more certainty. On the other hand, the holding that legal pluralism – also global legal pluralism – is a normative order can be seen both as a positive statement (is indeed) and as a normative statement (should be).1 Moreover, while this double statement may not exhaust the concept of “legal pluralism”, it is so core and already so complex that focusing on it exclusively seems legitimate and as well advisable. When legal pluralism as a normative order is therefore the core topic of this contribution, two issues should be highlighted from the beginning that are important for how the topic is approached. These are the points that determine the architecture of the contribution. The first point adds some detail to the question why the dichotomy of global vs. regional is important (it will play a role both at the conceptual level and at the level of examples). While legal pluralism at the level of globalisation forms the more far-reaching dimension, and while it may indeed be that (only) globalisation has transferred the concept of legal pluralism from a status of “slum-dwelling” to one of mainstream and core importance,2 the regional dimension is important for this topic as well. Examples from the

1 

From the large array of literature on global legal pluralism, see in the first sense (is a normative order): Teubner, in: Teubner (ed.), Global Law without a State, 1997, 3–28; rather in the second sense (should still become a normative order): Schiff Berman, in: Schiff Berman (ed.), The Oxford Handbook of Global Legal Pluralism, 2020, 1–35. 2  In this sense, see namely: Michaels, 5 Annual Review of Law and Social Science (2009), 243, 243 et passim; von Benda-Beckmann/Turner, 50 The Journal of Legal Pluralism and Unofficial Law (2018), 255, 265.

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international, but regional level are more intense in substance, and therefore this article strongly refers to them as well. The second point is about which normative instruments are seen as being key for legal pluralism – also global legal pluralism. These are two, which are discussed in some detail. The first one is a constitutional framework for a sound development of pluralism (of values mainly), and this is seen as being key, but also as existing in nuce at the global level as well. The second instrument is seen in a pluralist methodology and law theory. While the first instrument has been discussed intensively over the last two decades, the second much less and only very scarcely in the context of global legal pluralism. This does not imply, of course, that there is not a much larger multitude of questions raised by the concept of ‘legal pluralism’, such as pluralism of legal orders and sources, pluralism of legal values, pluralism of legal actors, and many more. However, the ultimate (constitutional) values and the shape of the overall methodology by which all thinking on pluralism should be approached would still seem to stand out among all questions on (global) legal pluralism. A third point needs to be addressed. The two dimensions – regional vs./and global and constitutional and methodological – are discussed in more depth. The overall thrust is, however, that the findings are necessary as foundations for any discussion of the topic of “rights of nature” (and probably of any topic of similar revolutionary and foundational shape in the international sphere). “Rights of nature” are approached in a much more sketchy way in the conclusions. Thus the article is designed primarily as one about the question to know which arguably are the most important pillars of a legal pluralism, in particular a global legal pluralism (see II. and III.), and only then as well about potential repercussions of such view for innovative questions such as that of “rights of nature” (see IV.).

II. Global Legal Pluralism – Constitutionalization as its First Pillar 1. Constitutionalization as Order for Global Legal Pluralism The development over the last two decades, both on the level of theory and on that of legislative tools and (some) adjudicative trends can be summarized in this way. Constitutionalization at the regional and global (international) level has paved its way – despite the fact that a global rule setter can only partially be found. At the level of theory, it would indeed seem as if two major trends had evolved as the two dominant ones for the conceptualisation of “law” in the transnational arena. This arena is characterized by the fact that law of state origin – includ-

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ing public international law treatises and ratification processes – clearly forms only a part, in a number of fields or cases even the less significant part, of the applicable rule material.3 The two dominant trends (in legal theory and as well doctrinal thinking) would seem to be the new law merchant approach and the constitutionalization approach.4 These are, of course, poles and extremes, characterized in a number of ways, certainly with many grades and shades of transition between them. However, they mark the two opposite views on the perceived desirability of state influence and namely of influence of democratic decision processes (as in a large number of market economies).5 In the new law merchant mainstream, party autonomy, trade practices and perceived social norms, namely social norms within certain circles such as specific industries, form the constitutive elements. 6 Conversely, the constitutionalization approach would see more room for a solid regime of values that can be traced back primarily to state authority. It may well be that the constitutionalization approach also acknowledges that rule-setting from state source, including constitutional norms, is less intense in the transnational sphere and that law created by private parties, namely the business world where multinational enterprises act as rule-setters, plays a (still) more dominant role in this sphere.7 This, however, is perceived as not represent3  For the scarcity of input from state (public authority) sources as the most prominent and characteristic feature for “transnational law” (as opposed to national, international and European law), see namely Zumbansen, 1 Transnational Legal Theory (2010), 141. 4  For the new law merchant approach Schmitthoff, 2 Current Law and Social Problems (1961), 129; Trakman, 48 American Business Law Journal (2011), 775; Berger, The Creeping Codification of the New Lex Mercatoria, 2nd Ed. 2010; G.-P. Calliess, in: J. Basedow et al. (eds.), Encyclopedia of Private International Law, 2017, 1119–1129. For a transnational consti­ tutional law Teubner, Constitutional Fragments: Societal Constitutionalism in Globalization, 2012, 172. For the new constitutionalism Gill, 10 Global Change, Peace & Security (1998), 23–38; affirming even a global constitutionalism Kumm, in: Suami/Peters/Venoverbeke/Kumm (eds.), Global Constitutionalism from European and East Asian Perspectives, 2018, 168–199. 5  Of course, state input into international rule setting not necessarily is based on democratic decision processes alone. Given, however, the dominant economic power of the US – also with long-arm statutes and the like – and given the Brussels effect (Bradford, The Brussels Effect – How the European Union Rules The World, 2020), democratic decision processes at least play a dominant role in the transnational scene whenever state input is in fact shaping the regimes. 6  For the dominance of these features in the new law merchant approach, see Schmitthoff, 2 Current Law and Social Problems (1961), 129, 151; Dalhuisen, 24 Berkeley Journal of International Law (2006), 129, 180. 7 See Backer, 39 Connecticut Law Review (2007), 1739–1784; building on the – not primarily transnational law related – seminal works of Bernstein, 21 Journal of Legal Studies (1992), 115; Ellickson, Order Without Law: How Neighbors Settle Disputes, 1991, 123–136; in German literature see as well Bachmann, Private Ordnung. Grundlagen ziviler Regelsetzung, 2006; Wielsch, 60 American Journal of Comparative Law (2012), 1075–1104. On transnational value chains and their social sciences conceptualisation and legal construction, see recently Eller, Rechtsverfassung globaler Produktion, forthcoming 2022. Good summary in Renner,

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ing the total picture. The other side stressed in the constitutionalization approach is a web of constitutional values for whose formulation state sources have the dominant say and that is equally shaping law in the transnational sphere. All this does not refer only to those pockets of international economy – less so of other parts of society – that are highly regulated. This means where indeed rather detailed regulation exists world-wide, at least in the form of guidelines implemented in binding state law (also EU law) in most of the dominant public economies. 8 What has been said about constitutionalization rather refers to transnational law in general, not only regulated industries, but any business or activities in the transnational sphere. The main line of thinking can be characterised as building on sociological models of internalisation of key norms and also of embeddedness.9 The main argument could be summarized in this way. When in free market economies under the rule of law and with democratic decision making processes it is clear that legislatures, decision-takers, courts etc. have to respect the framework of constitutions – guiding and taking precedence over any rule-setting –, leaving the well-defined domestic realm of law should not lead to complete abandon of such framework philosophy. It is too foundational not to follow actors (thus socialised) also into the transnational sphere. Rather, a transnational law practice established and exercised by state bodies, non-state bodies or private parties, that all nevertheless have agreed in a social contract in their respective contexts to the binding force of a constitutional framework and constitutional values, must be seen under this perspective. Their social contract – similar to all in their respective contexts – does not lapse. in: Grundmann/Micklitz/Renner, New Private Law Theory – A Pluralist Approach, 2021, §  26. 8  There are indeed such highly regulated industries where de facto world-wide detailed regulation does exist, the financial sector constituting one example – where the Basel Core Principles regulate Banking Supervision, the International Organization of Securities Commissions’ (IOSCO) Objectives and Principles the disclosure duties, namely in prospectuses, on capital markets and the Financial Action Task Force’s (FATF) Recommendations the anti-money-laundering framework (albeit all only as recommendations). See, for a survey Wymeersch, 1 Global Policy (2010), 202–208; more recent Jones/Knaack, 10 Global Policy (2019), 193; see also Newman/Posner, 23 Review of International Political Economy (2016), 123; the broad survey in Quaglia, The European Union & Global Financial Regulation, 2014. There are several of these “high-risk” or “key-resources” industries that are regulated in this way and that, because of the so called impact theory in private international law, are regulated in this way consistently at least for the US and for the EU market (thereby also for the bulk of global consumption). In these cases, however, the transnational world is similarly state-rule regulated as is any national context. These are not the areas for which the constitutionalization approach needed to be developed. 9  On internalisation of norms as a core idea of the sociological perception of the evolution and power of law, see McAdams, 96 Michigan Law Review (1997), 338, 378 et seqq.; also, Cooter, 144 University of Pennsylvania Law Review (1996), 1643. On embeddedness, see the seminal work by Granovetter, 91 American Journal of Sociology (1985), 481. For an explanation of the context and the repercussions, see Grundmann, in: Grundmann/Micklitz/Renner, New Private Law Theory (note 7), §  27.

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It may be altered, be less sharply and concisely applicable, but does not vanish completely and remains binding at least in its essence.10 The actors have internalised it, they and the contexts in which they are anchored feel embedded in it. If one wants to look for the still deeper underpinning of this approach, the Habermasian idea of two equally strong basic orders and sources of a society under the rule of law comes to mind. Habermas sees individual autonomy and collective/public autonomy as equally legitimate axiomatic starting points for such societies. Neither is the one “granted” by the other (public autonomy / state not the ultimate foundation of law such as in the Kelsenian tradition) nor is the other (individual autonomy) given by nature of man (natural law philosophy) – but both are equally strong as a starting point and always to be brought into an equilibrium.11 Whether the latter is left to a balancing exercise or to discursive discussion in a state of freedom, constitutes a further issue that, however, is not of prime relevance in our context. If then constitutionalization is soundly theorised also at the transnational-global level, thus giving strong foundations to a genuinely legal order also in the transnational, global sphere, how does this translate into global legal plural­ ism as the third element of global legal pluralism? For answering this question, one may first remember from where this article started out. “Diversity in the international sphere is a fact, legal pluralism is a normative order – and the latter holds true as well for global legal pluralism.” As a tentative first answer, it can be held at least that via constitutionalization – i.e., embedding the transnational sphere into a legal order grounded in fundamental values – the diversity in the international sphere which is a fact has a foundational legal underpinning. Whether the latter itself also enhances values of pluralism, can then better be answered after looking into the concrete examples – the question and interim answer therefore will be taken up once they have been discussed. 2. Examples, Regional and Global, for a Constitutionalization of Society at Large Examples from legislation and from case law are suitable to demonstrate that the constitutional approach sketched out in the previous section is not theory alone – consistent theory today –, but that it is supported by core pieces of practice with a very high degree of visibility. These examples stem both from the regional international and from the global international level, in a number of instances 10 Path-breaking Teubner, in: Teubner (ed.), Global Law without a State, 1997, 3–28; moreover, the quotes above note 4. 11  Path-breaking in Habermas’ work, see Habermas, Between Facts and Norms. Contributions to a Discourse Theory of Law and Democracy, 1996, esp.  84–104. The German original of 1992 as „Faktizität und Geltung: Beiträge zur Diskurstheorie des Rechts und des demokratischen Rechtsstaats“. For an explanation of the context and the repercussions, see Renner, in: Grundmann/Micklitz/Renner, New Private Law Theory (note 7), §  4.

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from a combination of both. Their typical thrust would seem to be that constitutional values are seen to govern society more broadly, as an overarching value basis – even in realms for which they have not been designed originally or not with the same binding force, for instance in the global sphere. a) Corporate Social Responsibility If one takes the core player of a new law merchant, the multinational enterprise, one of the most striking developments of the last decade – many authors would say even the most striking development – would seem to be the evolution of a concept of corporate social responsibility. As has been explained, core industries that are considered key for the risks they carry and even more for the centrality of assets the exchange of which they administer, are often regulated densely already at the global level (with guidelines and recommendations). Capital (i.e. the financial sector) constitutes the example mentioned and exemplified in a few words.12 For corporate social responsibility, it is meaningful that a similar development can be observed with the setting of a regulatory framework both at the UN level and at the OECD level over the last one or two decades.13 While it is true that enterprises are typically covered only above a certain threshold (size), it is equally true that these recommendations and guidelines are not sector-specific (even though this does not exclude that certain fields, like critical minerals, are regulated in a more substantive and in a stricter way). This is remarkable in its general thrust. If one considers that encompassing all fields of the economy in global regulatory instruments is unusual and that rather only a few key sectors are regulated so densely, it is plausible that it was the importance of the values protected that lead to such a broad coverage in the UN and/or OECD guidelines, recommendations and standards. This holds irrespective of whether the guidelines etc. rather advise for disclosure rules, substantive rules of best practice or others. Asking the question in this way, indeed makes exceptionality plausible. The values are so exceptional that constitutionalizing them for all multinational enterprises (at least of a certain size) was seen as being necessary. Indeed those two dimensions stand out from a constitutional values perspective that are the prime focus of corporate social responsibility. These are environmental issues – the stronger the more global the impact may be – and massive and systematic infringements of human rights – again, the stronger the more the infringements are related to essential personal rights and the more they are mas12 

See above note 8. See UN, Guiding Principles on Business and Human Rights – Implementing the United Nations “Protect, Respect and Remedy” Framework (New York – United Nations 2011); OECD, Guidelines for Multinational Enterprises (Paris – OECD, 2011); OECD, Due Diligence Guidance for Responsible Business Conduct (Paris – OECD, 2018). 13 

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sive.14 Human rights stand out because of their rank in any constitutional value system committed to the rule of law and because of their universal recognition, in universal declarations and in regional binding conventions.15 Environmental issues stand out, namely if the amount to which the impact is global, irreversible and severe is a key facture for the intensity of corporate social responsibility, because they have incalculable general effects on third parties (external effects) that can all translate again into severe human rights problems. At the global level, regulation comes by guidelines and recommendations. They are taken up in regional, still international contexts, such as the European Union, in more stringent regimes. The EU Corporate Social Responsibility Directive of 2014 is characterised by stating a stringent disclosure duty – designed to clarify the issue which measures are taken with respect to a list of human rights and environmental issues, when they occur down the supplier chain, also beyond borders, indeed globally.16 This duty has indeed its lacunae (too short a coverage in the chain, no clear liability for incorrect statements and no clear view of how the information will influence behaviour).17 Nevertheless it would seem to constitute a (laudable) first step, has ostensibly been designed only as a 14 For these two dimensions as the focus of corporate social responsibility legislation, practice and philosophy see, for instance, Hart, 20 The Academy of Management Review (1995), 986; Johns, 22 A Journal of Policy Analysis and Reform (2005), 369, 370; Garriga/Melé, 53 Journal of Business Ethics (2004), 51; Humbert, 71 Schmalenbach Business Review (2019), 279. Also see the European Commission’s latest proposal for amending the CSR-directive, 2021/0104 (COD), especially recital 25. 15  For universal acts, see fundamentally the United Nations (UN) Universal Declaration of Human Rights (UDHR) of 10th December 1948, which is, however, a legally non-binding resolution (see in detail on this for instance Schabas, The Universal Declaration of Human Rights, 2013, et passim). On this basis, the UN has adopted a series of further human rights conventions since 1966, which, in contrast to the UDHR, constitute legally binding treaties under international law. Specifically, these are the Civil Covenant (ICCPR), the Social Covenant (ICESCR), the Convention against Racism (ICERD), the Convention on the Elimination of All Forms of Discrimination against Women (CEDAW), the Convention against Torture (CAT), the Convention on the Rights of the Child (CRC), the Convention on Migrant Workers (ICMW), the Convention on the Rights of Persons with Disabilities (CRPD) and the Convention against Enforced Disappearances (CPED) (for a survey see for instance O’Fla­ herty, Human Rights and the UN-Practice before the Treaty Bodies, 2002. On human rights obligations of companies and their implementation in corporate law see most recently (from a German law perspective) Brunk, Menschenrechtscompliance, forthcoming 2022. For regional examples, see below notes 27 and 28. 16  Directive 2014/95/EU of the European Parliament and of the Council of 22 October 2014 amending Directive 2013/34/EU as regards disclosure of non-financial and diversity information by certain large undertakings and groups, OJ 2014, L 330/1; on the directive, see, for instance, Accountability Europe, Member State Implementation of Directive 2014/95/EU – A comprehensive overview of how Member States are implementin the EU Directive on Non-financial and Diversity Information, (2017); Szabó/Sørensen, 12 European Company and Financial Law Review (2015), 307. 17  For these different lines of criticism of the directive, see, for instance, Spießhofer, Neue Zeitschrift für Gesellschaftsrecht 2014, 1281; Szabó/Sørensen, 12 European Company and Financial Law Review (2015), 307; Quinn/Connolly, 14 European Company Law (2017), 15.

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starting point, triggering societal development, in a perspective of unleashing a dynamic learning process, mobilizing society or giving it tools for doing so. Therefore, it does not come as a surprise that already after five years amendments are strongly discussed – 18 an area high on the political agenda, a core piece of constitutionalization of the international sphere. b) Constitutional Pluralism Embedded in Human Rights Discourses If one wants to step from the specific sphere of enterprises to the general terrain of norms and rules in the transnational sphere, it is again examples of high visibility that come to mind, strongly invigorated or even developed over the last one or two, perhaps three decades and that have again both a global and a regional dimension. For a regional example, the EU is particularly illustrative here (beyond the example already given of Corporate Social Responsibility). As a starting point, it is worth highlighting the fact that the European Union has once been created as a genuine public international law treaty, but – via van Gend & Loos and Costa ENEL and others – has soon adopted the shape of a regime that is sui generis – between public international law treaty and federal state. Still, the multi-level design is similar to genuinely global contexts, and with Article 2 para 2 of the EU Treaty, the Union has defined the legal regime of this international sphere sui generis as “pluralist”, it has indeed specified this as a normative order – 19 the EU has to foster pluralism and keep it intact, among others by a principle of subsidiarity. This new rule in the Treaty of Lisbon does, however, not constitute the piece of the EU regime for which this regime is of primordial interest here – how foundational Article 2 of the EU Treaty may indeed be! Still more pervasive and indeed primordial would seem to be the example of human rights seen as overarching value basis and governing all spheres of public life, including between private parties. Indeed, what has been the main root for the theory of constitutionalization of the transnational sphere, has a longer his18  See the European Commission’s Proposal for a Directive of the European Parliament and of the Council amending Directive 2013/34/EU, Directive 2004/109/EC, Directive 2006/43/EC and Regulation (EU) No 537/2014, as regards corporate sustainability reporting COM/2021/189 final; on the reform proposal, see, for instance, Müller/Scheid/Baumüller, 76 Betriebs Berater (2021), 1323; Hummel/Jobst, The Current State and Future of Corporate Sustainability Reporting Regulations in the European Union (February 28, 2022), https:// ssrn.com/abstract=3978478; for a nice survey of the challenges and opportunities of a CSR-reform (with many references to further literature) see Venturelli/Fasan/Pizzi, Rethinking non-financial reporting in Europe: challenges and opportunities in revising Directive 2014/95/EU, 23 Journal of Applied Accounting Research (2022), 1. 19  On the foundations of this provision, constitutional for the EU, see Verschraegen, 29 Journal of Law and Society (2002), 258 (fundamental rights as basis of societal differentiation); on the repercussions of legal pluralism vested in the EU Fundamental Rights Charter on private law, namely contract law, see Wielsch, 10 European Review of Contract Law (2014), 365, 370 et seqq.

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tory, of three decades, if going back to the very roots in the Lüth case decided by the German Constitutional Court in 1958, of even many decades. As seen, it actually started at the global level with the (non-binding) Universal (UN) declaration of Human Rights of 1948, 20 but did not stop developing. It is this further development that is of interest in our context. When the German Constitutional Court applied fundamental rights of the German Constitution to resolve a dispute between private parties (freedom of speech vs. freedom to conduct business), it justified this move by stating that these rights were not only directed against state action, but contained as well an overarching value basis for all spheres to which law applied.21 The true boom of this case law came only in the 1990ies when it was applied to contract law, and when this caused an upheaval in private law academia more generally.22 Looking back, there is hardly any doubt that the development and clarification of this issue (the interdependency between the two) was one, if not the most important step for the development of Private Law in total in Germany in the second half of the century.23 The real potential – and potentiation! – of this case / these cases lies, however, in the repercussions for Europe in whole,24 flanked, of course, by similar national devel20 

See above note 15. (Constitutional Court Reports) 7, 198 (Lüth). See beautiful description of overall context and development in Kübler, 83 Kritische Vierteljahresschrift für Gesetzgebung und Rechtswissenschaft (2000), 313. 22  Most disputed where the sales agent and the surety cases: BVerfGE 81, 242–263; 89, 214–236; more recently and seminal as well BVerfG, Neue Juristische Wochenschrift 2018, 1667 (Stadionverbot – Stadium Ban). See in particular Canaris, 184 Archiv für civilistische Praxis (1984), 201; id., Grundrechte und Privatrecht – eine Zwischenbilanz, 1999; on historical roots see Grimm, Verfassung und Privatrecht im 19. Jahrhundert. Die Formationsphase, 2017; for the dispute about this development, see, on the one hand Zöllner, 196 Archiv für civilistische Praxis (1996), 1 and Diederichsen, 198 Archiv für die civilistische Praxis (1998), 171; and on the other hand Kübler, 83 Kritische Vierteljahresschrift für Gesetzgebung und Rechtswissenschaft (2000), 313; comprehensive survey by Ruffert, Vorrang der Verfassung und Eigenständigkeit des Privatrechts, 2001; on the process of balancing fundamental rights of all affected parties, see Hager, 49 Juristenzeitung (1994), 373; conceptualizing such impact as a clash between different societal rationalities Teubner, 83 Kritische Vierteljahresschrift für Gesetzgebung und Rechtswissenschaft (2000), 388. On the different theories about the private law impact of fundamental rights, see Neuner, Privatrecht und Sozialstaat , 1999, 158–161, 170–173; Wielsch, 213 Archiv für die civilistische Praxis (2013), 718–759; as well as Grund­ mann, Constitutional Values and European Contract Law, 2008, 3–17 and Maultzsch, 67 Juristenzeitung (2012), 1040–1050 (both as well with comparative law survey); and on direct application of fundamental rights in private law, at least in certain situations, as advocated in the case of bans from stadia, see Hellgardt, 73 Juristenzeitung (2018), 901; Michl, 73 Juristenzeitung (2018), 910. Similar namely the development in Italy see below note 25. 23 Similar Canaris, Grundrechte und Privatrecht (last note), 9 et seqq.; Fezer, 53 Juristenzeitung (1998), 265, 267 sees the impact of constitutional values on private law as the „century’s main question“ and opines that it is legal pluralism that may overcome the often evoked crisis of liberal legal thought – by appeasing legitimacy concerns. 24  See broadly the early monograph by Starke, EU-Grundrechte und Vertragsrecht, 2016; and (however primarily targeted on fundamental freedoms) Cherednyschenko, Fundamental Rights, Contract Law and the Protection of the Weaker Party – a Comparative Analysis of the 21 BVerfGE

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opments already in other Member States, namely Italy, but also worldwide, for instance in Brazil that has a particularly rich and intensive case law in this respect.25 Thus, from a model in a few national constitutional discussions, the idea of constitutional values as overarching values in all areas arguably subject to law, developed progressively. From a national view and standard, it was carried into a regionally transnational (supranational) one and had an overspill worldwide, also well beyond Europe. While the examples in this case are “only” of regional international kind or “only” consist in transplants to other national regimes, they are still linked to the global scene via the UN Declaration and the wave of human rights acts it triggered. With these two examples, it is easier to answer the question of whether constitutionalization at the transnational level gives diversity in the international sphere (which is a fact) not only a strong and even foundational global legal un­ derpinning and order (thus our interim answer above 1.), but in its content also contributes to a pluralist order. Pointing to the EU, which states openness to a pluralist order to be a constitutional principle of the Union (Art.  2 TEU), gives a first hint, because, of course, the European Union does unify and harmonize a lot of the legal order within the EU and its Member States. In a similar way, constitutionalization at the global sphere would seem in its content to empower pluralism – different legal and economic systems to live side by side – by making it possible that they tolerate each other, not just ignore each other, but state what Constitutionalisation of Contract Law, with Emphasis on Risky Financial Transactions, 2007; id., 2 European Review of Contract Law (2006), 489; id., 14 European Review of Private Law (2006), 23; Alpa, 19 European Business Law Review (2019), 301; Rosaria Marella, 3 European Review of Contract Law (2006), 257; see also for this context Grundmann (ed.), Constitutional Values and European Contract Law, 2008 (seeing through all main fundamental rights, but as well fundamental constitutional principles issues, for instance the Social State principle, and also the EU Citizenship debate, §§  5 –12). More recent the judgments by the ECJ on (probably) direct horizontal application of certain fundamental rights enshrined in the EU Charter in: ECJ of 17.4.2018 – case C-414/16 (Egenberger) – para.  76; ECJ of 6.11.2018 – joined cases C 569/16 and C 570/16 (Bauer and Willmeroth); ECJ of 6.11.2018 – case C-684/16 (MaxPlanck-Gesellschaft) – para.  78–81; ECJ of 22.1.2019 – case C-193/17 (Cresco Investigation) – para.  79 et seq.; seminal ECJ of 26.2.2013 – case C-617/10 (Åkerberg Fransson). 25  See broadly Comandé (ed.), Diritto Privato Europeo e Diritti Fondamentali – Saggi a ricerche, 2004; Laghi, L’Incidenza dei Diritti Fondamentali Sull’Autonomia Negoziale, 2012; Vettori, Diritto dei contratti e ‘Costituzione’ Europea: Regole e principi ordinanti, 2005; id. (ed.), Contratto e Costituzione in Europa, 2005 – also in Italy with extensive case law, namely for the so-called “danno morale” (broad array of non-pecuniary damages); for Brazil, see Constitutional Court (Suprêmo Tribunal Federal), RE (Recurso Extraordinário) 201.819-8 (2nd senate) (reporter Gilmar Mendes), of 11.10.2005 (‚due process‘); RE 161.243-6 (2nd senate) (reporter Carlos Veloso), of 29.10.1996 (non-discrimination of Brazilian nationals); ADI (Ação Direta de Inconstitucionalidade) 4815 (grand chamber) (reporter Carmen Lucia) of 10.06.2015 (privacy and personality) – all available at www.stf.gov.br.; on the impact of fundamental rights on private law, today broadly to be found in national law regimes, see the comparative survey by: Beale/Fauvarque-Cosson/Rutgers/Vogenauer, Cases, Materials and Text on Contract Law: Ius Commune Casebooks for the Common Law of Europe, 3rd. Ed. 2019, section 1.1.D.

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is a unity of values needed and how far it goes. The very rationale of fundamental rights as basic protection and minorities rights is indeed to allow for diversity and pluralism to develop in a society that is of a rich array of ideas and convictions and that still needs to take (majority) decisions.26 A nice final example of the interplay between different layers, the combination of diversity/pluralism and basic unity and namely the dominance of a constitutionalization perspective can be seen in one concrete case and development. This is the broad application of the so-called Engel test developed by the European Court of Human Rights (adjudicating on the basis of the European Convention of Human Rights, pan-European indeed, including Russia).27 This broad application, as recently advocated, would extend to such areas as EU financial sanctions regimes (with a transfer of the ECHR case law to the European Charter of Fundamental Rights case law for which European Court of Justice is called upon).28 In this case, the criteria developed for a sanction being characterized as being criminal (and hence subject to strong constitutional protective devices) are seen as the following three. They can be characterized like this because national law does (diversity), but as well on the basis of how they and their prerequisites are shaped and namely on the basis of how deeply they impact (unitary, yet open-textured criterion). Indeed, the European Charter, coming into force in 2009, shows a last large step in the progression of constitutionalization beyond borders.

III. Global Legal Pluralism – New Pluralist Law Theory as its Second Pillar Less obvious than the increasing strength of constitutionalization as a strong normative basis for (global or international) legal pluralism is the view that a systematic use of a pluralism of disciplines may serve as an equally important pillar. At least, not many have advanced this holding so far. Such pluralism of 26  For this view of fundamental rights, see already quotes in Fn.  19; see moreover Besselink, 35 Common Market Law Review (1998), 629; specifically on media pluralism see Commissioner for human rights, Media Pluralism and Human Rights, 2011, 43; fundamental for political thought: Arendt, Elemente und Ursprünge totaler Herrschaft, 1955. 27  Council of Europe: European Convention on Human Rights of 4 Nov. 1950 as amended by Protocols Nos. 11, 14 and 15, and supplemented by Protocols Nos. 1, 4, 6, 7, 12, 13 and 16. European Court of Human Rights, namely ECtHR of 23.11.1976 – case Engel and Others v. the Netherlands, Appl. Nos. 5100/71, 5101/71, 5102/71, 5354/72, 5370/72. 28  See Art.  50 of the Charter of Fundamental Rights of the European Union of 7.12.2000, OJ 2000 C 364/1; ECJ of 26.2.2013 – case C-617/10 – Åkerberg Fransson; ECJ of 5.6.2012 – C-489/10 – Łukasz Marcin Bonda; see, on the transfer of the Engel test to EU financial sanctions regimes Sand-Henriksen, The Concept of Sanctions – Constitutional Challenges and Multilevel Governance of EU Financial Sanctions and Sanctions Regimes, EUI thesis, forthcoming.

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disciplines, balanced against each other and thus brought into a meaningful societal equilibrium with each other, may prove just as important for a normative order of pluralism at the global level because, as a tool, it systematically invites to draw on the most profound sources of knowledge on a pluralist value base in society. There is a theoretical side to this holding (below 1.), It can, however, also well be exemplified, and particularly well so for areas where traditionally only one discipline was dominant and influenced the thinking in this area accordingly. 1. New Pluralist Law Theory as Genuine Method for Global Legal Pluralism (New) pluralist legal theory has held over the last years that legal scholarship should not only be informed by adjoining disciplines (interdisciplinary shaping of legal scholarship), but that a broadly pluralist inclusion of relevant disciplines constitutes the most legitimate approach.29 Most legitimate for constitutional reasons. While such a pluralist legal theory is also heuristically much richer than any monist referral to one adjoining discipline can be (for instance in Law & Economics), the main reason for the statement made is different and twofold. The first reason is this. If constitutions in democracies under the rule of law are seen to all carry a pluralist regime of values30 and if this is explicitly stated, at least for the European Union, also in the fundamental positive specification of ultimate goals (Art.  2 TEU), this is seen as imposing as well a methodological necessity. As an overspill from the pluralist orientation of such constitutions, legal scholarship increasingly has to get informed of all relevant explanation bases (theories) in other disciplines on a footing of equal chances for them. Otherwise, legal scholarship would not be shaped in a way to optimally account for the pluralism of values enshrined in constitutions. In other words: Legal schol29  Grundmann/Micklitz/Renner, New Private Law Theory (note 7) (first formulated in: id., Privatrechtstheorie, 2015); on the normative superiority (from a constitutional perspective), more specifically: Grundmann, Pluralistische Privatrechtstheorie – Prolegomena zu einer pluralistisch-gesellschaftswissenschaftlichen Rechtstheorie als normativem Desiderat („normativer Pluralismus“), 86 The Rabel Journal of Comparative and International Private Law (RabelsZ) (2022) 364–420 (forthcoming also in English). Discussion by Alpa/Dagan/ Deakin/Hesselink/Mak/Markovits/Maugeri/Michaels/Niglia/Resta, in: German Law Journal, Special Issue 3/2022; similar Auer, Zum Erkenntnisziel der Rechtstheorie – Philosophi­ sche Grundlagen multidisziplinärer Rechtswissenschaft, 2018; Teubner, 1 Asian Journal of Law and Society (2014), 235. 30  For the (broadly shared) understanding of Western Constitutions as pluralistic canons of constitutional values, see, for instance: Di Fabio, 59 Juristenzeitung 2004, 1; Fraenkel, Deutschland und die westlichen Demokratien, 6th ed. 1974, 197 et seqq.; Tierney, Constitutional Law and National Pluralism, 2005; Walker, 65 Modern Law Review (2002), 317–359; also Ovádek, Constitutional Pluralism between Normative Theory and Empirical Fact‘ (23.10.2018), https://verfassungsblog.de/constitutional-pluralism-between-normative-theo ry-and-empirical-fact/ (10.2.2022); broader Marmor, Law in the Age of Pluralism, 2007; on implications for jurisprudential methodology Lepsius, 52 Der Staat (2013), 157.

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arship would have to give diverging values enshrined in constitutions equal chances in the scholarly approach chosen – and indeed not only when taking stock of and assessing those theories from other disciplines, but as well when establishing order between them (see next paragraph). The second reason has to do with the proprium of law and legal scholarship. If they are meant to serve society as a whole, it would seem obvious that weighing all interests and their conceptualization in several disciplines constitutes the proprium and not giving one perspective on society precedence over the others – unless there is a clear constitutional (or constitutionally founded) command into this direction, albeit also for certain fields. Legal scholarship would thus as well gain autonomy from other disciplines that formulate their ultimate goal and benchmark according to which they then assess legal norms and solutions. (New) pluralist law theory also admits that there are problems to such approach and sees them in two directions mainly. The first problem is taking stock of such enormously increased pool of theories and knowledge – and the answer to this problem can only be systemic, in the sense, that this is a task not for ­single scholars, but for legal scholarship as a whole. For this, legal scholarship would not need always to take stock of all details and be cutting-edge in research in one adjoining discipline, but rather solidly understand rationale and results reached, but on the other hand, always be capable of seeing such rationales and results reached by one adjoining discipline in conjunction and comparison with others. The second problem is that of establishing order between different theories and disciplines. This problem, first discussions about it and an approach in which the constitutional values form the benchmark for hierarchies and the balancing process (‘value tracking theory’) have been discussed elsewhere and need not be repeated here.31 (New) pluralist law theory, despite the problems named and because of its constitutional legitimacy and superiority, has obvious links to global legal pluralism as well. If arguably diversity is even higher, certainly, the problems raised are also exacerbated by higher diversity, sometimes even unsurmountable “dif­ férend” in the sense of Lyotard.32 Namely the caveat formulated so far in pluralist law theory that it still conceptualizes a law in (typically Western and some East-Asian) democracies under the rule of law will have to be approached. Reality and Theory of the Global South and more radically critical theories will have to make their impact more prominently.33 As such, however, the rationale formulated applies as well, even if the constitutional value basis may be more vague and characterized by still a stronger and more radical diversity. As has 31  See above note 29, namely the contribution in The Rabel Journal of Comparative and International Private Law (RabelsZ). 32  Lyotard, Le différend, 1986; see before as well Derrida, L’Écriture et la différence, 1967. 33  See contributions to the above-mentioned Special Issue in German Law Journal by: Mi­ chaels, GLJ (2022); Resta, GLJ (2022).

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been argued in the last section (above II.) and as increasingly would seem to become a majority view, such a constitutional background of values exists as well at the global level. 2. Examples – Regional and Global Rights of Nature – to which this contribution reverts in its last section – typically involve one clash already researched as well in core areas of economic activities. This is the clash between an economic rationale based primarily on individual utility functions – even though overall welfare is advocated as ultimate benchmark in mainstream models – and the awareness of other values and preferences that are typically formulated and researched more profoundly in other disciplines than economics. These alternative preferences are often less concisely defined, but the more they are, the more they typically can influence results as well in concrete cases and questions. From the perspective of normative pluralism, such precision does not even constitute a precondition for having them included in a societal balance. The examples, for simplicity sake, are, however, of a kind that alternative values and approaches have gained already a certain precision and clearer impact on mainstream models primarily shaped according to economic theory. They stem from the core of economic activities, but involve values not or only weakly formulated in economic theory. One setting is characterized by a strongly asymmetrical information and power arrangement, the other by a scheme between business enterprises. The first example involves what is seen as a third type of business organization – alternative to market and firm. This is the long-term network organization of business, this form is dominant in all supply and distribution chains, hence in the largest parts of all production and marketing, in all payment systems, and in many large research and development conglomerates.34 This constitutes hence a mega-field in practical (and conceptual) importance. W. Powell who first has researched so profoundly networks even states that it constitutes the most important form of business organization.35 This author is, however, even more important for first conceptualizing so profoundly networks of contracts – theoretically, but on a large empirical basis, namely in the Silicon Valley. He gives an alternative explanation to reciprocity and self-interest, maximizing own return as the driving force behind these networks. He rather sees an arrangement of responsibility for the own business combined with trust relation34  See Grundmann/Cafaggi/Vettori (eds.), The Organizational Contract – From Exchange to Long-Term Network Cooperation in European Contract Law, 2013; and therein id., The Contractual Basis of Long-Term Organization – The Overall Architecture, 1; Grundmann, in: Grundmann/Micklitz/Renner, New Private Law Theory – A Pluralist Approach, 2021, §  17; Teubner, in: Amstutz/Teubner (eds.), Networks: Legal Issues of Multilateral Cooperation, 2009, 3; Gilson/Sabel/Scott, 109 Columbia Law Review 431 (2009). 35  Powell, 12 Research in Organizational Behaviour 295 (1990).

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ships, interest in the success of the common network (also for self-interest, but via community), sharing of information not necessarily on the basis of ‘do ut des’. If this is the case, remedies in law have to be thought differently, furthering this image of collaboration, certainly not strict and immediate reciprocity. The second example involves the very pressing need of more household investment. It is expressed in the so-called investment gap paradox, which says that household investment is astonishingly much lower than a utility function of households (rational private investors) would suggest.36 Trust seems to be too low (as returns and increase in value in capital markets is higher than in virtually any other fields). This is not only a concern for capitalization of capital markets, but just as much and probably even more a mega-concern socially. It would be such namely if by the shape of regulation and investment instruments trust-building is not taken into account sufficiently and thereby large parts of society are de facto excluded from the most rewarding investment possibilities (at least statistics would suggest this strongly). Hence, the perspective to think trust in a way conceptualized in sociology rather than in economics, not relying on understanding, processing and controlling information as the basis of investment decision, but (as well) investment made possible on the basis of trust (also personalized trust) is of prime importance.37

IV. Conclusions – for Rights of Nature 1. Conclusions … The two core holdings of this article are the following. Firstly, a lot of attention has already been paid to the constitutionalization of the global order. This article both sees a sound theoretical foundation for this – even in (partial) absence of global rule setters – and a clear development into this direction in rule setting and adjudicative practice over the last two decades. If one takes the parallel movement at the international, yet regional level as a meaningful laboratory for the global perspective, this holding becomes even immensely stronger. Secondly, another dimension of (global) legal pluralism has been much less discussed. This is the dimension that a pluralism in methodology, namely a pluralism of disciplines used and balanced against each other and thus brought into a meaningful societal equilibrium with each other, may prove just as important for a normative order of pluralism at the global level. It constitutes the main source 36  Bertaut/Haliassos, 105 Economic Journal 1110 (1995); Campbell, 61 The Journal of Finance 1553 (2006). For statistical insight, see Chater/Huck/Inderst, Consumer Decision-Making in Retail Investment Services: A Behavioural Economics Perspective, (November 2010) Final report 1-480 (“non-participation puzzle”). 37 For the following, see Grundmann‚ Festschrift [Essays in Honour of] Windbichler 2020, 67; id., Festschrift [Essays in Honour of] Grunewald 2021, 227.

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for a truly pluralist knowledge pool on societal values at the highest level of expertise and reliability. 2. … for Rights of Nature … a) Basic Rationale These two main holdings are telling as well for one of the newest dimensions for which legal pluralism may have a particular bearing – the question of rights of nature. While this article has taken a detour, first focusing on those two foundations of legal pluralism that it considers to stand out, these two main holdings would seem to refer as well to some very foundational issues in the arena of rights of nature (like to other novel topics related to global pluralism). The focus in this section is on forms of evolution of law similar to the one described for the transnational sphere and global legal pluralism – i.e. namely without clear legislative foundations. This does not imply that they do not exist on the transnational, regional and national level, mostly still in infancy, but global legal pluralism points to other mechanisms. Therefore, an extremely short list of existing legislative initiative suffices here. They include – at the transnational and European level – the United Nations Harmony with Nature Program,38 the African Commission on Human and People’s Rights’ resolution on the protection of sacred natural rights, urging states to recognize their intrinsic value39 or the development of a framework for the legal recognition of Rights of Nature by the European Economic and Social Committee.40 Important examples at the national and local level include the introduction of rights of nature in the Constitution of Ecuador, the Bolivian Law of the Rights of Mother Earth or the growing number of countries, such as New-Zealand, India, Columbia, the U.S., Uganda or the Netherlands, that have recognized rights of nature, or of particular non-human entities such as rivers, lakes or mountain ranges through legislation or court rulings.41 As a starting point for the perspective taken here, on evolutions beyond legislative action, we may point to the fact that the legal regime for “rights of nature” is still made by human beings, administered by human beings and as well 38 See

Dancer, 53 The Journal of Legal Pluralism and Unofficial Law (2021), 21, 29 et seq. African Commission on Human and People’s Rights, 372 Resolution on the Protection of Sacred Natural Sites and Territories (2017), ACHPR/Res 372 (LX). 40  Carducci et al., Towards an EU Charter of the Fundamental Rights of Nature. Study (Brussels: European Economic and Social Committee, 2020). 41  For an extensive list of recent legislative developments see United Nations General Assembly, ‘Harmony with Nature – Report of the Secretary-General’ (2020), A/75/266, para 54–72; for a detailed analysis of legislative initiatives, see e.g. Cano Pecharroman, 7 Resources (2018), 1, 13; Jolly/Roshan Menon, 10 Transnational Environmental Law (2021), 467; Villavi­ cencio Calzadilla/Kotzé, 7 Transnational Environmental Law (2018), 397, all also touching on the important interconnectedness between rights of nature and indigenous culture. 39 

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having repercussions on them. It is not a law beyond the human sphere, having actors other than human beings – even though the core issue may be to vest the rights differently and to do so also for substantive reasons of protection of interests. Therefore, two views would seem to form the two poles and extremes that can be imagined from a conceptual point of view. Humans can act as a fiduciary for nature when rights of nature are formulated, strictly bound to the (perceived) interests of nature – fauna, flora, climate etc. as his or her principals.42 This may bring those human beings acting as well into the role of a multiple fiduciary – fiduciary for diverging interests in different parts of nature (cattle vs. climate). This, in turn, would then urge them to balance between diverging interests of different parts of nature (all these different parts of nature in the role of the human actors’ principals, being entitled to formulate their interests autonomously – with strict precedence of the interests of the principal).43 Conversely, human beings can as well focus on the repercussions, which inroads into nature may have on themselves, and only therefore give rights to (different parts of) nature, protecting them against such inroads for the sake of preventing certain kinds of repercussions on human beings themselves. The first approach could be addressed as the autonomous concept of rights of nature, the latter as the instrumental concept of rights of nature.44 In both cases, by doing so, rule setters give precedence to the interests protected by those rights and to the views of those human beings that see these interests as being more worthy of protection than others. Among those two approaches, the former would seem to 42  For this benchmark – that the fiduciary is strictly bound to what the principals have as their prime interests (or perceive as their prime interests, the latter a specification difficult to make use of in the case of rights of nature), first: so clearly, to our knowledge, Zöllner, Die Schranken mitgliedschaftlicher Stimmrechtsmacht bei den privatrechtlichen Personenverbänden, 1963, 341–356 et passim; later Grundmann, Der Treuhandvertrag – insbesondere die werbende Treuhand, 1997, chapters 4 and 5; and summary in English in: Grundmann, 47 The American Journal of Comparative Law (1999), 401–428. Required is ‘punctilio of an honour the most sensitive, not honesty alone’ – as Justice Cardozo so eloquently paraphrased it almost a century ago, see Meinhard v. Salmon, 164 N.E. 545, 546 (N.Y. 1928). 43  For the duty of any fiduciary that acts (may act) for several principals to balance between their interests (always, however, disregarding his own interest), see Grundmann/Hacker, in: Busch/Ferrarini (eds.), Regulation of the EU Financial Markets – MiFID II and MiFIR, 2017, 165–204, esp.  165–170; Kumpan/Leyens, 5 European Company and Financial Law Review (2008), 72, 80; for one rather recent legislative example, see MiFIR: Conflicts of interest are regulated with a view to mitigate clashes of interest between different (groups of) clients namely via rules regulating the organisation of particular kinds of markets, see namely recitals 9 and 26 of Regulation (EU) Nr.  600/2014 of the European Parliament and of the Council of 15 May 2014 on Markets in Financial Instruments [MiFIR]and amending Regulation (EU) Nr.  6 48/2012, EU OJ 2014 L 173/84. 44  In the rights of nature discourse, a conceptual distinction is often made between rights of nature and rights to nature or between a bio-/ecocentric and an anthropocentric approach to the protection of the environment, see e.g., Borràs, 5 Transnational Environmental Law (2016), 113; Darpö, Policy Department for Citizens’ Rights and Constitutional Affairs PE 689.328 (2021), 9; Neto/Lima, 13 Veredas do dereito (2016), 111, 120.

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be more radical, more idealistic and more in line with a true philosophy of “rights of nature”. Given these two poles – autonomous and instrumental conferral of rights of nature –, the question can be raised what bearing the constitutional dimension enhancing legal pluralism and what bearing the pluralist methodological approach enhancing legal pluralism may have on such conferral of rights, their foundations. b) Constitutionalization as First Pillar On the side of constitutionalization, it is worth remembering as a starting point that a (global) constitutional order can be held to exist most convincingly for fundamental human rights – i.e. rights related to personality and dignity – and for issues of sustainability (at the global level mainly environmental sustainability while social sustainability and solidarity have played a rather marginal role). This statement is so important because obvious lines run from both these strands to rights of nature. This is obvious for a sustainability goal, but perhaps even more concrete and as well particularly interesting for personal (human) rights and dignity. One can recall that the birth of universal human rights was in the 16th Century, when Montesino, Las Casas and de Vitoria formulated a rule in law, based on the bible’s image that all men are created as godlike and hence equal.45 This is interesting as well, because the same source in the bible in ancient times was seen as not translating into legal status (for instance for slaves, that where brothers in Christianity).46 In a time, where state law and ecclesiastic law – and both spheres – rather started to take a distance from each other, this is the core instance of an overspill: from religious order into law – and even a legal rule that went all the way to sanctions (restitution). The authors opined that those who are capable of organising developed societies must have capacity as human beings. It may well be that practice did not follow broadly (until after the French revolution, and even then it still took one Century or two until material equality in personal status was broadly reached).47 What is interesting, however, in our context is that personal equality seemed unthinkable before, but because of a theological or moral basic value – all men are godlike – the exact same personal equality could be thought and convincingly be theorised within very few years. After 45  See, more extensively, on this development: Repgen, in: Grundmann/Thiessen (eds.), Von formaler zu materialer Gleichheit – Vergleichende Perspektiven aus Geschichte, Kranz der Disziplinen und Theorie, 2021, 31–66, esp.  38–62 (forthcoming in English with Intersentia late 2022). 46  Last footnote; and Kähler, in: Müller (ed.), Theologische Realenzyklopedie, 2000, 373, esp.  375. 47  See the other contributions in Grundmann/Thiessen (eds.), Von formaler zu materialer Gleichheit (note 45).

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all, this is seen as well as the starting point for public international law, at least in its humanitarian part, i.e. the inchoate global constitution.48 These authors, thereby laying the foundations of public international law, admittedly did not think of rights of nature – for instance, because it is part of the other five days of the creation in the Genesis, hence of some dignity certainly as well, even though perhaps not of the same dignity as human beings (all men and women as equals!). As they did not think of such strand of ideas, they did not translate it into legally binding standards either. Thereby, a ‘chance’ was missed for rights of nature. This is the chance of still having a universally accepted benchmark – the word of god in the bible – from which to derive moral postulates that arguably could be coined as well as legally binding postulates. Such transcendent line of legitimacy can no longer be invoked today. However, while this one and exclusive benchmark no longer carries legitimacy, a pluralist referral to the many sources of legitimacy would seem to be more promising, perhaps even constitute the most promising approach – namely in line as well with the constitutional foundations of pluralism that were described in this contribution. This leads to the second pillar: c) New Pluralist Legal Theory as Second Pillar One core teaching of all that has been described for the development of personal equality may well be that overspill from other disciplines than law may be revolutionary, but, once accepted as a legal standard, even absent legislative acts, may later on form one of the most obvious and foundational commands of law. However, the circumstances for such ‘overspill’ have radically changed. It may well be that the rise of pluralism itself constitutes the most fundamental change. While in Montesino’s and de Vitoria’s times, a monist approach of legitimacy (the word of God) could prove decisive alone, today it would seem much more in line with the very nature of pluralism to ask for a broad foundation in different disciplines for any revolutionary statement of new rights – as in the case of rights of nature. John Rawls – from a non-pluralist perspective and rather as a rule of pragmatism – has formulated a very similar idea in his concept of ‘overlapping consensus’.49 In a genuinely pluralist concept, namely as well in a Habermasian world of discussion in an (ideal) environment of free discourse, and if one takes equality 48  For this view on the naissance of public international law, hence the foremost global legal order, see broadly Scott, The Spanish Origin of International Law (pt.I) – Francisco de Vitoria and his Law of Nations, 1934, Preface 9a, Chapter IV; Gómez Robledo, Fundadores del Derecho Internacional: Vitoria, Gentili, Suárez, Grocio, 1989; this is however not undisputed, see e.g. de la Rasilla del Moral, 15 International Community Law Review (2013), 287, 313. 49 See Rawls, A Theory of Justice, 1971, revised edn. 1999, chapter III; id., 7 Oxford Journal for Legal Studies (1987), 1.

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of human beings – and namely strict equality in their political participation rights – seriously,50 the overlap must be all the broader, the further the postulates reach. From this perspective, the two poles named above would seem to diverge substantially. Autonomous concepts of rights of nature – where the best interest of flora, fauna, environment and/or climate primes because of itself – would then, as a matter of principle, require broader support in a multiplicity of disciplines than instrumental concepts – where solely the repercussions on mankind have to be assessed. If today no longer an account of the creation of the world can give legitimacy to a postulate of such an autonomous concept of rights of nature (‘because God has created nature’), it may well be that ethical, sociological and utilitarian accounts have to step in. They should shortly be addressed – as proxies for a larger, more profoundly pluralist, but still outstanding analysis (pluralist in theoretical foundations). From an ethical perspective, it seems more plausible to advocate an autonomous concept of rights for nature, where phenomena of nature as such can be seen in closer vicinity and similarity to human beings (who clearly have rights conferred to them in an autonomous concept of rights). The closer the vicinity, the more plausible the claim. After all, the concept of equality from Artistoteles to Montesino and de Vitoria and later Kant and Rousseau (and the French Revolution) is one where equal has to be treated equally and unequal unequally, but this implies as well: the closer to equality the phenomena the closer a treatment has to be to equal treatment.51 In this respect, different concepts of what constitutes human being, will impact, but similar autonomy and similar suffering would probably be key and relevant for any of those concepts. From a (sociological) perspective of internalisation of norms – in this case clearly foundational norms –, the line of arguments would run to some extent in parallel, at least into the same direction. If today we perceive human dignity – and its equal attribution to all human beings – as the foundational, undisputable and unalienable principle of Western democracies under the rule of law and indeed as a global postulate,52 the following argument gains considerable appeal. 50  For Habermas in this respect, see again above note 11. The equality of political participation rights would seem to constitute relatively undoubted common ground for the seminal conceptualizations of ‘justice’ in political philosophy of the last half a century. This holds true for Rawls, namely his first principle of justice (formulated also in chapter III quoted above, last footnote), but as well for A. Sen, in many respects and namely with respect to pluralism radically opposed, but totally in conformity with Rawls on equal political participation rights: Sen, The Idea of Justice, 2009. 51  Such an ethical postulate of treating what is seen as ‘almost equal’ also ‘almost equally’, at least ‘more equally’ than what is less equal would seem to ensue from the postulate of consistency of ethical judgements. For such a postulate of treating what is seen as ‘almost equal’ also ‘almost equally’, with respect to rights of nature see Meyer-Abwich, 9 GAIA (2000), 248, 252. 52  Beautiful account, historical, philosophical, ethical, also comparative, in: Fabre-Mag­ nan, in: Grundmann/Thiessen (eds.), Von formaler zu materialer Gleichheit (note 45), 89–99

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It would seem highly plausible that internalisation of the fundamental norm of respecting dignity (of human beings) is strengthened and socially more strongly embedded53 with an attitude of respecting dignity as well (at least) in those phenomena of nature that come close to human being. The internalisation approach might even prove just as powerful as the ethical (near to-) equality approach – as a kind of more generalized ‘back to respect of beings and dignity’. Finally, a utilitarian perspective would seem to form the true irritant in the account.54 The reason for this is primarily normative individualism – relating utility functions always to individual human beings. Even though preferences can, of course, also go into the direction of altruism (also for nature), this is only a side aspect, not the basis of the fundamental (majoritarian) model.55 While this may change over time, empirical studies still seem to point strongly into the opposite direction. One decisive question is, of course, whether there might be a need of hierarchy between the theories – given that personal equality and human dignity rank higher certainly in most, if not all constitutions than does utility/efficiency.56 However, this is true so far only for personal human equality and human dignity. One second question is whether utilitarian theory, by necessity, is only an irritant in the context of rights of nature. This should indeed not be the case – to the contrary – if one considers those rights of nature granted in an instrumental way, where the risk for humans is high. Utilitarian thought is strong in taking into account mere probabilities – high, very high or low – 57 like in the case of climate risks. It thus can deal with advice for action more concisely in case, for instance, of extremely high damage in the case of realization of the risk, even if the probability of realization – as some climate scholars say – might be lower (forthcoming in English with Intersentia late 2022); see also, for the foundations in European and German constitutional law: Blömacher, Die Menschenwürde als Prinzip des deutschen und europäischen Rechts, 2016, passim; and most recently (inter alia with its anchoring in Kant’s concept of man and autonomy): Hong, Der Menschenwürdegehalt der Grundrechte: Grundfragen – Entstehung und Rechtsprechung, 2019, passim. Again, the concepts of justice both of J. Rawls, and of A. Sen would be in concordance. 53  See above note 9. 54  Interestingly, also the theories of justice in political philosophy, see utilitarian thought as the strongest counter-current to their own theory. Clearly so Rawls (above note 49), but perhaps even more Sen (above note 50), despite his strong anchoring in economic theory. 55  See, all approaches still from inside behavioural utilitarian theory and normative individualism: Schwartz, in: Berkowitz (ed.), Advances in experimental social psychology, vol.  10, 1977, 221; Hopper/Nielsen, 23 Environment and Behavior (1991), 195; Davari/Strutton, 22 Journal of Strategic Marketing (2014), 563. 56  For such a value tracking theory of constitutional values also for the hierarchy between theories, see Grundmann (above note 29). 57  Probably the most famous formulation of such probability account by Justice Hand: United States et al. v Carroll Towing Co, Inc, 159 F.2d 169 [1947]: Amount of Damages x Probability > Costs of Prevention = Fault; see, as well, among so many, such seminal accounts as: Coase, The Problem of Social Cost, 3 Journal of Law and Economics (1960), 1; Williamson, 22 Journal of Law & Economics (1979), 233.

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than mainstream press would insinuate. Such approach, again, could and would be inspired by an idea of ‘overlapping consensus’ – taking in also those layers in scholarship and society that to some extent doubt climate change. In this context, a last look at ethical and sociological thinking (with internalisation of norms) would seem meaningful. While at first sight, such layers in society and scholarship would seem in sharp opposition, this does not need to remain so at second sight. Equality concerns might as well translate into a calibrated weighing of interests, namely in the presence of an enormous damage (material and immaterial) if realized. In such an approach, high fear in society might be given more weight in political decision taking than economic burdens of a more moderate kind – namely in a situation where a definite answer on the forecasts is uncertain (‘decision-taking in the presence of uncertainty’). Moreover, the colloquial translation of Kant’s categorical imperative – ‘don’t do to others what you would not like to be done to you’ – would gain an altered importance. Those less convinced by man-made climate change – given the enormous amount of damage and fear which they can observe in others – might more easily be convinced that their economic loss – for instance higher energy costs incurred – is substantially less severe.

Global Threats and Global Emergencies: Legal Reactions1 Anna-Bettina Kaiser

I. Constitutional Law The German constitution, the Basic Law, is remarkable in two respects in its treatment of emergency situations. Regarding competences in states of emergency (Staatsorganisationsrecht), it contains highly differentiated and detailed regimes. Regarding constitutional rights, by contrast, it pursues what could roughly be described as a one-size-fits-all model.2 1. Emergency regimes in the German Basic Law In contrast to the Constitution of the Weimar Republic and its – now infamous – Article 48, which handed broad powers to the President of the Reich in states of exception, the Basic Law does not include a general provision that covers all emergencies. To the contrary, when the Basic Law was first drafted in 1949, its mothers and fathers were hesitant to include any provisions on the state of emergency, not least because the Allied powers had intervened against their inclusion. Accordingly, the original version of the Basic Law contained a minimum of emergency provisions only. Article 81 contained an unusual emergency mechanism for what is called a “legislative emergency” (Gesetzgebungsnot­ stand), a situation where the legislative process is blocked not for “external” reasons like natural disasters or wars but for reasons “internal” to the political system, that is, political gridlock. This was mostly meant to react to the experiences of political breakdown in the final Weimar years but has not yet been used under the Basic Law.3 Additionally, the “militant democracy” provisions were specifically designed to pre-empt internal political emergencies early-on. In particular, Article 21(2) Basic Law allowed for a ban of political parties seeking “to undermine or abolish the free democratic basic order (freiheitliche demokra­ 1 

I thank my research assistant Dominik Rennert for valuable research. An English translation is available at https://www.gesetze-im-internet.de/englisch_gg/. 3 German constitutional theory has called these situations constitutional disturbances (Verfassungsstörungen) as opposed to emergency situations, cf. Heckel, Diktatur, Notverordnungsrecht, Verfassungsnotstand, Archiv des öffentlichen Rechts 61 (1932), 257, 275. 2 

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tische Grundordnung) or to endanger the existence of the Federal Republic of Germany.” This did not change until 1968, when the “emergency constitution” (the socalled Notstandsverfassung) was introduced into the Basic Law. In these amendments, the constitutional legislator opted for a model that regulates the various states of emergency and their respective regimes with great specificity. In the following years, further minor crisis regimes were added. The German Basic Law now contains a number of provisions that apply to existential situations of crisis that, taken together, make up Germany’s “Constitutional Law on Emergencies” (Ausnahmeverfassungsrecht).4 Chiefly, the Basic Law now provides for the “classical” emergencies of war, i.e. the “state of tension” and the “state of defence”,5 internal insurgency, 6 and natural disasters7. Additionally, the Basic Law includes emergency provisions for certain special regimes. Article 109(3), the so-called “debt brake” provision that was introduced in 2009 and generally excludes balancing the federal and Länder 8 budgets by taking up new debt in normal times, allows exceptions for “market developments that deviate from normal conditions” as well as natural disasters or other “unusual emergency situations.” Of these provisions, only Article 35(2) and (3) for natural disasters and Article 109(3) regarding exceptions to the debt brake have so far been used. The respective regimes vary in the events that trigger them and the authorities that determine that their threshold is met. As mentioned, the classical “emergency constitution” stipulates events and competencies in a highly precise and layered manner that tries to capture all eventualities.9 The emergency provisions on war, which have frequently been criticised for being too complex and exaggerated, are emblematic of this style. Regarding events, they differentiate between a “state of defence,” that is, the actual state of (defensive) war, a current or imminent attack on the Federal Republic by armed force (Article 115a to l); a “state of tension,” which is meant to describe international crises that give reason to assume that they may lead to a state of defence in the near future (Article 80a(1) and (2)); a “casus foederi,” that is, collective defence obligations under the NATO treaty regime (Article 80a(3)); and the somewhat unclear “agreed state,” that is, Parliament’s express right to trigger the consequences of a state of tension without having to declare one, in the case where it is feared that even speaking of a state of tension might exacerbate the crisis (Article 80a(1)). 4  For the following, see Kaiser, Ausnahmeverfassungsrecht, 2020; Grote, Regulating the State of Emergency – The German Example, Israel Yearbook on Human Rights 33 (2003), 153. 5  Articles 80a, 87a, and 115 lit.  a –l. 6  The “internal emergency” in Articles 91 and 87a(4). 7  The “catastrophe emergency” in Article 35(2) and (3). 8  Germany’s federal units, comparable to US states or Swiss cantons. Land is the singular, Länder the plural. 9  Kaiser, Ausnahmeverfassungsrecht, 2020, 174 et seq.

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The authority to declare and maintain these states lies generally10 with the Federal Parliament, the main reason why the German military is commonly called a “parliamentary army” inside Germany. In their details, these provisions, too, however are layered, most notably those regarding the state of defence. While it is Parliament that declares the state of defence under Article 115a(1), the Federal Government must invite the declaration, the upper house must assent to it, and the Federal President must promulgate it; the responsibility, while ultimately lying with Parliament, is simultaneously shared across the branches. More detailed still, Article 115a includes specific fall-backs if any of the relevant actors lose their capability to act. Most notably, a “core parliament”, a Joint Committee consisting of two thirds parliamentarians and one third members of the upper house (Article 53a) can declare the state of defence if Parliament or the upper house cannot convene in time. The consequences, lastly, of the state of defence especially are laid out in great detail in Articles 115 lit.  b –l. Most importantly, the chief command of the armed forces reverts from the Minister of Defense to the Federal Chancellor under Article 115b and the legislative process is streamlined and largely centralized at the federal level under Articles 115 lit.  c–e. At the same time, Article 115g stipulates specific protections for the independence of the Federal Constitutional Court. The same restrictive style grounds the provisions on insurgencies and natural disasters. Regarding internal insurgencies, Article 91(1) allows a Land to demand the deployment of police forces of other Länder or of the Federation “in order to avert an imminent danger to the existence or free democratic basic order of the Federation or of a Land”, a threshold that is generally understood to only include military coups or civil wars (and not, for instance, labour strikes or political rallies).11 It is up to a Land to determine that the threshold is met. If the Land in question proves incapable or unwilling to address the situation, the Federal Government can, under Article 91(2), place the police forces of the Länder under its command and employ the Federal Police, until the danger passes or the Bundesrat, the upper house assembling all Länder governments, demands otherwise. Unrelatedly, Article 91(2) allows the Federal Government to issue directions to the Land governments if the danger of insurgency extends beyond the territory of one Land. Finally, Article 87a(4) also allows the Federal Government (not Parliament) to deploy the military as a last resort, that is, if the Federal Police forces prove insufficient to address the situation. In two high profile cases on the constitutionality of a statute that permitted shooting down a hijacked civilian airplane in a 9/11-style terrorist attack, the Federal Constitutional Court decided that the military is then allowed to also 10  The exception is the NATO casus foederi. In this case, Parliament has a right to rescind the state under Article 80a(3). 11 Cf. Kaiser, Ausnahmeverfassungsrecht, 2020, 175.

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apply military, and not just police, capabilities.12 Though the decision to deploy the armed forces rests with the (collective) Federal Government in these situations, that is, the full cabinet, the deployment has to cease when either Parliament or the upper house so demand. The provisions on natural disasters closely match these mechanisms with small variations. In case of a “natural disaster” or a “grave accident,” the latter of which the Federal Constitutional Court defined as “events of catastrophic dimensions,”13 such as nuclear accidents or power cuts affecting critical infrastructure, a Land can call on the police forces of other Länder or the Federal Police as well as, in this instance, the armed forces. If the natural disaster or grave accident extend beyond the territory of an individual Land, the Federal Government can instruct the Land governments to make their police forces available and deploy the Federal Police as well as the military, if there is no other way to address the situation. The Federal Constitutional Court decided that this, too, allows the employment of military capabilities, under the very strict requirements that both the deployment of the armed forces and the military force itself constitute the very last resorts and that the provisions are not used to circumvent the strict requirements set out for combatting armed insurgencies, meant to protect, among others, political rallies or labour strikes.14 All these decisions, too, rest with the Federal Government as a whole and last until the danger has passed or the upper house demands that they end. Lastly, the Basic Law does not contain any provisions for health emergencies such as pandemics. Instead, the Federal Infection Protection Act (Bundesinfek­ tionsschutzgesetz) contains a sub-constitutional emergency regime that in the way it is designed closely mirrors the state of defence-mechanism in the Basic Law.15 Under Section 5(1) of the Act, Parliament can declare an “epidemic emergency of national concern”, triggering, inter alia, a centralization of decision-making power at the federal level and with the executive, most importantly the Minister of Health, although the exact scope of those powers has been changed a number of times during the course of the Covid-19 pandemic and was heavily debated in the legal scholarship. 2. Constitutional rights in states of emergency The Basic Law does not allow the suspension of constitutional rights during emergencies and generally does not provide for any specific emergency regime.16 12  BVerfGE 115, 118 (148) – Luftsicherheitsgesetz I; 132, 1 (11) – Luftsicherheitsgesetz II. The statute was considered unconstitutional for different reasons, see below I.2. 13  BVerfGE 132, 1, 17; see also BVerfGE 115, 118, 143. 14  BVerfGE 132, 1, 10 et seq. 15 See Kaiser/Hensel, Federal Republic of Germany: Legal Response to Covid-19, in: King et al. (eds.), The Oxford Compendium of National Legal Responses to Covid-19, 2021, available at https://oxcon.ouplaw.com/view/10.1093/law-occ19/law-occ19-e2. 16  See for the following Kaiser, Revista Electrónica de Direito Público 7 (2020), 5.

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This is a shift from earlier German constitutions and sub-constitutional laws, which followed “suspension models.” First invented in France in the 1840s and disseminated from there throughout Europe, the suspension model was adopted in Prussia and later most famously in Article 48 of the Constitution of the Weimar Republic, which gave broad powers the Weimar President to act in states of emergency and suspend constitutional rights. The Basic Law instead follows, roughly speaking, a one size fits all model, that is, its constitutional rights protections apply both in normal times and times of emergency.17 At the same time, however, all rights protections in the Basic Law can generally be restricted (with the notable exception of the right to Human Dignity in Article 1), as long as the measures that limit them do not violate the proportionality principle, nor a number of other protections (what is called “limits on limits”, Schranken-Schranken). These include the so-called “Irremovable Essence” (Article 19(2)), or “Human Dignity core” (Article 1(1)), of the respective rights. These protections are what has been called the “negative constitutional law on emergencies”, because they set final limits to the state’s power to restrict constitutional rights, especially in times of crisis.18 The proportionality principle holds a central position in German constitutional law. It states that a constitutional right can only be restricted if the restriction pursues a legitimate aim, is suitable and necessary to further that aim, and is not, in its means, disproportionate to the aim pursued. It is hard to overestimate the importance of the proportionality principle in the practice of the German Constitutional Court. It governs practically every substantial constitutional rights question and has generally guaranteed a high standard of constitutional rights protection, to the extent that it has been taken up by the European Court of Justice, the European Court of Human Rights, and other constitutional courts. While the proportionality principle has proven a remarkably successful and effective tool during normal times, its structure and character risk of making it a weak standard of control in existential situations of crisis.19 When the good that the state measures are meant to protect is of such overarching importance as hundreds of thousands of lives, most state measures will prove to be proportionate under the test. A second point of weakness is the lack of knowledge that usually comes with times of emergency.20 When reviewing the suitability and 17  There are, however, some constitutional rights provisions that allow stronger restrictions in exceptional situations, such as Article 11(2), which permits the restriction of free movement throughout the German territory if „such restriction is necessary to avert an imminent danger to the existence or the free democratic basic order of the Federation or of a Land, to combat the danger of an epidemic,” or “to respond to a grave accident or natural disaster.“ 18  Kaiser, Ausnahmeverfassungsrecht, 2020, 154, 238, 241. 19  Kaiser, Ausnahmeverfassungsrecht, 2020, 234. 20  Trute, Zeitschrift für das Gesamte Sicherheitsrecht, 2020, 93.

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necessity of a measure such as, during the pandemic, temporarily closing down daycare centres, restaurants, business, and other premises, courts do not have more information at their disposal than the executive issuing the rule – they both have to rely on the same sources at any given time, in the case of the Covid-19 pandemic, for instance, the scientific reviews and summaries published by the Federal Robert Koch Institute (see Section 4 of the Infection Protection Act). As a consequence, the Federal Constitutional Court defers to the regulator’s prerogative when reviewing the suitability and necessity of a measure. However, that does not mean that the standard cannot be made workable. In order to sharpen the test, the Court also controls whether the legislator’s prediction of the measures’ likely effects is justifiable (vertretbar) and sufficiently reliable (hinreichend verlässlich).21 Another example: During the early stages of the Covid-19 pandemic, almost all Länder proceeded to effectively ban all public rallies as potential sources of infection (with only a few allowing very limited exceptions), practically suspending the right to freedom of assembly contained in Article 8 of the Basic Law. The Federal Constitutional Court reacted, in an injunction, by reading a Covid regulation from the Land of Hessen in a way that turned the tide on how the freedom of assembly was addressed in the lower courts. The Court refused to read a blanket ban on all assemblies into the Hessen regulation 22 . The city of Gießen, where the case had arisen, subsequently had to revisit the question whether an assembly of 30 participants could not take place and allowed it in the process. As mentioned, the untouchable human dignity clause in Article 1 of the Basic Law sets final limits to what the state can do in states of emergency. In a prominent decision, the Federal Constitutional Court found unconstitutional a law allowing the shooting down of a hijacked civilian airplane that threatened to be used as a weapon in a 9/11-style attack.23 According to the Court’s reasoning, the law effectively treated the innocent passengers merely as an extension of the weaponized airplane, thereby regarding them like objects and denying their inherent dignity. The legislator was therefore banned from authorizing such an attack.

21  Federal Constitutional Court, court order of November 19, 2021 – 1 BvR 781/21, available at https://www.bundesverfassungsgericht.de/SharedDocs/Entscheidungen/DE/2021/ 11/rs20211119_1bvr078121.html, para.  187. 22  Federal Constitutional Court (Chamber decision), court order of April 15, 2020 – 1 BvR 828/20 = Neue Juristische Wochenschrift 2020, 1426. See Hong, Coronaresistenz der Versammlungsfreiheit? Das Bundesverfassungsgericht ermöglicht eine Versammlung in Gießen, Verfassungsblog 17 April 2020, availabe at https://verfassungsblog.de/coronaresistenz-derversammlungsfreiheit/. 23  BVerfGE 115, 118 – Luftsicherheitsgesetz I.

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II. Private Law 1. The general regime in contract law German contract law does neither have strict liability for contractual obligations, nor a narrow frustration regime such as, for instance, English contract law (though contractual force majeure clauses nevertheless remain common). Instead, the German Civil Code (Bürgerliches Gesetzbuch) 24 contains a general regime consisting of two mechanisms which, although they are not specifically targeted at emergency situations, can be employed to address their effects on contractual obligations: Unmöglichkeit (“exclusion of the duty of performance”) in Section 275 and Wegfall der Geschäftsgrundlage (“interference with the basis of the transaction”) in Section 313. These provisions generally govern all types of contracts, though they are in certain instances modified for specific contract regimes, especially in labour law.25 They are applicable when the contract in question does not contain a force majeure clause. Generally, unexpected events or hindrances do not absolve contracting parties from fulfilling their contractual obligations. Section 275 contains an exception to that rule. Under it, the obligation owed in the contract falls away if the obligation becomes “impossible” (impossibilium nulla est obligatio). “Impossible” in this sense encompasses different scenarios: if fulfilling the obligation has become humanly impossible, if fulfilling the obligation would now require entirely disproportionate efforts, or if it cannot be demanded in good faith, mainly due to personal reasons, that the obligation be fulfilled.26 Especially the first and the second variants are relevant if catastrophic events affect contractual obligations. If, for instance, a public authority forbids large gatherings such as sport events, the organizer can claim exclusion of the duty to performance under the first variant. If the catastrophic event leads to a breakdown of supply chains to the extent that the supply becomes completely unavailable and the producer can therefore not fulfil the obligation, the obligation ceases under the first variant. If, however, supply is still available, but global shortages lead to considerable price hikes, additional conditions must be met for the obligation to cease under the second variant. Most notably, the producer’s interest not to fulfil the obligation must by far exceed the buyer’s interest in its fulfilment. If, on the other hand, the buyer’s interest in receiving the good also increases proportionately, such as when the shortage is “handed down” the supply chain, the producer cannot claim exclusion of the duty to performance. If the event making performance “impossible” is only temporary, it is possible to claim tempo24  An English translation by the Federal Ministry of Justice is available at https://www. gesetze-im-internet.de/englisch_bgb/. 25 See, for instance, Liebscher/Zeyher/Steinbrück, ZIP 2020, 852; Weller/Lieberknecht/ Habrich, Neue Juristische Wochenschrift 2020, 1017. 26  Taking care of sick relatives is the standard example.

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rary exclusion of the duty to performance. If it is, however, clear between the contracting parties that, once a certain date passes, the receiving party loses all interest in the performance of the obligation, the duty to performance may be excluded permanently. Once the duty of performance is excluded under Section 275, generally the obligation to pay also ceases under Section 326 of the Civil Code. There are numerous exceptions to that rule that mostly relate, however, to questions of fault and liability. In catastrophic events, by contrast, any disruptions in the fulfilment of contracts will likely not be attributable to either party nor foreseeable for them. The mechanism laid out in Sections 275 and 326 has the problem that it produces “all-or-nothing” results. The second mechanism in Section 313 permits more flexible adjustments and is more specifically targeted at catastrophic events.27 Historically, it dates back to the days of Weimar hyperinflation and the attempts by civil courts at the time to come to terms with the economic consequences on pre-inflation contracts. The mechanism overlaps in certain regards with Section 275. In those situations that do not neatly fit under one or the other, Section 313 is generally preferred due to its flexibility. The general idea underlying Section 313 is to allow the flexible adjustment of a contract if a fundamental social, political, and economic background assumption changes that the parties unconsciously shared. These background assumptions can include practically all aspects of the larger “contractual environment”: that natural disasters will not occur, that global supply chains will not collapse, that no war or pandemic breaks out, that the political system does not change fundamentally, etc. Generally, section 313 encompasses all those events that do not fall within the larger responsibility of one of the parties and that were not foreseeable for either. It covers those situations where the interests of both parties are affected by the fundamental change, such as when prices rise so considerably that it becomes prohibitively expensive for one party to perform its obligation and the interest of the other party to receive the good or service at preevent prices increases proportionately (but also cases where only one party is affected are better resolved under Section 313 than Section 275 for the reasons mentioned above). In these events, Section 313 requires a three-step test. First, an event of the magnitude described above must have occurred. Second, it must be safe to assume that the parties would not have concluded the contract in the manner that they did, if they had known that the event would occur. The third step is nor27 For the following, see Kumkar/Voß, Zeitschrift für Wirtschaftsrecht ZIP 2020, 893; Liebscher/Zeyher/Steinbrück, Zeitschrift für Wirtschaftsrecht ZIP 2020, 852; Prütting, in: Effe-Uhle/Mohnert (eds.), Vertragsrecht in der Coronakrise, 2020, 47; Weller/Lieberknecht/ Habrich, Neue Juristische Wochenschrift 2020, 1017; Armbrüster/Prill, Juristische Schulung 2020, 1144.

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mative: the affected party can only demand the alteration of the contract if it “cannot reasonably be expected to uphold” it under these changed circumstances. In this assessment, all specifics and interests must be considered and balanced, especially the relative burdens on the parties and the nature of the obligation. The Federal Civil Court generally requires that an event far exceeds the usual economic risks that a party can be expected to shoulder, even if it did not foresee it. If this threshold is passed, the party affected can demand that the contract be altered to take account of the new situation. What alterations are adequate depends on the individual situations of the parties and the circumstances of the specific case. If the parties cannot agree on what alterations are appropriate, it falls in the responsibility of the courts to determine the adaptations. Relevant considerations are usually the economic burdens that the parties need to carry, such as the losses that the disadvantaged party incurs, to what extent the parties are existentially affected by the performance (or lack of performance) of the contract, or what actions the parties have taken or could have been expected to take to mitigate the fallout of the event. If there is no conceivable adaption to accommodate the changed circumstances or if the other party cannot reasonably be expected to accept the alteration, the disadvantaged party may terminate the contract. Section 313 has historically proven a remarkably flexible tool to react and adjust to momentous events, including hyperinflations and World Wars. Prominent examples in the more recent past have included a music band that was no longer needed because a carnival event had been cancelled due to the Gulf War; a holiday trip cancelled because of the Chernobyl nuclear disaster; or a beer delivery to Iran that was cancelled after the Islamic Revolution.28 The most recent example has concerned the treatment of business leases during the Covid-19 pandemic.29 In its decision, the Federal Court of Justice (Bundesgericht­ shof) found that the Covid-19 pandemic constituted such a fundamental political, economic or social change to the background assumptions of a business lease agreement. The fact that public authorities locked down the premises to combat the spread of the pandemic exceeded, according to the court, the ordinary economic risks that the tenant could be expected to carry. The relevant reduction of the rate, or whether there should be a reduction at all, would then depend on all circumstances and details of the individual case.

28 OLG Karlsruhe Neue Juristische Wochenschrift 1992, 3176; BGH Neue Juristische Wochenschrift 1990, 572; BGH Neue Juristische Wochenschrift 1984, 1746; BGH Neue Juristische Wochenschrift 2000, 1714 (the examples listed in Kumkar/Voß, Covid-19 und das Institut der Geschäftsgrundlage, Zeitschrift für Wirtschaftsrecht ZIP 2020, 893, 899). 29  BGH Monatsschrift für Deutsches Recht 2022, 147.

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2. Modifications to the general regime (esp. in labour law) As mentioned, this general regime of the Civil Code covers all types of contracts, including business contracts and business-consumer contracts. They are, however, occasionally modified for specific contract types, or certain contract types contain additional mechanisms.30 Sections 536 et seqq. of the Civil Code contain, for instance, special provisions for leases. Travel contracts, to name another prominent example, include special mechanisms regarding the cancellation of a trip. Section 551h of the Civil Code allows customers who booked package tours to cancel their trip. While travel agents could then regularly demand compensation for their expenses, Section 551h contains an exception if there are exceptional circumstances at the destination that gravely affect the entire trip. What is more, during the heights of the Covid pandemic in 2020, the legislator created special provisions in Article 240 Sections 1 to 3 in the Introductory Act to the Civil Code for various contract types to mitigate the economic and social fall-out of the pandemic.31 Article 240 Section 1, for instance, contained a special moratorium for consumers that allowed them to pause certain permanent contractual obligations until 30 June 2020. The most important modification of the general regime, however, regards labour law. If employees fall ill in a global pandemic, they are freed from their obligation to work under Section 275 and would normally lose their salary during this time under Section 326. However, Section 3 of the Entgeltfortzahlung statute generally prescribes that employees keep their salaries when they fall ill, including in pandemics. In addition, under Section 615 of the Civil Code, an employer is forced to pay full wages even if less or no work can be done due to a shortage of orders or the mandatory measures that arise in crisis events, such as during the Covid lockdowns of 2020.32 If an employer considers laying off workers to save on wages in these situations, dismissal protections come into effect. The central German statute building up strong barriers against workers’ dismissal is the federal Dismissal Protection Act (Kündigungsschutzgesetz). Under this statute, the employer must not terminate the employment contract if the dismissal is ‘socially unjustified’ (Section 1). The provision only applies to employment contracts that have been in force for at least six months. It does not apply if only 10 or fewer employees work in the respective enterprise. Employees must file an application at the labour court within three weeks after the notice if they consider the dismissal to 30  The various special regimes and their operation during the Covid-19 crisis are analyzed in Effer-Uhle/Mohnert (eds.), Vertragsrecht in der Corona-Krise, 2020. 31  Kaulbach/Scholl, in: Effer-Uhle/Mohnert (eds.), Vertragsrecht in der Corona-Krise, 2020, 95. 32  Husemann, Neue Zeitschrift für Sozialrecht 2020, 873, 874; Fischinger/Hengstberger, Neue Zeitschrift für Arbeitsrecht 2020, 559.

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be ‘socially unjustified’. Otherwise, the dismissal becomes legally valid despite any contradiction of Section 1 Dismissal Protection Act. Besides reasons regarding the person or the behaviour of the employee (such as absence without excuse), the dismissal can be ‘socially justified’ (and thus valid) due to ‘urgent operational needs’ of the company. The latter is the case if a permanent shortage of orders forces the employer to downsize the enterprise,33 which is the most important reason for dismissals during times of economic crisis. Even if a dismissal is possible due to such ‘urgent operational needs’, the employer must conduct a so-called ‘social selection’ based on social criteria (duration of employment, age, maintenance obligations, and severe disability) in order to decide who is dismissed out of a group of employees. This can result in the dismissal of certain workers, especially aged persons who have worked in the company for a long time, being virtually ruled out. The Dismissal Protection Act rests on a well-established but sensitive balance between employers’ needs for flexibility and strong protections for workers. For that reason, there were, for instance, no changes of the Dismissal Protection Act 1969 during the pandemic. The most important measure for coping with a crisis in terms of worker protection has turned out to be short-time work, which was of utmost importance both during the financial crisis after 2008 and the Covid pandemic.34 Its purpose is to offer employers relief from their obligation under Section 615 to pay salaries even if production is at a standstill to allow them to keep on workers. For a correct legal understanding of short-time work, it is crucial to distinguish two aspects: first, the employer must be permitted to order short-time work, which is a question of contract law. The employment contract as well as collective agreements can include the relevant provisions. The ad hoc adoption of such a provision in the employment contract remains always possible if a mutual agreement between the worker and the employer can be reached. Second, in the case of short-time work, a part of the wages is substituted by the Short-time Allowance, which is technically a component of the unemployment insurance, thus regulated in Social Security Code III. In general, 60 % of the difference between the regular net income and the net income during short-time work is substituted by the Federal Employment Agency, or 67 % for people with children. In April 2020, almost six million people, a historically unprecedented figure, were registered as short-time workers. In January 2021, after the beginning of the second lockdown, there were about 2,85 million people in short-time work. The average shortage was about 59 %.35 33 

Federal Labour Court, Judgment of 23 February 2012 – 2 AZR 548/10. Petrak, Neue Zeitschrift für Arbeitsrecht – Beilage 44, 2020. 35  Federal Employment Agency, Monthly Report on the Labour and Training Market, March 2021, 9, available at https://www.arbeitsagentur.de/datei/arbeitsmarktbericht-marz2021_ba146910.pdf. 34 

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III. Public Law 1. The treatment of foreigners in emergency situations Germany’s immigration regime is partly determined by EU law, partly by national law, partly by bilateral and multilateral agreements. Its main requirements are laid down in the Act on Residence (Aufenthaltsgesetz).36 According to its Section 4(1), entering and staying in Germany requires a Residence Title, the types of which are enumerated in Section 4(2) and range from, among others, (limited) visas, temporary residence permits, the EU Blue Card to (unlimited) permanent settlement permits and EU long-term residence permits. The respective requirements of these different titles are specified in great detail in the subsequent sections of the Act. Visas, for instance, fall in two separate categories: The Schengen visa, which allows a stay of up to 90 days in the EU Schengen area, follows, according to Section 6(1), the requirements of the EU Regulation (EC) No.  810/2009; national visas, by contrast, follow, according to Section 6(1), the requirements for the remaining Residence Titles enumerated in Section 4(2). This includes national visa for asylum seekers subsequent to Sections 22 et seqq. of the Act on Residence.37 Finally, Section 25(3) sentence 2 lit.  d excludes all persons from receiving a Residence Title who might present a risk to national security, including those suspected of terrorist activities; under it, immigration and security authorities must make an assessment whether the individual may participate in terrorist attacks in the future. The recent Covid-19 pandemic has showcased how this system responds to large scale emergency events that affect transnational travel and migration patterns.38 There is no special regime contained within the Act on Residence that could be activated in cases of large-scale emergencies. The requirements for granting Residence Titles accordingly did not change throughout the pandemic. Any responses have come through the legislator and the responsible Ministry of the Interior by means of executive regulations and administrative guidelines. These responses aimed at easing the practical difficulties that arose during the standard Residence title application and renewal process due to anti-pandemic measures at embassies and national migration agencies. Responses meant to curb transnational travel instead took place outside of the visa regime and addressed entering the country directly, within the legal framework of the EU’s Schengen border regime.39 During the first lockdown in the spring of 2020, for instance, travel was restricted in two ways. First, entering the 36  An English translation of the Act on Residence is available at https://www.gesetze-iminternet.de/englisch_aufenthg/englisch_aufenthg.pdf. 37 Cf. Winkelmann/Kolber, in: Bergmann/Dienelt/Winkelmann/Kolber (eds.), Ausländer­ recht, 13th ed. 2020, Sec. 6 para.  57. 38  For the following, see Mävers, Arbeitsrecht Aktuell 2020, 305. 39 Cf. Mävers, Arbeitsrecht Aktuell 2020, 305, 307.

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country from outside the Schengen area was restricted for non-Germans upon recommendation from the European Commission. Exempted were EU-citizens and citizens from the UK, Iceland, Liechtenstein, Norway and Switzerland in transit to their home countries and citizens of third countries with long-term residence titles in Germany or in one of the aforementioned countries, when in transit to their places of permanent residency. Special exemptions were also granted for extraordinary circumstances such as a death in the family, providing care for minors or receiving medical treatment. Second, temporary border controls and travel restrictions were reintroduced at Germany’s Schengen borders. From these restrictions, the transport of goods and cross-border commuters were exempted, as well as citizens from the aforementioned countries in transit to their home countries, holders of permanent Residency Titles on their way to their places of permanent residency, and travellers travelling for the exceptional reasons described above. These severe restrictions have since then been eased and replaced by more flexible, and permanent, mechanisms. Once inside Germany, foreigners, including refugees, generally enjoy the same access to public facilities as German nationals, including in emergency situations. The respective regimes are largely unconnected. Foreign employees were, for instance, as eligible as German employees for short-term work during the Covid-19 pandemic.40 In addition, receiving short-term work benefits did not affect their respective Residence Title. Access to vaccines, too, is granted irrespective of residency status. The rights to public benefits for asylum seekers, to highlight one prominent example, is laid down in the Asylum-Seekers’ Benefits Act (Asylbewerberleistungsgesetz).41 Section 4(1) of the Act grants access to common vaccines to the same extent as members of German social insurance receive under Section 20(1) of the Social Security Code V. The right to a Covid-19 vaccine was introduced through an executive regulation from the German Ministry of Health pursuant to Section 20(3) of the Social Security Act V. Section 20(3) expressly permits including persons in its scope that do not pay into German social insurance. The Coronavirus Vaccination Regulation accordingly included, from the beginning, all persons who have their permanent or usual residence within Germany42 or who live in communal residencies for asylum seekers. In the early days of vaccine shortage, asylum seekers were given priority access to vaccination under Section 3(1) of the Regulation, to address the fact that they lived on closer quarters with higher infection rates than the larger 40  The Ministry of the Interior clarified both through internal communications to all ministries and agencies, cf. Mävers, Arbeitsrecht Aktuell 2020, 305, 306. 41  For the following, see Amhaouach/Kießling, Zeitschrift für Ausländerrecht und Ausländerpolitik 2022, 3, 6 et seq. 42  Which, according to the Federal Ministry of Health included asylum seekers living outside of communal residencies, cf. Amhaouach/Kießling, Zeitschrift für Ausländerrecht und Ausländerpolitik 2022, 3, 7.

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populace. Notwithstanding these equal legal rights, there remain considerable factual difficulties in reaching especially non-German speaking groups through public vaccine programs. Similar factual, as well as legal, problems have arisen around the question of mass quarantines in communal residencies for asylum seekers. Communal residencies are generally governed by the same health provisions as the general population, laid down in the Protection Against Infection Act and subsequent Länder regulations. Early in the pandemic, however, public health authorities developed the practice to quarantine entire residencies after individual outbreaks, even though the Protection Against Infection Act only permits the quarantining of people where there are factual grounds that an infection may have occurred. The same rules seem to have been applied more stringently to asylum seekers in communal residencies; these mass quarantines are now considered illegal.43 Finally, the distribution of refugees within the European Union is governed by Article 78 of the Treaty on the Functioning of the European Union and the Dublin III Regulation (EU) No 604/2013. Under this mechanism, it generally falls on the EU Member State where the asylum seeker first arrived to consider her application. When the numbers of asylum seekers rise considerably due to large scale catastrophic events, such as regional wars or natural disasters, and threaten to overwhelm the receiving Member State, there are different ways to react more flexibly within this generally static regime. Most importantly, Article 78(3) allows the Council, on a proposal from the Commission, to adopt emergency measures to help the relevant Member State. The mechanism was first employed during the 2015 refugee crisis by Council Decision (EU) 2015/1601 of 22 September 2015, which installed an emergency relocation scheme for refugees, thereby effectively derogating the Dublin mechanism temporarily. In its judgment on the Decision, the European Court of Justice accepted these emergency measures while emphasising their temporary and provisional nature.44 What is more, the German government decided, during the height of the crisis, to temporarily not make use of its right under the Dublin mechanism to send asylum seekers back to the Member State where they had first entered the EU, considering their applications instead.45

9.

43 Cf.

Amhaouach/Kießling, Zeitschrift für Ausländerrecht und Ausländerpolitik 2022, 3,

44 ECJ (Grand Chamber), Judgment of 6 September 2017, Joined Cases C-643/15 and C-647/15 – Slovakia v. Council, ECLI:EU:C:2017:631. 45  On the surrounding controversy, see Bast/Möllers, Dem Freistaat zum Gefallen, Verfassungsblog 16 January 2016, available at https://verfassungsblog.de/dem-freistaat-zum-gefal len-ueber-udo-di-fabios-gutachten-zur-staatsrechtlichen-beurteilung-der-fluechtlings krise/.

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2. Requisition of private assets for public use a) Property and goods It is possible to requisition private goods and property under the administrative law regime of public necessity (polizeilicher Notstand).46 Under this general mechanism, which dates back to the jurisprudence of the Prussian Higher Administrative Court and is now codified at Länder level, public authorities can under specific circumstances ask private individuals to temporarily give up their property for public use. The requirements are, however, strict. First, the public authority must have legitimate grounds to assume that there is an imminent and considerable danger to an overwhelmingly important public interest (such as the protection of life, physical well-being, property or public institutions). Second, the public authority must first exhaust all other means at its own disposal, which includes trying to obligate the person responsible for the danger (though in catastrophic events there will frequently be no such person) and exhausting their own resources, including investing additional funds and asking other public authorities for assistance. Third, the requisition must be proportionate to the end pursued. The person who is made to temporarily relinquish their asset under the public necessity mechanism can claim compensation from the public authority for losses incurred. Given the strict ultima ratio nature of the mechanism, its factual relevance remains low. There has, however, been a large debate during the 2015 refugee crisis under what circumstances public authorities can temporarily requisition private property to house refugees.47 It was generally agreed that the public authorities (in this case: the local authorities) would first have to exhaust all their properties and try to rent additional space, in hotels for instance, before they could resort to the requisition of private space, and that any requisition could only last for a limited number of months. Besides this general mechanism, there are a number of specific mechanisms of public necessity under which public authorities can requisition private goods more easily. Most pertinently perhaps, the Disaster Control Acts (Katastro­ phenschutzgesetze) of the Länder permit the requisition of goods if it is necessary to avert or protect from a natural disaster; one example is Section 9(1) of the Bavarian Disaster Control Act. Similar provisions are often contained in the Infection Protection Acts of the Länder, such as in Article 6 of the Bavarian Infection Protection Act (Infektionsschutzgesetz). b) Intellectual property rights Patents are protected as intellectual property rights under Article 14(1) of the Basic Law. This constitutional property right can, however, be limited, as Arti46 

See for the following Barczak, Die Verwaltung 49 (2016), 157. Barczak, Die Verwaltung 49 (2016), 157, 199.

47 Cf.

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cle 14(2) of the Basic Law stipulates (“Property entails obligations. Its use shall also serve the public good.”). Under the German Patent Act (Patentgesetz),48 for instance, patents enjoy strong protections, but still remain subject to limitations. In case of emergencies such as pandemics, these limitations are of particular importance. The German Patent Act provides for two main cases of limitations:49 First, Section 13(1) of the German Patent Act provides for so called “use orders” (Benutzungsanordnungen). The section empowers the Federal Government50 to order “that the invention is to be used in the interest of public welfare”, such as during epidemics and pandemics. The use order can also be issued in the interest of the security of the Federal Republic of Germany by the competent highest federal authority or by a subordinate authority acting on its instructions. A use order is only legal, however, if it is proportionate. This would, for instance, not be the case if the patent holder is willing to license out the patent or voluntarily manufacture or supply the protected products. The legality of a use order can be reviewed by direct appeal to the Federal Administrative Court under Section 13(2) of the Patent Act and Section 190(1)No.  8 of the Code of Administrative Court Procedure (Verwaltungsgerichtsordnung). A patent that is subject to a use order loses its exclusionary effect, that is, the patent holder can no longer exclude everyone from its use, allowing the patent to be made available, for instance, to a private company. This does not mean, however, that the patent itself ceases to exist. Instead, the patent holder remains entitled to equitable remuneration from the Federal Republic of Germany under Section 13(3). Second, Section 24(1) of the Patent Act provides for compulsory licences (Zwangslizenzen). Under the provision, the Federal Patent Court may grant non-exclusive authorisation to commercially use an invention, provided that the patent holder refused to grant a license and that the public interest calls for a compulsory licence. Under Section 24(6), the holder of the patent remains entitled to remuneration from the holder of the compulsory licence, as long as a remuneration can be considered equitable under the relevant circumstances and taking into account the economic value of the compulsory licence. Given that, like the use order, the compulsory license encroaches considerably on the rights of the patent holder, a public interest can only be assumed to exist under special 48  See for an English translation of the German Patent Act https://www.gesetze-im-inter net.de/englisch_patg/. 49 See for the following Metzger/Zech, Gewerblicher Rechtsschutz und Urheberrecht 2020, 561. 50  According to the new Section 5(2) No.  5 of the German Infection Protection Act, which was introduced during the Covid-19 pandemic, the power to issue use orders passes to the Federal Minister of Health if the Federal Parliament declares an “epidemic emergency of national concern” (see above I.1) and the conditions set out in Section 13 of the German Patent Act are met.

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circumstances. A public interest is established by the misuse of a patent, but may also be established by other circumstances, in particular technical, economic, socio-political or medical considerations. The last constellation can be the case, for instance, if a vaccine can otherwise not be produced in sufficient quantities or if the patent holder makes unreasonable licensing demands.51 According to Section 24(5), a compulsory licence can also be issued in situations where the holder of the patent does not offer the patented invention on the German market or does not do so predominantly to ensure adequate supply of the patented product in Germany. Here, too, the conditions of Section 24(1) have to be met. Comparing both mechanisms, use orders are the relevant tool for times of emergency. While compulsory licences can only be issued if a third (private) party applies for them, use orders can be issued by the Federal Government on its own initiative and do not require court proceedings. Despite national and international pressure calling for the “abolition of certain IP rights”,52 however, use orders have not yet been issued and compulsory licenses have remained extremely rare. For the most part, compulsory licence applications fail to pass the high legal requirements laid down in the Patent Act and the relevant case-law. Only once, in a 2017 case regarding the HIV drug Raltegravir, has the Federal Court of Justice (Bundesgerichtshof) upheld a compulsory license granted by the Federal Patent Court since the Patent Act entered into force in 1980.53 In the very next decision, the Court made it clear that it would not ease the high bar for compulsory licences and rejected the application.54 As regards use orders, none have been issued so far. Still, one should not underestimate their psychological effect. The holders of relevant patents remain conscious of their threat during emergencies and will likely be more willing to grant licences. c) Labour/military duties After the broad use of forced labour under National Socialism, Article 12(2) and (3) of the Basic Law erected a blanket ban on any forced labour and also most forms of labour duties except within the framework of a traditional duty of community service that applies generally and equally to all, e.g. fire service. In addition, Article 12a of the Basic Law excludes compulsory military service and alternative civilian service from this ban. Thus, under Section 1 of the Conscription Act (Wehrpflichtgesetz), all men aged 18 or older are subject to military service. Until 2011, this military service (or alternative civilian service) had to be 51  Metzger/Zech, Gewerblicher Rechtsschutz und Urheberrecht 2020, 561, 564; see also 565 on Article 31 of the Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS). 52  Oser, Gewerblicher Rechtsschutz und Urheberrecht International 2021, 846. 53  BGH Gewerblicher Rechtsschutz und Urheberrecht 2017, 1017. 54  BGH Gewerblicher Rechtsschutz und Urheberrecht 2019, 1038 – Alirocumab.

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performed during peacetime. Since then, the new Section 2 of the Conscription Act limits military service and its alternatives to the state of defence and the state of tension.55 What is more, according to Article 12a(3) of the Basic Law, conscripts who have not been called up for military service or alternative service (and according to Article 12(4) also women) may be required by law to perform civilian services related to national defense. E.g., under Section 28(1) of the Civil Protection and Disaster Assistance Act (Zivilschutz- und Katastrophenhil­ fegesetz), the relevant public authorities can enlist men and women between the age of 18 and 60 to help to combat the specific dangers and damages that can arise during a state of defence. 4. Tax regimes Under the Basic Law, the German state must finance itself exclusively through general taxes. There are, however, exceptions to that rule. According to Article 106(1) No.  5, the revenue from “non-recurring levies on property and equalisation of burdens levies” “shall accrue to the Federation”. Although the provision is only meant to designate the beneficiary of various taxes (Federation or Länder), it allows the inference that “non-recurring levies” must be permissible under the Basic Law. The requirements for these special levies are, however, disputed,56 and the Federal Constitutional Court has not yet had the opportunity to clarify them.57 In an obiter dictum from 1995, the Court stated that such a special levy could be constitutional in “exceptional situations” (“staatliche Ausnahmelagen”) only. While it did not define these exceptional situations, it gave two examples, the Reichsnotopfergesetz of 1919 – a law which raised a onetime levy to finance the burdens of World War I – and the Lastenausgleichs­ gesetz (Equalisation of Burdens Levies Act) of 1952 – a law that raised a non-recurring levy to finance the burdens of World War II.58 There is an ongoing discussion what scenarios would amount to a similar “exceptional situation.” While most tax lawyers require an existential threat to the state finances59 or a singular event that leads to an unprecedented burden on the state, 60 others want to be more lenient. 61 Still, there seems to be a consensus 55 

See above I.1. See for the following the report by the Wissenschaftlicher Beirat beim Bundesministerium der Finanzen (Scientific Advisory Board to the Federal Ministry of Finance), Sollte wegen Corona eine einmalige Vermögensabgabe erhoben werden?, Expert Opinion 3/2021, available at https://www.bundesfinanzministerium.de/Content/DE/Downloads/Ministerium/ Wissenschaftlicher-Beirat/Gutachten/Vermoegensabgabe-Corona.pdf?__blob=publication File&v=3. 57  The decision in BVerfGE 23, 288, only concerned public international law. 58  BVerfGE 93, 121, 138 et seq. 59  Schemmel, Verfassungsfragen einer Vermögensabgabe, 1999, 9. 60  G. Kirchhof, Steuer und Wirtschaft 88 (2011), 189. 61  Wieland, Vermögensabgaben im Sinne von Art.  106 sect. 1 Nr.  5, 2012, 24. 56 

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that such a non-recurring levy on property must remain an instrument of last resort, or ultima ratio, meaning that it can be constitutional only if raising of taxes or borrowing by the state is not possible. There are two reasons for these strict limits: the protection of property under Article 14(1) of the Basic Law and the fact that a one-time levy constitutes a rather blunt instrument, because it is set according to the amount of assets on a specific reporting date, which can subsequently change again. It comes as no surprise that the Covid-19 crisis and the high levels of government spending that it triggered led to a discussion whether it met the conditions for an exceptional levy. While the Left party made corresponding demands, the Scientific Advisory Board to the Federal Ministry of Finance remained highly sceptical, both from an economic and from a legal point of view. The Board pointed out that the Covid crisis, while considerable, did not amount in gravity to the situation after World War II, when the losses in assets were disproportionately higher. The Board compared it instead to the economic and financial crisis after 2008, where public debt levels had fallen back below pre-crisis levels within ten years, without any need for one-off levies. It therefore rejected an “exceptional situation” under Article 106(1) No.  5 for the Covid crisis and argued for distributing the debt burden over an extended period of time through “tax smoothing.” Besides the option to raise non-recurring levies on property, the Basic Law also provides for “income and corporation surtaxes” in its Article 106(1) No.  6. This provision was used to raise the so-called “solidarity surtax” (Solidari­ tätszuschlag), targeted at financing the Reconstruction of Eastern Germany after Reunification. The revenue of this surtax also accrues to the Federation. In comparison to the “non-recurring levies on property and equalisation of burdens levies” under No.  5, the conditions for the income and corporation surtaxes are more easily met. According to the jurisprudence by the German Federal Constitutional Court, the surtax is intended to meet “peaks in budgetary demand that cannot be met in any other way.” It can be raised in the event of an “unavoidable increase of the federal government’s financial requirements” and “in emergencies.”62 While an additional need can exist for a longer period of time and while there are therefore no constitutional limits on how long a surtax can be raised, 63 there must still not be a permanent revenue shift in favour of the Federal Government – otherwise the surtax would cease to be provisional. The exact limits, however, remain unclear. The solidarity surtax has been raised continuously since 1995, that is, over 25 years. In 2019, the Federal Parliament finally abolished it for

62 

63 

BVerfGE 32, 333, 341. BVerfG of September 8, 2010 – 2 BvL 3/10, para.  17; BVerfGE 32, 333, 341 et seq.

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roughly 90 % of German taxpayers, excluding, for instance, corporations.64 There is currently a case pending before the German Federal Fiscal Court (Bun­ desfinanzhof) 65 raising the constitutionality of its continued burden on a small group of taxpayers such as corporations.

IV. Criminal Law In the 19th century, the Prussian law regulating the state of siege (Belagerungszu­ stand) did indeed provide for a special criminal law regime as one of its essential components. Sections 8 et seq. of the Prussian State of Siege Act (Belagerungszu­ standsgesetz), which were later applied to the whole of the German Empire, contained special crimes such as misleading the military authorities by knowingly spreading false rumours concerning, e.g., alleged victories by the enemies or insurgents, as well as extraordinary courts and special “protective custody” arrangements (Schutzhaft). Under Nazi rule, the “protective custody” mechanism especially was used as early as February 1933 to persecute and incarcerate opposition members and vulnerable groups. After the Reichstag (the German parliament building) burnt down in February 1933, an emergency decree based on the notorious Article 48 of the Weimar Constitution led to the “protective custody” of 26,000 Jews, regime critics, workers’ movement officials, Sinti and Roma and others. The first concentration camps were set up during that period, finally leading to the Holocaust in the 1940s. Due to this history, German criminal law eschews both special crimes for emergency situations and special criminal procedural rules. To the contrary, the Basic Law explicitly forbids certain special regimes in a form of “negative constitutional law on emergencies.”66 Article 101(1) sentence 1 of the Basic Law reads for example: “Extraordinary courts shall not be allowed.” This was expressly meant as an answer to the earlier emergency instruments. Yet – though, it should be highlighted, at a completely different level – the German Criminal Code (Strafgesetzbuch) did undergo certain changes in the last decades. Under the impression of domestic terrorism from the “Red Army Faction” (Rote ArmeeFraktion, RAF) group, a new Section 129a of the Penal Code penalizing the “formation of terrorist organizations” was introduced in 1976 and extended in 2002 to cover foreign terrorism after 9/11.67 The provision exhibits a shift of criminal responsibility to far earlier stages than the usual “act” 64  Act for the Reduction of the Solidarity Surtax 1995 (Gesetz zur Rückführung des Soli­ daritätszuschlags 1995) of December 12, 2019, BGBl. 2019, part I, No.  46, 2115. 65  German Federal Fiscal Court, File number IX R 15/20. 66  See above I.2. 67 See for an English translation of the German Criminal Code https://www.gesetzeim-internet.de/englisch_stgb/englisch_stgb.html#p1310.

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and “harm”-based provisions in ordinary criminal law: It already criminalizes the formation of the terrorist organization, not the terrorist attack itself. This is why the new section of the Penal Code has been heavily criticised. 68 Günther Jakobs, a former law professor at Bonn University, relied on Section 129a of the Criminal Code, as well as on Section 31 of the Introductory Act to the Courts Constitution Act69 and on other norms, to hypothesise in a series of articles that a special “Criminal Law for Enemies” (Feindstrafrecht) had developed in Germany.70 Jakobs’ thesis oscillated between criticism and approval and became influential after 9/11. Yet, both its normative and factual claims fail: Endorsing any form of a special “Criminal Law for Enemies” is unconstitutional under the Basic Law’s “thick” notion of the rule of law. But even as criticism of a factual development, it largely exaggerates the isolated shifts that occurred. There have also been procedural shifts during the height of the Red Army Faction terrorism of the 1970s. A new Section 31 of the Introductory Act to the Courts Constitution Act (Einführungsgesetz zum Gerichtsverfassungsgesetz) allowed blocking personal contact for incarcerated terrorists (Kontaktsperre).71 The measure aimed at isolating prisoners and extended not only to contact between detainees, but also with their defence lawyers. However, the provision, which was used against RAF prisoners in 1977, has not again been applied since then. In 2017, the section was amended and mitigated: The prisoner’s communication with his defence lawyers may not be restricted during the period of judicial proceedings.

68 See, inter alia, Jahn, Das Strafrecht des Staatsnotstandes, 2004, 236; Hörnle, in: Vormbaum (ed.), Kritik des Feindstrafrechts, 2009, 85; see also Asholt, Zeitschrift für Internatio­ nale Strafrechtsdogmatik 2011, 180. 69  See below. 70  Jakobs, Zeitschrift für die gesamte Strafrechtswissenschaft 97 (1985), 756; Jakobs, Höchst­r icherliche Rechtsprechung im Strafrecht 8–9 (2006), 289; Jakobs, Zeitschrift für die gesamte Strafrechtswissenschaft 117 (2005), 839. 71  Act of September 30, 1977, BGBl. 1977, part I, 1877.

The Protection of the Adult and Respect for his/her Autonomy Christoph Benicke

I. Overview of the Legal System1 1. Description of the Legal Framework The central measure in the field of adult protection measures is the appointment of a guardian for the adult. The law on the protection of adults was completely redesigned in Germany in 1992. The guardianship and the associated incapacitation were abolished and replaced by the new legal institution of guardianship. The aim of this reform was to preserve as much autonomy as possible for the adult in need of protection.2 1  Abbreviated

cited literature: Gsell/Krüger/Lorenz/Reymann (eds.), Beck’scher Online Grosskommentar zum BGB, Verlag C.H. Beck, München, as of: 01.11.2021; Bienwald/Sonnenfeld/Harm (eds.), Betreuungsrecht, Verlag Ernst und Werner Gieseking, Bielefeld 2016; Grüneberg (ed.), Bürgerliches Gesetzbuch, 81. Edition, Verlag C.H. Beck München 2022; Jurgeleit (ed.), Betreuungsrecht, 4. Edition, Nomos Verlagsgesellschaft, Baden-Baden 2018; Jürgens (ed.), Betreuungsrecht, 6. Edition, Verlag C.H. Beck, München 2019; Lipp (ed.), Handbuch der Vorsorgeverfügungen, Vorsorgevollmacht, Patientenverfügung, Betreuungsverfügung, Verlag Franz Vahlen, München 2009; Meier/Deinert, Handbuch Betreuungsrecht, 2. Edition, C.F. Müller, Heidelberg 2016; Säcker/Rixecker/Oetker/Limperg (eds.), Münchener Kommentar zum BGB, Band 10: Familienrecht II §§  1589–1921; SGB VIII, 8. Edition, Verlag C.H. Beck, München 2020; Rauscher (ed.), Münchener Kommentar zum FamFG, Band 2: §§  271–493; Internationales und Europäisches Zivilverfahrensrecht in Fa­ miliensachen, 3. Edition, Verlag C.H. Beck, München 2019; Kaiser/Schnitzler/Schilling/Sanders (eds.), Nomos Kommentar BGB, Band 4, Familienrecht, 4. Edition, Nomos Verlagsgesellschaft, Baden-Baden 2021; Spickhoff (ed.), Medizinrecht, 3. Edition, Verlag C.H. Beck, München 2018; Zimmermann, Vorsorgevollmacht, Betreuungsverfügung, Patientenverfügung für die Beratungspraxis, 3. Edition, Erich Schmidt Verlag, Berlin 2017; Bundestag Drucksache 16/10808, Gesetzentwurf der Bundesregierung v. 08.11.2008, Entwurf eines Gesetzes zu dem Übereinkommen der Vereinten Nationen vom 13. Dezember 2006 über die Rechte von Menschen mit Behinderungen sowie dem Fakultativprotokoll vom 13. Dezember 2006 zum Übereinkommen der Vereinten Nationen über die Rechte von Menschen mit Behinderungen, https://dserver.bundestag.de/btd/16/108/1610808.pdf; Bundestag Drucksache 19/24445, Gesetzentwurf der Bundesregierung v. 18.11.2020, Entwurf eines Gesetzes zur Reform des Vormundschafts- und Betreuungsrechts, https://dserver.bundestag.de/btd/19/244/ 1924445.pdf. 2  Gernhuber/Coester-Waltjen, Familienrecht, 7. Edition, 2020, §  78 paras. 1 et seq.; Spick­ hoff, in: Spickhoff (ed.), Medizinrecht, §  1896 BGB paras. 2 et seq.

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After various amendments to the law, which mainly involved adjustments to the case law of the Bundesverfassungsgericht and the Bundesgerichtshof, a farreaching reform was passed by the legislature in 2021, which will come into force on 1 January 2023.3 The comments in this article refer to this new regulation if not otherwise indicated. The regulations on the prerequisites and effects of legal guardianship are found in the Civil Code (Bürgerliches Gesetzbuch, BGB) in Book 4 on family law in sections 1814 to 1888. The rules on the procedure for the judicial appointment of a guardian are regulated in the Act on Proceedings in Family Matters and in Matters of Voluntary Jurisdiction (Gesetz über das Verfahren in Famil­ iensachen und in den Angelegenheiten der freiwilligen Gerichtsbarkeit, FamFG) in Book 3 in sections 271 to 311. The Act on the Organisation of Guardianship (Betreuungsorganisationsgesetz, BtOG) regulates the competence and tasks of the state guardianship authorities as well as the recognition, tasks and financing of guardianship associations. It also regulates the procedure and requirements for the registration of professional guardians. All these acts are federal law. The guardianship authorities and the guardianship courts are institutions of the respective federal states and are also financed by them. A guardian is appointed by the competent guardianship court (section 1814 para.  1 BGB). The guardianship court is a division of the local court (Amtsgeri­ cht, section 23c Gerichtsverfassungsgesetz, GVG). The respective local guardianship authority (section 11 BtOG) supports the guardianship court in this. Guardianship authorities also have the task of supporting guardians and authorised representatives (section 5 para.  2 BtOG). Furthermore, the guardianship authority has to inform the general public about general questions of guardianship law, about provisional powers of attorney and about other assistance (section 5 para.  1 BtOG). The guardianship authorities are responsible for the re-registration of professional guardianship (section 24 BtOG). Another important player in the field of adult protection are the state-recognised private-law guardianship associations (section 14 BtOG). Guardianship associations are entrusted with providing information on general questions of guardianship law, continuing power of attorney, advance guardianship directive and advance health care directive, as well as recruiting voluntary guardians (section 15 para.  1 no.  1, 2 BtOG). Guardianship associations have the task to introduce voluntary guardians to their duties, to provide them with further training and to advise and support them in the performance of their duties, as well as to advise and support authorised representatives in the performance of their duties (section 15 para.  1 no.  3, 3 BtOG). Furthermore, a recognised guardianship association is obliged to employ staff who are available to take on guard3  Gesetz zur Reform des Vormundschafts- und Betreuungsrechts vom 04.05.2021 (BGBl. I 2021, 882).

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ianship (section 16 BtOG). The recognised guardianship associations are financed by the individual federal states (section 17 BtOG). As a rule, only a natural person can be appointed as guardian. Priority is given to persons who carry out the guardianship in an honorary capacity. These are usually persons with family or other personal ties to the adult. In addition, there are self-employed professional guardians who perform this activity for remuneration. The appointment of a guardianship is subsidiary to other measures by which the adult’s need for assistance can be met. These include the continuing power of attorney by which the adult grants power of attorney. One important measure is the continuing power of attorney (Vorsorgevoll­ macht) by which the adult appoints a representative who can act legally on his or her behalf when he or she is no longer able to take care of his or her own legal affairs. The 2021 reform introduces a new statutory power of representation for spouses in matters of health care (section 1358 BGB). This legal power of representation is limited to a maximum of six months and is intended to eliminate the need for temporary guardianship. In addition, the Social Code, Book 1 (section 17 para.  4 Sozialgesetzbuch 1. Buch, SGB I) stipulates an obligation for social service providers to cooperate with guardianship authorities when arranging suitable assistance so that the appointment of a guardian can be avoided. 2. Key Terms and Definitons Act on Proceedings in Family Matters Gesetz über das Verfahren in Familien­ and in Matters of Voluntary Jurisdiction sachen und in den Angelegenheiten der freiwilligen Gerichtsbarkeit (FamFG) Act on the Organisation of Guardianship Betreuungsorganisationsgesetz (BtOG) Advance guardianship directive Betreuungsverfügung Advance health care directive Patientenverfügung Appointment of legal guardian Betreuerbestellung Civil Code Bürgerliches Gesetzbuch (BGB) Continuing power of attorney Vorsorgevollmacht Ex lege representation gesetzliche Vertretung Federal Constitutional Court Bundesverfassungsgericht (BVerfG) Federal High Court of Justice Bundesgerichtshof (BGH) Free will Freier Wille Government explanation Regierungsbegründung Guardian/legal guardian Betreuer Guardianship authority Betreuungsbehörde Guardianship court Betreuungsgericht Legal capacity Geschäftsfähigkeit Legal incapacity Geschäftsunfähigkeit Local court Amtsgericht

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Mental capacity (de facto) Natural will Representative Vulnerable adult/adult

Fähigkeit, einen natürlichen Willen zu bilden und zu äußern natürlicher Wille Stellvertreter Betroffener; schutzbedürftiger Erwachsener, Betreuter

3. International Instruments The Convention on the Rights of Persons with Disabilities (CRPD) was ratified by the Federal Republic of Germany on 24 February 2009 and entered into force in Germany on 26 March 2009.4 Germany has ratified the Hague Convention on the International Protection of Adults. It entered into force for Germany on 1 January 2009.5 4. Current Discussion and Reform When ratifying the CRPD, the Federal Government assumed that the German law on guardianship complied with the requirements of the Convention. 6 Nevertheless, a discussion subsequently took place as to whether the CRPD required a reform of the legal regulations and an improvement in legal practice.7 In the case law of the Bundesgerichtshof, the legal regulations were interpreted in such a way that the legal position of the person in guardianship was strengthened. For example, the best interests of the person in guardianship, to which the guardian must orient his or her actions (section 1901 para.  2 BGB old version), was not interpreted in an objective sense, but determined subjectively from the point of view of the person in guardianship.8 This discussion intensified following the “Concluding Observations on the initial report of Germany”, in which the Committee on the Rights of Persons with Disabilities criticised the German legal situation regarding guardianship.

4  Gesetz zu dem Übereinkommen der Vereinten Nationen v. 13.12.2006 über die Rechte von Menschen mit Behinderungen sowie zu dem Fakultativprotokoll v. 13.12.2006 zum Übereinkommen der Vereinten Nationen über die Rechte von Menschen mit Behinderungen v. 21.12.2008 (BGBl. II 2008, 1419). 5  Gesetz zu dem Haager Übereinkommen vom 13. Januar 2000 über den internationalen Schutz von Erwachsenen vom 17.03.2007 (BGBl. II 2007, 323). 6  Government explanation, Bundestag Drucksache 16/10808, 52, 56. 7 Bundesministerium der Justiz und für Verbraucherschutz (ed.), Umsetzung des Erforderlichkeitsgrundsatzes in der betreuungsrechtlichen Praxis im Hinblick auf vorgelagerte „andere Hilfen“ Abschlussbericht, Band I, BundesanzeigerVerlag Köln 2018, 18, (https:// www.bmj.de/DE/Service/Fachpublikationen/Abschlussbericht_Erforderlichkeitsgrund satz_Betreuung.html); Lipp, FamRZ 2012, 669. 8  BGH (XII ZR 77/06), NJW 2009, 2814.

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The committee expressed its concerns that the legal instrument of guardianship, as outlined in and governed by the BGB is incompatible with the Convention.9 The Committee recommends that the State party: (a) Eliminate all forms of substituted decision-making and replace it with a system of supported decision-making, in line with the Committee’s general comment No.  1 (2014) on equal recognition before the law; (b) Develop professional quality standards for supported decision-making mechanisms; (c) In close cooperation with persons with disabilities, provide training on article 12 of the Convention in line with the Committee’s general comment No.  1 at the federal, regional and local levels for all actors, including civil servants, judges, social workers, health and social services professionals and the wider community.10

In preparation for a reform of guardianship law, the federal government commissioned two major empirical scientific studies on the legal practice of guardianship in Germany. One research project examined the “implementation of the principle of necessity in guardianship law practice with regard to upstream other assistance”.11 The other examined the “quality of legal guardianship”.12 On the basis of these research reports and a broad consultation of the stakeholders and in deliberate consideration of the requirements of the CRPD, the Federal Government has drawn up a legislative reform proposal.13 The central concern of this reform is to strengthen the self-determination and autonomy of people in need of support in the run-up to and within legal guardianship, to improve the quality of legal guardianship in practice and to ensure, through better implementation of the principle of necessity, that a legal guardian is only appointed if this is necessary to protect the person concerned.14 The law refrains from using the concept of the adult’s best interest (Wohl des Betreuten) as a standard for guardianship, because this concept runs the risk of being understood in an objective sense.15 It is made clear that no measures are possible against the free will of the adult. Even if the adult cannot form a free 9  Committee on the Rights of Persons with Disabilities, Concluding observations on the initial report of Germany, CRPD/C/DEU/CO/1, no.  25. 10  Ibid. no.  26. 11 Bundesministerium der Justiz und für Verbraucherschutz (ed.), Umsetzung des Erforderlichkeitsgrundsatzes in der betreuungsrechtlichen Praxis im Hinblick auf vorgelagerte „andere Hilfen“, Abschlussbericht, Band I–III, BundesanzeigerVerlag Köln 2018 (https:// www.bmj.de/DE/Service/Fachpublikationen/Abschlussbericht_Erforderlichkeitsgrund satz_Betreuung.html). 12  Bundesministerium der Justiz und für Verbraucherschutz (ed.), Qualität in der recht­ lichen Betreuung Abschlussbericht, BundesanzeigerVerlag Köln 2018 (https://www.bmj.de/ SharedDocs/Downloads/DE/Service/Fachpublikationen/Forschungsbericht_Qualitaet_ rechtliche_Betreuung.html). 13  Government explanation, Bundestag Drucksache 19/24445. 14  Ibid. 2–3. 15 Government explanation, Bundestag Drucksache 19/24445, 249; Schnellenbach/Nor­ mann-Scheerer/Loer, BtPrax 2021, 83 (II.6.).

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will, his or her natural will must be observed. If the adult cannot form a natural will, his or her presumed will is decisive (section 1821 paras. 2 – 4 BGB).16 However, this does not exclude that in individual cases a substitute decision may also be made and enforced against the natural will of the adult if this is necessary to prevent a considerable danger to him or herself.17 This follows from the requirements of German constitutional law and the case law of the Bundesverfassungsgericht on the state’s duty to protect on the basis of the fundamental rights of the German constitution. Specifically, the Bundesverfas­ sungsgericht has ruled that the German state is obliged to protect a guardianship patient who lacks capacity to consent and is at risk of significant health impairments by providing for medical treatment as a last resort under strict conditions, even against his natural will.18 5. Statistical data19 a) Elderly Persons In 2020 a total of 83,155,031 people lived in Germany.20 Of these, 64.89 million (78 %) were under the age of 65.21 18.27 million were older than 65 (22 %).22 15.3 million of the population (around 18.4 %) were under 20. 20 – 40 years old were 20.4 million (24.5 %). The largest share of the population in Germany, 23.4 million (28.1 %), was between 40 and 60 years. 18.2 million (21.8 %) were between 16 

Government explanation, Bundestag Drucksache 19/24445, 250. Ibid. 120. 18  BVerfG (1 BvL 8/15), NJW 2017, 53; see also BVerfG (2 BvR 309/15, 2 BvR 502/16), NJW 2018, 2619 para.  74. 19 Abbreviated cited resources on statistical data: Destatis (Statistisches Bundesamt), Kurzbericht Statistik der schwerbehinderten Menschen 2019, https://www.destatis.de/DE/ Themen/Gesellschaft-Umwelt/Gesundheit/Behinderte-Menschen/Publikationen/Down loads-Behinderte-Menschen/sozial-schwerbehinderte-kb-5227101199004.html; Destatis (Statistisches Bundesamt), Öffentliche Sozialleistungen 2019, https://www.destatis.de/DE/ Themen/Gesellschaft-Umwelt/Gesundheit/Behinderte-Menschen/Publikationen/Down loads-Behinderte-Menschen/lebenslagen-behinderter-menschen-5122123199004.pdf;jsessio nid=2F694619D633A3A80B692377EE40609E.live742?__blob=publicationFile; Destatis (Statistisches Bundesamt), Pflegestatistik 2019, https://www.destatis.de/DE/Themen/Gesellschaft-Umwelt/Gesundheit/ Pf lege/ Publikationen / Down loads-Pf lege/pf legedeutschlandergebnisse-5224001199004.pdf?__blob=publicationFile; Destatis (Statistisches Bundesamt), Pflegebedürftige nach Versorgungsart, Geschlecht und Pflegegrade 2019, https:// www.destatis.de/DE/Themen/Gesellschaft-Umwelt/Gesundheit/Pflege/Tabellen/pflegebe duerftige-pflegestufe.html; Destatis (Statistisches Bundesamt), Statistik über d. Empfänger vonb Pflegebedürftigen 2017, 2019, https://www-genesis.destatis.de/genesis/online?sequenz =tabelleErgebnis&selectionname=22421-0001#abreadcrumb. 20  Destatis (Statistisches Bundesamt), Bevölkerungsstand 2021, https://www.destatis.de/ DE/Themen/Gesellschaft-Umwelt/Bevoelkerung/Bevoelkerungsstand/_inhalt.html. 21  Statista, Bevölkerung – Zahl der Einwohner in Deutshland nach relevanten Altergruppen am 31. Dezember 2020, https://de.statista.com/statistik/daten/studie/1365/umfrage/be voelkerung-deutschlands-nach-altersgruppen/. 22 Ibid. 17 

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60 and 80. 5.9 million people (7.1 %) were in the 80 to 100 age range. Finally, a small proportion of the population in Germany, 20,465 people (< 1 %), were those over 100 years of age.23 b) People with Disabilities aa) The Term Disability Used in the Statistic In order to understand the following statistics, it is first necessary to outline the term of disability on which they are based. The statistics refer to the terms used in Book IX of the Social Code (Sozialgesetzbuch 9. Buch, SGB IX), 24 which contains the provisions on rehabilitation and participation of persons with disabilities. People with disabilities are defined as people with physical, mental, intellectual or sensory impairments, which, in interaction with attitudinal and environmental barriers, are likely to prevent them from participating in society on an equal basis for longer than six months. An impairment exists if the physical and health condition deviates from the condition typical for the person’s age. Causes of disability can be congenital disabilities, illnesses, accidents, war, military service or civilian service injuries.25 In the statistics on severe disabilities, the most severe disability is shown if there are several disabilities. The degree of disability (hereafter GdB)26 , which is expressed in degrees of ten from 20 to 100, indicates the intensity of the impact of the disability on social participation. Persons with a GdB of 50 or more are considered severely disabled. The GdB is measured on the basis of the “medical care principles”, which are laid down in the Medical Care Ordinance.27 bb) Statistics on People with Disabilities In Germany, around 10.4 million people with officially recognised disabilities were registered in 2019.28 This means that one out of eight inhabitants were disabled (13 %). The majority of these, around 7.9 million people, were severely disabled. This corresponds to a population share of 9.5 %.29 Almost a quarter of severely disabled people, namely 1.8 million, suffered from very severe impair23  Destatis (Statistisches Bundesamt), Bevölkerung nach Altergruppen 2020, https://www. destatis.de/DE/Themen/Gesellschaft-Umwelt/Bevoelkerung/Bevoelkerungsstand/Tabel len/liste-altersgruppen.html. 24 „Sozialgesetzbuch Neuntes Buch“. 25  Destatis (Statistisches Bundesamt), Kurzbericht Statistik der schwerbehinderten Menschen 2019, 4. 26 „Grad der Behinderung“. 27 „Versorgungsmedizin-Verordnung – VersMedV”. 28  Destatis (Statistisches Bundesamt), Öffentliche Sozialleistungen 2019, 15. 29  Destatis (Statistisches Bundesamt), Kurzbericht Statistik der schwerbehinderten Menschen 2019, 5; see also https://www.destatis.de/DE/Themen/Gesellschaft-Umwelt/Gesund heit/Behinderte-Menschen/_inhalt.html.

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ments (GdB 100). 2.6 million people had a GdB 50.30 In 89.4 % of the cases, the cause of the disability was an illness. In 3.3 %, the disability was congenital or manifests itself in the first year of life. 0.2 % of severely disabled people suffered permanent damage in war, military service or civilian service. For 1.4 %, the cause was accident or occupation. For the remaining 5.8 %, the disability was due to other, multiple or insufficiently described causes.31 The majority (4.5 million/about 57 %) of severely disabled people were aged 65 or older. Approximately 1.7 million (around 21 %) were between 55 and 65 years of age. 790,371 persons between 45 and 55 made up 10 %. The younger age groups accounted for a much smaller share.32 Compared to the last survey from 2017, the total number of severely disabled people has increased by 1.8 %.33 c) People in need of care aa) People in need of care in the sense of the statistics The statistics on people in need of care are based on the definitions in Book XI of the Social Code (Sozialgesetzbuch 11. Buch, SGB XI), the regulations on social long-term care insurance. In order to provide social protection against the risk of needing long-term care, a social long-term care insurance was created in 1995 as a new independent branch of social insurance (section 1 para.  1 SGB XI). According to section 1 para.  4 SGB XI, long-term care insurance has the task of providing assistance to those in need of care who are dependent on solidary support due to the severity of the need for long-term care. In Germany, almost the entire population are covered by the health insurance and long-term care insurance.34 Persons in need of care in this sense are persons who receive benefits according to SGB XI. The general prerequisite for being registered as a person in need of long-term care is the decision of the long-term care insurance or the private insurance company on the existence of a need for long-term care and the allocation of the person to one of the care degrees 1 – 5.35 Persons in need of care in the 30  Destatis (Statistisches Bundesamt), Kurzbericht Statistik der schwerbehinderten Menschen 2019, 5. 31  Ibid. 5. 32  Ibid. 6. 33  Ibid. 5. 34  Only 61,000 people (< 0.1 % of the population) are not insured; see Destatis (Statistisches Bundesamt), Pressemitteilung Nr.  365 of 15.09.2020, https://www.destatis.de/DE/Presse/ Pressemitteilungen/2020/09/PD20_365_23.html. 35  For the care degrees, see section 15 para 2 SGB XI; in 2017, care level 1 was newly introduced, which caused problems in recording, which continue in today’s statistics. Care level 1 covers people who have not yet (until 2017) received a care level, but who still need support in their daily lives due to limitations. Unfortunately, this information was not recorded correctly by the long-term care insurance companies. Similar to 2017, the under-recording is estimated at 160,000 people in need of care; for this, see Destatis, Pflegestatistik 2019, 4, 5.

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sense of the Social Code Book XI are persons who have health-related impairments of independence or abilities and therefore need help from others. They must be persons who cannot independently compensate for or cope with physical, cognitive as well as mental impairments or health-related burdens and demands. The need for long-term care must be expected to last for at least six months and must be at least as severe as defined in section 15 SGB XI (section 14 para.  1 SGB XI).36 bb) Statistics on Persons in Need of Care At the end of 2019, there were a total of 4,127,605 people in need of long-term care in Germany.37 Of these, 818,255 (19.8 %) were under 65 years of age and the majority, 3,309,350 (80.2 %), were over 65 years of age.38 Of the 4,127,605 persons in need of long-term care, 3,309,288 (about 80.2 % of all persons in need of long-term care) were cared for at home. Of those in need of care at home, 757,863 were under 65 and 2,551,425 were over 65.39 818,317 persons were in full inpatient care (residential care home)40 (about 19.8 % of all persons in need of care).41 Of those in full inpatient care, 60,392 were under the age of 65 and 757,925 were older than 65.42 d) Legal Guardians There are no nationwide statistics on the number and types of guardianships in Germany. The latest available figures for the whole of Germany are therefore from 2015.43 On 31 December 2015, there were 1,276,538 appointed legal guardians in Germany.44 The proportion of professional guardians was 47.2 % (of 36 

Destatis, Pflegestatistik 2019, 6. (Statistisches Bundesamt), Pflegebedürftige nach Versorgungsart, Geschlecht und Pflegegrade 2019. 38  Destatis, Pflegestatistik 2019, 21. 39  Destatis (Statistisches Bundesamt), Statistik über die Empfänger von Pflegegeldleistungen 2017, 2019, https://www-genesis.destatis.de/genesis/online?sequenz=tabelleErgebnis& selectionname=22421-0001#abreadcrumb. 40  Persons in need of long-term care who are cared for in residential care homes include those who receive fully inpatient (long-term/short-term care) or partially inpatient care (day/ night care) through the nursing homes approved according to SGB XI, Destatis, Pflegestatistik, 6. 41 Destatis (Statistisches Bundesamt), Pflegebedürfite nach Versorgungsart, Geschlecht und Pflegegrade 2019. 42  Destatis (Statistisches Bundesamt), Statistik über d. Empfänger von Pflegebedürftigen 2017, 2019. 43  Deinert, BtPrax 2018, 14 with an extrapolation of the figures for 2016. 44  BMJV (Bundesministerium der Justiz und für Verbraucherschutz), Qualität in der recht­ lichen Betreuung Abschlussbericht, 2018, 633 (https://www.bmj.de/SharedDocs/Down loads/DE/Service/Fachpublikationen/Forschungsbericht_Qualitaet_rechtliche_Betreuung. html); Deinert, Betreuungszahlen 2015, https://www.reguvis.de/fileadmin/BT-Prax/down loads/Statistik_Betreungszahlen/2015/Betreuungsstatistik_2015.pdf. 37  Destatis

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which 39.9 % were self-employed including lawyers, 7.2 % were guardianship associations, 0.5 % were guardianship authorities), the proportion of voluntary guardians was 52.8 % (of which 43 % were family members, 9.7 % were other voluntary guardians).45 While the total number of guardianships rose sharply until 2012, it decreased in the following years.46 More and more people are taking advantage of the opportunity to avoid the need for legal guardianship by setting up a continuing power of attorney.47 The number of registered continuing powers of attorney is steadily increasing. In 2015, 382,292 new continuing powers of attorney were registered, totalling to a number of 3,031,223.48

II. State-Ordered Measures 1. Overview of Existing State Ordered Measures The central state ordered measure for the protection and the empowerment of vulnerable adults is the appointment of a legal guardian according to section 1814 BGB. When ordering guardianship, the guardianship court determines which areas of responsibility the legal guardian is responsible for (section 1815 BGB). The task of the legal guardian is to carry out the activities in the assigned areas of responsibility that are necessary to legally manage the affairs of the vulnerable adult (section 1821 BGB). Another measure to protect a vulnerable adult is involuntary commitment under public law. This is a measure in which the vulnerable adult is deprived of his or her liberty against his or her will. It can take place if the vulnerable adult poses a considerable risk to himself or herself or to other persons or to the general public.49 Public-law involuntary commitment is ordered by the guardianship court. It is applied for by the competent authority. It is independent of whether or not guardianship has been appointed for the vulnerable adult. The legal basis for involuntary commitment under public law is the respective law of the federal state. 45 

Deinert, BtPrax 2018, 14. der Berufsbetreuer/innen, Rechtliche Betreuung Daten und Fakten, https://www.berufsbetreuung.de/berufsbetreuung/was-ist-rechtliche-betreuung/datenund-fakten/. 47  Institut für Betreuungsrecht Kester-Haeusler Forschungsinstitut, Entwicklung des Betreuungsrechts/Betreuungszahlen, http://www.betreuungsrecht.de/betreuung/entwicklungdes-betreuungsrechts-betreuungszahlen/. 48  Note: The registration is not constitutive. 49  §  1 Hessisches Gesetz über die Entziehung der Freiheit geisteskranker, geistesschwa­ cher, rauschgift- oder alkoholsüchtiger Personen vom 19. Mai 1952 (GVBl. I 1952, 111); see BGH (XII ZB 488/11), NJW 2012, 1448 para.  16. 46 Bundesverband

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A distinction must be made between this public-law involuntary commitment and the so-called private-law involuntary commitment. A private-law involuntary commitment can only take place in cases of self-endangerment or for the purpose of carrying out curative treatment (section 1831 BGB). The prerequisite is that a guardian is appointed or a representative is available and that the guardian or the representative applies for the involuntary commitment. The involuntary commitment must be ordered by the guardianship court. 2. Requirements for Appointing a Legal Guardian a) General Requirements A legal guardian can be appointed when an adult is impaired in his or her legal capacity to act and requires the support of a guardian to perform legal acts (section 1814 para.  1 BGB). The explanatory memorandum to the law explicitly points out that the appointment of a guardian is an appropriate measure to provide access by persons with disabilities to the support they may require in exercising their legal capacity according to Article 12 para.  3 CRPD. The requirements for the appointment of a guardian thus refer on the one hand to the fact that they establish the state’s obligation to take a support measure to protect the vulnerable adult. On the other hand, however, they also set the limits for the encroachment on the fundamental right of the vulnerable adult to free and self-determined development of the personality, which lies in the appointment of a legal guardian by the state.50 Legal guardianship is a protective measure for adults, i.e. for persons aged 18 and over. For minors in need of protection, a tutelage (Vormundschaft) (section 1773 BGB) or a curatorship (Pflegschaft) (section 1809 BGB) can be ordered. Since tutelage (Vormundschaft) or curatorship (Pflegschaft) end by act of law when the child comes of age, a legal guardian can already be appointed for a minor at the age of 17 as a precaution. However, the appointment of the legal guardian only becomes effective when the age of majority is reached (section 1814 para.  5 BGB). This provision ensures that the protective measures for a minor can be continued without interruption by a protective measure for adults. Section 1814 BGB sets out four requirements for the appointment of a guardian: (1) The adult cannot legally manage his or her affairs in whole or part (need for guardianship). (2) There is an illness or disability. (3) This illness or disability is the reason why the adult cannot legally mangage his or her affairs in whole or in part. (4) The guardianship must be necessary. 50 

Government explanation, Bundestag Drucksache 19/24445, 239 et seq.

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(1) Need for Guardianship A guardian can only be appointed if there is a need for guardianship. The need for guardianship exists if the adult cannot legally manage his or her own affairs in whole or in part and there is a need for action. The need for action does not exist if no action is required for the matters. For example, legal guardianship is not required for asset management if there are no assets and the adult has no regular income.51 (2) and (3) Illness or Disability as a Cause of the Need for Guardianship During the revision of the legal regulation, it was considered whether the precondition of illness or disability as a reason for the adult not being able to legally take care of his or her affairs should be deleted. This requirement was criticised above all because it could lead to the assumption that a guardian should be appointed as a rule when certain illnesses are diagnosed.52 The requirement was retained because it is intended to ensure that a lack of capacity to act alone is not sufficient to appoint a guardian. A guardian should only be appointed if there is a need for care resulting from an illness or disability. A person who exhibits criminal behaviour but does not suffer from a diagnosed illness or disability should not be able to be placed under guardianship.53 However, the risk of discrimination on the basis of the diagnosis of a certain illness or handicap was recognized to the extent that the wording was changed compared to the previous legal situation. The previous regulation (section 1896 BGB old version) stipulated, whether a person of full age „by reason of a mental illness or a physical, mental or psychological handicap, cannot in whole or in part take care of his affairs“. The new wording puts the inability to take care of his legal affairs on first place and omits the mentioning of a mental illness or a mental or psychological handicap in order to avoid exposing these as prone for custodial needs.54 The use of the open and general terms illness and disability ensures that all persons with a need for care can be covered. A limitation takes place primarily through the prerequisite of necessity.55 A relevant illness or disability may exist in particular in the case of psychoses (organic like Alzheimer’s disease or nonorganic like schizophrenia).56 Oligophrenia (reduced intelligence) can justify the appointment of a guardian as a so-called mental disability.57 The appointment of a guardian solely on the basis

51 

BayObLG (3Z BR 250/94), BtPrax 1995, 64. Government explanation, Bundestag Drucksache 19/24445, 230. 53  Ibid. 230, 231. 54  Ibid. 230. 55  Jürgens, in: Jürgens (ed.), Betreuungsrecht, §  1896 BGB para.  3. 56  Ibid. §  1896 BGB para.  4. 57  BayObLG (3Z BR 193/93), FamRZ 1994, 318; Jürgens, in: Jürgens (ed.), Betreuungsrecht, §  1896 BGB para.  7. 52 

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of illiteracy is excluded, since this is not a disability.58 Addictions, such as alcoholism, medication or drug addiction, cannot in themselves justify the appointment of a guardian.59 However, the appointment of a guardian is possible if the addiction has led to a mental illness, for example through damage to the nervous system, or if the addiction itself is the consequence of a (mental) illness or disability.60 In the literature, it is criticised that in practice psychiatric experts sometimes do not classify the disease or disability correctly according to the International Statistical Classification of Diseases and Related Health Problems (ICD-10). 61 A correct classification is particularly important in the case of personality disorders. In the case of such disorders, guardianship can only be justified if there are severe abnormalities and disorders that affect the cognitive and voluntary abilities of the person concerned. The classification of diseases and disabilities should be avoided in the case of conspicuous character traits, such as “obstinacy in old age” or “intransigence and stubbornness”.62 This problem also arises in particular with wastefulness and gambling addiction. These are only symptoms in themselves; it is necessary for the psychiatric expert to be able to diagnose an illness or disability (mental disorder) that is the reason for the wastefulness or gambling addiction.63 In the case of physical disabilities such as paralysis, blindness, deafness or muteness, the appointment of a guardian is regularly ruled out because it is not necessary. In most cases, the person concerned can take care of their legal affairs with other assistance or by appointing their own representative. 64 (4) Necessity of Guardianship The requirement that a guardian may only be appointed if this is necessary is laid down by the German constitution, because any guardianship represents an encroachment on the fundamental rights of the person concerned.65 The requirement of necessity is specified in section 1814 para.  3 s. 2 BGB. Necessity 58 

LG Kleve (4 T 29/13), NJW-RR 2013, 1161. Garmisch-Partenkirchen (XVII 0211/08), FamRZ 2009, 149; AG Bad Iburg (11 XVII L 2027), BtPrax 2004, 204. 60  Schneider, in: Münchener Kommentar zum BGB, §  1896 para.  11; Jürgens, in: Jürgens, Betreuungsrecht, §  1896 BGB para.  4. 61  Schmidt-Recla, in: Beck‘scher Online Grosskommentar zum BGB, §  1896 BGB para.  89. 62  BayObLG (3Z BR 246/01), FamRZ 2002, 494; AG Obernburg (XVII 269/08), FamRZ 2009, 1515; Schmidt-Recla, in: Beck’scher Online Grosskommentar zum BGB, §  1896 BGB para.  89; Schneider, in: Münchener Kommentar zum BGB, §  1896 para.  12. 63  Schmidt-Recla, in: Beck’scher Online Grosskommentar zum BGB, §   1896 BGB para.  80.2. 64  OLG Köln, 16 Wx 100/95AG, FamRZ 1996, 249; Schneider, in: Münchener Kommentar zum BGB, §  1896 para.  17; Heitmann/Füchtenkord, in: Nomos Kommentar BGB, §  1896 BGB para.  13. 65  BVerfG (1 BvR 184/13), NJW 2016, 2559; Spickhoff, in: Spickhoff (ed.), Medizinrecht, §  1896 BGB paras. 3, 11. 59 AG

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does not exist if there is sufficient other support. Therefore, other forms of support take precedence over guardianship. In the first place, the law mentions the continuing power of attorney (section 1814 para.  3 s. 2 no.  1 BGB). However, the prerequisite is that the power of attorney was effectively granted and has not expired, for example due to revocation by the adult. If there are concrete doubts about the effectiveness of the power of attorney or if the authorized person is unsuitable, the appointment of a guardian may be necessary. 66 In practice, this often raises the question of whether the adult had legal capacity at all and therefore effectively granted a power of attorney or effectively revoked a previously granted power of attorney. 67 (See 3.2.4.) In addition, the law explicitly states that the appointment of a guardian is not necessary if the affairs of the person concerned can be dealt with by other means that do not require the appointment of a legal representative (section 1814 para.  3 s. 2 no.  2 BGB). The government’s explanatory memorandum mentions informal assistance by family or friends as an example. 68 The law makes special reference to support based on social rights and other regulations. This is intended to clarify that legal guardianship is subordinate to assistance provided by social service providers. The explanatory memorandum to the law cites as an example the counselling that the respective social service provider has to ensure with regard to social law benefit claims, such as integration assistance. 69 Another example are youth welfare measures for young adults up to 27 years of age according to section 41 of Book VIII of the Social Code70 or assistance to avert particular social difficulties according to sections 67 – 69 of Book XII of the Social Code.71 The Reform Act introduced an obligation for social service providers to cooperate with the guardianship authorities in arranging suitable social assistance in order to avoid the appointment of guardians (section 17 para.  4 SGB I). However, guardianship is required when the adult is unable to receive help from others. This can also be due to the fact that he or she does not realise that he or she is dependent on help.72 b) Will and Preferences of the Vulnerable Adult A guardian must not be appointed against the free will of the adult (section 1814 para.  2 BGB). It follows from this provision that the appointment of a guardian 66  BGH (XII ZB 370/14), NJW 2015, 1752 para.  19; BGH (XII ZB 498/15), NJW-RR 2016, 1025 para.  12; Schneider, in: Münchener Kommentar zum BGB, §  1896 para.  52. 67  Schneider, in: Münchener Kommentar zum BGB, §  1896 para.  53. 68  Government explanation, Bundestag Drucksache 19/24445, 233. 69  Ibid. 233. 70 „Sozialgesetzbuch VIII“, SGB VIII. 71  Government explanation, Bundestag Drucksache 19/24445, 233. 72  Spickhoff, in: Spickhoff (ed.), Medizinrecht, §  1896 BGB para.  11.

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against the will of the adult is also possible if the opposing will cannot be classified as “free will” but only as “natural will”. A free will presupposes two elements: the capacity of discernment and the ability to act according to the discernment gained.73 For the capacity to discern, it is important that “the adult is in principle capable of recognising and weighing up the points of view in favour of and against the appointment of a guardian, as well as intellectually grasping the reason, significance and scope of a guardianship”:74 The existence of a need for care due to an illness or disability does not exclude that the person concerned can form a free will with regard to the refusal of guardianship. For example, in the case of alcoholism, it may be possible for the person concerned to form a free will with regard to refusing the appointment of a guardian. Even if the person concerned is unable to control his alcohol consumption, this does not lead to the conclusion that he cannot form a free will with regard to the appointment of a guardian.75 On the other hand, the lack of insight into the illness may indicate that the adult does not possess the capacity of discernment necessary to form a free will.76 Free will also presupposes the ability to control, i.e. the ability of the person concerned to act according to the insight gained.77 Guardianship cannot be ordered against the free will of the person concerned even if it is objectively advantageous for the person concerned or if the person concerned is helpless and harms himself or herself without legal care.78 If there is a risk of serious harm to the adult, a guardianship must be ordered because of the state’s duty to protect unless the adult acts “in clear awareness of the consequences”.79 In the selection of the person of the legal guardian, the wishes of the adult are primarily decisive. The respect of the adult’s wishes was strengthened by the 2021 reform.80 If the adult wishes a certain person to be appointed, this wish must be complied with. A wish is also respectable if the adult is otherwise unable to form a free will.81 An exception applies only in the event that this person 73  BGH (XII ZB 336/17), NJW-RR 2018, 4; Schneider, in: Münchener Kommentar zum BGB, §  1896 para.  30. 74  BVerfG (1 BvR 665/14), NJW 2015, 1666 para.  32; BGH (XII ZB 336/17), NJW-RR 2018, 4 para.  20. 75  BVerfG (1 BvR 665/14), NJW 2015, 1666 para.  31; Schneider, in: Münchener Kommentar zum BGB, §  1896 para.  32. 76  BGH (XII ZB 336/17), NJW-RR 2018, 4; BGH (XII ZB 372/13), NJW-RR 2014, 770 para.  15. 77  BGH (XII ZB 336/17), NJW-RR 2018, 4. 78  See BGH (XII ZB 495/16), NJW-RR 2017, 964; BGH (XII ZB 372/13), NJW-RR 2014, 770 para.  12. 79  Schneider, in: Münchener Kommentar zum BGB, §  1896 para.  30. 80  Government explanation, Bundestag Drucksache 19/24445, 135. 81  Government explanation, Bundestag Drucksache 19/24445, 484; BGH (XII ZB 206/13), NJW-RR 2013, 1473 para.  8.

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is not suitable to manage the legal affairs of the adult (section 1816 para.  2 s. 1 BGB). Before the reform, compliance with the adult’s wishes was subject to the provision that the proposal was not contrary to the adult’s best interests (section 1897 para.  4 s. 1 BGB old version). The adult can express such a wish not only in the specific procedure. A previously expressed wish in relation to the person to be appointed is relevant if the adult is currently no longer able to express his or her wishes. One possibility is that the adult has established an advance guardianship directive (section 1816 para.  2 s. 4 BGB; see 3.3. below). Thereby, compliance with a form is not required. Wishes that the adult has verifiably expressed verbally are also authoritative and must be followed.82 If the adult rejects a certain person as a legal guardian, this person cannot be appointed, unless the rejection does not refer to the person but to the guardianship in general (section 1816 para.  2 s. 2 BGB). c) Procedure The appointment of a guardian is made by the guardianship court, a special division of the local court (section 1814 BGB, section 23a para.  1 no.  2, para.  2 no.  1, section 23c Gerichtsverfassungsgesetz). Decisions and control measures of lesser importance are thereby fulfilled by a senior court officer (Rechtspfleger). This includes the measures of control and supervision of the guardian. The essential decisions and measures must be taken by a judge. These include the appointment of a guardian, the ordering of a reservation of consent (see 2.4.2.) and the approval of medical measures of considerable importance as well as the approval of compulsory medical measures (section 3 no.  2b, section 15 Rechts­ pflegergesetz). Proceedings for the appointment of a guardian can be initiated on the basis of an application by the adult himself/herself (section 1814 para.  4 s. 1 BGB). The adult is capable of conducting proceedings on the appointment of a guardian even if he or she lacks legal capacity (section 275 para.  1 FamFG). Other persons have no formal right of application. However, the guardianship court must initiate proceedings ex officio when it learns of facts that make the appointment of a guardian appear necessary. Anyone can provide the guardianship court with relevant information and request the initiation of proceedings: Relatives or acquaintances of the adust, institutions such as nursing homes or care services. In practice, the suggestion is often made by the guardianship authority (section 9 para.  1 BtOG).83 If the adult suffers only from a physical illness or disability, proceedings can only be opened at his or her request. An

82 

Schneider, in: Münchener Kommentar zum BGB, §  1897 para.  25. Meier/Deinert, Handbuch Betreuungsrecht, para.  61; Zimmermann, Ratgeber Betreuungsrecht, Hilfe für Betreute, Betreuer und Angehörige, 11. Edition, 2020, 122. 83 

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exception applies only in the case that the adult is not able to make his will known (section 1814 para.  4 s. 2 BGB). This is conceivable only in rare cases.84 The principle of official investigation applies to the proceedings of the guardianship court (section 26 FamFG). This means that the guardianship court must ascertain the relevant facts to the decision independently of applications by the parties involved. Since 2014, the guardianship court must hear the guardianship authority before appointing a guardian (section 279 para.  2 FamFG). The hearing of the guardianship authority regularly takes place in such a way that the guardianship authority prepares a (social) report on the adult for the guardianship court (section 11 para.  1 no.  1 BtOG). The report is meant to strengthen the adult’s right to self-determination and to include the expertise of the guardianship authority into the court proceedings. In particular, the report should comment on whether the adult can grant a continuing power of attorney and whether the existing deficits can be compensated for by other assistance measures, so that the appointment of a legal guardian is not necessary.85 With the report, the guardianship authority has to propose a person who is suitable as a legal guardian. The guardianship authority should justify the proposal and state what the adult’s opinion on the proposal is (section 12 BtOG). After the reform, the law now expressly stipulates that the guardianship authority should first prepare a report and only after that the guardianship court should issue the order for the preparation of a medical expert opinion (section 279 para.  2 s. 1 FamFG). This also aims to strengthen the adult’s right to self-determination. If the social report shows that there are sufficient other possibilities for help, there is no need for a medical expert opinion. 86 A mandatory prerequisite for the appointment of a guardian is the obtaining of a medical expert opinion.87 If there are sufficient indications that there is a need for guardianship, the guardianship court obtains a medical expert opinion

84  Government explanation, Bundestag Drucksache 11/4528, Gesetzentwurf der Bundesregierung v. 11.05.1989, Entwurf eines Gesetzes zur Reform des Rechts der Vormundschaft und Pflegschaft für Erwachsene (Betreuungsgesetz – BtG), 116, https://dserver.bundestag.de/ btd/11/045/1104528.pdf. 85  Günter, in: Hahne/Schlögel/Schlünder (eds.), Beck’scher Online Kommentar zum FamFG, 41. Edition, 2022, §  279 FamFG para.  12; Mückner/Gölz, Sozialbericht der Behörde, in: Diekmann/Lipp/Winterstein (eds.), Betreuungsrecht im internationalen Kontext – Aktuelle Aspekte in Deutschland – Berichte und Beiträge vom 4. Weltkongress Betreuungsrecht, Eigenverlag Betreuungsgerichtsverlag, 2017, 128, 129. 86  Government explanation, Bundestag Drucksache 19/24445, 332. 87  Kretz, in: Jürgens (ed.), Betreuungsrecht, §  280 FamFG para.  5; according to section 281 FamFG, a medical certificate is sufficient if the adult has applied for the appointment of a guardian and has waived the assessment.

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on whether it is necessary to appoint a guardian (section 280 para.  2 s. 1 FamFG).88 The appointment of the expert shall be communicated to the adult.89 The expert should be a specialist in psychiatry or a doctor with experience in the field of psychiatry (section 280 para.  1 s. 2 FamFG). Other doctors may be appointed as experts if the case does not involve a mental illness or disability.90 The expert must personally examine or question the adult before providing the medical expert opinion (section 280 para.  2 s. 1 FamFG). The appointment of the expert must have taken place before the examination and questioning of the adult and the expert must inform the adult of the purpose of the examination and questioning.91 If the adult refuses to cooperate in the assessment, coercive measures can be taken if necessary.92 A mandatory prerequisite for the preparation of the medical expert opinion is that the expert has gained a personal impression of the person concerned.93 The medical expert opinion must provide information on the existing illness or disability, the physical and mental condition of the adult, the need for support that exists from a medical point of view due to the illness or disability, and the expected duration of the measure (section 280 para.  3 FamFG). The adult is always a party to the proceedings, even if he or she does not have legal capacity (section 275 para.  1 FamFG). He or she may call on the assistance of a lawyer to represent him or her in the proceedings. However, there is no obligation to be represented by a lawyer. If it is necessary to safeguard the interests of the adult, the guardianship court appoints a procedural guardian for the adult who has not contracted a lawyer as his procedural representative (section 276 para.  1 s. 1 FamFG). This is generally the case if the adult exceptionally cannot be heard in person by the guardianship court or if the guardian is to be appointed against the declared will of the adult (section 276 para.  1 s. 2 FamFG). The procedural guardian must ascertain the wishes, or alternatively the presumed wishes, of the adult and assert them in the proceedings (section 276 para.  3 FamFG). The 2021 reform introduced the requirement that the guardianship court informs the adult about the tasks of a legal guardian, the possible course of the proceeding and the costs that could generally result from the appointment of a legal guardian (section 275 para.  2 FamFG). The adult must also be informed that he or she may request that a person close to him or her be heard in the pro88 

BGH (XII ZB 610/14), NJW 2016, 159 para.  31. BGH (XII ZB 610/14), NJW 2016, 159 para.  14; Kretz, in: Jürgens (ed.), Betreuungsrecht, §  280 FamFG para.  3. 90  Schmidt-Recla, in: Münchener Kommentar zum FamFG, §  280 FamFG para.  11. 91  BGH (XII ZB 610/14), NJW 2016, 159 para.  15; BGH (XII ZB 393/18), NJW 2019, 1681 para.  8. 92  BGH (XII ZB 88/17), NJW-RR 2017, 1219 para.  8; Kretz, in: Jürgens (ed.), Betreuungsrecht, §  280 FamFG para.  6 . 93  BGH (XII ZB 536/16), NJW-RR 2017, 963 para.  10. 89 

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ceedings (section 279 para.  3 FamFG).94 The purpose of this new provision is to strengthen the adult’s right to self-determination.95 This information must be provided in a manner that is as appropriate as possible to the recipient, i.e. as comprehensible as possible and in simple language. However, the information does not have to be provided in person. It is planned to develop standardised barrier-free information material which will be sent to the adult.96 The law requires that the guardianship court hears the adult in person and asks about his or her wishes and obtains a personal impression of the adult (section 278 para.  1 s. 2, 3 FamFG). This must take place in the presence of the adult. A video interview is not sufficient.97 It is unlawful to appoint a legal guardian without first hearing the adult.98 The obligation to inquire about the adult’s wishes was introduced by the 2021 reform in order to strengthen the adult’s right to self-determination.99 In practice, this hearing usually takes place at the end of the proceedings, after the guardianship authority has drawn up the (social) report and the medical expert opinion has been completed.100 The guardianship court must provide the adult with the full text of the medical expert opinion in sufficient time before the hearing. Otherwise, the hearing suffers from a substantial procedural defect.101 At the hearing, the guardianship court must discuss the following points with the adult: the procedure, the result of the medical expert opinion, the person to be considered as legal guardian, the scope of the guardian’s responsibilities and the duration of the order (section 278 para.  2 s. 1, 3 FamFG). In appropriate cases, the guardianship court must inform the adult of the possibility of establishing a continuing power of attorney (section 278 para.  2 s. 2 FamFG). This is also intended to strengthen the adult’s right to self-determination; the appointment of a legal guardian is secondary to assistance chosen by the adult with the help of a representative. The hearing of the adult should take place in the adult’s usual environment if the adult wishes or if the guardianship court considers it useful for the clarification of the matter and the adult does not object (section 278 para.  1 s. 3 FamFG). In practice, the hearing of the adult therefore often takes place at the adult’s home or in the care home where the adult lives.102 If the adult is unable to ex94 

Government explanation, Bundestag Drucksache 19/24445, 329. Ibid. 329. 96  Ibid. 329. 97  Kretz, in: Jürgens (ed.), Betreuungsrecht, §  278 FamFG para.  2. 98  BVerfG (1 BvR 184/13), NJW 2016, 2559; Kretz, in: Jürgens (ed.), Betreuungsrecht, §  278 FamFG para.  4. 99  Government explanation, Bundestag Drucksache 19/24445, 158. 100  Ibid. 332. 101  BGH (XII ZB 610/14), NJW 2016, 159 para.  16; BGH (XII ZB 393/18), NJW 2019, 1681 para.  8; Schmidt-Recla, in: Münchener Kommentar zum FamFG, §  280 FamFG para.  26; however, it is sufficient to hand it over to an authorised representative of the adult, but not to the procedural guardian, BGH (XII ZB 168/17), NJW 2018, 1824. 102  Kretz, in: Jürgens (ed.), Betreuungsrecht, §  278 FamFG para.  3. 95 

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press his or her will and opinion, no hearing can take place. Nevertheless, the guardianship court must obtain a personal impression of the adult.103 In principle, the hearing of the adult must be conducted by the judge who decides on the appointment of a legal guardian. A hearing by another judge by way of judicial assistance is only permissible as an exception if the deciding judge’s own impression is not necessary (section 278 para.  3 FamFG). This must be explicitly justified in the decision. An example would be the case where the adult is unconscious and at a place far away from the competent guardianship court.104 A personal hearing of the adult by the guardianship court must be avoided if a hearing is likely to have considerable disadvantages for the health of the adult. The guardianship court may only decide to dispense with a personal hearing for this reason on the basis of a medical expert opinion (section 278 para.  4 FamFG). In this case, it is mandatory to appoint a procedural guardian for the adult (section 276 para.  1 s. 2 no.  1 FamFG). If the adult refuses to attend a hearing by the guardianship court, the adult may be brought before it by force if necessary (section 278 paras. 5 – 7 FamFG). All such measures must be proportionate.105 The guardianship court may, at its discretion, hear other persons, in particular family members of the adult. If the adult requests the hearing of one or more106 persons close to him or her, the guardianship court must hear these persons if this is possible without considerable delay (section 279 para.  3 FamFG). The guardianship court must inform the adult of this right at the beginning of the proceedings.107 3. Eligibility to be Appointed a Legal Guardian a) General Prerequisites The general prerequisite for the appointment of a legal guardian is that the person is suitable to take care of the adult’s affairs in the assigned area of responsibilities and to maintain personal contact with the adult to the extent necessary (section 1816 para.  1 BGB). The new regulation has included the requirement that the suitability to take care of the adult’s affairs must exist according to the principles of section 1821 BGB. Therefore, the legal guardian must also have the ability to ascertain and adequately implement the wishes and the presumed will of the adult.108 This is intended to strengthen the orientation of legal guardians 103 

Ibid. §  278 FamFG para.  16. Kretz, in: Jürgens (ed.), Betreuungsrecht, §  278 FamFG para.  13; see BGH (XII ZB 48/16), NJW-RR 2016, 1029 para.  7; BGH (XII ZB 258/15), NJW 2016, 2741 paras. 12, 13. 105  BGH (XII ZB 246/16), NJW 2017, 332. 106  Kretz, in: Jürgens (ed.), Betreuungsrecht, §  279 FamFG para.  9; contestable for only one person Bučić; in: Jurgeleit (ed.), Betreuungsrecht, §  279 para.  12. 107  Government explanation, Bundestag Drucksache 19/24445, 329. 108  Government explanation, Bundestag Drucksache 19/24445, 237. 104 

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towards the wishes and the presumed will of the adult, as opposed to an orientation towards the objectively understood welfare of the adult. In the selection of the person of the legal guardian, the wishes of the adult are primarily decisive (see 2.2.2.). The adult can express such a wish not only in the specific procedure. Such a wish may also have been expressed earlier. This is significant if the adult is currently no longer able to express his or her wishes. One possibility is that the adult has established an advance guardianship directive (section 1816 para.  2 s. 4 BGB; see 3.3. below). Thereby, compliance with a form is not required. Wishes that the adult has verifiably expressed verbally are also authoritative and must be followed.109 If the adult rejects a certain person as a legal guardian, this person cannot be appointed. A limit exists if the rejection does not refer to the person but to the guardianship in general (section 1816 para.  2 s. 2 BGB). The guardianship authority must propose a suitable legal guardian to the guardianship court during the judicial hearing (section 279 FamFG) (section 11 para.  2 no.  2, section 12 BtOG). b) Types of Legal Guardians As a rule, a natural person is appointed as legal guardian. German law distinguishes between voluntary guardians and professional guardians. Most professional legal guardians exercise this activity as an independent profession. It is also possible for employees of a recognised legal guardianship association to be appointed as a legal guardian (section 19 para.  2 BtOG). Professional legal guardians must be registered with the guardianship authority (section 24 BtOG). Voluntary legal guardians are natural persons who provide this kind of service outside of a professional activity. Voluntary legal guardians may be persons who have family ties or personal ties to the person concerned, as well as other persons (section 19 para.  1 BtOG). A voluntary legal guardian should be appointed as a priority. Only if no suitable voluntary legal guardian is available a professional legal guardian can be appointed (section 1816 para.  5 BGB). The priority of the voluntary legal guardian is based on the premise that the exercise of legal guardianship by family members, other close persons or volunteers, insofar as one of these persons is available and suitable in the specific case, is generally preferable as an optimal form of support to the provision of legal guardianship by professional persons.110 Furthermore, professional legal guardians with special qualifications are to be available for those adults for whom the corresponding knowledge and skills of the professional legal guardian are necessary.111 Finally, fiscal reasons also 109 

Schneider, in: Münchener Kommentar zum BGB, §  1897 para.  25. Government explanation, Bundestag Drucksache 19/24445, 238. 111  BGH (XII ZB 642/17), NJW 2018, 3385 para.  23; consensual: Government explanation, Bundestag Drucksache 19/24445, 239. 110 

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play a role. Voluntary legal guardians receive only a small amount of compensation for their services, while professional legal guardians receive full remuneration for their work. In practice, this remuneration is often disbursed by the state treasury because the legal guardianship recipient does not have sufficient financial means.112 In individual cases, however, due to a special personal relationship between the adult and the proposed professional legal guardian, another person may be unsuitable as a voluntary guardian in the specific case.113 For the selection of a professional legal guardian, it was newly introduced that the number of legal guardianships already held by the legal guardian must also be taken into account (section 1818 para.  5 s. 2 BGB). The background to this is the concern that professional legal guardians sometimes manage a very large number of legal guardianships and therefore sufficient personal contact with the adult hardly seems possible. However, the legislator did not want to introduce a rigid upper limit for the permissible number of legal guardianships, as the quality of legal guardianship strongly depends on the efficient organisation of the legal guardian’s work.114 It is also possible for a recognised legal guardianship association to be appointed as legal guardian. This is only possible if the adult wishes or if the adult cannot be adequately serviced by one or more natural persons (section 1818 para.  1 BGB). The legal guardianship association must assign the management of the legal guardianship to a single natural person. This may be an employee or a volunteer. A distinction can therefore be made between two different types of cases: One case is that an employee of a legal guardianship association is appointed as legal guardian, and the case is that the legal guardianship association as such is appointed as legal guardian. In both cases, a specifically designated natural person carries out the legal guardianship. If the legal guardianship association as such is appointed as legal guardian, the association and not the guardianship court decides which natural person will be in charge of the legal guardianship. Furthermore, it is easier to change this person. It is only necessary to notify the guardianship court (section 1818 para.  2 s. 4 BGB). When selecting the person, the legal guardianship association must follow the adult’s suggestions unless there are substantial reasons to the contrary (section 1818 para.  2 s. 2 BGB). The appointment of another institution, a legal person or a company as a legal guardian is not possible. The appointment of a person as a legal guardian who

112 

Government explanation, Bundestag Drucksache 19/24445, 239. BGH (XII ZB 642/17), NJW 2018, 3385 para.  24. 114 Government explanation, Bundestag Drucksache 19/24445, 240; Bundesministerium der Justiz und für Verbraucherschutz (ed.), Qualität in der rechtlichen Betreuung, 2018, 579, 597, 616 (41). 113 

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performs this task by way of a contract of service for a legal body or a company is also excluded.115 Secondarily, it is also possible that the guardianship authority is appointed as legal guardian if a natural person or a guardianship association (section 1818 para.  4 s. 1 BGB) cannot adequately care for the adult. In this case, too, the guardianship authority must appoint a specific employee to manage the legal guardianship (section 1818 para.  4 s. 2 BGB). The legislator wants to promote high-quality legal guardianship oriented towards the requirements of Article 12 para.  3 CRPD by ensuring that voluntary legal guardians are closely linked to a legal guardianship association or a guardianship authority.116 Thus, one of the tasks of recognised legal guardianship associations is to advise and support voluntary legal guardians (section 15 para.  1 s. 1 no.  4 BtOG).117 The legislature considers it desirable for voluntary legal guardians to conclude an agreement on advice and support with a recognised legal guardianship association or guardianship authority (section 22 para.  1 BtOG). If the voluntary legal guardian does not have an existing family relationship or personal bond with the adult, he or she should only be appointed if he or she concludes such an agreement (section 1816 para.  4 BGB). A new important measure to support voluntary legal guardianship is also that the regulations for appointing several legal guardians have been made more flexible. Thus, a legal guardianship association can be appointed as an additional legal guardian to act when the actual legal guardian is prevented (section 1817 para.  4 BGB). This applies in particular to voluntary legal guardians who may be temporarily prevented from carrying out the legal guardianship due to illness or holidays.118 4. Legal Effects of the Appointment of a Guardian a) General The loss of legal capacity solely due to the appointment of a guardian was provided for in the old law before 1992. Under current law, the appointment of a guardian as such has no influence on the adult’s capacity to contract.119 Whether the adult has legal capacity or not is determined by the general rules (sections 104, 105 BGB). However, the guardianship court can order a reservation of consent for the adult if a legal guardian has been appointed or is appointed at the same time. The 115 

Schneider, in: Münchener Kommentar zum BGB, §  1897 para.  19. Government explanation, Bundestag Drucksache 19/24445, 239. 117  Government explanation, Bundestag Drucksache 19/24445, 369. 118  Government explanation, Bundestag Drucksache 19/24445, 241 et seq. 119  Loer, in: Jürgens (ed.), Betreuungsrecht, §  1903 BGB para.  1; Schneider, in: Münchener Kommentar zum BGB, §  1903 para.  1. 116 

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effect of the reservation of consent is that the adult can in principle only conclude transactions (declarations of intent) with the consent of the guardian (section 1825 para.  3 BGB). His or her legal capacity is restricted to that of a minor child over the age of 7. The compatibility of this reservation of consent with the UN Convention on the Rights of Persons with Disabilities (CRPD) is being discussed. The Committee on the Rights of Persons with Disabilities recommends abolishing all forms of substituted decision-making and replacing them with a system of supported decision-making.120 In Germany, it is predominantly assumed that the reservation of consent is designed in such a way that it is compatible with the requirements of the CRPD.121 b) Reservation of Consent aa) Prerequisites and Procedure A reservation of consent may only be ordered if the adult is unable to act on his or her own responsibility in an area of responsibility. A reservation of consent may not be ordered against the free will of the adult (section 1825 para.  1 s. 2 BGB). There must be concrete indications of a considerable danger to the adult’s person or property. This may be the case if the adult takes measures that severely damage assets or counteracts measures taken by the guardian to protect assets.122 The risk of only minor financial losses is not sufficient.123 Prodigality as such does not justify a reservation of consent.124 A reservation of consent cannot be ordered to protect other persons, for example in order to preserve assets for the heirs. Only if the prodigality leads to self-endangerment, for example due to over-indebtedness, it can justify the reservation of consent.125 In addition, the reservation of consent must be suitable and necessary to avert this considerable danger.126 The principle of necessity means that the reservation of consent must be limited to a single asset or a certain type of transaction, depending on the circumstances.127 In the proceedings in which a reservation of consent is to be ordered, the adult must as a rule be supported either by a procedural assistance of his or her own

120  Concluding observations on the initial report of Germany, United Nations CRPD/C/ DEU/CO/1, 13.5.2015, no.  26. 121  Schneider; in: Münchener Kommentar zum BGB, §  1903 para.  3. 122  BGH (XII ZB 99/18), NJW-RR 2018, 963; BGH (XII ZB 10/18), NJW 2019, 237. 123  Schneider; in: Münchener Kommentar zum BGB, §  1903 para.  12. 124  Schmidt-Recla, in: Beck’scher Online Grosskommentar zum BGB, §  1903 para.  8 .1. 125  Schneider; in: Münchener Kommentar zum BGB, §  1903 para.  15; Heitmann/Füchten­ kord, in: Nomos Kommentar BGB, §  1903 BGB para.  2. 126  Ibid. §  1903 para.  6 . 127  BGH (XII ZB 577/17), NJW-RR 2018, 1091 para.  16.

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choice or by an assigned procedural guardian if he or she opposes the reservation of consent (section 276 FamFG). The reservation of consent cannot extend to certain highly personal transactions, such as entering into marriage or the drawing up of a will (section 1825 para.  2 BGB). Whether the adult can enter into marriage or draw up a will depends on whether he or she possesses legal capacity in this sense. If this is the case, he or she can enter into marriage or draw up a will without the consent of the guardian. bb) Distinction between Legally Capable and Legally Incapable Adults A reservation of consent is possible irrespective of whether the adult is legally capable or legally incapable according to the general rules.128 The general rules on capacity remain unaffected and are only supplemented by the rules on the reservation of consent. A person is legally incapable if he or she is in a state of mental disorder that precludes the free determination of will, unless this state is temporary in nature (section 104 no.  2 BGB). A person who is legally incapable cannot enter into legal transactions on his own but only through a legal representative (section 105 para.  1 BGB). An exception applies to so-called everyday transactions (§  105a BGB). For the sake of clarification, it should be noted that the person who is legally incapable still enjoys legal personality and can be the holder of rights. If the adult for whom a legal guardian is appointed has legal capacity, he or she can still validly carry out transactions. The appointment of a legal guardian as such does not affect the adult’s legal capacity. The guardian’s authority to transact business as an agent for the adult is ancillary to the adult’s continuing legal capacity.129 If the appointment of a legal guardian is combined with a reservation of consent, the adult can no longer effectively conduct business on his or her own without the consent of the legal guardian in the area in which the reservation of consent has been ordered. An adult who enjoys legal capacity under the general rules loses that capacity through the reservation of consent. The reservation of consent may also be ordered for an adult who is legally incapable. This may be necessary because of the factual uncertainty about the adult’s legal capacity or incapacity. In the case of a reservation of consent, it is certain that a legal transaction undertaken by the adult is not effective without the consent of the guardian.130 If the adult is incapable, the transaction is legally ineffective irrespective of the reservation of consent. However, there is often uncertainty in this respect, because it must be determined in retrospect and in 128 

BGH (XII ZB 141/17) NJW 2018, 1255 para.  15. Bienwald, in: Bienwald/Sonnenfeld/Harm (eds.), Betreuungsrecht, §  1902 BGB para.  6. 130  Schneider, in: Münchener Kommentar zum BGB, §  1903 para.  20. 129 

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individual cases whether the adult was legally capable or not when the transaction was undertaken. The adult who claims that a transaction is invalid due to legal incapacity must prove this in court.131 The reservation of consent therefore avoids disputes with the adult’s business partners.132 However, the mere uncertainty about the legal capacity does not justify the ordering of a reservation of consent.133 Rather, it is always necessary that the reservation of consent is required to avert significant dangers to the person or the assets of the adult.134 cc) Capacity to Enter Minor Transactions (Everyday Transactions) In any case, the adult is authorised to carry out minor everyday transactions even without the consent of the guardian. The legal regulation is complicated because it differentiates between whether the adult is legally incapable or legally capable according to the general rules. According to section 105a BGB135 , which was introduced in 2002, a legally incapable adult may enter into a transaction of daily life that can be effected by low-value means. The contract is deemed to be validly concluded when performance and consideration have been effected. If a reservation of consent has been ordered for an adult, who is legal capable under the general rules, the adult may still enter into transactions concerning a minor matter of daily life without the consent of the guardian (section 1825 para.  3 s. 2 BGB). Even though there are differences in detail,136 both regulations are intended to enable vulnerable adults to carry out transactions that are part of the ordinary course of life and have only a minor economic significance. Examples are the purchase of food or clothing and the purchase of tickets to sporting events.137 The aim of both regulations is to open up a wider area of autonomy for the adults concerned. Contractual partners are willing to enter into contracts with them if they do not have to fear having to reimburse the consideration received. Without these regulations, even these minor transactions of everyday life would be void. The business partner of the adult would have to restore what he has received in performance from the adult, such as the purchase, under the law of unjust enrichment (sections 812 et seq. BGB). For his or her part, the business partner can only reclaim what the adult has received if the value is still present in the 131 

BGH (XII ZB 141/17) NJW 2018, 1255 para.  15. Ibid. para.  15. 133  Ibid. para.  16. 134  Bienwald, in: Bienwald/Sonnenfeld/Harm (eds.), Betreuungsrecht, §   1903 BGB para.  32. 135  Gesetz vom 23.07.2002 (BGBl. I, 2850). 136  Bienwald, in: Staudinger (ed.), Kommentar zum Bürgerlichen Gesetzbuch, 2017, §  1903 paras. 192–194; Schmidt-Recla, in: Beck’scher Online Grosskommentar zum BGB, §  1903 para.  91. 137  Schneider, in: Münchener Kommentar zum BGB, §  1903 para.  50. 132 

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adult’s assets. When it is used up, he or she is not entitled to compensation for the loss of value. Both regulations provide for limits to protect the adult. Thus, in the case of an adult who is legally incapable, the validity of the contract is excluded if there is a considerable danger to the person or the assets of the adult (section 105a s. 2 BGB). In case of a reservation of consent, the guardianship court may order that the person under guardianship cannot effectively engage in even such minor transactions (section 1825 para.  3 s. 2 BGB). c) Capacity to Sue and to be Sued Until the reform of 2021, section 53 Zivilprozessordnung (ZPO) stated that a person who is legally capable according to the general rules and thus is also capable to sue and to be sued automatically loses this capacity to sue and to be sued when the legal guardian acts as his representative in a proceeding. The regulation applied not only to court proceedings, but also to proceedings under administrative law and social security law.138 This regulation was criticised and considered incompatible with the CRPD.139 It was therefore deleted by the reform. The adult thus remains capable to sue and to be sued even in proceedings in which he or she is represented by a guardian and can thus also file applications himself or herself. Nevertheless, the guardian can declare that he or she will conduct the proceedings exclusively. As a consequence, the adult is no longer capable to sue or be sued in this specific proceeding (section 53 para.  2 ZPO). This is intended to protect the adult from self-harm. In deciding whether to make such a declaration of exclusivity, the guardian is bound by the standards of section 1821 para.  2 – 4 BGB (see 2.5.3. below).140 If a reservation of consent (see 2.4.3.) has been ordered (section 1825 BGB), the adult is not capable to sue or be sued in the area concerned.141 A special regulation has been created for the delivery of judicial and official documents. If a guardian is appointed, the documents must be served on the guardian if it concerns a matter in the guardian’s area of responsibility. However, to strengthen the adult’s right to self-determination, a copy must be sent to the adult (section 170a para.  1 ZPO, section 6 para.  1 s. 3 Verwaltungszustel­

138 

Schnellenbach/Normann-Scheerer/Loer, BtPrax 2021, 83, see V. der Abschaffung in Bundesministerium der Justiz und für Verbraucher­ schutz (ed.), Qualität in der rechtlichen Betreuung Abschlussbericht, BundesanzeigerVerlag Köln 2018, Empfehlung 53, 583, (https://www.bmj.de/SharedDocs/Downloads/DE/Service/ Fachpublikationen/Forschungsbericht_Qualitaet_rechtliche_Betreuung.html); see also Government explanation, Bundestag Drucksache 19/24445, 446. 140  Schnellenbach/Normann-Scheerer/Loer, BtPrax 2021, 83, see V. 141  Kieß, in: Jurgeleit (ed.), Betreuungsrecht, §  1903 BGB paras. 70–72. 139 Vorschlag

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lungsgesetz, VwZG).142 In guardianship proceedings and involuntary commitment proceedings concerning the adult, the adult is always capable to sue and to be sued (section 275 FamFG). d) Right to Vote Under previous law, an adult automatically lost the right to vote and to stand for election if a guardian had been appointed who was responsible for managing all of his or her affairs (sections 13, 15 Bundeswahlgesetz old version, BWG).143 This general exclusion from the right to vote was declared unconstitutional by the Bundesverfassungsgericht144 and has been deleted by the legislature with effect from 1 July 2019.145 According to the new provision in section 14 BWG, a person entitled to vote who is unable to read or is prevented from casting his or her vote due to a disability may avail himself or herself of the assistance of another person. In order to ensure that the decision to vote originates from the adult himself or herself, the assistance must be limited to technical assistance in expressing a decision to vote.146 Unauthorised assistance is punishable as electoral fraud (section 107a para.  1 s. 2 Strafgesetzbuch, StGB). e) Factual Restriction of the Legal Capacity to Act Due to the Appointment of a Guardian Even though the appointment of a legal guardian without an order for a reservation of consent does not legally affect the adult’s legal capacity, this is often not sufficiently observed in practice.147 When banks or other business partners of the adult learn that a legal guardian has been appointed, in practice they are often no longer willing to enter into transactions with the adult without the involvement of the guardian. It is reported that banks regularly block the adult’s accounts as soon as they learn of the appointment of a legal guardian. They only accept dispositions made by the legal guardian.148 As a result, the adult cannot make bank transfers or withdrawals without the involvement of the guardian. 142 

Government explanation, Bundestag Drucksache 19/24445, 447. Bienwald, in: Bienwald/Sonnenfeld/Harm (eds.), Betreuungsrecht, §   1896 BGB para.  157. 144  BVerfG (2 BvC 62/14), NJW 2019, 1201. 145  Gesetz zur Änderung des Bundeswahlgesetzes und anderer Gesetze vom 18.06.2019 (BGBl. 2019 I 834). 146 Government explanation, Bundestag Drucksache 19/9228, Gesetzentwurf der Fraktionen der CDU/CSU und SPD v. 09.04.2019, Entwurf eines Gesetzes zur Änderung des Bundeswahlgesetzes und anderer Gesetze, 15, https://dserver.bundestag.de/btd/19/092/ 1909228.pdf. 147  See Government explanation, Bundestag Drucksache 19/24445, 258. 148  Meier/Deinert, Handbuch des Betreuungsrecht, para.  1069. 143 

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The background for this behaviour of banks and other business partners is the uncertainty about legal incapacity according to the general rules. It is usually not possible for the business partner to determine with certainty whether the adult, for whom guardianship without reservation of consent has been ordered, is legally capable according to the general rules. If it later turns out that the adult is legally incapable, the transfer or payment order is legally invalid. The bank must then credit the corresponding amount back to the adult’s account.149 On the other hand, if the guardian has acted as the adult’s representative the business partner can be sure that the transaction is effective. As a remedy, the legal guardian can agree with the bank upon the adult being able to make dispositions within certain limits. In practice, the adult with legal capacity for whom a legal guardian is appointed is therefore largely dependent on the cooperation of the legal guardian in order to still be able to conclude transactions.150 5. Powers and Duties of the Legal Guardian a) Scope of the Guardianship (Section 1815 BGB) The guardianship court must specify the areas of responsibility for which the legal guardian is to be appointed (section 1815 para.  1 s. 2 BGB). The guardianship cannot be ordered in general for all the adult’s affairs. The principle of necessity also applies with regard to the areas of responsibility assigned to the legal guardian (section 1815 para.  1 s. 3 BGB). Therefore, the appointment of a legal guardian can be restricted for a single, narrowly defined matter, for example the defence against the termination of a rental agreement. However, it is still permissible to order guardianship for wider areas, for example, administration of the adult’s asset management151 or health care. Certain special areas of responsibility, in which the adult’s right to self-determination is intensively interfered with, must be expressly ordered by the guardianship court. This is to ensure that the guardianship court pays particular attention to whether it is necessary to include such areas of responsibility.152 These areas are, for example, determining with whom the adult has contact (section 1815 para.  2 no.  4 BGB), deciding on the adult’s telecommunications, including electronic communications (section 1815 para.  2 no.  5 BGB), and deciding on receiving, opening and stopping the adult’s mail.

149 

Ibid. para.  1070. Ibid. paras. 1072–1075. 151  Government explanation, Bundestag Drucksache 19/24445, 234. 152  Ibid. 235. 150 

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b) Duties of the Guardian (section 1821 para.  1 BGB) The legal guardian is obliged to carry out all activities that are necessary to legally take care of the matters to which the guardianship extends (section 1821 para.  1 s. 1 BGB). The task of guardianship is to support the adult in legal matters. Depending on the area of responsibility, this includes support in making applications to the authorities or in concluding contracts, such as a medical treatment contract, a care contract or a tenancy agreement. The guardian’s task does not include the physical or social care to the adult. However, legal guardianship based on the wishes of the adult is only possible if the guardian also establishes and maintains a personal relationship of trust with the adult.153 The study on the quality of legal guardianship commissioned by the Federal Government found that some guardians prefer to deal efficiently with the adult’s affairs themselves instead of solving them together with the adult.154 The reform therefore introduced a new provision in section 1821 para.  5 BGB, which expressly stipulates that the legal guardian must maintain the necessary personal contact with the adult, regularly obtain a personal impression of him or her and discuss his or her affairs with him or her.155 c) Alignment with the Wishes of the Adult (section 1821 paras. 2 – 3 BGB) The previous regulation in section 1901 para.  2 s. 1 BGB (old version) stipulated that the legal guardian must take care of the adult’s affairs in a way that is in the adult’s best interests. Sentence 2 stated that the adult’s best interests also included the possibility to live his or her life according to his or her own wishes and ideas within the scope of his or her abilities. The case law of the Bundesgericht­ shof has therefore interpreted the concept of best interests subjectively.156 Nevertheless, the wording of the law was regarded to pose the risk that guardianship would be oriented towards an objectively understood best interest of the adult, thus leading to third-party determination.157 For this reason, the concept of best interests was deliberately avoided in the new version of this provision in section 1821 para.  2 BGB. Instead, the focus is on the wishes of the adult. The provision now reads: “The guardian has to take care of the affairs of the person under guardianship in such a way that he or she can live his or her life according to his or her wishes within the scope of his or her possibilities.” To this end, the 153 

Government explanation, Bundestag Drucksache 19/24445, 251. Bundesministerium der Justiz und für Verbraucherschutz (ed.), Qualität in der rechtlichen Betreuung Abschlussbericht, BundesanzeigerVerlag Köln 2018, 285 et seq., (https:// www.bmj.de/SharedDocs/Downloads/DE/Service/Fachpublikationen/Forschungsbericht_ Qualitaet_rechtliche_Betreuung.html). 155  Government explanation, Bundestag Drucksache 19/24445, 255. 156  BGH (XII ZR 77/06), NJW 2009, 2814; Schneider, in: Münchener Kommentar zum BGB, §  1901 para.  16. 157  Government explanation, Bundestag Drucksache 19/24445, 252. 154 

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guardian shall ascertain the wishes of the person in guardianship. Subject to paragraph 3, the guardian shall comply with these wishes and provide legal support to the person in need of guardianship in implementing them. This also applies to the wishes expressed by the person under guardianship prior to the appointment of the guardianship, unless it is evident that he or she does not wish to adhere to these wishes. The wishes are not only those that the adult forms on a free will, but also those that an adult has who can no longer form a free will.158 The adult’s wishes are only exceptionally to be disregarded if the conditions of section 1821 para.  3 BGB are met. This is the case, on the one hand, if the adult’s person or property would be considerably endangered and the adult cannot recognise this danger due to his or her illness or disability or cannot act according to this insight. This restriction is an expression of the state’s duty to protect an adult in need of help. However, it is not sufficient that the wish is objectively unreasonable and contrary to the adult’s objective interests. Rather, the fulfilment of the wishes must endanger the adult’s higher-ranking legal interests or significantly worsen his or her entire living situation and care situation. Furthermore, the state’s duty to protect can only intervene if the wish is not an expression of the right to self-determination, i.e. it is not based on the adult’s free will.159 Furthermore, the legal guardian does not have to comply with the wishes of the adult if this is unreasonable for the guardian (section 1821 para.  3 no.  2 BGB). This covers cases in which the guardian would have to participate in unlawful acts or endangerment of other persons. The guardianship is also not obligated to perform actions that would place a disproportionately high demand on him or her.160 d) Relevance of the Presumed Will Section 1821 para.  4 BGB stipulates that in two cases the presumed will of the adult are to be taken into account. Firstly, if the adult’s wishes cannot be ascertained, for example because he or she can no longer make himself or herself understood. Secondly, if the adult’s wishes are to be disregarded in accordance with section 1821 para.  3 BGB. The explanatory memorandum to the law states that the presumed will is to be determined primarily from the personal circumstances of the adult, from his or her individual interests, wishes, needs and values. Objective criteria, such as how a reasonable average person would normally decide, have no independent significance. However, if there is no evidence that the adult would have decided

158 

Schneider, in: Münchener Kommentar zum BGB, §  1901 para.  12. Government explanation, Bundestag Drucksache 19/24445, 252. 160  Ibid. 253. 159 

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differently, it can be assumed that the presumed will corresponds to what is generally considered normal and reasonable.161 e) Power of Representation of the Guardian (sections 1823, 1824 BGB) Section 1823 BGB stipulates that the guardian is the legal representative of the adult in the assigned areas of responsibility. The power of representation applies in particular to the making of declarations of intent and the receipt of declarations of intent. Examples are the conclusion of a care contract or the termination of a rental agreement. The guardian is also authorised to represent the adult in legal proceedings in the areas of responsibility assigned to him or her. It is also possible that the guardian gives his or her consent to a medical treatment of the adult (see 2.5.6. below).162 The guardian’s legal power of representation does not affect the adult’s capacity to contract. Only if the guardianship court orders a reservation of consent the adult cannot legally act effectively without the consent of the guardian (see above 2.4.1.). Section 1821 para.  1 s. 2 BGB stipulates that the guardian must primarily support the adult in legally managing his or her own affairs. The guardian may only make use of the right of representation if this is necessary. The priority of support also applies to legal representation by the guardian (supported decision making). The guardianship should primarily support the adult to make the concrete decision and to carry out the legal act himself/herself.163 Even if the guardian acts as the adult’s legal representative, this does not mean, according to the prevailing opinion in Germany, that this is a case of substitute decision making. Representation by the guardian is rather considered to be in line with the requirement of supported decision making.164 Even when acting as a representative, the guardian is bound to act in accordance with the wishes of the adult or the presumed will of the adult.165 161  Government explanation, Bundestag Drucksache 19/24445, 254 with reference to BGH (2 StR 93/88), NJW 1988, 2310 et seq.; expressly: Kersting, BtPrax 2021, 203. 162  Bienwald, in: Bienwald/Sonnenfeld/Harm (eds.), Betreuungsrecht, §   1902 BGB para.  21. 163  Government explanation, Bundestag Drucksache 19/24445, 251; Diekmann, in: Diek­ mann/Lipp/Winterstein (eds.), Betreuungsrecht im internationalen Kontext – Aktuelle Aspekte in Deutschland – Berichte und Beiträge vom 4. Weltkongress Betreuungsrecht, Eigenverlag Betreuungsgerichtsverlag, Bochum 2017, 99, 108 et seq. 164  Lipp, FamRZ 2017, 4, 7; Diekmann, in: Diekmann/Lipp/Winterstein (eds.), Betreuungsrecht im internationalen Kontext – Aktuelle Aspekte in Deutschland – Berichte und Bei­ träge vom 4. Weltkongress Betreuungsrecht, Eigenverlag Betreuungsgerichtsverlag, Bochum 2017, 99, 108 et seq. 165  Diekmann, in: Diekmann/Lipp/Winterstein (eds.), Betreuungsrecht im internatio­ nalen Kontext – Aktuelle Aspekte in Deutschland – Berichte und Beiträge vom 4. Weltkongress Betreuungsrecht, Eigenverlag Betreuungsgerichtsverlag, Bochum 2017, 99, 108 et seq.

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However, the guardian’s power of representation in relation to third parties is not limited. If the guardian concludes a contract with a third party as the adult’s representative, although it would have been sufficient to assist the adult, the contract is nevertheless binding.166 However, there is a breach of duty in the internal relationship between the guardian and the adult. The guardian is obliged to compensate the adult for the damage caused by the breach of duty (section 1826 para.  1 BGB). f) Consent to Medical Treatment The law contains a special provision for consent to medical measures (section 1827 BGB). If the adult can currently form a free will with regard to medical treatments, only this will is relevant. The adult’s consent to a medical treatment is necessary and sufficient. If the adult cannot form a free will with regard to consent to a medical measure, the law differentiates according to whether or not the adult has made an advance health care directive. To draw up a valid advance health care directive an adult who is capable of giving consent must specify in writing, whether, in the event of his or her incapacity to give consent, he or she consents to or refrains from certain medical treatment that is not yet imminent at the time of the specification (section 1827 para.  1 BGB, see 3.1. below). If the stipulations in the advance health care directive cover the current life situation and treatment situation, the decisions made are authoritative. The guardian must give effect to the will of the adult (section 1827 para.  1 BGB). If there is no authoritative advance health care directive, it is the guardian’s task to give or withhold consent (section 1827 para.  2 s. 1 BGB). In the case of dangerous medical measures, the guardianship court must approve the consent or the withholding of consent by the guardian (section 1829 BGB; see below 2.6.2.). 6. Supervision of the Guardian The actions of the guardian are supervised by the guardianship court (section 1862 para.  1 s. 1 BGB). In a broad sense, three types of supervision can be distinguished. On the one hand, there is ongoing supervision. The guardian has to submit an initial report to the guardianship court and annual reports during the course of the guardianship. On the other hand, the guardian must notify the guardianship court of certain measures before they are taken. This enables the guardianship court to intervene if there is a risk of a breach of duty. Furthermore, the guardian must obtain the approval of the guardianship court for certain measures before he or she may undertake the measure.

166 

Government explanation, Bundestag Drucksache 19/24445, 258.

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The supervision by the guardianship court is aimed at checking, whether the guardian acts in accordance with the wishes of the person in guardianship and observes, as far as possible, the requirement of the priority of supportive action in the adult’s own exercise of rights.167 The provisions of section 1821 BGB also apply to supervision.168 The supervision is to ensure that the guardian may only act for the adult if it is necessary. The guardianship must be conducted in such a way that the adult can live his or her life according to his or her wishes within the scope of his or her possibilities. If the adult can no longer express his or her wishes, or if they are exceptionally irrelevant, his or her presumed will is to be taken into account (section 1862 para.  1 s. 2, section 1821 paras. 2 – 4 BGB). The reform law introduced that the guardianship court must hear the adult in person if there are indications that the guardian is not complying with the wishes of the adult in breach of his/her duties (section 1862 para.  2 BGB). The guardianship court may issue prohibitions and orders to the guardian (section 1862 para.  3 BGB). The guardianship court can dismiss the guardian if it is not ensured that he or she is suitable to take care of the adult’s affairs (section 1868 para.  1 BGB). a) Ongoing Supervision aa) Initial Report The guardian must prepare an initial report on the personal circumstances of the adult. The initial report should be sent to the guardianship court within three months of appointment. Section 1863 para.  1 BGB expressly stipulates that the initial report must in particular contain information on the adult’s personal situation, on the adult’s wishes for the guardianship, on the goals of the guardianship and on planned measures. If the guardianship includes the management of assets, the initial report must also contain an inventory of the adult’s assets (section 1863 para.  1 s. 3, section 1835 BGB). The general obligation to prepare an initial report was introduced by the 2021 reform. The purpose of the initial report is to ensure the quality of guardianship and in particular to improve the orientation of guardianship towards the wishes of the adult. In this way, the adult’s right to self-determination is to be safeguarded in the best possible way.169 The initial report is handed over by the guardian to the guardianship court. It is intended that the guardianship court should discuss the initial report with the adult and the guardian in a personal meeting.170 This is in response to a re167 

Government explanation, Bundestag Drucksache 19/24445, 141. Ibid. 250. 169  Government explanation, Bundestag Drucksache 19/24445, 300. 170 Section 1863 para.   1 s. 5 BGB; Government explanation, Bundestag Drucksache 19/24445, 301. 168 

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quest made by vulnerable adults during the legislative process. The person at the guardianship court who supervises the guardianship should know the adult personally. The background to this is that the adult must be heard personally when a decision is made on the appointment of the guardianship (section 278 para.  1 FamFG). The decision on the appointment of the guardian is made by a judge at the guardianship court (section 15 para.  1 no.  1 Rechtspflegergesetz, RPflG). The ongoing supervision of the guardian is then carried out by a senior court officer at the guardianship court (section 3 no.  2 lit.  b RPflG). Voluntary guardians who have a family relationship or a personal bond with the adult only have to draw up a list of assets and do not have to prepare an initial report (section 1863 para.  2 s. 1, 4 BGB). This is to prevent these guardians from being overburdened and therefore discouraged from taking on a guardianship.171 As a substitute, the law provides for discussions between the guardianship court and the voluntary guardian and the adult. As a rule, the guardianship court must inform voluntary guardians of their duties in a meeting and point out counselling and support services (section 1861 para.  2 BGB). In the case of voluntary guardians who do not have to prepare an initial report, the guardianship court conducts an initial interview with the adult, in which the topics that an initial report would contain are specified. This initial interview must take place if the adult wishes it or if it seems appropriate. The voluntary guardian should participate in this initial interview (section 1863 para.  2 s. 2 – 3 BGB). bb) Annual Report As already mentioned, the guardian must submit an annual report to the guardianship court on the personal circumstances of the adult (section 1863 para.  3 BGB). If the guardianship also includes asset management, the guardian must also report annually on asset management to the guardianship court (section 1865 BGB).172 The law now specifically stipulates what information the annual report on personal circumstances must contain (section 1863 para.  3 s. 3 no.  1 – 5 BGB). This is intended to provide the guardianship court with the information to enable it to exercise supervision effectively.173 This includes, among other things, the nature, extent and occasion of personal contacts with the adult and the guardian’s personal impression of the adult. Furthermore, the guardian must report on the implementation of the care goals to date and describe which measures have been implemented or are planned. The report must also state the 171 

Government explanation, Bundestag Drucksache 19/24445, 301. guardians, such as children or spouses of the person under guardianship, are only required to submit an overview of the assets instead of an accounting statement (section 1859 para.  1 s. 1 no.  3, s. 2 BGB). 173  Government explanation, Bundestag Drucksache 19/24445, 302. 172  Certain

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adult’s opinion of the information contained in the report. The purpose of the obligation to state the adult’s opinion is to enable the guardian to include the adult’s perspective more strongly in his or her report. The guardianship court should be able to check whether the guardianship is conducted in such a way that it enables the adult as far as possible to shape his or her life according to his or her own wishes, as stipulated in section 1821 para.  2 s. 1 BGB as the guideline for guardianship.174 During the legislative process, it was discussed whether the annual report also had to be handed over to the adult. In the end, such an obligation was not included in the law. The manner of communication in the annual report is designed to ensure supervision by the guardianship court. In individual cases, the annual report could therefore also lead to misunderstandings and a loss of trust on the part of the adult.175 However, the law obliges the guardian to discuss the annual report with the adult. This can only be dispensed with if the discussion poses a risk to the adult’s health or the adult is obviously unable to take note of the contents of the annual report (section 1863 para.  3 s. 2 BGB). cc) Ongoing Information and Notification In addition, the guardianship court may at any time request information from the guardian about personal and financial circumstances (section 1864 para.  1 BGB). The guardian is obliged on his or her own accord to inform the guardianship court of any significant changes in personal and financial circumstances. This applies in particular to circumstances that make it possible to terminate or limit the guardianship (section 1864 para.  2 BGB). dd) Final Report After the end of the guardianship, the guardian must prepare a final report in which the changes in personal circumstances that have occurred since the last annual report must be reported. In this final report, the guardian must also inform to whom he or she has handed over the adult’s assets under his or her management and to whom he or she has handed over the documents obtained during the guardianship (section 1863 para.  4 BGB). b) Notification and Authorisation Requirements Further instruments of supervision are notification obligations and authorisation requirements. In the case of a duty of notification, the guardian must notify the planned measure to the guardianship court in advance. In this way, the 174 

175 

Ibid. 303. Ibid. 301 et seq.

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guardianship court is informed of the planned measure and can intervene if there are doubts about its permissibility. If the guardianship court does not react to the notification, the guardian can implement the measure. Authorisation requirements represent a more far-reaching control. In such a case, the guardian must apply to the guardianship court for authorisation. The guardianship court examines in each individual case whether the measure is permissible and then grants approval. Without the authorisation, the measure cannot be effectively carried out. In the case of a contract or a declaration of consent, the contract or consent is not effective without authorisation. The requirement for authorisation therefore also applies to third parties. The notification and authorisation requirements are intended to ensure that the measures comply with the wishes or the presumed will of the adult.176 Section 1833 para.  2 BGB is an example of a duty to notify. According to this, the guardian must notify the guardianship court if he or she wishes to give up the living space used by the adult. He or she must state the reasons for the measure and explain what the adult thinks about it. The law provides for authorisation obligations, for example, in the case of various dispositions of property (sections 1848 – 1854 BGB). The provisions are very detailed and contain numerous exceptions. This is intended to adapt the level of protection to the risk situations, which vary depending on the asset. At the same time, business dealings with the guardianship should not be made excessively difficult.177 Under the old law, there was a fundamental prohibition on gifts by the guardianship from the adult’s assets. Under the new law, gifts by the guardianship are subject to approval (section 1854 no.  8 BGB). An exception applies only to a gift that corresponds to the adult’s wish or presumed will and that is customary or appropriate as an occasional gift according to the adult’s circumstances.178 Authorisation requirements are of particular importance in the case of a dangerous or coercive medical treatment and of measures which deprive the adult of his or her liberty. If there is a justified risk that the adult will die or suffer serious and prolonged damage to his or her health as a result of a medical measure, the guardian must in principle obtain the approval of the guardianship court for consent to this medical measure (section 1829 para.  1 BGB). The same applies to the refusal of consent by the guardianship if the medical measure is medically indicated and there is a justified risk that the adult will die or suffer serious or prolonged damage to health as a result of the measure not being taken (section 1829 para.  2 BGB). The authorisation of the guardianship court is also necessary in the case of a medical measure that contradicts the natural will of the adult (section 1832 176 

Government explanation, Bundestag Drucksache 19/24445, 286. Ibid. 286. 178  Government explanation, Bundestag Drucksache 19/24445, 290. 177 

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BGB). The same applies if the adult is to be placed in a closed facility against his or her will or if the adult, who is in a hospital or home, is prevented from moving freely (section 1831 BGB). If the adult himself/herself is not capable of giving consent, the consent of the guardianship for sterilisation must be approved by the guardianship court (section 1830 para.  2 BGB). Sterilisation is only possible under special conditions. In particular, it must correspond to the natural will of the adult. Sterilisation cannot be carried out against the natural will of the adult (section 1830 para.  1 BGB). In addition, consent to sterilisation can only be given by a guardian who has been additionally appointed for this area of responsibility and is not entrusted with any other task (section 1817 para.  2 BGB).179

III. Voluntary measures 1. Advance Health Care Directive The “advance health care directive” is an instrument under German law that enables the adult to make arrangements for his or her medical treatment when he or she is no longer able to give legally effective consent to medical treatment or to refuse medically indicated treatment. According to the law, an advance health care directive exists under the following conditions (section 1827 para.  1 BGB): An adult determines which medical measures may and may not be carried out in the event that he or she is no longer capable of effectively consenting to a medical measure in the future. This determination must be made in writing. The advance health care directive concerns only decisions about medical treatments that are in the future and not imminent. The adult’s decision on imminent medical treatment is directly binding. An example: An adult declares immediately before an operation under general anaesthesia, after proper medical information, that he does not want artificial nutrition in case of irreversible apallic syndrome.180 The advance health care directive is intended to provide binding instructions for future cases. This raises the problem of sufficient specificity. A general declaration that life-prolonging measures should not be taken is too vague.181 An advance health care directive is only sufficiently specific if it describes in which treatment situation which medical measures are to be carried.182 The advance health care directive must therefore firstly describe the treatment situation to which it is to apply and secondly specify the medical measures that may or 179 

Spickhoff, in: Spickhoff (ed.), Medizinrecht, §  1899 BGB para.  4. Spickhoff, in: Spickhoff (ed.), Medizinrecht, §  1901a BGB para.  8. 181  BGH (XII ZB 604/15), NJW 2017, 1737. 182  Ibid. para.  17. 180 

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should not be carried out.183 In practice, an effective advance health care directive can therefore only be drawn up on the basis of individual legal advice or by using model forms.184 If an effective advance health care directive exists, it is binding. However, this binding nature is limited by the fact that the guardian must check whether the stipulations in the advance health care directive apply to the current life situation and treatment situation (section 1827 para.  1 s. 1 BGB).185 The legal guardian has its own scope for assessment.186 The advance health care directive may no longer apply, for example, if the adult’s life situation has changed significantly since the advance health care directive was drawn up.187 If the guardian comes to the conclusion that the stipulations of the advance health care directive fit the current life situation and treatment situation, he or she must enforce this will of the adult (section 1827 para.  1 s. 2 BGB). The consent of the guardian or an objection by the guardian are not necessary, since the person concerned has made this decision himself/herself in a manner that is binding for all parties involved.188 If the guardian comes to the conclusion that the stipulations in the patient’s advance health care directive do not apply to the current life situation and treatment situation, he or she must consent to the medical measure or refuse it. In doing so, he or she must be guided by the treatment wishes of the adult. If the treatment wishes cannot be determined, the presumed will of the adult is decisive (section 1827 para.  2 BGB). The guardian’s consent to a medical measure requires the approval of the guardianship court if there is a reasonable risk that the adult will die or suffer serious and prolonged harm as a result of the measure (section 1829 para.  1 s. 1 BGB). The requirement for authorisation also applies if the guardian refuses consent to a medically indicated measure and there is a reasonable risk that the adult will die or suffer serious and prolonged harm to his or her health without the medical measure (section 1829 para.  2 BGB). However, the authorisation of the guardianship court is not required if the guardian and the attending physician agree that the performance or non-performance of the medical measure corresponds to the treatment wishes or the presumed will of the adult (section 1894 para.  4 BGB).189 183 

Ibid. para.  18. Eisenreich/Raischl (eds.), Muster für eine Patientenverfügung in Bayerisches Staatsministerium der Justiz (ed.), Vorsorge für Unfall, Krankheit, Alter, 20. Edition, Verlag C.H. Beck, 2022, 39. 185  Spickhoff, in: Spickhoff (ed.), Medizinrecht, §  1901a BGB para.  12. 186  Ibid. §  1901a BGB para.  10. 187  Ibid. §  1901a BGB para.  12. 188  BGH (XII ZB 202/13), NJW 2014, 3572 para.  14; BGH (XII ZB 604/15), NJW 2017, 1737 para.  14. 189  BGH (XII ZB 202/13), NJW 2014, 3572 para.  18. 184 See

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In practice, the decision as to whether the stipulations in the advance health care directive cover the current life situation and treatment situation of the adult is often associated with great uncertainty. If the decision is wrong, there is a risk of criminal sanctions. Case law therefore allows the guardian to apply for court approval even if the law does not require it. If the guardianship court concludes that authorisation is not required because the adult has effectively expressed his or her binding will in an advance health care directive, the court issues a socalled negative certificate.190 An advance health care directive can only be drawn up by a person who is capable of giving informed consent to medical treatment at that time.191 The adult can only make an advance health care directive himself/herself. Representation by proxy is excluded.192 The adult can revoke an advance health care directive informally at any time (section 1827 para.  1 s. 3 BGB). However, capacity to consent is required for revocation.193 2. Continuing Power of Attorney a) Introduction In German law, it is possible for the adult to appoint another person as a representative who can act legally on his or her behalf if he or she is no longer able to take care of his or her own legal affairs. The law does not contain a definition or comprehensive regulation of the continuing power of attorney. In the title guardianship, in particular in section 1820 BGB, there are a few special regulations on the continuing power of attorney. In all other respects, the general civil law provisions on representation (sections 164 – 181 BGB) apply.194 The legislator wants to promote the drawing up of continuing powers of attorney as a legal instrument. A valid continuing power of attorney makes the appointment of a guardian superfluous when the adult is not able to legally manage his or her affairs. It strengthens the adult’s right to self-determination because he or she decides which person will act on his or her behalf. It also relieves the state financially, because in many cases the guardian’s remunerations are paid from the state treasury.195 There is a risk of abuse by the representative acting under a continuing power of attorney. However, regulations to protect against abuse are only found to a very limited extent in German law. The legislator justifies its reluctance with the 190  BGH (XII ZB 604/15), NJW 2017, 1737 para.  26; see also BGH (XII ZB 202/13), NJW 2014, 3572 para.  19; Spickhoff, in: Spickhoff (ed.), Medizinrecht, §  1901a BGB para.  14. 191  Spickhoff, in: Spickhoff (ed.), Medizinrecht, §  1901a BGB para.  4. 192  Ibid. §  1901a BGB para.  4. 193  Ibid. §  1901a BGB para.  21. 194  Zimmermann, Vorsorgevollmacht, 2. Kapitel para.  26. 195  Government explanation, Bundestag Drucksache 19/24445, 244.

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fact that stronger regulation of the continuing power of attorney causes an encroachment on the adult’s right to self-determination and therefore requires a special justification.196 b) Legal Nature With regard to the power of attorney, German law makes a clear distinction between the authorisation of the agent on the one hand and the contractual obligation of the agent towards the principal on the other hand.197 One is the authorisation given by the principal (adult) to the representative (support person) to act in a legally binding manner on behalf of the principal towards third persons. This authorisation is granted by a unilateral declaration of the principal (section 167 para.  1 BGB). In principle, this authorisation does not require any form (section 167 para.  2 BGB). The authority of the agent is relevant to the external relationship between the principal and the third party. The conferment of authority determines the scope of the power of attorney, i.e., which transactions the agent can carry out with legal effect for the principal. Authority must be sharply distinguished from the internal relationship (usually a mandate or other contractual relationship) between the principal and the agent. This contractual relationship determines the obligations of the agent towards the principal, i.e., how and in what way the agent should and may act. The purpose of the continuing power of attorney is that the representative should only act on behalf of the principal when the principal himself is no longer able to take care of his legal affairs. Legally, it would be possible that the power of attorney becomes effective only when the principal himself is no longer legally capable. In practice, however, such a provision is avoided. Such a provision would lead to uncertainties in business transactions. For a business partner who concludes a contract with the representative, there would be a risk that the power of attorney is not yet effective. The business partner is not able to determine with certainty whether the principal is currently legally capable or not.198 In practice, therefore, an immediate unconditional power of attorney is granted. It only follows from the contractual internal relationship that the representative should only act for the principal when the latter can no longer take care of his legal affairs himself. If the authorisation towards third parties is unlimited, there is a risk that the representative violates his or her duties from the internal relationship and arbi196  Government explanation, Bundestag Drucksache 19/24445, 244; the significant potential for abuse is emphasized by Schmidt-Recla, in: Beck’scher Online Grosskommentar zum BGB, §  1896 BGB para.  265; Zimmermann, Vorsorgevollmacht, 2. Kapitel para.  37. 197  Zimmermann, Vorsorgevollmacht, 2. Kapitel paras. 26–27; Spalckhaver, in: Lipp, Handbuch der Vorsorgeverfügungen, §  8 para.  5 et seq. 198  Schneider, in: Münchener Kommentar zum BGB, §   1896 paras. 58 et seq.; Zimmer­ mann, Vorsorgevollmacht, 2. Kapitel paras. 58–63; Stascheit, RNotZ 2020, 61, 79.

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trarily concludes transactions. Despite the breach of duty, these transactions are in principle effective and bind the principal toward third parties. In practice, attempts are made to avoid the risk of premature use of the power of attorney by only handing over the document containing the authorisation when the need for support has arisen.199 c) Granting The adult must enjoy legal capacity at the time of granting a power of attorney. When the adult loses his/her legal capacity, the power of attorney continues to be effective (section 672 s. 1, section 168 s. 1 BGB).200 A continuing power of attorney can be granted without compliance with a form. The involvement of witnesses is not a prerequisite for an effective power of attorney. However, witnesses can be important for the later proof of an effective power of attorney.201 Formal requirements exist only if the power of attorney is to apply to specific transactions. It must be expressly stated in writing whether the representative is to be authorised to give or withhold consent to dangerous medical measures or to order certain coercive measures (section 1820 para.  2 BGB). If the power of attorney shall include the execution of real estate transactions (section 29 Grundbuchordnung, GBO) or the disclaimer of an inheritance (section 1945 para.  1, 3 BGB), the signature of the adult must be officially authenticated. The authentication can be done by a notary public or by the guardianship authority. The legislator set a fee of only 10 Euros for the authentication by the guardianship authority (section 7 para.  4 BtOG), in order to facilitate the drawing up of valid continuing powers of attorney.202 The power of attorney must be officially recorded by a notary public if the representative shall have the power to take out loans (section 492 para.  4 s. 2 BGB). The legislator has deliberately refrained from imposing further requirements for a continuing power of attorney in order not to restrict private autonomy.203 Even if an informal power of attorney is sufficient for all other legal transactions, powers of attorney issued orally or simply in writing are largely useless in practice.204 The business partners are afraid of the risk that it will later turn out that the power of attorney is not effective. In order to be accepted in business transactions, it is usually necessary that at least the signature of the adult is officially authenticated. Continuing powers of attorney that have been officially 199 

Stascheit, RNotZ 2020, 61, 80 et seq. Schneider, in: Münchener Kommentar zum BGB, §  1896 paras. 60 et seq.; Zimmer­ mann, Vorsorgevollmacht, 2. Kapitel paras. 41, 45. 201  Zimmermann, Vorsorgevollmacht, 2. Kapitel para.  47. 202  Government explanation, Bundestag Drucksache 19/24445, 349. 203  Ibid. 244. 204  Spalckhaver, in: Lipp, Handbuch der Vorsorgeverfügungen, §  13 paras. 18 et seq.; Zim­ mermann, Vorsorgevollmacht, 2. Kapitel para.  46. 200 

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recorded by a notary public enjoy the greatest acceptance in business dealings. The authentication of the signature guarantees that the signature has been done by this specific person (sections 39, 40 Beurkundungsgesetz, BeurkG). When officially recording a power of attorney, the notary public must also instruct the adult and ensure that the wording is clear and effective. If the notary public has doubts about the adult’s legal capacity, he must state this in the minutes (section 11 para.  1 s. 2, section 28 BeurkG). If the notary public is convinced that the adult lacks legal capacity, he must refuse the recording (section 11 para.  1 s. 1, section 28 BeurkG). Therefore, the officially recording by a notary public provides strong evidence that the adult was legally capable when granting the continuing power of attorney.205 d) Registration In Germany, it is possible to have a continuing power of attorney entered into a register. This register of continuing powers of attorney is kept by the Federal Chamber of Notaries (section 78a of the Federal Code of Notaries).206 All continuing powers of attorney can be entered into the register, not only those drawn up with the help of a notary public.207 Registration is not a prerequisite for the effectiveness of the power of attorney.208 On the other side, registration does not provide proof that the power of attorney is legally effective. Guardianship courts have the possibility to request information from this register as to whether a continuing power of attorney exists for an adult. This is intended to safeguard the priority of the power of attorney over guardianship.209 A guardian may not be appointed if the adult’s affairs can be handled equally well by a representative (section 1814 para.  3 s. 2 no.  1 BGB). According to section 1820 para.  1 BGB, the person who holds a document in which the adult has authorised another person to manage his or her affairs must inform the guardianship court if he or she learns that a guardian is to be appointed for the adult. e) Priority of Continuing Power of Attorney over the Appointment of a Guardian The appointment of a guardian is not necessary and can therefore not take place if the adult’s affairs can be equally taken care of by a representative (section 1814 para.  3 s. 2 no.  1 BGB). In order to observe this priority, the guardianship court 205  Zimmermann, Vorsorgevollmacht, 2. Kapitel para.   51; Spalckhaver, in: Lipp, Handbuch der Vorsorgeverfügungen, §  13 para.  4 4. 206  There is a one-time registration fee between 20.50 Euro and 26.00 Euro (https://www. vorsorgeregister.de/privatpersonen/kosten). 207  Kieß, in: Jurgeleit (ed.), Betreuungsrecht, §  1901c BGB para.  42. 208  Hushahn, in: Görk (ed.), Beck’scher Online Kommentar zur BNotO, 5. Edition, Verlag C.H. Beck, 2021, §  78a para.  4. 209  Ibid. §  78a para.  2.

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will obtain information from the register of continuing powers of attorney at the beginning of proceedings. The aforementioned obligation (section 1820 para.  1 BGB) to inform the guardianship court about a document containing a continuing power of attorney serves the same purpose. The priority of the continuing power of attorney depends on the representative being able to take care of the adult’s affairs. This requires that the authorised representative is personally suitable to manage the legal affairs of the adult. In addition, there must be no doubts about the legal validity of the power of attorney. An existing continuing power of attorney does not enable the representative to take care of the adult’s affairs like a guardian if it is not accepted in legal practice by business partners. This may be the case, for example, if there are doubts as to whether the adult was still legally capable when the power of attorney was granted.210 Doubts about the effectiveness of the power of attorney may also arise from the fact that the adult later revoked the power of attorney, but it is unclear whether he or she was already no longer legally capable at that time.211 An existing continuing power of attorney is often not sufficient when banking transactions have to be carried out.212 Banks usually only accept powers of attorney that have been issued directly to them on the bank’s own forms or that have been officially recorded by a notary public. Continuing powers of attorney that are only valid under the condition that the principal is no longer legally competent are also not accepted in practice and therefore usually cannot make guardianship dispensable (see above under 3.2.3.).213 In order for a continuing power of attorney to make the appointment of a guardian unnecessary, it must therefore as a rule be conferred unconditionally and officially recorded or authenticated. A continuing power of attorney has no priority over the appointment of a legal guardian, if the authorised person works in the care facility or for the care service provider that cares for the adult. The same applies if the authorised person has another close relationship with the care facility or care service provider (section 1814 para.  3 s. 1 no.  1, section 1816 para.  6 BGB). This has been assumed, for example, for the owner or the spouse of the owner of a care facility. This regulation is intended to avoid conflicts of interest and thus prevent abuse of the power of attorney.214

210 

Zimmermann, Vorsorgevollmacht, 2. Kapitel para.  42. BGH (XII ZB 610/14), NJW 2016, 159 para.  28. 212  Kammergericht (1 W 95/08), FGPrax 2009, 108, 109; Spalckhaver, in: Lipp, Handbuch der Vorsorgeverfügungen, §  12 para.  31. 213  Kammergericht (1 W 49/09), NJOZ 2010, 1682, 1684. 214  Government explanation, Bundestag Drucksache 19/24445, 244 et seq. 211 

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f) Powers and Duties The appointment of a representative does not affect the legal capacity of the principal. The principal can therefore continue to act legally as long as he or she has legal capacity. Unlike guardianship, a reservation of consent cannot be ordered.215 The scope of the power of attorney is determined by the principal. They can be very broad and cover all the adult’s affairs or be limited to certain areas. In practice, the forms recommended for use distinguish between different areas that can be selected by the adult:216 Health care and care dependency, residence and housing matters, care of property and assets, care of postal and telecommunication matters, representation of authorities and representation in court. If the representative is to be authorised to give or refuse consent to dangerous medical measures and to order certain coercive measures, this must be expressly stipulated in a written declaration (section 1820 para.  2 BGB). In addition, the authorised representative, like the guardian, must obtain the prior authorisation of the guardianship court for these measures (section 1829 para.  5, section 1831 para.  5, section 1832 para.  5 BGB). For all other measures, the authorisation of the guardianship court is not required. Thus, unlike the guardian, the authorised representative can give up the adult’s home without having to give notice to the guardianship court.217 The authorised representative is in principle also authorised to make gifts within the scope of the power of attorney granted to him or her.218 However, the adult may limit the scope of the authorisation and exclude gifts.219 Even if the authorised representative is empowered to make a gift in relation to a third party, it may result from the internal relationship with the adult that the gift does not correspond to the adult’s wishes or presumed will.220 The authorised representative who enters into a transaction contrary to the instructions, wishes or presumed will of the adult violates his or her duties in the internal relationship (contract) with the adult. Nevertheless, the transaction is valid in relation to the third person as long as it is covered by the power of attorney.221 The adult or his or her heirs may assert claims for damages against 215 

Zimmermann, NJW 2014, 1573, 1574. Eisenreich/Raischl (eds.), Muster in Bayerisches Staatsministerium der Justiz, Vorsorge für Unfall, Krankheit, Alter, 20. Edition, Verlag C.H. Beck, München 2022, 29 et seq. 217  Government explanation, Bundestag Drucksache 19/24445, 245. 218  Stascheit, RNotZ 2020, 61, 71. 219  Spalckhaver, in: Lipp, Handbuch der Vorsorgeverfügungen, §  14 para.  134. 220  BGH (XII ZB 647/12), NJW2013, 1085 para.  10. 221  Schmidt-Recla, in: Beck’scher Online Grosskommentar zum BGB, §  1896 para.  265.1; a 216 See

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the authorised representative if they can prove the breach of duty.222 The authorised representative is liable for simple negligence.223 This potential liability vis-à-vis the heirs can represent a particular risk for the authorised representative if he or she undertakes a legal transaction in property matters which is desired by the adult but which, according to objective standards, does not correspond to the best interests of the adult.224 In such cases, the authorised representative is advised to document the adult’s wishes properly. g) Supervision German law does not provide for supervision of a continuing power of attorney by the guardianship court. Unlike the guardian, the authorised representative is not obliged to notify the guardianship court in advance of certain transactions or to obtain prior authorisation from the guardianship court. An exception applies only to a few actions in important matters of personal care. Like a legal guardian the authorised representative must apply for the approval by the guardianship court in the case of dangerous or coercive medical treatments and of measures which deprive the adult of his or her liberty (sections 1829, 1831, 1832 BGB, see above 2.6.2.). In all other respects, the authorised representative is legally able to effectively carry out all matters covered by the power of attorney on his or her own. The authorised representative does not have to provide the guardianship court with reports on the adult’s situation or on the management of his or her affairs.225 In special cases, state supervision is possible in the form of the guardianship court appointing a guardian with the task of controlling the authorised representative (section 1820 para.  3 BGB). The prerequisite for this is that the adult cannot exercise the control himself. In addition, there must be concrete indications that the representative is not taking care of the adult’s affairs in accordance with the instructions in the agreement or the declared or presumed will of the adult (section 1820 para.  3 BGB).226 The appointment of a controlling guardian is thus subject to high requirements, because it significantly interferes with the adult’s right to self-determination.227 narrowly defined exception exists only in the case of abuse of the power of representation which is obvious to the third party, see for this Spalckhaver, in: Lipp, Handbuch der Vorsorgeverfügungen, §  8 para.  14. 222  Stascheit, RNotZ 2020, 61, 69. 223  Stascheit, RNotZ 2020, 61, 69; Zimmermann, Vorsorgevollmacht, 2. Kapitel para.  296. 224  Meier/Deinert, Handbuch Betreuungsrecht, para.  1811 for a comparable case in legal guardianship. 225  Zimmermann, NJW 2014, 1573, 1574. 226  BGH (XII ZB 125/15), NJW 2015, 3575 para.  12. 227  Government explanation, Bundestag Drucksache 19/24445, 246 et seq. with reference to BVerfG (1 BvR 1415/08), FamRZ 2008, 2260; BGH (XII ZB 624/14), NJW 2015, 3657.

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In the literature, this only very weakly developed monitoring of the power of attorney is criticised.228 h) Termination The power of attorney can be revoked by the principal at any time.229 However, the principal can only revoke the power of attorney as long as he or she still has legal capacity. In the case of the revocation of a power of attorney for health care, it is sufficient that the adult still has the capacity to give consent to medical measures.230 If the principal is no longer legally capable, revocation can only be effected by appointing a legal guardian, who then declares the revocation. The law restricts the right of the guardian to revoke the power of attorney. The reason is that once a power of attorney has been revoked, it cannot be re-established. The revocation of the power of attorney therefore represents a serious encroachment on the adult’s right to self-determination.231 A continuing power of attorney which authorises the authorised representative to take measures in the care of the person or in essential areas of the care of property may only be revoked by the legal guardian if adherence to the power of attorney gives rise to fear of a future violation of the person or the property with sufficient probability and in considerable severity and if milder measures do not appear suitable to avert harm to the adult (section 1820 para.  5 s. 1 BGB). In addition, the guardianship court must approve the revocation of a continuing power of attorney by the guardian (section 1820 para.  5 s. 2 BGB). There may only be a partial revocation of the power of attorney if this is sufficient to protect the adult.232 If there is a suspicion of abuse, the guardianship court may prohibit the authorised representative from using the power of attorney for a short period of time in order to have time to clarify the facts (section 1820 para.  4 BGB).233 The adult can stipulate that the power of attorney is valid even after his or her death. However, the heirs can revoke the power of attorney at any time. If the adult has handed over a power of attorney document to the representative, the power of attorney is deemed to remain effective until the document is returned to the adult (section 172 para.  2 BGB). The representative can still ef228  Zimmermann, Vorsorgevollmacht, 2. Kapitel para.  37; Schmidt-Recla, in: Beck’scher Online Grosskommentar zum BGB, §  1896 para.  265. 229  This applies even if the power of attorney is granted as irrevocable, see Loer, in: Jürgens (ed.), Betreuungsrecht, §  168 BGB para.  2; Huber, in: Beck’scher Online Grosskommentar zum BGB, §  168 BGB para.  58. 230  Stascheit, RNotZ 2020, 61, 71; Zimmermann, Vorsorgevollmacht, 2. Kapitel para.  75. 231  Government explanation, Bundestag Drucksache 19/24445, 248. 232  Government explanation, Bundestag Drucksache 19/24445, 248. 233  Ibid. 247.

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fectively conclude transactions on behalf of the adult on presentation of the power of attorney document (section 172 para.  1 BGB).234 3. Advance Guardianship Directive The adult can make a guardianship directive in which he or she determines in advance which person should be appointed as legal guardian if he or she is no longer able to take care of his or her own legal affairs. The adult can also determine which person should not be appointed as a guardian. Furthermore, the adult may make provisions as to how the guardianship is to be conducted (section 1816 para.  2 s. 4 BGB). The advance guardianship directive does not require any special form to be effective. Wishes declared orally are also to be respected.235 The advance guardianship directive, like the continuing power of attorney, can be entered in the register of continuing powers of attorney kept by the Federal Chamber of Notaries (section 78a of the Federal Code of Notaries; see above 3.2.4.). Registration is not a prerequisite for its effectiveness. Advance guardianship directives are only little known to the general public in Germany.236 A guardianship directive loses its significance if the adult recognisably no longer wishes to adhere to it (section 1816 para.  2 s. 3 BGB). This may be the case in particular if the adult can still express wishes regarding the person to be appointed as legal guardian. These current wishes take precedence over an advance guardianship directive. Legal capacity or natural insight are not required for this.237 It is sufficient that the adult expresses his or her will or wish that a certain person should or should not become his or her guardian.238 Non-verbal communication is also sufficient.239 The wishes of the adult must be complied with by the guardianship court. The previous rule that the wish was only binding if it was not contrary to the adult’s best interests (section 1897 para.  4 s. 1 BGB old version) was deleted. The wish of the adult does not have to be followed if the named person is not suitable as a legal guardian (section 1816 para.  2 s. 1 BGB). If the adult rejects a certain person as guardian, then the guardianship court is only not bound by this rejection if the rejection does not relate to the person of the guardian, but to the appointment of a guardian as such (section 1816 para.  2 s. 2 BGB).

234 

Zimmermann, Vorsorgevollmacht, 2. Kapitel para.  56. Schneider, in: Münchener Kommentar zum BGB, §  1897 para.  25. 236  Zimmermann, Vorsorgevollmacht, 3. Kapitel para.  363. 237  BGH (XII ZB 558/17), NJW-RR 2018, 705 para.  10; Schneider, in: Münchener Kommentar zum BGB, §  1897 para.  24. 238  BGH (XII ZB 601/17), NJW-RR 2018, 1089 para.  8 . 239  Ibid. para.  11. 235 

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IV. Ex lege representation 1. Representation of spouses according to section 1357 BGB German law recognises two types of legal representation for spouses or registered partnerships. One type is the entitlement of each spouse to enter into transactions to appropriately provide for the necessaries of life of the family, also binding the other spouse (section 1357 BGB). In the original version of the BGB of 1900, section 1357 BGB stipulated a right of the wife to represent her husband in transactions to adequately meet the family’s necessaries of life. The background was the wife’s obligation to manage the household on her own responsibility. In order to be able to fulfil this obligation, she needed the power to conclude transactions binding also her husband.240 In the current version of the BGB, the entitlement is given to each spouse irrespective of gender. Transactions for the adequate coverage of the family’s necessities of life are covered. A transaction is deemed to be adequate if, in view of its scope and urgency, a prior agreement between the spouses does not appear necessary and, as a rule, does not take place.241 Accordingly, the spouse may conclude current transactions for the joint household management on his or her own and thereby also bind the other spouse. This applies, for example, to the conclusion of an energy supply contract242 or the conclusion of a tradesmen’s contracts243 or the purchase of household goods.244 The scope of application of section 1357 BGB may also include contracts for medically necessary treatment 245 and the application for disability benefits for the spouse who is unconscious due to an accident.246 This regulation is independent of whether the other spouse is prevented from taking care of his or her own affairs due to illness or disability. Nevertheless, if representation is possible under this provision, it can also be used in such a care situation. However, the requirement to represent the other spouse if he or she is unable to act is not sufficiently addressed by this instrument. Section 1357 BGB does not give the spouse any authority to dispose of the assets of the other spouse. For example, he or she cannot arrange for payments to be debited from a bank account of the other spouse or assert claims to which the spouse is entitled against other persons or institutions.

240 

Siede, in: Grüneberg (ed.) Bürgerliches Gesetzbuch, §  1357 BGB para.  1. Ibid. §  1357 BGB para.  12. 242  BGH (XII ZR 159/12), FamRZ 2013, 1199. 243  OLG Düsseldorf (21 U 68/00), NJW-RR 2001, 1084. 244  Siede, in: Grüneberg (ed.), Bürgerliches Gesetzbuch, §  1357 BGB para.  13. 245  LG Heidelberg (5 O 275/13), NJW-RR 2014, 777. 246  VG Frankfurt am Main (V/2 E 308/87), NJW-RR 1988, 393. 241 

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2. Legal Representation in Matters of Health Care (section 1358 BGB) a) General Scope With effect from 1 January 2023, a new mutual legal representation of spouses in matters of health care will be introduced in section 1358 BGB. Proposals for such a statutory regulation had already been made in previous reforms of the law on guardianship, in particular in 2003247 and 2017,248 but did not become law at the time. The central concern was the risk of abuse. Restrictive regulations to prevent the risk of abuse were regarded as making the legal instrument impracticable. Those affected would have the option of making provisions through powers of attorney.249 The new regulation in section 1358 BGB now provides for a mutual right of representation of spouses and partners in a registered partnership250 , not of other partners in an informal cohabitation or of close relatives such as children. The guiding principle for the design of the newly introduced legal instrument is, on the one hand, to create a right of representation that is useful in practice and, on the other hand, to keep the risk of abuse as low as possible. If a person requires medical treatment as a result of an accident or serious illness but is unable to make the necessary declarations, the spouse’s251 right of representation is intended to be applicable until the patient is again able to manage his or her own affairs. The goal is to avoid the appointment of a provisional guardian in the event of only temporary impairment of legal capacity.252 The right of representation is therefore limited in time. The right of representation ends by law after six months.253 An extension is not possible.254 If the need for legal representation exists for a longer period, a guardian must be appointed.

247 See Diekmann, Stellvertretung in Gesundheitsangelegenheiten, Universitätsverlag Göttingen, Göttingen 2009, 108–111. 248  Dutta, FamRZ 2017, 581. 249  Legal Committee of the German Bundestag (Rechtsausschuss des Deutschen Bundes­ tags), Bundestag Drucksache 15/4874, 26. 250  The applicability of section 1358 BGB to registered partnerships results from section 21 LPartG. 251  For ease of reading, only the term spouse is used in the text; it always also refers to the civil partner; in Germany, new registered civil partnerships can no longer be established after 30.09. 2017. 252  Government explanation, Bundestag Drucksache 19/24445, 155. 253  The original proposal provided for a deadline of three months; the deadline was extended to six months by the Bundestag’s Legal Affairs Committee, Government explanation, Bundestag Drucksache 10/27287, Beschlussempfehlung und Bericht des Ausschusses für ­Recht und Verbraucherschutz (6. Ausschuss) v. 03.03.2021, 22. 254  Government explanation, Bundestag Drucksache 19/24445, 155.

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b) Prerequisites The right of representation requires that the other spouse is legally unable to take care of his or her health matters due to unconsciousness or illness. The prerequisites of unconsciousness or illness are intended to clarify that there must be an acute impairment of the spouse’s health as a result of an accident or illness that makes acute medical care necessary.255 The requirements regarding the restriction to manage one’s own affairs are basically the same as those that must be met for the appointment of a legal guardian. The spouse’s legal power of representation does not arise if one of the grounds for exclusion under section 1358 para.  3 BGB applies. Firstly, this is the case under no.  1 if the spouses live separately. The spouses live separately if they do not live together in the form of a domestic community and if this is based on an intention to separate. The intention to separate means that at least one of the spouses rejects the marital partnership. Therefore, the spouses do not live separately if they have different places of residence, but this is not based on an intention to separate but, for example, on the fact that one spouse is in need of care and lives in a care home.256 According to no.  3, the legal power of representation does not apply if a guardian has already been appointed for health care matters. Furthermore, the legal power of representation is excluded if the sick spouse refuses representation by the other spouse (para.  3 no.  2 lit.  a) or has granted a (different) person a continuing power of attorney for health care matters (para.  3 no.  2 lit.  b). A spouse may have the refusal of representation by his or her spouse entered in the register for continuing powers of attorney, which is kept by the Federal Chamber of Notaries (see above 3.2.4.). However, the entry is not constitutive for the validity of the refusal. c) Written Statement Issued by the First doctor The doctor who performs the first treatment for which the spouse exercises the right of representation shall issue a written statement confirming that the requirements for the right of representation have been met.257 This written statement shall be given to the spouse (section 1358 para.  4 s. 2 BGB). Before making the written statement, the doctor can request information from this register on continuing powers of attorney as to whether the patient has granted a power of attorney or a refusal of representation by his/her spouse has been entered into the register. According to the government’s explanatory protocol, such information should only be sought if the doctor has doubts that 255 

Ibid. 179. Ibid. 181. 257  Ibid. 183. 256 

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the patient wants to be represented by his or her spouse or if there are indications that a continuing power of attorney exists.258 The written statement issued by the first doctor has no constitutive effect and third parties may not rely on the statement in good faith.259 If the written declaration is made even though not all requirements are met, there is no effective legal right of representation of the spouse. During the legislative process, it was considered to allow the bona fide recipient to rely on the statement,260 but this was ultimately rejected as the spouse who was represented cannot be held responsible for the issuance of the statement.261 On the other hand, the right of representation exists irrespective of a statement made by the first doctor, if the legal requirements according to section 1358 paras. 1 and 3 BGB are met. However, the spouse’s right of representation will only be recognised in practice if a properly issued statement from the first doctor can be presented.262 d) Registration The confirmation must be issued in writing and given to the spouse (section 1358 para.  4 no.  2 BGB). Registration of the spouse’s right of representation is not provided for, as the temporal validity is limited to six months. e) Scope of the Power of Representation The spouse’s right of the representation is not all-encompassing, but only covers the areas specified in the law. The spouse is entitled to consent to or prohibit examinations of the state of health, medical treatment or medical interventions and to receive medical explanations (section 1358 para.  1 no.  1 BGB). He or she is entitled to decide on measures involving deprivation of liberty if the duration of the measures does not exceed six weeks in an individual case (section 1358 para.  1 no.  3, section 1831 para.  4 BGB). Deprivation of liberty measures are those in which the patient, who is in a hospital, a home or another institution, is to be deprived of his or her liberty for a longer period of time or on a regular basis by means of mechanical devices, medication or in some other way. However, as in the case of a guardian, such a decision by the spouse requires the approval of the guardianship court (section 1358 para.  6 , section 1831 paras. 2, 4 BGB). If liberty-depriving measures are required for a longer period than six weeks, a legal guardian must be appointed. The legislature considers 258 

Ibid. 182. Dutta, FamRZ 2020, 1881, 1883. 260  Government explanation, Bundestag Drucksache 19/24445, 422 et seq. 261  Government explanation, Bundestag Drucksache 19/24445, 480; see also Dutta, FamRZ 2017, 581, 581 (related to a previous legislative proposal). 262  Government explanation, Bundestag Drucksache 19/24445, 183. 259 

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this narrow time frame to be necessary for the protection of the patient263, although the measure itself still requires the approval of the guardianship court. The spouse may conclude and enforce treatment contracts, hospital contracts or contracts for urgent rehabilitation and care measures as the patient’s representative (section 1358 para.  1 no.  2 BGB). He or she may also assert claims to which the patient is entitled against third parties on the occasion of the illness and assign them to health care providers or demand payment to them (section 1358 para.  1 no.  4 BGB). The assertion of claims for benefits primarily concerns claims against insurance companies that are obliged to pay for the costs of health care. According to the government explanation, the spouse is only entitled to demand payment of the insurance benefits to the provider of the health care services. He or she should not be able to demand payment to himself/herself. This is to prevent abuse of the power of representation.264 The spouse is thus not entitled to represent the patient in concluding contracts which have no specific connection with the treatment of the medical condition. He or she cannot conclude or terminate contracts on behalf of the patient which are necessary to cover the patient’s maintenance needs or for the day-today management of the patient’s assets. On the basis of the legal right of representation according to section 1358 BGB, the spouse cannot carry out any transactions to the debit of a bank account of the patient, even if this is to be done for the purpose of paying medical bills. The attending physicians are released from the medical obligation to confidentiality towards the spouse. The spouse may inspect the medical records and also authorise their disclosure to third parties (section 1358 para.  2 BGB). A general right of the spouse to open the patient’s mail and correspondence was discussed in the legislative process265 but rejected in the end. The spouse must make provisions that all mail relating to health care issues will be addressed to him or her.266 Overall, the newly introduced right of representation is very narrowly defined and it seems questionable whether it will achieve its goal of making the appointment of a legal guardian superfluous in cases of only temporary illness.267 f) Supervision The law does not require the guardianship court or the guardianship authority to supervise the spouse’s actions on behalf of the patient.268 It is the patient’s 263 

Government explanation, Bundestag Drucksache 19/24445, 180. Ibid. 180. 265  Government explanation, Bundestag Drucksache 19/24445, 422. 266  Ibid. 480. 267  Critical therefore: Dutta, FamRZ 2020, 1881, 1882 et seq.; Dutta, FamRZ 2017, 581, 583. 268  Ibid. 182. 264 

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own responsibility to proceed against abusive actions by the spouse when he or she is again able to manage his or her own affairs. It is also possible for a legal guardian appointed in the case of an illness lasting more than six months to assert rights against the spouse for abuse. The spouse, like the guardian, is under the obligation to conduct the affairs in accordance with the wishes or presumed will of the patient (section 1358 para.  6 , section 1821 paras. 2–4 BGB). A living will must be observed (section 1358 para.  5, section 1827 paras. 1–3 BGB). As is the case with a guardian, the authorisation of the guardianship court may be required for the execution of medical measures where there is a risk that the patient will die or suffer prolonged damage to his or her health (section 1358 para.  6 , section 1829 BGB). Decisions on measures involving deprivation of liberty also require the approval of the guardianship court (section 1358 para.  1 no.  3, section 1831 BGB). g) Termination The doctor issuing the statement must enter the date on which the conditions for the power of representation first existed. The power of representation ends automatically after six months from this date. An extension is not possible. The spouse must assure the doctor in writing that the right of representation has not yet been exercised due to unconsciousness or illness. This is to ensure that only a one-time six-month power of representation can intervene due to a case of illness. This should also apply if there is a persistent illness which only periodically leads to the patient being legally unable to take care of health care matters. However, a renewed intervention of the power of representation is possible if the illnesses occur independently of each other.269 The power of representation ends even before the six months period if the prerequisites according to section 1358 para.  1 BGB no longer exist270 or a reason for exclusion occurs (section 1358 para.  3 BGB). This is the case, for example, when the patient has recovered to the extent that he or she is legally able to take care of health care matters (section 1358 para.  3 no.  4 BGB).271 It also ends if a guardian has been appointed for health care matters (section 1358 para.  3 no.  3 BGB).

269 

Ibid. 183. Dutta, FamRZ 2020, 1881. 271  Government explanation, Bundestag Drucksache 19/24445, 182; Legal Committee of the German Bundestag (Rechtsausschuss des Deutschen Bundestags), Bundestag Drucksache 10/27287, Beschlussempfehlung und Bericht des Ausschusses für Recht und Verbrau­cher­ schutz (6. Ausschuss) 03.03.2021, 22. 270 

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V. Impact of Covid-19 and Medical Treatment 1. Regulations for the Case of Triage The term triage describes the sorting of and allocation of treatment to patients and especially battle and disaster victims according to a system of priorities designed to maximize the number of survivors.272 In the context of intensive care medicine, it refers to a procedure of prioritised (ordered by higher and lower priority) distribution of scarce life-sustaining resources among a number of patients whose acute need in its entirety exceeds the available resources.273 Officially, in relation to the treatment of COVID-19 patients, no cases of triage have occurred in Germany so far.274 To date, the German legislator has not yet created any (legal) regulations on triage. The German Ethics Council even argues that there is no need or possibility to create specific regulations by the legislator.275 The Ethics Council focuses particularly on the recommendations of the medical societies. Within the framework of the state’s basic guidelines, these provide orientation beyond what can be standardised by the state at a non-statutory level.276 The German Interdisciplinary Association for Intensive Care and Emergency Medicine (Deutsche interdisziplinäre Vereinigung für Intensiv- und Not­ fallmedizin; DIVI), together with seven other medical societies, has published a guideline to provide clinical and ethical recommendations when making decisions about the allocation of intensive care resources in the context of the COVID-19 pandemic.277 The aim is to provide medical and ethical criteria to support the decision-making by the health professionals involved.278 First of all, it is

272 

Merriam-Webster Dictionary, https://www.merriam-webster.com/dictionary/triage. Merkel/Augsberg, JZ 2020, 704. 274  So far (January 2022), all serious emergencies could be treated, albeit under more difficult conditions. This is because operations have been postponed and ambulances have to go to several clinics due to lack of capacity. Transfers for redistribution of patients are also taking place, https://www.tagesschau.de/inland/corona-triage-103.html. 275 Deutscher Ethikrat, Solidarität und Verantwortung in der Corona-Krise – Ad.hoc Empfehlung v. 26.03.2020, 4, https://www.ethikrat.org/fileadmin/Publikationen/Ad-hocEmpfehlungen/deutsch/ad-hoc-empfehlung-corona-krise.pdf; Merkel/Augsberg, JZ 2020, 704, 705. 276 Deutscher Ethikrat, Solidarität und Verantwortung in der Corona-Krise – Ad.hoc Empfehlung v. 26.03.2020, 4, https://www.ethikrat.org/fileadmin/Publikationen/Ad-hocEmpfehlungen/deutsch/ad-hoc-empfehlung-corona-krise.pdf. 277 Deutsche Interdisziplinäre Vereinigung für Intensiv- und Notfallmedizin (DIVI), Entscheidungen über die Zuteilung intensivmedizinischer Ressourcen im Kontext der COVID-19-Pandemie Version 3 v. 13.12.2021, https://www.divi.de/joomlatools-files/docmanfiles/publikationen/covid-19-dokumente/211214-divi-covid-19-ethik-empfehlungversion-3-entscheidungen-ueber-die-zuteilung-intensivmedizinischer-ressourcen.pdf. 278  Ibid. 3. 273 

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pointed out that the indication and the will of the patient are the basis of every decision.279 Hospitals have to adjust their regular operations so that resources for non-COVID-19 patients can be reduced. However, the principle of equal treatment prohibits a non-COVID-19 patient from being disadvantaged compared to a COVID-19 patient.280 If resources are insufficient, surrounding capacities (within the hospital as well as regionally) must be considered first.281 Only if no other accessible resources are available, a decision must be made on the distribution of the insufficient available resources. The aim is to enable as many patients as possible to participate in medical care under crisis conditions with the (limited) resources available.282 Prioritisation is based on the criterion of clinical probability of success.283 Therefore, (if not otherwise avoidable) those patients are not treated with intensive care who have only a very low probability of survival.284 Priority is given to those patients who have a higher probability of survival because of these measures.285 Careful prioritisation always includes all patients in need of intensive care. In addition, the principle of equality should prohibit weighing only within the group of COVID-19 sufferers, as well because of age, social characteristics or on the basis of certain underlying diseases, disabilities or vaccination status.286 (Re-) evaluation should be carried out at adequate intervals so that changes in the patient’s condition, needs and available resources can be taken into account.287 The decision should be made in a predetermined procedure in a team that includes at least two doctors and one nurse who have experience in intensive care medicine.288 In the first step, the need for intensive care treatment is clarified, and in the second step, the patient’s individual chances of success are assessed, i.e. the probability of surviving the current illness through intensive care therapy.289 The recommendations then list diseases and conditions that should be sufficiently assessed in an overall view. In a third step, the patient’s consent (current, advance, previously verbally expressed, presumed) to intensive care therapy needs to be checked.290 In the fourth step, the actual prioritisation takes place, taking into account the estimated prospects of success of the possible in279 

Ibid. 3. Ibid. 4. 281  Ibid. 4. 282  Ibid. 5. 283  Ibid. 5. 284  Ibid. 5. 285  Ibid. 5. 286  Ibid. 5. 287  Ibid. 6. 288  Ibid. 6. 289  Ibid. 7. 290  Ibid. 8. 280 

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tensive therapy, with regard to a realistically achievable, patient-centred therapy goal, in comparison to the prospects of success of intensive care therapy for other patients and taking into account the available capacities.291 2. Recent decision of Bundesverfassungsgericht The Bundesverfassungsgericht recently issued a decision stating the obligation of the legislator to enact effective legislation to ensure that no person with disability is disadvantaged in triage.292 Nine people who have a disability or a pre-existing condition have filed a constitutional complaint with the Bun­ desverfassungsgericht in order to achieve effective protection against discrimination against people with disabilities in triage. They believe that the legislator does not protect them from discrimination on the basis of their disability in such a case.293 Starting point of the decision’s reasoning is the prohibition of any direct or indirect discrimination on the grounds of disability. Furthermore, the state has the mandate to effectively protect people from discrimination based on their disability, including by third parties. This derives from Article 3 para.  3 s. 2 of the German Constitution (Grundgesetz, GG).294 In certain constellations of a pronounced need for protection, this general mandate to protect can develop into a concrete duty to protect. This is particularly the case when there is a targeted exclusion of disabled persons, which is to be regarded as an attack on human dignity (protected by Art.  1 para.  1 s. 1 GG). This is also the case if there is a risk to high-ranking fundamental rights, such as life (protected by Art.  2 para.  2 s. 1 GG), associated with the discrimination on the grounds of disability, or if situations of structural inequality arise.295 According to the Bundesverfassungsgericht, there is evidence that the complainants are at risk of being disadvantaged in decisions about the distribution of pandemic-related insufficient vital resources in intensive care and thus in a life and death decision because of their disability. Expert assessments and opinions, as well as the professional recommendations for action reveal that people with disabilities are currently not effectively protected from recognisable risks to highest-ranking legal interests in a situation in which they cannot protect themselves.296 Thus, even from a medical perspective, it is assumed that “subjective moments” may arise in the complex decision on intensive medical therapy that involve risks of discrimination. It has been demonstrated by professional institutions and social associations, in line with scientific studies, that there is a 291 

Ibid. 8. BVerfG, Beschl. v. 16.12.2021 – 1 BvR 1541/20. 293  BVerfG, Pressemitteilung Nr.  109/2021 v. 28.12.2021. 294  BVerfG, Beschl. v. 16.12.2021 – 1 BvR 1541/20. 295 Ibid. 296  BVerfG, Pressemitteilung Nr.  109/2021 v. 28.12.2021. 292 

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risk of being disadvantaged in a situation of scarce medical resources due to a disability. It has also been demonstrated that the life situation of people with disabilities is often factually misjudged and that unconscious stereotyping carries the risk of disadvantaging people with disabilities in medical decisions.297 According to the BVerfG, this risk is not eliminated by the recommendations issued by the German Interdisciplinary Association for Intensive Care and Emergency Medicine (DIVI). The recommendations are not legally binding and risk becoming a gateway for the discrimination of disabled people as they cite severe other illnesses in terms of comorbidities and frailty as negative indicators for the likelihood of success of intensive care treatment. It cannot be ruled out that disability is sweepingly associated with comorbidities or stereotypically linked with poor recovery prospects.298 The court therefore sees a constitutional duty on the part of the legislature to enact a law to effectively address the risk of discrimination against people on the basis of disability in the allocation of scarce intensive care treatment resources when the attending physicians are in an extreme decision-making situation.299 As the legislature has a margin of assessment in fulfilling its obligation to legislate,300 a discussion has begun about the specific design of a future legal regulation. One option is that the legislator establishes only the framework, which is supposed to protect discrimination against persons with disabilities, and that the fine-tuning will be delegated to professional societies.301

VI. Conlcusion In summary, it can be said that the German legislator took the criticism of the Committee on the Rights of Persons with Disabilities very seriously. On the basis of two large-scale empirical studies and a broad discussion among interested parties, a comprehensive reform of the law on guardianship was enacted. The reform is geared towards the central goal of shaping the practice of guardianship in such a way that it realises the right of self-determination of adults in the best possible way. One measure is the enhancement of other support instruments that make it unnecessary to appoint a guardian. This includes a time-limited right of representation of spouses in medical matters. In addition, cooperation between the guardianship authority and the social authorities has

297 Ibid.

298 Ibid.

299 Ibid. 300 

BVerfG, Beschl. v. 16.12.2021 – 1 BvR 1541/20. Kubiciel, Legal Tribune Online, 28.12.2021, https://www.lto.de/recht/hintergruende/h/bverfg-1bvr1541-20-triage-behinderte-divi-diskriminierung-kubiciel/. 301 See

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been strengthened so that the adult can receive social assistance even without the help of a guardian. The primacy of the adult’s will is the central criterion for the appointment of a guardian, for the actions of the guardian and for judicial supervision of the guardian. The guardian’s task is to support the adult in his or her decisions as far as possible and not to make decisions in his or her place. The guardian continues to have the legal status of a representative of the adult. However, he or she may only make use of this right of representation if action by the adult himself or herself is not possible. Decisions against the free will of the adult are not allowed. Measures against the natural will of the adult are limited to exceptional cases in which the state has a duty to protect the adult on the basis of the fundamental rights of the German constitution. The reform stipulates that the adult be better informed and more involved at all stages of the guardianship proceedings. Thus, the obligation to involve and personally hear the adult in the guardianship proceedings and in the supervision of the guardian is considerably expanded. Furthermore, judicial supervision of guardians was intensified and measures were introduced to improve the quality of professional and voluntary guardians. Professional guardians must register with a guardianship authority and provide proof of their personal and professional suitability. The assistance and support of voluntary guardians by guardianship associations were reinforced. It is to be expected that these measures will bring about a significant improvement in the practice of guardianship. This does not mean that the reform cannot be criticised in detail. Whether and which deficits remain and make renewed reforms necessary will only become clear when the regulations are applied in practice.

Civil Liability for Autonomous Vehicles Martin Ebers

I. Introduction 1. The digital ecosystem of autonomous vehicles While in conventional vehicles, for technical and legal reasons, a human must maintain control while driving; in the case of autonomous, self-driving vehicles1, the system replaces the human driver. In the future, autonomous vehicles will be able to determine the entire driving operation without any human intervention – by recognising and interpreting the traffic situation in order to make and implement the right decisions. To achieve this, car manufacturers are using systems based on artificial intelligence (AI), in particular machine learning, which is able to act efficiently even in complex situations that cannot be predicted ex ante in detail.2 In addition, autonomous vehicles will most likely be embedded in a digital ecosystem 3 based on three essential components: in-car technologies, centralised back-end processes, and decentralised communication technologies where data is exchanged either amongst different vehicles or between vehicles and infrastructure (cf. figure 1).4

1 For

the different levels of automation, see the levels proposed by SAE International (Society of Automotive Engineers), available at https://www.sae.org/standards/content/ j3016_202104/ (last accessed 10.1.2022); German legislation in the Road Traffic Act is also guided by these SAE levels, cf. below, section II. 2  Stavens, Learning to Drive, 2011; Harris, IEEE Spectrum 2015; Tian/Luo/Wang/Tang, in: Proceedings of the IEEE Conference on Computer Vision and Pattern Recognition, 2015, 5079 et seq.; Langenwalter, Automobil Elektronik 2016, 30 et seq. 3  Ethics Commission on Automated and Connected Driving, appointed by the Federal Minister of Transport and Digital Infrastructure, Report, June 2017, 23, available at https:// www.bmvi.de/SharedDocs/EN/publications/report-ethics-commission.pdf?__blob=publi cationFile (last accessed 10.1.2022). 4  Cf. on this and the following Lemmer, Neue autoMobilität, Automatisierter Straßenverkehr der Zukunft (acatech STUDIE), 2016, 51; Fraunhofer, Hochautomatisiertes Fahren auf Autobahnen – Industriepolitische Schlussfolgerungen, Dienstleistungsprojekt 15/14, study commissioned by Bundesministerium für Wirtschaft und Energie (BMWi), 18.11.2015, 69, available at https://www.bmwi.de/Redaktion/DE/Downloads/H/hochautomatisiertesfahren-auf-autobahnen.html (last accessed 10.1.2022).

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Figure 1: The digital ecosystem of autonomous vehicles. Sources: Ethics Commission on Automated and Connected Driving, appointed by the Federal Minister of Transport and Digital Infrastructure, Report, June 2017, 27, available at https://www.bmvi.de/ SharedDocs/EN/publications/report-ethics-commission.pdf?__blob=publicationFile (last accessed 10.1.2022); Lemmer, Neue autoMobilität. Automatisierter Straßenverkehr der Zukunft (acatech STUDIE), 2016, 39, available at https://www.acatech.de/publika tion/neue-automobilitaet-automatisierter-strassenverkehr-der-zukunft/ (last accessed 10.1.2022).

If an autonomous vehicle causes an accident, this may be due to a variety of reasons. For instance, the in-car technology may itself malfunction owing to faulty sensors, disturbed signal transmission or incorrect receipt and processing of data by the software of the vehicle. Moreover, it is also possible that the cen­ tral back-end processes may be responsible for the accident. Back-ends provide autonomous vehicles with additional data, such as information about road and weather conditions or recent accidents. The receipt of incorrect back-end data (e.g., outdated maps or incorrect weather or traffic jam data) thus, represents another source of error. In addition thereto, autonomous vehicles also communicate directly, i.e. without a connection via a back-end, either with other vehicles (vehicle to vehicle; V2V) or with the road traffic infrastructure (vehicle to infrastructure; V2I). Both the data exchanges between vehicles (e.g., to control cooperative driving manoeuvres) and communication with infrastructure components, such as traffic lights and traffic signs, can lead to malfunctions in the operation of the autonomous vehicle.

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2. Current state of technology for autonomous driving in Germany The production of autonomous vehicles is often associated with the name ‘Tesla’, so it may come as a surprise that the US company is poorly placed at the lowest (18th place) in a ranking compiled by the market research institute, Guidehouse Insights5 on automated driving vehicles. With Volkswagen (7th place) and Daimler/Bosch (10th place), on the other hand, two German car manufacturers are listed in the top ten in this ranking. Daimler, which cooperates with Bosch in the field of autonomous driving, recently achieved a major breakthrough towards autonomous mobility with the world’s first series approval for driving at SAE level 3.6 As early as the first half of 2022, the new S-Class can be equipped with an automated lane keeping system (ALKS), which at Mercedes is called Drive Pilot. The system enables the vehicle to drive in a highly automated manner at speeds of up to 60 km/h in slow-moving traffic or traffic jams on German motorways. With Drive Pilot active, the driver can turn away from traffic and surf the internet, write emails or watch a movie. However, the driver must be ready to get back behind the wheel again, at any time, after a warning. If he does not, the car is automatically braked to a stop. The message to the competition is clear – German car manufacturers are also striving for a technological lead in the field of automated and autonomous driving. 3. Legal challenges Whether fully autonomous vehicles can be brought onto the market depends not only on advances in information technology, but also on the framework of liabilities in law. The advent of autonomous vehicles poses major challenges for traditional liability law. First and foremost, there is the question of whether accident victims will be compensated to the same extent as is currently the case for an accident in non-autonomous road traffic. In particular, the specific characteristics of many AI technologies – including opacity (“black box effect”), complexity, unpredictability, and partially autonomous behaviour,7 as well as interconnectivity (“many hands problem”) 8 – could make compensation under the current laws and rules much more difficult. 5  Guidehouse Insights Leaderboard: Automated Driving Vehicles, available at https://guidehouseinsights.com/reports/guidehouse-insights-leaderboard-automated-driving-vehicles (last accessed 10.1.2022). 6  Leichsenring, Autonomes Fahren: Level-3-System für EQS und S-Klasse genehmigt, available at https://insideevs.de/news/553420/autonomes-fahren-level3-genehmigung-merce des/ (last accessed 10.1.2022). 7  Cf. European Commission, White Paper on Artificial Intelligence, COM (2020) 65 final, 12, available at https://ec.europa.eu/info/sites/default/files/commission-white-paper-artifi cial-intelligence-feb2020_en.pdf (last accessed 10.1.2022). 8  Yeung, A study of the implications of advanced digital technologies (including AI sys-

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In addition, it is currently unclear who will actually be liable in the event of an accident caused by an autonomous vehicle. Since most accidents are currently caused by driving errors,9 it is generally the driver or the vehicle keeper and his or her insurance company who are obliged to pay. However, this situation could change. As the autonomous vehicle replaces the human driver, it is possible that in the future, it is primarily the car manufacturer who would be deemed liable. At the end of the day, most decisions the autonomous car takes in a specific situation, are determined by the intelligent machine and not by the driver. Accordingly, some German legal scholars assume that there will be a shift in the liability to the detriment of manufacturers.10 However, this conclusion is not compelling. Indeed, as will be outlined in the following sections,11 product and producer’s liability could prove largely ineffective for injured parties, mainly because it will be difficult for them to prove the defectiveness of autonomous cars as well as the causal relationship between the defect and the damage.12 4. Overview The remainder of this paper deals with civil liability for autonomous driving under German law. To this end, the following section provides an overview of the current legal framework (II.), followed by an analysis of the liability of drivers (III.), technical supervisors (IV.), vehicle keepers (V.), manufacturers (VI.) and IT service providers (VII.). Another section deals with the question of how autonomous vehicles would be integrated into the insurance system (VIII.), whereas the last section draws some final conclusions (IX.). In an appendix to this paper, the reader can find an English translation of the most important provisions of the German Road Traffic Act, which the legislatems) for the concept of responsibility within a human rights framework, 2019, Council of Europe – Expert Committee on human rights dimensions of automated data processing and different forms of artificial intelligence (MSI-AUT), 11. 9  Human error was by far the most frequent cause of accidents registered by the police in Germany in 2020: 88.5 % of accidents involving personal injury were due to the driver error and 2.9 % were due to the pedestrian error, while 7.5 % were due to the general causes of accidents (e.g., road conditions, weather conditions). Technical defects and maintenance defects, on the other hand, accounted for only 1 % of the accidents, cf. Statistisches Bundesamt, Verkehrsunfälle 2020, Fachserie 8, Reihe 7, 49, available at https://www.destatis.de/DE/Themen/ Gesellschaft-Umwelt/Verkehrsunfaelle/Publikationen/Downloads-Verkehrsunfaelle/verkehrsunfaelle-jahr-2080700207004.pdf;jsessionid=4F9EFFB66962CC96C91A00AC393 71175.live711?__blob=publicationFile (last accessed 10.1.2022). 10  Gasser, in: Maurer et al. (eds.), Autonomes Fahren, 2015, 543 (553 et seq.); Lutz, NJW 2015, 119 (121); Gomille, JZ 2016, 76 (81); different opinion Hey, Die außervertragliche Haftung des Herstellers autonomer Fahrzeuge bei Unfällen im Straßenverkehr, 2019, 139. 11  Cf. section VI. 12 Cf. Ebers, in: Oppermann/Stender-Vorwachs (eds.), Autonomes Fahren, 2017, 93–125; G. Wagner, VersR 2020, 717 (729); see also Enquete-Kommission Künstliche Intelligenz, Gesellschaftliche Verantwortung und wirtschaftliche, soziale und ökologische Potenziale, BTDrs. 19/23700, 28.10.2020, 76.

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tor enacted in 2017 for motor vehicles with highly or fully automated driving function and in 2021 for motor vehicles with autonomous driving function in defined operating areas.

II. Political debate and applicable law Both the federal government of the last and the current legislative period agree with the German automotive industry that Germany should take a leading role in the field of autonomous driving.13 In order to establish Germany as an innovation hub, a wide range of measures and projects have been initiated in recent years, which are illustrated in the following sections.14 1. Political debate The genesis of a political involvement in automated and autonomous driving in Germany was marked by the Round Table on Automated Driving (Runder Tisch Automatisiertes Fahren), which was convened by the Federal Ministry of Transport and Digital Infrastructure in 2013. Various stakeholders from the sciences, industry and politics exchanged ideas in this committee and performed the groundwork for the strategy paper “Strategie automatisiertes und vernetztes Fahren – Leitanbieter bleiben, Leitmarkt werden, Regelbetrieb einleiten”15 which was later adopted by the Federal Government of Germany in 2015. In 2016, the Federal Ministry of Transport and Digital Infrastructure also set up the Ethics Commission on Automated and Connected Driving, which presented its ethical guidelines16 in June 2017. These ethical guidelines were taken into consideration in the formulation of the Act on Autonomous Driving 2021, which shall be explained below in more detail.17 Like ordinary vehicles, autonomous vehicles must also venture beyond the national borders and in order to achieve this, the Federal Government has par13  Bundesministerium für Verkehr und digitale Infrastruktur (BMVI), available at https:// www.bmvi.de/SharedDocs/DE/Artikel/DG/gesetz-zum-autonomen-fahren.html (last accessed 10.1.2022); SPD, BÜNDNIS 90/DIE GRÜNEN and FDP, Coalition Agreement, 27, available at https://www.spd.de/fileadmin/Dokumente/Koalitionsvertrag/Koalitionsver trag_2021-2025.pdf (last accessed 10.1.2022). 14  Cf. on this and the following Krüger/Zielonka, in: Hermann/Knauff (eds.), Autonomes Fahren, 2021, 27 et seq. 15  Bundesregierung, Strategie automatisiertes und vernetztes Fahren, available at https:// www.bmvi.de/SharedDocs/DE/Publikationen/DG/broschuere-strategie-automatisiertesvernetztes-fahren.pdf?__blob=publicationFile (last accessed 10.1.2022). 16  Federal Ministry of Transport and Digital Infrastructure, Report of the Ethics Commission on Automated and Connected Driving, available at https://www.bmvi.de/SharedDocs/EN/publications/report-ethics-commission.pdf (last accessed 10.1.2022). 17  Act on Autonomous driving of 12th July 2021, BGBl. 2021 I, 3108; cf. on this section II. 3.

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ticipated in various international working groups on autonomous driving vehicles in the past. Participation in the working groups of the United Nations Economic Commission for Europe (UN-ECE) plays a key role here. While the Working Party on Road Traffic Safety (WP.1) is concerned with creating international standards and regulations in the field of road traffic safety; the World Forum for the harmonisation of vehicle regulations (WP.29) aims at technical harmonisation. Based on a German initiative in WP.29, UN Regulation 157 on the Automated Lane Keeping System (ALKS) came into force at the beginning of 2021, which enables automated vehicle systems to take over longitudinal and lateral guidance on motorways up to a speed of 60 km/h.18 This regulation forms the basis for the aforementioned world’s first series approval for automated driving at SAE level 3. 2. Applicable law Under German law, various liability regimes compete with each other in the case of accidents with (autonomous) motor vehicles. The general rules on civil liability are laid down in the German Civil Code (Bürgerliches Gesetzbuch). The most important provision in the area of tort law is section 823(1) Civil Code, which generally requires fault on the part of the tortfeasor. Additionally, the Road Traffic Act (Straßenverkehrsgesetz) provides for a strict liability of vehicle keepers (section 7) and for a presumed liability of drivers (section 18). Whereas, the Product Liability Act (Produkthaftungsgesetz) regulates producer’s liability based on no-fault liability.19 The special regulations do not supersede the general ones; there is a free competition of claims. Tort liability under the Civil Code and under the Road Traffic Act are solely of national origin. Liability under the Product Liability Act, on the other hand, is based on the fully harmonising EU Product Liability Directive 85/374/EEC. German courts must therefore interpret the Product Liability Act in the light of the wording and the purpose of the Directive20 and may not deviate from it within the scope of application of the Directive – not even in favour of the injured party.21

18 See

Lutz, DAR 2021, 182 (183). Cf. section VI. 1. 20  ECJ, Judgement of 10.5.2001 – Case C-203/99 (Henning Veedfald against Arhus Amts­ kommune) = EuZW 2001, 378 (380 et seq.), para.  27. 21  On the fully harmonising effect of the Product Liability Directive, see ECJ, Judgment of 25.4.2002 – Case C-183/00 (González Sánchez against Medicina Asturiana) = EuZW 2002, 574 (576). 19 

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3. Recent reforms of the Road Traffic Act In recent years, Germany amended its Road Traffic Act, to integrate specific provisions relating to automated and autonomous driving. In 2017, Germany first introduced regulations for the so-called ‘highly and fully automated vehicles’, i.e. for vehicles of SAE level 3.22 However, due to the lack of European and international regulations on the technical type approval, it took until December 2021 for the first vehicle model to receive such approval 23 and until May 2022 before the first car manufacturer was able to offer driving on SAE-Level 3 as an optional extra for series-production vehicles.24 Subsequently, in 2021, Germany amended the Road Traffic Act again, by means of the Autonomous Driving Act,25 to create a legal framework for autonomous, driverless systems in defined operating areas, i.e. for vehicles of SAE level 4.26 Changes to the legal framework for autonomous driving can also be expected in the future. In their coalition agreement, the new government which took office in December 2021 stated that the law on autonomous driving should be improved by clarifying liability issues and ensuring the data sovereignty of users.27

III. Liability of the driver As already mentioned, most road accidents currently occur due to human errors caused by the drivers.28 In the case of accidents with conventional vehicles, 22  8th Act Amending the Road Traffic Act of 16.7.2017, BGBl. 2017 I, 1648 et seq. Regulated in section 1a–c. Road Traffic Act; on the criticism of the German terminology which falsely suggests a SAE Level 4 regulation cf. Steege, SVR 2021, 128 (130); Kleemann/Arzt, RAW 2021, 99 (100). 23  Cf. section I. 2; for the reason cf. Lutz, DAR 2021, 182. 24 Cf. https://www.automobil-industrie.vogel.de/mercedes-bietet-drive-pilot-fuer-s-klas se-und-eqs-an-a-1115962/. 25  Act amending the Road Traffic Act and the Compulsory Insurance Act – Act on Autonomous Driving, BGBl. 2021 I, 3108 et seq. Regulated in section 1d–l Road Traffic Act; for the classification as level 4, cf. Bundesregierung, Draft of an Act to amend the Road Traffic Act and the Compulsory Insurance Act – Act on Autonomous Driving, BT-Drs. 19/27439, 9.3.2021, 15 et seq. 26  The German government is of the opinion that the approval of autonomous vehicles is only a matter of national law, since EU Regulation 2018/858 does not contain any approval procedure for autonomous vehicles, cf. Bundesregierung, Act on Autonomous Driving, BTDrs. 19/27439, 9.3.2021, 17. 27 SPD, BÜNDNIS 90/DIE GRÜNEN and FDP, Koalitionsvertrag, 52, available at https://www.spd.de/fileadmin/Dokumente/Koalitionsvertrag/Koalitionsvertrag_20212025.pdf (last accessed 10.1.2022). 28  88.5 % of accidents registered by the police in Germany in 2020 involving personal injury were due to the driver error, cf. footnote 9.

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injured parties therefore regularly have claims for damages against the driver of the vehicle. These can be based on both section 18(1)(1) Road Traffic Act and section 823(1) Civil Code. While the fault of the driver is presumed in the case of special liability under section 18(1)(1) Road Traffic Act, the injured party must prove the fault of the driver for a claim under section 823(1) Civil Code. The more the driving activities are automated, the less influence the driver exerts on the happenings on road. With fully autonomous driving, there will eventually no longer be a driver at all, but only a person using or operating the autonomous vehicle. Accordingly, the following sections will bring to light as to how this loss of control will affect the driver’s liability. 1. Liability for presumed fault under the Road Traffic Act According to section 18(1) Road Traffic Act, the driver is liable for damages caused by the vehicle, unless there is proof that the damage was not caused by him or her. However, such liability for presumed fault only comes into play if the vehicle is used by the driver. Section 1a(4) Road Traffic Act states that the person using a highly or fully automated vehicle, i.e. of SAE level 3, remains still the driver of the vehicle. According to section 1b Road Traffic Act, the driver may turn away from the traffic situation and the control of the vehicle while driving, but must remain aware of the situation in such a way that he/she can immediately take control of the vehicle again – either because the system prompts him or her to do so, or because he/she recognises or must recognise, on the basis of obvious circumstances that the prerequisites for the intended use no longer exist.29 If the driver cannot prove that he/she has complied with these obligations, his/her fault is presumed and he/she is liable for damages to the injured party according to section 18(1)(1) Road Traffic Act. The Autonomous Driving Act 2021, which legalised the use of vehicles with autonomous driving function within a defined operating area (SAE level 4), on the other hand, removes the user from any special duties. However, since Art.  8(5bis) Vienna Convention on Road Traffic30 states that autonomous motor vehicles are only permitted if there is at least a possibility of deactivation by a person – whether inside or outside the vehicle – Germany introduced by its new law, the new role of a ‘technical supervisor’ who is entrusted, inter alia, to deactivate (instead of the driver) the system.31 29  For further information on the driver’s obligations under section 1b Road Traffic Act, see Buck-Heeb/Dieckmann, NZV 2019, 113. 30  Vienna Convention on Road Traffic 1968, BGBl. 1977 II, 809 (811), last amended by agreement of 24.3.2014, BGBl. 2016 II, 1306. 31  Cf. Bundesregierung, Act on Autonomous Driving, BT-Drs. 19/27439, 9.3.2021, 16 et seq., 23; on the liability of the ‘technical supervisor’ cf. IV.

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Drivers can, therefore, only be held liable for damage under the Road Traffic Act if they are driving a vehicle of SAE levels 0–3. From SAE level 4 onwards, there is no longer a person driving the vehicle. Therefore, the user of the vehicle cannot be held liable under section 18(1)(1) Road Traffic Act.32 2. Tort liability under section 823(1) Civil Code Unlike section 18(1)(1) Road Traffic Act, liability under section 823(1) Civil Code does not require a ‘vehicle driver’. Therefore, it is possible that the users of an autonomous vehicle of SAE levels 4 and 5 or insofar as the autonomous driving function is permitted outside of the previously defined operating areas – are liable under the general rules on civil liability. However, the higher the degree of automation of a vehicle, the less reasonable it seems to hold the user responsible for damages caused by ‘the use of the system’. The ‘behaviour’ of a fully autonomous vehicle is typically neither predictable nor controllable for the user.33 The German legislator has also recognised this; accordingly, when it comes to autonomous vehicles, section 1f Road Traffic Act imposes obligations solely on the vehicle keeper, the ‘technical supervisor’ and the producer. Hopefully, German courts will recognise the clear intent of the legislator not to impose excessive monitoring and operating obligations on the user of autonomous vehicles in the context of tort liability under section 823(1) Civil Code. As provided for in section 1f Road Traffic Act, the technical supervisor, the vehicle keeper or the producer should be responsible for checking the roadworthiness and system safety, and not the uninformed vehicle occupant – especially since at SAE levels 4 and 5, the vehicle can also be on the road without any occupants at all. In conclusion, it is safe to state that in autonomous vehicles at SAE level 4, there is no driver, but only a user, who is exempt from liability under German law.

32  Hofmann, CR 2020, 282 (286); Schrader, in: Hermann/Knauff (eds.), Autonomes Fahren, 2021, 57 (72); also Bundesregierung, Act on Autonomous Driving, BT-Drs. 19/27439, 9.3.2021, 20: “In contrast to conventional motor vehicles and those with automated driving systems up to SAE level 3, motor vehicles with an autonomous driving function within the meaning of this Act no longer have a person driving the vehicle when operating the autonomous driving function.” 33  Schrader, NJW 2015, 3537 (3541); Borges, CR 2016, 272 (273); in more general terms on the unpredictability of autonomous behaviour cf. Schaub, JZ 2017, 342 et seq.; Spindler, in: Lohsse/Schulze/Staudenmayer (eds.), Liability for Artificial Intelligence and the Internet of Things, 2019, 125 (126 et seq.); G. Wagner, VersR 2020, 717 (724).

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IV. Liability of the technical supervisor With the Autonomous Driving Act 2021, the German legislator has created the legal basis for operating autonomous vehicles within the previously defined traffic areas. In the course of this new regulation, a new actor in traffic law was introduced, namely, the ‘technical supervisor’. 1. Introduction by the Autonomous Driving Act 2021 According to the legal definition in section 1d(3) Road Traffic Act, the technical supervisor is a natural person 34 who can deactivate the motor vehicle during its autonomous operation and approve an alternative driving manoeuvre. The tasks of the technical supervisor are listed in section 1f(2) Road Traffic Act. The duties as well as requirements for the technical qualification are specified in accordance with section 1j(1)(4) Road Traffic Act by a regulation of the Federal Ministry of Transport and Digital Infrastructure (Bundesministerium für Ver­ kehr und digitale Infrastruktur, BMVI).35 From this regulation, as already indicated in the explanatory memorandum, it follows that the technical supervisor is not obliged to constantly monitor the autonomous vehicle.36 Rather, the task of a supervisor is to perceive emergency messages from the autonomous vehicle system and to decide whether the vehicle should be deactivated or an alternative driving manoeuvre be initiated. The statutory interpretation and the explanatory memorandum indicate that the introduction of the technical supervisor is based on the requirements of the Vienna Convention on Road Traffic. In its Art.  8(5) and Art.  13(1), the Convention stipulates that a vehicle must be controlled by a driver. However, according to Art.  8(5bis) of the Vienna Convention on Road Traffic, vehicles with automated or autonomous vehicle functions are considered compatible with the controllability requirement if the vehicle either complies with UN-ECE regulations or if the vehicle system can be overridden or switched off by the driver. Since corresponding UN-ECE regulations do not (yet) exist, the German legislator has chosen to ensure compatibility with the Vienna Convention by entrusting overdrive and switch-off functions to technical supervisors.

34  Thus, no institution or entity may be entrusted with the tasks of technical supervision, Bundesregierung, Act on Autonomous Driving, BT-Drs. 19/27439, 20. 35  Verordnung zur Regelung des Betriebs von Kraftfahrzeugen mit automatisierter und autonomer Fahrfunktion und zur Änderung straßenverkehrsrechtlicher Vorschriften, BGBl. 2022 I, 986. 36  Cf. Bundesregierung, Act on Autonomous Driving, BT-Drs. 19/27439, 9.3.2021, 25; Verordnung zur Regelung des Betriebs von Kraftfahrzeugen mit automatisierter und autonomer Fahrfunktion und zur Änderung straßenverkehrsrechtlicher Vorschriften, BGBl. 2022 I, 986 (993 et seq.).

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The non-obligatory presence of the technical supervisor inside the vehicle37 raises the pertinent question of whether the Autonomous Driving Act 2021 is compatible with the Vienna Convention. After all, the Vienna Convention entrusts the deactivation or overriding to a ‘driver’ who, according to the common understanding of the statutory text and the general scheme of the Convention, must be in the vehicle.38 Arguably, in light of the dynamic interpretation of international law and a resolution of the Global Forum for Road Safety (WP.1)39, one might assume that the person entrusted with supervision does not have to be present in the vehicle.40 However, the aforementioned resolution neither addresses the specific question of whether the ‘driver’ within the meaning of Art.  8(5 bis) Vienna Convention on Road Traffic may also be outside the vehicle,41 nor is the resolution a treaty-related agreement between the contracting parties.42 However, the question of compatibility with this international convention loses importance considering that an amendment to the Vienna Convention was initiated in September 2020, which will most likely make autonomous driving systems compatible with the Vienna Convention in 2022.43 2. Tort liability Both the opposition parties and the Federal Council, the Bundesrat, criticised that the Autonomous Driving Act 2021 did not amend the liability rules.44 In fact, the legislator did not include any explicit liability rules for the technical

37 

Bundesregierung, Act on Autonomous Driving, BT-Drs. 19/27439, 9.3.2021, 17. See in detail Gatzke, NZV 2021, 402. 39  Global Forum for Road Traffic Safety (WP.1) of the United Nations Economic Commission for Europe, Resolution on the deployment of highly and fully automated vehicles in road traffic, 20.9.2018, available at https://unece.org/DAM/trans/main/wp1/wp1doc/WP1_ Resolution_Brochure_EN_web.pdf (last accessed 10.1.2022). 40  Bundesregierung, Act on Autonomous Driving, BT-Drs. 19/27439, 9.3.2021, 17; Schrad­ er, in: Hermann/Knauff (eds.), Autonomes Fahren, 2021, 57 (74); Lutz, DAR 2021, 182 (184). 41  Kleemann/Arzt, RAW 2021, 99 (102). 42  Gatzke, NZV 2021, 402 (406). The resolution is – as WP.1 itself states – a ‘non-binding guidance’, cf. Global Forum for Road Traffic Safety (WP.1) of the United Nations Economic Commission for Europe, Report of the Global Forum for Road Traffic Safety on its 77th session, 3.10.2018, 4, available at http://www.unece.org.net4all.ch/fileadmin/DAM/trans/ doc/2018/wp1/ECE-TRANS-WP1-165e.pdf (last accessed 10.1.2022). 43  On this development, see Lutz, DAR 2021, 182 (184). 44  Cf. the motions for resolutions of the FDP parliamentary group and the BÜNDNIS90/ DIE GRÜNEN parliamentary group, Beschlussempfehlung und Bericht des Ausschusses für Verkehr und digitale Infrastruktur zum Entwurf des Gesetzes zum autonomen Fahren, BTDrs. 19/29875, 9 et seq.; on the criticism of the Bundesrat cf. Unterrichtung durch die Bundesregierung zum Entwurf des Gesetzes zum autonomen Fahren, Stellungnahme des Bundesrates und Gegenäußerung der Bundesregierung, 1.4.2021, BT-Drs. 19/28178, 11. 38 

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supervisor in the Road Traffic Act. Therefore, the technical supervisor can only be held liable under the general conditions of section 823(1) Civil Code.45 In particular, the legislator rejected the proposal of the Bundesrat46 to impose liability for presumed fault on the technical supervisor, similar to the liability of a driver according to section 18(1)(1) Road Traffic Act. The German Government argued that the potential dangers of activities carried out by a technical supervisor differs considerably from that of a conventional vehicle driver, as the technical supervisor can only intervene in the driving situation if he/she has been requested to do so by the vehicle. Even after being requested to do so by the vehicle, the technical supervisor can either only release certain driving manoeuvre that are suggested by the vehicle, or deactivate the vehicle and put it into a risk-minimising condition. These possibilities of intervention are fundamentally different from those of a classic vehicle control, in which the vehicle is exclusively controlled by the driver.47 In contrast to the driver’s liability according to section 18(1)(1) Road Traffic Act, the fault of the technical supervisor must therefore be proven by the injured party for a claim based on section 823(1) Civil Code. In view of this liability requirement and the fact that liability against the vehicle keeper continues to be strict liability,48 the injured party will probably only make a claim against the technical supervisor in rare cases.49 However, a conclusive assessment is only possible with regard to the duties and requirements for the professional qualification of the technical supervisor specified in the regulation of the BMVI. The draft of the BMVI50 was criticised in particular with regard to the high professional requirements for the technical supervisor.51 According to the Ministry’s draft, the technical supervisor should 45  M. Wagner, SVR 2021, 287 (289); Haupt, NZV 2021, 172 (176); Schrader, in: Hermann/ Knauff (eds.), Autonomes Fahren, 2021, 57 (76). 46  Stellungnahme des Bundesrates zum Entwurf des Gesetzes zum autonomen Fahren, 1.4.2021, BT-Drs. 19/28178, 11. Also considering liability for presumed fault, cf. Schrader, in: Hermann/Knauff (eds.), Autonomes Fahren, 2021, 57 (76). 47  Gegenäußerung der Bundesregierung zur Stellungnahme des Bundesrates zum Ent­w urf des Gesetzes zum autonomen Fahren, 1.4.2021, BT-Drs. 19/28178, 24 et seq. 48  Cf. below, section V. Of course, it must be taken into account that the liability of the ‘technical supervisor’ according to section 823(1) Civil Code is unlimited, in contrast to the liability according to the Road Traffic Act, cf. section 12 Road Traffic Act. 49  Also critical regarding the practical relevance of the liability of the technical supervisor is M. Wagner, SVR 2021, 287 (289). 50  Available at https://ec.europa.eu/growth/tools-databases/tris/index.cfm/de/search/ ?trisaction=search.detail&year=2021&num=344&mLang=DE (last accessed 10.1.2022). 51  Bitkom, Stellungnahme – Entwurf der Autonome-Fahrzeuge-Genehmigungs-und-Betriebs-Verordnung (AFGBV) des Bundesministeriums für Verkehr und digitale Infrastruktur (BMVI), 13.9.2021, available at https://www.bitkom.org/sites/default/files/2021-09/bitkom_ stellungnahme_afgbv.pdf (last accessed 10.1.2022); Verband der Automobil Industrie (VDA), Stellungnahme zum Gesetz zum autonomen Fahren sowie über eine Verordnung zur Genehmigung und zum Betrieb von Kraftfahrzeugen mit autonomer Fahrfunktion in festgeleg-

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have a university degree or a degree confirming the technical supervisor as a state-certified technician in an engineering discipline, which is apparently not a justified qualification to handle transport-related responsibilities. In the final version of the regulation, it has now been clarified that, although a person with the aforementioned qualification must in principle be appointed as a technical supervisor, this technical supervisor may, in turn, with the approval of the keeper, make use of other suitable persons. These assistants do not need a specific qualification, but they must have at least three years of professional experience in the field of transport or motor vehicles. In addition, these assistants shall be trained at least once a year by the manufacturer in the use of the autonomous vehicle. (footnote: Verordnung zur Regelung des Betriebs von Kraftfahrzeugen mit automatisierter und autonomer Fahrfunktion und zur Änderung straßenverkehrsrechtlicher Vorschriften, BGBl. 2022 I, 986 (993 et seq.). However, the concrete due diligence requirements of the technical supervisor will only emerge during their deployment,52 as the introduction of the technical supervisor represents a novelty in German road traffic law.

V. Liability of the vehicle keeper Under the current liability system, injured parties can also assert their claims for damages against the vehicle keeper. 1. Conditions of strict liability Section 7(1) Road Traffic Act provides for strict liability of the vehicle keeper. The keeper of a vehicle is liable for property damage and personal injury solely on the basis of the operational risk of his/her motor vehicle – irrespective of his/ her fault. The vehicle keeper is the person who may not be the owner of the vehicle but uses the vehicle for his/her own account and exercises the power of disposal over it.53 The use of autonomous vehicles does not fundamentally change the strict liability of the vehicle keeper. Liability under section 7(1) Road Traffic Act also applies if the vehicle behaves in a manner contrary to traffic regulations due to a system error and causes an accident. Driving while using autonomous driving functions is considered as operating a motor vehicle.54 In particular, liability is not excluded under section 7(2) Road Traffic Act due to ten Betriebsbereichen, February 2021, 3, available at https://en.vda.de/de/services/Publika tionen/vda-stellungnahme-zum-gesetzentwurf-zum-autonomen-fahren.html (last accessed 10.1.2022). 52  Hilgendorf, JZ 2021, 444 (452). 53  Burmann, in: Burmann/Heß/Hühnermann/Jahnke (eds.), Straßenverkehrsrecht, 26th edition 2020, §  7 StVG, para.  5. 54  Fleck/Thomas, NJOZ 2015, 1393 (1394).

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force majeure, since these driving functions cannot be regarded as an event outside the operation of the vehicle caused externally by the forces of nature or the conduct of a third party.55 Malfunctions of the technical system are also not an “unavoidable event” in the sense of section 17(3) Road Traffic Act; rather, in the event of a technical malfunction, the operational risk of the motor vehicle is realised. It can, thus, be stated that the use of autonomous vehicles does not open up any gaps in the vehicle keeper’s liability. The low level of predictability and explainability of AI-based systems does not affect keeper’s liability, because this liability is designed to be strict. Widespread legal deliberations on the subject have often raised the question as to whether the strict liability of the keeper as stipulated in section 7(1) Road Traffic Act is still appropriate in the case of autonomous driving.56 While the keeper can influence the operating risk of a conventional vehicle by selecting the driver, this form of control no longer exists with autonomous driving. This could argue in favour of abolishing the current liability under section 7(1) Road Traffic Act for autonomous driving. In the end, however, there are better reasons for retaining the keeper’s liability under the Act. On the one hand, the keeper can also decide whether to use the vehicle in the case of autonomous driving. This is also the basis of the current keeper’s liability, according to which, the operation of the motor vehicle and the increased dangers associated with it already justify strict liability. On the other hand, with autonomous driving, the keeper claims many advantages associated with the new technology (higher safety in road traffic, lower insurance premiums, comfort, possibly commercial use, etc.). Finally, keeper’s liability also seems appropriate from the standpoint of victim protection. Injured parties can turn to the vehicle keeper and the motor vehicle liability insurance behind it to settle their claims quickly. This saves the injured parties from dealing with other, more distant actors involved like manufacturers, who often cannot be clearly identified, especially in the case of autonomous driving, to raise their claims. In this way, the keeper’s liability insurance acts as an assurance for the injured party’s claims.57 If the damage is due to a software or hardware error on the part of the manufacturer, the liability insurer can take recourse against the manufacturer.

55  Fleck/Thomas, NJOZ 2015, 1393 (1394); Jänich/Schrader/Reck, NZV 2015, 313 (315); Schrader, NJW 2015, 3537 (3538). 56  Borges, CR 2016, 272 (279 et seq.); for details of the legal policy discussion cf. König, JR 2017, 323 (328 et seq.). 57  For legal questions regarding the insurance of the keeper and the technical supervisor, cf. section VIII.

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The German legislator has recognised the advantages of strict keeper’s liability also in the case of autonomous driving and has therefore left it untouched in its amendments to the law. 2. New duties according to the Autonomous Driving Act 2021 Although the Autonomous Driving Act 2021 did not change the basis of strict liability, it has imposed new obligations on the keeper of an autonomous motor vehicle. According to section 1f(1) Road Traffic Act, the keeper of an autonomous vehicle is obliged to maintain the road safety and environmental compatibility of the motor vehicle and must take the necessary precautions to this end. In particular, the keeper must maintain the upkeep of the systems required for the autonomous driving function and take precautions so that the traffic regulations not directed at the driving of the vehicle are observed. The requirements and obligations of the keeper are also specified by the regulation of the BMVI in accordance with section 1j(1)(4) Road Traffic Act. Section 13 (7) if this regulation obliges the keeper to carry out a ‘daily extended departure check’. To this end, the keeper must carry out a test drive, during which all systems must be activated and then checked. This canon of obligations indicates that the legislator has primarily commercial vehicle keepers in mind in the current phase of autonomous driving, as the safety and environmental impact assessment can hardly be carried out by private vehicle keepers.58 In addition, the explanatory memorandum of the Autonomous Driving Act 2021 highlights that the vehicle keeper must also define the permissible traffic area according to section 1d(2) Road Traffic Act.59 Particularly, attention should be paid to section 1f(1)(3) Road Traffic Act, according to which the keeper must ensure that the tasks of the technical supervision are fulfilled. In principle, the keeper is free to decide whether he/she fulfils the tasks of technical supervision himself/herself or whether he/she delegates them to another person. 60 However, if the keeper is a legal entity, it must delegate the task, as the technical supervisor must always be a natural person, cf. section 1d(3) Road Traffic Act. According to the explanatory memorandum, in case the tasks of the technical supervisor have been delegated to another person, the keeper should be liable for any fault on the part of the person entrusted. 61 58 

Kleemann/Arzt, RAW 2021, 99 (104). Bundesregierung, Act on Autonomous Driving, BT-Drs. 19/27439, 9.3.2021, 20. 60  Bundesregierung, Act on Autonomous Driving, BT-Drs. 19/27439, 9.3.2021, 25. 61  Bundesregierung, Act on Autonomous Driving, BT-Drs. 19/27439, 9.3.2021, 25. While the keeper is always liable towards the injured person regardless of any fault under section 7 Road Traffic Act, a fault is still an important factor to determine – in the case of damages caused by a number of motor vehicles – the vehicle keepers’ liability towards one another according to section 17(1) and (3) Road Traffic Act. 59 

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VI. Liability of the producer 1. Principles of product and producer’s liability a) Overview In Germany, the manufacturer’s liability can essentially be based on two legal grounds. On the one hand, the manufacturer is subject to strict liability under the Product Liability Act, which in turn is based on the Product Liability Directive 85/374. On the other hand, the manufacturer is subject to fault-based tort liability according to section 823(1) Civil Code. Contractual claims against the manufacturer, in contrast, are of little importance in practice, as injured parties generally have no contractual relationship with the manufacturer. The same applies to tort liability under section 823(2) Civil Code which provides for damages on the grounds of breach of statutory duties or a protective law (Verstoß gegen ein Schutzgesetz). Theoretically, it would be conceivable to recognize the provisions of the Road Traffic Act, the Road Traffic Licensing Regulations and the Product Safety Act as statutory duties or protective laws. 62 However, since these laws are already taken into account when determining the safety obligations in the context of fault-based tort liability according to section 823(1) Civil Code,63 liability according to section 823(2) Civil Code is of no practical relevance. 64 b) The nature of product and producer’s liability: strict or fault-based liability? While product liability under the Product Liability Act applies irrespective of the manufacturer’s fault; fault is a necessary condition for producer’s liability under section 823(1) Civil Code. At first glance, product and producer liability are thus based on different liability systems. Therefore, the liability for damages regulated in the Product Liability Act is often referred to as strict liability. 65 However, if one compares this liability with other strict liability regimes, such as the liability of the motor vehicle keeper under section 7(1) Road Traffic Act, it becomes obvious that the same is not a strict liability in true essence. Although liability under the Product Liability Act is independent of the manufacturer’s fault, the Act still requires that a defective product has been placed on the market and that there has been some kind of unlawful conduct. In con62 Cf. Schulz, Verantwortlichkeit bei autonom agierenden Systemen, 2015, 174; Borges, CR 2016, 272 (275). 63  Eichelberger, in: Ebers/Heinze/Krügel/Steinrötter (eds.) Künstliche Intelligenz und Robotik, 2020, §  5 para.  48. 64  Spindler, CR 2015, 766 (772); Borges, CR 2016, 272 (275). 65  Cf. the government’s explanatory memorandum to the Product Liability Act, BT-Drs. 11/2447, 8 and 11. See also Taschner, ZEuP 2012, 560; Fleck/Thomas, NJOZ 2015, 1393 (1396).

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trast, producer’s liability under section 823(1) Civil Code requires an unlawful, culpable (intentional or negligent) breach of protected interests. However, case law has shaped producer’s liability into an intensified, tortious liability by developing specific safety obligations and by placing the burden of proof in favor of injured parties. This is the reason why both liability systems run largely parallel in Germany, at least insofar as design, manufacturing and instruction defects are concerned.66 The safety expectations relevant under section 3(1) Product Liability Act, are in principle, based on the same objective standards as the manufacturer’s safety obligations in the context of tort liability pursuant to section 823(1) Civil Code. 67 c) Differences between product and producer’s liability Despite these similarities, there are still some differences between product and producer’s liability insofar as a breach of product monitoring obligations is concerned, i.e. the obligation to inform product users about defects that only became apparent after the product was placed on the market. Since section 3(1)(c) Product Liability Act refers solely to the time of placing the product on the market, the manufacturer is essentially not subject to any product monitoring obligations.68 Damages in this respect are therefore only compensable via section 823(1) Civil Code. There are also differences regarding who is liable. With regard to the producer’s liability under section 823(1) Civil Code, the responsibility for the safety of the product lies primarily with the final manufacturer, i.e. the company that controls the design and manufacture of autonomous vehicles. In the automotive industry, these are the so-called, ‘Original Equipment Manufacturers’ (OEM). However, the manufacturer is only liable for defects that occur within its sphere. In contrast, the manufacturer is not liable for defective components (e.g. software) obtained from suppliers, if he/she can successfully prove that he/she has carefully selected and supervised his/her suppliers and that he/she has also carried out sufficient controls on incoming goods.69 In these cases, only the supplier can be held liable according to section 823(1) Civil Code.

66  Kötz, in: FS Werner Lorenz, 1992, 109 (113 et seq.); Schlechtriem, in: FS Rittner, 1991, 545 (547 et seq.); G. Wagner, in: Münchner Kommentar zum Bürgerlichen Gesetzbuch: BGB (hereinafter: MüKo, BGB), 8th ed. 2020, ProdHaftG, Einl. para.  19. 67  BGH, NJW 2009, 2952 (2953), para.  12 – Airbag; BGH, NJW 2009, 1669 (1670), para.  6 – Kirschtaler. 68  Wilhelmi, in: Erman, BGB, 16th ed. 2020, Vor §  1 ProdHaftG para.  4 u. §  3 ProdHaftG para.  8; Graf v. Westphalen, in: Foerste/Graf v. Westphalen (eds.), Produkthaftungshandbuch, 3rd ed. 2012, §  48 para.  8. 69  G. Wagner, in: MüKo, BGB, 8th ed. 2020, §  823 para.  926 f

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In contrast, the ambit of liability of responsible persons under the Product Liability Act is much wider.70 First, the final manufacturer (section 4(1)(1) Product Liability Act) is liable for all defective components regardless of where the safety defect occurred.71 Second, the supplier is also liable to the injured party under the Product Liability Act to the extent that the component qualifies as a ‘product’ within the meaning of section 2 Product Liability Act.72 On the other hand, the Product Liability Act limits the manufacturer’s liability in many respects: The Product Liability Act only applies if a product causes a person’s death, injury to his/her body or damage of his/her health. Property damage only triggers liability under the Product Liability Act if any item of the property, other than the defective product was damaged. Additionally, this other item of property ought to be of a type ordinarily intended for private use or consumption and which was also used by the injured person, mainly for his/her own private use or consumption. In contrast, property damage in the commercial sector falls outside the scope of the Product Liability Act. In addition, there is a maximum amount of compensation for personal injury (section 10 Product Liability Act) as well as self-participation of 500 Euros in the case of damage to property (section 11 Product Liability Act). For such damages, as well as in the event that the specified maximum limits are exceeded, liability must therefore be resorted to under section 823(1) Civil Code. d) Results Despite the differences described above, product and producer’s liability have much in common. The liability of the manufacturer can therefore be discussed in the following sections for both liability systems together. 2. Liability for manufacturing defects A manufacturing defect is present if a product does not meet the requirements which the manufacturer has imposed on himself/herself, i.e. if it fails to meet the safety standard defined for the product series.73 This will regularly be the case if individual products of a series do not comply with the design defined for this series.74 70 

G. Wagner, in: MüKo, BGB, 8th ed. 2020, §  4 ProdHaftG para.  13. Fuchs, JZ 1994, 533 (536); Meyer/Harland, CR 2007, 689 (692). 72  On the frequently discussed question of whether software and data fall under the product term of section 2 ProdHaftG or Art.  2 Product Liability Directive 85/374, cf. Ebers, in: Specht-Riemenschneider/Werry (eds.), Datenrecht in der Digitalisierung, 2019, §  9.2 para.  34 et seq. 73  G. Wagner, in: MüKo, BGB, 8th ed. 2020, §  4 ProdHaftG para.  42. 74  Goehl, in: beck-online.GROSSKOMMENTAR, ProdHaftG, 15.8.2021, §  3 ProdHaftG para.  70. 71 Cf.

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In the production of autonomous vehicles, manufacturing defects can arise in particular in the production of the vehicle’s hardware, for example in the case of safety-relevant sensors such as radar, camera, lidar, ultrasound or GPS. In case of software, which is particularly important for autonomous vehicles, manufacturing defects can be present in the case of copying errors.75 However, all in all, such defects do not raise any specific legal problems. 3. Liability for design defects a) Overview A design defect exists if the product, by its very conception, falls below the required safety standard,76 i.e. if it does not provide the required safety of the level of reasonable expectation, taking all circumstances into account, including the time when the product was put into circulation, cf. section 3(1) Product Liability Act. The decisive factor is not the individual safety expectation of the injured party, but the objective perspective of an average product user.77 Manufacturers of autonomous vehicles must therefore take into account all measures that are objectively necessary to avoid damages when designing and planning the product. Such safety measures should be incorporated at the time of placing the product on the market, according to the state-of-the-art technology and which are suitable and sufficient to prevent damage.78 In the case of autonomous systems based on machine learning, it is problematic that the manufacturer cannot predict ex ante how the learning system will behave in a specific situation. Especially in the case of the so-called, ‘reinforcement learning’, the system only learns in its operating environment by exploring available alternative actions on a trial-and-error basis, adjusting its own parameters based on the results obtained. However, since all learning is based on trial-and-error, errors are inevitable operational consequences of any reinforcement learning based autonomous systems. Can the manufacturer therefore exempt itself from liability by stating that the behaviour of the AI system that caused the damage is not a design defect, but rather a necessary property for learning and adaptive behaviour? Is there perhaps no design defect at all ‘at the time of placing it on the market’ if the AI system only exhibits a certain behaviour much later as a result of the environmental influence? 75 Cf. Spindler, Verantwortlichkeiten von IT-Herstellern, Nutzern und Intermediären, 2007, para.  122; for US law cf. accordingly Andersen et al., Autonomous Vehicle Technology, 2016, 123. 76  BGH, NJW 2009, 2952 (2953), para.  15 – Airbag. 77  BGH, NJW 2009, 1669 (1670), para.  9 – Kirschtaler. 78  BGH, NJW 2009, 2952 (2953), para.  16 – Airbag.

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What is certain is that the AI system must be tested before it is placed on the market and the training must be carried out at regular intervals (automatically) until the risks posed by the system are reduced to an acceptable level. The higher the perceived threat emanating from the system, the greater should be the safety requirements and standards. AI systems that control cars or other machines or that are used in the medical field must therefore meet higher safety standards than, for example, search engines, the improper operation of which may ‘merely’ lead to an infringement of privacy or copyright. For products with a high-risk coefficient – such as autonomous vehicles – the manufacturer is obliged to carry out cost-intensive control and test procedures until the error rate has fallen below a specified threshold value. The question of how this threshold value must be determined is still open for debate. b) Requirements laid down in the Autonomous Driving Act 2021 The Autonomous Driving Act 2021 has further specified the design obligations of producers. According to the recently introduced section 1f(3) Road Traffic Act, the manufacturer of an autonomous vehicle must, in particular, carry out a risk assessment for the vehicle over the course of the entire development and operation period. Additionally, the manufacturer must ensure that the electronic and electrical architecture of the vehicle and the infrastructure communicating with it is secured against cyberattacks. In order to determine the required safety, technical standards are of particular importance. According to the newly introduced section 1e(2) Road Traffic Act, motor vehicles with an autonomous driving function must be able to carry out the driving task independently within the respectively defined operating range, without the need for a driver to intervene or the technical supervisor to continuously monitor the motor vehicle’s journey. Moreover, the autonomous vehicle must comply with traffic rules and have an accident avoidance system which, in the event of an unavoidable damage (moral dilemmas),79 takes into account the importance of the legal interests, with the protection of human life having the utmost priority. In addition, section 1e(2) Road Traffic Act foresees the following requirements which must be met before an autonomous vehicle can be admitted to traffic:

79  Dilemma situations are characterised by the fact that an automated vehicle has to decide which of the two evils it necessarily has to perform. These cases are typically discussed as the famous ‘trolley problem’, a philosophical thought-experiment in which a runaway trolley car on a track is about to kill five unaware people, but could be diverted onto another track where it would kill just one person, thus saving the five; Philippa Foot, The Problem of Abortion and the Doctrine of the Double Effect, Oxford Review 1967, 5 (8); Thomson, Yale Law Journal 1985, 1395 et seq.; Gurney, Albany Law Review 2016, 183 et seq.

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– The motor vehicle must have a function to put itself in a risk-minimised state if the continuation of the journey would only be possible by violating the Road Traffic Law and, in such cases, propose possible driving manoeuvres to the technical supervisor to continue the journey and provide data to assess the situation so that the technical supervisor can decide whether to approve the proposed driving manoeuvre. The vehicle shall then be able to verify the manoeuvre proposed by the technical supervisor. – Moreover, the vehicle must be designed in such a way that functional defects are immediately reported to the technical supervisor, so that it can be deactivated at any time by the technical supervisor or by the vehicle occupants and be put into a risk-minimised state. – In addition, the vehicle must also recognise system limits and malfunctions independently, so that it can automatically put itself into a risk-minimised state, when a system limit is reached or when a technical malfunction occurs that impairs the exercise of the autonomous driving function or when the limits of the defined operating range are reached. – Finally, the manufacturer must ensure that radio links, especially to the technical supervisor, are sufficiently protected from unauthorised interferences. In the event of a malfunction of the radio link, the motor vehicle shall set itself to a risk-minimised state. If the prerequisites laid down in the Road Traffic Act are not met, a design defect is deemed to be present. At the same time, however, it should be noted that technical requirements necessary for approval only constitute a minimum standard. 80 Even the granting of an authorization does not release the manufacturer from the obligation to investigate any hazards himself/herself and to counteract them in a technically more effective and reasonable way.81 c) Technical Standards developed by Standardisation Organisations The same applies to supra-company technical standards which are important for autonomous driving,82 such as: – ISO 26262 (Road vehicle’s – Functional safety), – ISO/PAS 21448:2019 (Road vehicles – Safety of the intended functionality), – ISO/TR 4804:2020 (Safety and cybersecurity for automated driving systems – Design, verification and validation), – IEC 61508-1:2010 (Functional Safety of Electrical/Electronic/Programmable Electronic Safety-related Systems), 80  BGH, BeckRS 1954, 31198768 – Pendeltür; Canaris, in: FS Larenz, 1983, 27 (54); Foerste, in: Foerste/Graf v. Westphalen (eds.), Produkthaftungshandbuch, 3rd ed., 2012, §  24 para.  124. 81  BGH, NJW 1987, 1009 (1011 et seq.) – Lenkerverkleidung. 82  On the significance of these standards for autonomous driving, see Jänich/Schrader/ Reck, NZV 2015, 313 (316 et seq.); Lutz/Tang/Lienkamp, NZV 2013, 57 (61).

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– IEEE P2846 (Formal rules-based mathematical model for automated vehicle decision making using discrete mathematics and logic), – IEEE P7001 (Transparency of autonomous systems, e.g. event data recorder) Such standards are often adduced as prima facie evidence by the courts. Conceptually, it is recognised that the failure to comply with technical safety standards is an indication of a breach of the duty of care on the part of the manufacturer.83 Conversely, compliance with these standards is supposed to indicate compliance with the safety obligations.84 However, the manufacturer must not only take into account the established standards of technology, but also the state-of-the-art in science and technology and this can certainly go beyond technical standards published by international or national standardisation organisations.85 For autonomous driving, one should also be cognizant of the fact that technical standards might become quickly outdated in view of the rapid development in the IT sector.86 This is another reason why manufacturers will only be able to rely on technical standards to a limited extent. d) Benchmarking the AI system against the human standard of care In addition to technical standards, the defectiveness of AI systems could also be determined using the standard of care applicable to humans, by comparing the envisaged behaviour of a rational human with the behaviour of the AI system. If one follows this approach, a self-driving car would always be assumed to have a product defect, if it does not correspond as would be expected of a human driver in a traffic situation.87 Conversely, another approach is to make an overall assessment — the decisive factor is not the behaviour of the AI system in a specific situation, but rather whether the error rate of the AI system is overall lower than that of a human.88 Consequently, in the case of an autonomous vehicle, the question of a design defect would only be ruled out if the system, as a whole, had a lower crash risk than human drivers.89

83  BGH, VersR 1984, 270 – Meißel; OLG Hamm, VersR 1982, 152 et seq. – Glasbaustein. In-depth Marburger, VersR 1983, 597 et seq. 84 Thus Foerste, in: Foerste/Graf v. Westphalen (eds.), Produkthaftungshandbuch, 3rd ed., 2012, §  24 para.  46. 85  Cf. BGH, NJW 1987, 372 (373) – Verzinkungsspray; NJW 1994, 3349 (3350) – Atem­ überwachungsgerät. 86  Anderson et al., Autonomous Vehicle Technology, 2016, 139 (143); Hanisch, in: Hilgendorf (ed.), Robotik im Kontext zwischen Recht und Moral, 2014, 27 (35). 87  Borges, CR 2016, 272 (275 et seq.); Gomille, JZ 2016, 76 (77). 88  Geistfeld, California Law Review 2017, 1611 (1644 et seq.). 89  Kirn/Müller-Hengstenberg, MMR 2014, 225 (229); Weisser/Färber, MMR 2015, 506 (511 et seq.).

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However, such a human-based standard of care is ultimately of little use.90 Admittedly, the criterion of whether the autonomous system performs better or worse overall than a reasonable human being plays a decisive role in the question of whether the autonomous system may be placed on the market at all. However, as soon as such an AI system is used in practice, the purely anthropocentric ‘standard of care’ loses its significance: AI systems are developed and used precisely because they perform certain tasks better than humans. Thus, the use of AI systems leads to an increase in safety expectations. As soon as AI systems show a lower risk of damage (in a certain areas) than humans, the concept of human standard of care will become superfluous. Rather, the AI systems available on the market will lead to increased safety expectations as compared to humans.91 e) Comparing the AI system with other AI systems If the overall probability of damage caused by an AI system is below the rate of potential damage caused by a prudent human, the AI system in question could still be classified as defective if there are other AI systems on the market that have an (even) lower damage rate. However, such a benchmark would be problematic. If the best available AI system became the absolute reference standard, all other AI systems available on the market would automatically be defective.92 Since AI systems are constantly improving by way of trial and error, those manufacturers who entered the market first would have an unassailable lead over all other manufacturers who came later.93 Alternatively, one could stipulate that an AI system is only defective if it deviates negatively from the best AI system by x %. This approach also raises numerous questions:94 Which AI system should serve as the reference system? What is the percentage variance from the “best” AI system that is tolerable? Is a system already defective if it is only 90 % or 80 % as good as the AI reference system? Or only when the performance of this system is below 50 %? – The recognition of an AI reference system is, apart from this, also problematic from the standpoint of fairness, as it can lead to an arbitrary segmentation of markets into two parts: Those manufacturers who deviate from the best AI system by (x

90  Borghetti, in: Lohsse/Schulze/Staudenmayer (eds.), Liability for Artificial Intelligence and the Internet of Things, 2019, 63 (68 f.); G. Wagner, AcP 217 (2017), 734. 91  Spindler, CR 2015, 766 (773 et seq.). 92  G. Wagner, AcP 217 (2017), 734 (737); Borghetti, in: Lohsse/Schulze/Staudenmayer (eds.), Liability for Artificial Intelligence and the Internet of Things, 2019, 63 (70). 93  Geistfeld, California Law Review 2017, 1611 (1680); G. Wagner, AcP 217 (2017), 734 (737). 94 Cf. Borghetti, in: Lohsse/Schulze/Staudenmayer (eds.), Liability for Artificial Intelligence and the Internet of Things, 2019, 63 (70 et seq.).

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+ 1) % would be exempt from liability, while manufacturers of AI systems with a performance of (x – 1) % would be liable.95 f) Results The preceding considerations show that it is anything but easy to determine the safety standard applicable to autonomous vehicles. It can be stated that an AI system should in any case be classified as defective if it violates applicable safety standards and – from an overall perspective – is not suited to surpass the level of safety expected from a human being. Beyond this threshold, however, it is not clear what safety requirements should be imposed on AI systems. 4. Liability for defective instructions The manufacturer is also liable under the Product Liability Act and section 823(1) Civil Code if there is a defect in instruction. Instruction duties are breached if the manufacturer does not (sufficiently) inform customers about the existence and management of potential dangers so that the least informed and competent consumer is able to take notice of potential risks.96 While for conventional vehicles, the proper use of the vehicle is at least partially ensured by the obligation to obtain a driving license,97 the same is not the case with autonomous driving. In addition, there is the great potential for damage that exists in the case of insufficient knowledge of proper operation of the autonomous vehicle. Instruction is therefore of paramount importance and the manufacturer must make special efforts to ensure that the user can operate the autonomous vehicle properly. The German legislator has also recognised the increased need for manufacturer’s instruction and standardised various instruction obligations by means of the Act on Autonomous Driving 2021. According to section 1f(3) No.  4 Road Traffic Act, the manufacturer must prepare a system description and an operating manual for every autonomous motor vehicle. In addition, according to section 1f(3) No.  5 Road Traffic Act, the manufacturer must provide training for the persons involved in operation of the vehicle on the technical functioning, in particular, with regard to the driving functions and the tasks to be performed by the technical supervisor.

95  Borghetti, in: Lohsse/Schulze/Staudenmayer (eds.), Liability for Artificial Intelligence and the Internet of Things, 2019, 63 (71). 96  G. Wagner, in: MüKo, BGB, 8th ed. 2020, §  3 ProdHaftG para.  46. 97  Lutz/Tang/Lienkamp, NZV 2013, 57 (61).

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5. Liability for defective monitoring While the Product Liability Act does not recognise any product monitoring obligations, manufacturers are obliged under section 823(1) Civil Code to monitor products already placed on the market in order to identify any risks for product users. According to a court ruling, this can result in a duty to warn or to recall the product.98 The manufacturer must not merely follow up on complaints that are forwarded to him/her (passive product monitoring). Rather, he/she is required to systematically record and evaluate conceivable warnings on his/her own initiative (active product monitoring).99 Product monitoring not only covers design defects, but also includes defective instructions that become apparent after the vehicle has been placed on the market. Since the autonomous vehicle is equipped with digital technology, the obligation to active product monitoring can be fulfilled, as far as permitted by data protection law, primarily through the collection and evaluation of vehicle data.100 In principle, product monitoring is not limited to the manufacturer’s own product, but also extends to possible interactions of the manufacturer’s own product with accessories of other manufacturers.101 Whether this results in an obligation on the part of the manufacturer to observe the interaction of the autonomous vehicle with other (possibly also automated) vehicles has not yet been clarified.102 However, such an obligation seems reasonable, since the autonomous vehicle must be able to communicate with other vehicles without errors. This is in line with the fact that the manufacturer, according to section 1f(3) No.  1 Road Traffic Act, must ensure that the electronic and electrical architecture of the motor vehicle as well as the infrastructure connected to the motor vehicle is secured against cyberattacks during the entire period of operation. If a design defect becomes apparent after a product has been placed on the market, the manufacturer must change the current production.103 For products already on the market, on the other hand, there are duties to instruct104 and warn.105 Whether manufacturers are also obliged to recall products is disputed. If such an obligation is affirmed, manufacturers would have to eliminate all design de98  BGH, NJW 1994, 3349 (3350) – Atemüberwachungsgerät; BGH, NJW 2009, 1080 (1081) – Pflegebetten; OLG Frankfurt, NZV 1996, 147 – Volvo. 99  Foerste, in: Foerste/Graf v. Westphalen (eds.), Produkthaftungshandbuch, 3rd ed., 2012, §  24 para.  376. 100 Cf. Droste, CCZ 2015, 105 (110). 101  BGH, NJW 1987, 1009 – Honda; Foerste, in: Foerste/Graf v. Westphalen (eds.), Pro­ dukt­haftungshandbuch, 3rd ed., 2012, §  25 para.  178 et seq. 102 Rejecting Spindler, CR 2015, 766 (769). 103  G. Wagner, in: MüKo, BGB, 8th ed. 2020, §  823 para.  997. 104  BGH, NJW 1987, 1009 – Lenkerverkleidung. 105  G. Wagner, in: MüKo, BGB, 8th ed. 2020, §  823 para.  998.

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fects free of charge. In particular, the software would have to be constantly maintained and updated. Such an obligation is rejected by many German scholars citing it as too far-reaching.106 In contrast, the case law at hand portrays a more generous position. The Federal Court of Justice ruled in its nursing home bed decision that the manufacturer is generally not obliged to recall the product.107 Nevertheless, manufacturers may not always limit themselves to issuing warnings. According to the Federal Court of Justice, far-reaching safety obligations of the manufacturer can be considered in particular if there is reason to believe that the warning is insufficient, because product users would disregard the warning – even deliberately – and thereby endanger third parties.108 Accordingly, it must be assumed that an obligation of the manufacturer to provide an update exists in any case, if a significant danger to the legal interests of third parties arises due to a software error and other measures (such as warnings) are insufficient.109 6. Burden of proof a) Difficulties to proof design defects The question of how to prove a product defect is particularly relevant in practice. In particular, proving a design defect poses difficulties here. According to section 1(4)(1) Product Liability Act, the injured party bears the burden of proof for the defect, the damage and the causal link between the defect and the damage. For producer’s liability under section 823(1) Civil Code, it is established that it is not sufficient that the injured party claims to have suffered damage due to the nature of a product.110 Rather, the injured party must additionally prove that the damage was caused by a design defect within the ambit of the manufacturer.111 In other words, if the injured party proves that the damage was caused by a defective product, the courts presume (rebuttably) the existence of a fault and breach of duty by the manufacturer.112 In the case of autonomous driving, such proof is likely to be very difficult for the injured party to present. Traffic accidents with autonomous vehicles do not necessarily have to be caused by a design defect. Rather, if an autonomous vehicle behaves in a way that is contrary to traffic regulations and an accident occurs, this can have very different causes. For example, the accident may have 106 

See only Spindler, CR 2015, 766 (770). BGH, NJW 2009, 1080 – Pflegebetten. 108  BGH, NJW 2009, 1080, para.  11 – Pflegebetten. 109  Borges, CR 2016, 272 (276); see also Droste, CCZ 2015, 105 (110). 110  G. Wagner, in: MüKo, BGB, 8th ed. 2020, §  823 para.  1016. 111  BGH, NJW 1969, 269 (274) – Hühnerpest; BGH, NJW 1981, 1603 (1605) – Derosal; BGH, NJW 1991, 1948 (1951) – HIV. 112  BGH, NJW 1969, 269 (274) – Hühnerpest; BGH, NJW 1981, 1603 (1605) – Derosal; BGH, NJW 1991, 1948 (1951) – HIV. 107 

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been caused by the transmission of erroneous data from the backend (not operated by the manufacturer), other vehicles (V2V) or the traffic infrastructure (V2I); by the user because he/she failed in his/her duty to carefully maintain and monitor the system; by external software attacks; or by entirely different causes (such as interference by other road users or weather conditions). Moreover, it is possible that the autonomous vehicle makes a specific decision in a traffic situation that was not pre-programmed, but is based on experience that the system has gathered during its operation after being placed on the market, based on data over which the manufacturer had no influence. Accordingly, the infringement of road traffic regulations does not in itself justify the presumption of a design defect.113 Such a presumption would ultimately amount to mutating a product and producer’s liability into pure strict liability for placing autonomous vehicles on the market.114 However, such a strict liability is not provided for in the current system of product and producer’s liability.115 Instead, the injured party must prove that the product defect causing the damage originates from the manufacturer beyond reasonable doubt. The mere possibility and presumption that the product defect originates from the manufacturer is not sufficient.116 b) Event data recorder It can be assumed that the problems of proof of fault described above cannot be completely overcome even by the provision for ‘data storage’ regulated in section 63a Road Traffic Act for highly and fully automated vehicles and section 1g Road Traffic Act for autonomous vehicles. Although the keeper of an autonomous vehicle involved in an accident is, in principle, obliged under section 1g (7) Road Traffic Act to make available to third parties the operational data required to assert, satisfy or defend claims under section 7(1) Road Traffic Act; decisions made by an intelligent vehicle are unlikely to be fully comprehensible ex post. This is especially true for systems that not only learn during the development phase (before being placed on the market), but also continue to learn during operation (after being placed on the market) based on accumulated experience. Especially the opacity of many machine learning algorithms makes it difficult to determine the cause of damages. 113  However, this is the case with Borges, CR 2016, 272 (275 et seq.), with the thesis that a malfunction of the vehicle is to be assumed if there is a driving error according to the rules of road traffic law. Similarly see, Gasser et al., Berichte der BASt, Heft F 83, 2012, 22, as well as Fleck/Thomas, NJOZ 2015, 1393 (1397). 114  Borges, CR 2016, 272 (277 et seq.), apparently does not only want to introduce such a causal liability de lege ferenda, but already establish it de lege lata. 115  G. Wagner, in: MüKo, BGB, 8th ed. 2020, §  3 ProdHaftG para.  1. 116  BGH, NJW 1969, 269 (274) – Hühnerpest; BGH, NJW 1973, 1602 (1603) – Feuerwerks­ körper; BGH, NJW 1981, 1603 (1605) – Apfelschorf.

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It is true that in certain cases, in order to establish their claim, the injured parties could invoke the principle that a well-founded and irremovable suspicion of a defect is sufficient to presume a product defect. In the Boston Scientific case the ECJ decided that a product can be classified as defective if it is found that products belonging to the same production series have a potential defect.117 However, it must be acknowledged that the decision concerned pacemakers and defibrillators and thus, certain products with significant risks of harm. For these kind of medical devices, the safety expectations of the general public are particularly high due to the vulnerability of the patients using these devices.118 In addition, the principle only applies if the risk of damage to the product in question is greater than for comparable products.119 It is also rather problematic to prove a prima facie case in the case of autonomous vehicles. It is true that, according to the Federal Court of Justice, such prima facie evidence can be considered in the case of typical sequences of events both in the case of producer’s liability in tort and in the context of the Product Liability Act.120 However, especially in complex cases – such as motor vehicle accidents – the Court is of the opinion that there is often no typical sequence of events that can form the basis for such prima facie evidence.121 Moreover, insofar as the courts recognise prima facie evidence in road traffic, the same is only currently limited to the fault of a driver and does not extend to specific defects in the vehicle. For the conduct of autonomous vehicles, on the other hand, there are still no principles or set of common standards which are uniformally recognised.122 7. Results The current law provides a rich arsenal to sanction manufacturing, construction, instruction and product observation errors under civil liability law. In this respect, the assumption discussed at the beginning confirms that the introduction of autonomous vehicles leads to increased litigation risks for manufacturers. Injured parties and liability insurers will try to raise claims against the manufacturer for all damages that occur during the operation of an autonomous vehicle. In particular, the keeper and his liability insurer will try to seek recourse against the manufacturer if a claim is made. 117  ECJ, Judgement of 5.3.2015 – Cases C-503/13 und C-504/13, para.  43 (Boston Scientific Medizintechnik) = EuZW 2015, 318. 118  ECJ, Judgement of 5.3.2015 – Cases C-503/13 und C-504/13, para.  39 (Boston Scientific Medizintechnik) = EuZW 2015, 318; G. Wagner, in: MüKo, BGB, 8th ed. 2020, §  3 ProdHaftG para.  54 et seq. 119  On possible determinants of a risk threshold cf. G. Wagner, JZ 2016, 292 (296 et seq.). 120  G. Wagner, in: MüKo, BGB, 8th ed. 2020, §  823 para.  1017 and §  1 ProdHaftG para.  8 0. 121 Cf. Kullmann, NZV 2002, 1 (7); Meyer/Harland, CR 2007, 689 (692). 122  Kütük-Markendorf/Essers, MMR 2016, 22 (25).

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However, there is a risk that product and producer’s liability will run dry in complex damage situations if it cannot be determined in retrospect whether the damage is actually due to a malfunction of the autonomous vehicle or other causes that do not fall within the manufacturer’s sphere of responsibility. Such problems could probably only be addressed if product and producer’s liability were tightened de lege ferenda towards stricter liability.123

VII. Liability of the IT service provider Injured parties may also raise claims for damages against IT service providers, especially back-end operators, if a traffic accident occurs due to defective data. 1. Limitations of liability under the Telemedia Act Claims for damages can only be considered if IT service providers are not exempted from liability under the Telemedia Act. The Telemedia Act, which is based on the fully harmonising E-Commerce Directive 2001/31, stipulates a graduated liability in this respect: The closer the service provider’s connection with the respective content, the greater is its liability.124 For providers who offer their own information services (content providers), there is no privilege at all under the Telemedia Act (section 7(1) Telemedia Act). The provider is also liable without any exceptions or limitations to their liability for system errors and insufficient cyber security: If a virus or a hacker attack occurs due to security gaps in the system, sections 7–10 Telemedia Act are, accordingly not applicable from the outset, as these deficiencies emanate from the operating realm of the provider, which can only be monitored and controlled by the provider.125 On the contrary, if the content amounts to a third-party content, the Telemedia Act differentiates the situation as follows: In principle, the provider neither has a duty to monitor the information which it transmits nor a general obligation to actively seek facts or circumstances indicating an illegal activity (section 7(2)(1) Telemedia Act). However, service providers who store third-party information for a user (host providers) are responsible for any third-party unlawful information if they have actual knowledge of the illegal activity. In these cases, 123  In both German and US legal literature, consideration is already being given to tightening the manufacturer’s liability for autonomous vehicles de lege ferenda. Cf. for German law, esp. Borges, CR 2016, 272 (277 et seq.); Zech, Verhandlungen des 73. Deutschen Juristen­ tages, Gutachten A: Entscheidungen digitaler autonomer Systeme, 2020, 98 et seq.; G. Wag­ ner, VersR 2020, 717 (734 et seq.); from a US perspective Gurney, Journal of Law, Technology & Policy 2013, 247 (271 et seq.). 124  Hilgendorf/Valerius, Computer- und Internetstrafrecht, 2nd ed. 2012, para.  193 et seq. 125  Spindler, in: Spindler/Schmitz (eds.), Telemediengesetz, 2nd ed. 2018, Vor §  7 para.  32

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however, host providers are not liable if they immediately remove or disable the access to the information after becoming aware of it (section 10 Telemedia Act). Moreover, if the provider’s activity is limited to purely technical processes of data transfer (transmission of data during access or network providing as well as automatic intermediate storage), they are generally exempt from liability (section 8, 9 Telemedia Act). Whether backend operators fall under the liability privileges of the Telemedia Act has not yet been conclusively clarified. Some authors answer affirmatively, but at the same time consider provider liability to be inappropriate in light of networked autonomous systems and call for an amendment of sections 8–10 Telemedia Act.126 From a contrarian perspective, some point out that the liability privileges of sections 7 et seq. Telemedia Act do not apply at all to the operators of a ‘traffic cloud’, no matter how it is structured, since such providers are usually to be classified as content providers within the meaning of section 7(1) Telemedia Act.127 This view seems to be convincing as the core understanding appears to be that even if the data transmitted via the traffic cloud does not originate directly from the provider, but from third parties, the provider adopts the content as its own if it processes this content and integrates it into its own service in such a way that it is no longer recognisable to the individual user from whom the content initially originated.128 2. Contractual Warranty Liability Contractual warranty claims can only be considered if a contract has been concluded between the injured party and the IT service provider. Such a contractual relationship for the provision of permanent cloud services is likely to exist regularly between the vehicle owner or keeper and the backend operator, because it can hardly be assumed that vehicle manufacturers (or dealers) commit themselves to provide cloud services required for the operation of the vehicle for the entire period of use without any additional payment. Insofar as contracts for cloud computing services, whereby data or software is made available for a certain period of time (data as a service, DaaS; software as a service, SaaS) are concerned, the same are classified in different ways. The majority assumes a rental agreement.129 In contrast, a classification as a service 126  Kian/Tettenborn, in: Hilgendorf/Hötitzsch/Lutz (eds.), Rechtliche Aspekte automatisierter Fahrzeuge, 2015, 101 et seq. 127  Schuster, in: Hilgendorf (ed.), Autonome Systeme und neue Mobilität, 2017, 49 (53 et seq.). 128  On the justification of liability by attributing third-party content, see BGH, GRUR 2010, 616 (619) – marions-kochbuch.de; OLG Hamburg, MMR 2016, 269 – Störerhaftung von YouTube; Schuster, in: Hilgendorf (ed.), Autonome Systeme und neue Mobilität, 54 et seq.; vgl. auch Paal/Hennemann, in: Gersdorf/Paal (ed.), Beck’sche Online-Kommentare, Informations- und Medienrecht, 1.11.2021, §  7 TMG para.  30 et seq. 129  BGH, Judgement of 15.11.2006 – XII ZR 120/04 = NJW 2007, 2394 (on application

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contract130 is rightly rejected for DaaS and SaaS.131 In the case of a service contract, the service provider only owes a sincere effort towards the user to provide the contractually owed service and not a guarantee of a demonstrable success. In the case of DaaS and SaaS, however, it is precisely important for the cloud user to receive the contractually owed service. The classification of cloud computing services as a contract for work (section 631 Civil Code) is also not convincing, as the cloud provider usually does not provide a user-specific work, but only standardised services.132 Warranty claims against the IT service provider require non-performance. In principle, the parties to a rental contract can define the performance themselves (subjective requirements for conformity). For autonomous driving, however, it is to be expected that the performance to be rendered by the IT service provider will be determined primarily with recourse to objective safety and security standards (objective requirements for conformity).133 If the back-end-operator provides defective data to the autonomous vehicle, he/she is liable regardless of fault for initial defects and for subsequent defects occurring during the subsistence of the cloud service contract if he/she or third parties appointed by him/her are at fault.134 Since cloud providers face unlimited liability for all consequential damages, they are exposed to high liability risks, especially since it has not yet been clarified that in terms of cloud computing, to what extent liability can be limited or excluded under the general terms and conditions.135 3. Tort liability under section 823(1) Civil Code IT service providers can also be liable towards the injured party under section 823(1) Civil Code. By contrast, strict product liability under the Product Liability Act does not apply to IT service providers. The reason for this is that data from the cloud cannot be regarded as ‘product’ in the sense of the Product Liability Act due to their lack of embodiment, and the service character is clearly in the foreground in the case of data that is continuously transmitted by a traffic cloud. software providing); Boehm, ZEuP 2016, 358 (365 et seq.); Meents, in: Borges/Meents (eds.), Cloud Computing, 2016, §  4 para.  45 et seq. 130 Thus Redeker, IT-Recht, 6th ed. 2017, para.  1131, who now, however, wants to apply the provisions of the rental agreement by analogy, see Redeker, IT-Recht, 7th ed. 2020, para.  1231 et seq. 131 Cf. Meents, in: Borges/Meents (eds.), Cloud Computing, 2016, §  4 para.  53. 132  Wicker, MMR 2012, 783 (785). 133  Cf. generally on the sale of vehicles BGH, Judgement of 22.11. 2006 – VII ZR 72/06 = NJW 2007, 759. 134  Schuster, in: Hilgendorf (ed.), Autonome Systeme und neue Mobilität, 2017, 56. 135  Boehm, ZEuP 2016, 358 (370 et seq.); Meents, in: Borges/Meents (eds.), Cloud Computing, §  4 para.  246 et seq.

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The IT service provider is liable under section 823(1) Civil Code, in particular if he/she culpably transmits defective data leading to an accident of the autonomous vehicle. Since the data transmitted by the traffic cloud has a direct influence on the driving of the autonomous system, the requirements for data quality will presumably be very high. Providers must also ensure that the cloud is sufficiently protected against external attacks (especially viruses and hackers). The responsibility of the IT service provider exists alongside the obligation of the manufacturer who, according to section 1f(3)(1) Road Traffic Act, must also ensure the cybersecurity of the autonomous vehicle and the infrastructure connected to it. The injured party does not have to prove that the provider was at fault. Rather, according to the principles of producer liability developed by case law, it should be sufficient to show that the provider transmitted defective data that ultimately led to a road traffic accident. The backend operator, may however, exculpate himself/herself by proving that he/she observed the due diligence required in traffic, for example, by showing that the data error was a ‘runaway’ (Ausreißer) that was unavoidable despite all reasonable precautions.136 Additionally, liability under section 823(1) German Civil Code is also excluded if the provider can successfully defend himself/herself by claiming that he/she obtained the faulty data from the suppliers and carefully selected and monitored them.137

VIII. Integration of Autonomous Vehicles in the Insurance System The afore-stated liability of various actors in a road traffic situation is partly accompanied by compulsory insurance in Germany. If such compulsory insurance exists, the injured party has a direct claim against the liability insurer according to section 115 Insurance Contract Act. This claim is accessory to the claim for damages under liability law and therefore cannot go further than the latter. 1. Compulsory insurance of the vehicle keeper According to section 1(1) Compulsory Insurance Act, the keeper of a motor vehicle regularly based in Germany is obliged to take out liability insurance for himself/herself, the owner and the driver to cover damage caused by the use of the vehicle. The keeper of an autonomous motor vehicle must additionally take out liability insurance for the technical supervisor, cf. section 1(2) Compulsory 136  137 

G. Wagner, in MüKo, BGB, 8.  Aufl. 2020, §  823 para.  976. G. Wagner, in: MüKo, BGB, 8.  Aufl. 2020, §  823 para.  926 et seq.

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Insurance Act. Thus, in the event of liability of the keeper, the driver and/or the technical supervisor, there is a direct claim under section 115 Insurance Contract Act against the keeper’s liability insurer. Among other situations, section 12(1) Compulsory Insurance Act grants the injured party a right to claim against the compensation fund for damages resulting from motor vehicle accidents in cases where the motor vehicle liability insurance in favour of the keeper, the owner and the driver of the vehicle does not exist despite the legal obligations; the insurance does not grant coverage because the damage was caused intentionally and unlawfully; or the damaging vehicle cannot be identified. According to section 12(2) Compulsory Insurance Act this subsidiary claim is subject to a number of limitations, e.g. immaterial damages are only compensated in the case of particularly serious injuries and only to avoid gross inequities. It is questionable why, in a similar vein, a provision for claiming against the compensation fund was not established under the Autonomous Driving Act 2021, in the event that the insurance cover of the technical supervisor did not exist.138 2. No compulsory insurance for manufacturers In contrast, there is no general compulsory insurance under German law for the manufacturer of automated and autonomous vehicles. Nevertheless, recognising the above-mentioned advantages of an insurance obligation de lege ferenda, various insurance law models are being discussed.139 An insurance obligation on the part of the manufacturer would, of course, not exempt the injured party from proving the product defect, as due to the accessoriness of the insurance, there is no direct claim against the insurer without a claim for damages under liability law.

IX. Final conclusions 1. Analysis Under the current law, injured parties will primarily assert their claims for damages against the vehicle keeper, because the keeper of the autonomous vehicle is liable regardless of any fault according to section 7(1) Road Traffic Act if a 138  The Federal Council (Bundesrat) had pointed out this deficiency during the legislative process and the Federal Government had announced an examination of the proposal (cf. Bundestag, Unterrichtung durch die Bundesregierung zum Entwurf des Gesetzes zum auto­ nomen Fahren, Stellungnahme des Bundesrates und Gegenäußerung der Bundesregierung, 1.4.2021, BT-Drs. 19/28178, 12 and 25.). Nevertheless, no changes were subsequently made to section 12 Compulsory Insurance Act. 139  Especially see Hey, Die außervertragliche Haftung des Herstellers autonomer Fahrzeuge bei Unfällen im Straßenverkehr, 2019, 209 et seq.

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damage occurs during the operation of the motor vehicle. This means that the keeper or his/her insurer is liable to pay compensation to the injured party even if the accident occurs due to a product defect. The manufacturer, on the other hand, will only rarely be successfully held liable, despite the fact that it is primarily the design of the autonomous vehicle (especially its software) that determines how the vehicle moves in road traffic. Although the manufacturer is liable regardless of fault according to the Product Liability Act and also for presumed fault under section 823(1) Civil Code, it will only rarely be possible for injured parties to prove the defect and the causal link between defect and damage, due to the complexity, opacity (‘black box problem’), unpredictability, partially autonomous behaviour, and interconnectivity (‘many hands problem’) of autonomous vehicles. Thus, it is mainly the keeper of the vehicle who will be held liable. The German legislator has not modified this liability framework in the new rules on highly and fully automated140 and autonomous141 driving. Although the most recent legislative act intensified the manufacturer’s obligations and introduced a new addressee for liability in the form of a technical supervisor, this however does not result in a shift in liability in view of the existing problems of proof with regard to product defects and the fact that the technical supervisor is only liable depending on the fault. 2. Perspectives This raises the question of whether the keeper’s strict liability is still appropriate for autonomous vehicles. While the keeper can influence the operational risk of a conventional vehicle by selecting the driver, this form of control does not exist with autonomous driving. This could be argued in favour of removing the current liability under section 7(1) Road Traffic Act for autonomous driving.142 Ultimately, there are better reasons for retaining the keeper’s liability.143 On the one hand, the keeper can also decide in the case of autonomous driving whether the vehicle is used. On the other hand, in the case of autonomous driving, the keeper claims many advantages associated with the new technology (higher road safety, lower insurance premiums, comfort, possibly commercial use, etc.). Additionally, keeper’s liability also seems appropriate from the per140 

8th Act Amending the Road Traffic Act of 16.7.2017, BGBl. 2017 I, 1648 et seq. Act on Autonomous Driving, BGBl. 2021 I, 3108 et seq. 142  In a survey by the industry association, Bitkom, the majority of respondents voted for liability of the manufacturers of autonomous vehicles (or the manufacturers of the software), while only a small minority considered the keeper to be responsible; cf. the press release of Bitkom e.V., available at https://www.bitkom-research.de/de/pressemitteilung/wer-haftetfuer-mein-selbstfahrendes-auto (last accessed 10.1.2022). 143  Also, in favour of maintaining strict owner liability for autonomous vehicles, see König, JR 2017, 323 (328 et seq.); G. Wagner, VersR 2020, 717 (731 et seq.). 141 

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spective of victim protection. Injured parties can turn to the vehicle keeper and the motor vehicle liability insurance company behind it to settle the claims quickly and do not have to deal with other, more distant actors involved (manufacturers) to settle the claim, who often cannot be clearly identified, especially in the case of autonomous driving. Finally, the legal amendments to the Road Traffic Act in recent years, which have imposed more rather than fewer obligations on the keeper,144 do not lead us to expect any mitigation of the keeper liability in the coming years. In accordance to the above, if the strict liability of the keeper should remain unamended, the question that then arises is whether the liability of the manufacturer of autonomous vehicles should be adjusted instead. In both, Germany and USA, the legal literature indicates that consideration is already being given to tightening the manufacturer’s liability for autonomous vehicles de lege feren­ da.145 Accordingly, the manufacturer – just like the vehicle keeper – should be liable for all damages caused by the operation of autonomous vehicles. Under this liability model, it would no longer be necessary to prove a product defect since the existence of a product defect would simply not be a necessary condition for manufacturer’s liability. Apparently, there are good reasons to support such a liability model. Firstly, the manufacturer is in a better position to limit the risk of damage, not only compared to the user, but also the vehicle keeper, since he/she can ensure through design, instruction and product monitoring that the measures necessary to avoid danger are taken. Secondly, strict liability could provide the right incentives to make the best possible effort in macroeconomic terms to ensure the safe design and manufacture of autonomous vehicles. So long as the vehicle keeper is also liable for the operational risk in addition to the manufacturer, it would also be ensured that there is no unilateral shift of liability onto the manufacturer as such a shift would be inappropriate. On the one hand, the keeper consciously takes advantage of the benefits that come with the new technology (higher road safety, lower insurance premiums, comfort, etc.). Moreover, damage that occurs at the time of the operation of an autonomous vehicle is not always attributable to a product defect. In this respect, it is only appropriate if the manufacturer and the vehicle keeper are jointly and severally liable to the injured party for the operational risk emanating from an autonomous vehicle. Subsequently, in the internal relationship (between the vehicle keeper, his insurance company and the manufacturer as well as his insurance company), the re-

144 

Cf. section V. 2. German law with regard to motor vehicles, see esp. Borges, CR 2016, 272 (277 et seq.). In general for the decoupling from the product defect requirement for digital products, see G. Wagner, VersR 2020, 717 (734). From a US perspective, see Gurney, Journal of Law, Technology & Policy 2013, 247 (271 et seq.). 145  For

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spective liability share (possibly according to risk spheres) could still be determined. There are two main problems with the tightening of vehicle manufacturer liability. First, the liability risks must remain predictable. Otherwise, manufacturers will refrain from producing autonomous vehicles altogether or only offer them at very high prices – even though society has a keen interest in autonomous vehicles that could potentially reduce the overall number of road accidents. Second, the discussed reforms in liability law cannot be made in Germany alone. According to the established case law of the ECJ, the Product Liability Directive 85/374 is based on the concept of full harmonisation. The Directive aims at a ‘complete harmonisation of the laws, regulations and administrative provisions of the Member States’146 . Member States are therefore prohibited from going beyond the standard of the Directive and tightening the liability of producers. According to the ECJ in the González Sánchez case, Member States may not, in particular, provide for producer’s liability in favour of the injured party, where the injured party only has to prove the damage and the causal link, but not – as provided for in Art.  4 Product Liability Directive 85/374 – the defect of the product. At the European level, discussions have been going on for some time about how European liability law should be adapted to new technologies, in particular AI. The European Parliament has called on the Commission in several initiatives to further develop the European liability framework.147 Following the evaluation of the Product Liability Directive in 2018148 and the preparatory work of two expert groups,149 the Commission identified in 2020, in its White

146  ECJ, Judgement of 10.1.2006, Case C-402/03 (Skov against Bilka); ECJ, Judgement of 25.4.2002, Case C-154/00 (Commission against Hellenic Republic), para.  23. 147  European Parliament, Resolution of 16.2.2017, 2015/2103 (INL), available at https:// eur-lex.europa.eu/legal-content/EN/TXT/PDF/?uri=CELEX:52017IP0051&from=DE (last accessed 10.1.2022); European Parliament, Resolution of 20.10.2020, 2020/2014 (INL), available at https://www.europarl.europa.eu/RegData/seance_pleniere/textes_adoptes/ definitif/2020/10-20/0276/P9_TA(2020)0276_EN.pdf (last accessed 10.1.2022). 148  European Commission, Evaluation of Council Directive 85/374/EEC of 25 July 1985 on the approximation of the laws, regulations and administrative provisions of the Member States concerning liability for defective products, SWD (2018) 157 final, available at https:// eur-lex.europa.eu/legal-content/EN/TXT/PDF/?uri=CELEX:52018SC0157&from=EN (last accessed 10.1.2022). 149  The Expert Group on liability and new technologies set up by the EU Commission consists of two subgroups, the Product Liability Directive Formation and the New Technolo­ gies Formation, see http://ec.europa.eu/transparency/regexpert/index.cfm?do=groupDetail. groupDetail&groupID=3592&NewSearch=1&NewSearch=1 (last accessed 10.1.2022). The report of the New Technologies Formation is available at https://ec.europa.eu/newsroom/dae/ document.cfm?doc_id=63199 (last accessed 10.1.2022).

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Paper on AI150 and the accompanying ‘Report on safety and liability’151, the potential problems with liability rules, especially stemming from the specific properties of certain AI systems. At the end of June 2021, the EU Commission launched the initiative ‘Civil Liability – adapting liability rules to the digital age and artificial intelligence’. After completion of the public consultation process, the adaptations are to be presented in the third quarter of 2022.152 These initiatives reveal an insight into the interesting future legal developments that should be buttressed by comparative law study in order to finally achieve an overall European consensus. Annex: Non-official English translation of the most important provisions of the German Road Traffic Act, which the legislator enacted in 2017 for motor vehicles with highly or fully automated driving function and in 2021 for motor vehicles with autonomous driving function in defined operating areas. Straßenverkehrsgesetz

Road Traffic Act

§  1a StVG – Kraftfahrzeuge mit hoch- oder vollautomatisierter Fahrfunktion

Section 1a Road Traffic Act – Motor vehicles with highly or fully automated driving function

(1) Der Betrieb eines Kraftfahrzeugs mittels hoch- oder vollautomatisierter Fahrfunktion ist zulässig, wenn die Funktion bestimmungsgemäß verwendet wird. (2) Kraftfahrzeuge mit hoch- oder vollautomatisierter Fahrfunktion im Sinne dieses Gesetzes sind solche, die über eine technische Ausrüstung verfügen,   1. die zur Bewältigung der Fahrauf­ gabe – einschließlich Längs- und Querführung – das jeweilige Kraftfahrzeug nach Aktivierung steuern (Fahrzeugsteuerung) kann,

(1) The operation of a motor vehicle with a highly or fully automated driving function is permitted if the function is used in accordance with its intended purpose. (2) Motor vehicles with a highly or fully automated driving function, within the meaning of this Act, are those that have a technical equipment:   1. which, in order to perform the driving task – including longitudinal and lateral guidance – can control the respective motor vehicle after activation (vehicle control),

150  European Commission, White Paper on Artificial Intelligence, COM (2020) 65 final, available at https://ec.europa.eu/info/sites/default/files/commission-white-paper-artificialintelligence-feb2020_en.pdf (last accessed 10.1.2022). 151 European Commission, Report on the safety and liability implications of Artificial intelligence, the Internet of Things and robotics, COM (2020) 64 final, available at https:// eur-lex.europa.eu/legal-content/EN/TXT/PDF/?uri=CELEX:52020DC0064&from=en (last accessed 10.1.2022). 152  On this initiative see https://ec.europa.eu/info/law/better-regulation/have-your-say/ initiatives/12979-Civil-liability-adapting-liability-rules-to-the-digital-age-and-artificial-in telligence_en (last accessed 10.1.2022).

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  2. die in der Lage ist, während der hoch- oder vollautomatisierten Fahrzeugsteuerung den an die Fahrzeugführung gerichteten Verkehrsvor-schriften zu entsprechen,   3. die jederzeit durch den Fahrzeugführer manuell übersteuerbar oder deaktivierbar ist,   4. die die Erforderlichkeit der eigenhändigen Fahrzeugsteuerung durch den Fahrzeugführer erkennen kann,   5. die dem Fahrzeugführer das Erfordernis der eigenhändigen Fahrzeugsteuerung mit ausreichender Zeitreserve vor der Abgabe der Fahrzeugsteuerung an den Fahrzeugführer optisch, akustisch, taktil oder sonst wahrnehmbar anzeigen kann und   6. die auf eine der Systembeschreibung zuwiderlaufende Verwendung hinweist. Der Hersteller eines solchen Kraftfahrzeugs hat in der Systembeschreibung verbindlich zu erklären, dass das Fahrzeug den Voraussetzungen des Satzes 1 entspricht.

  2. which, during highly or fully automated vehicle control, is capable of complying with the traffic regulations addressed to vehicle control,

(3) Die vorstehenden Absätze sind nur auf solche Fahrzeuge anzuwenden, die nach §  1 Absatz 1 zugelassen sind, den in Absatz 2 Satz 1 enthaltenen Vorgaben entsprechen und deren hoch- oder vollautomatisierte Fahrfunktionen   1. in internationalen, im Geltungsbereich dieses Gesetzes anzuwendenden Vorschriften beschrieben sind und diesen entsprechen oder   2. eine Typgenehmigung gemäß Artikel 20 der Richtlinie 2007/46/ EG des Europäischen Parlaments und des Rates vom 5. September 2007 zur Schaffung eines Rahmens für die Genehmigung von Kraftfahrzeugen und Kraftfahrzeuganhängern sowie von Systemen,

(3) The preceding paragraphs shall only apply to such vehicles which are approved in accordance with section 1(1), comply with the specifications as contained in subsection (2), sentence (1), and whose highly or fully automated driving functions:   1. are described in and comply with international regulations applicable within the scope of this Act, or

  3. which can be manually overridden or deactivated at any time by the driver of the vehicle,   4. which is capable of recognising the need for the driver to control the vehicle manually,   5. which is capable of indicating to the driver the need for manual control of the vehicle with a sufficient time reserve before the driver is given control of the vehicle by optical, acoustic, tactile or other perceptible signals, and   6. which warns of any use contrary to the system description. The manufacturer of such a motor vehicle shall make a binding declaration in the system description to the effect that the vehicle complies with the requirements of sentence 1.

  2. have been granted type-approval in accordance with Article 20 of Directive 2007/46/EC of the European Parliament and of the Council of 5 September 2007, establishing a framework for the approval of motor vehicles and their trailers, and of systems, components

Civil Liability for Autonomous Vehicles

Bauteilen und selbstständigen technischen Einheiten für diese Fahrzeuge (Rahmenrichtlinie) (ABl. L 263 vom 9.10.2007, S.  1) erteilt bekommen haben. (4) Fahrzeugführer ist auch derjenige, der eine hoch- oder vollautomatisierte Fahrfunktion im Sinne des Absatzes 2 aktiviert und zur Fahrzeugsteuerung verwendet, auch wenn er im Rahmen der bestimmungsgemäßen Verwendung dieser Funktion das Fahrzeug nicht eigenhändig steuert.

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and separate technical units intended for such vehicles (Framework Directive) (OJ L 263, 9.10.2007, p.  1). (4) A driver is also a person who activates a highly or fully automated driving function within the meaning of paragraph (2) and uses it to control the vehicle, even if he does not steer the vehicle himself within the scope of the intended use of this function.

§ 1b StVG - Rechte und Pflichten des Fahrzeugführers bei Nutzung hochoder vollautomatisierter Fahrfunktionen

Section 1b Road Traffic Act - Rights and obligations of the vehicle driver using highly or fully automated driving functions

(1) Der Fahrzeugführer darf sich während der Fahrzeugführung mittels hoch- oder vollautomatisierter Fahrfunktionen gemäß § 1a vom Verkehrsgeschehen und der Fahrzeugsteuerung abwenden; dabei muss er derart wahrnehmungsbereit bleiben, dass er seiner Pflicht nach Absatz 2 jederzeit nachkommen kann. (2) Der Fahrzeugführer ist verpflichtet, die Fahrzeugsteuerung unverzüglich wieder zu übernehmen,   1. wenn das hoch- oder vollautomatisierte System ihn dazu auffordert oder   2. wenn er erkennt oder auf Grund offensichtlicher Umstände erkennen muss, dass die Voraussetzungen für eine bestimmungsgemäße Verwendung der hoch- oder vollautomatisierten Fahrfunktionen nicht mehr vorliegen.

(1) The driver is allowed to turn away from the traffic situation and the vehicle control during the operation of the vehicle with highly or fully automated driving functions, in accordance with section 1a. While doing so, he must remain perceptive in such a way that he can fulfil his duty in accordance with paragraph (2) at any time. (2) The driver shall immediately resume control of the vehicle:

§ 1d StVG - Kraftfahrzeuge mit autonomer Fahrfunktion in festgelegten Betriebsbereichen

Section 1d Road Traffic Act - Motor vehicles with autonomous driving function in defined operating areas

(1) Ein Kraftfahrzeug mit autonomer Fahrfunktion im Sinne dieses Gesetzes ist ein Kraftfahrzeug, das

(1) A motor vehicle with an autonomous driving function within the meaning of this Act is a motor vehicle which:

  1. if the highly or fully automated system requests him to do so, or   2. if he recognises or must recognise on the basis of the obvious circumstances that the prerequisites for the intended use of the highly or fully automated driving functions no longer exist.

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  1. die Fahraufgabe ohne eine fahrzeugführende Person selbstständig in einem festgelegten Betriebsbereich erfüllen kann und   2. über eine technische Ausrüstung gemäß § 1e Absatz 2 verfügt. (2) Ein festgelegter Betriebsbereich im Sinne dieses Gesetzes bezeichnet den örtlich und räumlich bestimmten öffentlichen Straßenraum, in dem ein Kraftfahrzeug mit autonomer Fahrfunktion bei Vorliegen der Voraussetzungen gemäß § 1e Absatz 1 betrieben werden darf. (3) Technische Aufsicht eines Kraftfahrzeugs mit autonomer Fahrfunktion im Sinne dieses Gesetzes ist diejenige natürliche Person, die dieses Kraftfahrzeug während des Betriebs gemäß § 1e Absatz 2 Nummer 8 deaktivieren und für dieses Kraftfahrzeug gemäß § 1e Absatz 2 Nummer 4 und Absatz 3 Fahrmanöver freigeben kann. (4) Risikominimaler Zustand im Sinne dieses Gesetzes ist ein Zustand, in dem sich das Kraftfahrzeug mit autonomer Fahrfunktion auf eigene Veranlassung oder auf Veranlassung der Technischen Aufsicht an einer möglichst sicheren Stelle in den Stillstand versetzt und die Warnblinkanlage aktiviert, um unter angemessener Beachtung der Verkehrssituation die größtmögliche Sicherheit für die Fahrzeuginsassen, andere Verkehrsteilnehmende und Dritte zu gewährleisten.

  1. can perform the driving task independently, within a defined operating area, without a person driving the vehicle, and   2. has technical equipment, in accordance with section 1e(2). (2) A ‘defined operating area’ within the meaning of this Act means the locally and spatially determined public road space in which a motor vehicle with an autonomous driving function may be operated, if the prerequisites in accordance with section 1e(1) are fulfilled.

§  1e StVG – Betrieb von Kraftfahrzeugen mit autonomer Fahrfunktion; Widerspruch und Anfechtungsklage

Section 1e Road Traffic Act – Operation of motor vehicles with autonomous driving function; objection and action for annulment (1) The operation of a motor vehicle with an autonomous driving function is permitted if:   1. the motor vehicle meets the technical requirements in accordance with paragraph (2),

(1) Der Betrieb eines Kraftfahrzeugs mittels autonomer Fahrfunktion ist zulässig, wenn   1. das Kraftfahrzeug den technischen Voraussetzungen gemäß Absatz 2 entspricht,

(3) The ‘technical supervisor’ of a motor vehicle with an autonomous driving function within the meaning of this Act is the natural person who can deactivate this motor vehicle during its operation in accordance with section 1e(2) No. 8 and release the driving manoeuvres for this motor vehicle in accordance with section 1e(2) No. 4 and paragraph (3). (4) For the purposes of this Act, a ‘risk-minimised state’ is a state in which the motor vehicle with an autonomous driving function, at its own initiative or at the initiative of the technical supervisor, comes to a stop in the safest possible place and activates the hazard warning lights in order to ensure the greatest possible safety for the vehicle occupants, other road users and third parties, taking due account of the traffic situation.

Civil Liability for Autonomous Vehicles

  2. für das Kraftfahrzeug eine Betriebserlaubnis nach Absatz 4 erteilt worden ist,   3. das Kraftfahrzeug in einem von der nach Bundes- oder Landesrecht zuständigen Behörde oder auf Bundesfernstraßen, soweit dem Bund die Verwaltung zusteht, von der Gesellschaft privaten Rechts im Sinne des Infrastrukturgesellschaftserrichtungsgesetzes genehmigten, festgelegten Betriebsbereich eingesetzt wird und   4. das Kraftfahrzeug zur Teilnahme am öffentlichen Straßenverkehr gemäß §  1 Absatz 1 zugelassen ist. Ein Betrieb eines Kraftfahrzeugs gemäß §  1h und die Zulassung im Übrigen gemäß §  1 Absatz 1 bleiben hiervon unberührt. (2) Kraftfahrzeuge mit autonomer Fahrfunktion müssen über eine technische Ausrüstung verfügen, die in der Lage ist,   1. die Fahraufgabe innerhalb des jeweiligen festgelegten Betriebsbereichs selbstständig zu bewältigen, ohne dass eine fahrzeugführende Person in die Steuerung eingreift oder die Fahrt des Kraftfahrzeugs permanent von der Technischen Aufsicht überwacht wird,   2. selbstständig den an die Fahrzeugführung gerichteten Verkehrsvorschriften zu entsprechen und die über ein System der Unfallvermeidung verfügt, das    a) auf Schadensvermeidung und Schadensreduzierung ausgelegt ist,    b) bei einer unvermeidbaren alternativen Schädigung unterschiedlicher Rechtsgüter die Bedeutung der Rechtsgüter berücksichtigt, wobei der Schutz menschlichen Lebens die höchste Priorität besitzt, und    c) für den Fall einer unvermeidbaren alternativen Gefährdung von

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  2. an operating permit has been granted for the motor vehicle in accordance with paragraph (4),   3. the motor vehicle is used in a defined operating area approved by the authority responsible under federal or federal state law or, on federal trunk roads where the Federal Government is responsible for administration, by the private-law company within the meaning of the Infrastructure Company Establishment Act, and   4. the motor vehicle is authorised to participate in public road traffic in accordance with section 1(1). An operation of a motor vehicle in accordance with section 1(h) and the approval in other respects in accordance with section 1(1) shall remain unaffected. (2) Motor vehicles with an autonomous driving function must have a technical equipment which is able to:   1. perform the driving task independently within the respective defined operating area without a driver intervening in the control system or the technical supervisor continuously monitoring the driving of the motor vehicle,   2. comply independently with the traffic regulations addressed to the driver of the vehicle and which has a system of accident prevention that:    a) is designed to prevent and reduce damage,    b) in the event of unavoidable alternative damage to different legal interests, takes into account the importance of the legal interests, with the protection of human life having the highest priority, and    c) in the case of an unavoidable alternative risk to human life,

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Menschenleben keine weitere Gewichtung anhand persönlicher Merkmale vorsieht,   3. das Kraftfahrzeug selbstständig in einen risikominimalen Zustand zu versetzen, wenn die Fortsetzung der Fahrt nur durch eine Verletzung des Straßenverkehrsrechts möglich wäre,   4. im Fall der Nummer 3 der Technischen Aufsicht selbstständig    a) mögliche Fahrmanöver zur Fortsetzung der Fahrt vorzuschlagen sowie    b) Daten zur Beurteilung der Situation zu liefern, damit die Technische Aufsicht über eine Freigabe des vorgeschlagenen Fahrmanövers entscheiden kann,   5. ein von der Technischen Aufsicht vorgegebenes Fahrmanöver zu überprüfen und dieses nicht auszuführen, sondern das Kraftfahrzeug selbstständig in einen risikominimalen Zustand zu versetzen, wenn das Fahrmanöver am Verkehr teilnehmende oder unbeteiligte Personen gefährden würde,   6. eine Beeinträchtigung ihrer Funktionalität der Technischen Aufsicht unverzüglich anzuzeigen,   7. ihre Systemgrenzen zu erkennen und beim Erreichen einer Systemgrenze, beim Auftreten einer technischen Störung, die die Ausübung der autonomen Fahrfunktion beeinträchtigt, oder beim Erreichen der Grenzen des festgelegten Betriebsbereichs das Kraftfahrzeug selbstständig in einen risikominimalen Zustand zu versetzen,   8. jederzeit durch die Technische Aufsicht oder durch Fahrzeuginsassen deaktiviert zu werden und im Falle einer Deaktivierung das Kraftfahrzeug selbstständig in den risikominimalen Zustand zu versetzen,

does not provide for any further prioritisation on the basis of personal characteristics,   3. independently bring the motor vehicle into a risk-minimised state, if the continuation of the journey would only be possible by way of a violation of the road traffic law,   4. in the case of number 3, the technical supervisor shall be independently:    a) suggested possible driving manoeuvres to continue the journey, and    b) provided data to assess the situation so that the technical supervisor can decide whether to approve the proposed manoeuvre,   5. check the driving manoeuvre specified by the technical supervisor and not carry it out, but independently put the motor vehicle in a risk-minimised state if the driving manoeuvre would endanger persons participating in traffic or uninvolved persons,   6. report any impairment of their functionality to the technical supervisor without delay,   7. recognise its system limits and, in the event that a system limit is reached, if a technical malfunction occurs which impairs the exercise of the autonomous driving function, or if the limits of the defined operating area are reached, independently set the motor vehicle to a risk-minimised state,   8. get deactivated at any time by the technical supervisor or by the vehicle occupants and, in the event of a deactivation, return the motor vehicle autonomously to the risk-minimised state,

Civil Liability for Autonomous Vehicles

  9. der Technischen Aufsicht das Erfordernis der Freischaltung eines alternativen Fahrmanövers, der Deaktivierung mit ausreichender Zeitreserve sowie Signale zum eigenen Funktionsstatus optisch, akustisch oder sonst wahrnehmbar anzuzeigen und   10. ausreichend stabile und vor unautorisierten Eingriffen geschützte Funkverbindungen, insbesondere zur Technischen Aufsicht, sicherzustellen und das Kraftfahrzeug selbstständig in einen risikominimalen Zustand zu versetzen, wenn diese Funkverbindung abbricht oder darauf unerlaubt zugegriffen wird. (3) Zur Erfüllung der Anforderungen nach Absatz 2 Nummer 1 bis 4 ist es im Falle sonstiger Beeinträchtigungen, die dazu führen, dass die technische Ausrüstung die Fahraufgabe nicht selbstständig bewältigen kann, auch ausreichend, wenn   1. die technische Ausrüstung in der Lage ist sicherzustellen, dass alternative Fahrmanöver durch die Technische Aufsicht vorgegeben werden können,   2. die alternativen Fahrmanöver gemäß Nummer 1 durch die technische Ausrüstung selbstständig ausgeführt werden und   3. die technische Ausrüstung in der Lage ist, die Technische Aufsicht mit ausreichender Zeitreserve optisch, akustisch oder sonst wahrnehmbar zur Vorgabe eines Fahrmanövers aufzufordern. (4) Liegen die technischen Voraussetzungen gemäß Absatz 2 und die Erklärung des Herstellers nach §  1f Absatz 3 Nummer 4 vor, erteilt das Kraftfahrt-Bundesamt auf Antrag des Herstellers eine Betriebserlaubnis für ein Kraftfahrzeug mit autonomer Fahrfunktion. Laufende Genehmigungsverfahren, die sachlich unter §  1d bis §  1g fallen und

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  9. indicate visually, acoustically or otherwise perceptibly to the technical supervisor the need for activation of an alternative manoeuvre, deactivation with sufficient time reserve as well as signals concerning their own functional status, and   10. ensure sufficiently stable radio links protected against unauthorised interference, in particular with the technical supervisor, and set the motor vehicle automatically to a risk-minimised state if this radio link is interrupted or accessed without authorisation. (3) In order to meet the requirements of paragraph 2, numbers 1 to 4, in the case of other impairments which result in the technical equipment not being able to cope with the driving task independently, it is also sufficient if:   1. the technical equipment is capable of ensuring that alternative manoeuvres can be provided by the technical supervisor,   2. the alternative manoeuvres according to number 1 are carried out independently by the technical equipment, and   3. the technical equipment is capable of prompting the technical supervisor visually, acoustically or otherwise perceptibly with sufficient time reserve to specify a manoeuvre. (4) If the technical requirements pursuant to paragraph (2) and the manufacturer‘s declaration pursuant to section 1f(3) No.  4 are fulfilled, the Federal Motor Transport Authority shall grant an operating permit for a motor vehicle with an autonomous driving function at the manufacturer‘s request. Ongoing approval procedures which are subject to sections 1d to 1g and

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in denen der Antrag auf Erteilung einer Betriebserlaubnis inklusive einer Ausnahmegenehmigung bereits gestellt worden ist, bleiben unberührt. (5) Widerspruch und Anfechtungsklage gegen den Widerruf oder die Rücknahme einer Betriebserlaubnis für ein Kraftfahrzeug mit autonomer Fahrfunktion haben keine aufschiebende Wirkung. (6) Widerspruch und Anfechtungsklage gegen den Widerruf oder die Rücknahme einer Genehmigung eines festgelegten Betriebsbereichs haben keine aufschiebende Wirkung. §  1f StVG – Pflichten der Beteiligten beim Betrieb von Kraftfahrzeugen mit autonomer Fahrfunktion (1) Der Halter eines Kraftfahrzeugs mit autonomer Fahrfunktion ist zur Erhaltung der Verkehrssicherheit und der Umweltverträglichkeit des Kraftfahrzeugs verpflichtet und hat die hierfür erforderlichen Vorkehrungen zu treffen. Er hat   1. die regelmäßige Wartung der für die autonome Fahrfunktion erforderlichen Systeme sicherzustellen,   2. Vorkehrungen zu treffen, dass die sonstigen, nicht an die Fahrzeugführung gerichteten Verkehrsvorschriften eingehalten werden und   3. zu gewährleisten, dass die Aufgaben der Technischen Aufsicht erfüllt werden. (2) Die Technische Aufsicht über ein Kraftfahrzeug mit autonomer Fahrfunktion ist verpflichtet,   1. ein alternatives Fahrmanöver nach §  1e Absatz 2 Nummer 4 und Absatz 3 zu bewerten und das Kraftfahrzeug hierfür freizuschalten, sobald ihr ein solches optisch, akustisch oder sonst wahrnehmbar durch das Fahrzeugsystem angezeigt wird, die vom Fahrzeugsystem bereitgestellten Daten ihr eine Beurteilung der Situation ermögli-

in which the application for the granting of a type approval including an exemption has already been submitted shall remain unaffected. (5) An objection and an action for annulment against the revocation or withdrawal of an operating permit for a motor vehicle with an autonomous driving function shall not have a suspensive effect. (6) Objections and actions for annulment against the revocation or withdrawal of a permit of a defined operating area shall not have a suspensive effect. Section 1f Road Traffic Act – Obligations of the parties involved in the operation of motor vehicles with autonomous driving function (1) The keeper of a motor vehicle with an autonomous driving function is obliged to maintain the road safety and environmental compatibility of the motor vehicle and must take the necessary precautions to this end. He shall:   1. ensure the regular maintenance of the systems required for the autonomous driving function;   2. take precautions to ensure compliance with other traffic regulations not relating to the driving of the vehicle; and   3. ensure that the tasks of the technical supervisor are fulfilled. (2) The technical supervisor of a motor vehicle with an autonomous driving function shall:   1. assess an alternative driving manoeuvre in accordance with section 1e(2) No.  4 and paragraph 3 and release the motor vehicle for this purpose as soon as he is visually, acoustically or otherwise perceptibly notified of such a manoeuvre by the vehicle system, which the data provided by the vehicle system enables him to assess; and the

Civil Liability for Autonomous Vehicles

chen und die Durchführung des alternativen Fahrmanövers nicht die Verkehrssicherheit gefährdet,   2. die autonome Fahrfunktion unverzüglich zu deaktivieren, sobald dies optisch, akustisch oder sonst wahrnehmbar durch das Fahrzeugsystem angezeigt wird,   3. Signale der technischen Ausrüstung zum eigenen Funktionsstatus zu bewerten und gegebenenfalls erforderliche Maßnahmen zur Verkehrssicherung einzuleiten und   4. unverzüglich Kontakt mit den Insassen des Kraftfahrzeugs herzustellen und die zur Verkehrssicherung notwendigen Maßnahmen einzuleiten, wenn das Kraftfahrzeug in den risikominimalen Zustand versetzt wird. (3) Der Hersteller eines Kraftfahrzeugs mit autonomer Fahrfunktion hat   1. über den gesamten Entwicklungsund Betriebszeitraum des Kraftfahrzeugs gegenüber dem Kraftfahrt-Bundesamt und der zuständigen Behörde nachzuweisen, dass die elektronische und elektrische Architektur des Kraftfahrzeugs und die mit dem Kraftfahrzeug in Verbindung stehende elektronische und elektrische Architektur vor Angriffen gesichert ist,   2. eine Risikobeurteilung für das Kraftfahrzeug vorzunehmen und gegenüber dem Kraftfahrt-Bundesamt und der zuständigen Behörde nachzuweisen, wie die Risikobeurteilung durchgeführt wurde und dass kritische Elemente des Kraftfahrzeugs gegen Gefahren, die im Rahmen der Risikobeurteilung festgestellt wurden, geschützt werden,   3. eine für das autonome Fahren ausreichend sichere Funkverbindung nachzuweisen,

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execution of the alternative driving manoeuvre does not endanger road safety,   2. deactivate the autonomous driving function immediately as soon as this is indicated visually, acoustically or otherwise perceptibly by the vehicle system,   3. evaluate signals from the technical equipment regarding its own functional status and, if necessary, initiate required road safety measures, and   4. immediately contact the occupants of the motor vehicle and initiate the measures necessary for road safety when the motor vehicle is placed in the risk-minimised status. (3) The manufacturer of a motor vehicle with an autonomous driving function shall   1. demonstrate to the Federal Motor Transport Authority and the competent authority throughout the entire development and operating period of the motor vehicle that the electronic and electrical architecture of the motor vehicle and the electronic and electrical architecture connected to the motor vehicle are protected against attacks,   2. carry out a risk assessment for the motor vehicle and demonstrate to the Federal Motor Transport Authority and the competent authority how the risk assessment has been carried out and that the critical elements of the motor vehicle are protected against hazards identified in the risk assessment,   3. demonstrate a sufficiently secure radio link for autonomous driving,

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  4. für jedes Kraftfahrzeug eine Systembeschreibung vorzunehmen, ein Betriebshandbuch zu erstellen und gegenüber dem Kraftfahrt-Bundesamt und im Betriebshandbuch verbindlich zu erklären, dass das Kraftfahrzeug die Voraussetzungen nach §  1e Absatz 2, auch in Verbindung mit Absatz 3, erfüllt,   5. für das Kraftfahrzeug eine Schulung für die am Betrieb beteiligten Personen anzubieten, in der die technische Funktionsweise insbesondere im Hinblick auf die Fahrfunktionen und die Aufgabenwahrnehmung der Technischen Aufsicht vermittelt werden, und   6. sobald er Manipulationen am Kraftfahrzeug oder an dessen elektronischer oder elektrischer Architektur oder an der mit dem Kraftfahrzeug in Verbindung stehenden elektronischen oder elektrischen Architektur erkennt, insbesondere bei einem unerlaubten Zugriff auf die Funkverbindungen des Kraftfahrzeugs, diese unverzüglich dem Kraftfahrt-Bundesamt und der nach Bundes- oder Landesrecht zuständigen Behörde oder auf Bundesfernstraßen, soweit dem Bund die Verwaltung zusteht, der Gesellschaft privaten Rechts im Sinne des Infrastrukturgesellschaftserrichtungsgesetzes mitzuteilen und erforderliche Maßnahmen einzuleiten.

  4. prepare a system description for each motor vehicle, an operating manual, a binding declaration to the Federal Motor Transport Authority and declare in the operating manual that the motor vehicle fulfils the requirements of section 1e(2), in conjunction with paragraph 3,

§  7 StVG – Haftung des Halters, Schwarzfahrt

Section 7 Road Traffic Act – Liability of the keeper, unauthorised Driving

(1) Wird bei dem Betrieb eines Kraftfahrzeugs ein Mensch getötet, der Körper oder die Gesundheit eines Menschen verletzt oder eine Sache beschädigt, so ist der Halter verpflichtet, dem Verletzten den daraus entstehenden Schaden zu ersetzen.

(1) If, during the operation of a motor vehicle, a person suffers death, the body or health of a person is injured or an object is damaged while operating a motor vehicle, the keeper is obliged to compensate the injured person for the resulting damage.

  5. provide training for the persons involved in the operation of the motor vehicle, in which the technical function, in particular, with regard to the driving functions and the performance of the tasks of the technical supervisor, are instructed, and   6. immediately notify the Federal Motor Transport Authority and the competent authority under federal or federal state law or, on federal trunk roads where the Federal Government is responsible for administration, the private law company within the meaning of the Infrastructure Company Establishment Act, as soon as he detects any manipulation of the motor vehicle or its electronic or electrical architecture or of the electronic or electrical architecture connected to the motor vehicle, in particular in the event of unauthorised access to the radio links of the motor vehicle, and initiate the necessary measures.

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(2) Die Ersatzpflicht ist ausgeschlossen, wenn der Unfall durch höhere Gewalt verursacht wird. (3) Benutzt jemand das Kraftfahrzeug ohne Wissen und Willen des Fahrzeughalters, so ist er anstelle des Halters zum Ersatz des Schadens verpflichtet; daneben bleibt der Halter zum Ersatz des Schadens verpflichtet, wenn die Benutzung des Kraftfahrzeugs durch sein Verschulden ermöglicht worden ist. Satz 1 findet keine Anwendung, wenn der Benutzer vom Fahrzeughalter für den Betrieb des Kraftfahrzeugs angestellt ist oder wenn ihm das Kraftfahrzeug vom Halter überlassen worden ist.

(2) The obligation to compensate is excluded if the accident is caused by the event of force majeure. (3) If anyone uses the motor vehicle without the knowledge and consent of the keeper, he is liable to pay compensation for the damage instead of the keeper; in addition, the keeper remains liable to pay compensation for the damage if the use of the motor vehicle was made possible through the fault of the keeper. Sentence 1 does not apply if the user is employed by the keeper to operate the motor vehicle or if the keeper has assigned the motor vehicle to the user.

§  18 StVG – Ersatzpflicht des Fahrzeugführers

Section 18 Road Traffic Act – Liability of the driver

(1) In den Fällen des §  7 Abs.  1 ist auch der Führer des Kraftfahrzeugs zum Ersatz des Schadens nach den Vorschriften der §§  8 bis 15 verpflichtet. Die Ersatzpflicht ist ausgeschlossen, wenn der Schaden nicht durch ein Verschulden des Führers verursacht ist. (2) Die Vorschrift des §  16 findet entsprechende Anwendung. (3) Ist in den Fällen des §  17 auch der Führer eines Kraftfahrzeugs zum Ersatz des Schadens verpflichtet, so sind auf diese Verpflichtung in seinem Verhältnis zu den Haltern und Führern der anderen beteiligten Kraftfahrzeuge, zu dem Tierhalter oder Eisenbahnunternehmer die Vorschriften des §  17 entsprechend anzuwenden.

(1) In the cases of section 7(1), the driver of the motor vehicle is also liable to pay compensation for the damage in accordance with the provisions of sections 8 to 15. The obligation to pay compensation is excluded if the damage is not caused by the fault of the driver. (2) The provision of section 16 shall apply accordingly. (3) If, in the cases referred to in section 17, the driver of a motor vehicle is also liable to pay compensation for the damage, then the provisions of section 17 shall apply accordingly, with respect to the driver’s relationship with the keepers and drivers of the other motor vehicles involved, with the animal keeper or with the railway operator.

The Impact of force majeure on Contractual Obligations1 Ivo Bach

I. Introduction Anyone who engages in a search for the term “force majeure” in the German Civil Code (Bürgerliches Gesetzbuch, hereinafter: BGB) will (almost) ultimately fail. There is merely a single provision that addresses the consequences of a force majeure event on the debtor’s contractual liability: according to §  701 (3) BGB,2 an innkeeper is not liable for the damage incurred by the loss of, destruction of, or damage to things brought in by a guest if the loss, destruction or damage is caused by force majeure.3 Of course, force majeure events have an impact on other contracts as well: if a debtor fails to perform his obligations due to force majeure, the creditor can claim neither specific performance nor damages. However, it is not only force majeure that exempts the debtor from liability. Instead, German law grants exemption more generously: the debtor is exempt from his obligation to specific performance whenever performance is impossible or unreasonably onerous (irrespective of whether or not this is due to a force majeure event). Further, he is exempt from liability for damages when he is not at fault, i.e., when he neither intentionally nor negligently caused his non-performance. 1 

Assisted by Dipl. Jur. Sebastian Otto. §  701 BGB – Liability of the innkeeper: (1) A n innkeeper who accommodates strangers commercially must make compensation for the damage incurred by the loss of, destruction of or damage to things brought in by a guest accommodated in the course of operating such a business. (2) […] (3) Liability in damages is not incurred if the loss, destruction or damage is caused by the guest […] or by force majeure. 3  Apart from that, German BGB uses the term force majeure in two provisions that do not directly deal with the impacts of force majeure on contractual obligations: §  206 BGB suspends the limitation period for contractual claims in the event that the creditor is prevented from exercising his rights due to force majeure. §  484 (2) allows the debtor of a time-share agreement to “unilaterally alter the preliminary contract information in order to adjust it to changes caused by force majeure”. Further, two provisions address “unavoidable, extraordinary circumstances”; both provisions deal with particular contracts: package travel contracts (§  651h (3) (2) BGB) and payment services (§  676c (1) BGB). 2 

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As a consequence of this low threshold for exemption, the requirements of force majeure do not play a significant role under German Law.4 Nevertheless, when looking into the details of the German liability mechanism, the questions that arise are similar to those that are relevant in regard to force majeure. In the following, I will describe the German liability mechanism in more detail (II.), explain how far questions related to force majeure play a role and – if they do – outline how they are answered (III.). Subsequently, I will briefly illustrate the role of party agreements (in practice: general conditions) regarding force majeure (IV.).

II. German Liability Mechanism When describing the German liability mechanism, reasons of clarity demand the differentiation between two scenarios: (i) an insurmountable impediment effectively bars the buyer from performing the contract, i.e., performance is impossible; (ii) the impediment is not completely insurmountable, i.e., performance has become more onerous but not impossible. When the impediment is insurmountable, exempting the debtor from his obligation to specific performance is, in a sense, the legal reflex to a physical necessity: a debtor who cannot perform should not be obliged to specific performance.5 The focus therefore lies on a liability for damages. German law – as mentioned above – follows a generous approach, restricting the debtor’s liability to cases of fault (regarding the impediment’s accrual). When the impediment is not completely insurmountable, the (initial) focus shifts to the claim for specific performance: under what circumstances will the debtor be required to overcome the impediment and therefore be obliged to specific performance? The answer to this question forms the basis for the follow up question regarding a liability for damages: when the debtor is obliged to specific performance, he is – at least in general – automatically liable for damages in a case of non-performance. When the debtor is not obliged to specific performance this does not automatically exclude any liability for damages. Instead, the same standard applies as in regard to insurmountable impediments: the standard of fault (regarding the impediment’s accrual).

4 Cf. Weick, ZEuP 2014, 281, 282: “Schattendasein” (“shadowy existence”); Otte-Gräbe­ ner, GWR 2020, 147. 5 Cf. Bach, Leistungshindernisse, 2017, p.  23.

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1. Insurmountable Impediments (Impossibility) a) Specific Performance German contract law follows the Roman law principle impossibilium nulla est obligatio. The creditor can only demand specific performance to the extent that such performance is physically (and legally6) possible. In cases of impossibility, §  275 (1) BGB7 excludes the creditor’s claim for specific performance. However, a high standard is applied in favour of the creditor: if performance is at least theoretically feasible, it is not considered impossible in the meaning of §  275 (1) BGB. Economic considerations and efficiency aspects are not taken into account at this point. A classic textbook example illustrates well the strict standard that German courts apply: the seller of a ring may not rely on §  275 (1) BGB if he transports the ring by ship, and the ship – including the ring – sinks to the bottom of a lake (or even the sea). In this case, German lawyers would not consider the impediment to be completely insurmountable – as long as there is the possibility that divers could, in theory, retrieve the ring from the bottom of the lake. Therefore, the liability mechanism concerning surmountable impediments would apply. In sales contracts for generic goods (i.e., for goods that are defined only by class), §  275 (1) BGB only applies when all specimens of the class are destroyed or damaged.8 If one specimen is left, the seller can – at least in theory – acquire and consequently deliver it to the buyer (just as he can rescue the ring from the bottom of the lake). Again, the liability mechanism concerning surmountable impediments applies. In certain exceptions, however, §  275 (1) BGB will apply – and therefore the seller will be exempt from his obligation to specific performance: if he has already “done what is necessary on his part to supply” a particular specimen of the class (§  243 (2) BGB), and this very specimen perishes or is irretrievable. §  275 (1) BGB requires that performance be permanently impossible. In cases of a mere temporary impossibility, the creditor’s claim for specific performance is not excluded. However, since the debtor temporarily is not able to perform, 6  Performance may e.g. be legally impossible when an administrative closing order prevents specific performance of the contract, cf. Daßbach/Bayrak, NJ 2020, 185, 186. 7  §  275 BGB – Exclusion of the duty of performance: (1) A claim for performance is excluded to the extent that performance is impossible for the obligor or for any other person. (2) Infra fn.   28. (3) […]. (4) Infra fn.   18. 8  Riehm, in: beck-online.Großkommentar zum Zivilrecht (hereinafter: BeckOGK), edited by Gsell et al., 1.7.2021, BGB §  275 para.  57; Ernst, in: Münchener Kommentar zum Bürger­ lichen Gesetzbuch (hereinafter: MüKoBGB), edited by Säcker et al., 8th Ed. 2019, BGB §  275 para.  35.

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courts have held that the creditor’s claim is suspended until performance becomes possible again.9 In two exceptional cases, courts apply §  275 (1) BGB even if performance is only temporarily impossible: firstly, in cases in which the time of performance is in such way fundamental for the contract, that late performance is equivalent to non-performance (because the creditor can use the debtor’s performance only at a particular point in time);10 secondly, in cases in which a) the parties cannot foresee when performance will become possible again, b) it is unlikely that this will happen on a short-term basis, and c) at least one of the parties cannot be expected to uphold their contract under such unclear conditions.11 §  275 (1) BGB applies irrespective of whether the impossibility to perform is due to force majeure or not. Even if the debtor is at fault, §  275 (1) BGB excludes the creditor’s claim for specific performance.12 When a famous artist decides to shred his painting instead of delivering it to the buyer, §  275 (1) BGB will still exempt him from his specific performance obligation. A fortiori, §  275 (1) BGB applies irrespective of whether or not the debtor was delayed with his performance when the impediment occurred. Note, however, that §  275 (1) BGB does not apply to the obligation to pay a certain sum of money (e.g., the purchase price). More precisely, a lack of sufficient financial capacity does not render the debtor’s payment obligation impossible. Instead, courts hold that each debtor “has to have money”.13 The rationale behind this ruling is that exempting a (payment-) debtor from a monetary obligation falls short as he would in any event be liable for damages (of the same amount). This liability occurs irrespective of fault, because a debtor always assumes the procurement risk or a guarantee for his financial capacity.14 The consequences of insufficient financial capacity are conclusively regulated by the

9 

BGH, 19.10.2010 – IX ZR 121/09, ZIP 2010, 2164. 19.10.2007 – V ZR 211/06, NJW 2007, 3777 para.  24; BGH, 11.3.1982 – VII ZR 357/80, NJW 1982, 1458; BGH, 31.1.1967 – V ZR 125/65, NJW 1967, 721, 722. 11  BGH, 11.3.1982 – VII ZR 357/80, NJW 1982, 1458; Ernst, in: MüKoBGB (fn.  8), BGB §  275 para.  148. 12  Albers, ZEuP 2012, 687, 692; Grüneberg, in: Palandt, Bürgerliches Gesetzbuch (hereinafter: Palandt), edited by Grüneberg, 80th Ed. 2021, BGB §  275 para.  5; Ernst, in: MüKoBGB (fn.  8), BGB §  275 para.  60; cf. Parliamentary Documentation (Bundestags-Drucksache, BTDrs.) No.  14/6040, p.  127. 13  BGH, 4.2.2015 – VIII ZR 175/14, NJW 2015, 1296 para.  18; BGH, 28.2.1989 – IX ZR 130/88, NJW 1989, 1276, 1278; BGH, 25.03.1982 – VII ZR 60/81, NJW 1982, 1585, 1587. For a detailed description of the “one has to have money”-principle see Pfeiffer, in: German National Reports on the 19th International Congress of Comparative Law, edited by Schmidt-Kessel, 2014, p.  173, 175 et seq; Grundmann, in: MüKoBGB (fn.  8), BGB §  276 para.  180. 14  Pfeiffer (fn.  13), p.  176; cf. Parliamentary Documentation (Bundestags-Drucksache, BTDrs.) No.  14/7052, p.  184. 10  BGH,

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enforcement provisions of the code of civil procedure (Zivilprozessordnung, hereinafter: ZPO) and the rules of insolvency law.15 When §  275 (1) BGB excludes the creditor’s claim for specific performance, the creditor is exempt from his own contractual (counter-)obligations.16 However, if the creditor is at fault (regarding the impediment that bars the debtor from performing), the creditor’s obligations are upheld (but may be reduced).17 b) Damages §  275 (1) BGB only excludes the creditor’s claim for specific performance, but not his claim for damages; by contrast, §  275 (4) BGB explicitly allows such a claim for damages.18 However, German Law restricts the debtor’s liability for damages to cases in which he is responsible for his non-performance. The criteria for such a responsibility differ, depending on whether the impediment that prevents the debtor’s performance has occurred before or after the conclusion of contract. If it occurred before, the debtor is responsible when he knew or ought to have known of the impediment (§  311a BGB19). If it occurred afterwards, his responsibility must concern the causation of the impediment (§  280 (1) BGB20): 15  Riehm, in: BeckOGK (fn.  8), BGB §  275 para.  29; cf. BGH, 28.2.1989 – IX ZR 130/88, NJW 1989, 1278, 1278. 16  §  326 BGB – Release from consideration and revocation where the duty of performance is excluded: (1) If, under section 275 (1) to (3), the obligor is not obliged to perform, there is no entitlement to consideration; in the case of part performance, section 441 (3) applies with the necessary modifications. Sentence 1 does not apply if the obligor, in the case of failure to perform in conformity with the contract, does not, under section 275 (1) to (3), have to effect cure. (2) If the obligee is solely or very predominantly responsible for the circumstance due to which the obligor does not, under section 275 (1) to (3), have to effect cure, or if this circumstance for which the obligor is not responsible occurs at a time when the obligee is in default of acceptance, the obligor retains the entitlement to consideration. However, he must allow to be credited against him what he saves due to release from performance or acquires or wilfully fails to acquire from other use of his labour. (3) […]. (4) To the extent that the consideration that is not owed under this provision is effected, what is performed may be claimed back under sections 346 to 348. (5) […]. 17  §  326 (2) BGB, see supra fn.  16. 18  §  275 BGB – Exclusion of the duty of performance: (4)  The rights of the obligee are governed by sections 280, 283 to 285, 311a and 326. 19  §  311a BGB – Obstacle to performance when contract is entered into: (1) A contract is not prevented from being effective by the fact that under section 275 (1) to (3) the obligor does not need to perform and the obstacle to performance already exists when the contract is entered into. (2) The obligee may, at his option, demand damages in lieu of performance or reimbursement of his expenses in the extent specified in section 284. This does not apply if the obligor was not aware of the obstacle to performance when entering into the contract and is also not responsible for his lack of awareness. […]. 20  §  280 BGB – Damages for breach of duty:

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as a rule, he is responsible for intention and negligence (i.e., for fault). Negligence is defined as a failure to exercise reasonable care (see §  276 (2) BGB21). Therefore, the debtor is liable for damages under §  280 BGB when he either intentionally or carelessly caused the impediment or when he did not prevent the impediment even though he could have done so without unreasonable effort.22 When the debtor neither actively caused the impediment nor failed to prevent it, he is not liable for damages – irrespective of whether or not the impediment falls into his sphere of risk, i.e., whether or not the impediment is due to a force majeure event. This seems to be the major difference between the German liability mechanism and a force majeure-based liability mechanism. The difference is illustrated by the following example: A seller is unable to deliver the contractually owed goods because his facilities were destroyed by a fire. This fire was caused by (scenario A) a stroke of lightning or (scenario B) an electrical short in the seller’s facilities. Under German law both scenarios are treated equally: the seller is liable for damages if he could have prevented the fire had he exercised reasonable care. Thus, he is liable when he did not install a lightning arrester (in scenario A) or did not regularly undertake maintenance of the electric installation (in scenario B).23 Under a force majeure mechanism, the question of whether the seller could have prevented the fire is only relevant in scenario A. As an electrical short does not constitute a force majeure, the seller will under no circumstance be exempt from liability in scenario B. This difference, however, is reduced by the tendency of German courts to apply a rigorous standard of reasonable care. When an impediment originates

(1) If the obligor breaches a duty arising from the obligation, the obligee may demand damages for the damage caused thereby. This does not apply if the obligor is not responsible for the breach of duty. (2) […]. (3) […]. 21  §  276 BGB – Responsibility of the obligor: (1) The obligor is responsible for intention and negligence, if a higher or lower degree of liability is neither laid down nor to be inferred from the other subject matter of the obligation, including but not limited to the giving of a guarantee or the assumption of a procurement risk. […]. (2) A person acts negligently if he fails to exercise reasonable care. (3) […]. 22  Riehm, in: BeckOGK (fn.  8), BGB §  283 para.  30; Ernst, in: MüKoBGB (fn.  8), BGB §  283 para.  6. 23  Note that in both scenarios the seller is not liable if the fire had occurred even if he had installed the lightning arrestor or properly undertaken maintenance; cf. Riehm, in: BeckOGK (fn.  8), BGB §  280 para.  196.

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from the debtor’s sphere of risk, courts tend to assume that the debtor could – and should – have prevented it.24 The burden of proof lies with the debtor.25 Note that German law provides for a strict liability when the impediment occurs at a time in which the seller is at default with his performance. In such a case the seller is liable for damages even if the impediment is due to force majeure which he could neither foresee nor prevent or overcome (§  287 BGB26). However, the seller is only regarded as being in default with his performance when he is at fault regarding the delay (§  286 (4) BGB27). 2. Surmountable Impediments a) Specific Performance If specific performance of the contract is not entirely impossible, but merely more onerous, the legal situation is less clear-cut: §  275 (1) BGB does not exclude the creditor’s claim for specific performance. However, §  275 (2) BGB28 allows the debtor to refuse performance if the costs for such performance would be 24  For examples cf. Grüneberg, in: Palandt (fn.  12), BGB §  276 para.  32. Meder, JZ 1994, 485, 490 therefore fears an “erosion of the principle of fault”. 25  Lorenz, in: Beck’scher Online-Kommentar BGB (hereinafter: BeckOKBGB), edited by Hau/Poseck, 60th Ed. 1.11.2021, BGB §  283 para.  10; Ernst, in: MüKoBGB (fn.  8), BGB §  283 para.  26. 26  Section 287 BGB – Liability during default: While he is in default, the obligor is responsible for all negligence. He is liable for performance in the case of chance as well, unless the damage would have occurred even if performance had been made in good time. 27  Section 286 BGB – Default of the obligor: (1) If the obligor, following a warning notice from the obligee that is made after performance is due, fails to perform, he is in default as a result of the warning notice. Bringing an action for performance and serving a demand for payment in summary debt proceedings for recovery of debt have the same effect as a warning notice. (2) There is no need for a warning notice if 1. a period of time according to the calendar has been specified, 2. performance must be preceded by an event and a reasonable period of time for performance has been specified in such a way that it can be calculated, starting from the event, according to the calendar, 3. the obligor seriously and definitively refuses performance, 4. for special reasons, weighing the interests of both parties, the immediate commencement of default is justified. (3) […]. (4) The obligor is not in default for as long as performance is not made as the result of a circumstance for which he is not responsible. (5) […]. 28  §  275 BGB – Exclusion of the duty of performance: (2) The obligor may refuse performance to the extent that performance requires expense and effort which, taking into account the subject matter of the obligation and the requirements of good faith, is grossly disproportionate to the interest in performance of the obligee. When it is determined what efforts may reasonably be required of the obligor, it must also be taken into account whether he is responsible for the obstacle to performance.

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grossly disproportionate to the creditor’s interest in the performance (infra lit.  aa). Further, §  313 BGB29 allows the debtor to terminate the contract if, due to a severe change in circumstances, performance and counter performance have become grossly inequivalent (infra lit.  bb). In short: when the debtor can overcome an impediment, this does not necessarily mean that he is obliged to do so. However, the threshold for an exemption is high. German Law does not follow the utilitarian approach of the efficient breach doctrine, but instead adheres quite strictly to the deontological principle of pacta sunt servanda.30 aa) Disproportion between the costs for and the creditor’s interest in performance According to §  275 (2) BGB, the debtor may refuse specific performance when the latter would be so onerous for the debtor that it is considered to be “factually impossible”.31 More precisely, §  275 (2) applies in case of a gross disproportion between – on one hand – the potential expenses that such performance would require from him and – on the other hand – the creditor’s interest in the debtor’s performance. When determining the potential expenses, all service resources must be taken into account – i.e., financial means as well as manpower and other personal efforts of the debtor.32 By contrast, opportunity costs remain out of consideration: when a seller has sold goods to buyer No.  1, he may not argue that meanwhile a potential buyer No.  2 has offered a higher price.33 Instead, the seller bears the risk of a bad deal with buyer No.  1. The creditor’s interest – more or less – corresponds to the potential loss that he would suffer in case of a non-performance: it consists of the direct value of 29  §  313 BGB – Interference with the basis of the transaction: (1) If circumstances which became the basis of a contract have significantly changed since the contract was entered into and if the parties would not have entered into the contract or would have entered into it with different contents if they had foreseen this change, adaptation of the contract may be demanded to the extent that, taking account of all the circumstances of the specific case, in particular the contractual or statutory distribution of risk, one of the parties cannot reasonably be expected to uphold the contract without alteration. (2) It is equivalent to a change of circumstances if material conceptions that have become the basis of the contract are found to be incorrect. (3) If adaptation of the contract is not possible or one party cannot reasonably be expected to accept it, the disadvantaged party may revoke the contract. In the case of continuing obligations, the right to terminate takes the place of the right to revoke. 30  Cf. in more detail Canaris, JZ 2001, 499, 501; Koller, NJW 1996, 300, 301; Bach (fn.  5), pp.  285 et seq. 31  BGH, 14.1.2009 – VIII ZR 70/08, NJW 2009, 1660 para.  18; Parliamentary Documentation (Bundestags-Drucksache, BT-Drs.) No.  14/6040, p.  129. 32 Parliamentary Documentation (Bundestags-Drucksache, BT-Drs.) No.   14/6040, 130; Armbrüster/Prill, JuS 2020, 1008, 1011; Bach (fn.  5), p.  339; Canaris, JZ 2001, 499, 502. 33  Ernst, in: MüKoBGB (fn.  8), BGB §  275 para.  9 0.

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the performance (e.g., the goods that are to be delivered) and the potential benefit that the creditor could gain from the debtor’s performance (e.g., by either using or reselling the goods). Cases of a gross disproportion between the debtor’s expenses and the creditor’s interest in a specific performance are rare. When the debtor’s expenses increase, more often than not, the creditor’s interest increases accordingly.34 Example: A sells goods to B which A does not produce himself but must procure on the market (let’s say: surgical masks). When the market price doubles, it is not only the seller’s costs that double accordingly – the buyer’s loss in case of a non-performance doubles, as well. Therefore, (the debtor’s) performance costs and (the creditor’s) performance interest have not become grossly disproportionate; they have not even become disproportionate at all, but – most likely – remain in the same proportion as they had been at the time of contracting. While the seller’s expenses might have to be considered grossly disproportionate when compared with the purchase price, this does not meet the requirements of §  275 (2) BGB, which – thus – does not help the seller in this situation (however, sometimes §  313 BGB will, see infra bb). §  275 (2) BGB only applies when the creditor’s interest does not rise (or at least: not in the same amount), although the debtor’s expenses do. This rarely happens in legal reality35 – unless the debtor’s performance is unique.36 Returning to the classic textbook example of the ring that sank to the bottom of the lake, one might assume that the ring’s value does not rise as a consequence of the sinking incident and that, therefore, the buyer’s interest remains at the same level. In such a case the ultimate requirement of §  275 (2) BGB becomes crucial: the “gross disproportion”. The potential expenses for performance must be in such a way disproportionate to the creditor’s interest that the creditor would act in abuse of law when claiming specific performance.37 The legislative materials (of 2001) refer to an example which can be found in the “Comments” on the Principles of European Contract Law. According to this example, the debtor of a yacht should be exempt from the obligation to perform if the yacht sinks and the cost of lifting it is forty times its value.38 Further, the legislative materials refer to a decision of the German Federal Supreme Court (Bundesgerichtshof, hereinafter: BGH), in which the court held the debt34 Cf.

Armbrüster/Prill, JuS 2020, 1008, 1011. 14.1.2009 – VIII ZR 70/08, NJW 2009, 1660 para.  18: “rarely applicable, exceptional provision that has to be interpreted restrictively” [translation by the author]. 36 Cf. Canaris, JZ 2001, 499, 502 et seq. 37  Canaris, JZ 2001, 499, 505; Dauner-Lieb, in: BGB. Schuldrecht (hereinafter: DaunerLieb/Langen), edited by Dauner-Lieb/Langen, 4th Ed. 2021, BGB §  275 para.  45; Ernst, in: MüKoBGB (fn.  8), BGB §  275 para.  75. 38  Parliamentary Documentation (Bundestags-Drucksache, BT-Drs.) No.  14/6040, p.  129; cf. Lando/Beale, Principles of European Contract Law, Comments on Art.  9:101, p.  396. 35  BGH,

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or to be exempt because his potential expenses were thirty-three times higher than the creditor’s interest in specific performance.39 Recently, the BGH has applied §  275 (2) BGB in cases in which the disproportion was less “gross”: in one case the seller’s expenses were “only” nine times higher than the creditor’s interest40 ; in another case the disproportion remained at 6:1.41 Still, these numbers cannot be used for determining a general threshold. What is more, the BGH has explicitly refused to define a precise threshold – e.g., in form of a certain percentage value. Instead, the BGH has repeatedly stressed that whether or not §  275 (2) applies depends on the circumstances of each individual case.42 The provision itself demands that three aspects be considered: (i) the subject matter of the obligation, (ii) the requirements of good faith, and (iii) the debtor’s responsibility for the impediment. The latter aspect becomes relevant in the context of force majeure: if the impediment is due to force majeure, courts will more generously allow the seller to refuse specific performance than in other cases.43 They will be less generous, however, when the subject matter of the contract is generic goods, which the seller must procure on the market; in such cases he bears the procurement risk.44 If the impediment becomes apparent and the debtor fails to take obvious precautionary measures, courts will also apply a rather strict threshold.45 §  275 (2) BGB requires that performance be permanently grossly disproportionate. In cases of a mere temporary disproportion the creditor’s claim for specific performance is not excluded, but merely suspended.46 When the debtor can refuse specific performance according to §  275 (2) BGB, the creditor is exempt from his contractual counter-obligations.47 However, if the creditor is at fault (regarding the impediment that bars the debtor from performing), his obligations are upheld (but may be reduced).48 39  Parliamentary Documentation (Bundestags-Drucksache, BT-Drs.) No.  14/6040, p.  130; cf. BGH, 2.10.1987 – V ZR 140/86, NJW 1988, 699. 40  BGH, 21.4.2010 – VIII ZR 131/09, NJW 2010, 2050, 2053. 41  BGH, 19.12.2012 – VIII ZR 96/12, NJW 2013, 1074. 42  BGH, 21.5.2010 – V ZR 244/09, NJW 2010, 2341 para.  20; BGH, 21.4.2010 – VIII ZR 131/09, NJW 2010, 2050 para.  22 et seq.; BGH, 20.7.2005 – VIII ZR 342/03, NJW 2005, 3284. In practice, the parameters to be used for determining a gross disproportion are often stipulated in the contract, see Weller/Lieberknecht/Habrich, NJW 2020, 1017, 1020. 43  Cf. BGH, 23.10.2009 – V ZR 141/08, NJW-RR 2010, 315 para.  2 2 et seq.; Bach (fn.  5), p.  437; Armbrüster/Prill, JuS 2020, 1008, 1010. 44  Weller/Lieberknecht/Habrich, NJW 2020, 1017, 1020; Wolf/Eckert/Denz/Gerking/ Holze/Künnen/Kurth, JA 2020, 401, 408. 45  Riehm, in: BeckOGB (fn.  8), BGB §  275 para.  196. 46  BGH, 19.10.2010 – IX ZR 121/09, ZIP 2010, 2164; Ernst, in: MüKoBGB (fn.  8), BGB §  275 para.  141. 47  §  326 (1) BGB, see supra fn.  16. 48  §  326 (2) BGB, see supra fn.  16.

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bb) Inequivalence of performance and counter performance When both the debtor’s potential expenses for and the creditor’s interest in performance increase equally (or at least similarly), the debtor cannot rely on §  275 (2) BGB. However, he might have a right to adapt or ultimately terminate the contract under §  313 BGB.49 This provision applies if three prerequisites are met: (i) the circumstances which form the basis of a contract have significantly changed since the time of conclusion of the contract; (ii) the parties did not foresee this change of circumstances when concluding the contract; (iii) one of the parties cannot reasonably be expected to uphold the contract without alteration. The first (and gatekeeper) requirement is a change of such circumstances that – although they have not become part of the contractual agreement50 – form its basis (i.e., circumstances on which the parties’ contractual intent is based).51 The change must be “significant”; it must be of such nature that the parties – had they foreseen the change – would not have entered into the contract or would have entered into it with different contents.52 Therefore, §  313 BGB – just as §  275 (2) BGB – has a fairly high threshold, and in consequence courts tend to apply it rather reluctantly.53 However, a force majeure event will generally amount to a change of circumstances (if its consequences to the contract are severe enough).54 The second requirement goes without saying: a change of circumstances can only be relevant if the parties did not see it coming when they concluded the contract. However, §  313 BGB does not require that the parties could not foresee the change in circumstances; instead, it is sufficient that they did not actually foresee it. Note that §  313 BGB even applies, when the circumstances had already changed before the contract was concluded, if the parties did not have knowledge of this change at that time.55 What is more, §  313 (2) BGB56 expressly extends the provision’s scope to cases in which the circumstances have not 49  While this provision has not been introduced into the BGB before 2002, jurisprudence had established corresponding case law for almost 100 years (since the times of World War I); cf. Finkenauer, in: MüKoBGB (fn.  8), BGB §  313 para.  20 et seq.; Martens, in: BeckOGK (fn.  8), BGB §  313 para.  14. It is this case law that legislature intended to codify when drafting §   313 BGB in 2001, Parliamentary Documentation (Bundestags-Drucksache, BT-Drs.) No.  14/6040, p.  174. 50  BGH, 28.2.1961 – VI ZR 95/60, BeckRS 1961, 31186478. 51  BGH, 28.4.2005 – III ZR 351/04, NJW 2005, 2069, 2071; BGH, 5.11.2000 – VIII ZR 324/99, NJW 2001, 1204, 1205; BGH, 23.10.1957 – V ZR 219/55, NJW 1958, 297 et seq. 52  Cf. BGH, 11.10.1994 – XI ZR 189/93, NJW 1995, 47, 48 et seq. 53  Jung, in: Dauner-Lieb/Langen (fn.  37), BGB §  313 para.  3. 54 Cf. BGH, 08.02.1984 – VIII ZR 254/82, NJW 1984, 1746; Lorenz, in: BeckOKBGB (fn.  25), BGB §  313 para.  7; Koller, NJW 1996, 300, 302; Otte-Gräbener, GWR 2020, 147, 149. 55  Lorenz, in: BeckOKBGB (fn.   25), BGB §  313 para.  25; Jung, in: Dauner-Lieb/Langen (fn.  37), BGB §  313 para.  56. 56  §  313 (2) BGB, supra fn.  29.

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changed at all, but the parties have based their contract on incorrect conceptions of actual circumstances. The third requirement constitutes the core of §  313 BGB: it must be unreasonable for (at least) one of the parties to uphold the contract. This is in particular the case when the expenses for the debtor are (grossly) disproportionate compared with the creditor’s counter performance, i.e., when performance and counter performance are not equivalent anymore.57 Note that the BGH has held that the equivalence of performance and counter performance can be regarded as a circumstance on which the parties have based their contract.58 That means: a disproportion constitutes in itself a change of circumstances59 – and thus passes the gatekeeper to open the gate of §  313 BGB. Again, jurisprudence has not defined a precise threshold for a relevant disproportion. But as with §  275 (2) BGB, there are some decisions in which a certain disproportion ratio was considered relevant and others in which another ratio was not. 60 Bearing in mind that all of these decisions are somehow characterized by particular features, one may still excerpt some (very rough) guidance for the relevant threshold under §  313 BGB. More likely than not, the BGH will apply §  313 BGB when the debtor’s expenses for performance are twice as high as the (value of) the creditor’s counter performance. This threshold is considerably lower than the threshold under §  275 (2) BGB – rendering the latter provision nearly ineffective in practice. Again, this “rough guidance” may not be misunderstood as a precise threshold. Instead, jurisprudence – even more than in regard to §  275 (2) BGB – pays regard to the circumstances of each individual case. 61 The most relevant factor is the contractual risk allocation: the more speculative a bargain, the higher the threshold. 62 If a seller promises to deliver goods over a long period of time at a fixed price, he bears the risk of rising (and the chance of falling) prices. Therefore, courts will not apply §  313 BGB when market prices have doubled; in fact, they will hardly apply §  313 BGB at all. 63 The same is true for cases in which the 57  BGH, 31.5.1990 – I ZR 233/88, NJW 1991, 1478, 1479; BGH, 24.2.1984 – V ZR 222/82, NJW 1984, 2212. 58  BGH, 31.5.1990 – I ZR 233/88, NJW 1991, 1478, 1479; cf. Bach (fn.  5), p.  481. 59  BGH, 23.5.2014 – V ZR 208/12, NJW 2014, 3439 para.  18; BGH, 27.10.2004 – XII ZR 175/02, NJW-RR 2005, 236, 237. 60  BGH, 24.3.2010 – VIII ZR 160/09, NJW 2010, 1663; BGH, 27.10.2004 – XII ZR 175/02, NJW-RR 2005, 236; BGH, 8.5.2002 – XII ZR 8/00, NJW 2002, 2384; BGH, 14.10.1992 – VIII ZR 91/91, NJW 1993, 259; BGH, 10.7.2002 – XII ZR 107/99, NJW 2002, 3234; BGH, 23.1.1976 – V ZR 76/74, NJW 1976, 846; BGH, 23.4.1976 – V ZR 167/74, WM 1976, 1034; BGH, 23.5.1980 – V ZR 20/78, NJW 1980, 2241; BGH, 12.7.1961 – V ZR 43/60, NJW 1961, 1859; BGH, 28.9.1964 – VII ZR 47/63, BB 1964, 1397; BGH, 8.3.1979 – VII ZR 9/78, WM 1979, 582. 61  BGH NJW 1995, 47, 48 et seq. 62  BAG, 28.9.2006 – 8 AZR 568/05, NJW 2007, 2348 para.  23; BGH, 23.3.1982 – X ZR 76/80, NJW 1982, 2861, 2862; Finkenauer, in: MüKoBGB (fn.  8), BGB §  313 para.  70. 63  Cf. BGH, 9.3.2010 – VI ZR 52/09, NJW 2010, 1874, 1877; BGH, 28.2.1961 – VI ZR

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debtor is responsible for the change of circumstances. In the [translated] words of the BGH: “In the light of the paramount importance of the principle of observance of a contract, a party may only rely on a change of circumstances if this appears absolutely necessary in order to avoid an unbearable result which would be incompatible with law and justice and which therefore is not reasonable for this party […]. However, this cannot be assumed if the party concerned had the opportunity to avoid such a result.”64 A fortiori, a party can hardly rely on §  313 BGB when it (intentionally or negligently) caused the change of circumstances.65 When all three requirements are fulfilled, the debtor may demand that the contract be adjusted to the changed circumstances. 66 In practice, such an adjustment aims at either reducing the debtor’s obligations or increasing the price paid by the other party. 67 When the impediment bars the debtor’s performance only temporarily, the time of delivery may be adjusted.68 If, and only if, adjusting the contract would be unreasonable for one party (e.g., because the creditor is not interested in the debtor’s performance when the latter is postponed or significantly more expensive), the debtor is entitled to terminate the contract. 69 b) Damages The debtor’s liability for damages depends on whether he can refuse specific performance under §  275 (2) BGB or is entitled to an adaption/termination of contract according to §  313 BGB. When neither §  275 (2) nor §  313 BGB applies, the debtor remains under an obligation for specific performance – and if he does not comply with this obligation he will be liable for damages according to §  280 BGB70 . In such a case he will always be at fault: whenever the impediment does not meet the threshold of §  275(2) or §  313 BGB, the debtor’s non-performance cannot be attributed to the impediment, but instead qualifies as an intentional act of the debtor. Note that the debtor will not be liable under §  311a BGB71 as this provision applies only if the debtor can refuse specific performance according to §  275 BGB (i.e., if specific performance is impossible or grossly disproportionate). 95/60, BeckRS 1961, 31186478 under II; Dietrich, NJ 2020, 257, 259; Grüneberg, in: Palandt (fn.  12), BGB §  313 para.  19; Tomic, ZfBR 2020, 419, 423. 64 BGH, 8.2.1978 – VIII ZR 221/76, JZ 1978, 235 [translation by the author]; cf. Bach (fn.  5), p.  499. 65  BGH, 3.5.1995 – XII ZR 29/94, NJW 1995, 2028, 2031; BGH, 11.3.1993 – I ZR 27/91, NJW-RR 1993, 880, 881 et seq. 66  §  313 (1) BGB, see supra fn.  29. 67  Bach (fn.  5) p.  482. 68  Finkenauer, in: MüKoBGB (fn.  8), BGB §  313 para.  58. 69  §  313 (3) BGB see supra fn.  29. 70  See supra fn.  20. 71  See supra fn.  19.

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When the debtor may (and does) refuse specific performance according to §  275 (2) BGB, this does not automatically result in an exemption from liability for damages. By contrast, a non-performance may still meet the requirements of §  280 BGB, i.e., that the debtor be responsible for the impediment. Again (see also – and in more detail – supra 1. b), he is responsible when he either intentionally or carelessly caused the impediment, or when he did not prevent the impediment although he could have done so without unreasonable effort. If the impediment was already in existence when the parties concluded their contract, the debtor’s liability for damages is governed by §  311a BGB72 – i.e., it does not depend on the debtor’s responsibility for the impediment; instead, the debtor is liable if (at the time of contract conclusion) he knew or ought to have known of the impediment. By contrast, a termination of contract according to §  313 BGB excludes liability for damages – even if the debtor is responsible for the impediment. However, in the latter case, the debtor will (most likely) not be entitled to termination in the first place (see supra a) bb)). The same is true when the debtor knew, or ought to have known, of an impediment existing at the time of contract conclusion. When the contract has been adjusted according to §  313 BGB, the debtor remains under an (altered) obligation for specific performance. If he does not comply with this obligation, he will be liable for damages: again, his non-performance cannot be attributed to the impediment but instead qualifies as an intentional act of the debtor.

III. Change of perspective: the consequences of force majeure events under German Law To summarize the above: German contract law does not use the term force majeure – neither in regard to an exclusion of specific performance nor in regard to a liability for damages. Consequently, German law does not set up certain prerequisites for assuming a case of force majeure. Nevertheless, three of the four classic elements of force majeure are relevant under German Law: whether the debtor could be expected to foresee the impediment (infra 1.), whether he could be expected to avoid it (infra 2.) and whether he could be expected to overcome it (infra 3.). By contrast, it is not relevant whether the impediment is internal or external (infra 4.).

72 

See supra fn.  19.

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1. Foreseeable impediment Whether the debtor actually foresaw, or at least ought to have foreseen, the impediment, has an impact on the debtor’s obligation for specific performance as well as on his liability for damages. Regarding specific performance, however, it only impacts the debtor’s right to adapt or terminate the contract according to §  313 BGB. This right is excluded when the debtor actually foresaw the impediment (a mere foreseeability has no impact; supra II. 2. a) bb)). By contrast, §  275 BGB applies irrespective of whether the debtor foresaw the impediment or not – let alone whether or not he ought to have foreseen it. Regarding a liability for damages, the debtor’s knowledge becomes relevant when the impediment occurred before the conclusion of contract: in this case the debtor is liable when he knew, or ought to have known, of the impediment’s existence (§  311a (2) BGB, see supra II. 1. b)). When determining whether he ought to have known of it, courts apply an objective standard73: they refer to what a reasonable person of the debtor’s profession/business would have known. Note, however, that courts always consider the circumstances of each individual case, especially the subject of the contract.74 When the impediment occurred after the conclusion of contract, liability for damages depends on the debtor’s responsibility for the impediment. If he is not responsible for it (which is the case in force majeure events), liability cannot be based on the fact that he foresaw or ought to have foreseen it. 2. Unavoidable impediment The picture is quite similar when it comes to the question of whether the debtor could reasonably be expected to avoid/prevent the impediment. Again, the question affects the debtor’s right to adapt or terminate the contract according to §  313 BGB: the right is excluded when the debtor could – and ought to – have avoided the impediment (see supra II. 2. a) bb)). And again, §  275 BGB applies irrespective of whether or not he could have avoided it (see supra II. 1. a)). The picture differs, however, in regard to the debtor’s liability for damages: avoidability of the impediment has an impact only when it occurred after the contract was concluded – not when it occurred before. When the debtor ought to have avoided the impediment but did not, he is responsible for it and, therefore, liable under §  280 BGB (supra II. 1. b)). By contrast, liability under §  311a BGB (i.e., for initially existing impediments) depends on the debtor’s knowledge of the impediment, not on his responsibility for it. 73  Higher Regional Court Karlsruhe, 14.9.2004 – 8 U 97/04, NJW 2005, 989, 990 et seq.; cf. Herresthal, in: BeckOGK (fn.  8), BGB §  311a para.  110. 74  Higher Regional Court Karlsruhe, 14.9.2004 – 8 U 97/04, NJW 2005, 989, 990; DaunerLieb, in: Dauner-Lieb/Langen (fn.  37), BGB §  311a para.  19.

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When determining under §  313 or §  280 BGB whether or not the debtor could be expected to have avoided the impediment, courts apply an objective standard75: instead of referring to the ability of the individual debtor, courts consider the ability of a reasonable person engaged in the same type of business as the debtor.76 3. Insurmountable impediment Whether or not the debtor can (be reasonably expected to) overcome the impediment is of utmost relevance for the German liability mechanism. When he cannot overcome it at all (i.e., in cases of impossibility), he is not obliged to specific performance (§  275 (1) BGB; see supra II. 1. a)). The same is true when he can overcome it in theory, but in practice his potential expenses would be grossly disproportionate to the creditor’s interest (§  275 (2) BGB, see supra II. 1. a) aa)). When his expenses are not disproportionate to the creditor’s interest, but to the counter performance, the debtor is entitled to adjust or terminate the contract (§  313 BGB, see supra II. 1. a) bb)). There is no clear general guidance as to when the debtor’s expenses are grossly disproportionate. Rather, courts will always base their decision on the circumstances of each individual case. In regard to §  275 (2) BGB, courts have not yet assumed a gross disproportion when the debtor’s expenses amount to less than five times the creditor’s interest (see supra II. 2. a) aa)). Regarding §  313 BGB, courts are more generous and tend to apply the provision when the debtor’s expenses are twice as high as the (value of) the creditor’s counter performance (see supra II. 2. a) bb)). When the debtor can reasonably be expected to overcome the impediment, i.e., if the threshold of neither §  275 (1), §  275 (2) nor §  313 BGB is met, he is – as a rule – liable for damages in case of a non-performance (see supra II. 2. b)). When specific performance is impossible (§  275 (1) BGB) or grossly disproportionate to the creditor’s interest (§  275 (2) BGB), the debtor’s liability for damages in case of a non-performance depends on whether he is responsible for an impediment that occurred after the conclusion of the contract (§  280 BGB, see supra II. 1. b), II. 2. b)) or whether he knew or ought to have known of an impediment that had occurred before the conclusion of the contract (§  311a BGB, see supra II. 1. b), II. 2. b)). If the debtor terminated the contract according to §  313 BGB (inequivalence of performance and counter performance), he is exempt from both specific performance and liability for damages (supra II. 2. b)). 75  BGH, 27.3.2003 – IX ZR 399/99, NJW 2003, 2022, 2024; BGH, 11.4.2000 – X ZR 19/98, NJW 2000, 2812, 2813; cf. Grundmann, in: MüKoBGB (fn.  8), BGB §  276 para.  55; Schwarze, in: J. von Staudingers Kommentar zum Bürgerlichen Gesetzbuch (hereinafter: Staudinger), edited by Löwisch et al., 18th Ed. 2019, BGB §  280 para. D 9. 76  BGH, 15.11.1971 – VIII ZR 62/70, NJW 1972, 150, 151; cf. Lorenz, in: BeckOKBGB (fn.  25), BGB §  276 para.  21.

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4. External nature of the impediment Whether the impediment is due to an external event (i.e., an event beyond the debtor’s sphere of influence/risk) or an internal event, has no direct impact – neither on the debtor’s obligation to specific performance nor on his liability for damages in case of a non-performance. Often, however, internal impediments are due to the debtor failing to exercise reasonable care – i.e., the debtor could reasonably be expected to prevent/avoid the impediment (which has impact on both specific performance and liability for damages, see supra 2.).

IV. Contractual agreements on force majeure Given that in cases of force majeure the debtor’s liability for damages is excluded under the BGB (supra II. 1. b), II. 2. b)), a contractual exclusion of liability for such cases in the debtor’s general conditions is redundant. What is more, such a clause might be interpreted as imposing a stricter liability on the debtor than the BGB provisions, i.e., that he is liable whenever his non-performance is not due to force majeure (instead of being liable for fault only). As a consequence, force majeure clauses are only advisable for the creditor’s general conditions. Jurisprudence holds, however, that waivers of the fault requirement (in the general conditions of the creditor) are ineffective according to §  307 BGB because they unreasonably disadvantage the debtor and are incompatible with essential principles of contract law (i.e., the fault requirement).77 In the debtor’s general conditions, force majeure clauses may however serve the purpose of substantiating which effort the debtor must incur in order to overcome a surmountable impediment. As explained above, the relevant provisions (§  275 (2) and §  313) use utterly unspecific and vague terms in this regard and jurisprudence has not yet sufficiently concretized these terms. Therefore, it is permissible (and seems advisable) to define concrete limits in general conditions, beyond which the debtor is either exempt from his obligation to perform or has a right to adjust the contract.78 However, such substantiation may not go 77  §  307 BGB – Test of reasonableness of contents: (1) Provisions in standard business terms are ineffective if, contrary to the requirement of good faith, they unreasonably disadvantage the other party to the contract with the user. An unreasonable disadvantage may also arise from the provision not being clear and comprehensible. (2) An unreasonable disadvantage is, in case of doubt, to be assumed to exist if a provision    1. is not compatible with essential principles of the statutory provision from which it deviates, or    2. limits essential rights or duties inherent in the nature of the contract to such an extent that attainment of the purpose of the contract is jeopardized. (3) … 78  Finkenauer, in: MüKoBGB (fn.  8), BGB §  313 para.  51.

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along with a significant reduction of the limits: such reduction will most likely render the clause invalid according to §  307 BGB, as it disadvantages the creditor by undermining his contractual rights.79

79  Cf. BAG, 07.12.2005 – 5 AZR 535/04, NZA 2006, 423, 426; BAG, 24.01.2017 – 1 AZR 772/14, NZA 2017, 931, 932; Wendland, in: Staudinger (fn.  75), BGB §  307 para.  248; dissenting Finkenauer, in: MüKoBGB (fn.  8), BGB §  313 para.  51.

The Financial Obstacles of the Access to the Judge Ann-Kristin Mayrhofer/Beate Gsell

I. Introduction As will be shown in the following, German law on the costs of civil litigation has traditionally been governed by principles which assert that both court and out-of-court costs can be calculated reliably in advance by litigating parties and remain within a range that does not make civil actions prohibitively expensive. These principles include, as will be explained in more detail below, the ‘loser pays’ principle1 as well as the principle that court fees and lawyer fees are not calculated according to the actual expenditure (or according to market-based profit expectations of the lawyers), but in a rather arithmetically manner with recourse to the statutory fee rates according to the dispute value, whereby increasing dispute values do not lead to linearly higher fees, but instead the cost curve becomes flatter.2 Part of this framework is also the widespread use of insurance coverage through private legal expenses insurance,3 alongside the guarantee of state legal aid4. Furthermore, German civil litigation cost law is influenced by the fact that German law has traditionally been cautious towards both collective redress5 and commercial litigation financing and enforcement models6 . Accordingly, lawyers had been prohibited from advertising commercially for a long time.7 1 Cf.

infra IV. 1. infra III. 1. a) and III. 2. a) aa). 3 Cf. infra VI. 2. a). 4 Cf. infra VI. 1. 5 Cf. infra V. 4. 6 Cf. infra VI. 2. d). 7  Cf. s 43b of the (German Federal Lawyers Act, Bundesrechtsanwaltsordnung BRAO) which nowadays at least permits advertising as far as it provides matter-of-fact information concerning the form and the nature of the professional services and as long as it is not aimed at soliciting specific instructions or a specific brief. Yet, the Federal Constitutional Court (Bundesverfassungsgericht – BVerfG) has called for an interpretation of the prohibition in conformity with the constitution and emphasised that the freedom to exercise a profession (article 12 of the German Basic Law [Grundgesetz, GG, akin to a constitution]) includes the right to inform the public truthfully and in an appropriate form about acquired qualifications, including the reference to acquired knowledge and skills, BVerfG, NJW 2003, 2816, 2817. Moreover, the German Federal Court of Justice (Bundesgerichtshof – BGH) has ruled that the prohibition must be interpretated in conformity with article 24 of the EU Directive 2006/123/ 2 Cf.

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Also, the law governing the legal profession still prohibits the external participation in the capital of law firms8 and lawyers are only allowed to agree on success fees under very limited conditions9. Even if this means that the cost structure for individual civil actions in Germany does not appear unfavourable for legal enforcement overall, the German model is not without problems. The traditional notion of civil litigation as an individual action, in which the party personally takes its risk of losing, supported by a lawyer who does not primarily pursue commercial interests and takes on a certain number of mandates that are not profitable, has obvious limitations in practice. Private plaintiffs and consumers often shy away from the risk of legal enforcement and therefore refrain from filing a lawsuit if they do not have legal expenses insurance. And even if they want to sue, they may not find a suitable lawyer to represent them if their claim is of little monetary value but the facts or the legal situation are complicated. It is therefore not surprising that new developments, in particular the assertion and, as far as possible, the bundled assertion of even small claims through the use of ‘Legal Tech’ tools,10 but also the market entry of commercial litigation financiers,11 are challenging the traditional German civil litigation model and civil litigation cost model. These developments tend to overcome the individual perspective of civil proceedings, to break the link between individual chances of success and cost risk and, finally, to establish models of commercial legal enforcement that are traditionally alien to German law and therefore forEC of 12 December 2006 on services in the internal market. It held that a ban on advertising was only justified in the event of a concrete threat to the interests protected by EU law, in particular, to the independence, dignity and integrity of the profession, as well as to professional secrecy, BGHZ 199, 43 = BGH, NJW 2014, 554 para 13 et seq.; BGH, NJW-RR 2018, 1086 para 16 et seq. 8  Cf. s 59e of the BRAO. The Act on the Reorganization of the Professional Law of Lawyers’ and Tax consultants’ Professional practice companies and on the amendment of other Provisions in the area of legal professions (Gesetz zur Neuregelung des Berufsrechts der an­ waltlichen und steuerberatenden Berufsausübungsgesellschaften sowie zur Änderung weiterer Vorschriften im Bereich der rechtsberatenden Berufe), 07.07.2021, BGBl. 2021 I, 2363, in principle maintains the prohibition of external participation in the capital (new s 59i of the BRAO, coming into force on 01.08.2022), cf. Bundestagsdrucksache no.  19/27670, 193, 283, where the need to prevent circumvention of this prohibition is mentioned, https://dserver.bundestag.de/ btd/19/276/1927670.pdf (last accessed February 7, 2022); Kilian, NJW 2021, 2385, 2385; Dahns, NJW-Spezial 2020, 766, 766. However, for associations with other professionals such as auditors or tax advisors, the principle that the majority of company shares and voting rights must be owned by lawyers has been abandoned (new s 59c et seq. of the BRAO, coming into force on 01.08.2022) which at least considerably attenuates the prohibition; cf. Markworth, ZRP 2021, 6, 8. 9 Cf. infra VI. 2. b) bb). 10 Cf. infra VI. 2. c). 11 Cf. infra VI. 2. d).

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bidden to lawyers.12 This process of change will also be sketched out in the following, albeit inevitably only in broad strokes.

II. Constitutional framework The German Basic Law (Grundgesetz, GG, akin to a constitution) guarantees the right to effective and equal access to justice. It also provides for other basic rights and principles, which must be considered when enacting and interpreting cost rules. 1. Effective access to justice The German Basic Law provides for a right to effective legal protection, which is guaranteed for civil proceedings by the principle of the rule of law (article 20 paragraph 3 of the GG) in conjunction with the fundamental rights, especially the general freedom of action (article 2 paragraph 1 of the GG).13 The general right to access to justice (Allgemeiner Justizgewährungsanspruch) does not only ensure that there is any legal recourse at all, but also guarantees the effectiveness of legal protection. Access to court must not be unreasonably impeded.14 The German Federal Constitutional Court (Bundesverfassungsgericht – BVerfG) pointed out that cost rules could become a ‘de facto bar to legal action’ if the cost risk exceeded the individual’s economic capacity or was disproportionate to the success sought by the proceedings.15 Besides, the parties must be able to reliably estimate in advance the amount of the costs they may incur. The principle of rule of law requires legal certainty and therefore cost transparency.16 The general right to effective access to justice does not establish a right to an appeal. However, if the legislature has decided to open a further instance, access to the appellate court ‘must not be impeded in an unreasonable manner that can no longer be justified’.17 Furthermore, the constitutional right to access to justice requires that a remedy, e.g. a procedural review, be available if constitutional procedural rights are violated by a court of last instance, so-called legal protection against judges (Rechtsschutz gegen den Richter).18 Lastly, effective access to justice also requires to ensure the effective enforcement of judgments.19 Here, 12 Cf.

infra VI. 2. b) bb) and VI. 2. d). BVerfG, NJW 2006, 136, 137; BVerfGE 93, 99, 107; 107, 395, 401. 14  BVerfG, NJW 2006, 136, 137; BVerfGE 88, 118, 124. 15  BVerfG, NJW 2006, 136, 137; BVerfGE 85, 337, 347. 16  Schulz, in: MüKoZPO, 6th ed. 2020, ZPO Vor §  91 para 2; cf. VG Köln, NJW 2005, 3513; BGH, NJW 2005, 1373, 1375. 17  BVerfG, NJW 2014, 1796, 1796; BVerfGE 77, 275, 284; 78, 88, 99. 18  BVerfGE 107, 395; 108, 341. 19  Papier, in: Isensee/Kirchhof (eds.), Handbuch des Staatsrechts, 3rd ed. 2010, §  176 Jus­ tiz­gewähranspruch para 24. 13 

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too, cost aspects can play a role in assessing whether access to proceedings is granted effectively. 2. Equal access to justice In addition, the German Basic Law (Grundgesetz, GG) contains a right to equal legal protection which is based on the principle of the rule of law (article 20 paragraph 3 of the GG) in conjunction with the general principle of equality (article 3 paragraph 1 of the GG).20 The GG requires procedural ‘equality of arms’.21 The cost risk shall be distributed equally between the parties.22 The Federal Constitutional Court (Bundesverfassungsgericht – BVerfG) does not demand complete equality, but at least an ‘equalization’ of the parties’ situations.23 Procedural equality of arms is not only affected when a person is prevented from bringing a case before a court because of costs, but also threatened when there is a significant imbalance between the financial resources of the parties allowing only one side to instruct experienced law firms and experts. This problem especially arises in B2C-disputes involving a consumer and a large company.24 3. Further Limits of cost regulations German legislation usually provides for the levying of fees (Gebühren) for the use of the courts. In contrast to taxes, fees are to generate revenue to cover the costs of an individually attributable public service fully or partially. The Federal Constitutional Court (Bundesverfassungsgericht – BVerfG) does not require that the amount of the fee is limited by the costs of the public service or that a fee regulation does not pursue other purposes than the generation of revenue for the cost recovery.25 However, the amount of the fee must not be set completely independently of the actual costs of the state service subject to the fee. The link between the actual costs and the amount of the fee must be appropriate.26 20 

BVerfGE 81, 347, 356 et seq. BVerfGE 35, 283, 289; BVerfG, NJW 2006, 136, 137. 22  Schulz, in: MüKoZPO, 6th ed. 2020, ZPO Vor §  91 para 1. 23  BVerfGE 81, 347, 356 et seq.; BVerfG, NJW 1988, 2231, 2232; 2009, 209, 209 et seq.; in some decisions, the Court also cites the principle of the welfare state (article 20(3) GG), e.g. BVerfG, NJW 2009, 209. 24  Gsell/Meller-Hannich, Die Umsetzung der neuen EU-Verbandsklagenrichtlinie, 2021, 45, https://www.vzbv.de/sites/default/files/downloads/2021/02/03/21-02-04_vzbv_verbands klagen-rl_gutachten_gsell_meller-hannich.pdf (last accessed February 7, 2022); Gsell/ Möllers, in: Gsell/Möllers (eds.), Enforcing Consumer and Capital Markets Law, 2020, 465– 498, 482. 25  BVerfGE 50, 217, 226. 26  BVerfG, NJW 2013, 2882 para 16; BVerfGE 85, 337, 346. 21 

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Regarding lawyer fees, cost rules may affect lawyers’ occupational freedom (article 12 of the GG) and the general contractual freedom (article 2 paragraph 1 of the GG).27 If these rights conflict with the right to access to justice, the legislator must establish an ‘appropriate balance of the conflicting interests in the legal system’.28

III. Costs of Litigation The costs of a legal dispute consist of court costs, lawyer costs and other costs of litigation, e.g., the parties’ personal expenses. The actual costs largely depend on the dispute value as fixed by the court but also on the course of the proceeding. 1. Court costs In Germany, there are two types of court costs: fees and expenses. They are mainly regulated by the German Court Costs Act (Gerichtskostengesetz, GKG). According to an evaluation of the European Commission for the Efficiency of Justice (CEPEJ) based on 2018 data, in Germany, the court fees and taxes cover 40 % of the judicial system budget, which is a significant part, considering that the European median is only 13 %.29 a) Court fees In Germany, the total court fees (Gebühren) to be paid are determined by the quantity of units (Anzahl an Gebühren) and their respective value (Höhe einer Gebühr). The quantity of units depends on the nature and the course of the procedure. The value of one unit is generally based on the dispute value (section 3 paragraph 1 of the GKG). The increase is degressive: the higher the dispute value, the lower the fee in relation to the value.30 Consequently, whereas the absolute cost risk increases, the relative cost risk decreases when the dispute value becomes higher.31 This mechanism is based on the idea that the actual costs of the court – which, as mentioned above, must at least be reflected in the 27  BVerfGE 101, 331, 346 et seq.; 117, 163, 181 et seq. The Court concentrates its assessment on the occupational freedom which is the more specific basic right. 28  BVerfGE 118, 1, 22. 29  European judicial systems – CEPEJ Evaluation Report, Part 1, 2020, 33, https://rm.coe. int/evaluation-report-part-1-english/16809fc058 (last accessed February 7, 2022); Kilian, Anwaltsblatt 2021, 164, 165. 30  Hess/Hübner, in: Basedow/Kischel/Sieber (eds.), German National Reports to the 18th International Congress of Comparative Law, 2010, 161–179, 167. 31  Cf. Dissenting Opinion of Judge Gaier, BVerfGE 118, 1, 43 et seq. (concerning lawyer fees).

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fee – do not grow at the same rate as the dispute value.32 This way of calculating court (and lawyer)33 fees provides for certainty and foreseeability. The parties can calculate litigation costs in advance, unforeseen cost spikes at the end of the proceeding are rare.34 A ‘normal’ first instance proceeding in a Local Court (Amtsgericht) or in a Regional Court (Landgericht), ending with a judgment, is usually charged at 3.0 units.35 If the dispute value is 1,000 EUR, in 2022, one unit amants to 58.00 EUR.36 Therefore, the court fees would be 174.00 EUR. If the proceedings were terminated by a judicial settlement, the number of units would only be 1.0.37 If the dispute value was 2,000 EUR, the number of units would not change but the value of one unit (98.00 EUR in 2022)38 would. Appellate remedies and enforcement proceedings trigger new fees.39 In appeal proceedings, the dispute value is usually determined according to the appellant’s claims (section 47 paragraph 1 sentence 1 of the GKG). The number of units is higher, e.g., 4.0 units for an appeal proceeding ending with a judgment.40 Generally, the plaintiff must advance the court fees (section 12 paragraph 1 sentence 1 of the GKG). Whether these will be reimbursed depends on the course and the outcome of the proceedings.41 b) Court expenses Court costs also include court expenses (Auslagen). They are calculated based on the actual costs or on flat rates.42 The costs of the taking of evidence initially incurred by the state treasury are usually part of these expenses. The remuneration and compensation of court-appointed experts and witnesses is regulated in the German Judicial Remuneration and Compensation Act (Justizvergütungsund -entschädigungsgesetz, JVEG). Court-appointed experts usually receive a remuneration between 70 and 155 EUR per hour.43 The tight regulation allows parties to assess the financial risk, if they can estimate the time experts will have to spend.44 32  Cf. ibid., 44; Leutheusser-Schnarrenberger/Goebel, NJW 2017, 3207, 3210 (concerning lawyer fees). 33 Cf. infra III. 2. a) aa). 34  Wagner, in: Gottwald (ed.), Litigation in England and Germany, 2010, 149–184, 173 et seq. 35  Cf. no.  1210 of the Annex 1 to the GKG (Kostenverzeichnis zum GKG, KV GKG). 36  Cf. Annex 2 to the GKG. 37  Cf. no.  1211 of the KV GKG. 38  Cf. Annex 2 to the GKG. 39  Cf. no.  1220 et seq. of the KV GKG. 40  Cf. no.  1220 of the KV GKG. 41 Cf. infra IV. 42  Cf. no.  9 000 et seq. of the KV GKG. 43  Cf. ss 9 et seq. of the JVEG, Annex 1 to the JVEG. 44  Hess/Hübner, in: Basedow/Kischel/Sieber (eds.), German National Reports to the 18th International Congress of Comparative Law, 2010, 161–179, 163.

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If one party requests from the court an act involving expenses, e.g., the appointment of an expert, it must usually pay an advance sufficient to cover these expenses (section 17 paragraph 1 of the GKG).45 The court can also request an advance if it acts ex officio (section 17 paragraph 3 of the GKG).46 2. Lawyer costs At the beginning of 2021, the German Federal Bar (Bundesrechtsanwaltskam­ mer – BRAK) counted 144,733 registered lawyers.47 The German Act on the Remuneration of Lawyers (Rechtsanwaltsvergütungsgesetz, RVG) provides for a statutory remuneration with fixed and therefore precisely calculable fee levels. However, in principle, lawyers and their clients can deviate from these provisions by concluding remuneration agreements. a) Statutory remuneration Similar to the GKG, the RVG contains rules regarding fees and expenses. Usually, the remuneration is due when the mandate has been performed or the matter has been closed (section 8 paragraph 1 of the RVG).48 However, the lawyer may demand an appropriate advance payment from his client for the fees and expenses incurred and likely to be incurred (section 9 of the RVG). aa) Lawyer fees In principle, the calculation of lawyer fees follows the same logic as the calculation of the court fees, even though the statutory fee-values for lawyers are higher than those of the courts. The number of units depends on the activities of the lawyer and the value of one unit depends on the dispute value (section 2 paragraph 1 of the RVG), the increase being degressive. Just like the actual court costs the lawyer’s actual effort increases at a slower rate than the dispute value. Thus, the statutory fees do not intend to remunerate the specific mandate adequately. Rather, they follow the idea that only the lawyer’s total income must cover both his costs and his livelihood. The statutory fees are based on a mixed 45  Cf. ss 402, 379 sentence 1 of the German Code of Civil Procedure (Zivilprozess­ordnung, ZPO); Zimmermann, in: BDZ, 5th ed. 2021, GKG §  17 para 2 et seq. If both parties request the appointment of an expert, the party who bears the burden of proof has to pay the advance, BGH, NJW 1999, 2823, 2824 et seq. 46 Cf. Zimmermann, in: BDZ, 5th ed. 2021, GKG §  17 para 17 on the question of the debtor of this advance. 47  Excluding in-house lawyers (Syndikusrechtsanwälte), cf. Bundesrechtsanwaltskammer, Mitglieder 2021, https://brak.de/w/files/04_fuer_journalisten/statistiken/2021/2021_brakmg_statistik.pdf (last accessed February 7, 2022). 48  If the lawyer works in court proceedings, remuneration shall also be due if a decision regarding costs has been issued, or the instance has terminated, or the proceedings have been stayed for more than three months (s 8(1) sentence 2 of the RVG).

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calculation: less lucrative mandates are subsidized by more profitable ones.49 Regarding their preventive effects on the lawyer’s performance, the statutory fees on the one hand do not provide an incentive to produce more billable hours, on the other hand they do not encourage the lawyer to work particularly diligently either.50 However, even though such a mixed calculation may sound plausible at first glance, there is no mistaking that it harbours a serious problem: there is generally no way to force lawyers to take on mandates with low dispute value. Their personal interest in maximising profit will typically induce them to acquire as many cases as possible with high dispute values and to reduce the number of cases with low dispute values. Therefore, in areas of law where the dispute values are often small, but the cases are nevertheless complex, it can be difficult to find lawyers’ help to bring disputes to court. This is notorious, for example, for cases involving the assertion of a rent reduction due to material defects in a rented flat.51 The question of the admissibility of individually agreed contingency fees,52 but also the one of the availabilities of alternative dispute resolution mechanisms,53 is therefore particularly urgent for such situations. A ‘normal’ first instance proceeding in a Local Court or in a Regional Court, ending with a judgment, is usually charged at 2.5 units.54 If the dispute value is 1,000 EUR, in 2022, one unit is valued at 88.00 EUR.55 Therefore the lawyer fees would amount to 220.00 EUR. If the proceeding was terminated by a settlement, the lawyer could request 1.5 additional units.56 The conciliation fee – in conjunction with the reduction of the court fee57 – exemplifies how cost rules are used to create incentives for certain procedural behaviour, that is to settle the dispute amicably.58 It is not only intended to remunerate the additional 49  BVerfGE 83, 1, 14; Dissenting Opinion of Judge Gaier, BVerfGE 118, 1, 44; BVerfG, NJW-RR 2010, 259 para 17; Leutheusser-Schnarrenberger/Goebel, NJW 2017, 3207, 3210. 50  Wagner, in: Gottwald (ed.), Litigation in England and Germany, 2010, 149–184, 177 et seq. 51  Cf. therefore, for example, the lecture by Meller-Hannich on the subject of effective legal protection in the case of low dispute values (Effektiver Rechtsschutz bei geringen Streit­ werten) at the German Tenancy Court Conference (Deutscher Mietgerichtstag) on 4.12.2021, https://www.mietgerichtstag.de/mietgerichtstage/download-vorträge/mietgerichtstag-2021/ (last accessed February 7, 2022). 52 Cf. infra VI. 2. b) bb). 53 Cf. infra V. 3. b). 54  The lawyer usually receives 1.3 units of fees for the proceedings (Verfahrensgebühr) and 1.2 units of fees for the appointments (Terminsgebühren), cf. no.  3100, 3104 of the Annex 1 to the RVG (Vergütungsverzeichnis zum RVG, VV RVG). 55  Cf. Annex 2 to the RVG. 56  Cf. no.  1000 of the VV RVG. 57 Cf. supra III. 1. a). 58 Cf. Bundestagsdrucksache no.   12/6962, 52, https://dserver.bundestag.de/btd/12/069/ 1206962.pdf (last accessed February 7, 2022); Hess/Hübner, in: Basedow/Kischel/Sieber (eds.), German National Reports to the 18th International Congress of Comparative Law, 2010, 161–179, 166: ‘two major incentives to encourage settlements’.

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workload and increased responsibility of the lawyer but also to reduce the burden on the courts.59 Appellate and enforcement proceedings trigger new fees.60 If the dispute value was 2,000 EUR, the number of units would not change but the value of one unit (166.00 EUR in 2022). In appellate proceedings, the number of units is usually higher. 61 bb) Lawyer expenses Generally, lawyers may demand reimbursement of the expenses incurred, e.g., travel expenses. 62 They are calculated on the basis of actual costs or on flat rates. 63 b) Remuneration Agreements Generally, lawyers and their clients are free to agree on a remuneration that deviates from the RVG. According to a study of 2006, single lawyers and small law firms (up to 5 lawyers) achieve about 27 %, bigger law firms (more than 20 lawyers) about 78 % of their turnover on the basis of remuneration agreements. 64 Therefore, legislative modifications and especially limitations of the statutory fees and expenses do mostly affect the activities of smaller law firms.65 As remuneration agreements are more often agreed with commercial clients, their significance for the lawyer’s turnover also depends on the client structure. 66 Unsurprisingly the same study found that the most common reason for concluding such agreements is that statutory fees are considered too low. Other reasons, e.g., the estimation that statutory fees are too high, the client’s wish or the law firm’s general policy play a subordinate role. 67 The remuneration can be calculated in various ways, e.g., by stipulating a time-based fee (most common) or a flat-rate fee, by modifying the statutory remuneration or by combining different elements. 68

59 

Cf. BGH, NJW 2007, 2187, 2188; OLG Köln, BeckRS 2011, 18420. Cf. no.  3200 et seq. of the VV RVG. 61  In appellate proceedings the lawyer usually receives 1.6 units of fees for the proceedings, cf. no.  3200 of the VV RVG. 62  Cf. ss 675(1), 670 of the BGB (German Civil Code, Bürgerliches Gesetzbuch), Preliminary Note no.  7(1) of the VV RVG. 63  Cf. no.  7000 et seq. of the VV RVG. 64  Hommerich/Kilian, Vergütungsvereinbarungen deutscher Rechtsanwälte, 2006, 33 et seq. 65  Kilian, Anwaltsblatt 2013, 882, 882. 66  Hommerich/Kilian, Vergütungsvereinbarungen deutscher Rechtsanwälte, 2006, 34 et seq. 67  Ibid., 42 et seq. 68  Schons, Anwaltsblatt Online 2020, 372, 373 et seq. 60 

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However, remuneration agreements must respect certain formal and substantial requirements provided for by the RVG and the German Federal Lawyers’ Act (Bundesrechtsanwaltsordnung, BRAO). For example, they must be made in writing (section 3a paragraph 1 sentence 1 of the RVG) 69 and the remuneration cannot be inappropriately high (section 3a paragraph 3 of the RVG)70 . According to the German Federal Court of Justice (Bundesgerichtshof – BGH), the fact that a remuneration exceeds the statutory fees by more than five times is an indication of its inappropriateness, however, it may still be appropriate in the specific case, e.g. because of the difficulty of the case or the position of the lawyer.71 The Federal Constitutional Court (Bundesverfassungsgericht – BVerfG) held with regard to criminal proceedings that the general interest to protect the client against the risk of excessive fee demands – arising from the lack of price competition due to insufficient market transparency – provides a justification for the appropriateness limit, even though this limit interferes with the lawyer’s occupational freedom. In contrast, the Federal Constitutional Court did not consider the appropriateness limit to be justified as a means of guaranteeing an effective access to justice. Instead, the Court held that for criminal proceedings, the law had other mechanisms assuring sufficient legal counsel and that the market provided for lawyers willing to work for the statutory fees.72 Whether this constitutional assessment can be applied in full to civil proceedings may be doubtful especially regarding the Court’s assumption that a lawyer can always be found who would be willing to work for the standard fees.73 Remuneration agreements that contain lower fees and expenses than the RVG and success-oriented remuneration agreements are only permitted under certain circumstances which will be further discussed below.74 3. Other costs of litigation During a civil proceeding, a party may occur additional costs, e.g., personal travel expenses or losses of profit. Some costs of the taking of evidence are also part of these additional costs, e.g., the remuneration of privately contracted experts.75 69  If this provision is violated, the lawyer generally may not demand a remuneration higher than the statutory remuneration (s 4b sentence 1 of the RVG). 70  If this provision is violated, the remuneration can be reduced to the appropriate amount, the minimum being the statutory remuneration (s 3a(3) sentence 1 of the RVG). 71  BGHZ 184, 209 = BGH, NJW 2010, 1364 para 48 et seq. 72  BVerfG, NJW-RR 2010, 259 para 19 et seq. 73  Cf. on this problem of finding a lawyer for cases with small dispute values already supra III. 2. a) aa). 74 Cf. infra VI. 2. b) aa) and VI. 2. b) bb). 75  Cf. BGHZ 192, 140 = BGH, NJW 2012, 1370 on the reimbursement of privately contracted experts’ remuneration.

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Furthermore, there may be out-of-court conciliation efforts which may incur costs, such as the fee of the dispute-resolution body. In some cases, pre-litigation conciliation proceedings are even mandatory.76 However, these cases are rare. In 2020, only 195 out of 856,035 proceedings terminated before Local Courts were preceded by such conciliation procedures.77 4. Example calculations In 2020, the average net income of an employee in Germany was 2,088 EUR.78 The costs of a legal dispute at a court of first instance, ending with a judgment, in which both parties would be represented by a lawyer are, including postal flat rates and VAT, excluding other expenses, as follows:79 453.16 EUR for a 100 EUR claim (very small claim), 745.20 EUR for a 1,000 EUR claim (small claim), 4,498.90 EUR for a 10,000 EUR claim (small to medium claim) and 13,281.86 EUR for a 100,000 EUR claim (high value claim). The numbers illustrate that the relative risk decreases noticeably as the dispute value increases. In case of a 100 EUR claim, the costs exceed the dispute value by more than four times whereas in case of a 10,000 EUR claim, costs are less than half of the dispute value. This disproportion often leads to ‘rational apathy’ of consumers in pursuing very small claims (individually) and is a barrier to access to justice.80 On the other hand, regarding high value claims, the absolute cost risk can easily exceed an individual’s financial means which can equally deter them from pursuing their claims, even if the cost-benefit ratio argument is in favour of a court proceeding.

76  Cf. s 15a of the German Introductory Act to the Code of Civil Procedure (Einführungs­ gesetz ZPO, EGZPO). 77 Cf. the Report of the German Federal Statistic Agency, Statistisches Bundesamt, Zivilgerichte – Fachserie 10 Reihe 2.1 – 2020, 2021, 30, https://www.destatis.de/DE/Themen/ Staat/Justiz-Rechtspflege/Publikationen/Downloads-Gerichte/zivilgerichte-2100210 207004.html (last accessed February 7, 2022). 78  Cf. the statistics of the German Federal Statistic Agency, Statistisches Bundesamt, VGR des Bundes – Inlandsproduktberechnung – Vierteljahresergebnisse – Fachserie 18 Reihe 1.2 – 3. Vierteljahr 2021, 2021, 1.8, https://www.destatis.de/DE/Themen/Wirtschaft/Volkswirt schaftliche-Gesamtrechnungen-Inlandsprodukt/Publikationen/Downloads-Inlandspro dukt/inlandsprodukt-vierteljahr-pdf-2180120.pdf (last accessed February 7, 2022). 79  The costs are calculated as follows: 3.0 units of court fees (no.  1210 of the KV GKG) + 2 x (2.5 units of lawyer fees [no.  3100, 3104 of the VV RVG] + 20 EUR lawyer expenses [no.  7001 et seq. of the VV RVG] + 19 % VAT), cf. the Online Calculator: juris GmbH, Der juris Pro­ zesskostenrechner, https://www.juris.de/jportal/nav/services/prozesskostenrechner/index. jsp (last accessed February 7, 2022). 80  Cf. Bundestagsdrucksache no.  19/27673, 2, 14, https://dserver.bundestag.de/btd/19/276/ 1927673.pdf (last accessed February 7, 2022).

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IV. Cost allocation regime Regarding the final allocation of the costs, the German Code of Civil Procedure (Zivilprozessordnung, ZPO) generally follows the ‘loser pays’ principle but also provides for a number of exceptions to this principle and for some limitations to the compensation. 1. Basic rule: ‘loser pays’ principle Generally, the party that has been unsuccessful in the dispute is to bear the costs of the legal dispute (section 91 paragraph 1 sentence 1 of the ZPO). In the event a party prevails in part, the costs are usually shared.81 The ‘loser pays’ principle is justified by the idea that the loser has given cause to the legal dispute and therefore to the costs (Veranlassungsprinzip); the losing defendant by his disregard of the plaintiff’s request, the losing plaintiff by conducting an unnecessary lawsuit.82 Furthermore, the principle is said to facilitate access to justice as the person seeking justice does not risk bearing the costs if the case is successful. 83 However, whether the ‘loser pays’ principle really meets its objectives largely depends on the parties’ ability to correctly assess the prospects of their claim or defence. Over-optimism can lead to undesired lawsuits, risk aversion may deter a person from bringing before court an objectively well-founded claim or to give in to an unjustified claim for fear of being sued.84 Anyway, the principle can at least foster an economic litigation: A party who knows that in case of failure it will have to bear all the costs will carefully consider whether to bring its case to the courts.85 The ‘loser pays’ principle generally also applies in appellate proceedings. The party who unsuccessfully lodges an appeal must pay its costs (section 97 paragraph 1 of the ZPO). In case of success in the last instance, the adverse party must pay the cost of all previous court proceedings, even if it won in the first instance.86 Likewise, the costs of compulsory enforcement are borne by the debtor (section 788 paragraph 1 sentence 1 of the ZPO). 81  According to s 92(1) sentence 1 of the ZPO the costs can also be cancelled against each other. In that case, the parties must bear the court costs at one half each (s 92(1) sentence 2 of the ZPO). 82  Jaspersen, in: BeckOK ZPO, 43. Ed. 1.12.2021, ZPO §  91 para 7. 83  Jaspersen, in: BeckOK ZPO, 43. Ed. 1.12.2021, ZPO §  91 para 7; Schulz, in: MüKoZPO, 6th ed. 2020, ZPO Vor §  91 para 1. 84  Wagner, in: Gottwald (ed.), Litigation in England and Germany, 2010, 149–184, 174. 85  Jaspersen, in: BeckOK ZPO, 43. Ed. 1.12.2021, ZPO §  91 para 7; Schulz, in: MüKoZPO, 6th ed. 2020, ZPO Vor §  91 para 2; Wagner, in: Gottwald (ed.), Litigation in England and Germany, 2010, 149–184, 174 et seq.; Hess/Hübner, in: Basedow/Kischel/Sieber (eds.), German National Reports to the 18th International Congress of Comparative Law, 2010, 161–179, 162. 86  Hess/Hübner, in: Basedow/Kischel/Sieber (eds.), German National Reports to the 18th

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In case of a settlement, by definition, there is no loser. Usually, the settlement contains an agreement as to costs. Otherwise, the costs are cancelled against each other, i.e., every party bears its own lawyers’ fees and other expenses, and the court costs are equally split (sections 98, 92 paragraph 1 sentence 2 of the ZPO).87 2. Exceptions and limitations a) Exceptions to the ‘loser pays’ principle Under the ‘loser pays’ principle, the court generally does not enjoy much discretion. However, German civil procedure law provides for certain exceptions to the ‘loser pays’ principle, including some that actually grant the court a certain margin of discretion: If, for example, the plaintiff has slightly over-claimed, according to section 92 paragraph 2 no.  1 of the ZPO the court may refrain from the trouble of calculating and imposing on the plaintiff a corresponding cost ratio as required by the ‘loser pays’ principle when strictly interpreted.88 In general, however, exceptions to the ‘loser pays’ principle serve less to give the court more flexibility, but rather follow, just like the principle itself, the idea of imposing the costs on the party that caused them.89 Thus, they intend to assure cost fairness by sanctioning procedural ineffectiveness.90 Examples of exceptions: Where the defendant’s pre-litigation conduct did not give cause for an action to be brought, the plaintiff must bear the costs of the proceedings should the defendant immediately acknowledge the claim (section 93 of the ZPO). Where the procedural means of challenge or defence brought have not met with success, their costs may be imposed on the party that has availed itself of such means, even in those cases in which it has prevailed on the merits of the case (section 96 of the ZPO). Section 97 paragraph 2 of the ZPO equally aims at assuring cost fairness by sanctioning procedural lack of diligence91 and is intended to accelerate civil proceedings92: The costs of appellate International Congress of Comparative Law, 2010, 161–179, 163; Schulz, in: MüKoZPO, 6th ed. 2020, ZPO §  97 para 14. 87  Flockenhaus, in: Musielak/Voit (eds.), Zivilprozessordnung, 18th ed. 2021, ZPO §   98 para 7. 88  However, this only applies provided that the excess amount has not caused any or has caused only slightly higher costs. S 96 of the ZPO also grants discretion when it provides that the court may, but is not obliged to, impose on a party the costs of an unsuccessful means of attack or defence. 89  Jaspersen, in: BeckOK ZPO, 43. Ed. 1.12.2021, ZPO §  93 para 1 and §  96 para 1. 90  Ibid., §  96 para 1. 91  Jaspersen, in: BeckOK ZPO, 43. Ed. 1.12.2021, ZPO §  97 para 1; Hess/Hübner, in: Basedow/Kischel/Sieber (eds.), German National Reports to the 18th International Congress of Comparative Law, 2010, 161–179, 164. 92  BGH, NJW-RR 2005, 866, 867; NJOZ 2016, 1793 para 38; Jaspersen, in: BeckOK ZPO, 43. Ed. 1.12.2021, ZPO §  97 para 1.

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proceedings are exceptionally imposed on the prevailing party if it has prevailed by reason of a new submission of facts or evidence, or on the basis of new means of attack or new defence submissions that it would have been able to assert and file previously. Apart from this consideration of (unnecessary) cost causation, as already indicated, the idea of simplification also plays a role in justifying exceptions to the general ‘loser pays’ principle. Again: The court may impose the entire costs of the proceedings on the losing party, although the prevailing party could not substantiate its entire claim (section 92 paragraph 2 no.  1 of the ZPO).93 Section 98 sentence 1 of the ZPO provides for another simplification:94 In case of a judicial settlement the costs are deemed to have been cancelled against each other unless otherwise agreed by the parties to the dispute. b) Limitations to the compensation The civil procedural claim of the succeeding party against the losing party for reimbursement of costs (prozessualer Kostenerstattungsanspruch) is generally limited to the ‘costs of the legal dispute’ which ‘were required in order to bring an appropriate action or to appropriately defend against an action brought by others’ (section 91 paragraph 1 sentence 1 of the ZPO).95 Other costs incurred by the succeeding party, especially pre-court lawyer costs, are reimbursed only if the party has a claim for recovery under substantive law (materieller Kosten­ erstattungsanspruch), such as a contractual or non-contractual claim for damages.96 Generally, the loser must pay all the court costs. If the winning party has already paid (part of) these costs, it can claim compensation from the loser. Regarding the lawyer costs, only the statutory fees and expenses are to be compensated (section 91 paragraph 2 sentence 1 of the ZPO), even if the winner has incurred higher amounts due to a remuneration agreement.97 This restriction ensures that the cost risk remains calculable for the party.98 On the other hand, in cases where legal representation is not specifically ‘required’, compensation is also due, regardless if the case facts or law are considered simple.99 93 Cf. Flockenhaus, in: Musielak/Voit (eds.), Zivilprozessordnung, 18th ed. 2021, ZPO §  92 para 1. 94  Ibid., §  98 para 1. 95  Regarding enforcement procedures see s 788(1) sentence 1 of the ZPO, according to which, to the extent the costs of compulsory enforcement were required (s 91 of the ZPO), they must be borne by the debtor; they are to be recovered concurrently with the claim subject to compulsory enforcement. 96  Jaspersen, in: BeckOK ZPO, 43. ed. 1.12.2021, ZPO §  91 para 24. 97  Schulz, in: MüKoZPO, 6th ed. 2020, ZPO §  91 para 61. 98  BGH, NJW-RR 2005, 499; Hess/Hübner, in: Basedow/Kischel/Sieber (eds.), German National Reports to the 18th International Congress of Comparative Law, 2010, 161–179, 162. 99 Cf. Jaspersen, in: BeckOK ZPO, 43. Ed. 1.12.2021, ZPO §  91 para 164.

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Other costs of the legal dispute, e.g. travel expenses or the remuneration of privately contracted experts, must (only) be paid to the extent that these costs were necessary and appropriate.100 Thereby, the parties are encouraged to behave in a cost-saving manner (Kostenschonungsprinzip) and to conduct a cost-efficient litigation.101 The compensation for the opponent regarding travel or time the opponent has lost by having been required to make an appearance at hearings is usually calculated in the same way as the compensation of a witness (section 91 paragraph 1 sentence 2 of the ZPO). The flat rates regulated in the German Court Costs Act (Gerichtskostengesetz, GKG), the German Act on the Remuneration of Lawyers (Rechtsanwaltsvergütungsgesetz, RVG) and in the German Judicial Remuneration and Compensation Act (Justizvergütungs- und -entschädigungsgesetz, JVEG) provide for predictability and legal certainty.102 Fees arising because of conciliation proceedings before a dispute-resolution body established or recognised by a department of justice of a German state (Landesjustizverwaltung) are generally compensated (section 91 paragraph 3 of the ZPO). Whether this applies to lawyer costs produced by such proceedings and to the costs arising as a result of other extrajudicial dispute resolution is controversial.103 At least, lawyer costs produced by a mandatory conciliation proceeding should be subject to reimbursement.104 A party will hardly be able to judge whether it is reasonable to accept a conciliation proposal if it does not know what rights it is likely to be entitled to. Therefore, a lawyer’s representation is also advisable here.

V. Mechanisms of cost reduction Cost reduction may be achieved by a reduction of court and lawyer fees and expenses, by cost effective proceedings and by collective actions. However, the possibilities to resort to such mechanisms, especially to alternative dispute resolution and to collective actions, are rather limited under German law.

100  According to the German Federal Court of Justice (Bundesgerichtshof – BGH) the remuneration of privately contracted experts can be ‘appropriate’ even when it derives from the remuneration provided for by the JVEG regarding court-appointed experts, BGH, NJW 2007, 1532 para 11. 101  Schulz, in: MüKoZPO, 6th ed. 2020, ZPO §  91 para 2. 102  Ibid., Vor §  91 para 2. 103  Jaspersen, in: BeckOK ZPO, 43. Ed. 1.12.2021, ZPO §  91 para 90 et seq.; Schulz, in: MüKoZPO, 6th ed. 2020, ZPO §  91 para 35. 104  Jaspersen, in: BeckOK ZPO, 43. Ed. 1.12.2021, ZPO §  91 para 90; Schulz, in: MüKoZPO, 6th ed. 2020, ZPO §  91 para 36; Saenger ZPO/Gierl, 9th ed. 2021, §  91 para 6. The German Federal Court of Justice did not apply s 91 of the ZPO to lawyer costs produced by a voluntary conciliation proceeding, BGH, NJW-RR 2019, 378 para 8 et seq.

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1. Reduction of court and lawyer fees In principle, the dispute value cannot exceed 30 Mio. EUR (section 39 paragraph 2 of the GKG) which limits both court and lawyer (section 23 paragraph 1 sentence 1 of the RVG) fees. In some cases, the cap is even lower, e.g., in non-pecuniary disputes (1 Mio. EUR, section 48 paragraph 2 sentence 2 of the GKG). The caps are intended to limit the costs and to enable the parties to calculate their risks.105 Their objective is ‘to avoid disproportionately high fees in the case of high dispute values in the interest of effective justice.’106 A similar effect can be achieved by modifying the way of setting the dispute value. For example, in tenancy disputes, the value which determines the fee (section 48 paragraph 1 sentence 1 of the GKG) is calculated in deviation from the general provisions (sections 8, 9 of the ZPO: Limitation to twenty-five times the annual rent respectively three and a half times the annual value) in order to reduce the costs of such disputes (‘social protection legislation’107).108 However, one should be aware that such caps are not unproblematic. If the actual value of a dispute is much higher than the statutory maximum amount and the effort required to settle it properly is correspondingly greater, then law firms may be reluctant to take on the case. This danger is particularly acute in the case of civil procedural actions for a model declaratory judgement (Musterfeststel­ lungsurteil) and actions for an injunction under the German Injunctions Act (Unterlassungsklagengesetz, UKlaG). In these cases, the dispute value may not exceed 250,000 EUR (section 48 paragraph 1 sentence 2 of the GKG).109 For example, in the case of the model declaratory action against Volkswagen AG, which was joined by approximately 446,000 buyers of manipulated diesel vehicles, this amount fell far short of the actual value of the claims of these buyers.110 105  Dörndorfer, in: BDZ, 5th ed. 2021, GKG §  39 para 3; Schumann, NJW 1982, 1257, 1258; Bundestagsdrucksache no.   15/1971, 154, https://dserver.bundestag.de/btd/15/019/1501971. pdf (last accessed February 7, 2022): ‘Only in this way can it be avoided that disproportionately high fees arise in the case of high dispute values. The cost risk associated with litigation is reduced to a reasonable level for the parties in proceedings with high dispute values’. 106  BVerfGE 118, 1, 22. 107  Cf. BGH, NJW 1967, 2263, 2263 regarding a former but similar provision. 108  Cf. s 41 of the GKG; Dörndorfer, in: BDZ, 5th ed. 2021, GKG §  41 para 1; Schumann, NJW 1982, 1257, 1258. 109 Cf. infra V. 4. 110  The proceedings were dropped by the claimant, i.e. the Federation of German Consumer Organisations (vzbv) in April 2020 after a general agreement was concluded between the parties in February 2020, in which Volkswagen undertook to make an offer to about 262.500 consumers concerned to conclude an agreement on compensation. The compensation sums to be paid to each consumer ranged from 1,350 EUR to 6,257 EUR depending on the vehicle concerned; the terms of the general agreement between the vzbv and Volkswagen are available at https://www.musterfeststellungsklagen.de/sites/default/files/2020-08/Rah menvergleich_zwischen_vzbv_und_Volkswagen_28022020_1.pdf (last accessed February 7, 2022).

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In other situations, cost law allows the court to reduce the dispute value in favour of only specific parties. For example, in some corporate disputes, if the burden of costs would ‘gravely jeopardize’ the economic situation of a party, the court may order that its duty to pay court fees shall be assessed based on only a part of the dispute value (section 247 paragraph 2 of the German Stock Corporation Act [Aktiengesetz, AktG]). This possibility of splitting the dispute value in favour of one party equally serves to encourage financially weaker people (e.g., a stockholder) to bring high value cases before court.111 At the same time, it prevents unnecessary relief for the financially stronger party (e.g., a stock corporation). 2. Reduction of court and lawyer expenses Several provisions of the ZPO aim to reduce the costs of taking evidence. For example, since 2004,112 the court may take evidence ‘in the manner it deems suitable’, provided that it has obtained the consent of the parties to do so (section 284 sentence 2 of the ZPO), which allows to derive from the usual formalities of taking evidence and e.g. interview a witness via e-mail.113 Furthermore, it is now possible to use expert opinions obtained from other proceedings (section 411a of the ZPO).114 The significance of the innovation is limited however, because only expert opinions from proceedings in which the taking of evidence follows the same essential principles as in civil proceedings can be considered.115 Online-hearings are generally possible but not mandatory (section 128a of the ZPO). Whether they take place depends on the court’s discretion and its technical equipment116 . The court files of the dispute may be kept electronically (section 298a paragraph 1 sentence 1 of the ZPO). From 2026, the electronic file will be mandatory (section 298a paragraph 1a sentence 1 of the ZPO). The parties and lawyers generally can submit their documents electronically (section 130a of the ZPO). Since 2022, lawyers must make use of this opportunity (section 130d of the

111 

Vatter, in: BeckOGK, 1.9.2021, AktG §  247 para 17; Schumann, NJW 1982, 1257, 1259. the First Act on the Modernization of the Judiciary (Erstes Gesetz zur Moderni­ sierung der Justiz, 1. Justizmodernisierungsgesetz), 24.08.2004, BGBl. 2004 I, 2198. 113 Bundestagsdrucksache no.   15/1508, 13, 18, https://dserver.bundestag.de/btd/15/015/ 1501508.pdf (last accessed February 7, 2022). 114  Bundestagsdrucksache no.  15/1508, 19 et seq., https://dserver.bundestag.de/btd/15/015/ 1501508.pdf (last accessed February 7, 2022). 115  Scheuch, in: BeckOK ZPO, 43. Ed. 1.12.2021, ZPO §  411a para 6. 116  Von Selle, in: BeckOK ZPO, 43. Ed. 1.12.2021, ZPO §  128a para 2. 112  Cf.

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ZPO).117 These digitalization measures can reduce both court and lawyer expenses, e.g., by avoiding travel costs or costs of printouts.118 3. Cost effective proceedings a) Judicial proceedings At the Local Court level parties do not need to be represented by lawyers (section 78 paragraph 1 of the ZPO). They may pursue the legal dispute themselves (section 79 paragraph 1 sentence 1 of the ZPO) or be represented by their employees, family members or jurists, consumer associations or – in some simple proceedings119 – by collection service providers (section 79 paragraph 2 of the ZPO). The fact that a lawyer is not required aims at providing low-cost access to justice to the litigants.120 The proceedings usually concern small dispute values (up to 5,000 EUR, section 23 no.  1 of the GVG) but also, independent of the amount, some special matters, e.g., residential tenancy law (section 23 no.  2a of the GVG). If the dispute value does not exceed 600 EUR, the court may decide at its equitably exercised discretion on how to implement its proceedings (section 495a of the ZPO). However, this authorisation to shape the procedure more efficiently is of little practical significance. This is mainly because the fundamental procedural rights, in particular the right to be heard, often do not allow for any significant deviations from the regular course of proceedings.121 Still, the provision can make it possible for a court decision to be reached without an oral hearing,122 which may save costs. Yet, in 2020, only in 76,320 of the 856,035 cases terminated before Local Courts, neither party was represented by a law-

117  In two states (Länder), regarding certain courts, lawyers have already been obliged to use the so called ‘special electronic lawyers’ mailbox’ (besonderes elektronisches Anwaltspost­ fach) since 2020 (Schleswig-Holstein) or 2021 (Bremen), cf. article 24 paragraph 2 of the Act on the Promotion of Electronic Legal Relations with the Courts (Gesetz zur Förderung des elek­ tronischen Rechtsverkehrs mit den Gerichten), 10.10.2013, BGBl. 2013 I, 3786, in conjunction with the respective state regulations. 118  Cf. Bundestagsdrucksache no.  18/9416, 3 et seq., https://dserver.bundestag.de/btd/18/ 094/1809416.pdf (last accessed February 7, 2022) (regarding the electronic file); Bundestagsdrucksache no.   14/6036, 119 et seq., https://dserver.bundestag.de/btd/14/060/1406036.pdf (last accessed February 7, 2022) (regarding online-hearings). 119  Cf. s 79(2) no.  4 of the ZPO. 120 Bundestagsdrucksache no.   16/3655, 34, https://dserver.bundestag.de/btd/16/036/1603 655.pdf (last accessed February 7, 2022); Niesler, in: BeckOK GVG, 13. Ed. 15.11.2021, GVG §  23 para 2; Pabst, in: MüKoZPO, 6th ed. 2022, GVG §  23 para 1. 121 Cf. e.g. Herget in: Zöller, Zivilprozessordnung, 34th ed. 2022, ZPO §  495a para 1 and 8 et seq. with further references, according to which the provision hardly brings any real easement. 122  Toussaint, in: BeckOK ZPO, 43. Ed. 1.12.2021, ZPO §  495a Introduction.

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yer.123 About 69 % of the proceedings before Local Courts ended without a hearing.124 Using summary proceeding for a payment order (sections 688 et seq. of the ZPO) instead of a traditional contradictory proceeding can also reduce costs, at least if the opponent accepts the payment order and therefore no regular adversarial proceeding (pursuant to section 696 of the ZPO) follows. b) Alternative dispute resolution Even though out of state court dispute resolution may traditionally be less pronounced in Germany than in some other countries German law provides certain frameworks for mechanisms of alternative dispute resolution (ADR), such as arbitration,125 conciliation126 or mediation127. A dispute resolution by way of a conciliation body’s proposal or through the parties finding their own solution may be less expensive than judicial proceedings. As seen above, in some rare cases, before bringing a case to court, a conciliation procedure is mandatory.128 Recently, particularly B2C-dispute resolution has been encouraged: In 2016, to implement the Directive 2013/11/EU (ADR-Directive), the German Consumer Dispute Settlement Act (Verbraucherstreitbeilegungsgesetz, VSBG) was passed. Consumers do not need to be represented by a lawyer (section 13 paragraph 2 of the VSBG) and usually, in B2C disputes the ADR entity must not demand a remuneration for its services from the consumer (sections 23, 31 of the VSBG). To lower the barriers of initiating such a proceeding, the European Commission has also established an Online-Dispute-Resolution platform.129

123  Statistisches Bundesamt, Zivilgerichte – Fachserie 10 Reihe 2.1 – 2020, 2021, 30, https:// www.destatis.de/DE/Themen/Staat/Justiz-Rechtspflege/Publikationen/Downloads-Geri chte/zivilgerichte-2100210207004.html (last accessed February 7, 2022); cf. Hess/Hübner, in: Basedow/Kischel/Sieber (eds.), German National Reports to the 18th International Congress of Comparative Law, 2010, 161–179, 166: ‘Civil litigation in Germany is dominated by lawyers’. 124  Statistisches Bundesamt, Zivilgerichte – Fachserie 10 Reihe 2.1 – 2020, 2021, 30, https:// www.destatis.de/DE/Themen/Staat/Justiz-Rechtspflege/Publikationen/Downloads-Geri chte/zivilgerichte-2100210207004.html (last accessed February 7, 2022). 125  Cf. ss 794 no.  4a, 1025 et seq. of the ZPO. 126  In Germany, conciliation bodies are traditionally strongly organized along the different economic and social sectors. This is still evidenced today e.g. by the diverse list of consumer dispute resolution entities pursuant to s 33(1) of the German Consumer Dispute Settlement Act (Verbraucherstreitbeilegungsgesetz, VSBG), cf. https://www.bundesjustizamt.de/DE/ SharedDocs/Publikationen/Verbraucherschutz/Liste_Verbraucherschlichtungsstellen.html (last accessed February 7, 2022). 127 Cf. e.g. the German Mediation Act (Mediationsgesetz, MediationsG). 128 Cf. supra III. 3. 129  Cf. Regulation (EU) no.  524/2013 of the European Parliament and of the Council of 21 May 2013 on online dispute resolution for consumer disputes and amending Regulation (EC) no.  2006/2004 and Directive 2009/22/EC (ODR-Regulation).

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These measures especially aim at providing ‘low-cost’130 ways of dispute resolution between consumers and traders. Furthermore, in 2021, the German Federal Ministry of Justice and Consumer Protection has launched a project to develop an online litigation tool.131 4. Collective actions Regarding class or group actions, German procedural law has traditionally been rather restrictive. Genuine class or group actions, in which an agent acts as the sole plaintiff and seeks damages on behalf of the entire group of injured parties, have so far been rather alien to German law. Still, a plurality of persons may jointly sue or be sued as joined parties (sections 59 et seq. of the ZPO) even though the various plaintiffs or defendants are not merged into one party. Instead, the various procedural relationships between plaintiff(s) and defendant(s) are only aggregated, but usually stay legally separated. However, such an aggregation of proceedings can still lead to a reduction of costs, especially if multiple persons are represented by the same lawyer.132 If joined parties lose, they are generally liable for the compensation of costs on a per capita basis (section 100 paragraph 1 of the ZPO).133 However, if the joined parties’ participation in the legal dispute differs significantly, the court may decide at its discretion to base its cost ruling on such participation (section 100 paragraph 2 of the ZPO) and where a joined party has availed itself of a special means of challenge or defence, the remaining joined parties shall not be liable for the costs caused thereby (section 100 paragraph 3 of the ZPO). In specific cases, explained hereafter, German law allows entities to sue in the interest of a group of people. Apart from the fact that the existing collective action instruments have only limited appeal because they do not yet include the right to seek damages for the benefit of a group of injured parties, the costs of such collective actions may also deter entities with standing to sue.134 Usually, the suing body, typically a consumer association, has significantly less financial resources than the defendant, typically a large company. The cost barrier that

130 

Cf. Recital 2 of the ODR-Regulation; Recital 4 of the ADR-Directive. BMJV, Digitale Zugänge zu den Gerichten – BMJV startet Projekt für ein Online-Klagetool, 2021, https://www.bmj.de/SharedDocs/Artikel/DE/2021/0819_Online_Kla getool.html (last accessed February 7, 2022). 132  Cf. s 7 of the RVG, no.  1008 of the VV RVG; Schultes, in: MüKoZPO, 6th ed. 2020, ZPO §  59 para 25. Generally, the joined parties are free to mandate separate lawyers, however there are some limitations, see BGH, NJW 2012, 319 para 6 et seq.; OLG München, BeckRS 2013, 198424 para 15 et seq. 133  However, in the event that several defendants are sentenced as joint and several debtors, they are also liable for the compensation of costs as joint and several debtors (s 100(4) of the ZPO). 134  Gsell, Common Market Law Review 2021, 1365, 1393 et seq. 131 Cf.

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exists for the individual consumer is shifted to the level of the suing institution.135 In disputes under capital markets law, model case proceedings are possible under the German Act on Model Case Proceedings in Disputes under Capital Markets Law (Kapitalanleger-Musterverfahrensgesetz, KapMuG). The model case proceeding is based on several similar main proceedings initiated by different plaintiffs. To minimize the cost risk, the model proceeding does not trigger additional court or lawyer fees. However, to compensate the efforts of the model plaintiff’s lawyer, the court can allow him to charge a special fee which is paid by the state treasury (section 41a of the RVG) and will be part of the court expenses.136 The costs incurred by the model case defendant are generally on a pro rata basis part of the costs of the respective main proceedings (section 24 paragraph 2 of the KapMuG) which reduces the cost risks of the individual plaintiff.137 To the extent that a plaintiff must bear the costs of an appeal, its reimbursement obligation is calculated based on the dispute value resulting from the original claim (section 26 paragraph 5 of the KapMuG). Consequently, the defendant may not obtain full compensation. This privilege aims at providing effective access to the appeal proceedings to strengthen investors’ rights.138 The German Injunctive Relief Act (Unterlassungsklagengesetz, UKlaG) which implements the European Injunctions Directive139 allows specified bodies to assert claims for cease-and-desist orders in cases of the violation of certain, especially consumer protective, national and European provisions. The usual cost rules apply so that the cost risk is born by the body being party to the litigation. However, the dispute value fixed by the court as the basis for the calculation of court and lawyer fees140 must not exceed 250,000 EUR (section 48 paragraph 1 sentence 2 of the GKG). Additionally, when setting the dispute value, courts generally consider that the bodies – which usually act in the public interest – must be ‘protected from unreasonable cost risks’.141 Likewise, in case of anticompetitive behaviour or antitrust violations, specified bodies can demand elimination and injunctive relief (section 8 of the Ger135  Cf. on the cost issue Gsell/Meller-Hannich, Die Umsetzung der neuen EU-Verbandsklagenrichtlinie, 2021, 45 et seq., https://www.vzbv.de/sites/default/files/downloads/2021/ 02/03/21-02-04_vzbv_verbandsklagen-rl_gutachten_gsell_meller-hannich.pdf (last accessed February 7, 2022); Gsell/Möllers, in: Gsell/Möllers (eds.), Enforcing Consumer and Capital Markets Law, 2020, 465–498, 482 et seq. 136 Cf. Kroiß, in: HK-RVG, 8th ed. 2021, RVG §  41a para 1 et seq. 137  Riedel, in: Vorwerk/Wolf, KapMuG, 2nd ed. 2020, KapMuG §  24 para 7. 138 Bundestagsdrucksache no.   15/5091, 33, https://dserver.bundestag.de/btd/15/050/150 5091.pdf (last accessed February 7, 2022) (concerning s 19, the old version of s 26 of the KapMuG). 139  Directive 2009/22/EC of the European Parliament and of the Council of 23 April 2009 on injunctions for the protection of consumers’ interests (Injunctions Directive). 140 Cf. supra III. 1. a) and III. 2. a) aa). 141  BGH, BeckRS 2017, 103961 para 4.

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man Act against Unfair Competition [Gesetz gegen den unlauteren Wettbe­ werb, UWG], section 33 of the German Act against Restraints of Competition [Gesetz gegen Wettbewerbsbeschränkungen, GWB]) and skimming of profits (section 10 of the UWG, section 34a of the GWB). Regarding these claims, the law does not provide for a cap but allows to reduce the dispute value in favour of a party if otherwise the burden of the costs would ‘significantly jeopardize its economic situation’ (section 12 paragraph 3 sentence 1 of the UWG, section 89a paragraph 1 sentence 1 of the GWB). Access to these proceedings shall not be prevented by the cost risk.142 However, profit skimming lawsuits are extremely unattractive for the associations entitled to sue and therefore do not play a major practical role. The associations bear the risk of legal costs if they lose, but conversely, they have no advantage if they win the case. This is because the skimmed profit goes to the state treasury, not to the associations bringing the lawsuit. In 2018, the model declaratory action (Musterfeststellungsklage) was introduced (sections 606 et seq. of the ZPO). It allows qualified bodies to demand the determination of the existence of the prerequisites of a legal relationships between consumers and a trader. However, the model declaratory procedure does not produce an enforceable title. Consumers who register their claims before the first hearing (section 608 of the ZPO, ‘opt-in’) must assert them in a separate proceeding. In that subsequent proceeding the court is bound by the model declaratory judgment (section 613 paragraph 1 of the ZPO). Therefore, the costs, especially the costs of evidence, are usually lower. The registration of a claim does not produce additional lawyer fees (section 19 paragraph 1 no.  1a of the RVG). To reduce the cost risks of the qualified bodies, the dispute value of the model declaratory action fixed by the court cannot exceed 250,000 EUR (section 48 paragraph 1 of the GKG). Still, costs are deemed to be an obstacle to the filing of model declaratory actions.143 Because of the cap the legal remuneration of the plaintiff’s lawyer is relatively low.144 Therefore, lawyers will insist on a remuneration agreement145 and the qualified body will not be reimbursed for the total of its lawyer costs.146 142  Hess/Hübner, in: Basedow/Kischel/Sieber (eds.), German National Reports to the 18th International Congress of Comparative Law, 2010, 161–179, 172. 143  Stadler, in: Musielak/Voit (eds.), Zivilprozessordnung, 18th ed. 2021, ZPO Vor §§  606 ff. para 7; Gsell/Möllers, in: Gsell/Möllers (eds.), Enforcing Consumer and Capital Markets Law, 2020, 465–498, 483 et seq. 144  Stadler, in: Musielak/Voit (eds.), Zivilprozessordnung, 18th ed. 2021, ZPO Vor §§  606 ff. para 7: 8,000 EUR. 145  Especially, the Court cannot allow the lawyer to charge a special fee as it is the case in KapMuG-proceedings (s 41a KapMuG), for criticism see Heese, JZ 2019, 429, 437; Gsell/ Möllers, in: Gsell/Möllers (eds.), Enforcing Consumer and Capital Markets Law, 2020, 465– 498, 483 et seq. 146  Gsell/Meller-Hannich, Die Umsetzung der neuen EU-Verbandsklagenrichtlinie, 2021, 45 et seq., https://www.vzbv.de/sites/default/files/downloads/2021/02/03/21-02-04_vzbv_

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In 2020, the European Union passed the Directive (EU) 2020/1828 on representative actions for the protection of the collective interests of consumers (Representative Action Directive). It allows qualified entities to seek injunctive and redress measures if Union law specified in the Annex or the national law transposing it is violated or infringed. Regarding cost rules, Member States must apply the ‘loser pays’ principle ‘in accordance with conditions and exceptions provided for in national law applicable to court proceedings in general’ (article 12 paragraph 1). In principle,147 individual consumers shall not pay (article 12 paragraph 2). At the same time, Member States must ensure that the costs of the proceedings do not prevent qualified entities from effectively exercising their rights (article 20 paragraph 1). The Directive lists public funding, limitation of applicable court or administrative fees and access to legal aid as examples of possible measures to ensure the effet utile (effectiveness) of the Directive’s representative action regime (article 20 paragraph 2). Member States may also allow qualified entities to require consumers represented in a redress action to pay a modest charge in order to participate (article 20 paragraph 3). Prior to the adoption of the Directive, it was proposed to allow the qualified entity to retain part of the amount won in a redress action for the financing of future actions.148 Assuming that such a deduction exceeds the amount of a ‘modest’ charge then there is considerable reason to believe that such a rule could not be established by national law without violating the Directive. Regarding the implementation into German law, it is proposed to install a dispute value cap of 250,000 EUR for these proceedings.149 Another idea is to pay out the return flow generated from profit skimming actions (section 12 of the UWG, section 34a of the GWB) to the consumer associations.150

VI. Mechanisms of cost distribution The cost burden which is usually imposed on the parties can be eased not only by reducing but also by redistributing the costs of a legal dispute. Different public and private mechanisms aim at (partially) relieving the parties, especially parties with limited financial means from the cost risk. However, they are not all equally effective. verbandsklagen-rl_gutachten_gsell_meller-hannich.pdf (last accessed February 7, 2022) and supra V. 1. 147  For exceptions see art 12(3). 148  Gsell/Möllers, in: Gsell/Möllers (eds.), Enforcing Consumer and Capital Markets Law, 2020, 465–498, 485. 149  Gsell/Meller-Hannich, Die Umsetzung der neuen EU-Verbandsklagenrichtlinie, 2021, 45–46, https://www.vzbv.de/sites/default/files/downloads/2021/02/03/21-02-04_vzbv_ver bandsklagen-rl_gutachten_gsell_meller-hannich.pdf (last accessed February 7, 2022). 150  Ibid., 50.

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1. Public mechanisms a) Assistance with costs of the legal dispute A party is granted public assistance with the costs of the legal dispute (Prozess­ kostenhilfe) under three prerequisites (section 114 paragraph 1 sentence 1 of the ZPO): Firstly, the party must be, due to its personal and economic circumstances, unable to pay the costs of litigation. Secondly, the action it intends to bring or its defence against an action must have sufficient prospects of success. Thirdly, the action or the defence must not seem frivolous.151 The procedure is to assure equal access to justice.152 However, it is limited: Depending on its economic situation, the party is not necessarily fully exempt from paying the court costs and the costs of its lawyer153 but has to pay monthly instalments or has to pay some of the costs out of its assets (section 120 paragraph 1 of the ZPO). Furthermore, the approval of legal aid does not affect the obligation to reimburse the opponent for the cost it has incurred (section 123 of the ZPO). Notably, the losing party must pay the statutory fees and expenses of the opponent’s lawyer. In 2020, German Regional Courts terminated 340,515 first instance proceedings, in 16,135 cases legal aid was demanded and in 11,192 cases the application was approved. Payment by instalment was only ordered in 1,542 cases.154 According to a study, in 2018 the German states expended around 350 Mio. EUR on assistance with costs of the legal dispute. The study also found that since 2007 the costs are declining.155 b) Other public mechanisms Generally, bringing a lawsuit before court requires the payment of court fees in advance (section 12 paragraph 1 of the GKG). However, if the prompt payment 151  This third condition is only significant in special cases. For if there is a prospect of success, legal action is in principle not wanton. According to the legal definition in s 114(2) of the ZPO, legal action or defence is frivolous if a party who cannot claim legal aid would refrain from legal action or defence based on a reasonable assessment of all the circumstances, even though there is a reasonable prospect of success. 152  Wache, in: MüKoZPO, 6th ed. 2020, ZPO §  114 para 1. 153  The conditions under which a party shall be assigned a lawyer as counsel are regulated in s 121 of the ZPO. 154  Statistisches Bundesamt, Zivilgerichte – Fachserie 10 Reihe 2.1 – 2020, 2021, 56, https:// www.destatis.de/DE/Themen/Staat/Justiz-Rechtspflege/Publikationen/Downloads-Gerichte/zivilgerichte-2100210207004.html (last accessed February 7, 2022). 155  Kilian/Dreske (eds.), Statistisches Jahrbuch der Anwaltschaft 2019/2020, 2020, 218, 233 et seq.; Kilian, Anwaltsblatt 2021, 164, 164 et seq.; cf. equally European judicial systems CEPEJ Evaluation Report, Part 1, 2020, 38, https://rm.coe.int/evaluation-report-part-1-eng lish/16809fc058 (last accessed February 7, 2022). However, it is estimated that the actual burden on the state is lower (280–300 Mio. EUR) as the parties‘ repayments are not fully factored in, Kilian/Dreske (eds.), Statistisches Jahrbuch der Anwaltschaft 2019/2020, 2020, 218; Kilian, Anwaltsblatt 2021, 164, 164 note 3.

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of the fees would cause difficulties in view of the plaintiff’s financial situation, there can be an exception (section 14 no.  3 of the GKG). Besides, the court may refrain from demanding the court fees in case of the debtor’s permanent inability to pay (section 10 paragraph 1 of the German Cost Order [Kostenverfügung, KostVfg]). In extrajudicial proceedings, assistance with the costs of legal advice can be granted under certain conditions which are in principle equivalent to those of assistance with the costs of a legal dispute (section 1 of the German Consulting Assistance Act [Beratungshilfegesetz, BerHG]).156 2. Private mechanisms While insurances have traditionally played a major role in Germany when it comes to spreading cost risks, other private mechanisms, such as success-oriented lawyer remuneration or outside litigation funding, have been typically, and are even today, viewed with suspicion. Although regulations have recently been relaxed, German law continues to impose strict limits on such ‘modern’ types of litigation financing. a) Insurances Liability insurances usually cover passive legal protection, notably the costs incurred by the client in defending the claims asserted by a third party, insofar as the expenditure of the costs is necessary under the circumstances (section 101 paragraph 1 sentence 1 of the German Insurance Contract Act [Versicherungsver­ tragsgesetz, VVG]).157 The costs of such an insurance vary depending on the insured damage. A basic private liability insurance with a coverage sum of 10 Mio. EUR costs about 30 EUR a year. Professional liability insurances are much more expensive. Liability insurances generally only cover damages claims. Legal insurances generally insure the risk of both passive and active legal protection (section 125 of the VVG).158 Basic private legal insurances with a coverage sum of 3 Mio EUR and an insurance deductible of 300 EUR costs about 240 EUR a year.

156  It is estimated that in 2018, around 54 Mio. EUR were spent on assistance with the costs of legal dispute in extrajudicial proceedings, cf. Kilian/Dreske (eds.), Statistisches Jahrbuch der Anwaltschaft 2019/2020, 2020, 217. 157  Hess/Hübner, in: Basedow/Kischel/Sieber (eds.), German National Reports to the 18th International Congress of Comparative Law, 2010, 161–179, 173: ‘passive protection’. 158  Cf. BGH, NJW 2019, 2852.

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Legal insurance is common in Germany.159 In 2020, 47.5 Mio contracts of general liability insurance160 and 23.1 Mio contracts of legal insurances161 were counted in Germany with a population of 83 Mio. Regarding legal insurances the number of contracts has increased by almost 17 % since the turn of the millennium.162 However, legal insurances have their limits: Not every individual can afford the premiums and insurances do not cover all fields of litigation.163 Different insurance companies offer different policies.164 And after mass damage events, one can observe regarding new insurance contracts that corresponding damage scenarios will be excluded from the insurance coverage. Usually, insurance companies do not assess the potential of a claim or a defence as closely as e.g., a litigation funder.165 They assist in gaining access to justice even in case of a low probability of success. Consequently, the incentive for the party to carefully weigh the risks and benefits of a litigation is at least reduced.166 This is not at all unproblematic, because it entails the risk that lawyers with strong advertising power may attract clients with legal expenses insurance and conduct lawsuits on their behalf that have little chance of success, so that the courts are called upon without good reason and unnecessary costs are produced. If a party’s cost risk is sufficiently insured, the party is not entitled to receive assistance with the costs of the legal dispute (sections 114 et seq. of the German Civil Procedure Code [Zivilprozessordnung, ZPO]).167

159  The German market is said to be ‘by far the largest legal protection insurance market in the world’, Kilian/Dreske (eds.), Statistisches Jahrbuch der Anwaltschaft 2019/2020, 2020, 216. The amount of money spent by the state on legal assistance is estimated to be only about 16 % of the amount spent on legal insurance, ibid., 219. 160 Cf. Gesamtverband der Deutschen Versicherungswirtschaft (GDV), Statistisches Taschenbuch der Versicherungswirtschaft 2021, chart 65, https://www.gdv.de/resource/ blob/69974/ce5a0b7c5ad43b0baaf4cb0e7afe2fd4/-iv-schaden-und-unfallversicherung-tab59-89-data.pdf (last accessed February 7, 2022). 161 Ibid. 162 Ibid. 163  BVerfGE 117, 163 para 101. 164  Yet, the German Insurance Association (GDV) has published General Sample terms and conditions which can be used by the insurers, cf. GDV, Allgemeine Bedingungen für die Rechtsschutzversicherung (ARB 2021), 2021, https://www.gdv.de/resource/blob/5904/9dc 6f61037b213cd9d270811e155cbff/01-allgemeine-bedingungen-fuer-die-rechtsschutzversiche rung--arb-2021--data.pdf (last accessed February 7, 2022). 165  Wagner, in: Gottwald (ed.), Litigation in England and Germany, 2010, 149–184, 172 et seq.; Lenz, Anwaltsblatt 2007, 483, 483. Usually, the General Conditions provide for an assessment of the potential of the claim or the defense. However, the insurance company is not completely free, and its evaluation can be challenged by the client (cf. clauses 3.4 of the ARB 2021). 166  Wagner, in: Gottwald (ed.), Litigation in England and Germany, 2010, 149–184, 180. 167  Reichling, in: BeckOK ZPO, 43. Ed. 1.12.2021, ZPO §  115 para 52.

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b) Remuneration Agreements aa) Pro Bono Work Pro Bono Work has gained increasing importance in Germany, especially due to the influence of Anglo-American law firms.168 In 2011 the association ‘Pro Bono Deutschland e.V.’ was founded. Its goal is to ‘help organisations with non-profit objectives and legal seekers with legitimate concerns who do not qualify for state support to meet their legal advice needs and thus provide access to justice.’169 Pro Bono Work is regarded as a complement rather than as a substitute to public mechanisms.170 In 2011, a study found that 66 % of the interviewed lawyers also offered their services pro bono.171 Pro Bono Work is restricted by lawyers’ professional law: In principle, as mentioned above, lawyers must not agree on lower fees than provided for by the German Act on the Remuneration of Lawyers (Rechtsanwaltsvergütungsgesetz, RVG) (section 49b paragraph 1 sentence 1 of the German Federal Lawyers’ Act [Bundesrechtsanwaltsordnung, BRAO]). However, they are allowed to consider special circumstances in the person of the client, in particular the client’s indigence, by reducing or waiving fees or expenses after the mandate has been completed (section 49b paragraph 1 sentence 2 of the BRAO). Besides, in certain cases, success-oriented remuneration is admissible (section 4a of the RVG). Extrajudicial counselling can be provided for free as the remuneration is no longer regulated by the RVG.172 Regarding extrajudicial representation, a lower remuneration can be stipulated if it is still ‘appropriate’ and under certain circumstances, notably if the prerequisites of assistance with the costs of legal assistance are met, the lawyer can waive his remuneration (section 4 of the RVG). People who are not subject to lawyers’ professional law are generally allowed to provide free legal services (section 6 paragraph 1 of the German Act on Outof-Court Legal Services [Rechtsdienstleistungsgesetz, RDG]). In 2008, the law of legal services was substantially liberalised.173 The legislator did not want to ‘hinder (objectively necessary) civic engagement’ anymore.174 The permission especially enables law student associations (‘law clinics’) to provide their servic168 Cf. Heidrich, Die Welt retten: Pro-Bono-Arbeit von Kanzleien, 2021, https://www. azur-online.de/artikel/die-welt-retten-pro-bono-arbeit-von-kanzleien/ (last accessed February 7, 2022). 169  Pro Bono Deutschland e.V., Definition des Pro Bono Deutschland e.V., https://www. pro-bono-deutschland.org/pro-bono-rechtsberatung/ (last accessed February 7, 2022). 170  Seltmann/Dahms, NJW-Spezial 2012, 702, 703. 171  Kilian, Anwaltsblatt 2012, 45, 46. 172  Cf. s 34 of the RVG and Seltmann/Dahms, NJW-Spezial 2012, 702, 703. 173  Cf. the Act on the Reorganization of the Law on Legal Advice (Gesetz zur Neuregelung des Rechtsberatungsrechts), 12.12.2007, BGBl. 2007 I, 2840. 174 Bundestagsdrucksache no.   16/3655, 39, https://dserver.bundestag.de/btd/16/036/160 3655.pdf (last accessed February 7, 2022).

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es.175 However, it is accompanied by some ‘quality assurance requirements to ensure consumer protection’,176 notably, in certain cases, the advisor must be supervised by a qualified jurist (section 6 paragraph 2 of the RDG). bb) Success-oriented lawyer remuneration Success oriented remuneration has been a contentious issue in Germany. In principle, agreements under which remuneration or the amount of fees depend on the outcome of the case or on the success of the lawyer’s work, or under which the lawyer keeps a part of the award made by the court as a fee are not permitted (section 49b paragraph 2 sentence 1 of the BRAO). The prohibition concerns contingency fee (quota litis), ‘no win, no fee’ as well as success premium (uplifts, ‘no win, less fee’) agreements.177 The prohibition aims at guaranteeing the lawyers’ independence, furthermore at protecting the clients from being overcharged by excessive remuneration rates and at promoting procedural equality of arms – usually, it is more difficult for the defendant to agree on a success-based remuneration than for the plaintiff.178 However, there are exceptions: Success oriented remuneration is permitted if the assignment relates to a monetary claim of no more than 2,000 EUR, if a collection service is provided out of court (or in some simple court proceedings179) or if, without such a remuneration agreement, the client would be deterred from pursuing legal action (section 4a paragraph 1 sentence 1 of the RVG). An earlier version of section 49b paragraph 2 sentence 1 of the BRAO did not provide for any exception. However, in 2006, the Federal Constitutional Court (Bundesverfassungsgericht – BVerfG) decided that the lack of exceptions violated the lawyers’ occupational freedom, guaranteed by the Constitution.180 Therefore, in 2008, the law was slightly modified, and at first, the exception that is now the third exception (section 4a paragraph 1 sentence 1 no.  3 of the RVG) was established. At that time, it was required that the client’s economic situation deterred him from taking legal proceedings.181 In 2021, the first and the second exceptions were introduced, and the third exception was extended.182 175  Cf. the Association of Student Legal Advisors (Bund Studentischer Rechtsberater e.V.), http://b-s-r-b.de/der-bsrb/geschichte/ (last accessed February 7, 2022). 176  Bundestagsdrucksache no.  16/3655, 39, https://dserver.bundestag.de/btd/16/036/16036 55.pdf (last accessed February 7, 2022). 177  Cf. BVerfGE 117, 163, 164 et seq. 178  BVerfGE 117, 163, 185. 179  Cf. s 79(2)2 no.  4 of the ZPO. 180  BVerfGE 117, 163. 181  Cf. the Act to Revise the Prohibition on the Agreement of Success oriented fees (Gesetz zur Neuregelung des Verbots der Vereinbarung von Erfolgshonoraren), 12.06.2008, BGBl. 2008 I, 1000, 1001. 182 Cf. the Act to Promote Consumer-Oriented Offers in the Legal Services Market

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The first exception considers the fact that bringing very small and small claims to court may seem irrational if the party must fear to bear all the costs in case of a defeat.183 The second exception was introduced to achieve equal treatment of lawyers and collection service providers in debt collection (Inkasso) regarding the admissibility of success fees.184 To the latter lawyers’ professional law does not apply. The third exception assures that the prohibition does not become an obstacle to access to justice.185 The Federal Constitutional Court found that a strict prohibition could prevent a person who, due to his economic circumstances, is not able to bear the cost risk, from pursuing his rights. In this case, the public goals mentioned above can no longer justify the prohibition.186 According to a study of 2019, only 22 % of the interviewed lawyers stipulated ‘no win, no fee’ or ‘no win, less fee’ agreements and only 11 % made use of quota litis.187 Generally, success oriented remuneration appears to be more frequent if the lawyer works for a bigger law firm or provides his services to commercial clients.188 This finding is particularly interesting because the exceptions mentioned above are primarily aimed at addressing consumers’ needs.189 It remains to be seen whether the new exceptions will foster success oriented remuneration. According to a study of 2013, commercial clients seem to be more interested in such agreements and more willing to pay a success bonus.190 However, the rise of other legal services providers, especially ‘Legal Tech’ enterprises, could lead to a change in demand also on the consumer side.191 Consumers may become increasingly aware of the possibility of bringing their claims to court in a cost-efficient way. The German regime of success-oriented remuneration is attacked from both directions: Some critics want to completely abolish the general prohibition,192 others plead to maintain it.193 Whereas proponents claim that success-oriented (Gesetz zur Förderung verbrauchergerechter Angebote im Rechtsdienstleistungsmarkt), 10.08.2021, BGBl. 2021 I, 3415, 3416. 183  Bundestagsdrucksache no.  19/27673, 31, https://dserver.bundestag.de/btd/19/276/19276 73.pdf (last accessed February 7, 2022). 184 Bundestagsdrucksache no.   19/27673, 13 et seq., https://dserver.bundestag.de/btd/19/ 276/1927673.pdf (last accessed February 7, 2022); cf. infra VI. 2. c). 185  Teubel, in: HK-RVG/Winkler, 8th ed. 2021, RVG §  4a para 27 et seq. 186  BVerfGE 117, 163 para 102 et seq. 187  Kilian, NJW 2021, 445, 446 et seq. 188  Ibid., para 15 (exception: quota litis, cf. para 17). 189  Ibid., para 16. 190  Ibid., para 19 et seq. 191  Ibid., para 29 et seq. 192  Römermann, Anwaltsblatt Online 2020, 588, 610 et seq. 193  Cf. the Statements of the German Federal Bar (Bundesrechtsanwaltskammer, BRAK) no.  81 of December 2020, 10 et seq., https://brak.de/zur-rechtspolitik/stellungnahmen-pdf/ stellungnahmen-deutschland/2020/dezember/stellungnahme-der-brak-2020-81.pdf (last accessed February 7, 2022), and no.  10 of February 2021, 10 et seq., https://www.brak.de/zur-

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remuneration fosters access to justice,194 opponents fear that it interferes with this right. It is deemed that lawyers will only offer success-oriented remuneration if they are likely to win so that access to justice will only be provided in relatively clear but not in highly controversial cases.195 Besides, opponents remark that access to justice must be granted regarding the whole claim whereas success-oriented fees lead to a deduction of the amount of the claim.196 c) Collection Services German law defines collection services as ‘the collection of third-party claims or claims assigned for the purpose of collection for account of a third party if the debt collection is conducted as a stand-alone business’ (section 2 paragraph 2 sentence 1 of the RDG). The rise of ‘Legal Tech’ enterprises has made these services increasingly attractive, especially for holders of smaller claims. Firstly, their services are easily accessible via the Internet. Secondly, the cost risks are low as the enterprises generally offer success-oriented remuneration. Usually, the client only pays if the claim is successful, in that case, the enterprise keeps a part of the sum, normally between 10 % and 40 %.197 As mentioned above, lawyers’ professional law does not apply to collection service providers. Recently, in particular regarding the bringing of claims to court, it has been contentious to which extent the activities of ‘Legal Tech’ enterprises still count as ‘collection services’. The Federal Constitutional Court198 and the Federal Court of Justice (Bundesgerichtshof – BGH)199 have adopted a rather broad interpretation of the notion. In 2021, the legislator made clear that collection services included ‘the legal examination and advice related to the collection’ (section 2 paragraph 2 rechtspolitik/stellungnahmen-pdf/stellungnahmen-deutschland/2021/februar/stellung nahme-der-brak-2021-10.pdf (last accessed February 7, 2022). 194  Kleine-Cosack, NJW 2007, 1405, 1408 et seq.; Duve, in: Gottwald (ed.), Litigation in England and Germany, 2010, 217–240, 235 et seq. 195  Cf. the Statements of the German Federal Bar (BRAK) no.  81 of December 2020, 11, https://brak.de/zur-rechtspolitik/stellungnahmen-pdf/stellungnahmen-deutschland/2020/ dezember/stellungnahme-der-brak-2020-81.pdf (last accessed February 7, 2022), and no.  10 of February 2021, 10, https://www.brak.de/zur-rechtspolitik/stellungnahmen-pdf/stellung nahmen-deutschland/2021/februar/stellungnahme-der-brak-2021-10.pdf (last accessed February 7, 2022). 196  Statement of the German Federal Bar no.  10 of Februar 2021, 10 et seq., https://www. brak.de/zur-rechtspolitik/stellungnahmen-pdf/stellungnahmen-deutschland/2021/februar/ stellungnahme-der-brak-2021-10.pdf (last accessed February 7, 2022). 197  Bundestagsdrucksache no.  19/27673, 15, https://dserver.bundestag.de/btd/19/276/1927 673.pdf (last accessed February 7, 2022): 10–40 % of the claim; Gsell/Meller-Hannich, Die Umsetzung der neuen EU-Verbandsklagenrichtlinie, 2021, 47, https://www.vzbv.de/sites/de fault/files/downloads/2021/02/03/21-02-04_vzbv_verbandsklagen-rl_gutachten_gsell_ meller-hannich.pdf (last accessed February 7, 2022): 25–30 % of the claim. 198  BVerfG, NJW 2002, 1190, 1191; NJW-RR 2004, 1570, 1571. 199  BGH, NZM 2020, 26 para 141 – wenigermiete.de; 2020, 542 para 43 – wenigermiete.de II; BGHZ 225, 352 = BGH, NZM 2020, 551 para 53 – wenigermiete.de III;

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sentence 1 of the RDG). Notably, ‘Legal Tech’ enterprises can carry out an extensive (manual or automated) legal examination of the claim,200 assert the claim out of court and, if the out of court efforts fail, sue for a claim assigned to them on a fiduciary basis in court proceedings by instructing a lawyer.201 According to the Federal Court of Justice, a collection services licence even allows for business models that exclusively aim at the judicial collection and ‘class action collection’, where the enterprise asserts in court a number of similar claims in a bundled manner.202 However, according to the explanation of the government and in contrast to the former interpretation of the Federal Court of Justice,203 auxiliary measures which are not directly related to the specific claim, shall not be included.204 If the collection service provider exceeds its competence, the collection agreement, as well as a transfer of the claim (section 398 of the German Civil Code [Bürgerliches Gesetzbuch, BGB]), is usually void (section 3 of the RDG, section of the 134 BGB).205 It is noteworthy that collection service providers are not allowed to represent a client in a civil court proceeding but in very limited cases (section 79 paragraph 2 sentence 2 no.  4 of the ZPO).206 Likewise, they must not assert a third-party monetary claim, or a monetary claim assigned to them for the purpose of collecting the claim on another’s account, without being represented by a lawyer, even before the Local Courts (section 79 paragraph 1 sentence 2 of the ZPO). In 2021, about 2,100 collection service providers were registered in Germany.207 However, it is estimated that only 10 % offer their services to consumers.208 Carrying out collection services usually requires a registration (section 10 paragraph 1 no.  1 of the RDG). Furthermore, the law provides for disclosure and information requirements (sections 13a et seq. of the RDG). In 2021, the legislator has tightened the regulation to better protect consumers.209 Generally, lawyers can also offer collection services. However, when doing so, they are 200  BGH, NZM 2020, 26 para 153 et seq. – wenigermiete.de; 2020, 542 para 46 – wenigermiete.de II; BGHZ 225, 352 = BGH, NZM 2020, 551 para 54 – wenigermiete.de III. 201  BGH, NZM 2020, 26 para 225 et seq. – wenigermiete.de; BGHZ 225, 352 = BGH, NZM 2020, 551 para 59 et seq. – wenigermiete.de III. 202  BGHZ 230, 255 = BGH, NJW 2021, 3046 para 12 et seq. – Airdeal. 203  BGH, NZM 2020, 26 para 163, 169 – wenigermiete.de. 204 Bundestagsdrucksache no.   19/27673, 39, https://dserver.bundestag.de/btd/19/276/192 7673.pdf (last accessed February 7, 2022): Such services can be permitted as ancillary services under s 5 of the RDG; cf. equally Kilian, NJW 2021, 445, 446. 205  BGH, NZM 2020, 26 para 69 – wenigermiete.de with further references. 206  Bundestagsdrucksache no.  19/276373, 52, https://dserver.bundestag.de/btd/19/276/192 7673.pdf (last accessed February 7, 2022). 207  For the current number cf. https://www.rechtsdienstleistungsregister.de/ (last accessed February 7, 2022). 208  Bundestagsdrucksache no.  19/27673, 28. 209 Bundestagsdrucksache no.   19/27673, 18 et seq., https://dserver.bundestag.de/btd/19/ 276/1927673.pdf (last accessed February 7, 2022).

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bound to lawyers’ professional law. To avoid discrimination, lawyers’ law was, as mentioned before,210 recently adapted, especially regarding success-oriented remuneration and outside litigation funding.211 d) Outside litigation funding In Germany, outside litigation funding is generally permitted. Whereas insurances allow litigants to cover their cost risks before a dispute arises, outside litigation funding helps them after such a dispute has evolved.212 Commercial litigation funders usually receive 10–50 % of the amount won. Many of them limit their offers to medium and high value claims.213 Their offers are primarily directed at enterprises rather than at individuals214 and usually only concern plaintiffs, not defendants.215 Generally, only promising claims216 which are directed against a solvent defendant217 are financially supported. Contrary to an insurance company the funding company carries out a close examination of the case’s potential.218 Frequently, the lawyer acts as an intermediary. His extra work is usually remunerated by an additional unit.219 The client allows his lawyer to report to the financing company.220 However, lawyers’ pro210 Cf.

supra VI. 2. b) bb). it is doubtful whether the adaptation of the law really brings about a true equality of lawyers and collection service providers regarding the admissibility of success fees and third-party funding in judicial debt collection. This is because the new provisions, that is s 4a(1) sentence 1 no.  2 of the RVG and s 49b(2) sentence 2 of the BRAO explicitly allow lawyers to charge success fees and to act as a litigation funders mainly only for out-of-court collection, whereas the Federal Court of Justice recently has clarified with regard to collection service providers that they may extend or even focus their activity on judicial collection, albeit only under representation by a lawyer, cf. BGHZ 230, 255 = BGH, NJW 2021, 3046 para 12 et seq. – Airdeal. In contrast to collection service providers, lawyers are therefore probably still not permitted to charge success fees or to finance litigation in judicial debt collection. cf. also Mayer, Anwaltsblatt Online 2021, 246, 247. 212  Wagner, in: Gottwald (ed.), Litigation in England and Germany, 2010, 149–184, 172. 213  For an overview cf. https://anwaltsblatt.anwaltverein.de/files/anwaltsblatt.de/anwalts blatt-online/2021-223.pdf (last accessed February 7, 2022). 214  BVerfGE 117, 163 para 101. 215  Wagner, in: Gottwald (ed.), Litigation in England and Germany, 2010, 149–184, 172. 216  Herr, “Bei 50/50-Chancen könnten wir auch ins Casino gehen”, 2014, https://www. lto-karriere.de/beruf/stories/detail/prozessfinanzierung-voraussetzungen-anwalt-vorteilrisiko-rechtsschutz-datenschutz (last accessed February 7, 2022); Wagner, in: Gottwald (ed.), Litigation in England and Germany, 2010, 149–184, 173. 217  Herr, “Bei 50/50-Chancen könnten wir auch ins Casino gehen”, 2014, https://www. lto-karriere.de/beruf/stories/detail/prozessfinanzierung-voraussetzungen-anwalt-vorteilrisiko-rechtsschutz-datenschutz (last accessed February 7, 2022). 218  Wagner, in: Gottwald (ed.), Litigation in England and Germany, 2010, 149–184, 173; Lenz, Anwaltsblatt 2007, 483, 483. 219  Herr, “Bei 50/50-Chancen könnten wir auch ins Casino gehen”, 2014, https://www. lto-karriere.de/beruf/stories/detail/prozessfinanzierung-voraussetzungen-anwalt-vorteilrisiko-rechtsschutz-datenschutz (last accessed February 7, 2022). 220 Ibid. 211  However,

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fessional law in principle prohibits lawyers to ‘take on the obligation to cover court costs, administrative costs or costs incurred by other parties’ themselves (section 49b paragraph 2 sentence 2 of the BRAO). There is only one exception in case that the lawyer makes use of the second exception to the prohibition of success-oriented fees (collection services provided out of court or in simple court proceedings). As mentioned before this exception also aims at equalizing the situation of lawyers and collection service providers, especially ‘Legal Tech’ enterprises.221 The latter can generally offer litigation funding to their clients. Furthermore, in principle, they can themselves make use of third parties to finance their activities (sections 4 sentence 2, 13b paragraph 1 no.  2 of the RDG).222 They must make sure that the funder’s influence does not jeopardise the due provision of the legal service (section 4 sentence 1 of the RDG).223 Third-party funding allows them to develop their enterprise, especially their technologies,224 and to provide cost effective offers to consumers. However, it is estimated that only about 20 % of the consumer-oriented collection service providers make use of third-party funding.225 The Federal Court of Justice has decided that a consumer association’s action to confiscation of profits (section 10 of the UWG) which is financed by a commercial litigation financier who is to receive a share of profits in the event of success, is an improper use of law and thus inadmissible.226 The court argues that the claim would then, contrary to the legislator’s intention, (also) be asserted out of the motive of obtaining a share of the profit.227 The decision was heavily criticised, especially with regards to the financial situation of consumer associations entitled to bring such actions.228 The Representative Action Directive229 is vague concerning the conditions and limits of third-party funding. It does neither prohibit nor prescribe to admit these models.230 At least, Member States must ensure that conflicts of interests are prevented and that the funding does not divert the representative action 221 Bundestagsdrucksache no.   19/27673, 18, https://dserver.bundestag.de/btd/19/276/192 7673.pdf (last accessed February 7, 2022), but see supra VI. 2. c) for the limited effect of this alignment. 222  Ibid., 19 et seq. 223  The legislator clarified that reporting obligations do not automatically threaten the service (s 4 sentence 2 of the RDG). 224 Bundestagsdrucksache no.   19/27673, 18, https://dserver.bundestag.de/btd/19/276/192 7673.pdf (last accessed February 7, 2022), but see supra VI. 2. c) for the limited effect of this alignment. 225  Ibid., 28. 226  BGH, NJW 2018, 3581 – Prozessfinanzierer; 2019, 2691 – Prozessfinanzierer II. 227  BGH, NJW 2018, 3581 para 41 et seq. – Prozessfinanzierer; 2019, 2691 para 25 et seq. – Prozessfinanzierer II. 228 Cf. Wolf/Flegler, NJW 2018, 3581, 3586; Stadler, JZ 2019, 203, 203 et seq. 229 Cf. supra V. 1. 230  Gsell, Common Market Law Review 2021, 1365, 1393 et seq.

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away from the protection of the collective interests of consumers (article 10). Regarding implementation into German law, it has been recommended to clarify that the entities can in principle finance their proceedings via third party funding.231 Besides, it has been proposed to oblige the losing (entrepreneurial) opponent to bear (at least to a certain extent) the financing costs of the legal dispute based on the ‘loser pays’ principle (section 91 of the ZPO).232

VII. Conclusion The preceding considerations have outlined the cornerstones of the legal framework on costs of civil actions in Germany, but they should also show that the traditional model of the individual civil action with individual allocation of the chance and risk of litigation and the use of a lawyer who is remunerated according to the value of the dispute based on fixed fees has long since ceased to be the only practice. ‘Legal Tech’ based ‘class actions’ and other new models certainly offer the opportunity for more law enforcement, but inevitably at the price of a stronger commercialisation of civil law enforcement in Germany, which also integrates success fees and private litigation financing to a greater extent than before. It is to be expected that the judiciary will only be able to adequately cope with such new forms of litigation after a strong digitalisation push.233 Unfortunately, it is to be anticipated that enforcement deficits will remain for low-value claims that are difficult to bundle or are only of limited use for legal tech tools because the underlying facts vary greatly or can only be determined with great effort.

231  Gsell/Meller-Hannich, Die Umsetzung der neuen EU-Verbandsklagenrichtlinie, 2021, 50, https://www.vzbv.de/sites/default/files/downloads/2021/02/03/21-02-04_vzbv_verbands klagen-rl_gutachten_gsell_meller-hannich.pdf (last accessed February 7, 2022). 232  Ibid., 49. 233  Germany is generally said to be lacking behind regarding digitalization, cf. Jung, ”Ein Plädoyer für das Fax”, 2021, https://www.faz.net/aktuell/wirtschaft/modernisierungsstauder-justiz-ein-plaedoyer-fuer-das-fax-17527002.html (last accessed February 7, 2022). The German government intends to foster digitalization by adopting a so called ‘Digital pact for the judiciary’ (Digitalpakt für die Justiz), cf. the coalition agreement: SPD/Bündnis 90 – Die Grünen/FDP, Mehr Fortschritt wagen, 2021, 105, https://www.bundesregierung.de/breg-de/ service/gesetzesvorhaben/koalitionsvertrag-2021-1990800 (last accessed February 7, 2022).

Contractualisation of Civil Litigation Felix Maultzsch/Stefan Klingbeil

I. Introduction Contracts are the main instrument of private parties for forming their legal relationships. Not only can individuals and organizations structure their substantive private law relationships through contracts. Rather, they can also conclude contracts whose main effect lies in the procedural area. In this way, they can influence a present or future civil lawsuit. Some procedural contracts are already recognized as admissible by the German Code of Civil Procedure (Zivil­ prozessordnung).1 In the late 19th and early 20th century, some scholars have, by way of an argumentum e contrario, considered all litigation contracts not explicitly mentioned in the code as inadmissible.2 However, the modern view in German case law and jurisprudence has increasingly recognized other types of procedural contracts as also permissible.3 In a broader perspective, this trend mirrors a general development under which civil litigation is no longer primarily seen as a sovereign means of dispute resolution but more and more as a kind of service for the parties.4 This shift calls for widening the scope of contractual party autonomy in civil procedure. The following analysis shall first explore the scope of permissible procedural contracts under German law (II.). In the next step, the article examines the judicial review of such agreements (III.) and then puts the focus on the significance of context for the treatment of litigation contracts (IV.). Subsequently, the remedies for non-compliance with the agreement will be analyzed (V.), before we will take a look at the implications of constitutional law and human rights (VI.). The last point to be discussed is the already touched upon question of whether there are shifting attitudes towards procedural agreements in Germany (VII.). 1 For

an overview, see Rauscher, in: MünchKomm, ZPO, 6th ed. 2020, introduction mn. 465. 2 See Wach, AcP 64 (1881), 201, 225; Ehrenzweig, Grünhuts Zeitschrift 18 (1891), 228, 237, 240; Hellwig, in: Festgabe für Otto Gierke, vol.  2, 1910, 41, 88; Hellwig, System des Deutschen Zivilprozeßrechts, vol.  1, 1912, §  151 I, 450; see also Bülow, AcP 64 (1881), 1 et seq., 62 et seq. 3  For an in-depth analysis of the development Wagner, Prozeßverträge, 1998, 48 et seq. 4  See further on this point infra VII.

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II. The Permissible Scope of Litigation Contracts 1. Mediation Agreements Mediation agreements oblige the parties to participate in a mediation procedure before filing a lawsuit in order to settle the conflict out of court. Therefore, mediation clauses contain either an explicit or an implicit dilatory waiver of action.5 The German Federal Court of Justice (Bundesgerichtshof) has not yet explicitly dealt with mediation clauses but it has ruled that the dilatory waiver of action contained in a conciliation agreement (Schlichtungsvereinbarung) leads to the dismissal of a action as “currently inadmissible” if a party invokes the agreement. 6 According to the prevailing opinion in legal literature, this ruling can also be applied to mediation agreements since, in this respect, there is no significant difference to conciliation agreements.7 In lower court case law, an action in violation of a mediation clause has consequently been declared as “currently inadmissible”. 8 In a few cases, however, other lower courts have not classified mediation clauses as an obstacle to legal action if, according to the content of the clause, the parties had the right to unilaterally terminate the mediation proceedings at any time.9 The courts argued that in such a constellation a provisional waiver of action was “pointless and irrelevant” because the mediation proceedings could be unilaterally terminated immediately after their initiation.10 Against this background, the reference to a mediation procedure would be regarded “as a mere formality” if one party was not interested in conducting such a procedure.11 This point of view, however, is predominantly rejected in legal doctrine since, on closer examination, a preliminary waiver of action is not futile even if mediation proceedings can be terminated unilaterally at any time.12 Firstly, the primary initiation of mediation proceedings corresponds to the parties’ will at the time of conclusion of the litigation contract.13 Furthermore, there is also a good chance that the conflict can be resolved amicably if the parties meet in mediation proceedings with the assistance of a medi5 See Wagner, in: Eidenmüller/Wagner (eds.), Mediationsrecht, 2015, ch. 2 mn. 10, 37 et seq. 6 

BGH, NJW 1984, 669, 670; BGH, NJW 1999, 647, 648; BGH, NJW-RR 2009, 637 mn. 33. Wagner, in: Eidenmüller/Wagner (eds.), Mediationsrecht, 2015, ch. 2 mn. 38; Wagner, ZKM 2011, 29 et seq.; Tochtermann, ZKM 2008, 89, 90; Hilbig-Lugani, ZZP 126 (2013), 463, 481. 8  LG Köln, BeckRS 2013, 198797 mn. 22 et seq. 9  See LG Heilbronn, ZKM 2011, 29 mn. 17; OLG Frankfurt, NJW-RR 2010, 788 et seq. 10  LG Heilbronn, ZKM 2011, 29 mn. 17. 11  LG Heilbronn, ZKM 2011, 29 mn. 17; see also OLG Frankfurt, NJW-RR 2010, 788 et seq. 12 See Wagner, in: Eidenmüller/Wagner (eds.), Mediationsrecht, 2015, ch. 2 mn. 87; Wag­ ner, ZKM 2011, 29, 30; Thole, ZZP 127 (2014), 339, 369; Unberath, NJW 2011, 1320, 1322; Hilbig-Lugani, ZZP 126 (2013), 463, 481 et seq. 13  Wagner, in: Eidenmüller/Wagner (eds.), Mediationsrecht, 2015, ch. 2 mn. 86; Wagner, ZKM 2011, 29, 30; Unberath, NJW 2011, 1320, 1322; Thole, ZZP 127 (2014), 339, 369. 7 See

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ator.14 Therefore, there are good reasons for treating a mediation clause as an objection to a court action even if the opponent can terminate the mediation proceedings at any time. From a practical perspective, however, it is uncertain how courts will rule on this point in the future.15 In order to ensure the effectiveness of mediation clauses, parties should therefore formulate specific requirements in their agreement so that the aforementioned ambiguity does not apply to their case.16 In case a party invokes a mediation agreement, the court will first examine its validity before dismissing the action. If the clause was agreed upon individually in the contract, the interim waiver of action contained in the mediation clause is generally permissible.17 However, in case of a business-to-consumer (B2C) transaction, the situation is different if the mediation clause is contained in standard terms since Section 309 No.  14 of the German Civil Code (Bürgerlich­ es Gesetzbuch) declares such a provision as invalid. Consequently, in this scenario, a court would not dismiss the action. In business-to-business (B2B) transactions, on the other hand, the provision of Section 309 No.  14 of the German Civil Code does not apply so that dilatory waivers of action are generally allowed in these constellations. 18 2. Choice-of-Court Agreements A court can also be confronted with an agreement stating that another court shall have sole jurisdiction on a dispute. Originally, choice-of-court agreements were generally allowed under the German Code of Civil Procedure. However, the freedom of choice was often exploited by the economically stronger party to enforce a place of jurisdiction that was convenient to its purposes.19 For this reason, in 1974, the legislator severely restricted the permissible scope of choiceof-court agreements.20 The conditions for admissibility of such contracts are now governed by Sections 38 and 40 of the German Code of Civil Procedure. According to these provisions, a distinction is to be made as to whether merchants (Kaufleute) or non-merchants agree on a competent court. Pursuant to Section 38 (1) of the German Code of Civil Procedure, merchants can choose a court of the first instance by an expressed or implied agreement. In 14  LG Köln, BeckRS 2013, 198797 mn. 33; Unberath, NJW 2011, 1320, 1322; see also Lapp, jurisPR-ITR 2-2011 mn. 4. 15  Lapp, jurisPR-ITR 2-2011 mn. 4. 16  Hilbig-Lugani, ZZP 126 (2013), 463, 490; Lapp, jurisPR-ITR 2-2011 mn. 4; cf. also Tö­ ben, RNotZ 2013, 321, 330. 17  Wagner, in: Eidenmüller/Wagner (eds.), Mediationsrecht, 2015, ch. 2 mn. 31. 18 See Coester-Waltjen, in: Staudinger, BGB, new ed. 2019, §  309 no.  14 mn. 8; Becker, in: BeckOK-BGB, 60th ed. 2021, §  309 no.  14 mn. 15; Hau, MDR 2017, 853, 854. 19  See BT-Drucksache 7/268, 4 et seq. 20  BT-Drucksache 7/268, 3 et seq.; see also the Act on the Amendment of the Code of Civil Procedure (Gesetz zur Änderung der Zivilprozessordnung) of March 21, 1974 (BGBl. I, 753).

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principle, according to Section 1 (1) of the German Commercial Code, a merchant is anyone who conducts a commercial business. Choice-of-court agreements by such parties are allowed even before the specific dispute arises. In particular, an agreement in standard terms is permissible and customary, too.21 However, due to Section 261 (3) No.  2 of the German Code of Civil Procedure, a competent court can no longer lose jurisdiction after the dispute has become pending.22 Furthermore, there are some other limitations with regard to choiceof-court agreements of merchants. First, pursuant to Section 40 (1) of the German Code of Civil Procedure, an agreement has no legal effect if it does not refer to a specific relationship and the legal disputes arising from it. Accordingly, blanket agreements are not allowed.23 Moreover, a choice-of-court agreement is not admissible if the law prescribes an exclusive court of jurisdiction for the dispute in question (Section 40 (2) sentence 1 No.  2 of the German Code of Civil Procedure). For example, according to Section 802 of the German Code of Civil Procedure, in the area of enforcement law, a choice-of-court agreement is not allowed. Should a party present a contract to the court in which the parties agree that another court has sole jurisdiction, the designated court would both examine the admissibility and effectiveness of the agreement ex officio.24 The consequence of a permissible and effective agreement on the sole jurisdiction of a specific court is, on the one hand, the competence of the chosen court to hear the case and, on the other hand, the lack of jurisdiction of all other courts. Therefore, the prorogation also contains a derogation. A court seized in contradiction to the agreement would dismiss the action as inadmissible in this scenario. However, at the request of the plaintiff, this court would have to refer the dispute to the chosen court pursuant to Section 281 (1) sentence 1 of the German Code of Civil Procedure. By contrast, the law imposes significantly stricter requirements on choice-ofcourt agreements by non-merchants. In these constellations, the question of whether the agreement is entered into before or after the dispute arises is of decisive importance. Before the dispute arises, a choice-of-court agreement is generally inadmissible. However, according to Section 38 (2) sentence 1 of the German Code of Civil Procedure, an exception applies to cases with a cross-border dimension since a choice-of-court agreement is admissible if at least one of the parties does not have a general place of jurisdiction in Germany. In this case, in accordance with Section 38 (2) sentence 2 of the German Code of Civil Procedure, the agreement must be concluded in writing or an oral agreement must be 21 See Rosenberg/Schwab/Gottwald, Zivilprozessrecht, 18th ed. 2018, §  37 mn. 5, 20; Bey, in: Prütting/Gehrlein (eds.), ZPO, 13th ed. 2021, §  38 mn. 8. 22  Rosenberg/Schwab/Gottwald, Zivilprozessrecht, 18th ed. 2018, §   37 mn. 22; Keller, JURA 2008, 523, 525. 23  Schellhammer, Zivilprozess, 16th ed. 2020, mn. 1460. 24  Keller, JURA 2008, 523, 527.

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confirmed in writing. If at least one of the parties has a place of jurisdiction in Germany, pursuant to Section 38 (2) sentence 3 of the German Code of Civil Procedure, either its general place of jurisdiction must be chosen or a court where a special place of jurisdiction is established. In addition, before the dispute arises, pursuant to Section 38 (3) No.  2 of the German Code of Civil Procedure, a jurisdiction agreement can be concluded by an explicit and written contract for the event that the party to be sued moves its place of residence abroad later on. The law imposes lower requirements for choice-of-court agreements between private individuals if they are made after the specific dispute has arisen. The reason for this relaxation is that the parties can now sufficiently estimate the risks and consequences of a jurisdiction agreement.25 Therefore, according to Section 38 (3) No.  1 of the German Code of Civil Procedure, an explicit and written agreement on the place of jurisdiction may be made by any type of party after the dispute has arisen. Of course, the limitations of Section 40 of the German Code of Civil Procedure already mentioned for agreements by merchants also apply in these cases. In particular, an agreement is inadmissible under Section 40 (2) sentence 1 No.  1 of the German Code of Civil Procedure if the legal dispute concerns non-pecuniary claims that are assigned to the local district courts (Amtsgerichte) without regard to the value of the subject matter of the dispute. First of all, this applies to disputes on family matters.26 Finally, it is worth mentioning that agreements on the place of jurisdiction at the European level are possible under relaxed conditions pursuant to Article 25 of the Brussels Ibis Regulation for disputes with a cross-border element. According to this provision, even non-merchants can choose the court of an EU member state in a written agreement before a dispute arises. However, Article 25 of the Brussels Ibis Regulation does not apply to a purely national jurisdiction agreement between two parties residing in Germany.27 Rather, Section 38 of the German Code of Civil Procedure remains applicable in this scenario. With regard to non-merchants, this can lead to startling results. For example, according to Section 38 of the German Code of Civil Procedure, in principle, two non-merchants residing in Germany cannot agree on a German court of their choice before a dispute arises, whereas this is possible if one of the parties resides in France.28

25  BT-Drucksache 7/268, 6; Klunzinger, JR 1974, 271, 272; Lüke, Zivilprozessrecht, vol.  1, 11th ed. 2020, §  6 mn. 11; Bey, in: Prütting/Gehrlein (eds.), ZPO, 13th ed. 2021, §  38 mn. 6. 26  Patzina, in: MünchKomm, ZPO, 6th ed. 2020, §  40 mn. 6. 27 See Patzina, in: MünchKomm, ZPO, 6th ed. 2020, §  38 mn. 25. 28  Jauernig/Hess, Zivilprozessrecht, 30th ed. 2011, §  11 mn. 2.

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3. Exclusion of Interim Measures The question of whether interim measures can be excluded by party agreement is not much discussed in Germany.29 However, the problem is sometimes touched upon for arbitration agreements (Schiedsvereinbarungen). Pursuant to Section 1032 (1) of the German Code of Civil Procedure, an action before a state court must be dismissed as inadmissible if the parties have entered into an effective arbitration agreement with regard to the subject matter of the dispute. Under the conditions of Section 1041 of the German Code of Civil Procedure, arbitral tribunals may also impose interim measures. However, pursuant to Section 1033 of the German Code of Civil Procedure, an arbitration agreement does not preclude a state court from ordering a provisional measure relating to the subject matter of the arbitral proceedings at the request of a party. Put differently, the arbitration defense does not apply to interim proceedings in state courts.30 However, it is debated whether the state’s supplementary jurisdiction in interim relief can be waived by an express agreement of the parties.31 Some lower courts and authors argue in favor of a possibility to waive.32 According to this view, the loss of legal protection is acceptable due to the expressed will of the parties.33 But the prevailing view is that the interim measures by state courts cannot be waived by an agreement between the parties to the arbitration.34 The reason given for this view is the requirement of effective legal protection.35 Therefore, the following conclusion could be drawn with respect to the general admissibility of a waiver of interim measures: If, according to the prevailing opinion, temporary legal protection by the state’s courts cannot be waived even in the context of arbitration proceedings and despite the tribunal’s competence to grant interim measures on its hand, then it will certainly not be possible to consider it waivable in constellations without a functional substitute to the legal protection by state courts. However, according to the German Federal Court of Justice and most scholars, it is permissible for the parties to waive the general right of action with regard to a specific legal dispute.36 On this basis, it is not 29  See, however, Wagner, Prozeßverträge, 1998, 421; Schlosser, Einverständliches Parteihandeln im Zivilprozeß, 1968, 73. 30  Münch, in: MünchKomm, ZPO, 6th ed. 2022, §  1033 mn. 1. 31 See Münch, in: MünchKomm, ZPO, 6th ed. 2022, §  1033 mn. 17, 27. 32 LG München I, BeckRS 2016, 21343; OLG Celle, BeckRS 2008, 21809; Geimer, in: Zöller, ZPO, 34th ed. 2022, §  1033 mn. 12; Geimer, SchiedsVZ 2005, 52; Münch, in: MünchKomm, ZPO, 6th ed. 2020, §  1033 mn. 17, 27. 33  Steinbrück, IPRax 2010, 424, 427. 34  LG Berlin, BeckRS 2011, 9092; Münch, in: MünchKomm, ZPO, 6th ed. 2022, §  1033 mn. 17, 27; Voit, in: Musielak/Voit (eds.), ZPO, 18th ed. 2021, §  1033 mn. 3; Thümmel, DZWir 1997, 133, 135; Wolf, DB 1999, 1101, 1103. 35  Voit, in: Musielak/Voit (eds.), ZPO, 18th ed. 2021, §  1033 mn. 3; Thümmel, DZWir 1997, 133, 135; Wolf, DB 1999, 1101, 1103. 36  BGHZ 109, 19, 29; BGH, NJW-RR 2006, 632 mn. 19; Becker-Eberhard, in: Münch-

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quite clear why it should not also be permissible to exclude interim relief only.37 Against this background, no clear prediction can be made regarding the likely reaction of the courts vis-à-vis procedural agreements that exclude interim measures. What is clear, though, is that clauses containing a waiver of interim measure are invalid in standard terms for B2C transactions pursuant to Section 309 No.  14 of the German Civil Code.38 Although this provision explicitly covers only the exclusion of legal protection in case of a simultaneous agreement on out-of-court settlement, there should be no doubt that this applies all the more in the case of exclusions without replacement procedures. Furthermore, the prevailing opinion rejects an exclusion of interim measures in standard terms for B2B transactions, too.39 4. Modifications of the Format of the Proceedings To a certain extent, the parties are also entitled to modify the format of the proceedings by litigation contracts. For example, it is permissible to exclude special types of proceedings. A well-known case is the exclusion of proceedings by deed (Urkundenprozess). This type of proceedings is governed by Sections 592 et seq. of the German Code of Civil Procedure and is available especially if the plaintiff demands payment of a certain sum of money. The special feature of proceedings by deed is that one can prove all facts substantiating the claim only by means of documentary evidence (Sections 592 and 595 (3) of the German Code of Civil Procedure). In the early literature, a contractual exclusion of the proceedings by deed was occasionally rejected.40 It was argued that the exclusion would run counter to the court’s interest in the efficient resolution of the dispute.41 In contrast, the Supreme Court of the German Reich (Reichsgericht) already took the view that it is up to the creditor’s discretion and does not touch upon state interests whether ordinary proceedings are to be chosen instead of proceedings by deed.42 Therefore, the court regarded the exclusion of this form of procedure by litigation agreements as admissible.43 This position has become the prevailing view in case law and literature.44 Komm, ZPO, 6th ed. 2020, preliminary note to §  253 mn. 10; Schilken, Zivilprozessrecht, 7th ed. 2014, mn. 182. 37 See Schlosser, Einverständliches Parteihandeln im Zivilprozeß, 1968, 73. 38 Cf. Hau, MDR 2017, 853, 854; Schmidt, in: Ulmer/Brandner/Hensen (eds.), AGB-Recht, 12th ed. 2016, §  309 no.  14 BGB mn. 18, 20. 39  Hau, MDR 2017, 853, 854. 40 See Kohler, Gruchots Beiträge 31 (1887), 276, 309 et seq.; Hellwig, Lehrbuch des Deutschen Civilprozeßrechts, vol.  1, 1903, §  26 I 1, 168; Hellwig, System des Deutschen Zivilprozeßrechts, vol.  1, 1912, §  151 I, 450. 41  Kohler, Gruchots Beiträge 31 (1887), 276, 310. 42  RGZ 160, 241, 245. 43  RGZ 160, 241, 243. 44  BGHZ 148, 283, 285 et seq.; 38, 254, 258; 109, 19, 29; BGH, DB 1973, 1451; Kern, in:

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The German Code of Civil Procedure expressly provides for some further options to influence the proceedings. For instance, Section 224 (1) sentence 1 of the German Code of Civil Procedure allows the alteration of time limits. In this way, the parties can change the time period in which certain procedural acts can and must be undertaken. However, according to Section 224 of the German Code of Civil Procedure, only a shortening of time limits is possible.45 In contrast, a contractual extension of time limits is not permissible because it would run counter to the principle of speeding up civil proceedings.46 Furthermore, certain time limits are even excluded from the possibility of shortening them. For example, the two-week period for filing a statement of defense under Section 276 (1) sentence 1 of the German Code of Civil Procedure cannot be reduced.47 On a general level, the possibility of shortening deadlines by means of a procedural agreement is rarely used in practice.48 The parties are in principle not in the position to agree on a completely written procedure. Pursuant to Section 128 (1) of the German Code of Civil Procedure, the hearing before the court must generally be held orally. On the other hand, Section 128 (2) sentence 1 of the German Code of Civil Procedure stipulates that the court may also make a decision without an oral hearing with the consent of the parties. However, the mutual consent of the parties is not to be classified as a procedural contract in this context.49 Thus, the agreement of the parties does not have a directly binding effect on the court which will have to make the final decision on this point. In general, it is not possible to bypass a specific stage of the proceedings by means of a procedural agreement. However, a consensual declaration by the parties can have some influence on the order of proceedings. To illustrate this point, the example of the conciliation hearing may be used. Pursuant to Section 278 (2) sentence 1 of the German Code of Civil Procedure, a conciliation hearing for the purpose of amicably settling the legal dispute must, in principle, precede the oral hearing. However, according to Section 278 (2) sentence 1 alt. 2 of the German Code of Civil Procedure, this stage of the proceedings may be bypassed if the conciliatory hearing appears to have no prospect of success. As a rule, a lack of prospect of success is to be assumed if both parties object to a

Stein/Jonas (eds.), ZPO, 23rd ed. 2016, §  128 mn. 338; Rosenberg/Schwab/Gottwald, Zivilprozessrecht, 18th ed. 2018, §  66 mn. 6; Teubner/Künzel, MDR 1988, 720. 45 See Jaspersen, in: BeckOK-ZPO, 42nd ed. 2021, §  2 24 mn. 2. 46  Jaspersen, in: BeckOK-ZPO, 42nd ed. 2021, §  2 24 mn. 2. 47 See Hüßtege, in: Thomas/Putzo (eds.), ZPO, 42nd ed. 2021, §  2 24 mn. 2. 48  Stackmann, in: MünchKomm, ZPO, 6th ed. 2020, §   224 mn. 1; Kazele, in: Prütting/ Gehrlein (eds.), ZPO, 13th ed. 2021, §  224 mn. 2. 49  Blomeyer, Zivilprozeßrecht: Erkenntnisverfahren, 2nd ed. 1985, §  30 VIII 1, 176; Jauer­ nig/Hess, Zivilprozessrecht, 30th ed. 2011, §  70 mn. 20; Rosenberg/Schwab/Gottwald, Zivilprozessrecht, 18th ed. 2018, §  66 mn. 9.

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conciliation hearing.50 In this case, the court will therefore usually skip this stage of the proceedings. However, the mutual declaration does again not constitute a binding litigation contract, but merely a suggestion by the parties to the court.51 5. Shifting the Burden of Proof The basic rule on the distribution of the burden of proof in German law is that each party bears the burden of proving the facts in its favor.52 However, the parties are, in principle, entitled to modify this distribution of burden by a litigation contract. According to the prevailing opinion in case law and literature, shifting the burden of proof through a negotiated agreement is permissible insofar as the parties may dispose of the subject matter of the contract.53 In contrast, Section 309 No.  12 of the German Civil Code declares contractual shifts of the burden of proof through standard terms in B2C transactions to be inadmissible. According to Section 309 No.  12 lit.  a of the German Civil Code, the user of standard terms is not allowed to shift the burden of proof for circumstances that lie within his sphere of responsibility. For example, a clause in standard terms of warehouse businesses which imposes the burden of proof on the depositor that the stored goods were damaged through the fault of the warehouse keeper is invalid.54 Furthermore, pursuant to Section 309 No.  12 lit.  b of the German Civil Code, confirmations of certain facts made on the basis of standard forms are also inadmissible in B2C transactions, e.g., the confirmation that a leased car is free of defects upon handover.55 Pursuant to Section 310 (1) of the German Civil Code, the provision of Section 309 No.  12 of the German Civil Code does not directly apply to B2B transactions. However, it follows from the general rule in Section 307 of the German Civil Code that provisions in standard terms can also be invalid in B2B transactions if they shift the bur50  Foerste, NJW 2001, 3103, 3104; Foerste, in: Musielak/Voit (eds.), ZPO, 18th ed. 2021, §  278 mn. 3; Prütting, in: MünchKomm, ZPO, 6th ed. 2020, §  278 mn. 21; Thole, in: Stein/Jonas (eds.), ZPO, 23rd ed. 2016, §  128 mn. 25. 51  Leipold, in: Stein/Jonas (eds.), ZPO, 22nd ed. 2008, §  278 mn. 19. 52  Jauernig/Hess, Zivilprozessrecht, 30th ed. 2011, §  50 mn. 11; Rosenberg/Schwab/Gott­ wald, Zivilprozessrecht, 18th ed. 2018, §  116 mn. 9. 53  BGHZ 41, 151, 153 et seq.; BGH, NJW 1973, 1192, 1193; RGZ 106, 295, 299 et seq.; Thole, in: Stein/Jonas (eds.), ZPO, 23rd ed. 2018, §  286 mn. 285; Prütting, in: MünchKomm, ZPO, 6th ed. 2020, §  286 mn. 169; Seiler, in: Thomas/Putzo (eds.), ZPO, 42nd ed. 2021, preliminary note to §  284 mn. 38; Rosenberg/Schwab/Gottwald, Zivilprozessrecht, 18th ed. 2018, §  116 mn. 34; Schellhammer, Zivilprozess, 16th ed. 2020, mn. 557; Blomeyer, Zivilprozeßrecht: Er­kenntnisverfahren, 2nd ed. 1985, §  70 IV 3, 378; Nikisch, Zivilprozeßrecht, 2nd ed. 1952, §  82 VI 4, 324; Wagner, Prozeßverträge, 1998, 699; Baumgärtel, in: Festschrift für Hans W. Fasching, 1988, 67, 69; Sachse, ZZP 54 (1929), 409, 425. 54  Wurmnest, in: MünchKomm, BGB, 8th ed. 2019, §  309 no.  12 mn. 11; Leipold, in: Stein/ Jonas (eds.), ZPO, 22nd ed. 2008, §  286 mn. 214; see also BGHZ 41, 151, 155. 55 See Wurmnest, in: MünchKomm, BGB, 8th ed. 2019, §  309 no.  12 mn. 18.

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den of proof for circumstances for which the user of the standard terms is responsible.56 6. Limitations of Specific Types of Evidence The provision of evidence is generally the responsibility of the parties in German law. Against this background, the prevailing doctrine accepts limitations of the scope of admissible evidence by litigation contracts.57 For example, the parties may limit the presentation of evidence to certain pieces, such as a specific document.58 It is also possible for the parties to exclude certain types of evidence altogether, such as expert evidence or witness testimony.59 There are various reasons for such contractual arrangements. It is possible, for instance, that the parties doubt the reliability of a piece of evidence, such as the credibility of a witness.60 They may also be concerned with protecting certain secrets that would otherwise be disclosed. Another reason could be that the parties find it too costly to use a particular piece of evidence, such as obtaining an expert opinion. 61 If a party breaches such a procedural agreement, the opponent is entitled to raise a procedural defense to prevent the excluded evidence from being considered in the process. 62 Nonetheless, the limits of evidence agreements are disputed. Some authors consider a limitation of evidence by the parties to be permissible even where the German Code of Civil Procedure allows the court to take evidence ex officio. 63 In particular, this applies to the constellations covered by Sections 142 (provi56  Wurmnest, in: MünchKomm, BGB, 8th ed. 2019, §  309 no.  12 mn. 22; Becker, in: BeckOK-BGB, 60th ed. 2021, §  309 no.  12 mn. 12. 57  BGHZ 38, 254, 258; 109, 19, 28 et seq.; BGH, WM 1973, 144; RGZ 96, 57, 59; 160, 241, 243; Leipold, in: Stein/Jonas (eds.), ZPO, 22nd ed. 2008, §  286 mn. 211; Prütting, in: MünchKomm, ZPO, 6th ed. 2020, §  286 mn. 167; Seiler, in: Thomas/Putzo (eds.), ZPO, 42nd ed. 2021, preliminary note to §  284 mn. 41; Rosenberg/Schwab/Gottwald, Zivilprozessrecht, 18th ed. 2018, §  114 mn. 9; Blomeyer, Zivilprozeßrecht: Erkenntnisverfahren, 2nd ed. 1985, §  71 II, 381 et seq.; Schellhammer, Zivilprozess, 16th ed. 2020, mn. 557; Wagner, Prozeßverträge, 1998, 687; Baumgärtel, in: Festschrift für Hans W. Fasching, 1988, 67, 73; Sachse, ZZP 54 (1929), 409, 429 et seq. 58  Laumen, in: Prütting/Gehrlein (eds.), ZPO, 13th ed. 2021, §   286 mn. 107; Wagner, Prozeßverträge, 1998, 683. 59  Rosenberg/Schwab/Gottwald, Zivilprozessrecht, 18th ed. 2018, §  114 mn. 9; Prütting, in: MünchKomm, ZPO, 6th ed. 2020, §  286 mn. 167. 60  Wagner, Prozeßverträge, 1998, 683. 61  Laumen, in: Prütting/Gehrlein (eds.), ZPO, 13th ed. 2021, §   286 mn. 107; Wagner, Prozeßverträge, 1998, 683. 62  Schellhammer, Zivilprozess, 16th ed. 2020, mn. 557. 63 See Schlosser, Einverständliches Parteihandeln im Zivilprozeß, 1968, 24 et seq., 86 et seq.; Wagner, Prozeßverträge, 1998, 689 et seq.; Laumen, in: Prütting/Gehrlein (eds.), ZPO, 13th ed. 2021, §  286 mn. 107; Thole, in: Stein/Jonas (eds.), ZPO, 23rd ed. 2018, §  286 mn. 285; Foerste, in: Musielak/Voit (eds.), ZPO, 18th ed. 2021, §  286 mn. 16; Laumen, in: Baumgärtel/ Laumen/Prütting (eds.), Handbuch der Beweislast, vol.  1, 4th ed. 2018, ch. 26 mn. 26.

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sion of documents), 144 (legal inspection and expert witnesses) and 448 (interrogation of a party) of the German Code of Civil Procedure.64 The prevailing opinion, on the other hand, assumes that party autonomy reaches its limits in these constellations. 65 According to this view, the court’s taking of evidence ex officio remains permissible despite a party agreement to the contrary. 66 Furthermore, the restriction of evidence in standard terms in B2C transactions is problematic. As already mentioned, Section 309 No.  12 of the German Civil Code prohibits clauses in standard terms by which the user shifts the burden of proof to the disadvantage of the other party. The scope of application of this prohibition is not limited to burden of proof agreements in a technical sense. Rather, according to the prevailing opinion, the provision also prohibits clauses in standard terms that worsen the opponent’s position of proof. 67 In B2C transactions, therefore, the limitation or exclusion of specific types of evidence through standard terms is not permissible. 68 In B2B transactions, clauses that worsen the opponent’s position of proof can also be invalid.69 However, in such relationships the admissibility of a specific clause depends more on the circumstances of the individual case.70 7. Determination of Experts and Their Remuneration Section 404 (1) of the German Code of Civil Procedure provides that both the selection of expert witnesses and the determination of their number shall, in principle, be at the discretion of the court. However, in case the parties agree on certain persons as experts, the court shall comply with this agreement pursuant to Section 404 (5) of the German Code of Civil Procedure. According to this provision, the court may limit the parties’ choices to a certain number. Should the parties nevertheless name a larger number of experts, according to the prevailing opinion, the court’s right to choose shall be effective again.71 In this 64  Rosenberg/Schwab/Gottwald, Zivilprozessrecht, 18th ed. 2018, §   114 mn. 9; Wagner, Prozeßverträge, 1998, 689 et seq. 65  Rosenberg/Schwab/Gottwald, Zivilprozessrecht, 18th ed. 2018, §  114 mn. 9; Leipold, in: Stein/Jonas (eds.), ZPO, 22nd ed. 2008, §  286 mn. 211. 66  Rosenberg/Schwab/Gottwald, Zivilprozessrecht, 18th ed. 2018, §  114 mn. 9. 67  BGHZ 99, 374 et seq.; Laumen, in: Baumgärtel/Laumen/Prütting (eds.), Handbuch der Beweislast, vol.  1, 4th ed. 2018, ch. 26 mn. 27; Laumen, in: Prütting/Gehrlein (eds.), ZPO, 13th ed. 2021, §  286 mn. 107; Schuster, in: Spindler/Schuster (eds.), Recht der elektronischen Medien, 4th ed. 2019, §  309 no.  12 BGB mn. 75. 68  Becker, in: BeckOK-BGB, 60th ed. 2021, §  309 no.  12 mn. 2; Grüneberg, in: Grüneberg, BGB, 81st ed. 2022, §  309 mn. 107; Laumen, in: Prütting/Gehrlein (eds.), ZPO, 13th ed. 2021, §  286 mn. 107; Schuster, in: Spindler/Schuster (eds.), Recht der elektronischen Medien, 4th ed. 2019, §  309 no.  12 BGB mn. 75; Graf von Westphalen, NJW 2019, 2214, 2217. 69  OLG Düsseldorf, BB 1996, 658. 70 Cf. Coester-Waltjen, in: Staudinger, BGB, new ed. 2019, §  309 no.  14 mn. 8. 71  Berger, in: Stein/Jonas (eds.), ZPO, 23rd ed. 2015, §  404 mn. 36; Gehle, in: Baumbach/ Lauterbach/Hartmann/Anders/Gehle (eds.), ZPO, 79th ed. 2021, §  404 mn. 8; Katzenmeier,

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constellation, the court is not limited to selecting from the experts named by the parties.72 It is, however, disputed whether the court may also appoint further experts in addition to the ones selected by the parties. The predominant view in the literature is in the affirmative,73 while the case law has not yet decided on this question. According to Section 413 of the German Code of Civil Procedure, the expert’s remuneration is governed by the German Judicial Remuneration and Compensation Act (Justizvergütungs- und -entschädigungsgesetz).74 Pursuant to Section 9 of this Act, the expert’s fee is generally calculated according to fixed rates of remuneration. However, according to Section 13 of the German Judicial Remuneration and Compensation Act, the parties may agree to a higher remuneration that deviates from the fixed rates. This provision is to be regarded as an expression of party autonomy in civil proceedings.75 On a practical level, it has to be seen in light of the fact that the statutory rates for remuneration in Germany are rather modest for renowned experts. From a doctrinal perspective, the party agreement increasing the fees is a contract concerning a part of the costs of the proceedings and at the same time, vis-à-vis the expert, a contract to the benefit of a third party (Vertrag zugunsten Dritter) pursuant to Section 328 of the German Civil Code.76 According to Section 13 of the German Judicial Remuneration and Compensation Act, a further requirement for a special remuneration of an expert is that a sufficient amount for the entire remuneration has been paid to the state treasury.

in: Prütting/Gehrlein (eds.), ZPO, 13th ed. 2021, §  404 mn. 14; see for the opposing view Zim­ mermann, in: MünchKomm, ZPO, 6th ed. 2020, §  404 mn. 10. 72  Berger, in: Stein/Jonas (eds.), ZPO, 23rd ed. 2015, §  404 mn. 36; Gehle, in: Baumbach/ Lauterbach/Hartmann/Anders/Gehle (eds.), ZPO, 79th ed. 2021, §  404 mn. 8. 73  Berger, in: Stein/Jonas (eds.), ZPO, 23rd ed. 2015, §  404 mn. 38; Greger, in: Zöller (ed.) ZPO, 34th ed. 2022, §  404 mn. 4; Ahrens, in: Wieczorek/Schütze (eds.), ZPO, 4th ed. 2013, §  404 mn. 23; Gehle, in: Baumbach/Lauterbach/Hartmann/Anders/Gehle (eds.), ZPO, 79th ed. 2021, §  404 mn. 8; Siebert, in: Saenger (ed.), ZPO, 9th ed. 2021, §  404 mn. 4; Scheuch, in: BeckOK-ZPO, 42nd ed. 2021, §  404 mn. 10; Reichold, in: Thomas/Putzo (eds.), ZPO, 42nd ed. 2021, §  404 mn. 2; see for the opposing view Zimmermann, in: MünchKomm, ZPO, 6th ed. 2020, §  404 mn. 10; Huber, in: Musielak/Voit (eds.), ZPO, 18th ed. 2021, §  404 mn. 6; Katzen­ meier, in: Prütting/Gehrlein (eds.), ZPO, 13th ed. 2021, §  404 mn. 14; Wagner, Prozeßverträge, 1998, 690; Schlosser, Einverständliches Parteihandeln im Zivilprozeß, 1968, 26. 74  Act on the Remuneration of Experts, Interpreters, Translators and the Compensation of Honorary Judges, Witnesses and Third Parties (Gesetz über die Vergütung von Sachverstän­ digen, Dolmetscherinnen, Dolmetschern, Übersetzerinnen und Übersetzern sowie die Ent­ schädigung von ehrenamtlichen Richterinnen, ehrenamtlichen Richtern, Zeuginnen, Zeugen und Dritten) of May 5, 2004 (BGBl. I, 776). 75  Weglage, Die Vergütung des Sachverständigen, 2nd ed. 2010, 150; Weber, in: Hartmann/ Toussaint, Kostenrecht, 49th ed. 2019, §  13 JVEG mn. 2. 76  Weber, in: Hartmann/Toussaint, Kostenrecht, 49th ed. 2019, §  13 JVEG mn. 8; Weglage, Die Vergütung des Sachverständigen, 2nd ed. 2010, 151; Wittgens, AG 2007, 106, 110.

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8. Changing the Evaluation of Evidence Through contractual agreements, the parties in civil proceedings can influence the factual basis of a court decision as well as the taking of evidence in many ways. However, according to the prevailing opinion in case law and literature,77 agreements by which the parties intend to dictate to the court a certain evaluation of evidence are inadmissible. Such agreements are seen as a violation of the principle of the free evaluation of evidence, which is laid down in Section 286 (1) of the German Code of Civil Procedure.78 Pursuant to sentence 1 of this provision, the court has to decide freely whether a factual assertion is to be considered true or not on the basis of the entire content of the hearings and the result of any taking of evidence. According to sentence 2 of this provision, the final judgment shall state the reasons that have guided the court’s belief. Accordingly, the evaluation of evidence is the sole responsibility of the court, whereas it is the responsibility of the parties to provide the factual basis for the court’s decision.79 Admittedly, the parties can influence a court decision by not presenting certain facts or by not providing evidence.80 However, they cannot influence how the result of collection of evidence is to be evaluated. 81 Against this background, it would be inadmissible for the parties to stipulate that certain types of evidence will be given a specific value, e.g., that two concurring witness statements shall equal full proof.82 Furthermore, the parties cannot agree on the 77  RGZ 20, 398, 402; 96, 57, 59; BGH, NJW 1993, 1856, 1860; Thole, in: Stein/Jonas (eds.), ZPO, 23rd ed. 2018, §  286 mn. 289 et seq.; Kern, in: Stein/Jonas (eds.), ZPO, 23rd ed. 2016, preliminary note to §  128 mn. 333; Ahrens, in: Wieczorek/Schütze (eds.), 4th ed. 2013, §  286 mn. 46; Prütting, in: MünchKomm, ZPO, 6th ed. 2020, §  286 mn. 166; Foerste, in: Musielak/ Voit (eds.), ZPO, 18th ed. 2021, §  286 mn. 16; Greger, in: Zöller (ed.), ZPO, 34th ed. 2022, preliminary note to §  284 mn. 2b; Reichold, in: Thomas/Putzo (eds.), ZPO, 42nd ed. 2021, preliminary note to §  284 mn. 41; Laumen, in: Prütting/Gehrlein (eds.), ZPO, 13th ed. 2021, §  286 mn. 108; Laumen, in: Baumgärtel/Laumen/Prütting (eds.), Handbuch der Beweislast, vol.  1, 4th ed. 2018, ch. 26 mn. 30 et seq.; Rosenberg/Schwab/Gottwald, Zivilprozessrecht, 18th ed. 2018, §  114 mn. 9; Nikisch, Zivilprozeßrecht, 2nd ed. 1952, §  84 III 2, 331; Eickmann, Beweisverträge im Zivilprozeß, 1987, 92 et seq.; Baumgärtel, in: Festschrift für Hans W. Fasching, 1988, 67, 78 et seq.; Häsemeyer, ZZP 118 (2005), 265, 306 et seq; Teubner/Künzel, MDR 1988, 720, 722; see for the opposing view Habscheid, in: Festschrift für Heinrich Lehmann, vol.  2, 1956, 789, 803 et seq.; Schlosser, Einverständliches Parteihandeln im Zivilprozeß, 1968, 89; Wagner, Prozeßverträge, 1998, 692 et seq. 78  BGH, NJW 1993, 1856, 1860; Prütting, in: MünchKomm, ZPO, 6th ed. 2020, §  286 mn. 166; Laumen, in: Prütting/Gehrlein (eds.), ZPO, 13th ed. 2021, §  286 mn. 108; Eickmann, Beweisverträge im Zivilprozeß, 1987, 92 et seq.; Teubner/Künzel, MDR 1988, 720, 722. 79  Teubner/Künzel, MDR 1988, 720, 722; Laumen, in: Baumgärtel/Laumen/Prütting (eds.), Handbuch der Beweislast, vol.  1, 4th ed. 2018, ch. 26 mn. 30 et seq. 80 Cf. Habscheid, in: Festschrift für Heinrich Lehmann, vol.  2 , 1956, 789, 803; Wagner, Prozeßverträge, 1998, 693. 81  Laumen, in: Baumgärtel/Laumen/Prütting (eds.), Handbuch der Beweislast, vol.  1, 4th ed. 2018, ch. 26 mn. 31. 82 Cf. Laumen, in: Baumgärtel/Laumen/Prütting (eds.), Handbuch der Beweislast, vol.  1, 4th ed. 2018, ch. 26 mn. 31.

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credibility of a witness or his testimony with a binding effect for the court.83 Moreover, changes to the standard of proof by party agreement are invalid. 84 However, so-called confession agreements (Geständnisverträge) are permissible.85 Through these agreements, the parties can stipulate that certain facts are to be regarded as conceded or not conceded. Furthermore, so-called presumption agreements (Vermutungsverträge) are also possible. 86 Such agreements stipulate that one fact is deemed to be proven if another fact can be established. For example, the parties can agree that the receipt of a contractual offer or acceptance shall already be proven by the proof of its dispatch.87 9. Cost Agreements In the German law pertaining to litigation costs, there is limited room for procedural agreements between the parties. Pursuant to Section 98 sentence 1 of the German Code of Civil Procedure, the parties may agree on the costs of a settlement that ends court proceedings. Furthermore, according to sentence 2 of this provision, they may also regulate the costs of the legal dispute resolved by the settlement, insofar as the court has not already made a final decision on the costs. In this way, the parties are entitled to make arrangements for specific expenses such as lawyer’s fees or costs of evidence.88 In legal literature, such an agreement is classified as a procedural contract by which the parties settle a dispute over costs. 89 As a consequence, a court decision on the costs is no longer admissible.90 The provision of Section 98 of the German Code of Civil Procedure thus reflects the principle of party autonomy in cost law.91 However, in general, the parties have no freedom of disposition in this area. Rather, the prevailing opinion understands the provisions on costs in the German Code of Civil Procedure as mandatory rules.92 Pursuant to Section 308 (2) 83  Laumen, in: Prütting/Gehrlein (eds.), ZPO, 13th ed. 2021, §  286 mn. 108; Laumen, in: Baumgärtel/Laumen/Prütting (eds.), Handbuch der Beweislast, vol.  1, 4th ed. 2018, ch. 26 mn. 31. 84  Laumen, in: Prütting/Gehrlein (eds.), ZPO, 13th ed. 2021, §  286 mn. 108; Laumen, in: Baumgärtel/Laumen/Prütting (eds.), Handbuch der Beweislast, vol.  1, 4th ed. 2018, ch. 26 mn. 32. 85  Laumen, in: Baumgärtel/Laumen/Prütting (eds.), Handbuch der Beweislast, vol.  1, 4th ed. 2018, ch. 26 mn. 35 et seq. 86  Laumen, in: Baumgärtel/Laumen/Prütting (eds.), Handbuch der Beweislast, vol.  1, 4th ed. 2018, ch. 26 mn. 47 et seq. 87 Cf. Leipold, in: Stein/Jonas (eds.), ZPO, 22nd ed. 2008, §  286 mn. 210. 88 Cf. Flockenhaus, in: Musielak/Voit (eds.), ZPO, 17th ed. 2020, §  98 mn. 3. 89  Smid/Hartmann, in: Wieczorek/Schütze (eds.), ZPO, 4th ed. 2015, §  98 mn. 5. 90  BGH, JR 1970, 464 et seq.; BGH, BeckRS 2019, 28186; OLG Hamm, NJW 2021, 2063 mn. 12; Smid/Hartmann, in: Wieczorek/Schütze (eds.), ZPO, 4th ed. 2015, §  98 mn. 1. 91  Smid/Hartmann, in: Wieczorek/Schütze (eds.), ZPO, 4th ed. 2015, §  98 mn. 1, 5; cf. also BGH, NJW-RR 2006, 1000 mn. 2; BGH, JR 1970, 464, 465; OLG Hamm, NJW 2021, 2063 mn. 12. 92  BGH, JR 1970, 464, 465; OLG Hamm, NJW 2021, 2063 mn. 13; Herget, in: Zöller (ed.),

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of the German Code of Civil Procedure, a decision on the costs of proceedings must be made ex officio. In making this decision, the court has to comply with the statutory requirements. Accordingly, the parties cannot oblige the court to issue a decision on costs that alters the statutory provisions.93 Against this background, an agreement of the parties that cost-shifting should only apply to lawyer’s fees but not to costs of evidence would not be binding for the court. Nonetheless, such agreements on costs may be effective as substantive private law agreements between the parties.94 However, a disposition of the costs owed to the state, which in civil proceedings include the costs of evidence,95 is not possible in this way.96 Although taking over court costs by party declaration is permissible pursuant to Section 29 No.  2 of the Court Costs Act (Gerichtskos­ tengesetz),97 this does not eliminate the liability of the original debtor in relation to the state.98 Rather, this debtor only receives a claim for reimbursement against the other party that has agreed to bear the costs.99 Insofar as reimbursement claims between the parties are concerned, they are entitled to dispose of their respective cost claims.100 For example, they may waive their reimbursement claims arising from a court cost decision in whole or in part.101 10. Waivers of the Right to Appeal A waiver of the right to appeal is generally permissible under German law. Pursuant to Section 515 of the German Code of Civil Procedure, such a waiver on the right to a first appeal (Berufungsverzicht) is not dependent on the opponent’s acceptance of the waiver. Therefore, the code provides for a unilateral waiver of the right to appeal.102 Such a waiver may be declared to the opposing party before the commencement of the proceedings.103 According to the case law and most legal scholars, this declaration can be made by a party itself even if it conZPO, 34th ed. 2022, preliminary note to §§  91–107 mn. 14; see for the opposing view Schlosser, Einverständliches Parteihandeln im Zivilprozeß, 1968, 60. 93  BGH, JR 1970, 464, 465; OLG Hamm, NJW 2021, 2063 mn. 13. 94  BGHZ 5, 251; OLG Hamm, NJW 2021, 2063 mn. 17; Herget, in: Zöller (ed.), ZPO, 34th ed. 2022, preliminary note to §§  91–107 mn. 14. 95 See Rosenberg/Schwab/Gottwald, Zivilprozessrecht, 18th ed. 2018, §  83 mn. 11. 96 Cf. Flockenhaus, in: Musielak/Voit (eds.), ZPO, 18th ed. 2021, preliminary note to cost regulation mn. 6; Hartmann, Kostengesetze, 35th ed. 2005, §  29 GKG mn. 16. 97  Gerichtskostengesetz of May 5, 2004 (BGBl. I, 718). 98 See Meyer, GKG/FamGKG, 16th ed. 2018, §  29 GKG mn. 15; Hartmann, Kostengesetze, 35th ed. 2005, §  29 GKG mn. 16. 99  Hartmann, Kostengesetze, 35th ed. 2005, §  29 GKG mn. 16. 100  Cf. BGH, BeckRS 2013, 13525; Jaspersen, in: BeckOK-ZPO, 42nd ed. 2021, §  91 mn. 17. 101  Cf. OLG Hamm, NJW 2021, 2063 mn. 17. 102  Heßler, in: Zöller (ed.), ZPO, 34th ed. 2022, §  515 mn. 1; Ball, in: Musielak/Voit (eds.), ZPO, 18th ed. 2021, §  515 mn. 9. 103  Rimmelspacher, in: MünchKomm, ZPO, 6th ed. 2020, §  515 mn. 9 et seq.; Heßler, in: Zöller (ed.), ZPO, 34th ed. 2022, §  515 mn. 1; Rosenberg/Schwab/Gottwald, Zivilprozess­ recht, 18th ed. 2018, §  136 mn. 43.

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cerns proceedings with compulsory representation of a lawyer pursuant to Section 78 of the German Code of Civil Procedure.104 The prevailing view is that a waiver of appeal declared to the opponent is not considered by the court ex officio, but only upon the opponent’s motion.105 The legal consequence is the rejection of the appeal filed contrary to the waiver as inadmissible.106 Should both parties declare a waiver of appeal to each other prior to the commencement of the proceedings, the judgment will become effective immediately upon its issuance.107 However, the declaration to the opposing party is also admissible during the ongoing proceedings or even in the appeal instance.108 After a case is pending, the waiver of appeal may be declared not only to the opposing party but also directly to the court.109 In this case, the waiver must be considered ex officio.110 Since the waiver is a procedural act in this scenario, in proceedings with compulsory representation by a lawyer, the parties must make the declaration through their lawyers.111 The waivers of the right to appeal in the sense explained above are only unilateral declarations of the parties. However, it is also accepted that the parties may enter into a contractual obligation not to appeal a judgment.112 The prevailing view classifies such a contractual waiver of the right to appeal as a substantive private law contract,113 whereas some scholars regard the agreement as a procedural contract.114 Notwithstanding this doctrinal dispute, there is widespread consensus that the agreed waiver of the right to appeal is only relevant in

104  BGHZ 28, 52; BGH, NJW-RR 1997, 1288; Heßler, in: Zöller (ed.), ZPO, 34th ed. 2022, §  515 mn. 10; Kern, in: Stein/Jonas (eds.), ZPO, 23rd ed. 2016, preliminary note to §  128 mn. 343; see for the opposing view Rosenberg/Schwab/Gottwald, Zivilprozessrecht, 18th ed. 2018, §  136 mn. 34. 105 See Heßler, in: Zöller (ed.), ZPO, 34th ed. 2022, §  515 mn. 9; Ball, in: Musielak/Voit (eds.), ZPO, 18th ed. 2021, §  515 mn. 8. 106  Ball, in: Musielak/Voit (eds.), ZPO, 18th ed. 2021, §  515 mn. 8. 107  Ball, in: Musielak/Voit (eds.), ZPO, 18th ed. 2021, §  515 mn. 8. 108  Heßler, in: Zöller (ed.), ZPO, 34th ed. 2022, §  515 mn. 1. 109  Heßler, in: Zöller (ed.), ZPO, 34th ed. 2022, §  515 mn. 3; Rosenberg/Schwab/Gottwald, Zivilprozessrecht, 18th ed. 2018, §  136 mn. 43. 110  Rosenberg/Schwab/Gottwald, Zivilprozessrecht, 18th ed. 2018, §  136 mn. 47. 111  Heßler, in: Zöller (ed.), ZPO, 34th ed. 2022, §  515 mn. 4; Rosenberg/Schwab/Gottwald, Zivilprozessrecht, 18th ed. 2018, §  136 mn. 45. 112 See Ball, in: Musielak/Voit (eds.), ZPO, 18th ed. 2021, §  515 mn. 7; Rimmelspacher, in: MünchKomm, ZPO, 6th ed. 2020, §  515 mn. 35; Heßler, in: Zöller (ed.), ZPO, 34th ed. 2022, §  515 mn. 13. 113  Althammer, in: Stein/Jonas (eds.), ZPO, 23rd ed. 2018, §  515 mn. 3; Ball, in: Musielak/ Voit (eds.), ZPO, 18th ed. 2021, §  515 mn. 7; Rimmelspacher, in: MünchKomm, ZPO, 6th ed. 2020, §  515 mn. 35; Heßler, in: Zöller (ed.), ZPO, 34th ed. 2022, §  515 mn. 13. 114 See Häsemeyer, ZZP 118 (2005), 265, 309 et seq.; Rosenberg/Schwab/Gottwald, Zivilprozessrecht, 18th ed. 2018, §  136 mn. 48.

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a lawsuit if the opponent raises an objection based on it.115 In this case, the court will dismiss the appeal as inadmissible.116 The principles outlined above apply to all types of judicial remedies. In particular, pursuant to Section 565 in conjunction with Section 515 of the German Code of Civil Procedure, the parties may also waive their right to a second appeal on points of law (Revisionsverzicht).

III. The Judicial Review of the Effectiveness of Procedural Agreements In starting with issues of reviewing procedural agreements, it seems sensible to sketch the way in which such agreements can operate in civil litigation in the first place. In order to be taken into account, a procedural contract must first be presented to the court.117 Whether it is necessary for a party that wants to draw a certain benefit from the agreement to specifically rely on the agreement or a certain clause of it, respectively, depends on the nature of the procedural agreement.118 In this respect, the prevailing opinion distinguishes between two types of procedural agreements, namely those with a dispositional character and those with a merely promissory character.119 In case a procedural agreement has a dispositional character, it is generally not necessary to specifically rely on it since the agreement has a direct effect on the proceedings.120 A typical example for this constellation is a choice-of-court agreement.121 If, on the other hand, a procedural agreement merely has a promissory character, it has a weaker effect on the proceedings.122 A violation of such an agreement is only examined by the

115  Rimmelspacher, in: MünchKomm, ZPO, 6th ed. 2020, §  515 mn. 35; Ball, in: Musielak/ Voit (eds.), ZPO, 18th ed. 2021, §  515 mn. 7; Heßler, in: Zöller (ed.), ZPO, 34th ed. 2022, §  515 mn. 13. 116  BGH, NJW 1968, 794; BGH, NJW 1984, 805; Ball, in: Musielak/Voit (eds.), ZPO, 18th ed. 2021, §  515 mn. 8. 117  Kern, in: Stein/Jonas (eds.), ZPO, 23rd ed. 2016, preliminary note to §  128 mn. 348. 118  Kern, in: Stein/Jonas (eds.), ZPO, 23rd ed. 2016, preliminary note to §  128 mn. 348 et seq. 119  Kern, in: Stein/Jonas (eds.), ZPO, 23rd ed. 2016, preliminary note to §  128 mn. 330 et seq., 336 et seq. and 348 et seq.; Rauscher, in: MünchKomm, ZPO, 6th ed. 2020, introduction mn. 470 et seq.; Rosenberg/Schwab/Gottwald, Zivilprozessrecht, 18th ed. 2018, §  66 mn. 2 et seq.; Teubner/Künzel, MDR 1988, 720, 723 et seq. 120  Rauscher, in: MünchKomm, ZPO, 6th ed. 2020, introduction mn. 470; Greger, in: Zöller (ed.), ZPO, 34th ed. 2022, preliminary note to §§  128–252 mn. 31. 121  Teubner/Künzel, MDR 1988, 720, 723; Kern, in: Stein/Jonas (eds.), ZPO, 23rd ed. 2016, preliminary note to §  128 mn. 348; Rosenberg/Schwab/Gottwald, Zivilprozessrecht, 18th ed. 2018, §  66 mn. 2. 122  Kern, in: Stein/Jonas (eds.), ZPO, 23rd ed. 2016, preliminary note to §  128 mn. 349; Rauscher, in: MünchKomm, ZPO, 6th ed. 2020, introduction mn. 471.

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court in case of an objection by the opposing party.123 In this scenario, any conduct in violation of the promissory agreement will be considered as a breach of the principle of good faith.124 In case the validity or effectiveness of a procedural agreement is challenged, a transfer of the case to another court for the purpose of review is not necessary in the German legal system. Rather, the court approached with the respective proceedings will carry out the review by itself to determine whether the dispositional or promissory effect of the agreement can occur. Both the valid conclusion of the procedural agreement and its content can be subject to judicial review. The valid conclusion of procedural agreements is generally governed by the contractual provisions of the German Civil Code.125 These rules apply to litigation agreements at least by analogy.126 Like any contract, litigation agreements are concluded by offer and acceptance in accordance with Sections 145 et seq. of the German Civil Code.127 Such agreements do not need approval or ratification by a judge. However, insofar as procedural agreements are concluded in the course of a court hearing, the parties must be capable of postulation (postulationsfähig) because the procedural contract is then at the same time a procedural act.128 Within the scope of Section 78 of the German Code of Civil Procedure, the parties must therefore be represented by a lawyer in order to conclude a valid procedural contract.129 If, in contrast, the agreement is concluded outside of the proceedings, then there is no need for representation by a lawyer, even if the subject matter of the contract concerns proceedings with compulsory representation by a lawyer under Section 78 of the German Code of Civil Procedure.130 In addition, litigation contracts can normally be concluded without any formal requirements.131 However, there are some exceptions to the freedom of form principle that will be examined below.132

123 

Kern, in: Stein/Jonas (eds.), ZPO, 23rd ed. 2016, preliminary note to §  128 mn. 349. Rauscher, in: MünchKomm, ZPO, 6th ed. 2020, introduction mn. 471. 125  Seiler, in: Thomas/Putzo (eds.), ZPO, 42nd ed. 2021, introduction III mn. 6. 126  Rauscher, in: MünchKomm, ZPO, 6th ed. 2020, introduction mn. 468. 127  Rauscher, in: MünchKomm, ZPO, 6th ed. 2020, introduction mn. 468; Greger, in: Zöller (ed.), ZPO, 34th ed. 2022, preliminary note to §§  128–252 mn. 27; Seiler, in: Thomas/ Putzo (eds.), ZPO, 42nd ed. 2021, introduction III mn. 6. 128  Rauscher, in: MünchKomm, ZPO, 6th ed. 2020, introduction mn. 469; Greger, in: Zöller (ed.), ZPO, 34th ed. 2022, preliminary note to §§  128–252 mn. 28; Rosenberg/Schwab/ Gottwald, Zivilprozessrecht, 18th ed. 2018, §  66 mn. 12. 129  Rauscher, in: MünchKomm, ZPO, 6th ed. 2020, introduction mn. 469. 130  Rauscher, in: MünchKomm, ZPO, 6th ed. 2020, introduction mn. 469; Greger, in: Zöller (ed.), ZPO, 34th ed. 2022, preliminary note to §§  128–252 mn. 28; Rosenberg/Schwab/ Gottwald, Zivilprozessrecht, 18th ed. 2018, §  66 mn. 13. 131  Greger, in: Zöller (ed.), ZPO, 34th ed. 2022, preliminary note to §§  128–252 mn. 32; Rosenberg/Schwab/Gottwald, Zivilprozessrecht, 18th ed. 2018, §  66 mn. 15. 132 See infra IV 5. 124 

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When the court reviews the content of a litigation agreement, the general limits to the validity of contracts must be observed.133 Accordingly, such agreements are not allowed to be unconscionable pursuant to Section 138 (1) of the German Civil Code.134 In addition, litigation contracts that violate a statutory prohibition are void pursuant to Section 134 of the German Civil Code.135 If procedural agreements are contained in standard terms, a court review takes place on the basis of Sections 305 et seq. of the German Civil Code. As we have already seen, strict standards apply in this respect particularly in B2C transactions. Moreover, in the event of errors, fraud or misrepresentation, the disadvantaged party may annul the procedural agreement by recission in accordance with Sections 119 et seq. and 142 (1) of the German Civil Code.136 However, such circumstances only lead to the voidability of an agreement if the procedural contract has not already been made obsolete by the procedural situation.137 Moreover, litigation contracts are not effective if they violate mandatory rules of the German Code of Civil Procedure.138 For instance, the parties cannot dictate to the court a certain evaluation of evidence through means of a procedural contract because such an agreement is regarded as a violation of Section 286 (1) of the German Code of Civil Procedure.139 It is also noteworthy that Section 139 of the German Civil Code, according to which the partial invalidity of a uniform legal transaction leads, in principle, to its overall invalidity, does not apply to the combination of a procedural agreement and a substantive private law contract.140 As a rule, therefore, the invalidity of the procedural agreement does not lead to the invalidity of a substantive private law contract connected with it.141 133  Kern, in: Stein/Jonas (eds.), ZPO, 23rd ed. 2016, preliminary note to §  128 mn. 345; Greger, in: Zöller (ed.), ZPO, 34th ed. 2022, preliminary note to §§  128–252 mn. 32; Seiler, in: Thomas/Putzo (eds.), ZPO, 42nd ed. 2021, introduction III mn. 6. 134  BGH, NJW-RR 2006, 632 mn. 19; Kern, in: Stein/Jonas (eds.), ZPO, 23rd ed. 2016, preliminary note to §  128 mn. 345; Greger, in: Zöller (ed.), ZPO, 34th ed. 2022, preliminary note to §§  128–252 mn. 32; Seiler, in: Thomas/Putzo (eds.), ZPO, 42nd ed. 2021, introduction III mn. 6. 135  Seiler, in: Thomas/Putzo (eds.), ZPO, 42nd ed. 2021, introduction III mn. 6. 136  Kern, in: Stein/Jonas (eds.), ZPO, 23rd ed. 2016, preliminary note to §  128 mn. 345; Rauscher, in: MünchKomm, ZPO, 6th ed. 2020, introduction mn. 468; Greger, in: Zöller (ed.), ZPO, 34th ed. 2022, preliminary note to §§  128–252 mn. 30; Rosenberg/Schwab/Gottwald, Zivilprozessrecht, 18th ed. 2018, §  66 mn. 16. 137  Kern, in: Stein/Jonas (eds.), ZPO, 23rd ed. 2016, preliminary note to §  128 mn. 345; Rauscher, in: MünchKomm, ZPO, 6th ed. 2020, introduction mn. 468; Greger, in: Zöller (ed.), ZPO, 34th ed. 2022, preliminary note to §§  128–252 mn. 30; Rosenberg/Schwab/Gottwald, Zivilprozessrecht, 18th ed. 2018, §  66 mn. 16; Wagner, Prozeßverträge, 1998, 296. 138  Greger, in: Zöller (ed.), ZPO, 34th ed. 2022, preliminary note to §§  128–252 mn. 32; Rosenberg/Schwab/Gottwald, Zivilprozessrecht, 18th ed. 2018, §  66 mn. 5, 8. 139 See supra II 8. 140  Kern, in: Stein/Jonas (eds.), ZPO, 23rd ed. 2016, preliminary note to §  128 mn. 356. 141  Kern, in: Stein/Jonas (eds.), ZPO, 23rd ed. 2016, preliminary note to §  128 mn. 356.

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IV. The Matter of Context 1. Personal Characteristics of the Parties Various characteristics of the parties may be relevant for the effectiveness of procedural agreements. In particular, the validity of clauses in standard terms may depend on the classification of parties as consumers or entrepreneurs. According to Section 13 of the German Civil Code, a consumer is a natural person who enters into a legal transaction for purposes that are predominantly not attributable to his or her professional activity. In contrast, pursuant to Section 14 of the German Civil Code, an entrepreneur is a natural or legal person acting in exercise of his or her professional activity when entering into a legal transaction. Outside of B2B transactions, the validity of litigation agreements in standard terms is to be assessed in particular on the basis of Sections 308 and 309 of the German Civil Code, which contain special prohibitions for various clauses. First of all, the provisions of Section 309 No.  12 and No.  14 of the German Civil Code must be taken into account with regard to procedural agreements in standard terms. As already mentioned, Section 309 No.  12 of the German Civil Code prohibits clauses in standard terms that change the evidentiary position of the opposing party to its disadvantage, e.g., by shifting the burden of proof or by excluding specific types of evidence.142 In addition, Section 309 No.  14 of the German Civil Code prohibits clauses in standard terms that provide for a waiver of action in mediation agreements or for an exclusion of interim measures.143 By contrast, according to Section 310 (1) sentence 1 of the German Civil Code, the prohibitions contained in Sections 308 and 309 of the German Civil Code do not apply to standard terms used vis-à-vis an entrepreneur. The reason for the enhanced scope of disposition is the greater business savvy and experience of entrepreneurs. In these cases, a review is based on Section 307 (1) and (2) of the German Civil Code. However, the rules in Sections 308 and 309 of the German Civil Code can be taken into account in the review of B2B transactions insofar as they are substantially transferable to these constellations.144 Accordingly, the prohibitions in Sections 308 and 309 of the German Civil Code have an indicative effect (Indizwirkung) for the invalidity of the clause in question in business transactions as well.145 However, according to Section 310 (1) sentence 2 of the German Civil Code, custom and practice in commercial transactions may indicate otherwise. Therefore, the circumstances of the individual case play a greater role for the validity than in B2C transactions. As shown above, the interpretation of Section 309 No.  12 of the German Civil Code must also be 142 See

supra II 5 and 6. supra II 1 and 3. 144  Basedow, in: MünchKomm, BGB, 8th ed. 2019, §  305 mn. 11. 145  BGHZ 228, 353 mn. 48. 143 See

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taken into account in commercial transactions so that changes to the burden of proof or to the admissibility of evidence are invalid pursuant to Section 307 (1) of the German Civil Code.146 Furthermore, an exclusion of interim measures in B2B transactions is also invalid according to the idea of Section 309 No.  14 of the German Civil Code.147 However, an agreement on mediation clauses is generally admissible in these constellations.148 The interpretation of Section 309 No.  14 of the German Civil Code therefore does not apply in business transactions because it is specifically tailored to the situation of consumers. This example shows that the consumer status of a person may play a decisive role in the assessment of procedural agreements in standard terms. Furthermore, it is worth mentioning that, according to the case law of the German Federal Labor Court (Bundesarbeitsgericht), an employment contract is also classified as a consumer contract within the meaning of Section 310 (3) of the German Civil Code.149 Accordingly, Sections 308 and 309 of the German Civil Code apply directly to employment contracts, which means that the employee, as the typically weaker party of the contract, can be adequately protected. Therefore, strict standards for review of procedural contracts also apply in the area of employment law. Moreover, personal characteristics of the parties play an important role for the effectiveness of choice-of-court agreements pursuant to Sections 38 and 40 of the German Code of Civil Procedure. As explained above, agreements on the place of jurisdiction by merchants are permissible in principle, whereas they are generally prohibited for non-merchants.150 An absolute limit for all constellations is set by the provision of Section 40 (2) sentence 1 of the German Code of Civil Procedure, according to whose No.  2 agreements on the place of jurisdiction are inadmissible if a court has sole jurisdiction. In this respect, the provision of Section 29a of the German Code of Civil Procedure, which stipulates an exclusive place of jurisdiction for disputes arising from tenancy and lease relationships, is of practical significance. Furthermore, the provision of Section 29c of the German Code of Civil Procedure sets narrow limits for agreements on the place of jurisdiction for doorstep selling (Haustürgeschäfte), thus extending consumer protection to the procedural level. Both provisions will be discussed in more detail below.151

146 See

supra II 5 and 6. supra II 3. 148 See supra II 1. 149  BAGE 115, 19 mn. 39 et seq. 150 See supra II 2. 151 See infra IV 3. 147 See

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2. Different Types of Court The type of court hearing the case is not decisive for the handling of litigation agreements in private law matters. Accordingly, it makes no difference to the admissibility of litigation agreements whether the proceedings in the first instance take place before a local court (Amtsgericht) or a regional court (Land­ gericht) since, pursuant to Section 495 of the German Code of Civil Procedure, the provisions governing proceedings before the regional courts apply in principle to proceedings before the local courts, too. In commercial law disputes, there are also no special rules in this respect. The German legal system has not yet established independent commercial courts. Rather, chambers for commercial matters have been set up at the regional courts whose proceedings are governed by Sections 93 et seq. of the German Judicial System Act (Gerichtsverfas­ sungsgesetz) and Section 349 of the German Code of Civil Procedure. In principle, the proceedings before the commercial chambers are governed by the general provisions of the German Code of Civil Procedure. Pursuant to Section 46 (2) sentence 1 of the Labor Court Act (Arbeitsgerichtsgesetz), the general provisions also apply, in principle, to labor law disputes. Consequently, the same standards determine the treatment of litigation contracts. The German Federal Labor Court points out that the parties may commit themselves to any procedural conduct which is provided for in the German Code of Civil Procedure and neither contrary to a statutory prohibition nor interferes with the rights of third parties or violates the concept of good faith.152 In contrast, party agreements on the presentation of evidence by means of a procedural agreement are inadmissible in proceedings that follow the principle of official investigation (Amtsermittlungsgrundsatz).153 This principle applies in particular in proceedings of voluntary jurisdiction (freiwillige Gerichtsbarkeit) within the scope of Section 26 of the German Act on Proceedings in Family Matters and in Matters of Voluntary Jurisdiction (FamFG).154 3. Subject Matter of the Dispute The subject matter of the dispute can be of significance for the assessment of litigation agreements. Of particular importance in this respect is the provision of Section 29a of the German Code of Civil Procedure, which stipulates an exclusive place of jurisdiction for tenancy and lease agreements. Due to the provision of Section 40 (2) sentence 1 No.  2 of the German Code of Civil Procedure, this excludes the parties’ freedom of disposition regarding the place of jurisdic152 

BAGE 135, 264 mn. 33. Seiler, in: Thomas/Putzo (eds.), ZPO, 42nd ed. 2021, preliminary note to §  284 mn.

153 See

41.

154  Gesetz über das Verfahren in Familiensachen und in den Angelegenheiten der freiwilligen Gerichtsbarkeit of December 17, 2008 (BGBl. I, 2586).

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tion. Against this background, the provision of Section 29a of the German Code of Civil Procedure aims especially at the protection of residential tenants who are entitled to bring a lawsuit at the place where they dwell and only need to defend opposing actions at this place.155 In addition, this provision applies to other tenancies and leases, too, and thereby takes account of the protection of smaller businesses.156 Another relevant provision in this context is Section 29c (1) sentence 2 of the German Code of Civil Procedure which stipulates that the courts of the consumer’s place of residence have exclusive jurisdiction for actions against the consumer stemming from doorstep selling. According to Section 312b (1) of the German Civil Code, doorstep sales are contracts concluded outside business premises in which the consumer is deemed to be particularly worthy of protection due to the risk of being taken by surprise.157 At the procedural level, this protection under substantive law is flanked by the provision of Section 29c (1) sentence 2 of the German Code of Civil Procedure guaranteeing the consumer in a non-waivable way that she will only have to defend actions stemming from the contract at her own place of residence.158 In addition, the extension of the standard term review to employment contracts,159 is also suitable for implementing the idea of protecting the weaker party with regard to litigation agreements. In this way, the employee is protected from litigation agreements that are disadvantageous to him. Furthermore, protective effects can be achieved by means of the general provisions in Sections 138 (1) and 242 of the German Civil Code. The concept of public order can also be taken into account in this respect. In particular, the requirements of constitutional law can be included in the evaluation under private law.160 In addition, a procedural agreement is inadmissible under Section 134 of the German Civil Code if it violates a statutory prohibition. In this way, public interests that are opposed to an agreement can also be taken into account in the legal review of a procedural contract. 4. Timing of the Procedural Agreements According to the prevailing opinion, an agreement on procedural matters can, in principle, be concluded before or after a specific dispute has arisen. For example, it is recognized by case law that a waiver of action by individual agreement 155 See

Heinrich, in: Musielak/Voit (eds.), ZPO, 18th ed. 2021, §  29a mn. 1. Heinrich, in: Musielak/Voit (eds.), ZPO, 18th ed. 2021, §  29a mn. 2. 157  Wendehorst, in: MünchKomm, BGB, 8th ed. 2019, §  312b mn. 2. 158  Heinrich, in: Musielak/Voit (eds.), ZPO, 18th ed. 2021, §  29c mn. 2; Patzina, in: MünchKomm, ZPO, 6th ed. 2020, §  29c mn. 2; Hüßtege, in: Thomas/Putzo (eds.), ZPO, 42nd ed. 2021, §  29c mn. 1. 159 See supra II 1. 160  For further details see infra VI. 156 

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can be declared even before a concrete dispute takes place.161 It is also permitted to make a waiver of appeal even before a legal controversy arises.162 However, the principle does not apply without exception. As follows from Section 38 (3) No.  1 of the German Code of Civil Procedure, an agreement on the place of jurisdiction by non-merchants is inadmissible if it is entered into before a dispute arises. Some legal scholars have argued for an extension of this limitation in order to protect the parties from rash and ill-considered commitments.163 According to this view, for example, a confession agreement would be inadmissible if the significance of a fact is not yet apparent because the corresponding procedural situation has not yet arisen.164 The prevailing opinion, however, rejects such a far-reaching restriction of the parties’ freedom of disposition.165 However, it takes some account of the idea of foreseeability by advocating a generalization of the requirement of the definiteness of a legal relationship from Sections 40 (1) and 1029 of the German Code of Civil Procedure to all procedural agreements.166 Pursuant to Section 40 (1) of the German Code of Civil Procedure, an agreement on jurisdiction has no legal effect if it does not refer to a specific legal relationship and the legal disputes arising from it. There must be sufficient individualization of the concrete legal relationship so that the disputes potentially arising from it can be estimated by the parties involved. Accordingly, it is not possible for the parties to agree that a specific place of jurisdiction applies to all future disputes between them or to all actions arising from their business transactions. A similar idea is expressed in Section 1029 (1) of the German Code of Civil Procedure for arbitration agreements. Under this provision, such an agreement may only be concluded with regard to disputes stemming from a specific legal relationship. Accordingly, an arbitration agreement is not admissible if it does not specify the legal relationship with sufficient precision, e.g., because it is intended to apply to all possible future disputes between the parties.167 The prevailing opinion considers this idea of sufficient definiteness as a general principle that draws the normative boundaries for all procedural agreements. Within this framework, the parties are protected from unmanageable dispositions with regard to future disputes. 161 

BGHZ 109, 19, 29. RGZ 36, 421, 422; BGH, NJW 1986, 198. 163 See Nikisch, Zivilprozeßrecht, 2nd ed. 1952, §  55 II 2, 219; Schlosser, Einverständliches Parteihandeln im Zivilprozeß, 1968, 44 et seq.; Baumgärtel, Wesen und Begriff der Pro­zess­ handlung, 2nd ed. 1972, 189 et seq. 164  Baumgärtel, Wesen und Begriff der Prozesshandlung, 2nd ed. 1972, 258. 165 See Wagner, Prozeßverträge, 1998, 172 et seq.; Urhahn, Prozessverträge im Invest­ment­ recht, 2021, 278 et seq.; Schiedermair, Vereinbarungen im Zivilprozess, 1935, 70 et seq. 166  RGZ 36, 421, 422; BAGE 135, 264 mn. 33; Blomeyer, Zivilprozeßrecht, 2nd ed. 1985, §  30 VIII 3, 176; Rosenberg/Schwab/Gottwald, Zivilprozessrecht, 18th ed. 2018, §  66 mn. 7; Wagner, Prozeßverträge, 1998, 51. 167  Patzina, in: MünchKomm, ZPO, 6th ed. 2020, §  40 mn. 5. 162 

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5. Form of the Procedural Agreement Under German law, in principle, it makes no difference to the legal status of procedural agreements whether they are contained in a separate document or form part of a substantive contract. Generally, procedural agreements can be concluded without the need for a specific form and, therefore, maybe even orally unless otherwise prescribed by law.168 For example, according to Section 38 (3) of the German Code of Civil Procedure, non-merchants may only conclude agreements on the place of jurisdiction within the limits of this provision explicitly and in writing. Furthermore, a particularly strict formal requirement applies to arbitration agreements involving a consumer. Pursuant to Section 1031 (5) sentence 1 of the German Code of Civil Procedure, such agreements must be contained in a document signed by the parties themselves. However, according to Section 1031 (5) sentence 2 of the German Code of Civil Procedure, the written form may be replaced by an electronic form pursuant to Section 126a of the German Civil Code. In any case, pursuant to Section 1031 (5) sentence 3 of the German Code of Civil Procedure, it is further required that the separate document exclusively contains agreements relating to the arbitral proceedings. The only exception is if the agreement has been notarized. The purpose of this strict formal requirement is to warn consumers when concluding an arbitration agreement that they are waiving a decision by state courts.169 However, a transfer of this formal requirement to other procedural agreements is generally rejected.170 Even if litigation agreements are contained in standard terms, it is irrelevant under Section 305 (1) sentence 2 of the German Civil Code whether the clauses form a separate part or are included in the contractual document itself. However, in B2C constellations, according to Section 305 (2) of the German Civil Code, an explicit reference to the standard terms and the possibility of reasonable notice are both prerequisites for the clauses to be included in the contract.

V. Remedies for Non-compliance with a Procedural Contract In the German legal system, there is usually no need to enforce procedural agreements in a separate lawsuit. On the one hand, some procedural agreements already have direct effects on the proceedings so that they must be taken into account ex officio as soon as the court takes notice of them.171 On the other hand, some procedural agreements merely impose an obligation on one party to 168 See

Rosenberg/Schwab/Gottwald, Zivilprozessrecht, 18th ed. 2018, §  66 mn. 15. See BT-Drucksache 13/5274, 37; Tochtermann, ZKM 2009, 57, 58. 170  Urhahn, Prozessverträge im Investmentrecht, 2021, 319 et seq.; Tochtermann, ZKM 2008, 57, 58. 171 See supra III. 169 

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behave in a certain way in the proceedings, e.g., not to use or name a certain piece of evidence. Even in these constellations, however, there is in principle no need for separate enforcement or claims for damages because a breach of the contractually agreed obligation can be invoked with a procedural defense by the opposing party.172 If the opposing party raises the procedural defense, this generally leads to the inadmissibility of the relevant procedural action. If, for example, evidence is presented to the court in breach of a contractual term, then raising the procedural defense leads to the court rejecting the evidence. This practice is particularly feasible in the case of obligations to cease and desist.173 Things are, however, more difficult in the case of contractual obligations to perform positive acts because solving the problem by means of a procedural defense is only sometimes helpful in these cases,174 e.g., in case of the promise to withdraw from an action. If the plaintiff, contrary to his contractual obligation, does not withdraw the action, the defendant may raise the procedural defense of conduct in breach of contract.175 This will result in the court dismissing the action as inadmissible.176 The situation is different in case a party contractually undertakes to file an appeal. In this case, there is no possibility of taking the conduct in breach of contract into account in the primary proceedings.177 Nor is it possible to proceed subsequently as if the appeal had been filed.178 In this constellation, therefore, only claims for performance or damages in a kind of satellite action can help the opponent.179 If the parties establish an obligation that cannot already be enforced by way of procedural defenses, there are generally also claims for specific performance of the promise.180 According to the prevailing opinion, such claims for performance can be enforced in court in secondary proceedings.181 If, for instance, the 172 

Greger, in: Zöller (ed.), ZPO, 34th ed. 2022, preliminary note to §§  128–252 mn. 33. Wagner, Prozeßverträge, 1998, 237. 174  Wagner, Prozeßverträge, 1998, 237 et seq.; Kern, in: Stein/Jonas (eds.), ZPO, 23rd ed. 2016, preliminary note to §  128 mn. 349 et seq.; Rosenberg/Schwab/Gottwald, Zivilprozess­ recht, 18th ed. 2018, §  66 mn. 6 et seq. 175  BGHZ 20, 198, 205; 41, 3, 5; Kern, in: Stein/Jonas (eds.), ZPO, 23rd ed. 2016, preliminary note to §  128 mn. 349; Saenger, in: Saenger (ed.), ZPO, 9th ed. 2021, §  269 mn. 9. 176  BGHZ 20, 198, 205; 41, 3, 5; Kern, in: Stein/Jonas (eds.), ZPO, 23rd ed. 2016, preliminary note to §  128 mn. 349; Saenger, in: Saenger (ed.), ZPO, 9th ed. 2021, §  269 mn. 9. 177  Kern, in: Stein/Jonas (eds.), ZPO, 23rd ed. 2016, preliminary note to §  128 mn. 350; Rosenberg/Schwab/Gottwald, Zivilprozessrecht, 18th ed. 2018, §  66 mn. 6; Wagner, Pro­zeß­ verträge, 1998, 237 et seq., 267. 178  Wagner, Prozeßverträge, 1998, 237 et seq., 267. 179  Kern, in: Stein/Jonas (eds.), ZPO, 23rd ed. 2016, preliminary note to §  128 mn. 350; Rosenberg/Schwab/Gottwald, Zivilprozessrecht, 18th ed. 2018, §  66 mn. 6; Wagner, Prozeß­ verträge, 1998, 237 et seq., 267. 180  Wagner, Prozeßverträge, 1998, 263 et seq. 181  Kern, in: Stein/Jonas (eds.), ZPO, 23rd ed. 2016, preliminary note to §  128 mn. 349; Teubner/Künzel, MDR 1988, 720, 724; Greger, in: Zöller (ed.), ZPO, 34th ed. 2022, preliminary note to §§  128–252 mn. 33; Wagner, Prozeßverträge, 1998, 263 et seq. 173 

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obligation to file an appeal is not fulfilled by the promisor, the opponent can sue for performance of the corresponding procedural act.182 Claims for damages may also be considered when one party does not comply with the procedural contract or parts thereof. The legal basis for such claims is primarily Section 280 (1) of the German Civil Code. Whether the parties intended to establish a duty that can be breached must be determined by interpretation of their agreement in accordance with Sections 133 and 157 of the German Civil Code.183 In this context, it is worth mentioning that the German Federal Court of Justice has recently ruled that claims for damages can be brought in the event of a breach of a choice-of-court agreement.184 In the case decided, the agreed place of jurisdiction was Bonn, a city in Germany. However, the party had filed suit in the US. As a result, the opponent had to pay attorney’s fees that were not eligible for compensation under the American rule of costs. In the opinion of the German Federal Court of Justice, due to the breach of the agreement on the place of jurisdiction, these costs can be claimed from the party in breach as damages under Section 280 (1) of the German Civil Code.185 Claims for damages under tort law, on the other hand, are rare in this context. The provision of Section 823 (1) of the German Civil Code will regularly not apply due to the lack of a violation of an absolutely protected right. Claims based on Section 823 (2) of the German Civil Code are also generally not given because there is typically no violation of a protective law (Schutzgesetz).186 Finally, liability under Section 826 of the German Civil Code can only be considered in exceptional cases,187 e.g., in the event of chicanery.188 This could be the case, for instance, if the opponent is sued in the US contrary to an agreement on the place of jurisdiction in order to drive him to economic ruin through high out-of-court costs.189

VI. The Constitutionality of Procedural Contracts In Germany, the question of the constitutionality of litigation agreements is only rarely discussed in detail. Nonetheless, some cornerstones of the constitu182 See

Wagner, Prozeßverträge, 1998, 267. BGHZ 223, 269 mn. 33 et seq. 184  BGHZ 223, 269. 185  BGHZ 223, 269 mn. 15 et seq. 186  Wagner, Prozeßverträge, 1998, 258 et seq.; Antomo, Schadensersatz wegen der Verletzung einer internationalen Gerichtsstandsvereinbarung, 2017, 562 et seq. 187  Wagner, Prozeßverträge, 1998, 263. 188 See Antomo, Schadensersatz wegen der Verletzung einer internationalen Gerichtsstandsvereinbarung, 2017, 568. 189  Antomo, Schadensersatz wegen der Verletzung einer internationalen Gerichtsstands­ vereinbarung, 2017, 570. 183 

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tional dimension can be identified. The right of the parties to conclude litigation agreements is derived from the fundamental rights of the individual, in particular from Article 2 (1) of the German Constitution (Grundgesetz).190 This provision guarantees the private autonomy of the individual, which includes party autonomy in procedural matters. In this sense, private autonomy is also the constitutional foundation for private jurisdiction, in particular for arbitration proceedings,191 which are regulated in Sections 1025 et seq. of the German Code of Civil Procedure. At the same time, arbitration agreements constitute a waiver of the right to sue in state courts and thereby affect the constitutional right of access to courts (Justizgewährleistungsanspruch).192 The German Federal Constitutional Court (Bundesverfassungsgericht) derives this fundamental right from the rule of law principle in Article 20 (3) of the German Constitution in conjunction with the fundamental rights of the individual, in particular with Article 2 (1) of the German Constitution.193 The right of access to courts does not only cover the access to state courts on a formal level but also the right to effective legal protection. However, it is recognized by the German Federal Court of Justice that the right of access to courts may be waived in favor of arbitration, provided that the agreement of the parties is made voluntarily.194 In addition, compliance with the minimum procedural standards is required by the body which shall replace state courts. In particular, the arbitral tribunal must be impartial and independent.195 Under these conditions, a waiver of the right to sue before state courts is considered to be permissible from a constitutional point of view. Accordingly, mediation clauses that do not contain a final but only a dilatory waiver of the right to sue before state courts are all the more acceptable.196 Furthermore, the German Federal Court of Justice has ruled in a public law dispute that a private party’s waiver of appeal does not violate its fundamental right under Article 19 (4) of the German Constitution.197 This right guarantees a recourse to courts for challenging acts of public authorities and is a special case of the general guarantee of justice.198 However, according to the aforementioned decision of the German Federal Court of Justice, it is not 190 See

Wagner, Prozeßverträge, 1998, 64. Hillgruber, in: Dürig/Herzog/Scholz (eds.), GG, 95th supplementary delivery 2021, Art.  92 mn. 90; Morgenthaler, in: BeckOK-GG, 49th ed. 2021, Art.  92 mn. 32.1; Gmeiner, in: Zöller (ed.), ZPO, 34th ed. 2022, preliminary note to §§  1025–1066 mn. 3. 192  Lemcke, NVwZ 2008, 42, 44. 193  BVerfGE 93, 99, 107; see further BGH, NJW 2016, 2266 mn. 52; Gmeiner, in: Zöller (ed.), ZPO, 34th ed. 2022, preliminary note to §§  1025–1066 mn. 30. 194  BGH, NJW 2016, 2266 mn. 52; see further Gmeiner, in: Zöller (ed.), ZPO, 34th ed. 2022, preliminary note to §§  1025–1066 mn. 3; Schulze-Fielitz, in: Dreier (ed.), GG, 3rd ed. 2018, Art.  92 mn. 52. 195  BGHZ 65, 59, 62. 196  Unberath, ZKM 2012, 12, 13 et seq. 197  BGHZ 79, 131, 135. 198  BVerfGE 107, 395 mn. 21. 191 

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compromised by a voluntary waiver of appeal. This ruling can be transferred to civil proceedings.199 Accordingly, from a constitutional standpoint, there are no objections to a waiver of the right to appeal. The German Federal Constitutional Court has further derived from Articles 2 (1) and 20 (3) of the German Constitution a right to a fair trial, which also applies in civil proceedings.200 This fundamental right includes the right of private parties to legal protection within a reasonable time. Closely connected to the right to a fair trial is the principle of the acceleration of court proceedings (Beschleunigungsgrundsatz).201 As explained above, under Section 224 (1) of the German Code of Civil Procedure, the parties of civil proceedings are entitled to shorten time limits by procedural agreement, which enables them to speed up the proceedings.202 Conversely, however, they are not entitled to extend time limits because this would constitute a violation of the acceleration principle. Therefore, this constitutionally protected principle sets limits on the parties’ freedom of disposition.203 In addition, some scholars further consider agreements on taking of evidence as inadmissible insofar as they may lead to a delay in the proceedings.204 In this scenario, too, the principle of acceleration is thus seen as a limit to the parties’ dispositions. In order to review the content of procedural agreements, the fundamental right to a fair trial can be taken into account especially by means of Sections 134, 138 (1), 307 et seq. of the German Civil Code since constitutional values must be taken into account when interpreting these provisions.205 Additionally, the right to a fair trial is also guaranteed by Article 6 (1) sentence 1 of the European Convention on Human Rights. According to this provision, in the determination of private rights and obligations, everyone is entitled to a fair and public hearing within reasonable time by an independent and impartial tribunal established by law. Like the right to an effective access to courts in the German Constitution, the right contained in Article 6 (1) sentence 1 of the European Convention on Human Rights is, in principle, waivable.206 In particular, the European Court of Human Rights has ruled that an arbitration clause is valid provided that the waiver is voluntary, permitted and unambigu199 Cf.

Zepf, DÖV 2012, 631, 638. 78, 123 et seq.; Di Fabio, in: Dürig/Herzog/Scholz (eds.), GG, 95th supplementary delivery 2021, Art.  2 (1) mn. 75; Vollkommer, in: Zöller (ed.), ZPO, 34th ed. 2022, introduction mn. 24. 201  Rosenberg/Schwab/Gottwald, Zivilprozessrecht, 18th ed. 2018, §  37 mn. 2. 202 See supra II 4. 203  Jaspersen, in: BeckOK-ZPO, 42nd ed. 2021, §  2 24 mn. 2. 204 See Schlosser, Einverständliches Parteihandeln im Zivilprozeß, 1968, 25 et seq., 46. 205  Cf. BGH, NJW 2016, 2266 mn. 57. 206  EGMR, 2.10.2018, 40575/10 and 67474/10, mn. 96 – Mutu et Pechstein/Suisse; BGH, NJW 2016, 2266 mn. 65; Meyer, in: Karpenstein/Mayer (eds.), EMRK, 3rd ed. 2022, Art.  6 mn. 69. 200  BVerfGE

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ous.207 In addition, it is necessary that the arbitration procedure is structured in accordance with the guarantees of Article 6 (1) sentence 1 of the European Convention on Human Rights and that the annulment of arbitral decisions by state courts is possible in the event of procedural errors.208 In this respect, the standards developed by the European Court of Human Rights are essentially in sync with the principles developed by German case law.209 Finally, a waiver of the right to appeal is also compatible with Article 6 (1) sentence 1 of the European Convention on Human Rights if it was agreed upon intentionally and without any undue influence.210

VII. Shifting Attitudes Towards Procedural Contracts As already mentioned in the introduction, until the beginning of the 20th century, many legal scholars recognized the admissibility of litigation agreements only insofar as they were expressly provided for in the German Code of Civil Procedure. In other cases, procedural agreements were considered to be invalid. This approach was driven by the concern that civil proceedings before state courts would otherwise degenerate into a procedure in which the parties themselves set the rules of the game.211 Over time, however, this view has been increasingly rejected. In particular, case law took a more liberal view early on. In fact, the Supreme Court of the German Reich already assumed that the parties could contractually commit themselves to any procedural conduct as long as it did not violate legal prohibitions or the concept of good faith.212 This more liberal approach was subsequently adopted by the German Federal Court of Justice.213 The shift towards more freedom of party disposition can be understood as a change in the way civil proceedings are looked at generally. Previously, civil procedure was often understood first and foremost as a state procedure in which the sovereign exercised its monopoly of jurisdiction in private law matters. At the same time, the structure of civil proceedings was meant to serve the 207  EGMR, 28.10.2010, – 1643/06, mn. 48 – Suda/République Tchèque; EGMR, 2.10.2018, 40575/10 and 67474/10, mn. 96 – Mutu et Pechstein/Suisse; Meyer, in: Karpenstein/Mayer (eds.), EMRK, 3rd ed. 2022, Art.  6 mn. 69. 208  EGMR, 28.10.2010, – 1643/06, mn. 48 – Suda/République Tchèque; EGMR, 2.10.2018, 40575/10 and 67474/10, mn. 96 – Mutu et Pechstein/Suisse; Meyer, in: Karpenstein/Mayer (eds.), EMRK, 3rd ed. 2022, Art.  6 mn. 69. 209  BGH, NJW 2016, 2266 mn. 65; Gleim, Letztwillige Schiedsverfügungen, 2020, 137 et seq. 210  Meyer, in: Karpenstein/Mayer, EMRK, 3rd ed. 2022, Art.  6 mn. 69. 211  Wach, AcP 64 (1881), 201, 220 et seq.; Bülow, AcP 64 (1881), 1 et seq.; Hellwig, in: Festgabe für Otto Gierke, vol.  2, 1910, 41, 88; cf. also Goldschmidt, Der Prozeß als Rechtslage, 1925, 311. 212  RGZ 102, 217, 221. 213  BGHZ 28, 45, 49.

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rule of law as a public good going beyond the interests of the parties to the specific dispute. However, this view of civil procedure was gradually replaced by a more liberal position. On this basis, the civil process is increasingly understood as a type of service towards private parties.214 This view goes hand in hand with the call for a more flexible and demand-oriented procedure in private law matters. The increasing liberalization in the area of litigation agreements can thus be understood as an expression of this changing image of the civil justice system. At the same time, it is clear that the current limits on the admissibility of procedural contracts are not carved in stone. In recent times, there has been a growing tendency to make civil procedure more demand-oriented and flexible in order to keep Germany attractive in the competition of legal systems.215 In addition, a demand-driven conception of civil procedure is also intended to stop the increasing migration of private law cases to arbitral tribunals.216 It remains to be seen what effect the current zeitgeist will have on the law of litigation contracts. Generally, it can be stated that the law of procedural agreements has evolved over time towards more freedom and flexibility for the parties. Lately, the corona pandemic has led to some difficulties in civil proceedings. Above all, oral hearings have become a problem due to the risk of infection with COVID-19.217 Nevertheless, no remarkable changes to the current civil procedure have become necessary so far.218 Rather, the existing instruments in the toolbox of the German Code of Civil Procedure have proven to be sufficiently flexible to take account of the pandemic situation. Especially the possibility of conducting a hearing by means of video and audio transmission in accordance with Section 128a of the German Code of Civil Procedure was regarded as a useful tool in the pandemic.219 Admittedly, not all German courts were ideally equipped for this purpose.220 Of practical importance was furthermore the possibility of a written procedure pursuant to Section 128 (2) of the German Code of Civil Procedure for which the consent of both parties is required.221 However, in this scenario, the dispositions of both parties do not constitute a procedural contract which could be binding to the court.222 Overall, there has not been a noticeable increase in litigation contracts in the pandemic. 214 See

seq.

215 

97.

216 

217 

Calliess, in: Verhandlungen des 70. Deutschen Juristentages, vol.  1, 2014, A 36 et

Wagner, Rechtsstandort Deutschland im Wettbewerb, 2017, 13 et seq. Calliess, in: Verhandlungen des 70. Deutschen Juristentages, vol.  1, 2014, A 40 et seq., A

Manz/Spoenle, MDR 2020, 637 et seq. Greger, MDR 2020, 509, 514. 219  Manz/Spoenle, MDR 2020, 637, 641 et seq.; Oswald, JURA 2020, 1013, 1017 et seq.; Gehrlein, FuR 2020, 264, 270. 220  Greger, MDR 2020, 509, 513; Manz/Spoenle, MDR 2020, 637, 638. 221  Manz/Spoenle, MDR 2020, 703 et seq.; Greger, MDR 2020, 509, 511 et seq. 222 See supra II 4. 218 See

The Social Enterprise: A New Form of the Business Enterprise? Birgit Weitemeyer

I. Concept and appearance 1. The concept of a social enterprise in Germany In some countries, social enterprises are registered or organized in special legal forms, and thereby acquire a special status. This is not yet the case in Germany. Increasingly, however, entrepreneurs and foundations in Germany are looking for ways to translate commercial activities directly into social projects.1 Therefore, scholars in Germany fall back on existing definitions.2 The European Commission, through its Social Business Initiative (SBI), has defined a social enterprise as an undertaking “(i) whose primary objective is to achieve social impact rather than generating profit for owners and shareholders, (ii) which uses its surpluses mainly to achieve these social goals, [and] (iii) which is managed by social entrepreneurs in an accountable, transparent and innovative way, in particular by involving workers, customers and stakeholders affected by its business activity”.3 Similarly, Social Entrepreneurship Netzwerk Deutschland defines the “primary goal of social entrepreneurship as solving social challenges. This is achieved through the sustained use of entrepreneurial means and results in new and innovative solutions. Steering and controlling mechanisms ensure that the social goals are being practised internally and externally”.4 1  Fleischer, ZIP 2021, 5; Habersack, in: FS für Christine Windbichler, 2020, 707; Hager, in: FS für Christine Windbichler, 2020, 731; Kuntz, in: FS für Klaus J. Hopt, 2020, 653; Möslein/ Sorensen, Columbia Journal of European Law 24 (2018), 391 (393). 2  The lack of definition was also pointed out in Parliament by members of parliament from the Green Party (small group question Bündnis 90/Die Grünen, BT-Drs. 19/6844). 3  European Commission, Communication from the Commission to the European Parliament, the Council, the European Economic and Social Committee and the Committee of the Regions, A renewed EU strategy 2011–14 for Corporate Social Responsibility, KOM(2011) 681 final, 25.10.2011, 4; Regulation (EU) No 346/2013 of the European Parliament and of the Council of 17 April 2013 on European social entrepreneurship funds, L 115/18 of 25.4.2013. 4  Ryland, Deutschland hat endlich eine Definition für Social Entrepreneurship!, 9.10.2019, https://www.tbd.community/de/a/deutschland-hat-endlich-eine-definition-fuer-social-en trepreneurship, last retrieved on 20.1.2022; Osbelt, Social Entrepreneurship – Entstehung und Bedeutung, Social Entrepreneurship Netzwerk Deutschland (SEND e.V.), 2019, https://

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2. Characteristics and industries In Germany, the most pragmatic characteristic is a non-profit legal form where there is no distribution of profits (non-distribution constraint) and a strong focus on social welfare. But even organisations that do not hold the status of a non-profit entity may (in part) pursue social and ecological goals that are not identified by applying this principle. Another criterion for distinguishing between social enterprises and traditional ventures is the degree of prominence of the business concept. Innovation can relate to products and services as well as to business models and organisational forms. Approaches that are more in line with economic principles often focus on providing capital and knowledge to promote self-help, or they apply strict ethical or ecological criteria in the production process (such as fair trade, alternative energies, and so on).5 One example is social enterprises that offer goods or services on the open market to support their employees. Typical of this group of enterprises is Discovering Hands (early detection of breast cancer through palpation of the breasts by blind women). Social enterprises pursue similar goals as workshops for disabled people (WISE), with the aim of integrating people with disabilities into working life, although they are traditionally less innovative and tend to assign employees simple tasks. A third distinguishing criterion is the generation of earned income. In Germany, this also applies if fixed rates are agreed for certain services, such as in the case of the health or care sectors. 6 The definition of a social enterprise does not apply to projects that are based exclusively on donations or subsidies. The distinction between social business (often referred to as the “social economy” or “third sector”) is not without ambiguity. In some cases, a social business is considered to be a special form of social enterprise.7 Mostly, however, a social business is in the ownership of traditional charities and welfare organisations that generate revenues by charging for social services that they themselves or their subsidiaries generate and generally also operate in a less innovative manner.8 Nevertheless, traditional welfare organizations are setting up social enterprises themselves with the help of subsidiaries.9 Thus, the term “social economy” is used as an umbrella term for classic third-sector organizations and social entrewww.send-ev.de/wp-content/uploads/2021/03/definition_socialentrepreneurship.pdf, last retrieved on 20.1.2022. 5  Scheuerle/Glänzel/Knust/Then (CSI University of Heidelberg), Social Entrepreneurship in Deutschland: Potentiale und Wachstumsproblematiken, 2013, 10. 6  Scheuerle/Glänzel/Knust/Then (CSI University of Heidelberg), Social Entrepreneurship in Deutschland: Potentiale und Wachstumsproblematiken, 2013, 11. 7  Lorenz, Social Entrepreneurs at the Base of the Pyramid, 2012. 8  Scheuerle/Glänzel/Knust/Then (CSI University of Heidelberg), Social Entrepreneurship in Deutschland: Potentiale und Wachstumsproblematiken, 2013, 21. 9  Nock/Krlev/Mildenberger, Soziale Innovationen in den Spitzenverbänden der Freien Wohlfahrtspflege – Strukturen, Prozesse und Zukunftsperspektiven, 2013.

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preneurs.10 Socially responsible companies that primarily distribute their profits to shareholders are generally not classified as social enterprises.11 According to the third German Social Entrepreneurship Monitor, social enterprises are most frequently represented in the care and education sectors (21.5 %), as well as the health and social services areas of the economy (17.5 %). In this way, the non-profit GmbH Teach First Deutschland facilitates the opportunity for young people to get actively involved in education for two years.12 In third place is information und communication (16.6 %).13 The company Co2Online GmbH, for instance, advises individuals online on how they can save energy in their households.14 3. Facts and figures The phenomenon of social enterprises as such is “nothing new”, but the underlying strategies of these enterprises have changed.15 The founders of the co-operative movement, Friedrich Wilhelm Raiffeisen and Hermann Schulze-De­ litzsch, or the Carl Zeiss Foundation, for example, were already acting as social entrepreneurs in the mid-19th century. However, due to the rapidly developing German social welfare state with government-subsidised welfare institutions, the idea of social enterprise spread much less quickly in Germany than in developing and emerging markets, as well as in the Anglo-Saxon industrialised countries, where social security systems are often based on inadequate or largely private provision of social services. As there is no standard legal form for social enterprises in Germany, it is not possible to give an exact figure. The German development bank KfW collected the most recent data in 2018, indicating that 108,000 social enterprises were founded between 2012 and 2017.16 The Social Entrepreneurship Netzwerk Deutschland (SEND e.V.) interest group has been active since 2017 and has

10  On the different definitions Salamon/Anheier, In Search of the Non-Profit Sector I: The Question of Definitions, in: Voluntas. International Journal of Voluntary and Nonprofit Organizations, 1992, 125–161; Scheuerle/Glänzel/Knust/Then (CSI University of Heidelberg), Social Entrepreneurship in Deutschland: Potentiale und Wachstumsproblematiken, 2013, 9. 11  Achleitner/Heister/Stahl, Social Entrepreneurship: Ein Überblick, 2007, 3 (7). 12  https://www.teachfirst.de/, last retrieved on 20.1.2022. 13  Hoffmann/Scharpe/Wunsch, 3. Deutscher Social Entrepreneurship Monitor 2020/2021, 18 et seq., https://www.send-ev.de/wp-content/uploads/2021/03/DSEM-2020-21.pdf, last retrieved on 20.1.2022. 14  https://www.co2online.de/, last retrieved on 20.1.2022. 15  Hackenberg/Empter, Social Entrepreneurship – Social Business: Für die Gesellschaft unternehmen, 2011, 12 et seqq. 16  Mezger, KfW Research Nr.   238, 2019, https://www.kfw.de/PDF/Download-Center/ Konzernthemen/Research/PDF-Dokumente-Fokus-Volkswirtschaft/Fokus-2019/Fokus-Nr.-238-Januar-2019-Sozialunternehmer.pdf, last retrieved on 20.1.2022.

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around 450 members (as at 2020).17 Besides the co-operatives already mentioned, in an article on social entrepreneurship the Federal Agency for Civic Education identifies the following enterprises as “well-known”: Ecosia (an ecological search engine), Discovering Hands and Kuchentratsch (an enterprise for self-determination in old age by means of business activities involving the baking and distribution of cakes).18 Plainly, there are no well-known social enterprises in Germany that stand out from the rest. 4. Certifications and Metrics According to German regulatory principles, recognition as a non-profit organisation under tax law acts as a special seal of approval for the pursuit of public welfare objectives. State supervision creates a special degree of public trust, even if it cannot guarantee the most effective use of funds because it is limited as such to mere legal control.19 The EU has meanwhile enacted the third version of the Eco Management and Audit Scheme (EMAS) of 2009, 20 which provides for a detailed certification procedure for environmentally sound production. The certification by the US organisation B Lab requires companies to meet 80 out of 200 criteria, ranging from labour concerns to environmental issues that are particularly oriented towards the common good, to attain the status of a Certified B Corporation.21 This is also available in Germany and is used by some companies, such as Inno­ cent Säfte. Furthermore, in Germany, there is certification for sustainable corporate governance issued by TÜV Rheinland, and the audit of the International Association, Economy for the Common Good (Gemeinwohlökonomie e.V.). Phineo gAG, founded by the Bertelsmann Foundation and other actors, is seeking to create greater transparency through a social marketplace whereby non-profit organisations are examined using an impact analysis.22 Private organisations like Betterplace.org 23 bring together donors and individual social projects. In doing so, the non-profit organisations are made more visible to do17  Rabl, Social Entrepreneurs: Zwischen den Stühlen, https://www.diepresse.com/5614815/ social-entrepreneurs-zwischen-den-stuehlen, last retrieved on 20.1.2022. 18  Yahyaoui, Social Entrepreneurship. Herausforderungen und Bedeutung für die Gesellschaft, 26.3.2021, https://www.bpb.de/apuz/im-dienst-der-gesellschaft-2021/329330/ social-entrepreneurship-herausforderungen-und-bedeutung-fuer-die-gesellschaft, last retrieved on 20.1.2022. 19  Hüttemann, NJW-Beilage 2018, 55 et seqq.; Momberger, Social Entrepreneurship, 2015, 207 et seq.; Weitemeyer/Vogt, NZG 2014, 12. 20  Schmidt-Räntsch, EurUP 2010, 123. 21  Möslein/Mittwoch, RabelsZ 80 (2016), 399 et seqq.; Möslein, in: Burgi/Möslein (eds.), Zertifizierung nachhaltiger Kapitalgesellschaften, 2021, 3 (5 et seqq.). 22 Phineo (ed.), Engagement mit Wirkung, 2010; Epkenhans, Transparenz über die Wirkungen gemeinnütziger Aktivitäten, in: Bürokratieentlastung des Dritten Sektors und des bürgerschaftlichen Engagements: Notwendigkeit, Praxis und Perspektiven, 2011, 271. 23  https://www.betterplace.org/de, last retrieved on 20.1.2022.

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nors by means of systematic recording, evaluations and comparisons related to the fields of work, modes of operation and performance. Private initiatives24 such as Transparency International Deutschland, DZI25 or Deutscher Spenden­ rat 26 monitor the spending of donations via their donation seals. Social entrepreneurs are expected to demonstrate their success or their social impact – that is, the (positive) effects on their subject area – to investors and other stakeholders with the help of an impact analysis. The methods and standards of the private sector for measuring impact can hardly be used for social enterprises. There still exist no binding, uniform reporting standards for the reporting of social impact. The organisation Ashoka has developed the Social Reporting Standard (SRS), which proposes a framework for reporting. The method helps to document and communicate the impact chain of programmes, projects and organisations. A distinction is made between output (for example, the number of unemployed young people who are trained) and outcome (the number of young people who actually get a job).27 Alternatively, the Capacity Assessment Grid is often used to identify the performance of an organisation based on structural features, skills and other resources. The Social Enterprise Scorecard, an adaptation of the BalancedScore Card, also takes into account social long-term goals.28 The fragmentation of these initiatives is largely considered to be an obstacle to a broader public response.29 Nevertheless, a study by the Heidelberg CSI concludes that the current accountability and transparency status in the third sector cannot be deemed visibly problematic. On the contrary, in Germany there is a greater reliance on state and regulatory monitoring and lesser reliance on the public interest.30 According to German regulatory principles, the role of non-profit status for tax purposes is that of an overarching organisational statute providing for the recognition of eligible non-profit organisations. It acts like a state seal of approval, opens up access to public or private funding and other benefits, ranging from fee reductions, for instance, for the broadcasting contribution, to the requirement of cooperation between social enterprises under social law as an exception from antitrust law, in that many laws contain provisions that are linked to non-profit

24  Krönes compares the seals; Krönes, in: Gmür/Schauer/Theuvsen (eds.), Performance Management in Nonprofit-Organisationen, 2013, 377 et seqq. 25  https://www.dzi.de/, last retrieved on 20.1.2022. 26  https://www.spendenrat.de/, last retrieved on 20.1.2022. 27  https://www.wirkung-lernen.de/, last retrieved on 20.1.2022. 28  Roder, Reporting im Social Entrepreneurship. Konzeption einer externen Unternehmensberichterstattung für soziale Unternehmer, Entrepreneurial and Financial Studies, 2011, 125. 29  Anheier/Beller/Haß, FJSB 2011, 96. 30  Anheier/Beller/Haß, FJSB 2011, 96.

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organisations or purposes.31 Government grants are often made dependent on the non-profit status of an organisation.32 5. Funding and finance A recent comparative study by the University of Heidelberg’s Research Centre for Social Investment and Innovation (CSI) found that access to funding is the main challenge for social enterprises.33 Due to the special financial status of social enterprises, their financing is very often a challenging task, because the return on investment for investors is often limited due to the income models of social enterprises.34 Typically, the sources of income vary. Income is generated through the sale of products, via donations, or from private or public funding.35 Some 23.2 % of social enterprises generate income exclusively through market activities, while 11.7 % obtain income exclusively through non-market activities (and may therefore not be defined as social enterprises from a strict point of view). The majority of market income is again generated from trade with commercial enterprises (37.6 %) and from private individuals (33.6 %). In the case of non-market activities, some 34.3 % of the funding comes from public funding sources and another 27.3 % from donations from private individuals.36 When social enterprises are asked to identify types of funding that go beyond financing operations (for example, for substantial investments), they frequently cite their own savings (51.6 %), government funding (41.8 %) and internal funds from operating cash flow (39.7 %). EU funding is drawn on by only one in five Deutsche Social Entrepreneurship Monitor (DSEM) social enterprises.37

31 

Cremer, Steuerliche Gemeinnützigkeit und allgemeine Rechtsordnung, 2021. Schauhoff, in: Schauhoff (ed.), Handbuch der Gemeinnützigkeit, 3.  Aufl. 2010, Grundlegung recital 37. 33  Krlev/Sauer/Scharpe/Mildenberger/Elsemann/Sauerhammer, Finanzierung von Sozialen Innovationen – Internationale Vergleichsstudie, Centrum für soziale Investitionen und Innovationen (CSI University of Heidelberg and SEND e.V.), 2021, 4, 11, https://www.sendev.de/wp-content/uploads/2021/10/Finanzierung_Sozialer_Innovationen.pdf, last retrieved on 20.1.2022. 34  Scheuerle/Glänzel/Knust/Then, Social Entrepreneurship in Deutschland: Potentiale und Wachstumsproblematiken (CSI University of Heidelberg), 2013, 65 et seqq., https:// www.kfw.de/PDF/Download-Center/Konzernthemen/Research/PDF-Dokumente-Studi en-und-Materialien/Social-Entrepreneurship-in-Deutschland-LF.pdf, last retrieved on 20.1.2022. 35  Hoffmann/Scharpe/Wunsch, 3. Deutscher Social Entrepreneurship Monitor 2020/2021, 42, https://www.send-ev.de/wp-content/uploads/2021/03/DSEM-2020-21.pdf, last retrieved on 20.1.2022; 65,1 % of the companies have hybrid sources of income. 36  For a detailed overview of the main sources of income of the organizations interviewed Hoffmann/Scharpe/Wunsch, 3. Deutscher Social Entrepreneurship Monitor 2020/2021, 43, https://www.send-ev.de/wp-content/uploads/2021/03/DSEM-2020-21.pdf, last retrieved on 20.1.2022. 37  Hoffmann/Scharpe/Wunsch, 3. Deutscher Social Entrepreneurship Monitor 2020/2021, 32 

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Public funding is a feature of almost all social enterprises in Europe.38 In 2010, the federal government adopted the promotion of social entrepreneurship as part of the National Engagement Strategy. KfW has had a financing programme for social entrepreneurship since 2012.39 State funding through KfW requires a business plan for the first two business years, must present their curriculum vitae and have to disclose their financial situation. The business model should not only focus on social involvement, but also on generating profits. The KfW therefore imposes requirements on the legal form: Only commercial enterprises can get a loan, non-profit companies are not supported.40 In the meantime, social enterprises are more strongly addressed in the federal government’s funding and advisory services. These include, for example, the loan, equity and mezzanine support (for example, ERP Start-up Loan – StartGeld, EXIST, Mi­ cromezzanine Fund, ERP VC Fund Investments), the KfW programme IKU – Investment Loan for Municipal and Social Enterprises, and the project Genera­ tionsbrücke Deutschland (2014 to 2019), in which more than 200 co-operation partners (such as elderly care facilities, day-care centres and schools) are currently involved.41 Since 2003, there have been venture capitalists for social enterprises (social venture) in Germany. Social venture capitalists do not expect a financial return (or only a small one), but they do expect a social return.42 Furthermore, to provide social enterprises with the necessary equity capital, loan and donation communities can come together. Typically, funding is provided through awards and prizes. As the first investment company in German-speaking countries, the 48, https://www.send-ev.de/wp-content/uploads/2021/03/DSEM-2020-21.pdf, last retrieved on 20.1.2022. 38  European Commission, Communication from the Commission to the European Parliament, the Council, the European Economic and Social Committee and the Committee of the Regions, Social Business Initiative, Creating a favourable climate for social enterprises, key stakeholders in the social economy and innovation, KOM(2011) 682 final, 25.10.2011; European Commission, Communication from the Commission to the European Parliament, the Council, the European Economic and Social Committee and the Committee of the Regions, A renewed EU strategy 2011–14 for Corporate Social Responsibility, KOM(2011) 681 final, 25.10.2011; funding program of KfW: https://www.kfw.de/inlandsfoerderung/Unternehmen/Gr%C3%BCnden-Nachfolgen/Sozialunternehmen/, last retrieved on 20.1.2022. 39  Federal Ministry for Family Affairs and KfW present new instrument for financing the growth of social enterprises, 25.10.2011, https://www.bmfsfj.de/bmfsfj/aktuelles/alle-mel dungen/bundesfamilienministerium-und-kfw-stellen-neues-instrument-zur-wachstums finanzierung-von-sozialunternehmen-vor-97002, last retrieved on 20.1.2022. 40 https://www.kfw.de/inlandsfoerderung/Zusatzcontent-und-Bilder/Nachfolge/Sozial unternehmen/0142_05_Infografik_Sozialunternehmen_V5_FINAL.pdf, last retrieved on 20.1.2022. 41  Answer of the Federal Government to the small group question of the parliamentary group Die Grünen, BT-Drs. 19/7293. 42  Kemnitzer/Schaarschmidt, Stiftung & Sponsoring 1/2011, 34; regarding these middle organisations see also Bertelsmann Stiftung (ed.), Grenzgänger, Pfadfinder, Arrangeure. Mitt­lerorganisationen zwischen Unternehmen und Gemeinwohlorganisationen, 2008.

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BonVenture Group has been supporting social entrepreneurs since 2003, providing them with venture capital as well as advice and networking contacts.43 The Social Venture Fund finances social enterprises and invests in the areas of education, integration, life in old age, combating long-term unemployment and health. Financiers are mostly high-net worth individuals, such as BMW heiress Susanne Klatten.44 In order to activate private investment capital to promote social entrepreneurship in the EU the European Social Entrepreneurship Fund (EuSEF) was created within the framework of the Social Entrepreneurship Initiative launched by the European Commission in 2011. The EuSEF is a label for private (investment) funds that must comply with certain uniform requirements that apply throughout the EU.45 As in a normal fund, the diversification in the portfolio should help to reduce the overall risk of the social investment if an organisation or project proves not to be effective. As far as the investors generate profits, these are transferred to the non-profit fund limited liability company (GmbH) in the form of grants and donations.46 As far as loan and donation communities are concerned, each member commits to donate a certain amount of money every month over a certain period of time (for example, five years). The donors sign a contract with the GLS Bank, a cooperative bank, which collects the donations. The total amount is made available to the social enterprise as a donation without any profit margin of its own. Foundations support social enterprises without any repayment obligation, such as the Siemens Foundation, the Vodafone Foundation, the Robert Bosch Foundation or the Haniel Foundation.47 The Social Entrepreneurship Netzwerk Deutschland as a network association, as well as the Ashoka Foundation, Pro­ jectTogether and Social Impact offer practical help, advice and networking through various funding programmes.48 Smaller initiatives also use this approach. For example, the brandstiftung finances the Social Lab Cologne, an association of 12 social enterprises in the education sector, who exchange information, know-how and contacts.49 43  Bundesverband Deutscher Kapitalbeteiligungsgesellschaften e.V., https://web.archive. org/web/20140103141935/http:/www.bvkap.de/privateequity.php/cat/137/aid/380/title/ Beispiel:_BonVenture_-_Portrait, last retrieved on 20.1.2022. 44  About impact investment for family offices: Ege/Klaiber/Prügl, FuS 2021, 192. 45  Regulation (EU) No 346/2013 of the European Parliament and of the Council of 17 April 2013 on European social entrepreneurship funds. 46  https://bonventure.de/, last retrieved on 20.1.2022. 47  Sahlmüller/Nazlier/Antes, Mit Collective Impact und Social Entrepreneurship im Ökosystem wirken: 7 Impulse aus dem Projekt „Bildung als Chance“, in: Berndt/Kreutter/Stolte (eds.), Zukunftsorientiertes Stiftungsmanagement, 2018, 251. 48 Bundesministerium für Wirtschaft und Energie (ed.), GründerZeiten 22 – Exis­ tenz­ gründungen im sozialen Bereich, 2020, 12, https://www.bmwi.de/Redaktion/DE/Publika tionen/Gruenderzeiten/infoletter-gruenderzeiten-nr-22-existensgruendung-im-sozialenbereich.pdf?__blob=publicationFile&v=3, last retrieved on 20.1.2022. 49  Aloui, Stiftung & Sponsoring 1/2011, 16.

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Numerous prizes and awards are given to support projects. The Entrepre­ neurship – Entrepreneurial Impact International Summer School, which has been held annually since 2008 under the motto “Billion Euro Projects to Foster Societal Change” at the Technical University of Munich, encourages entrepreneurial thinking with the aim of finding solutions to worldwide social problems. In 2011, the Social Entrepreneurship Academy was founded, a co-operation project of the four Munich universities.50 The Social Entrepreneurship Academy awards annual prize money of €48,000 to the winners through the Act for Impact funding programme.51 The Schwab Foundation for Social Entrepreneurship awards the international prize Social Entrepreneur of the Year.52 Every year, the Startsocial competition honours 100 social organisations for their commitment.53 There is no mention of advantages under public procurement law for social enterprises. The criticism is that the effects of state strategic procurement are thus given away.54 It is only in the case of protected workshops for persons with disabilities according to section 118 of the German Act Against Restraints of Competition (GWB), based on EU law,55 that contracting authorities may reserve the right to participate in procurement procedures. A similar narrow exception exists under section 107 (1) no.  4 GWB for certain ambulance services, which have been expressly exempted from the obligation to award public contracts under European law, if they are skilled (risk) ambulance services provided by non-profit organisations or associations without the intention of making a profit.56

II. Lack of specialised legal forms for social enterprises 1. Typically chosen legal forms Since all corporations and co-operatives are allowed to waive by their articles of association their right to make a profit and pursue social, ecological or other 50 https://heldenrat.wordpress.com/2011/02/28/social-entrepreneurship-forschung-bil dung/, last retrieved on 20.1.2022. 51  Wunsch, 15 Wettbewerbe für Deine Idee, 12.7.2017, https://www.tbd.community/de/a/ wettbewerbe-startup-social-nachhaltig, last retrieved on 20.1.2022. 52  Kasper-Claridge, The Schwab Foundation: 20 years of inspiring entrepreneurs, 24.9.2018, https://www.dw.com/en/the-schwab-foundation-20-years-of-inspiring-entrepre neurs/a-45615739, last retrieved on 20.1.2022. 53  Eipert, Gründen? Unbedingt! – Der Social Start-Up Guide, 8.3.2019, https://www. relaio.de/wissen/der-social-start-up-guide/, last retrieved on 20.1.2022. 54  Burgi/Rast, in: Burgi/Möslein (eds.), Zertifizierung nachhaltiger Kapitalgesellschaften, 2021, 31 (37). 55  EuGH, Urt. v. 6.10.2021 – C-598/19 – Conacee, NZBau 2021, 794. 56  EuGH, Urt. v. 21.3.2019 – C-465/17 – Falck Rettungsdienste, recital 59; Braun/Zwet­ kow, NZBau 2020, 219; Bühs, EuZW 2020, 658; Jaeger, NZBau 2020, 223.

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non-profit purposes, specific legal forms for social enterprises have not as yet been developed.57 Non-profit corporations, especially the flexible GmbH, have proven to be an important legal form for social enterprises. This is in stark contrast with other legal systems.58 While Swiss law has allowed the limited liability company to engage in non-commercial activities only since 2008,59 the public limited company has been used there for non-profit activities for far longer. 60 In US corporate law, the corporation can be used for a variety of purposes, 61 but there the doctrine of shareholder value has contributed to legal uncertainty about the extent to which the “normal” for-profit corporation may be used for social or mixed purposes, and has thus also led to the development of new legal forms oriented towards the common good.62 Therefore, traditional legal forms for business enterprises serving as legal forms for social enterprises are limited liability company (GmbH), public limited company (Aktiengesellschaft, AG) and co-operative (Genossenschaft). Due to its prevalence among social enterprises, the primary legal form is the GmbH. The fact that in German law the limited liability company (sections 1, 4 (2) of the German Limited Liability Companies Act, GmbHG) 63 and the public limited company (section 3 (1) of the German Stock Corporation Act, AktG) 64 can be adopted for any legally permissible purpose, makes corporations attractive for socially oriented enterprises. 65 All permissible purposes – that is, those not prohibited by criminal law – may be chosen, whether non-profit, commercial or hybrid. It is estimated that there are around 25,300 non-profit GmbHs. 66 The new legal form “entrepreneurial company with limited liability” (Unterneh­ mergesellschaft haftungsbeschränkt, UG), which was created in 200867 and is a sub-form of the GmbH according to section 5a GmbHG, is suitable for smaller 57  Möslein, in: Burgi/Möslein (eds.), Zertifizierung nachhaltiger Kapitalgesellschaften, 2021, 3 (21). 58  Momberger, Social Entrepreneurship, 2015, 242 et seq.; regarding France: Fleischer ZGR 2018, 703 (728 et seqq.); regarding section 172 (1) UK Companies Act 2006: Fleischer ZGR 2017, 411 (419 et seq.). 59  Code of Obligations (law on limited liability companies as well as amendments to the law on shares, co-operatives, commercial register and company law), amendment of 16.12.2005, BBl. 2005, 7289. 60  Schönenberg, Venture Philanthropie – Zulässigkeit und haftungsrechtliche Konsequenzen für Schweizer Stiftungen und deren Organe, 2011. 61  Fleischer/Mock, NZG 2020, 161 (164). 62  Momberger, Social Entrepreneurship, 2015, 104 et seqq., 254 et seqq., 289; Möslein/Mitt­ woch, RabelsZ 80 (2016), 400 (401 et seqq.). 63  Ullrich, Gesellschaftsrecht und steuerliche Gemeinnützigkeit, 2009, passim; Cramer, in: Scholz (ed.), GmbHG, 12.  Aufl. 2018, §  1 recital 8 et seqq. 64  Momberger, Social Entrepreneurship, 2015, 95 et seqq.; Bayer/Hoffmann, AG 2007, 347 et seqq.; Weber, Die gemeinnützige Aktiengesellschaft, 2014. 65  Momberger, Social Entrepreneurship, 2015, 87 et seqq., 103. 66  Mecking, Stiftung & Sponsoring, Rote Seiten 2/2020, 2. 67  Gesetz zur Modernisierung des GmbH-Rechts und zur Bekämpfung von Missbräuchen (MoMiG) vom 23.10.2008, BGBl. I 2008, 2026.

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social enterprises. Here, just as under English law with its limited company (Ltd), it is possible to set up the company without capital, or with a minimum capital of only one euro per shareholder. The German entrepreneurial company with limited liability (UG) may also be used for non-profit purposes. Public limited companies (for example, the Berlin Zoo AG) 68 and co-operatives are used by large social enterprises and commercially active self-help organisations with co-operative structures. 69 Regionalwert AG, for example, pools money and the vested interests of minority shareholders for investments in ecological agriculture and provides its shareholders with a return in the form of both money and added ecological value.70 In the course of the amendment of the German Co-operative Societies Act71 in 2006 it was clarified that, in addition to promoting the economic interests of the co-operatives, their social or cultural interests can also be promoted (section 1 (1) of the German Co-operative Societies Act, GenG), which means that co-operatives can also be used as social enterprises. Village shops in the form of co-operatives guarantee local sustainability and create communal places to meet,72 while energy co-operatives generate renewable energy.73 The advantage of the public limited company is that a large number of interested parties can participate in the organisation as shareholders. One reason for this is that the executive board of an AG, unlike the managing director of a GmbH, is not subject to shareholder instructions (section 76 AktG) and can therefore administer the company independently in day-to-day business according to entrepreneurial guidelines. Shareholders in a company (GmbH) are the owners of (at least) one share in the company. Shares in the company are in principle freely transferable (section 15 (1) GmbHG). Both the assignment of the shares and the transaction on which the assignment is based (for example, a purchase agreement) require notarial certification (section 15 (3) and (4) GmbHG). The articles of association may provide for restrictions on assignment (section 15 (5) GmbHG [Vinkulierung]). For example, the effectiveness of the assignment can be linked to the consent of all shareholders or an affirmative majority resolution of the shareholders’ meeting.74 In the case of a public limited

68 

Bayer/Hoffmann, AG 2007, 347; Weber, Die gemeinnützige Aktiengesellschaft, 2014. Hoffmann/Scharpe/Wunsch, 3. Deutscher Social Entrepreneurship Monitor 2020/2021, 20, https://www.send-ev.de/wp-content/uploads/2021/03/DSEM-2020-21.pdf, last retrieved on 20.1.2022; Picker, Genossenschaftsidee und Governance, 2019, 167. 70  Momberger, Social Entrepreneurship, 2015, 95 et seq. 71 Gesetz zur Einführung der Europäischen Genossenschaft und zur Änderung des Genossenschaftsrechts v. 18.8.2006, BGBl. I, 1911; Momberger, Social Entrepreneurship, 2015, 79. 72  Bösche, npoR 2011, 82. 73  Momberger, Social Entrepreneurship, 2015, 77 et seqq. 74  Seibt, in: Scholz (ed.), GmbHG, 12.  Aufl. 2018, §  15 recital 119 et seqq. 69 

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company, the transfer of membership can be made more simply and without a notary by merely handing over the share. In the GmbH and AG, the investors as shareholders have all the normal shareholder rights. Their voting power is determined by the size of their shareholding. In a co-operative, the shares also generally grant only one vote to each shareholder (one person, one vote). Only members who particularly promote business operations can be granted more votes, but only up to three votes (section 43 (3) GenG).75 In the co-operative, therefore, the participation of the co-operative members is guaranteed irrespective of their financial commitment; the entity is not structured in a capitalist way. In fact, co-operatives are the legal form most suitable for the commercial activities of social enterprises. Due to the disclosure and auditing obligations (sections 336 (2), 339 (3) of the German Commercial Code [HGB], section 53 GenG), which are also applicable, there is sufficient protection for legal transactions and section 1 GenG ensures that the co-operatives do not seek to maximise profits. However, the approximately €1,500–3,000 in auditing fees that a co-operative must pay for the compulsory audit at an auditing association are unaffordable for smaller social enterprises.76 Proposals to simplify the compulsory audit have not yet gained acceptance.77 For tax and business administration reasons, as well as the lack of special legal forms for social enterprises, a hybrid double structure consisting of a for-profit limited liability company and a non-profit supporting association, a holding foundation or a sponsoring limited liability company is often chosen. In this way, for example, a variety of interests can be bundled together in an association, and it can act in a non-profit capacity, while the subsidiary is liable to tax, generates income for the association and can conclude contracts with the outside world in a legally sound manner (section 37 (2) GmbHG). In contrast to the standard association solution, additional costs are incurred due to the notarial certification requirements necessary of the limited liability company (GmbH), its obligatory entry in the commercial register, and the accounting obligation. One such example in Hamburg is Dialog im Dunkeln (Dialogue in the Dark). The commercial sponsor is Consens Ausstellungs GmbH, and there is also a non-profit support association, the Förderverein Dialog im Dunkeln e.V.78 The company employs blind people in Hamburg, who introduce people who can see to sensory perceptions in a dark world in exhibition and restaurant rooms. The concept has spread to many countries around the world.

75 

Picker, Genossenschaft und Governance, 2019, 445 et seqq. Bösche, in: Bösche/Walz (eds.), Wie viel Prüfung braucht der Verein – Wie viel Prüfung verträgt die Genossenschaft?, 2005, 103; Wolff, Non Profit Law Yearbook 2013/2014, 2014, 19, 22. 77  Wolff, Non Profit Law Yearbook 2013/2014, 2014, 19. 78  http://www.dialog-im-dunkeln-verein.de/, last retrieved on 20.1.2022. 76 

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2. Stakeholder interests, public benefit and enforcement The extent to which the interests of stakeholders may be taken into account in standard commercial businesses has been the subject of debate for 200 years.79 Today, it is recognised that managers of German public limited companies are not primarily bound by shareholder value but must serve a broader corporate interest. They therefore enjoy greater discretion to take into account the interests of stakeholders.80 In the case of the limited liability company (GmbH), the shareholders directly determine the company’s objectives, which can range from pure profit maximisation to total non-profit. Co-operatives are not aimed at profit maximisation from the outset, but rather promote the business activities of their members or their social or cultural interests through joint business operations. But in Germany, typically all legal forms are open for non-profit organisations – that is, all corporations and co-operatives may by statute forego profit-making and pursue social, ecological or other non-profit purposes. To this end, both for-profit firms (corporations and co-operatives) may have their claims to profits and to the distribution of liquidation proceeds expressly excluded in whole or in part by the articles of association. 81 Insofar as corporations are not-for-profit organisations, for tax purposes they must stipulate these requirements in the articles of association. Shareholders may then not receive in return more than the paid-in capital shares (cash contributions) plus the fair value of their contributions in kind, not even in the event of their withdrawal from the corporation or the dissolution of the corporation. The tax law on non-profit organisations is also neutral with regard to legal form.82 The only requirement is that the legal entity benefiting is a corporation within the meaning of the German Corporate Tax Act (KStG) (section 51 (1)(1, 2) of the German Fiscal Code, AO). This is the only way to ensure the separation for tax purposes of the charitable sphere of the corporation and the private persons acting on its behalf. According to German regulation principles, non-profit status for tax purposes serves the function of an overarching organisational status for non-profit organisations that are eligible for funding. It functions like a seal of approval from the state.83 At its core, this particular status is based on the non-distribution constraint. Public trust in non-profit organisations is also strengthened by the 79 

Habersack, AcP 220 (2020), 594. Mittwoch, in: Burgi/Möslein (eds.), Zertifizierung nachhaltiger Kapitalgesellschaften, 2021, 51 (67–69). 81  Ullrich, Gesellschaftsrecht und steuerliche Gemeinnützigkeit, 2009, 45 et seqq. 82  Musil, in: Hübschmann/Hepp/Spitaler (eds.), AO/FGO, 266. Lfg., 2021, §  51 AO recital 20. 83  Schauhoff, in: Schauhoff (ed.), Handbuch der Gemeinnützigkeit, 3.  Aufl. 2010, Grund­ legung recital 37. 80 

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fact that the establishment of the non-profit purposes in the articles of association, as required by section 60 AO, documents the organisation’s “eligibility for promotion” to a certain extent to the outside world, and the tax authorities monitor whether the non-profit status in the statutes also corresponds with the actual management of the organisation. This is in line with the hypothesis of the US economist and legal scholar Henry Hansmann, who ascribes the existence of non-profit organisations to a contractual failure as a result of a deficiency of information.84 Accordingly, the enforcement is undertaken solely by means of tax law. Should the articles of association comply with the legal requirements, but later it transpires that the management failed to comply with the provisions of the articles of association, this results in the non-profit enterprise not being tax-exempt for the entire past assessment period, and therefore liable for the payment of taxes in the ordinary way. Any tax savings from these periods must be refunded to the tax authorities. However, the constitutional principle of proportionality must also be observed when this legal consequence is ordered (see section 60 (2) AO).85 The most severe contravention is when a non-profit corporation does not comply with the principle of asset retention – that is, for instance, by distributing profits to the executive board or members on account of excessive salaries, which violates section 55 (1)(1) AO. In such cases, the tax benefit should be forfeited not only for the assessment period in which the violation occurred, but also for periods prior to that (section 61 (3) AO).86 The objective of this harsh penalty is to prevent organisations from collecting tax-privileged funds in one year and deciding to “give up” their non-profit status the next year and distribute the state-subsidised funds to the board or members. The obligation to pay back taxes extends not only to the taxes that would have been incurred by the non-profit organisation itself (such as, in particular, corporate income tax and trade tax), 87 but also, where applicable, to taxes that its donors would otherwise have been obliged to pay, but which were exempted due to their donation to the supposedly non-profit organisation, pursuant to section 10b (4) of the German Income Tax Act (EStG). This is because the donor should be able to rely on a donation receipt once he has received it and can therefore 84  Hansmann, The Role of Nonprofit Enterprise, The Yale Law Journal 1989, Bd.  89, 835; Steinberg, Economic Theories of Nonprofit Organizations, in: Powell/Steinberg (eds.), The Nonprofit Sector – A Research Handbook, 2006, 117. 85  Gersch, in: Klein (ed.), AO, 15.  Aufl. 2020, §  63 AO recital 2; Koenig, in: Koenig (ed.), AO, 4.  Aufl. 2021, §  59 AO recital 8; Bott, in: Schauhoff (ed.), Handbuch der Gemeinnützigkeit, 3.  Aufl., 2010, §  10 recital 51 et seq., 80, 84. 86  Gersch, in: Klein (ed.), AO, 15.  Aufl. 2020, §  63 AO recital 2; Koenig, in: Koenig (ed.), AO, 4.  Aufl. 2021, §  61 AO recital 7, §  63 AO recital 7; Bott, in: Schauhoff (ed.), Handbuch der Gemeinnützigkeit, 3.  Aufl. 2010, §  10 recital 53, 120 et seqq. 87  Differentiated to the specific taxes Bott, in: Schauhoff (ed.), Handbuch der Gemeinnützigkeit, 3.  Aufl. 2010, §  10 recital 90 et seqq.

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claim his donation as income-reducing in any case without having to fear an obligation to pay tax arrears.88 In addition, managers may be held personally liable for the payment of the tax arrears pursuant to section 10b (4)(2–4) EStG. 3. The debate about disclosure and reporting GmbHs and public limited companies are obliged to keep accounts in accordance with section 13 (3) GmbHG, section 3 (1) AktG, section 6 (1), section 238 (1) HGB. According to section 325 HGB, the annual financial statements must be submitted to the electronic Federal Gazette and published. The company name and registered office, a domestic business address, the object of the company, the amount of the share capital, the date of conclusion of the memorandum and articles of association, and the identities of the managing directors must be made public by entry in the commercial register (section 10 (1) GmbHG, section 37 AktG, section 8 et seqq. HGB). Anyone is permitted to inspect the commercial register (section 9 HGB). In addition, the beneficial owners must be entered in the transparency register. Legislators and standard-setting professional bodies have also created framework concepts for non-financial reporting, through which companies must disclose their corporate social responsibility (CSR) measures according to section 289b, 289c or section 315b, 315c HGB.89 For a non-commercial association (Idealverein) there are only the somewhat simplified provisions of sections 27 (3), 666, 259, 260 of the German Civil Code (BGB), which only oblige associations to draw up an orderly list of their income and expenditure. As a rule, there is no obligation to publish the annual financial statements. Section 325 HGB only applies to corporations; for non-profit associations,90 an obligation to publish can only arise from the Publicity Act if the very stringent thresholds of section 1 of the Publicity Act (PublG) 91 are exceed88  Sections 10b (4) sentence 1 EStG, 9 (3) sentence 1 KStG, 9 no.  5 sentence 13 of the German Trade Tax Act, GewStG. 89  Corporate Social Responsibility Directive of the EU, Derective 2014/95/EU of the European Parliament and of the Council of 22 October 2014, L 330/1; European Commission, Proposal for a Directive of the European Parliament and of the Council amending Directive 2013/34/EU, Directive 2004/109/EC, Directive 2006/43/EC and Regulation (EU) No 537/2014, as regards corporate sustainability reporting, 21.04.2021, COM(2021)189; Lanfer­ mann/Scheid, DB 2021, 1213 et seqq.; Ekkenga/Schirrmacher/Schneider, NJW 2021, 1509; Möslein, Offenlegung nichtfinanzieller Unternehmensinformationen, in: Burgi/Möslein (eds.), Zertifizierung nachhaltiger Kapitalgeselllschaften, 2021, 343. There are also private standard-setters, e.g. the Global Reporting Initiative and the International Integrated Reporting Council (IIRC), which merged on 9.6.2021 with SASB to form the Value Reporting Foundation. The International Accounting Standards Board (IASB) plans to establish a new International Sustainability Standards Board; Paefgen, in: FS für Karsten Schmidt, 2019, 105; Schön, in: FS für Karsten Schmidt, 2019, 391. 90  Section 3 (1) no.  3 PublG. 91  At least two of the following three criteria must be met: (1) balance sheet total exceeds 65 million euros, (2) sales in the twelve months prior to the reporting date exceed 130 million

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ed. It is only when non-commercial associations operate a commercial enterprise within the meaning of section 1 HGB (for example, where a football club has a commercial league division that is not outsourced to subsidiaries) are they to be entered in the commercial register as traders pursuant to section 33 HGB. They are required to comply with the regulations for traders such as the preparation of a commercial balance sheet pursuant to section 242 HGB.92 It is unclear when an economic activity of an association constitutes a commercial enterprise within the meaning of section 1 HGB, and a large number of associations are not registered under section 33 HGB despite meeting the requirements. Anyone is permitted to inspect the commercial register (section 9 HGB). The non-profit GmbH (gGmbH) (or AG and co-operative) is already a formal trader according to its legal form, irrespective of its non-profit status, and is therefore obliged to register and keep accounts. Non-profit organisations benefit from tax advantages. For this purpose, they are accountable to the tax authorities, which examine the financial reporting of the non-profit organisations according to the requirements of the non-profit tax law under sections 51 and following AO. However, due to tax confidentiality (section 30 AO), the financial authorities are required to maintain secrecy vis-àvis the public. The existing external control of non-profit organisations in the legal forms of associations and foundations by the tax authorities is therefore widely considered to be insufficient, even by international standards.93As of the 1 January 2024, a register of beneficiaries will be introduced in which the status of the organisation as a non-profit organisation can be inspected.94 4. Tax exemption and limitation on trading The German state supports corporations whose activities are considered to be of particular value to society by granting them tax advantages. Non-profit corporations are exempt from income taxes provided they do not maintain a commercial business operation. Specifically, this includes exemption from the 15 % corporate income tax (section 5 (1) no.  9 KStG) and from around 14 to 15 % trade tax (section 3 no.  6 GewStG). In addition, there are tax exemptions for property tax (section 3 (1) no.  3 lit.  b of the German Property Tax Act, GrStG) 95 euros, (3) the company has employed an average of more than five thousand employees in the twelve months prior to the reporting date. 92  Hüttemann, in: FS für Wulf Henning Roth, 2015, 241 et seqq. 93  Vogt, Publizität im Stiftungsrecht. Analyse der geltenden Rechtslage und Vorschläge für eine umfassende Reform der stiftungsrechtlichen Publizität, 2013; Weitemeyer/Vogt, NZG 2014, 12 et seqq. 94  Article 28 of the Annual Tax Act (JStG) 2020, section 60b AO-new. 95  Real estate of a non-profit corporation is exempt from property tax if it is used for beneficial purposes, Kühnold, in: Lippross/Seibel (eds.), Basiskommentar Steuerrecht, 129. Lfg., 2022, §  3 GrStG recital 27.

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and the VAT rate for services provided by non-profit corporations96 is reduced from 19 % to 7 % (section 12 (2) no.  8 lit.  a of the German Value Added Tax Act, UStG).97 In addition, VAT law contains several special tax exemptions that are linked to non-profit status. For smaller non-profit corporations, VAT law facilitates the possibility of a flat rate for input taxes according to an average rate (section 23a UStG). Finally, charitable donations to non-profit entities can be received tax-free as non-taxable increases in assets (section 13 (1) no.  16 lit.  b, c, no.  17 of the German Inheritance and Gift Tax Act, ErbStG). Insofar as the corporation is engaged in commercial activities, the tax concession depends on the type and scope of the commercial activity. Pure asset management – that is, the use of assets, for example, through capital investment or leasing (section 14 (3) AO) – is allowed as long as the funds are not withdrawn from the corporation’s actual purpose in the long term.98 If the activities of a non-profit corporation are limited to asset management, this area remains tax-exempt. This holds true also for spin-off for-profit GmbHs as subsidiaries of non-profit organisations. The collection of profits does not constitute a commercial business operation at the level of the non-profit organisation if the holding of the participation is limited to the usual exercise of shareholder rights.99 If, on the other hand, the corporation pursues an independent consistent activity through which income or other economic benefits are generated and which goes beyond the scope of asset management, then it maintains a (partially) taxable commercial business operation within the meaning of section 14 sentence 1 AO.100 Due to the exclusivity requirement of section 56 AO, the commercial operation must at least indirectly serve the purpose of fulfilling the tax-privileged objectives, by regularly raising funds.101 The partial tax liability results from the fact that the non-profit corporation on the one hand promotes the tax-privileged purpose, but on the other hand is in competition with taxable businesses of the same or an analogous kind. For reasons of competition impar-

96 

These are usually sales from special-purpose operations or asset management. A non-profit status does not automatically lead to exemption from VAT. The differentiation between VAT and non-profit law results from the fact that non-profit law is national law, whereas VAT law is strongly influenced by European law; Kohlhepp, DStR 2019, 129 (136) and comprehensively Weitemeyer/Achatz/Schauhoff (eds.), Umsatzsteuer für den Nonprofit-Sektor, 2019. 98  In this respect, the requirement of timely application of funds is particularly relevant, section 55 (1) no.  5 sentence 3 AO, Hüttemann, Gemeinnützigkeits- und Spendenrecht, 5.  Aufl. 2021, recital 6.40. 99  BFH, Urt. v. 25.8.2010 – I R 97/09, BFH/NV 2010, 312; BFH, Urt. v. 27.3.2001, I R 78/99, BFHE 195, 239, BStBl. II 2001, 449; BFH, Beschl. v. 19.8.2002, II B 122/01, BFH/NV 2003, 64. 100  Hüttemann, Gemeinnützigkeits- und Spendenrecht, 5.  Aufl. 2021, recital 6.100. 101  Hüttemann, Gemeinnützigkeits- und Spendenrecht, 5.  Aufl. 2021, recital 6.50. 97 

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tiality, the corporation is taxable (in other words, partially taxed) on the business operation but remains tax-exempt in all other respects.102 According to section 21 BGB, the non-commercial association pursues charitable purposes, but may also engage in commercial activities, provided these do not result in profits being distributed to individual members and are secondary to the main charitable purpose. However, even a primary purpose that involves exchanges for payment has been deemed permissible by the most recent so-called Kita-case (childcare provider case) of the Federal Supreme Court103, provided it can be assumed that this activity serves only charitable purposes and is tax exempt. When commercial activities are further developed, associations often outsource these activities to wholly owned subsidiaries for business reasons (liability, governance, independence, and gaining managing directors). However, if the association is not supposed to operate exclusively on a non-profit basis, the scope of the permitted commercial activities is still not conclusively clarified.104 The gGmbH, on the other hand, can pursue any legally permitted purpose (section 1 GmbHG). Unlike as is the case with an association, it is irrelevant as to whether a commercial purpose or a non-profit purpose is pursued.105 In practice, the distinction between a non-commercial and a commercial association is difficult to discern because social enterprises as associations are also commercially active and thus pursue both charitable and commercial purposes. How­ ever, it has been recognised that running a commercial business does not per se prevent an association from being recognised as a non-profit organisation. The prerequisite for its recognition as a non-commercial organisation is that the main purpose of the organisation is of a philanthropic nature, and that the commercial business operation is “secondary and ancillary to the non-profit organisation’s purpose and aids in achieving it”.106 This is the position if the non-commercial purpose of the association is realised precisely through the business (“purpose realisation business”), or if the business is maintained in order to raise the funds necessary for the pursuit of the non-profit purpose (“fundraising business”).107 According to the more recent so-called Kita-case of the Federal Supreme Court, an important indication for assessing whether the commercial business operation is secondary and subordinate to the main non-profit purpose and auxiliary to its pursuit is the recognition of the association as a non-profit organisation for tax purposes.108 The altruism requirement ensures 102 

Blesinger, in: Kühn/von Wedelstädt (eds.), AO/FGO, 22.  Aufl. 2018, §  6 4 AO recital 2. BGH, Beschl. v. 16.5.2017 – II ZB 7/16, npoR 2017, 156. 104  Leuschner, in: MüKo-BGB, 9.  Aufl. 2021, §  2 2 recital 43 et seqq. 105  Cramer, in: Scholz (ed.), GmbHG, 12.  Aufl. 2018, §  1 recital 9 et seqq. 106  BGH, Beschl. v. 16.05.2017 – II ZB 7/16, NJW 2017, 1943 recital 21 et seqq.; Leuschner, in: MüKo-BGB, 9.  Aufl. 2021, §  22 recital 51 et seqq. 107  Terminology by Leuschner, Leuschner, in: MüKo-BGB, 9.  Aufl. 2021, §  2 2 recital 53 et seqq. 108  BGH, Beschl. v. 16.05.2017 – II ZB 7/16, NJW 2017, 1943 recital 22 et seqq. 103 

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that the association does not primarily pursue its own commercial goals.109 Since the right to freedom of association guaranteed under Article 9(1) of the German Constitution (GG) grants persons the right to form associations, it is not necessary to use alternative corporate forms if the protection of creditors does not require this (in view of the Unternehmergesellschaft without liable capital and the low risk of insolvency of associations).110 The Federal Supreme Court considers it irrelevant to what extent the commercial business operation is carried out and whether it has a non-profit purpose, as in the Kita-case.111 Following this judgment, non-profit associations are allowed to engage in commercial activities to a considerable extent, so that there is no longer any need to use a corporation as an alternative under the law on associations. Rather, the non-profit status for tax purposes determines the association’s status of commercially active social enterprises.112 If, however, social enterprises provide for even partial profit distribution, or profit distribution from the association’s activities in a concealed manner by way of excessive salaries or other benefits, not only is the non-profit status at risk, but the indirect effect for the civil law right of association is also jeopardised. However, appropriate remuneration of members or board members on the basis of an employment relationship does not prevent the association from being registered as a non-profit organisation.113 Nevertheless, if one wants to avoid uncertainty with regard to appropriate salary payments, hybrid models are the better ption.114 Even in the context of charitable non-profit organisations (such as the German Automobile Association ADAC), the Federal Supreme Court assumes that the purpose of the organisation “is not directed towards a commercial business operation”, provided that no distribution of profits actually takes place.115 This is relevant also for social enterprises that do not pursue a charitable, philanthropic or religious purpose within the meaning of sections 52–54 AO, but nevertheless refrain from distributing profits. Provided, however, that the social enterprise predominantly serves the commercial purposes of its members – say, through the joint operation of a village shop, the procurement of energy, or the purchase of ecologically produced food at reduced prices – the current case law on associations is of no assistance. The limited liability company is not suited to structures with a large number of committed members because of its notarial foundation and the time-consuming process associated with changing members. Some state administrations have 109 

BGH, Beschl. v. 16.5.2017 – II ZB 7/16, npoR 2017, 156 recital 25. BGH, Beschl. v. 16.5.2017 – II ZB 7/16, npoR 2017, 156 recital 26, 32. 111  BGH, Beschl. v. 16.5.2017 – II ZB 7/16, npoR 2017, 156 recital 28 et seqq., recital 30, 32. 112  Leuschner, NJW 2017, 1919 (1921); Schöpflin, ZStV 2018, 9 et seqq. 113  Echtermann/Hofmann/Lüken/Noll/Ortmann, npoR 2018, 133 (135). 114  Momberger, Social Entrepreneurship, 2015, 224 et seq. 115  Leuschner, NJW 2017, 1919 (1921). 110 

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started to revive the legal form of the commercial association (section 22 BGB) for village shops.116 After the legislator gave up its intention to revive the commercial association in the course of the Kita-case, however, the responsible authorities are probably also prevented from doing so administratively.117 Co-operatives are also not a viable alternative, especially for organisations in the low-profit sector, due to their considerable auditing costs.118 The small co-operative with simplified organisational requirements is limited to a maximum of 20 members, according to section 24 GenG, which is again too few for a village shop or a citizens’ energy co-operative. The restrictions described for commercial operations do not apply to special-purpose operations within the meaning of section 64 (1) and section 65 AO. A special-purpose business is deemed to exist if the commercial business operation in its entirety serves to realise the charitable purpose of the corporation (for example, if it provides advice and networking to other non-profit organisations for a small fee). This tax concession results from the fact that the special-purpose business serves not only to raise funds but also to directly realise the statutory purposes.119 Examples are non-profit enterprises in nursing or geriatric care, as well as the operation of educational institutions or youth hostels. These conditions are met, for example, in the case of consulting or the provision of co-operation services through social franchising, because the costs of professional consulting by a consulting company are usually much higher and cannot be borne by the non-profit actors. Moreover, such persons lack the special expertise required in that context. The Federal Fiscal Court (Bundes­ finanzhof, BFH) did not consider a catering business that served a non-profit corporation for the training of disadvantaged youths or disabled persons to be a special-purpose business. This was because the business had competed with other competitors more than was necessary. The decision is part of a larger context of several decisions through which the court has gained a reputation for being a “competition guardian”.120 Since the regulations on special-purpose operations, and specifically section 65 no.  3 AO, are intended to protect potential competition, so that no barriers to market entry can be erected by existing non-profit special-purpose operations,121 the requirements for special-purpose operations are increasingly coming under scrutiny. This is because, technically, 116 

Bösche, npoR 2011, 82 et seqq. Wolff, Non Profit Law Yearbook 2017, 2018, 99 et seqq. 118  Bösche, in: Bösche/Walz (eds.), Wie viel Prüfung braucht der Verein – Wie viel Prüfung verträgt die Genossenschaft?, 2005, 103; Wolff, Non Profit Law Yearbook 2013/2014, 2014, 19, 22. 119  Hüttemann, Gemeinnützigkeits- und Spendenrecht, 5.  Aufl. 2021, recital 6.2, 6.3. 120  Hüttemann/Schauhoff, DB 2011, 319. 121  BFH, Beschl. v. 19.7.2010 – I B 203/09, BFH/NV 2011, 1; BFH, Urt. v. 18.8.2011 – V R 64/09, HFR 2012, 784. 117 

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almost all the activities of social enterprises could also be offered by commercial providers, but they often do not do so because the profit margins are too low. In addition, the legislator offers incentives for private individuals or organisations to donate money or material resources to charitable corporations. In this way, the state indirectly contributes to an increase in the assets of the beneficiary corporation.122 As donations are made and sponsoring is done by companies within the framework of their CSR guidelines, they will predominantly only engage in this activity in respect of non-profit organisations. 5. Limitations on profit distributions to owners According to section 55 (1)(2) AO, the principle of altruism requires that the funds of the corporation be used only for objectives consistent with the statutes, and that the members, while holding membership, may not receive any benefits from the funds of the corporation (no.  1), and that the corporation may not favour any person by means of expenditure that is incompatible with the purpose of the corporation or by means of disproportionately high remuneration (no.  3). The importance of the principle of altruism is seen in “protecting the resources of the non-profit corporation from [being accessed by] its decision-makers contrary to the statutes[,] and ensuring the most efficient possible use of resources for the tax-privileged statutory objectives of the corporation”.123 This establishes a substantive link between the pursuit of charitable purposes by excluding investors from the distribution of profits,124 thereby preventing “a non-profit corporation from being misused by its members in the pursuit of their own commercial objectives”.125 In the everyday work of public benefit corporations, there are many potential points of contact with the (commercial) interests of members or third parties. A particular challenge for the assessment of the altruism of a corporation arises from the fact that the promotion of members is not infrequently a “necessary by-product” of the non-profit activity, because the members also belong to the group of persons promoted.126 The prime example in this respect is that of a sports club that promotes sport for the benefit of the general public, and thus pursues a recognised charitable purpose (section 52 (2) no.  21 AO) that regularly benefits its members.127 Other examples are self-help groups or co-operative structures. In these settings, in which the members benefit directly from the 122  Hüttemann, Gemeinnützigkeits- und Spendenrecht, 5.  Aufl. 2021, recital 1.25 et seqq., 1.41 et seqq. 123  Von Holt, in: Winheller/Geibel/Jachmann-Michel (eds.), Gesamtes Gemeinnützigkeitsrecht, 2.  Aufl. 2020, §  55 AO recital 2. 124  Walz, JZ 2002, 268 (270 et seq.). 125  Seer, in: Tipke/Kruse (eds.), AO/FGO, 168. Lfg., 2021, §  55 AO recital 1. 126  BFHE 244, 194 recital 28; BFH DStRE 2005, 957; BFHE 127, 330. 127  BFHE 127, 330.

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charitable, philanthropic or religious purpose of the corporation, purely immaterial interests are initially irrelevant within the framework of the commercially oriented section 55 AO (in other words, insofar as the members are promoted solely in a non-commercial manner, this is irrelevant for the assessment of altruism).128 However, there is a problem in cases where the subsidies also have an (indirect) commercial relevance (for example, because the members save on expenses to an extent that is not in proportion to the membership fee and other member benefits).129 Such benefits may also consist of interest-free/low-interest loans in favour of the members, or high-interest loans by the members in favour of the corporation,130 as well as discounts granted specifically to members without these being covered by the charitable purposes of the corporation’s statutes (cf. section 53 AO).131 However, due to the wording “in their capacity as members”, the law also makes it clear that not every commercial benefit in favour of persons who are (also) members of the corporation is excluded. If these persons deal with the corporation in general commercial dealings – that is, as third parties providing services, and not specifically in their capacity as members –a corresponding payment is not detrimental to the tax-exempt status.132 Members may therefore sell goods, provide services or grant loans to the corporation and demand consideration in return.133 Recently, courts have questioned what constitutes reasonable remuneration for the employees of a charitable organisation. According to the Federal Fiscal Court, the salaries of persons in comparable positions in the industry, and not only the usually lower salaries of non-profit organisations, are to be used to examine the appropriateness of remuneration under non-profit law.134 This is because, while non-profit organisations may not place their employees in a better position than managing directors with the same position and qualifications in commercial enterprises, they are not required to place them in a worse position. However, overstepping the limits set out in this provision triggers a hidden distribution of profits (section 55 (1) no.  3 AO), which can lead to the loss of the organisation’s non-profit status on account of misappropriation of funds (section 59 half-sentence 2 AO, section 63 AO).135 Nevertheless, some margin of 128 

Seer, in: Tipke/Kruse (eds.), AO/FGO, 168. Lfg., 2021, §  55 AO recital 3. Kümpel, DStR 2001, 152 (154); Reimer/Waldhoff, FR 2002, 318 (325 et seq.). 130  Unger, in: Gosch (ed.), AO/FGO, 165. Lfg., 2/2016, §  55 AO recital 67, 70, 80; Musil, in: Hübschmann/Hepp/Spitaler (eds.), AO/FGO, 266. Lfg., 2021, §  55 AO recital 181. 131  Von Holt, in: Winheller/Geibel/Jachmann (eds.), Gesamtes Gemeinnützigkeitsrecht, 2.  Aufl. 2020, §  55 AO recital 29, 31; BFHE 62, 462. 132  Leisner-Egensperger, DStZ 2008, 292 (299). 133  Leisner-Egensperger, DStZ 2008, 292 (299). 134  BFH, Urt. v. 12.3.2020 – V R 5/17, npoR 2020, 303 m. Anm. Kirchhain/Kampermann; Jansen/Fein, StuW 2019, 241 (249). 135  BFH, Urt. v. 12.3.2020 – V R 5/17, npoR 2020, 303 m. Anm. Kirchhain/Kampermann; Kampermann, Organvergütung in gemeinnützigen Körperschaften, 2018, 254. 129 

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appropriate remuneration conditions exists. In addition, there is a safety margin of up to 20 %, which if exceeded does not lead to the loss of non-profit status for the entity in question. For reasons of proportionality, there is also a de minimis provision which in the case in question was assumed to be €3,000.136 However, there is a considerable restriction in relation to non-charitable limited liability companies, as they are only allowed to pay reasonable salaries to shareholder-directors and related persons, but are allowed to pay even outstanding salaries to outside directors. In contrast to traditional non-profit organisations, which are not allowed to distribute profits, social enterprises, like non-profits, pursue public welfare goals, but they also want to be able to distribute profits to their shareholders or investors, even if profit maximisation is not the primary objective. In terms of their articles of association, corporations may also only partially refrain from distributing profits, but then they will not be non-profit entities. According to section 56 AO, as well as section 5 (1)(8)(1) KStG and section 12 (2)(8) UStG, non-profit status requires the exclusive pursuit of non-profit objectives. There is no partial non-profit status.137 The principle of exclusivity is intended to promote an organisational focus and to avoid conflicts of interest and misappropriation of funds.138 It thus prohibits arrangements under company law in which profit distribution is only partially waived, and founders and shareholders opt to have a minimum return distributed to them. For example, the Hamburg-based company viva con agua intends to retain 40 % of the profits from the sale of mineral water in the for-profit limited company in the long term and distribute 60 % to its supporting association and a foundation, which will then use the profits and additional donations to improve the water supply in developing countries.139 With reference to international models which, like the US low-profit limited liability company, in principle also permit profit distribution in full or,140 as in the case of the UK legal form of the community interest company introduced in 2004, merely partially,141 a relaxation of the ban on profit distribution is also called for in Germany.142 The possibility provided for in the former German law of still assuming the non-profit status of an entity at returns of 5 % (KStG 1925) or 4 % (KStDV 1935143), and therefore below the interest rate prevailing in the market at the time, has also 136 

BFH, Urt. v. 12.3.2020 – V R 5/17, npoR 2020, 303 m. Anm. Kirchhain/Kampermann. Hüttemann, Gemeinnützigkeits- und Spendenrecht, 5.  Aufl. 2021, recital 4.3. Legal exceptions can be found in section 58 no.  2–8 AO. 138  Hüttemann, NJW-Beilage zum 72. Deutschen Juristentag 2018, 55 (56). 139  https://www.vivaconagua.org/, last retrieved on 20.1.2022. 140  Möslein/Mittwoch, RabelsZ 80 (2016), 399 (411 et seqq.). 141  Momberger, Social Entrepreneurship, 2015, 254 et seqq. 142  www.goodimpact.org, Start Mitte Mai 2012, quoted according to Spiegel, Stiftung & Sponsoring 2/2012, 30. 143  German Corporate Tax Executive Order 1935. 137 

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been raised.144 A further possibility is the former non-profit housing association, which also allowed a return on equity of 4 % (of the shareholders or co-operators).145 However, in the case of the international models, the granting of a partial profit distribution is not usually accompanied by any tax relief.146 Hybrid structures are also somewhat challenging, as commercial enterprises are often accused of making hidden profit distributions if they make donations to charitable organisations within the maximum limits of section 9 (1) no.  2 KStG. The consequence is that the donation deduction is not recognised and the amount is added to the company’s profit off-balance sheet.147 In addition to the considerable uncertainty that therefore accompanies every act of corporate citizenship, the fact that every altruistic donation is motivated by idealsm, which is influenced by the personal preferences of the entrepreneurs, at least in the small and medium-sized companies speaks against the classification of the donation as a hidden profit distribution. Therefore, a hidden profit distribution should at most be assumed if a for-profit company donates to its own charitable or public-law supporting organisation.148 Nevertheless, no benefit would be gained, especially in the case of hybrid structures of interconnected non-profit and commercially active organisations. Hüttemann therefore consequently proposes that the legislature delete the proviso of section 8 (3) sentence 2 KStG in section 9 (1) no.  2 KStG, as in Austria, if necessary in conjunction with the introduction of an absolute maximum donation limit, or limit the tax promotion of altruism entirely to natural persons.149 In this context, the recognition of a benefit corporation in Germany could send a signal that it is already inherent in such companies by virtue of their corporate purpose to make substantial donations for the benefit of the general public, and that this should therefore also be recognised for tax purposes. 6. Exit The principle of altruism does not prohibit the realisation of profits as such, but according to section 55 (1) no.  2 AO it does prohibit the distribution of current or liquidation profits to non-charitable members or third parties. Members may therefore not receive back more than their paid-in capital shares and the fair market value of their contributions in kind when they leave the corporation or 144  Momberger, Social Entrepreneurship, 2015, 317 et seqq.; Momberger, Non Profit Law Yearbook 2016/2017, 2017, 113 (148 et seqq.). 145  Kuhnert/Leps, Neue Wohnungsgemeinnützigkeit, 2017. 146  Möslein/Mittwoch, RabelsZ 80 (2016), 399 (427 et seq.). 147  BFH/NV 2008, 988; BFH/NV 2008, 1704: donations to a foundation; BFH, Beschl. v. 13.7.2021 – I R 16/18: donations in kind of art works to a foundation; FG Rheinland-Pfalz, Urt. v. 7.10.2020 – 1 K 1264/19, Rev. filed BFH I R 52/20. 148  Weitemeyer, in: FS für Dieter Reuter, 2010, 1201 et seqq. 149  Hüttemann, Gemeinnützigkeits- und Spendenrecht, 5.  Aufl. 2021, recital 8.92.

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when the corporation is dissolved. This provision widens the general prohibition of profit distribution under section 55 (1) no.  1 sentence 2 AO to include the liquidation of the corporation and the withdrawal of a member to preclude the tax-privileged assets from being removed from the tax-privileged sphere.150 For social enterprises, therefore, contributions may be made to the nominal capital and may also be repaid in the event of the dissolution of the company or the withdrawal of a member. However, the amount is limited to the nominal amount, so that any increases in value remain in the company. Pursuant to section 55 (1) no.  4 AO, the assets remaining after the return of capital shares and contributions in kind must continue to be used for charitable purposes after the termination of the charitable activity. Practically, this is achieved by including a clause in the articles of association stating that the funds fall to a specific beneficiary or to the public purse. The identity of the tax-privileged purposes is not required.151 Therefore, an exit from non-profit status while retaining the assets is not possible unless all tax benefits of at least the last ten years are refunded according to section 61 AO.152

III. Conclusion and prospective changes in law The lack of specialized legal forms for social enterprises has been often criticised. The existing legal structures for social entrepreneurs and other sustainably operating enterprises between the market and the third sector, as well as the current non-profit law, are not sufficiently oriented towards their needs.153 There is a demand for greater flexibility pursuing dual purposes (for-profit and not-for-profit), the possibility of partial profit distribution, as well as the measurability and visibility of their own social successes in relation to the public through further certifications and special legal structures.154 Therefore, the current government coalition consisting of SPD, FDP and the Greens has undertaken to improve the legal basis for social enterprises.155 For similar reasons, the Stiftung Verantwortungseigentum proposes a new alternative to the limited liability company (GmbH),156 the Gesellschaft mit ge­ 150 

Seer, in: Tipke/Kruse (eds.), AO/FGO, 168. Lfg., 2021, §  55 AO recital 21. Koenig, in: Koenig (ed.), AO, 4.  Aufl. 2021, §  55 AO recital 27. 152  Fischer, Ausstieg aus dem Dritten Sektor, 2005. 153  Motion of the parliamentary group Bündnis 90/Die Grünen „Strategische Förderung und Unterstützung von Social Entrepreneurship in Deutschland“, BT-Drs. 19/8567; Mom­ berger, Social Entrepreneurship, 2015, 61 et seqq.; Weitemeyer, Non Profit Law Yearbook 2011/2012, 2012, 91 et seqq. 154  Momberger, Social Entrepreneurship, 2015, 43 et seqq., 60. 155  Coalition Agreement 2021 between SPD, Bündnis 90/Die Grünen and FDP, 30, https:// www.bundesregierung.de/resource/blob/974430/1990812/04221173eef9a6720059cc353d759 a2b/2021-12-10-koav2021-data.pdf?download=1, last retrieved on 20.1.2022. 156  Sanders/Kempny/Dauner-Lieb/von Freeden/Kempny/Möslein/Veil, Entwurf eines 151 

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bundenem Vermögen mbH (limited liability company with locked assets – GmbH-gebV).157 In this legal structure, the assets and profits of the GmbHgebV should permanently benefit the company alone. In addition, profit distributions to shareholders are excluded, as is the participation of shareholders in the increase in value of the company in the event of withdrawal from the company or in the event of liquidation (also known as the asset lock).158 In the course of business, the shareholders should at most receive (reasonable) remuneration under separate legal relationships, such as a salary, interest on a loan, licence fees, rent or lease.159 The proposal has generated significant response.160 The general criticism is that the GmbH-gebV is neither suitable nor necessary for the intended goals.161 In contrast to social enterprises as the US benefit corporation or the community interest company introduced in Great Britain in 2005 the GmbH-gebV does not require any social purpose.

Gesetzes für die Gesellschaft mit beschränkter Haftung in Verantwortungseigentum mit steuerlichen Begleitänderungen, in: Stiftung Verantwortungseigentum, 2020; Sanders, ZRP 2020, 140 et seqq. 157  Sanders/Kempny/von Freeden/Möslein/Veil, Entwurf eines Gesetzes für die Gesell­ schaft mit beschränkter Haftung mit gebundenem Vermögen, 2021, 7, 11 et seq., 24, https:// www.gesellschaft-in-verantwortungseigentum.de/der-gesetzesentwurf, last retrieved on 20.1.2022. 158  Sections 77b, 77c, 77e, 77f (2), 77g, 77i, 77j, 77k, 77l (2) GmbHG-gebV(E). 159  Sanders/Kempny/von Freeden/Möslein/Veil, Entwurf eines Gesetzes für die Gesell­ schaft mit beschränkter Haftung mit gebundenem Vermögen, 2021, 8, https://www.gesell schaft-in-verantwortungseigentum.de/der-gesetzesentwurf, last retrieved on 20.1.2022. 160  Beise, Das Ende der Patriarchen, SZ 5.5.2021, 15; Gehm, Zeiss als Vorbild, Die Welt, 30.11.2019, 16; Tönnesmann, Glücklich enteignet, DIE ZEIT, 6.8.2020; Winkelmann, Gier? Nein, Danke, stern 28.3.2019, 59 et seqq.; Budras/Freytag/Preuß, Start-ups für RechtsformRevolution, FAZ 7.10.2020, 15; Kapitalismus in gut, Spiegel 2.10.2020, 75; Neuer Anlauf für eine Gründer-Revolution FAZ 22.2.2021, 15. 161  Arnold/Burgard/Roth/Weitemeyer, NZG 2020, 1321 et seqq.; Habersack, GmbHR 2020, 992 et seqq.; Grunewald/Hennrichs, NZG 2020, 1201 et seqq.; Hüttemann/Rawert/ Weitemeyer, npoR 2020, 288 et seqq.

Alternative Dispute Resolution Mechanisms in the Enforcement of Security Interests and Insolvency Urs Peter Gruber

I. Overview In Germany, the large bulk of cases is solved through litigation before the state courts and not through mediation or arbitration. However, in proceedings before German courts, elements of mediation play an important role. In recent years, elements of mediation have also been integrated into enforcement procedures as well as insolvency procedures. In contrast, out-of-court mediation rather hovers at the periphery of dispute resolution in Germany. Although a new law on mediation was passed in 2012, this situation does not seem to have changed fundamentally since then. With regard to arbitration, a difference should be made between purely domestic cases and international cases. In domestic cases, arbitration plays a minor role; its impact on ongoing enforcement or insolvency procedures is therefore very limited. However, in international cases involving German enterprises, arbitration is generally of great importance, especially with regard to high value claims; it is therefore possible that in such a case, arbitration will coincide with a domestic enforcement or insolvency procedure.

II. General use of alternative dispute resolution mechanisms in German practice 1. Mediation with regard to an ongoing or impending court proceeding a) Mediation in an ongoing court proceeding aa) General legal framework Pursuant to section 278 para 1 of the German code of civil procedure (Zivilpro­ zessordnung – ZPO), the courts are obliged to promote an amicable settlement of the dispute at each stage of the proceedings.1 Bringing about a settlement can 1 

„In all circumstances of the proceedings, the court is to act in the interests of arriving at an amicable resolution of the legal dispute or of the individual points at issue.”

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therefore be regarded as a fundamental goal of German civil procedure. Pursuant to section 278 para 6 ZPO, the court has the right to propose a settlement to the parties in writing. In court practice, such propositions are quite frequent. At the regional courts, there are special chambers for commercial matters consisting of a professional judge and two entrepreneurs.2 Due to this composition, the courts do not only have legal expertise, but also an understanding of economic issues and a good grasp for the possibility of settlement in the course of the proceeding. Generally, judges invest substantial effort in facilitating settlements. To a large degree, this is due to the fact that in case of a settlement, they are released of the duty to write a judgment. Given the high caseload on German courts, the German judicial system would not function without a certain percentage of cases being settled. Not only the judges, but also the lawyers have an interest in reaching a settlement. First, also from a lawyer’s perspective, a settlement can save time and work. What is more, lawyers earn an additional statutory fee when a case is settled without a judgment.3 Consequently, while lawyers tend to show a more combative attitude at the beginning of the trial, they are usually willing to enter into settlement negotiations later on. Whether or not a settlement is in the interest of the parties, depends on the circumstances of each case and the opportunities and risks at stake. In this context, it should be noted that in case of a judgement, as a general rule, the unsuccessful party has to bear all the costs of the legal dispute. This obligation includes court costs and the necessary costs incurred by the opponent.4 Therefore, if the costs are not covered by a legal expenses’ insurance, losing a trial is a rather costly experience. In case of a settlement, the parties will usually agree on a cost allocation.5 Due to the German Court Fees Act, there is a reduction of court fees in case of a settlement. 6 However, this cost reduction is usually smaller than the additional fee the parties have to pay to their lawyers for settling the case. Nonetheless, from the perspective of costs, a settlement can be advantageous to both parties 2 

See sections 93 et seq. Courts Constitution Act (Gerichtsverfassungsgesetz). Nr.  1000 Vergütungsverzeichnis zum Gesetz über die Vergütung der Rechtsanwältinnen und Rechtsanwälte (Rechtsanwaltsvergütungsgesetz – RVG) = Nr.  1000 of the annex to the law regarding lawyers’ fees. 4  However, these costs must have been necessary and appropriate under the circumstances (see section 91 ZPO). 5  Pursuant to section 98 ZPO, if there is no agreement on the allocation of costs, the costs of any settlement shall be deemed to have been cancelled against each other. In this case, each party has to bear her own costs; court costs are concerned, each party shall bear the costs at one half each (section 92 par.  1 s. 2 ZPO). 6  Nr.  1211 Kostenverzeichnis, Anlage 1 zum Gerichtskostengesetz (= Nr.  1211 of the annex 1 to the German Court Fees Act). 3 

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when it permits to avoid the appointment of costly experts by the court or an appeal. Quite interestingly, it is generally accepted that lawyers are not obliged to inform their clients about the additional fee on their own initiative; they only have to provide information on the statutory lawyer’s fees if asked by their client.7 In many cases, parties will therefore consent to a settlement without having a precise idea of the cost implications. bb) Conciliatory hearing; conciliation judges Before commencing the oral hearing on the merits of the case, the courts are obliged to conduct a ‘conciliatory hearing’.8 In 2002, the German legislator introduced an amendment to the Code of Civil Procedure permitting courts to suggest that the conciliatory hearing should not take place before the trial judge, but before a special ‘conciliation judge’ (Güterichter). The conciliation judge’s only duty is to assist the parties in reaching a settlement; he has an obligation to maintain confidentiality. In 2012, the German legislature amended the Code of Civil Procedure again to permit mediation by a ‘conciliation judge’ not merely at the beginning, but at any stage of the trial.9 From the parties` view, the use of a conciliation judge does not involve any cost risk. There are no extra court or lawyer’s fees in case of failed negotiations before a conciliation judge. The use of a conciliation judge lies within the discretion of the courts. In a recent study launched by the German government, it is held that in the last years, the number of cases in which there was a hearing before a conciliation judge have stagnated at a rather low level.10 In the everyday world of the German justice system, conciliation judges are still a rather rare exception. cc) Mandatory pre-trial mediation Germany belongs to the few states that have introduced mandatory pre-trial mediation that serves as a prerequisite for commencing subsequent litigation. 7  This is based on the argument that, generally, lawyers have no obligation to inform their clients about fees that arise by operation of law (BGH, judgment of 24.5.2007 – IX ZR 89/06, NJW 2007, 2332, 2333). 8  Section 278 para 2 ZPO. 9  The rules of the Code of Civil Procedure apply by way of reference to procedures before social courts, administrative courts, patent courts and even fiscal courts. The Law on Procedure for Family Matters and Matters of Voluntary Jurisdiction (FamFG) and the Labour Courts Act (ArbGG) have been amended accordingly. 10  Bericht der Bundesregierung über die Auswirkungen des Mediationsgesetzes auf die Entwicklung der Mediation in Deutschland und über die Situation der Aus- und Fortbildung der Mediatoren (47), https://www.bmjv.de/SharedDocs/Downloads/DE/Service/Studien UntersuchungenFachbuecher/Evaluationsbericht_Mediationsgesetz.pdf?__blob=publica tionFile&v=1.

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Section 15a EGZPO allows the 16 German states (Bundesländer) to “experiment” with compelled mediation, thus shifting the authority to introduce mandatory mediation from the federal to the state level.11. Today, most of the 16 German states make use of section 15a EGZPO with the exception of Baden-Wuerttemberg, Saxony, Thuringia and the three “city states” Hamburg, Berlin and Bremen.12 However, mandatory pre-trial mediation can only be introduced in an exhaustive list of claims contained in section 15a EGZPO, in particular small claims for payment up to € 750, nuisance claims of neighbours, defamation claims and certain anti-discrimination claims. Initially, some states made use of the full list of claims, but in the meantime, there is not one state prescribing mandatory mediation for small claims up to € 750 anymore. Therefore, the practical relevance of mandatory pre-trial mediation which was limited from the start, has decreased even more.13 Generally, pursuant to section 15a para 2 s. 1 nr. 6 EGZPO, there can be no mandatory pre-trial mediation with regard to lawsuits that relate to enforcement measures. The explanatory memorandum to the draft Act gives a rather formalistic explanation for this rule: In lawsuits relating to enforcement measures, it is argued, the judge will very often have to declare the execution as whole – or the attachment of certain objects – inadmissible; the effect of such a decision, which immediately alters the legal rights of the parties involved, cannot be reached by a simple settlement between the parties.14 Although section 15a EGZPO is of limited practical importance, it has triggered a rather lively debate on mandatory pre-trial mediation.15 Many scholars and practitioners argue that mediation, in order to be successful, has to be based 11  One reason for this was that in some states, there are arbitration boards that can be used to conduct pre-trial mediations, whereas in other states, such arbitration boards are unknown. Thus, rules requiring mandatory pre-trial mediation will be easier to be put into practice in some states than in other states. 12 Baden-Wuerttemberg repealed its existing laws on mandatory pre-trial mediation in 2013 (holding that in most cases, mandatory pre-trial mediation did not produce any practical benefits). The other states mentioned above never introduced legislation on mandatory pretrial mediation. 13  What is more, section 15a para 2 s. 2 EGZPO provides that no mandatory pre-trial mediation can be required when the parties do not reside, maintain a principal place of business, or maintain a branch office within the same state. Moreover, section 15a para 5 EGZPO permits states to introduce additional conditions for requiring mandatory pre-trial mediation of claims. Some state laws now permit mandatory pre-trial mediation only when both parties reside in the same state and within the district of the competent Regional Court (Landge­ richt), or at least in neighbouring Landgericht districts within the same state. 14  Gesetzentwurf der Fraktionen SPD und BÜNDNIS 90/DIE GRÜNEN, Entwurf eines Gesetzes zur Förderung der außergerichtlichen Streitbeilegung, BT-Drucksache 14/980, 7. 15  There has been some debate in legal literature regarding whether a “coerced mediation” as provided for in section 15a EGZPO conforms with constitutional procedural rights, in particular the right to an effective and speedy trial. The Bundesverfassungsgericht (Constitutional Court), however, rejected a constitutional complaint that argued that mandatory

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on the voluntary consent of the parties. Against this backdrop, it seems very unlikely that the list of claims which can be subjected to mandatory pre-trial mediation by the states will be extended in the near future. 2. Out-of-court mediation a) Legal framework For a long time, out-of-court mediation was not subject to any specific legal rules in Germany. In 2012 however, the German parliament passed a law on out-of-court mediation (Mediation Act);16 four years later, as provided for in the Mediation Act, the Ministry of Justice issued a regulation on the education and training of certified mediators.17 The Mediation Act served to implement the European Mediation Directive18 into German law. However, the German legislature went far beyond what had been required by the European Mediation Directive. The German Mediation Act is neither restricted to mediations in civil and commercial matters nor to cross-border mediations. The Mediation Act gives a definition of the terms ‘mediation’ and ‘mediator’ and contains a general description of the mediator’s duties. Moreover, it addresses potential conflicts of interests of the mediator19 and stipulates that the mediator is obliged to maintain confidentiality.20 Apart from these limited areas, general contract rules or – to the extent that mediation requires court intervention – general rules of civil procedure apply. Anyone can act as a mediator without having to prove any formal qualifications. Pursuant to section 5 para 2 of the Mediation Act, however, mediators may use the designation of “certified mediator” if they successfully complete a training, the details of which are specified in a separate regulation issued by the Ministry of Justice.

pre-trial mediation unduly burdens the right to a speedy trial (Bundesverfassungsgericht, 14.2.2007, NJW-RR 2007, 1073 et seq.). 16  Mediationsgesetz (MedG), BGBl. I 2012, 1577, reproduced in relevant part in Bach/Gru­ ber, ‘Germany’, in Espligues/Iglesias/Palao (eds.), Civil and Commercial Mediation in Europe, vol. I: National Mediation Rules and Procedures, Intersentia, Cambridge 2013, 186 et seq. 17  Verordnung über die Aus- und Fortbildung von zertifizierten Mediatoren (Zertifizier­ te-Mediatoren-Ausbildungs-Verordnung – ZMediatAusbV). 18  Directive 2008/52/EC of the European Parliament and of the Council of 21 May 2008 on certain aspects of mediation in civil and commercial matters [2008] OJ L 136/3. 19  Section 3 Mediation Act. 20  Section 4 Mediation Act.

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In Germany, only lawyers21 and notaries22 are allowed to provide legal advice, with only few exceptions.23 Mediators who are not lawyers or notaries have to be careful not to cross the line between (pure) mediation and legal advice; if legal advice is needed, they can engage a lawyer or notary as a co-mediator.24 There is no legislation on fees for mediation. Renumeration of the mediator is governed by the contract concluded between the parties and the mediator. For the time being there is no legal aid for mediation; this stands in contrast to the fact that in Germany, there are rather generous rules on legal aid for legal counselling by a lawyer25 and for court costs26 . There is no special legislation with regard to the enforceability of a settlement reached in mediation either. Therefore, the general rules apply.27 The parties may (jointly) employ a notary to declare their mediation settlement agreement enforceable28 , or they may conclude the settlement while each of them is represented by a lawyer (who may not also be the mediator). In the latter case, either party may then apply to a court to declare the settlement enforceable.29 If the parties have not made use of these possibilities, a party to the settlement has to file a breach of contract claim in the event the other party does not comply with the settlement, and then enforce the resulting judgment.30

21 

See section 3 Bundesrechtsanwaltsordnung (BRAO) (Federal Attorney Ordinance) See section 24 para 1 s. 1 Bundesnotarordnung (BNotO) (Federal Notary Ordinance) 23  See the Legal Services Act (Rechtsdienstleistungsgesetz, RDG). 24  See OLG Rostock, judgment of 20.6.2001 – 2 U 58/00, NJW-RR 2002, 642, at 644. In contrast, a mediator, who is neither lawyer nor notary, may not overcome his inability to give legal advice by simply retaining a lawyer or notary as an advisor (BGH NJW 2008, 3069). 25  See the Legal Advising Act (Beratungshilfegesetz). 26  See sections 114 ZPO et seq. on “Prozesskostenhilfe“. 27  The original draft of the Mediation Act also contained a new section 796d ZPO that would have provided a third avenue for enforcement: courts could declare a mediation settlement enforceable if both parties requested such a declaration, or if one party requested it and the other party did not contest the request. However, the Parliament’s Committee of Legal Affairs deleted the draft section 796d ZPO from the final Mediation Act. It reasoned that existing enforcement mechanisms for mediation settlements sufficiently complied with the requirements of Article 6 of the Mediation Directive (BT-Drs. 17/8058, 21). 28  Section 796c ZPO. 29  Section 796a ZPO. 30  A further possibility is to agree on an escalation clause (mediation followed by arbitration) rather than a pure mediation clause. In such cases, a mediation settlement may be subject to an arbitration award with agreed wording under section 1053 para 2 ZPO. However, the admissibility of such an arbitration award with agreed wording after a mediation agreement has already been reached, is rather doubtful (see Dendorfer-Dilges, in: Kloweit/Gläßer, Mediationsgesetz, 2nd edition 2018, 3 N nr. 55 et seq.). 22 

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b) Singapore Convention on Mediation For the time being, Germany is not party to the United Nations Convention on International Settlement Agreements Resulting from Mediation (the Singapore Convention on Mediation). c) Use of out-of-court mediation Out-of-court mediation has a rather difficult position in German law. This is also due to the fact that there is a competitive relationship between mediation in connection with an ongoing court proceeding and out-of-court mediation. Regarding the costs, out-of-court mediation has its pitfalls: If out-of-court mediation fails and there is no settlement, the parties will inevitably have to commence a trial before a state court. In that case, there will be cumulative costs for both out-of-court mediation and for the trial. In theory, out-of-court mediation still stays possible even if a trial before a state court has already begun. As an alternative to mediation before a conciliation judge, section 278a ZPO permits the court to suggest at any time that the parties make use of an external mediation procedure to settle their dispute. If the parties agree to participate in mediation or any other extrajudicial conciliation procedure, courts must stay the litigation. The court’s suggestion, however, does not have any binding character upon the parties. As the out-of-court mediation will lead to additional costs, the parties will ordinarily not be willing to follow the court’s suggestion. Instead, they will usually prefer to negotiate before a conciliation judge – if such a possibility exists in the case at hand – or simply (in most cases) continue with the trial. All in all, it is therefore safe to say that in practice, mediation does not really constitute a general alternative to proceedings before state courts. In 2017, a survey launched by the German government came to the conclusion that the number of out-ot-court mediations had remained at a low level and that mediation offered only limited earning opportunities.31 3. Arbitration a) Legal framework aa) Incorporation of the UNCITRAL Model law In 1998, the German legislator largely incorporated the provisions of the United Nations Commission on International Trade Law (UNCITRAL) model law, 31  Bericht der Bundesregierung über die Auswirkungen des Mediationsgesetzes auf die Entwicklung der Mediation in Deutschland und über die Situation der Aus- und Fortbildung der Mediatoren (2), https://www.bmjv.de/SharedDocs/Downloads/DE/Service/StudienUn tersuchungenFachbuecher/Evaluationsbericht_Mediationsgesetz.pdf?__blob=publication File&v=1

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with only few exceptions, in the German Code of Civil Procedure (Zivilprozess­ ordnung – ZPO). Generally, German arbitration rules are applicable when the place of arbitration is situated in Germany.32 Certain provisions – such as the dismissal of court action if there is a valid arbitration agreement33 – apply regardless of the seat. German arbitration rules are based on the principle of freedom of contract.34 In their arbitration agreement, the parties will usually include provisions on the constitution of the tribunal, the qualifications of the arbitrators and the number of arbitrators. If there is no agreement on the number of arbitrators, the code of Civil Procedures stipulates that the tribunal consists of three arbitrators.35 The parties to an arbitration agreement are also free to set their own provisions with regard to the procedure and rules of evidence. For instance, they can freely choose between a procedure based on continental European or AngloAmerican procedural traditions.36 In scholarly writing, it has been observed that, absent a binding agreement on the parties on the procedure to be followed, German arbitrators tend to actively lead the proceeding, by asking questions and by referring the parties to particular factual or legal aspects.37 In this regard, they might therefore be influenced by the active role played by a judge in German state courts. Also, in a purely domestic proceeding, there will usually be no cross-examination of witnesses as it is not used in German state courts. bb) Arbitrability of disputes Pursuant to section 1030 ZPO, any claim that is assessable in financial terms can be the subject matter of an arbitration agreement.38 Other claims are arbitrable insofar as the parties to the dispute are entitled to conclude a settlement regarding the subject matter of the dispute.39 However, there are some exceptions to this broad definition of arbitrability. Pursuant to section 1030 para.  2 ZPO, disputes relating to the existence of a lease of residential accommodation are generally exempt from arbitration. Section 1030 papa 3 ZPO clarifies that other laws may contain additional excep-

32 

See section 1025 para 1 ZPO in connection with section 1043 para 1 ZPO. See section 1025 para 2 ZPO in connection with section 1032 ZPO. 34  See section 1042 para 3 ZPO. 35  Section 1034 para 1. 36  See – with regard to common law-influenced cross examination – Mekat, SchiedsVZ 2017, 119 et seq. 37  Trappe, Arbitration in Germany – some aspects and comparison of law, SchiedsVZ 2013, 167, 168. 38  Section 1030 para 1 s. 1. 39  Section 1030 para 1 s. 2. 33 

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tions; most importantly, there is legislation excluding most disputes relating to labour law from arbitration.40 cc) Applicable conventions Germany is party to the 1958 New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards (New York Convention) and to the 1961 European Convention on International Commercial Arbitration (Geneva Convention). As regards investment arbitration, Germany has concluded numerous bilateral and multilateral investment treaties. As a member of the EU, Germany is also bound by investment treaties concluded by the EU. b) Use of arbitration in practice aa) Domestic cases There are no available official or unofficial statistical data on the use of arbitration in Germany. However, there is a general assumption that in purely domestic cases, arbitration is of minor importance. Estimates assume that more than 99 percent of purely domestic cases are solved through litigation and less than 1 percent through arbitration.41 However, there are certain areas of the law where arbitration is used more frequently. This seems to be the case in disputes over company law relationships. Arbitration in this field is especially attractive as disputes between associates can be kept secret without putting strain on the company’s operational business.42 Some authors hold that in recent years, arbitration has increasingly been taken into consideration in the banking sector. Banking law specialists have asserted that arbitration clauses are increasingly used in complex project finance and in investment banking, namely in the derivate business.43 bb) International cases Arbitration has a totally different status in an international setting. In cross-border relationships, German companies, banks and entrepreneurs will resort to arbitration much more often, depending on the business they are in and on the party they are dealing with.

40 

For more detail, see section 101 et seq. of the Labour Court Act (Arbeitsgerichtsgesetz). this estimate, see Münch, in: Münchener Kommentar zur ZPO, 5. edition 2017, Vorbemerkung zu §  1025 point 23. 42 See Goette, AnwBl 2012, 33. 43 See Wiebecke, SchiedsVZ 2008, 34 et seq. 41 For

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In this context, many arbitration proceedings will take place abroad. Still today, Germany is not perceived as major seat for international arbitration. In recent years however, this situation has changed gradually. By incorporating the UNCITRAL model law, the German legislator tried to enhance Germany’s attractiveness to the international arbitral community. Some authors hold that in light of the UK’s Brexit and the possible decline of London as a preferred seat of arbitration, Germany might become more attractive as a seat of arbitration in the next years.44 As far as institutionalised arbitration in Germany is concerned, first to deserve mention is the Deutsche Institution für Schiedsgerichtsbarkeit e.V. – DIS (German Arbitration Institute).45 Moreover, some Chambers of Commerce offer services in the field of arbitration,46 but also specialised arbitration institutions such as the German Maritime Arbitration Association in Hamburg.47 4. Other forms of alternative dispute resolution In Germany, certain professional associations have established conciliation bodies which can be asked to resolve disputes between their members and their customers. Conciliation bodies have been established in the field of banking and insurance as well as by public transport organisations (especially in air travel) and the energy industry. Moreover, several liberal profession associations have implemented conciliation offices. These offices are especially important in cases of asserted medical malpractice or professional liability of attorneys. Finally, there are also conciliation bodies at the chamber of craft trades (Handwerkskammer). The customers can freely decide whether they want to bring their case before a conciliation body or directly file a claim before a state court. If the conciliation body rejects the claim, this does not have any binding effect on a later trial before a state court. In some cases, there will be a binding effect operating solely in favour of the consumer. This is especially the case in the field of findings by professional associations in banking and insurance: A ruling of the conciliation body in favour of the customer has a binding effect on the bank or the insurer, provided it refers to a claim not exceeding 10.000,– €.48

44 

Schmidt-Ahrendts/de Jong, SchiedsVZ 2018, 281 et seq.

46 

Such as the Chamber of Commerce in Hamburg (see http://www.hk24.de).

45 http://www.dis-arb.de. 47 http://www.gmaa.de.

48  Technically, this binding effect is construed as follows: At the beginning of the procedure, the bank or insurer involved acknowledges its debt on condition that the conciliation body decides in the customer’s favour (see Münch, in: Münchener Kommentar zur ZPO, 5. edition 2017, §  1025 ZPO point 41).

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Some of these conciliation bodies fall under the Act on Alternative Dispute Resolution in Consumer Matters which was passed in 2016.49 With this Act and amendments of existing laws, the German legislator has transposed the EU Directive on consumer ADR 50 into German law. The Act on Alternative Dispute Resolution in Consumer Matters contains provisions on the establishment, composition and recognition of conciliation bodies and deals with several procedural issues such as the right to be heard and confidentiality of the procedure.

III. Use of ADR in debt enforcement and secured transactions 1. General framework of debt enforcement in Germany a) Enforcement of unsecured debt aa) Enforceable judgements and documents In Germany, claims in private law are enforced by the state which operates through a number of different enforcement bodies. Judicial debt enforcement is mainly governed by sections 704 et seq., of the Code of Civil Procedure (Zivil­ prozessordnung – ZPO). As a complement to these rules, there is another law with special provisions for the forced sale of immovables and receivership (compulsory administration – Zwangsverwaltung).51 The Code of Civil Procedure deals first with the enforcement of judgements. There can of course be judicial enforcement of final and non-appealable judgements; however, as a general rule, judgments which are still open to appeal are also to be declared provisionally enforceable, normally – in a complex interplay of rules and exceptions – against provision of security.52 Beyond that there are many other enforceable documents as for instance settlements concluded by lawyers (Anwaltsvergleiche) 53 and settlements declared enforceable by a notary.54 Furthermore, a debtor may, in a document recorded by a notary (such as, for instance, a loan contract), subject himself to immediate compulsory enforcement of the claim as specified therein.55 Also in this case, 49  Gesetz über die alternative Streitbeilegung in Verbrauchersachen (Verbraucherstreitbei­ legungsgesetz – VSBG), of 19.2.2016 (BGBl. I S.  254, 1039, last amended by Art.  2 para 3 of the law of 25.6.2020 (BGBl. I S.  1474). 50  EU directive of 21 May 2013 on alternative dispute resolution for consumer disputes and amending Regulation (EC) No 2006/2004 and Directive 2009/22/EC (Directive on consumer ADR) 51  Gesetz über die Zwangsversteigerung und Zwangsverwaltung – ZVG. 52  See section 708 et seq. ZPO. 53  Section 796a ZPO. 54  Section 796c ZPO. 55  Section 794 para 5 ZPO.

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this document is already enforceable as such; there is no need to file a claim and to obtain a judgement first. The value of claim or the type of debtor (for instance: consumer or entrepreneur) have no impact on the enforcement proceeding. bb) Types of claims; seizable assets (1) Monetary claims If a monetary claim is enforced, basically all the debtor’s assets can be seized. However, several provisions of the Code of Civil Procedure stipulate that certain objects are exempted from attachment, as for instance certain movables serving the debtor’s personal use56 or earned income up to a certain amount.57 Enforcement will very often consist in attachment (Pfändung) and forced sale of immovable and movable physical objects. Very frequently, it will consist in the attachment of the claims of the debtor against a third-party debtor for collection by the creditor or in the attachment of other property rights (such as, e.g., intellectual property rights). The forced sale of immovable is within the competence of the local court for the place where the property is situated.58 The attachment of claims is pronounced by the local court at the place where the debtor lives.59 In both cases, competence lies with a judicial officer (Rechtspfleger) and not the judge. 60 Enforcement against movable property, however, is a task taken on by a bailiff (Gerichtsvollzieher), 61 a court officer under the administrative supervision of the presiding judge of the local court. (2) Other claims In Germany, not only monetary judgements are enforceable, but also judgements for other claims such as the delivery and recovery of goods or judgements on an obligation to cease and desist from actions. There are separate rules for the enforcement of different claims. Judgments for delivery or recovery of goods, for example, are enforced by the bailiff. He will simply take the goods away from the debtor and physically submit them to the creditor. In contrast to that, judgements on an obligation to cease and desist from actions are enforced by the court of first instance. Upon the creditor filing a corresponding petition, the court has to verify whether the debtor has violated his obligation to cease and desist from action as stipulated in the judgement; if 56 

See sections 811 et seq. Section 850 et seq. 58  Section 1 ZVG. 59  Section 828 ZPO. 60  Section 3 nr.1 (i) and section 20 para 1 nr. 17 Rechtspflegergesetz (RpflG). 61  Sections 808 and 753 ZPO. 57 

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that is the case, the court will sentence him for each count of the violation to a coercive fine or coercive detention. cc) Remedies In German law, there are several remedies against enforcement, depending on the objection put forward by the debtor, creditor or a third party. The debtor, but also the creditor and – if affected by the measure – third parties can object to the manner of the enforcement, either by a “reminder” (Er­ innerung) 62 or – in case there was a hearing before act of the enforcement – an “immediate complaint” (sofortige Beschwerde). 63 This way, the debtor can for instance object to the attachment of objects which, as stipulated by ZPO, are exempt from enforcement actions. With another action (“Vollstreckungsabwehrklage”), the debtor can also put forward objections that concern the claim itself. For instance, he can assert that in fact, the creditor is not entitled to payment any more as the sum has already been paid or the debt has been discharged due to other reasons, such as a set-off, subsequent agreements on contract termination or any other objection or defence provided for by substantive law. However, if there is enforcement of a judgement, such objections and defences can only be asserted insofar as the grounds on which they are based have arisen after the close of the hearing that was the last opportunity, pursuant to the stipulations of the ZPO, for objections to be asserted in the trial. 64 This way, the debtor is prevented from circumventing the effect of res judicata. The “Vollstreckungsabwehrklage” can also be used in case there is a covenant not to execute a judgement. If the creditor breaches such a covenant by seeking execution of the judgement, the debtor can file this action in order to bring execution to a halt. 65 Quite often, a third party claims to have a right in an object that has been attached. In this situation, the third party can use another action, the so-called “Dritt­widerspruchsklage”, in order to assert this right.66 Such an action can be brought before court if, for instance, the bailiff has attached movable property belonging not to the debtor but to the third party; this way, the third party can prevent a loss of his ownership which would otherwise occur in case of a forced sale effectuated by the bailiff. All those actions are governed by the general rules of German civil procedure. Consequently, the parties can end the trial through mutual settlement; 62 

Section 766 ZPO. Section 793 ZPO. 64  Section 767 para 2 ZPO. 65  See Bundesgerichtshof (Federal Supreme Court), decision of 18.5.2017 – VII ZB 38/16, Neue juristische Wochenschrift 2017, 2202 points 35 et seq. 66  Section 771 ZPO. 63 

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also, the rules on court-annexed mediation apply. However, as has been pointed out, section 15a EGZPO excludes those claims from mandatory pre-trial mediation. b) Enforcement of secured debt aa) Overview The enforcement of a secured debt depends very much on the type of asset which serves as collateral and the type of credit security. The type of asset and/ or the type of credit security also determines whether there can be an extrajudicial enforcement of the security or not. As such, a floating charge or similar security over a business do not exist in German law. bb) Security in real estate There are mainly two methods of taking security over real estate in Germany: the mortgage (Hypothek) 67 and the land charge (Grundschuld). 68 Whereas the mortgage is dependent on the secured obligation, the legal existence of a land charge is independent from the existence of a secured obligation.69 In practice, land charges are easier to handle; that’s why they are used much more frequently than mortgages. As a rule by law, a prior court judgment for enforcement is needed. However, the owner of the real estate can subject himself to immediate compulsory enforcement in document recorded by a notary. In this case, the creditor can directly apply for a forced sale and/or forced receivership; if the owner wants to challenge his legal obligation to pay the sum recorded in the document in the document, he has to file the above-mentioned “Vollstreckungsabwehrklage”. Security over real estate can be enforced by way of a forced sale (Zwangsver­ steigerung) and/or forced receivership (Zwangsverwaltung). At any rate, the mortgagee or land charge owner has to enforce its collateral through a courtsupervised proceeding; there is no possibility to realise the collateral out-ofcourt.70 cc) Security in movable physical objects With regard to movable physical objects, the German Civil Code lays down detailed rules about a pledge.71 In case of a pledge, the secured creditor has the

67 

Sections 1113 et seq. BGB. Sections 1191 et seq. BGB. 69  See section 1192 para 1 BGB. 70  See sections 15 et seq. and 146 et seq. ZVG. 71  Sections 1204 et seq. 68 

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right to sell the movable if the debtor is in default.72 As a rule, the sale is a public auction;73 however, the parties have the right to agree otherwise on the manner of sale.74 Therefore, the secured creditor has a right to realise the collateral outof-court. However, in practice, the pledge is hardly ever used. This is due to the fact that in order to establish a pledge, the pledgor has to give up possession of the movable and deliver it to the secured creditor;75 a non-possessory pledge on movables is not permitted. In Germany, the pledge on movables has almost entirely been replaced by the transfer of ownership of the movable to the creditor by way of security (Sicherungsübereignung). As a transfer of ownership (in contrast to the constitution of a pledge) does not necessarily require a transfer of possession,76 this operation leads to a security which (as far as its economic function is concerned) could be best described as a de facto non-possessory pledge. The transfer of ownership by way of security is solely based on the agreement of the parties; normally, if the debtor is in default, the secured creditor has a right to demand handover of the object and then sell it. If the debtor refuses to hand the goods to the creditor, the creditor has to sue him for a handover; he cannot simply deprive him of possession by force. Finally, it should be noted that there are also pledges on movables that are not created by contract, but by operation of law (statutory pledges). In a lease contract, there is a statutory pledge of the lessor, for his claims under the lease, with regard to movables owned by the lessee.77 In a contract to produce a work, the contractor has a statutory pledge over the movable things of the customer that he has produced or repaired.78 Other pledges on movables created by law for specific contracts can be found in the German Commercial Code (Handels­ gesetzbuch).79 All these pledges created by law result in a right to realise the collateral out-of-court. dd) Security in receivables and other transferable rights With regard to receivables and other transferable rights, the German Civil Code furnishes the pledge as the general security instrument. However, with regard 72 

Section 1228 BGB. Section 1235 BGB. 74  Section 1245 BGB. 75  Sections 1205 et seq. BGB. 76  Section 930 of the BGB stipulates that the delivery of the movable (normally required for transfer of ownership) “may be replaced by a legal relationship being agreed between the owner and the acquirer by which the acquirer obtains indirect possession”. 77  Section 562 et seq. BGB. 78  Section 647 BGB. 79 See in particular sections 397 HGB (commission merchant); 464 HGB (forwarding agent); 475b HGB (warehouse keeper); 441 et seq. (freight carrier). 73 

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to receivables, the pledge is hardly used because it requires notice of the security to the third-party debtor.80 That is why – just as in the case of movables – another type of security instrument has been invented. In practice, the parties use a security assignment (Sicherungsabtretung) which, in order to be fully valid, does not require notice of the security to the third-party debtor. In case of a security assignment, the creditor becomes the full holder of the assigned receivable. However, as long as the debtor is not in default, he still has the right to collect payment from the third-party debtor, and the payments effectuated by the third-party debtor to the debtor will discharge him of his obligations. It is only when the debtor is in default that the creditor will unveil the assignment and collect the receivables which have not yet been paid by the third-party debtor to the debtor. Security assignments are also used with regard to intellectual property rights. The pledge remains important with regard to specific assets. If the parties want to establish a security over a bank account, they will usually resort to a pledge. Also, a security over shares usually takes the form of a pledge. Security over intellectual property rights can either be created by way of a pledge or security assignment. If the rights have been assigned, the creditor can effectuate a private sale. If the rights have been pledged, they will have to be realized by way of public auction as long as the debtor does not agree to a private sale. 2. Use of arbitration and mediation a) Mediation in enforcement procedures As has been pointed out, pursuant to section 278 para 1 ZPO, the courts are obliged to try to reach an amicable settlement of the dispute at each stage of the proceedings. However, section 278 ZPO only refers to contentious proceedings and not to (ensuing) enforcement proceedings governed by the eight books of the ZPO. With regard to settlements in the course of enforcement proceedings, mediation is not provided by the courts, but by the bailiff (Gerichtsvollzieher). The bailiff is an independent organ of enforcement and at the same time an official. While he exercises public authority on his own responsibility, he is subject to the supervision of the enforcement court. Parties negatively affected by his actions can file a claim before a competent court, the above-mentioned “reminder” (Erinnerung, section 766 ZPO). At the beginning of the enforcement proceedings, the debtor is obliged to provide information on his financial circumstances and the assets he owns.81 80  81 

Section 1280 BGB. Sections 802c et seq. ZPO.

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The debtor is to record a statutory declaration in lieu of an oath, stating that he has provided correct and complete information. Therefore, the bailiff is aware of the debtor’s financial circumstances and his (non-)ability to provide the performance owed to the creditor. Section 802b para 1 ZPO repeats the principle pronounced by section 278 para 1 ZPO and extends it to enforcement proceedings: In all situations of the proceedings, the bailiff is to endeavour to achieve an amicable termination of the matter. First and foremost, the law tries to facilitate payment agreements between the creditor and the debtor. To this end, the law gives the bailiff power to grant to the debtor a period within which payment is to be made or may allow the debt to be redeemed by partial performance (payment in instalments). Payments to be effectuated by the debtor have to be determined in terms of their amount and timing. This is all subject to the condition that debtor demonstrates in a satisfactory way that he will be able to make the payments. However, the creditor has the possibility to rule out such an agreement when applying for enforcement. If the creditor has not ruled out such an agreement, and if the bailiff has granted a payment in instalments, he has to inform the creditor without undue delay of the payment plan. If the creditor opposes the payment plan without undue delay, the payment plan will be rendered invalid upon the debtor being notified of this fact; concurrently, the deferment of enforcement will end. In a nutshell, this rule amounts to an authority of the bailiff to grant payments instalments; this authority is however conditioned upon a non-objection by the creditor. b) Mediation in enforcement of secured debt The realisation of secured debt does not require the participation of the bailiff. This applies in particular to mortgages and the land charges, but equally to receivables and other which have been pledged or transferred by security to the creditor. So, in these cases, there is no mediation by the bailiff. Of course, in these cases, the parties are free to agree on a payment plan or other extension agreements; however, they will have to negotiate directly between themselves and cannot count of mediation by a judge or enforcement organs. c) Mediation with regard to lawsuits relating to enforcement measures As has been described above, there are several claims of the debtor, but also the creditor and third parties that can be filed in connection with an ongoing enforcement procedure. These claims are generally permissible in enforcement of secured debt as well as in enforcement of unsecured debt. In these proceedings, the above-mentioned rules on court-annexed mediation apply.

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IV. The use of ADR in the framework of insolvency und pre-insolvency restructuring 1. Differentiation between insolvency proceedings and pre-insolvency restructuring In recent years, German law on insolvency and pre-insolvency proceedings has been in a state of constant flux. Today, German law distinguishes between insolvency proceedings as provided for by the Insolvency Act (InsO) 82 and pre-insolvency restructuring governed by the new Act on the Stabilisation and Restructuring Framework for Businesses (StaRUG) 83 as of 22 december 2020. In order to gain a comprehensive picture of German law, both Acts have to be taken into consideration. 2. Insolvency proceedings a) General framework aa) Conditions for the commencement of insolvency proceedings Section 11 para 1 InsO stipulates that insolvency proceedings may be commenced in respect of the assets of any natural person or legal entity. 84 Insolvency proceedings may also be commenced if the debtor is a consumer or a former entrepreneur who has given up his business. For these debtors however, special rules aiming at an out-of-court settlement, or a specific debt settlement plan apply. Pursuant to section 15 InsO, it is a prerequisite for commencement of insolvency proceedings that a ground for commencement exists. The general ground for commencement of proceedings is illiquidity as defined by section 17 InsO, i.e., the debtor’s inability to pay due obligations. Another ground for commencement – which is applicable only to legal entities, but not natural persons – is overindebtedness. Pursuant to section 19 InsO, there is overindebtedness if the debtor’s assets no longer cover its existing liabilities, unless the continued operation of the enterprise during the next twelve months is substantially likely in the circumstances. The debtor and his creditors have the right to apply for the opening of an insolvency proceeding in these cases. Directors of illiquid or overindebted legal 82 

Insolvenzordnung. Unternehmensstabilisierungs- und -restrukturierungsgesetz – StaRUG. 84  Pursuant to section 11 para 1 S.  2 , an unincorporated association is equivalent to a legal entity in this respect. Moreover, under section 11 para 2, insolvency proceedings may further be commenced in respect of the assets of a company without legal personality (general partnership, limited partnership, registered partnership, partnership under the Civil Code, shipping partnership, European Economic Interest Grouping). 83 

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entities have a duty to apply for commencement of insolvency proceedings without undue delay. 85 If there is only imminent illiquidity, the debtor has a right – but not a duty – to apply for the opening of an insolvency procedure.86 In this case, he can use the insolvency procedure for restructuring measures, especially by opting for self-administration and using an insolvency plan. The debtor faces imminent illiquidity if he is likely to be unable to meet existing payment obligations when they fall due; in general, a forecast period of 24 months is to be taken as a basis. 87 bb) Rights of the insolvency administrator, creditors and debtor For a long time, these proceedings have been widely dominated by the insolvency administrator (“Insolvenzverwalter”), a practitioner appointed by the court. Still today, in a regular proceeding, the insolvency administrator plays a key role. When the proceedings are opened, the debtor generally loses the right to manage and transfer his assets; in this case, these rights are transferred to the insolvency administrator.88 However, the creditors also have their say in insolvency proceedings. The highest organ of the insolvency proceedings is the meeting of creditors. More­ over, an additional creditor committee can be established.89 The creditors’ committee has to support and supervise the insolvency administrator in the execution of his/her office. In the course of the proceedings, the insolvency administrator has to ask for the consent of the creditors’ committee or – if no committee is appointed – for the consent of the meeting of the creditors concerning to all transactions which are of particular importance.90 Creditors also participate in the appointment of the insolvency administrator; in certain situations, pursuant to a new provision which was enacted in 2012, the court is basically bound by a unanimous recommendation of the (preliminary) creditors’ committee on the person to be appointed as insolvency administrator.91 Moreover, in the last years, the legislator introduced legislation which has gradually strengthened the position of the debtor. The court can grant self-administration; in certain situations – especially if the debtor is only in a state of imminent illiquidity – the court can refuse to order self-administration only under special circumstances.92 85 

See section 15a InsO. See section 18 InsO. 87  Section 18 para 2 s.2. 88  Section 80 InsO. 89  See section 22a InsO. 90  Section 160 InsO. 91  See section 56a InsO. 92  See sections 270 et seq., especially section 270b InsO. 86 

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b) Elements of mediation in the insolvency proceedings aa) Insolvency plan In a regular proceeding, the insolvency administrator will convert the debtor’s assets into money and then distribute it to the creditors on a pro rata basis. Ordinarily, he will first try to sell the debtor’s business as whole; if this is not possible, he will sell the assets individually. Alternatively, the insolvency administrator or the debtor can present an insolvency plan which has to be voted on by the creditors. The creditors have no right to propose a plan themselves; however, the meeting of creditors can instruct the insolvency administrator to draw up an insolvency plan and specify the objective of the plan.93 The insolvency plan is the key tool for a restructuring of the debtor. Whereas in recent times, the insolvency plan was only scarcely used, recent reforms aimed at making the insolvency plan more attractive and accessible. This clearly reflects the fact that the German insolvency procedure – while still aiming at collective enforcement in the creditors’ interests – also pursues the goal of corporate recovery and restructuring. The vote on the plan takes place in different groups of creditors. Acceptance of the insolvency plan by the creditors requires that, in each group, the majority of the voting creditors approve the plan and the total of the claims of the assenting creditors amounts to more than half of the total of the claims of the voting creditors. 94 In group formation, a distinction shall be made between inter alia creditors entitled to separate satisfaction, non-subordinated insolvency creditors and subordinated creditors.95 Shareholders also form a group, if their share rights are affected by the plan, especially by a transfer of their shares to creditors (debt/equity-swap). Moreover, additional groups of parties with the same legal status may be formed, provided that each group consists of parties with equivalent economic interests.96 If the required majorities have not been reached in a group, the court can nonetheless approve the plan if the plan does not worsen that particular group’s position compared to its situation in the absence of an insolvency plan. However, such a cram-down is subject to the condition that the plan provides such group’s members with a reasonable economical share of the assets that are to be distributed on the basis of the insolvency plan and that a majority of the voting groups have approved the plan. Due to a reform of 2012, this cram-down-rule 93 

Section 157 s. 2 InsO. Section 244 para 1 InsO. 95  Section 222 para 1 s. 2 InsO. 96  Section 222 papa 2 InsO. 94 

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now also applies to shareholders of the debtor; this way, a debt/equity-swap can be reached against their will. Generally, an insolvency plan requires a process of negotiating which can take place before the official commencement of the insolvency proceeding. Pursuant to the insolvency code, the insolvency court shall schedule a meeting at which the insolvency plan and the voting rights of the parties concerned can be discussed and where there will be a subsequent voting on the plan (discussion and voting meeting).97 In exceptional cases, the insolvency court may schedule a separate meeting for the vote on the insolvency plan.98 A separate meeting for the vote might especially be appropriate if there are profound last-minute amendments to the plan before the discussing meeting. Although not being a mediation procedure in the strict sense, the negotiations on the insolvency plan may require several methods of conflict resolution, including mediation. The insolvency code does not provide for a special mediator but relies on the expertise of the insolvency administrator and the participation of the other stakeholders (especially the debtor and the creditors) involved in the process. bb) Consumer insolvency proceedings There are even more mediation elements in so-called “consumer insolvency proceedings”. Generally, these proceedings can be opened on request of the debtor if he or she is a natural person who has not pursued an independent economic activity. However, former entrepreneurs can also request the opening of the procedure if his/her financial circumstances are straightforward and there are no claims against him/her under employment contracts.99 The proceedings consist of three phases. Initially, the debtor is obliged to seek an out-of-court settlement with the creditors. If this attempt, as has to be proven by the debtor, has been unsuccessful, the creditors are asked to vote on a debt adjustment plan presented by the debtor. The debt adjustment plan is approved if there is no objection of any creditor. If, however, a creditor objects to the plan, the court may substitute the approval of the creditor if the sum of the claims of the approving creditors amount to more than one half of the sum of the claims of the registered creditors. In this context, section 307 para 2 InsO stipulates that if a creditor does not object to the plan, he or she shall be deemed to have approved it. However, there will be no substi97 

Section 235 para 1 s. 1 InsO. 241 para 1 s. 1 InsO. In this event the period of time between the discussion meeting and the voting meeting shall amount to not more than one month (section 241 para 1 s. 2 InsO). 99  Section 304 para s. 2 InsO. According to section 304 para 2 InsO, financial circumstances are straightforward only if, at the time when the application for commencement of insolvency proceedings is submitted, the debtor has fewer than 20 creditors. 98  Section

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tution of the approval if this creditor is likely to be placed in a worse economic position as a result of the debt settlement plan than would be the case if the proceedings relating to the applications for commencement of insolvency proceedings and for the grant of discharge of residual debt had been conducted.100 Only if objections to the debt settlement plan are raised that are not substituted by the court, the ordinary insolvency proceedings resume. Quite evidently, the German legislator favours a settlement concluded by the debtor and his creditors or, alternatively, a comprehensive solution by way of a debt settlement plan. c) Role of arbitration in insolvency proceedings aa) Possibility of arbitration agreements Generally, the insolvency administrator is bound by arbitration agreements concluded by the debtor before the opening of the insolvency procedure.101 Moreover, he can conclude new arbitration agreements. However, as a general rule, as an arbitration agreement involving a significant amount is considered a legal act of particular importance under section 160 para 2 no.  3 InsO, the insolvency administrator is first required to obtain the consent of the creditors’ committee or the creditors’ meeting before concluding such an agreement. In German practice, insolvency arbitrators will only very rarely conclude such arbitration agreements. bb) Binding forces of arbitration agreements concluded by the debtor As has shown above, according to section 1030 ZPO, all claims that are assessable in financial terms and claims which may be the subject matter of settlement are arbitrable. Moreover, section 160 para 2 no.  3 InsO presupposes that insolvency-related claims can be subjected to an arbitration agreement. Therefore, it is commonly recognised that disputes are arbitrable even if they are related to an ongoing insolvency proceeding. However, pursuant to the Bundesgerichtshof, with regard to arbitration agreements entered into by the debtor, a differentiation has to be made. Generally, with regard to claims that vested in the debtor, the insolvency administrator is bound by an arbitration agreement concluded by the debtor prior to the commencement of insolvency proceedings. However, if the administrator exercises “insolvency-specific rights” which never vested in the debtor, but arise ex lege from the Insolvency Code, the insolvency administrator is not bound by

100  101 

See 309 para 1 s. 2 InsO. BGH, decision of 9.8.2016 – I ZB 1/15, SchiedsVZ 2017, 103, 104 (point 10).

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such an arbitration agreement. When exercising “insolvency-specific” rights, he can therefore take action directly before the state courts.102 In most cases, the application of this criterion leads to clear results.103 The arbitration agreement is binding upon the insolvency administrator if the subject-matter of the dispute is the existence of a claim as such and the corresponding right of a creditor to take part in an insolvency proceeding. An arbitration agreement concluded by the debtor is also binding with regard to a creditor’s right to segregation or separate satisfaction.104 The same is true with regard to disputes where, making use of section 166 para 2 InsO, the insolvency administrator claims a right over an account receivable which the debtor has assigned in order to secure a claim.105 Therefore, if the insolvency administrator takes an action before state courts in these cases, the defendant can raise the arbitration defence under Section 1032 para 1 ZPO and petition the court to dismiss the claim as inadmissible. The most important independent “insolvency-specific right” of the insolvency administrator – not affected by an arbitration agreement concluded by the debtor – is the right to avoid legal acts undertaken by the debtor prior to commencement of insolvency proceedings and prejudicial to the creditors’ common interest according to section 129 et seq. InsO.106 The same is true for the insolvency administrator’s right to perform or terminate a mutual contract under section 103 InsO; as this right is conferred to the insolvency administrator by the Insolvency Code – and is not derived from a right that vested in the debtor prior to the commencement of the proceedings – it remains unaffected by an arbitration agreement concluded by the debtor.107 3. Pre-insolvency restructuring a) General framework The Directive (EU) 2019/1023 on preventive restructuring frameworks obliges the member states to implement certain restructuring tools outside formal insolvency proceedings. In Germany, the directive was transposed by an Act on the stabilisation and restructuring of enterprises (StaRUG) which entered into force on 1 January 2021.108 102 

See BGH, decision of 29.6.2017 – I ZB 60/16, SchiedsVZ 2018, 127 Rz.  21 et seq. For a comprehensive view on the remaining cases of doubt see Kuhli/Köppel, SchiedsVZ 2020, 2 et seq. 104  See section 47 et seq.; BGH, decision of 29.6.2017 – I ZB 60/16, SchiedsVZ 2018, 127, 129 n.  19. 105  BGH, judgment of 25.4.2013 – IX ZR 49/12, NZI 2013, 93. 106  See BGH, decision of 30.6.2011 – III ZB 59/10, SchiedsVZ 2011, 281, 282. 107  BGH, decision of 30.6.2011 – III ZB 59/10, SchiedsVZ 2011, 281, 282. 108  Unternehmensstabilisierungs- und -restrukturierungsgesetz, BGBl. I 2020, 3256. 103 

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The German legislator did not introduce fully-fledged pre-insolvency proceedings, but rather a “toolbox” with a variety of instruments which can be used individually by a debtor. The toolbox mainly consists of a stabilisation order by the court (which can include the prohibition or the temporary suspension of enforcement measures) and a restructuration plan. Finally, the StaRUG introduces a rehabilitation mediation procedure aiming at rehabilitation settlements. b) Elements of mediation in the pre-insolvency proceedings aa) Restructuring plan The principal restructuring tool provided for by the StaRUG is the restructuring plan. The rules for the restructuring plan are very similar to – or in many cases identical with – the rules for the insolvency plan. Just as in case of the insolvency plan, the creditors affected by the plan are classified in groups. Acceptance of the restructuring plan requires that, in each group, the members of the group who approve the plan account for a minimum of three-quarters of the voting rights in that group. Just as in the case of the insolvency plan, there can be a cram-down if this majority is not reached. bb) Rehabilitation mediation As an alternative to the restructuring plan procedure, the StaRUG provides for a mediation procedure aiming at a settlement between the debtor and his creditors. To this end, the court will appoint a mediator for a period of up to three months. Under certain circumstances, this period can be extended up to a maximum period of additional three months. The implementation of the rehabilitation mediation into German law was influenced by the French conciliation procedure.109 However, there are doubts as to whether the German mediation procedure will be as frequently used and as successful as the French counterpart. According to the explanatory memorandum to the government’s draft bill, rehabilitation mediation might primarily be used by micro and small enterprises which otherwise could not afford professional rehabilitation advice.110 It remains to be seen whether practice will go beyond that rather cautious estimate. A settlement reached in the mediation procedure can be confirmed by the court. In this case, the settlement enjoys a privilege under the law of avoidance: Any legal act which is undertaken in fulfilment of the settlement can only be

109 See 110 

Arnold/Slawik, NZI-Beilage 2021, 79, 80. BT-Drucksache 19/24181, 183.

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avoided if the confirmation by the court was based on incorrect or incomplete information provided by the debtor and if the other party was aware of this.111 The settlement is only binding on the parties; in contrast to a restructuring plan, it cannot be enforced against creditors who did not consent to it.

V. Conclusions Classical out-of-court mediation and arbitration play a rather limited role in Germany, at least in purely domestic cases. Legal practice – also in the field of enforcement and (pre-)insolvency – is largely dominated by court proceedings or court-controlled proceedings. Nonetheless, the German legal system is based on the principles of freedom of contract and party disposition. Therefore, in almost all proceedings, the parties can conclude a settlement or make use of other forms of consensual dispute resolution. In many fields of the law, there are special rules and procedures aiming at facilitating a consensual dispute resolution and introducing elements of mediation into the various proceedings. This is also the case in enforcement proceedings and in (pre-) insolvency proceedings: In enforcement proceedings, an amicable settlement on payments instalments can come around through mediation by the bailiff. In (pre-)insolvency proceedings, the restructuring plan and the insolvency plan are not the only, but the most important tools for a reconciliation of interests based on negotiation and a widest possible consensus. In a nutshell, it can be said that today’s German law offers court procedures or court-controlled procedures mixed with elements of mediation. Against this backdrop, at least from a German perspective, it would be wrong to construct an opposition between court proceedings or court-controlled proceedings on the one side and mediation on the other. On the contrary, as proven by German practice, they can engage in a profitable symbiosis.

111 

Section 97 para 3 in connection with section 90 StaRUG.

Cryptocurrencies1 Jens-Hinrich Binder

I. Introduction Just as in other jurisdictions, the legal treatment of cryptocurrencies under German law is a moving target. To date, a consistent framework for the legal qualification of crypto-assets,2 let alone comprehensive and consistent solutions for the treatment of such assets in areas like contract law, the law of property, inheritance law, IP law, civil procedure (including, for that matter, insolvency law), or tax law are yet to emerge. Although coverage of cryptocurrencies in the academic literature started almost a decade ago,3 legislative responses to the increasing role of cryptocurrencies within the country have remained reluctant and piecemeal, with many questions completely unresolved. While a growing number of court decisions addressing virtual currencies in various areas of the law have been reported in recent years, relevant case law, by and large, continues to be confined to judgments of lower instances, leaving not just many aspects completely uncharted, but also a substantial degree of legal uncertainty. In the area of financial law, however, the situation looks different. Following some initial confusion over the treatment for regulatory purposes, ‘crypto-assets’ (just like, for instance, traditional securities) have been expressly recognised as ‘financial instruments’ for the purposes of the German Banking Act (‘Kredit­ wesengesetz’, hereafter: ‘KWG’), which prepares the ground for the application of general licensing requirements and for the prudential regulation and supervision of intermediaries dealing in crypto-assets in line with received principles of financial regulation more generally. Significantly, recent legislation has also paved the way for the issuance of so-called crypto securities (‘Kryptowert­ papiere’), i.e., bonds issued electronically and registered in a designated regis-

1  The author would like to thank Mr Raphael Reiss for valuable research assistance. All remaining errors are his own. 2  As will be discussed further below, applicable German (regulatory) law is based on the notion of ‘crypto-assets’ rather than ‘cryptocurrency’. 3 For representative early examples, cf. Boehm/Pesch, MMR 2014, 75–79 and Spindler/ Bille, WM 2014, 1357–1369.

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try.4 While this legislation does not relate to cryptocurrencies and is, therefore, outside the scope of the present report, it is nonetheless illustrative of a more progressive approach to the regulation of crypto-assets in the regulatory realm in recent years. The transactional side of financial services, however, still remains largely uncharted territory, as both conduct-of-business and prospectus requirements yet have to be adapted to the issuance of, and transactions in, cryptocurrencies. In stark contrast to the regulatory framework, the treatment of crypto-assets under German private law – or, indeed, in other areas – has not yet been addressed in statutory law so far. While it is clear that cryptocurrencies are not recognised as legal tender, their precise qualification has not been addressed in the Bürgerliches Gesetzbuch (hereafter ‘BGB’, the Civil Code),5 resulting in difficulties to qualify relevant transactions in, and the possession of, such assets for the purposes of general principles of private law and the law of property. In this context, the recognition of crypto-assets in regulatory law, which is derived from international and European anti-money laundering standards, is of little use, and does not help to clarify the position of cryptocurrencies in the traditional categories of private property, so that the solution of specific cases rests entirely on the application (and adaptation) of established general principles. Following a more detailed introduction to the qualification of cryptocurrencies in German regulatory and private law summarised below (infra, II.), the present report examines the applicable regulatory framework in some detail (in­ fra, III.), before turning to the relevant private law issues (infra, IV.) and the treatment of cryptocurrencies in tax law (infra, V.) and other areas (infra, VI.).

II. The absence of common ground: Definition of crypto-assets in regulatory law and the position in private law 1. Cryptocurrencies within Germany – The current market While detailed statistics on the use of cryptocurrencies within Germany do not appear to exist, it certainly can be said that all relevant known forms, including, in particular Bitcoin and Ethereum, are also traded between parties in Germany. A country-specific market in such instruments, however, is yet to emerge,6 4  See Law on electronic securities (‘Gesetz über elektronische Wertpapiere’) of 3 June 2021, Bundesgesetzblatt I, 1423. 5 But see section 327(1) sentence 2 BGB (as introduced in 2021), which recognises that ‘digital representations of value’ may be agreed as a price payable in exchange for ‘digital products’ or ‘digital services’. See, further, infra, IV.1. 6  For an instructive discussion of the current role of crypto-assets within the country and potential perspectives in this regard, cf., e.g., Deutsche Bundesbank, ‘Krypto-Token im Zah­ lungsverkehr und in der Wertpapierabwicklung’, Monatsbericht [Monthly Report] July 2019,

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which has been attributed also to the absence of a coherent, reliable legal and regulatory framework that would ensure legal certainty for issuers and investors alike.7 2. Statutory definitions in regulatory law To date, no reference has been made to (the German language equivalent of) the concept of ‘cryptocurrencies’ – or, for that matter, to ‘virtual currencies’8 – in German statutory law. However, the transposition of the 2018 amendment to the EU Anti-Money Laundering Directive (AMLD),9 in 2019,10 has led to the recognition of the category of ‘crypto-assets’ in the KWG’, which – as will be discussed further in section 3 below – provides the legal basis for the prudential regulation and supervision of financial intermediaries other than insurance companies within the country. In line with the definition of the term in international standards,11 section 1(11), sentence 4 KWG now defines the term crypto-asset (‘Kryptowert’) as ’a digital representation of value that is not issued or guaranteed by a central bank or a public authority and does not possess a legal status of currency or money, but is accepted by natural or legal persons, on the basis of an agreement or otherwise in their current dealings, as a means of exchange or for investment purposes, and which can be transferred, stored and traded electronically’.12

39; id., ‘Krypto-Token und dezentrale Finanzanwendungen’, Monatsbericht July 2021, 33; see also Brühl, Wirtschaftsdienst 101 (2021), 629. 7  Klöhn/Parhofer/Resas, ZBB (2018), 89, 99. 8  E.g., within the meaning defined by Art.  3(18) AMLD: ‘a digital representation of value that is not issued or guaranteed by a central bank or a public authority, is not necessarily attached to a legally established currency and does not possess a legal status of currency or money, but is accepted by natural or legal persons as a means of exchange and which can be transferred, stored and traded electronically’. See also EBA, ‘EBA Opinion on ‘virtual currencies’’ (EBA/Op/2014/08) (4 July 2014), 11. 9  Directive (EU) 2015/849 of the European Parliament and of the Council of 20 May 2015 on the prevention of the use of the financial system for the purposes of money laundering or terrorist financing […], OJ L 141, 73 (as amended by Directive (EU) 2018/843 of the European Parliament and of the Council of 30 May 2018, OJ L 156, 43). 10  Law Transposing the Directive Amending the 4th EU Anti-Money Laundering Directive of 12 December 2019, Bundesgesetzblatt I, 2602. 11 Cf., e.g., Financial Stability Board, ‘Crypto-asset markets: Potential channels for future financial stability implications’ (10 October 2018), 3–4, referred to in Federal Government, Explanatory Notes to the 2019 legislation, Bundestags-Drucksache 19/13827, 48 and 110. 12  In the German original: ‘digitale Darstellungen eines Wertes, der von keiner Zentralbank oder öffentlichen Stelle emittiert wurde oder garantiert wird und nicht den gesetzlichen Status einer Währung oder von Geld besitzt, aber von natürlichen oder juristischen Personen aufgrund einer Vereinbarung oder tatsächlichen Übung als Tausch- oder Zahlungsmittel akzeptiert wird oder Anlagezwecken dient und der auf elektronischem Wege übertragen, ge­ speichert und gehandelt werden kann.‘

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Sentence 5 of the same provision then expressly exempts E-money and other forms of electronic token used exclusively in connection with payments processes from the application of that definition, which has been designed so as to provide a broad, catch-all term covering all relevant virtual assets not confined to virtual currencies in a strict sense.13 This definition is, in principle, consistent with, but broader in scope than the definition of the term ‘virtual currency’ in Art.  3(18) AMLD. By virtue of section 1(11) sentence 1 no.  10 KWG, crypto-assets within the meaning of section 1(11), sentence 4 (above) now qualify as ‘financial instruments’ (‘Finanzinstrumente’) for the purposes of the act. Since the provision of services related to financial instruments requires (at least) a license as a financial services institution (section 32(1) in conjunction with section 1(1a) KWG, see further infra, III.2.), the definition set out above thus serves as the basis for the application of general licensing and prudential requirements for intermediaries dealing in crypto-assets in the broadest sense. Moreover, the definition set out in section 1(11), sentence 4 KWG is also referred to in section 1(29) of the Geldwäschegesetz (Money Laundering Act, hereafter: ‘GWG’) and a statutory instrument complementing the GWG, which stipulates specific duties for the prevention of money laundering in connection with the transfer of crypto-assets.14 Upon completion of the present report, German regulatory law thus does not (yet) distinguish between specific forms of crypto-assets, and certainly does not provide for a specific category of cryptocurrencies, but rather treats them as part of a broader phenomenon. The framework summarised above will inevitably change with – and, as far as the licensing and prudential regulation of issuers is concerned, superseded by – the proposed EU Regulation on Markets in Crypto-Assets (MiCAR),15 which, if and when ultimately adopted, will introduce a similarly broad definition of crypto-assets,16 but also differentiate between various forms of assets in terms of the applicable substantive and procedural duties of issuers.

13  Cf. Explanatory Notes to the 2019 Law, Bundestags-Drucksache 19/13827, 110. On the regulatory position with regard to e-money, see further infra, III.5. 14  See Verordnung über verstärkte Sorgfaltspflichten bei dem Transfer von Kryptowerten (Kryptowertetransferverordnung – KryptoWTransferV) of 24 September 2021, Bundesgesetzblatt I, 4465. 15  Commission, Proposal for a Regulation of the European Parliament and of the Council on Markets in Crypto-assets, and amending Directive (EU) 2019/1937 (24 September 2020), COM(2020) 593 final. 16  Commission Draft, Art.  3(1)(2): ‘a digital representation of value or rights which may be transferred and stored electronically, using distributed ledger technology or similar technology’.

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3. The position in private law a) The starting point: Cryptocurrencies are not ‘money’ Importantly, cryptocurrencies (or, indeed, other forms of crypto-assets), just as in any other Member State of the Eurozone, are not recognised as legal tender under German law. This follows directly from the fundamental provision on the role of Euro banknotes and coins in Art.  128(1), sentence 3 of the Treaty on the Functioning of the European Union (‘TFEU’).17 The private law implications of this principle are rather ill-defined, however. Whether cryptocurrencies actually qualify as ‘money’ (or ‘currency’) at all for the purposes of private law, has been debated controversially by scholars in recent years. According to the majority view, this is not the case precisely because they cannot be universally exchanged into ‘public’ currency.18 As specific statutory provisions for the treatment of monetary obligations are rare anyhow, the immediate practical consequences of this controversy are rather limited, however. Effectively, the BGB addresses the concept of ‘money’ (or ‘currency’) only in two subsequent provisions. While section 244 BGB provides for the right to repay non-Euro denominated obligations payable within the country in Euro, section 245 complements this with a (rather irrelevant) provision for payments on obligations denominated in a currency that no longer exists. It is generally accepted that, for the purposes of the German law of obligations, monetary obligations – in the sense of claims for a certain amount of money – have to be strictly distinguished from all other claims. However, sections 244 and 245 BGB provide but a poor basis for the treatment of monetary obligations in German private law. Hence, most relevant aspects – for example, the legal consequences of a debtor’s inability to pay, or of late payments – have to be derived from more general principles of the law of obligations.19 As cryptocurrencies are not recognised as legal tender, they are not as such, or at least: not without modifications, subject to the private law principles governing monetary obligations,20 which will be discussed in more detail below (infra, IV.1.a)).

17  Pursuant to Art.  128(1), sentence 3 TFEU, ‘[t]he banknotes issued by the European Central Bank and the national central banks shall be the only such notes to have the status of legal tender within the Union.’ 18  E.g., Omlor, JZ 2017, 754, 759 f.; id., ZHR 183 (2019), 294, 307 f.; Engelhardt/Klein, MMR 2014, 355, 356; Spindler/Bille, WM 2014, 1357, 1360 f. But see (supporting a functional interpretation of the concept of ‘money’) also Freitag, Commentary to section 244 BGB, in: BeckOnline-Großkommentar zum BGB (15 March 2021), para.  31. 19 See, e.g., Grundmann, Commentary to section 245 BGB, in: J. Säcker et al. (eds.), Münchener Kommentar zum Bürgerlichen Gesetzbuch (8th ed., 2019), paras. 13–22. 20 Cf. Grundmann, ibid., para.  34.

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b) The classification in private law If then, according to the general distinction between monetary and other claims under the German law of obligations (supra, II.3.a)), crypto-assets do not, as a rule, qualify as ‘money’ for the purposes of private law, their qualification for the purposes of the law of obligations and other relevant areas (the law of property, inheritance law…) remains somewhat obscure. While it is generally agreed that crypto-currency tokens, as such, cannot be qualified as ‘claims’ (‘Forderungen’) under German law, if and to the extent that they do not reflect a bipolar relationship whereby one party (the creditor) has an enforceable right to claim something from the debtor,21 other alternatives have been discussed rather controversially in recent years. Some authors have claimed that crypto-assets generally, despite their ‘virtual’ nature, should be qualified as ‘things’ (tangible goods, ‘Sachen’) for the purposes of private law, 22 which would facilitate not just the application of legal principles pertaining to transactions in things (e.g., the law governing sales contracts and the requirements for the validity of transfers of property, see infra, IV.1.b)), but also help to clarify legal titles in such assets, not just in terms of the protection of property rights but also regarding their status in civil procedure, the execution of judgments and insolvency. This definition is difficult to reconcile with the wording and traditional interpretation of the statutory definition of ‘things’ in section 90 BGB, however, according to which only tangible (or, in the words of the official translation of the BGB, 23 ‘corporeal’) objects qualify as things. Against this backdrop, most authors have convincingly rejected the qualification of crypto tokens as ‘things’ within the meaning of section 90 BGB.24 If, then, cryptocurrency tokens can neither be qualified as ‘claims’ nor as ‘things’ for the purposes of private law, the remaining option would be the qualification as ‘other property right’, a category whose implications are not as clear21  E.g. Langenbucher, AcP 218 (2018), 385, 406; Skauradszun, AcP 221 (2021), 353, 365 f.; Spindler/Bille, WM 2014, 1357, 1360. It has been debated whether, by these standards, cryptocurrencies issued by a central issuer (e.g., Libra) could qualify as a claim by these standards: see Langen­bucher/Hoche/Wentz, ‘Virtuelle Währungen’, in: Langenbucher/Bliesener/Spind­ ler (eds.), Bankrechtskommentar (3rd ed., 2020), 782, 791, para.  37. This is far from settled and not free from doubt, however. 22  See, in particular, John, BKR 2020, 76 (arguing that the traditional concept of ‘things’ as tangible goods should be reinterpreted); see also Koch, ZBB 2018, 359, 362 f.; Walter NJW 2019, 3609, 3613 (both arguing for the application of principles pertaining to tangible goods per analogiam). 23  See https://www.gesetze-im-internet.de/englisch_bgb/englisch_bgb.html#p0736. 24  E.g. Langenbucher/Hoche/Wentz, ‘Virtuelle Währungen’, in: Langenbucher/Bliesener/ Spindler (eds.), Bankrechtskommentar (3rd ed., 2020), 782, 790 para.  35; Schmidt, commentary to §  9 0 BGB, in: Erman, BGB (16th ed., 2020), para.  3; Beck/König, JZ 2015, 130, 132; Engelhardt/Klein, MMR 2014, 355, 359; Skauradszun, AcP 221 (2021), 353, 361–363; Spindler/ Bille, WM 2014, 1357, 1359.

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ly defined. While they cannot be qualified as intellectual property rights for the purposes of German IP law (section 69a in conjunction with section 2(1)(1) Urheberrechtsgesetz [Act on Copyrights and Related Rights),25 their legal status as an ‘other property right’ (convincingly) has been acknowledged by many authors, but also remains contested.26 It should be noted, however, that while this qualification may be helpful in that it clarifies the legal nature of cryptocurrency as such, it certainly does not remove the resulting difficulties to qualify transactions in cryptocurrency for the purposes of contract and property law, which results in a high degree of legal uncertainty that also extends to procedural aspects (see infra, IV.1.a), IV.1.b) and IV.2.).

III. Regulatory framework and supervision 1. Overview As indicated before (supra, II.1.), current German law, which also serves as the legal basis for the supervision of transactions in cryptocurrencies, distinguishes between the regulation of cryptocurrencies for the purposes of prudential financial supervision (infra, III.2.) and the prevention of money laundering (infra, III.5.). In striking contrast to their recognition as ‘financial instruments’ for the purposes of the KWG, however, crypto-assets have not been included in the statutory definition of the same term in the Securities Trading Act (‘Wertpa­ pierhandelsgesetz’, hereafter ‘WpHG’) yet, which leaves some uncertainty as to the applicability of the transactions-oriented (conduct-of-business) framework of that act (infra, III.3.). Under the relevant statutory regimes, there is currently no prospectus requirement for the issuance of cryptocurrencies (infra, III.4.). 2. Prudential regulation of intermediation in crypto-assets a) Scope As noted before, the classification of crypto-assets as ‘financial instruments’ for the purposes of the Banking Act (supra, II.1.) prepares the ground for the application of the general licensing requirement for the provision of financial services. Already prior to the legislative amendment to the definition of ‘financial instruments’ in section 1(11) sentence 1 KWG, the Federal Financial Supervisory Authority (‘Bundesanstalt für Finanzdienstleistungsaufsicht’, ‘BaFin’) had 25  E.g., Beck/König, JZ 2015, 130, 131; Kütük/Sorge, MMR 2014, 643, 644; Schlund/ Pongratz, DStR 2018, 598, 600; Spindler/Bille, WM 2014, 1357, 1360. 26  E.g., Langenbucher, AcP 218 (2018), 385, 407; Schlund/Pongratz, DStR 2018, 598, 600; Skauradszun, AcP 221 (2021), 353, 468–469; Spindler/Bille, WM 2014, 1357, 1360. But see, arguing against the qualification as a property right, also Kütük/Sorge, MMR 2014, 643, 644; Paulus/Matzke, ZfPW 2018, 431, 451; Rückert, MMR 2016, 295, 296.

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treated cryptocurrencies as financial instruments for the purposes of the Act, namely, for want of more specific alternatives, as ‘units of account’ (‘Rechnung­ seinheiten’), within the meaning of section 1(11) sentence 1 no.  7 KWG.27 The introduction of a more specific definition into the catalogue of ‘financial instruments’ thus served as a mere clarification of the status quo ante. The current regulatory framework that builds, inter alia, on this definition has become rather complex of late (and will, to some extent, soon be replaced and/or superseded by the incoming MiCAR, supra, II.2.). Following a recent overhaul of the applicable EU framework for the licensing and prudential regulation of investment firms, as distinct from banks (or, in technical terms, ‘credit institutions’),28 there are now two separate licensing and regulatory regimes in German law. Universal banks and large providers of financial services other than banks (‘Finanzdienstleistungsinstitute’, translated literally: ‘financial services institutions’) continue to be regulated by, and supervised according to, a combination of the German KWG and Regulation (EU) 575/2013 (the ‘Capital Requirements Regulation’, hereafter: ‘CRR’).29 Investment firms not licensed under the KWG, however, are licensed and regulated as ‘Wertpapierinstitute’ (translated literally: ‘securities [services] institutions’) under the newly enacted ‘Wertpapierinstitutsgesetz’ (Securities Institutions Act, hereafter: ‘WpIG’) in conjunction with the EU Investment Firms Regulation.30 Under the new regime, the licensing and supervision pursuant to the WpIG will be the rule. The scope ratione materiae of both regimes has been, and will be, defined by reference to specific activities for which a license is required (‘banking services’ or ‘financial services’ for the purposes of the KWG, and ‘securities services’ for the purposes of the WpIG). Their provision at a commercial scale triggers the on-going application of specific prudential requirements, as well as their supervision by public authorities. 27  See BaFin, ‘Hinweise zu Finanzinstrumenten nach §  1 Abs.  11 Sätze 1 bis 3 KWG’ (20 December 2011, as amended), available at https://www.bafin.de/SharedDocs/Veroeffentlichungen/DE/Merkblatt/mb_111220_finanzinstrumente.html. Other forms of ‘units of account’ within this meaning include, for example, special drawing rights issued by the International Monetary Fund. This interpretation has been rejected in Kammergericht (Regional Court of Appeals) Berlin, 25 September 2018 – Case (4) 161 Ss 28/18 (35/18), reported in ZIP 2018, 2015, 2017 (a criminal law case). See, for a critical analysis (supporting the BaFin interpretation), Lorenz, ZIP 2019, 1699. 28  See, on the one hand, Directive (EU) 2019/2034 of the European Parliament and of the Council of 27 November 2019 on the prudential supervision of investment firms […], OJ L 314, 64 (Investment Firms Directive, hereafter ‘IFD’); on the other hand: Regulation (EU) 2019/2033 of the European Parliament and of the Council of 27 November 2019 on the prudential requirements of investment firms […], OJ L 314, 1 (Investment Firms Regulation, herafter ‘IFR’), fully in force since 26 June 2021. 29  Regulation (EU) No 575/2013 of the European Parliament and of the Council of 26 June 2013 on prudential requirements for credit institutions and investment firms […], OJ L 176, 1 (as amended). 30  Regulation (EU) 2019/2033 (supra).

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By contrast, other services related to cryptocurrencies can be carried out both by mere ‘financial services institutions’, also licensed under section 32 KWG, and by securities institutions licensed and supervised under the WpIG. Specifically, the following activities qualify both as ‘financial services’ (‘Fi­nanz­ dienstleistungen’) as defined by section 1(1a) KWG and as ‘securities services’ as defined by section 2(2) WpIG: – transactions in crypto-assets at a commercial scale in the form of dealing on own account (‘Eigenhandel’, cf. section 1(1a) sentence 2 no.  4 KWG and section 2(2) no.  10 WpIG, respectively), – the execution of orders for the sale or purchase on behalf of clients (‘Finanz­ kommissionsgeschäft’, cf. section 1(1) sentence 2 no.  4 KWG and section 2(2) no.  1 WpIG, respectively); – the operation of multilateral trading systems as trading platforms for crypto-assets (cf. section 1(1a) sentence 2 no.  1b KWG and section 2(2) no.  7 WpIG, respectively), and – the provision of investment advice in relation to crypto-assets (section 1(1a) no.  1a KWG and section 2(2) no.  4 WpIG). Depending on the structure, the operation of an ATM which issues cryptocurrency against payment of legal tender may qualify as either ‘Eigenhandel’ or ‘Finanzkommissionsgeschäft’ by these standards.31 Significantly, while the scope ratione materiae for both regimes has been defined in largely similar categories, the provision of depositary services in relation to crypto-assets (‘Kryptoverwahrgeschäft’) remains reserved to financial services institutions licensed pursuant to section 32 KWG, as the relevant services – which include, in particular, the admission of crypto-assets (and crypto-asset keys) into custody and, the administration of such assets, which in turn covers both the safekeeping and storage and the provision of wallets to clients32 – qualify as ‘financial services’ pursuant to section 1(1a) sentence 2, no.  6 KWG, which has not been replicated in the WpIG. Other relevant activities, including the issuance of crypto-assets in a wide sense, covering also relevant programming and coding and the block validation of transactions, do not fall within the scope ratione materiae under either regime and do not therefore require a license. It should be noted, however, that the provision of loans in cryptocurrency at a commercial scale qualifies as a bank-

31  See BaFin, ‘Aufstellen von Krypto-ATM: Erlaubnis der BaFin erforderlich’ (8 September 2020), https://www.bafin.de/SharedDocs/Veroeffentlichungen/DE/Verbrauchermittei lung/unerlaubte/2020/meldung_200908_Aufstellen_Krypto_ATM.html. 32  In the German wording: ‘die Verwahrung, die Verwaltung und die Sicherung von Kryptowerten oder privaten kryptografischen Schlüsseln, die dazu dienen, Kryptowerte für andere zu halten, zu speichern oder darüber zu verfügen […].’

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ing activity by virtue of section 32(1) no.  2 KWG and thus requires a license pursuant to section 32(1) KWG (see further infra, IV.1.a) aa)). Based broadly on parallel criteria delineating the scope ratione materiae, the respective scope ratione personae of both the KWG and the WpIG regime is defined by the size of the respective institution or, alternatively, of the group of which it is a part. Specifically, the WpIG applies to institutions (a) whose average of monthly total assets, calculated over a period of 12 consecutive months, does not exceed 30 billion Euro or (b) which are not part of a group in which the total value of the consolidated assets, calculated as an average over a period of 12 consecutive months, of all undertakings in the group that individually have total assets of less than EUR 30 billion and that engage in dealing on their own account or in the underwriting and/or placing of financial instruments on a firm commitment basis (cf. section 32(1) sentence 2 KWG). This mirrors the corresponding provisions established by the EU Investment Firm Regulation.33 b) Applicable prudential requirements, licensing procedure and sanctions In order to obtain a license under the respective regime, intermediaries, along with their application, have to provide proof of compliance with qualitative and quantitative minimum criteria which are, to a large extent, defined by European law. For credit institutions and financial services institutions licensed pursuant to section 32 KWG, the relevant criteria are summarised, as negative criteria and largely by way of reference to requirements set out either in the KWG or the CRR, in section 33(1) KWG. They include, in particular: – minimum quantitative requirements relating to the initial capitalisation (‘own funds’) of the relevant intermediary, as defined in Art.  26(1) CRR (which are complemented with own funds and liquidity requirements relative to the size and riskiness of on-going business activities); – minimum qualitative requirements pertaining to the qualification and reputation of senior management and owners of substantial investments in the relevant institution, as defined in sections 2c, 2d, 25c(1) and 25d(1) KWG, and – minimum requirements relating to the organisation and management of the relevant intermediary, as defined in sections 25a, 25b, 25c(3)-(4b), 25d(4)-(13) KWG. For securities institutions licensed under the WpIG, the relevant requirements are structured similarly, while less restrictive.34 Minimum quantitative criteria for the initial capitalisation of investment firms regulated thereunder are defined in section 17 WpIG (in conjunction with the IFR), and complemented by 33 

34 

See Arts. 1(2) and 55 IFR. See, for details, section 16 WpIG in conjunction with Regulation (EU) 2019/2033.

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own funds requirements for the on-going business laid down in Part III (Articles 11–34) of the IFR. Qualitative requirements for senior management and holders of substantial investments are defined in sections 20(1)-(3), 21(1) and (2) and 18(1) no.  3 WpIG, respectively. Unless the relevant intermediary’s size exceeds the threshold defined in section 32(1) sentence 2 KWG and, hence, has to apply for a license under section 32(1) KWG, the application and licensing procedure is defined in sections 15 and 16 WpIG. Applications have to be addressed to BaFin, which will decide in its capacity as national competent authority pursuant to section 5 WpIG. Under both regimes, licenses can be withdrawn in case the relevant company is found to have breached the applicable prudential requirements summarised above, or, indeed, applicable anti-money laundering law (section 35(2) KWG and section 19(2) WpIG, respectively). c) Supervisory practice and sanctions As is the case with all areas of financial supervision, on-going supervisory practice and the imposition of sanctions for the contravention of the licensing requirements are reported individually, on BaFin’s website, and in its annual reports (also available from the official website). Judging from these sources, supervisory actions have been rather rare to date, and usually dealt with incidents where individuals or companies engaged in the provision of financial services relating in cryptocurrencies without license.35 If services are marketed within Germany by providers from other countries, which do not fall within the territorial scope of German financial legislation and supervisory competences, Ba­ Fin will nonetheless issue a public warning to that effect.36

35  E.g., BaFin, ‘Crypto.exchange GmbH: BaFin ordnet Einstellung des Finanzkommissionsgeschäfts an’ (29 January 2018), https://www.bafin.de/SharedDocs/Veroeffentlichun gen/DE/Verbrauchermitteilung/unerlaubte/2018/meldung_180129_Crypto_exchange.html; id., ‘Özgün Göcer: BaFin ordnet Einstellung und Abwicklung des Finanzkommissionsgeschäfts an’ (26 June 2018), https://www.bafin.de/SharedDocs/Veroeffentlichungen/ DE/Verbrauchermitteilung/unerlaubte/2018/meldung_180626_Oezguen_Goecer.html; id., ‘Trading-Software ‘Bitcoin Deutschland’ bzw. ‘Crypto Bank Software’: BaFin ermittelt gegen die Verantwortlichen’ (1 September 2021), https://www.bafin.de/SharedDocs/Veroeffen tlichungen/DE/Verbrauchermitteilung/unerlaubte/2021/meldung_210901_bigtradingeur. html; id., ‘Handelsplattform cryptolicht.com: BaFin ermittelt gegen die Smarteek S Z.o.o.’ (30 September 2021), https://www.bafin.de/SharedDocs/Veroeffentlichungen/DE/Verbrauch ermitteilung/unerlaubte/2021/meldung_210930_cryptolicht.html; id., ‘Handelsplattform crypto-brokers.de: BaFin ermittelt gegen die CBROKERS-TECHNOLOGY Ltd.’ (23 December 2021), https://www.bafin.de/SharedDocs/Veroeffentlichungen/DE/Verbrauchermit teilung/unerlaubte/2021/meldung_211223_crypto-brokers.html. 36  E.g., BaFin, ‘Crypto Code kein nach §  32 KWG zugelassenes Institut’ (23 January 2019), https://www.bafin.de/SharedDocs/Veroeffentlichungen/DE/Verbrauchermitteilung/uner laubte/2019/meldung_190123_Crypto_Code.html.

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Pursuant to sections 37 and 38 KWG, in such cases, BaFin can order the relevant individual or company to wind down their activities, appoint a liquidator, and publish the sanctions on its website. It can also report those responsible for criminal prosecution, as the provision of financial services without the required license is an offense punishable pursuant to section 54(1) no.  2 KWG.37 3. Regulatory framework for transactions in cryptocurrencies In contrast to the institutional (prudential) regulatory treatment of intermediaries involved in transactions in cryptocurrencies, the position with regard to the regulation of transactions as such remains remarkably ill-defined. To some extent, this is part of a broader problem. To date, transactions-oriented regulation of financial services (in a broad sense) – including in the form of organisational and conduct-of-business rules to be followed by intermediaries in their dealings with customers – has remained rather piecemeal, and focuses mainly on traditional securities transactions, while other aspects, including not just traditional banking services but also innovative forms of financial intermediation, have not been addressed in a similarly comprehensive way.38 To date, the most detailed transactions-oriented regime for the regulation of financial intermediation can be found in the WpHG, which in turn transposes requirements stipulated by the reformed European Markets in Financial Instruments Directive (‘MiFID II’).39 For historic reasons and because of its roots in European securities regulation, however, its scope remains largely focused on traditional securities transactions and related business. Specifically, as noted before, crypto-assets, including cryptocurrencies, have not been included in the statutory definition of ‘financial instruments’ in section 2(4) WpHG (or, for that matter, of ‘securities’ – ‘Wertpapiere’ – as defined in section 2(1) WpHG). Consequently, the applicability of the organisational and conduct-of-business laid down in sections 63 et seq. (in particular: sections 63 and 80–83 WpHG) remains, at best, somewhat unclear. The scope of the relevant categories, which are derived from the corresponding categories of financial instruments listed in Annex I C to the MiFID II, remains very much focused on traditional forms of traded securities on the one hand and derivatives on the other hand, and is narrower than the corresponding definition of the same terms for the purposes of the KWG. Significantly, ‘units of account’ (within the meaning of section 1(11) sentence 1 no.  7 KWG, supra, III.2.a)) are not covered by the definition of ‘finan37  See, for a criminal law case involving financial services related to cryptocurrencies without the required license, e.g., Kammergericht (Regional Court of Appeals) Berlin, 25 September 2018 – Case (4) 161 Ss 28/18 (35/18), reported in ZIP 2018, 2015–2018. 38  See, generally, Binder, ‘Germany’, in: Busch/Van Dam (eds.), A Bank’s Duty of Care (2017), 61. 39  Directive 2014/65/EU of the European Parliament and of the Council of 15 May 2014 on markets in financial instruments […], OJ L 173, 349.

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cial instruments’ laid down in section 2(4) WpHG. While details have been debated controversially, the majority view as to whether cryptocurrencies can be qualified as ‘securities’ or other ‘financial instruments’ for the purposes of the WpHG is, understandably, sceptical.40 While this may be explicable in view of the fact that transactions in cryptocurrencies, to date, appear to occur outside more traditional forms of financial intermediation, the absence of a coherent regulatory framework nonetheless is to be deplored. 4. No statutory prospectus requirements Within Germany, prospectus requirements arise under two separate regimes. For securities, the relevant requirements follow directly from the EU Prospectus Regulation of 2017.41 For a definition of the term ‘securities’ which, pursuant to Article 1(1), delineates the scope ratione materiae, Article 2(a) of that Regulation refers to the definition of the same term in Article 4(1)(44) MiFID II, where ‘transferable securities’ are defined as ‘(…) those classes of securities which are negotiable on the capital market, with the exception of instruments of payment, such as: (a) shares in companies and other securities equivalent to shares in companies, partnerships or other entities, and depositary receipts in respect of shares; (b) bonds or other forms of securitised debt, including depositary receipts in respect of such securities; (c) any other securities giving the right to acquire or sell any such transferable securities or giving rise to a cash settlement determined by reference to transferable securities, currencies, interest rates or yields, commodities or other indices or measures’. Within the German legal literature, it is widely agreed that cryptocurrency token do not fall into either category and that their issuance, consequently, does not trigger a prospectus requirement under Art.  3 of the Prospectus Regulation.42 At the same time, cryptocurrencies do not fall within the definition of relevant other investments that would trigger a prospectus requirement under sec-

40 Cf., e.g., Bialluch-von Allwörden/von Allwörden, WM 2018, 2118, 2123; Klöhn/Par­ hofer/Resas, ZBB 2018, 89 100–103. 41  Regulation (EU) 2017/1129 of the European Parliament and of the Council of 14 June 2017 on the prospectus to be published when securities are offered to the public or admitted to trading on a regulated market […], OJ L 168, 12. 42 Cf., e.g., Bialluch-von Allwörden/von Allwörden, WM 2018, 2118, 2123; Kleinert/ Mayer, EuZW 2019, 857, 860; Rennig, BKR 2020, 23, 26; Spindler, WM 2018, 2109, 2214; Weit­ nauer, BKR 2018, 231, 233.

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tion 6 of the purposes of the Investment Law (‘Vermögensanlagegesetz’, hereafter: ‘VermAnlG’).43 BaFin, which is the competent authority also with regard to the enforcement of prospectus requirements, does not itself treat cryptocurrency token as falling within either prospectus regime.44 Irrespective of the foregoing, it should be noted that, if a prospectus has been published in relation to the issuance of cryptocurrency, the issuer will be liable for misleading or inaccurate information therein under principles of private law. These principles had been developed by case law long before the advent of statutory prospectus requirements on the basis of general provisions on pre-contractual liability in the Civil Code and continue to be applied for prospectuses outside the scope of the statutory regimes.45 5. Cryptocurrencies as E-Money or means of payment for the purposes of payment services regulation? Yet another regime potentially of relevance for the provision of services related to cryptocurrency can be found in the specific framework for the regulation of so-called e-money, as governed by the rules on payment services providers laid down in the ‘Zahlungsdiensteaufsichtsgesetz’ (Law on the Regulation of Payment Services Providers, hereafter ‘ZAG’),46 which transposes the Second EU Payment Services Directive (hereafter: ‘PSD2’).47 Among other things, the law stipulates a specific licensing requirement for providers of payment services (section 10 ZAG) and providers of E-money business (section 11), as defined by section 1(1) and (2) ZAG, respectively, as well as a comprehensive set of prudential (sections 15–18 ZAG) and sector-specific conduct-of-business requirements (sections 45–59 ZAG). While it had been disputed in the past that, at least, Bitcoins could qualify as ‘e-money’ within the meaning of section 1(2) sentence 3 ZAG (transposing Art.  11 PSD2) a limine,48 recent decisions by administrative 43  See, for a list of relevant instruments, section 1(2) VermAnlG. It is generally agreed that crypto-assets do not fall within the scope of the law, see, e.g., Bialluch-von Allwörden/von Allwörden, WM 2018, 2118, 2122–2123; Spindler, WM 2018, 2109, 2214. 44  See BaFin, ‘Merkblatt: Zweites Hinweisschreiben zu Prospekt- und Erlaubnispflichten im Zusammenhang mit der Ausgabe sogenannter Krypto-Token’ (WA 51-Wp 7100-2019/0011; IF 1-AZB 1505-2019/0003) (16 September 2019), available at https://www.bafin.de/Shared Docs/Downloads/DE/Merkblatt/WA/dl_wa_merkblatt_ICOs.pdf?__blob=publication File&v=1. 45  See, for illustration, Landgericht (High Court) Berlin, 27 May 2020 – Case 2 O 322/18, reported in WM 2021, 683, 689–695 (issuer liability for Ether token). 46 Gesetz über die Beaufsichtigung von Zahlungsdiensten (Zahlungsdienste-Aufsichtsgesetz) of 17 July 2017, Bundesgesetzblatt 2017 I, 2446. 47  Directive (EU) 2015/2366 of the European Parliament and of the Council of 25 November 2015 on payment services in the internal market […], OJ L 337, 35. 48  E.g., Spiegel, Blockchain-basiertes virtuelles Geld (2020), 42–45; J. Mimberg, commentary on section 1 ZAG, in: Schäfer/Omlor/Mimberg (eds.), ZAG, para.  219; Terlau, commen-

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courts have upheld the classification of certain cryptocurrencies as e-money and/or the object of payment services falling within the scope of the ZAG by BaFin, the competent authority also under that statute.49 However, in the light of the controversial debate in the academic and judging from the rather special facts of each case, general statements as to the applicability of payment services regulation to issuers of cryptocurrency and providers of related services cannot be made at the present moment in time. 6. Cryptocurrencies and anti-money laundering regulation Anti-money laundering legislation, including measures against the financing of terrorist activities, is laid down in the GWG, which in turn transposes applicable European legislation.50 As noted before (supra, II.2.), crypto-assets have been included in the list of financial assets covered by the GWG, which now also addresses, as a rule, all types of transfers of such assets (section 1(29) and 1(30) GWG). In line with the relevant European requirements, the Act stipulates specific organisational duties, including, in particular, requirements for the exploration of customers’ identity, as well as reporting requirements in case of suspicious transactions, for financial intermediaries, which now extend also to transactions in cryptocurrencies.

IV. Private Law 1. General private law As for all other transactions between private and/or commercial parties under German law, the applicable rules and principles are to be found in the BGB, the Civil Code. As noted before (supra, II.3.), cryptocurrencies have not been expressly addressed in the BGB. To be sure, the Code, transposing two European Directives,51 has been amended lately in order to address transactions in ‘digital products’ (in particular, sections 327–327u and 475a). The relevant provisions tary on section 1 ZAG, in: Casper/Terlau (eds.), ZAG (2nd. ed, 2020), para.  224. See also Kammergericht (Regional Court of Appeals) Berlin, 25 September 2018 – Case 161 Ss 28/18, reported in NJW 2018, 3734, at paras. 18–24. 49  E.g., Hessischer Verwaltungsgerichtshof (Regional Administrative Court of Appeals) Kassel, 13 March 2019 – Case 6 A 2579/18.Z, reported in Juris database; id., 28 February 2020 – Case 6 A 1131/19.Z, reported ibid.; Verwaltungsgericht (Administrative Court of first instance) Frankfurt am Main, 4 November 2011 – Case 7 K 1262/20.F, reported in Juris database. 50  In particular, Directive (EU) 2015/849 of the European Parliament and of the Council of 20 May 2015 on the prevention of the use of the financial system for the purposes of money laundering or terrorist financing […], OJ L 141, 73 (as amended). 51  Directive (EU) 2019/770 of the European Parliament and of the Council of 20 May 2019 on certain aspects concerning contracts for the supply of digital content and digital services,

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have been in force from 1 January 2022. However, ‘digital products’, for these purposes, do not include cryptocurrencies,52 to which the traditional set of provisions governing contracts and property continue to apply. The recognition, in section 327(1), sentence 2 BGB, that ‘digital representations’ of value may be agreed as a price payable in exchange for ‘digital products’ or ‘digital services’ does not itself provide a clear-cut classification of cryptocurrency token for the purposes of contract or property law,53 and, hence, does not itself create legal certainty as to the treatment of relevant transactions. The following subsections describe the position of cryptocurrencies, first, in the law of obligations (infra, IV.1.a)) and, subsequently, the law of property, including, for that matter, the use of cryptocurrency as the object of a pledge (infra, IV.1.b)), trust law (infra, IV.1.c)) and inheritance law (infra, IV.1.d)). a) Law of obligations aa) Acquisition of cryptocurrencies in exchange for legal tender Case example 1: X has 60 Bitcoins registered in his/her wallet. X wants to sell 5 Bitcoins against a legal tender (e.g., Euro, Yen, Dollar). – Is it legally possible, and under what conditions, for X to make such a transaction? – How would such a transaction be classified in your legal system? – W hat difference would it make if X uses an intermediary (e.g., a wallet provider) to hold and transfer the Bitcoins? – Under what conditions would the rules of your or other legal systems apply (please refer to the relevant private international law rules)?

Given the comprehensive nature of the German BGB and its abstract nature, designed for application to an indefinite range of transactions relating to an indefinite range of assets, it may appear odd that the legal treatment of transactions in cryptocurrencies, including the simple acquisition of currency tokens against payment of a Euro-denominated amount of money in the technical sense, would present any problems at all. In addition to a ‘General Part’ (‘Allge­ meiner Teil’) defining abstract principles for all types of obligations, the BGB lays down – to a large extent non-mandatory – specific rules for individual types of contracts (including, for example, sales contracts, barter contracts, contracts for services, or loan contracts), thus providing different ‘menus’ of provisions that would govern the relevant contractual relationships in the absence of specific individual agreements entered into by the parties. Notwithstanding the OJ L 136, 1 and Directive (EU) 2019/771 of the European Parliament and of the Council of 20 May 2019 on certain aspects concerning contracts for the sale of goods […], OJ L 136, 28. 52  Cf. the statutory definition of the term in section 327(2) BGB. 53  While ‘digital representations of value’, which include ‘virtual currencies’ are expressly recognised as a potential ‘price’ payable for the acquisition of digital services or products (section 327(1), sentence 2 BGB), such currencies do not themselves qualify as digital products or, for that matter, services: cf. Directive [EU] 2019/770, Art.  2(7) and Recital 23.

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abstract form of these principles, which, to a large extent, are not designed to govern only transactions in specific asset classes, however, the applicable rules, to a substantial extent, usually are designed in accordance with, and based on, traditional categories of property law. Given the absence of a statutory recognition of crypto-assets generally, and cryptocurrency token in particular, within German property law to date (supra, II.3.b)), the application of established principles of the German law of obligation comes with substantial difficulties,54 which are also present in the classification of the scenario described in the above case example. At first sight, the classification of such transactions as sales contracts within the meaning of sections 433 et seq. BGB would certainly appear to be the most logical approach, a sales contract, pursuant to section 433(1) and (2) BGB, being defined as a contract for the delivery of a good against payment of a sales price. However, by virtue of section 433(1) sentence 1 BGB, sales contracts are contracts for the delivery of a ‘thing’ (‘Sache’) within the meaning of section 90 BGB. As noted before (supra, II.3.b)), crypto token do not fall within the definition of ‘things’ pursuant to section 90 BGB and, hence, section 433 BGB does not apply.55 Against this backdrop, it has been discussed whether the acquisition of cryptocurrency against payment of legal tender could be classified as a barter (‘Tausch­vertrag’) within the meaning of section 480 BGB (which, in turn, refers back to the provisions governing sales contracts, e.g., with regard to the legal consequences of malperformance).56 If and where the acquisition of cryptocurrency is made against payment of legal tender, the classification as a barter would be unconvincing, however, since such contracts are meant to cover the mutual exchange of goods or rights other than money.57 Moreover, some authors have suggested that the acquisition of cryptocurrency against payment of legal tender could, instead, be classified as a contract for services (‘Werkvertrag’) within the meaning of section 631 BGB, the service being the execution of the transfer of the relevant amount of cryptocurrency, which requires authorisation through the blockchain.58 Pursuant to section 631(1) BGB, contracts for services are contracts whereby one party, the ‘contractor’ (‘Unternehmer’), undertakes to create an agreed ‘work’ (i.e., any service) on behalf of the customer, against payment of a fee. Given that the relevant trans54 Cf., for an in-depth doctrinal analysis, Spiegel, Blockchain-basiertes virtuelles Geld (2020), 60–68. 55  Ibid., 61; Beck/König, JZ 2015, 130, 132. 56  See, for an extensive analysis, e.g., Spiegel, Blockchain-basiertes virtuelles Geld (2020), 62–64. And see Engelhardt/Klein, MMR 2014, 355, 359. 57  Spiegel, Blockchain-basiertes virtuelles Geld (2020), 64; Engelhardt/Klein, MMR 2014, 355, 359. 58 Cf., for an extensive discussion, Spiegel, Blockchain-basiertes virtuelles Geld (2020), 64–65; Boehm/Pesch, MMR 2014, 75, 78.

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action focuses on the exchange of cryptocurrency against legal tender, not the mere execution as such, the majority view is, convincingly, that the classification of the transaction as a contract for services does not provide an adequate framework either.59 In the absence of more specific alternatives, the acquisition of cryptocurrency against payment of legal tender would thus qualify as a contract for the ‘sale of rights and other objects’ (other than things within the meaning of section 90 BGB), as defined in section 453(1) BGB. 60 While the acquisition of cryptocurrency does not fall within the standard type of a sales contract (and does not refer to the sale of a ‘right’), the application of section 453 BGB, in the form of a sale of ‘other objects’, nonetheless facilitates the application of sales law and, thus, a consistent treatment of the respective obligations for the purposes of contract law. 61 Against this backdrop, the above case example, under German law, would be treated as a valid and enforceable contract for the ‘sale of another object’ within the meaning of section 453(1) BGB. Within this framework, the involvement of an intermediary would not change the fundamental structure of the contract, or the rights and obligations of the parties thereto, as German contract law, as a rule, distinguishes between the (formation of) the contractual base of an obligation on the one hand and the fulfilment of the respective obligation, i.e., the actual transfer of value, on the other. For cross-border scenarios, in accordance with general conflicts-of-laws principles, German law, in the absence of a valid choice-of-law clause, would apply to such transactions if and where the party required to effect the characteristic performance of the contract, i.e., the delivery of cryptocurrency, has its habitual residence within the country. This follows directly from Art.  4(2) of Regulation (EC) 593/2008,62 while the term ‘habitual residence’ is defined in Art.  19 of that Regulation. 63

59  Spiegel, Blockchain-basiertes virtuelles Geld (2020), 65; Beck/König, JZ 2015, 130, 132; Boehm/Pesch, MMR 2014, 75, 78; 60 See, e.g., Spiegel, Blockchain-basiertes virtuelles Geld (2020), 67–68; Beck/König, JZ 2015, 130, 132–33. 61  E.g., Spiegel, Blockchain-basiertes virtuelles Geld (2020), 69–71; Beck/König, JZ 2015, 130, 132–33; Shmatenko/St. Möllenkam, MMR 2018 , 495, 499. 62  Regulation (EC) no.  593/2008 of the European Parliament and of the Council of 17 June 2008 on the law applicable to contractual obligations (Rome I), OJ L 177, 1. 63  Pursuant to Art.  19(1), ‘[f]or the purposes of this Regulation, the habitual residence of companies and other bodies, corporate or unincorporated, shall be the place of central administration. The habitual residence of a natural person acting in the course of his business activity shall be his principal place of business.’

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bb) Acquisition of cryptocurrency in exchange for another cryptocurrency Case example 2: X has 60 Bitcoins registered in his/her wallet. X wants to sell 5 Bitcoins against 10 Ethers. – Is it legally possible, and under what conditions, for X to make such a transaction? – How would such a transaction be classified in your legal system? – W hat difference would it make if X uses an intermediary (e.g., a wallet provider) to hold and transfer the Bitcoins? – Under what conditions would the rules of your or other legal systems apply (please refer to the relevant private international law rules)?

In order to classify the above transaction, it is important, first, to note that the use of cryptocurrency as consideration in exchange for goods or services is, at best, unsettled under German private law. If the above transaction were to be classified, just as the transaction in case example 1 above (supra, IV.1.a) aa)), as a contract for the ‘sale of another object’, the performance of the party qualifying as the purchaser would have to be classified as the payment of a ‘price’ within the meaning of section 433(2) BGB (in conjunction with section 453(1) BGB). Traditionally, however, section 433(2) BGB is generally construed to the effect that payments for sales can only validly be made in legal tender, and only in cash. Again, traditionally, even the (electronic) transfer of money through a financial intermediary is accepted as performance of the purchaser’s obligation only if the parties have consented, expressly or impliedly, that such transfer shall be accepted in lieu of a payment in cash. 64 As noted before, cryptocurrencies are not accepted as legal tender (supra, II.3.a)). Against this backdrop, it is certainly questionable whether payments agreed to be made in cryptocurrency rather than in legal tender should be treated in the same way as electronic transfers. While this has been discussed for obligations other than the price within sales contracts, where the law merely requires payment of a ‘Vergütung’ (i.e., a consideration in a broader sense), 65 the majority view remains that the same principle cannot be applied to contracts where the purchaser’s obligation refers explicitly to the payment of a ‘price’. 66 It is certainly arguable that this assessment should be reconsidered in view of the recent introduction of section 327(1)(2) to the BGB, which has accepted ‘digital representations of value’ as a potential price for the acquisition of digital products and services and is inconsistent with the received construction of the purchaser’s obligation under section 433(2) BGB. To date, however, the majority view is that, the exchange of a certain amount of token denominated in one 64  ‘Leistung an Erfüllungs Statt’, as defined by section 364(1) BGB. See, e.g., Bundesge­ richts­hof (Federal Supreme Court), 17 March 2004, Case VIII ZR 161/03, reported in ZIP 2004, 1354, at 1355. 65  E.g., Langenbucher/Hoche/Wentz, ‘Virtuelle Währungen’, in: Langenbucher/Bliese­ ner/Spindler (eds.), Bankrechtskommentar (3rd ed., 2020), 782, 787, para.  23; Paulus/Matzke, ‘Smart Contracts und das BGB – Viel Lärm um nichts?’, ZfPW 2018, 431, 450. 66  Ibid. And see, further, e.g., Spindler/Bille, WM 2014, 1357, 1362.

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particular cryptocurrency against another, unlike the acquisition of cryptocurrency against legal tender can only be qualified as a barter contract within German contract law. 67 All the same, as discussed above, section 480 BGB as the sole provision addressing such contracts in the Civil Code merely refers to the law on sales contracts, so that the parties’ rights and obligations effectively follow the same principles as sales. Just as with the acquisition of cryptocurrency against legal tender (supra, IV.1.a) aa)), the parties’ rights and obligations do not change if intermediaries are used to hold and transfer the relevant token. For cross-border barter contracts, the determination of the applicable law is more difficult by comparison with sales contracts, as both parties commit themselves to deliver effectively similar objects of value and, hence, the identification of the ‘characteristic performance’ for the purposes of Art.  4(2) of Regulation (EC) 593/2008 may not be possible merely on the grounds of the respective duties. 68 While case law, in this respect, does not appear to exist, the solution of relevant cases is likely to depend on the circumstances of each particular case. These would be relevant, at least, to determine to which jurisdiction the contract ‘is most closely connected’ within the meaning of Art.  4(4) of Regulation (EC) 593/2008, which applies by default. If, for instance, X, within case example 2, has marketed his or her Bitcoins to a broader public from within Germany, and has then been approached by a purchaser from another jurisdiction, it could be argued that the marketing and selling part of the transaction should be qualified either as the dominating and, hence, ‘characteristic’ performance within the meaning of Art.  4(2), or, at least, as constituting the closest connection to the laws of Germany within the meaning of Art.  4(4) of Regulation (EC) 593/2008. cc) Loan relationships Case example 3: PayB is a company regulated and supervised in its home jurisdiction to provide lending services. Z is a company whose seat is in your legal system. Z intends to borrow 60 Bitcoins from PayB, with an interest rate of 5 % payable either in a legal tender (e.g., Euro, US Dollar, Yen) or in Bitcoins. – Would it be possible, and under what conditions, for PayB and Z to conclude such a contract? How would such contract be characterised in your legal system? Please provide details. – Under what conditions would the relevant rules of your or other legal systems apply (please refer to the relevant private international law rules)? – Please also detail whether, and under what conditions, as per your legal system, the lending services provided by PayB would require a bank licence or other authorisa67  E.g., Westermann, commentary on section 480 BGB, in: F.J. Säcker et al. (eds.), Münche­ ner Kommentar zum Bürgerlichen Gesetzbuch (8th ed., 2019), para.  1. 68  This is usually the case with barter contracts, cf., e.g., Martiny, commentary on Art.  4 Regulation (EC) 593/2008, in: Säcker et al. (eds.), Münchener Kommentar zum Bürgerlichen Gesetzbuch (8th ed., 2021), para.  177.

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tion, and what would be the legal consequences in case of infringement of such requirement.

Just as other aspects relating to the treatment of cryptocurrency under German law, its status in relation to loan contracts remains ill-defined to date. According to section 488(1) BGB, the fundamental provision on traditional loan contracts in the Civil Code, a loan is a contract whereby the lender agrees to pay a certain amount of money to the borrower, whereas the borrower agrees to (a) repay that amount upon maturity and (b) to pay the agreed interest. While it has been argued, convincingly, that the parties can agree to a repayment of value other than money in lieu of a repayment denominated in the original currency, 69 it is, at least, dubious whether the provisions on loans in sections 488–90 BGB can be applied also to contractual relationships relating to the lending of cryptocurrency. While it is generally agreed that a lender, under a loan contract within the meaning of sections 488–90 BGB, can, if so agreed, be obliged to provide a loan not just in cash, but also by electronic transfer or in a foreign currency,70 the classification of ‘loans’ of cryptocurrency as falling within the scope of these provisions has hardly been discussed so far.71 Alternatively, such contracts could, in principle, be classified as a ‘Sachdarlehen’ (loans of things) within the meaning of section 607 BGB – which is dubious as well, given the wording of that provision, which expressly refers to (tangible) ‘things’ within the meaning of section 90 BGB. In principle, the respective scope of both regimes can be distinguished with regard to the economic nature of the relevant object: If the object is to provide the borrower with an abstract value rather than a specific good (or other object of value, e.g., an amount of a specific transferable security, the most important practical example of loans of things within the meaning of section 607 BGB), the contract should be classified as a loan for the purposes of sections 488–90 BGB. In this light, the classification of loans of cryptocurrency as falling within the scope of sections 488–90 BGB clearly is preferable.72 Against this backdrop, notwithstanding the absence of established principles relating to the legal treatment of such loans in German contract law, the transaction referred to in case example 3 above, to the extent that German law is applicable, accordingly should be treated as a valid loan contract under German law.73 German law, in the absence of a valid choice-of-law clause, would apply to such transactions only if the lender, as the party required to effect the char69 

Omlor, JZ 2017, 754, 760. E.g., Binder, commentary on section 488 BGB, in: Beck’scher Online-Großkommentar zum BGB (1 September 2021), para.  207; Berger, commentary on section 488 BGB, in: Säcker et al. (eds.), Münchener Kommentar zum Bürgerlichen Gesetzbuch (8th ed., 2021), para.  29. 71  But see, arguing, rather tentatively, in support of the classification as a loan within the meaning of sections 488–90, Röß, NJW 2021, 3751, 3752–3756. 72 See, e.g., S. Lohsse, commentary on section 607 BGB, in: Beck’scher Online-Großkommentar zum BGB (1 December 2021), para.  8. 73  See, for the same conclusion, also Röß, NJW 2021, 3751, 3752–3756. 70 

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acteristic performance of the contract, has its habitual residence within the country (cf., again, Art.  4(2) of Regulation (EC) 593/2008). As discussed before, parties, according to established principles of the law of loans, are free to agree on alternative denominations for the payment of interest in loan contracts, so that this result would apply irrespective of whether interest has to be paid in legal tender or in cryptocurrency, as the case may be. The question of whether the provision of such loans would require a license under German law is not, in itself, a matter of private law. Generally speaking, the provision of loan contracts (within the meaning of section 488 BGB) at a commercial scale within Germany qualifies as a ‘banking business’ as defined in section 1(1) no.  2 KWG and, consequently, requires a banking license according to section 32(1) KWG (see further supra, III.2.b)). If the relevant intermediary carries out its activities in another EU Member State, and has been duly licensed by that Member State, the intermediary may establish branches within Germany pursuant to sections 24a and 53b KWG or, alternatively, may choose to offer its services within the country subject to notification of BaFin pursuant to section 24a(3) KWG. In such cases, the home-country license effectively serves as a ‘European Passport’ facilitating the free entry into foreign markets, as required by Arts. 35–38 and 39–46 of Directive 2013/13/EU.74 Case example 4: PayB is a regulated company authorised to provide lending services in your legal system. Z is a company whose seat is in your country. Z intends to borrow 60 Bitcoins from PayB, at an interest rate of 5 % payable in Bitcoins. Z pays back in Bitcoin Cash, which are Bitcoin equivalents resulting from a fork in the initial Bitcoin blockchain. – Would it be possible, and under what conditions, for Z to pay back its loan in Bitcoin Cash instead of Bitcoins? – What difference does it make whether or not the fork took place only after the initial transfer of Bitcoin?

In the absence of specific provisions governing transactions in cryptocurrencies in the German Civil code, the acceptability of repayments in token denominated in cryptocurrency other than the original cryptocurrency provided to the borrower, according to general principles of contract law, would depend on the parties’ agreement. If no express agreement to that effect has been made, the agreement has to be construed according to sections 133, 157 BGB. Applying these provisions to the agreement at hand, it has to be asked whether the agreement, judging from the perspective of an objective observer in the parties’ position, would have covered the substitution of the original amount by an alternative. As the alternative – in case example 4 above: Bitcoin Cash – may develop in value independently from the original denomination, German courts would not 74  Directive 2013/36/EU of the European Parliament and of the Council of 26 June 2013 on access to the activity of credit institutions and the prudential supervision of credit institutions and investment firms […], OJ L 176, 338.

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normally presume that this would have been intended, unless there are reasons to assume, in the light of the circumstances of each individual case, that the parties have treated both denominations as equivalent for the purposes of their arrangements. Even if this is not the case, the lender may still accept repayment in another denomination in lieu of the original obligation (‘Leistung an Erfül­ lungs Statt’, section 364(1) BGB). These principles would apply irrespective of whether or not the fork took place before or after the initial transfer. dd) Donation of cryptocurrency; cryptocurrency admissible as consideration Donations are possible according to sections 516, 518 BGB, which also apply with regard to ‘other objects of value’ within the meaning of section 453(1) BGB.75 As a rule, a donation is only valid and enforceable if the contract has been made before, and documented by, a notary public (section 518(1) in conjunction with section 125 BGB). If, however, the donor has completed the transfer, the contract will be valid even if not so documented pursuant to section 518(2) BGB. German law would apply to the transaction pursuant to Art.  4(4) of Regulation (EC) 593/2008 (as to which, see supra, IV.1.a)) if the donor has his/ her habitual residence within the country. Importantly, German law distinguishes between the donation as such, which provides the legal basis for the transfer, and the transfer as such, just as it distinguishes between the sale of a thing and the actual delivery of the object. On the acceptability of cryptocurrency as consideration, see supra, IV.1.a) aa). ee) Compensation for loss of cryptocurrency due to tortious behaviour Case example 5: X opened an account with MontC and has 60 Bitcoins registered in his/ her wallet. MontC’s IT systems have been hacked. As a result, X lost all his/her Bitcoins. 1. Can X, and under which conditions, bring an action against MontC? 2. Can X, and under which conditions, bring an action against the hacker (if he/she is identified)? 3. What would be the case if X transferred the Bitcoin to the tortfeasor after being misled?

Under German law, cases like the foregoing would be governed by a combination of general principles of contract and of tort law. As far as X’s position visà-vis MontC is concerned, the relevant action would be for damages arising out of a breach of MontC’s obligation to ensure the safekeeping of X’s wallet. While the private-law dimension of Kryptoverwahrgeschäfte (within the meaning of section 1(1a) sentence 2, no.  11 KWG, see supra, II.2.a)) remains ill-defined,76 75  E.g., Harke, commentary on section 516 BGB, in: Beck’scher Online-Großkommentar zum BGB (1 October 2021), para.  18. 76  It is worth noting, in this context, that there is, to date, no specific legal basis governing

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and case law does not appear to exist, X, according to general principles, could be entitled to damages pursuant to section 280(1) BGB if and to the extent that he or she can establish to the satisfaction of the court that MontC has failed to apply reasonable protections against violation of its IT systems and that, as a consequence, X has lost his/her Bitcoins stored in the wallet. By contrast, the hacker (if identified) could be liable in damages under general provisions of tort law. While it is unclear whether tort law, given the virtual nature of cryptocurrencies, would be protected under the general provision of section 823(1) BGB, which protects only a selected range of rights,77 claims for damages could be based on section 826 BGB, which provides the basis for damages for loss caused by intentional unlawful actions. Moreover, claims could be based on section 823(2) BGB in conjunction with section 303a of the Criminal Code (‘Strafgesetzbuch’, hereafter ‘StGB’), which protect the integrity of private data. If X transferred Bitcoin after having been misled, the tortfeasor would be liable in damages by virtue of section 823(2) BGB in conjunction with section 263 StGB, which penalises fraud. b) Law of property aa) Ownership and transfer of cryptocurrency Case example 6: X has 60 Bitcoins registered in his/her wallet. – Has X legal ownership over the 60 Bitcoins in his/her wallet? Please provide details. Case example 7: X opened an account with MontC and has 60 Bitcoins registered in his/ her wallet. – Has MontC any ownership rights over the 60 Bitcoins registered in X’s wallet?

As a direct consequence of the uncertain legal nature of cryptocurrencies in German private law (supra, II.3.b)), the treatment of crypto token for the purposes of property law in general and the legal classifications of the transfer of ownership therein in particular remain largely unsettled to date. As noted before, such token neither qualify as ‘things’ (within the meaning of section 90 BGB) nor as ‘rights’, which, as such,78 have not been defined by the Code. As defined by section 903 BGB, the concept of ownership, in a technical sense, liability of a wallet provider for a client’s loss of tokens stored in a wallet. This is in contrast to the situation with regard to unauthorised transactions carried out by a payment services provider (cf. sections 675u and 675v BGB). This situation is about to change because of Art.  67(8) of the draft MiCAR, which provides for a wallet provider’s liability for the loss of crypto-assets resulting from a malfunction or hacks. 77 See, for further discussion, e.g., Spiegel, Blockchain-basiertes virtuelles Geld (2020), 112–15; Shmatenko/St. Möllenkamp, MMR 2018, 495, 498 (both arguing for recognition of cryptocurrencies as a right protected by section 823(1) BGB). 78  Unlike ‘claims’, which are defined by a right of one party to demand another party to perform, cf. section 194(1) BGB.

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applies only to tangible objects (i.e., ‘things’ within the meaning of section 90 BGB).79 ‘Rights’ cannot be owned in that technical sense, while the entitlement of the holder of the right has not been defined as such in the Code. Against this backdrop, in case example 6, X’s position relating to the Bitcoins registered in his/her wallet, under German law, cannot be qualified as ‘ownership’ in a technical sense. Rather, the position would be perceived as reflecting a claim, namely, as X’s contractual right against the wallet provider to release the Bitcoin or to transfer them on X’s order to an acquirer. For the same reason, MontC’s position to the Bitcoin in case example 7 above cannot be qualified as legal ‘ownership’ in a technical sense. This fundamental doctrinal problem directly translates into substantial difficulties in terms of the qualification of transfers of cryptocurrency. While ‘claims’, under the Civil Code, can be the object of an assignment between parties (‘Abtretung’, sections 398–412 BGB), the legal title in movable ‘things’ is transferred in accordance with sections 929–31 BGB, while the legal title in real estate follows a specific regime defined by sections 873, 925 BGB. In addition, section 413 BGB provides for the applicability of the law on assignments in relation to rights other than claims. Given that cryptocurrency token qualify as neither ‘rights’ nor ‘things’, it is rather obvious that neither regime can be applied directly. Against this backdrop, a number of authors have argued that the transfer of cryptocurrency should be interpreted by way of an analogy to one of these different statutory means.80 The majority view appears to be that, as (a) transfers of cryptocurrencies require the confirmation of the blockchain and thus follow a different pattern than the typical bilateral relationship characteristic of any of the above statutory models and (b) the ‘ownership’ of cryptocurrency differs from traditional concepts of exclusive rights of ownership, neither category provides a suitable explanation and that, consequently, transfers of cryptocurrency should be treated as a de facto shift of legal entitlement based on the parties’ actions (‘Realakt’).81 Given that neither of the existing statutory modes of transfer actually matches the specific characteristics of transactions in cryptocurrency, this is certainly convincing. It should be noted, however, that both 79 

Cf. the wording of that provision, which refers expressly to the ‘owner of a thing’. E.g., Spiegel, Blockchain-basiertes virtuelles Geld (2020), 102–106; Koch, ZBB 2018, 359, 362–363 (arguing in support of the application of sections 929–31 BGB by analogy). And see (arguing, unconvincingly, in support of the application of sections 873, 925 BGB [on the transfer of real estate]) Ammann, CR 2018, 379, 382–383. See also, for a comprehensive critique of received approaches and a redefinition of transactions, Arndt, Bitcoin-Eigentum (2021). 81 See, e.g., Langenbucher/Hoche/Wentz, ‘Virtuelle Währungen’, in: Langenbucher/ Bliesener/Spindler (eds.), Bankrechtskommentar (3rd ed., 2020), 782, 792, para.  39; Beck/ König, JZ 2015, 130, 131; Kaulartz/Matzke, NJW 2018, 3278, 3280; Omlor, ZHR 183 (2019), 294, at 327–329. But see, arguing in support of the application of section 413 in conjunction with sections 398 et seq. BGB, Skauradszun, AcP 221 (2021), 353, 376–379. 80 

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the absence of a satisfactory definition of the legal nature of an ‘owner’s’ entitlement and the resulting difficulty to classify transactions in cryptocurrency merely highlight the inadequacies of the German law of property as it currently stands. In a nutshell, both the holding and the transfer of cryptocurrency are not addressed by the current Civil Code in a manner that would afford interested parties a degree of legal certainty at least comparable to that traditionally available to the owners of tangible property and their counterparties in related transactions. bb) Pledges Case example 8: Z is a company whose seat is in your legal system. To secure a loan for the financing of a specific project, Z has agreed to pledge 30 Bitcoins that are registered in its wallet. – Would it be possible, and under what conditions, for Z to make such pledge? Is there one or more ways of pledge? What would change if the wallet is kept with an intermediary? – Under what conditions would the relevant rules of your or other legal systems apply (please refer to the relevant private international law rules)?

Pledges, under German law, are addressed by two distinct regimes: one for pledges relating to ‘things’ (sections 1204–59 BGB) and another for pledges relating to claims (sections 1273–96 BGB). Moreover, as neither regime fully satisfies practical needs, standard legal practice, over time, has developed alternatives to the statutory regimes, whereby the pledgor, for the duration of the contract, provides the pledgee with the full title in the relevant object of value, and both parties agree that the title will be returned if and when the secured claim is repaid. Depending on the nature of the relevant object of value, the transfer will take either the form of an assignment within the meaning of sections 398–412 BGB (in the case of claims as security, known as ‘Sicherungszession’) or of a full transfer of ownership of a thing as defined by sections 929–31 BGB (in the case of a ‘thing’, known as ‘Sicherungsübereignung’). Within this framework, the feasibility of pledges relating to cryptocurrency faces the same difficulties of classification that have been discussed above with regard to other aspects: As cryptocurrency is neither a tangible ‘thing’ within the meaning of section 90 BGB nor a ‘claim’ that could be assigned (see, again, supra, II.3.b) and IV.1.b) a)), it can be pledged neither according to the statutory frameworks defined in sections 1204–59 BGB or 1273–96 BGB, nor under the alternatives thereto developed in legal practice, since these also make use of the respective statutory frameworks developed for the transfer of property. In a legal environment defined by the principle of freedom of contract, this result is certainly unsatisfactory. In principle, however, it is perfectly conceivable that cryptocurrency can be transferred, subject to conditions similar to those developed for ‘Sicherungszessionen’ or ‘Sicherungsübereignungen’, under

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a functional equivalent of a pledge in property law, and there is nothing to suggest that such an agreement, while certainly not yet common and not as clearly defined as the traditional models, would not be recognised by the courts as valid and enforceable. Such arrangements, however, will, in all likelihood, be treated merely as creating binding obligations between the parties, and will lack the protection in property law that would be associated with the traditional categories of general property law. As a result, their status in the insolvency of a debtor is, at best, uncertain. Given that traditional categories of property law (‘rights’, or ‘things’ eligible for ‘ownership’ in the technical sense) do not apply, it would certainly be difficult to justify the application of the general principles of security rights and their protection in insolvency in such settings. c) Inheritance law Under German law, upon the death of a natural person, that person is ipso iure succeeded by his/her heir(s) in relation to the legal title in the entire estate pursuant to sections 1922(1) BGB. In the absence of any more specific rules in the Code that would be of relevance to the ownership of ‘virtual’ property, the same principle also applies in the case of cryptocurrency held by the deceased, so that his/her heir(s) inherit a portfolio of cryptocurrency just as any other asset (or liability) of the deceased. In technical terms, two scenarios have to be distinguished: If the deceased has access to his/her portfolio through a tangible electronic storage device, e.g., in the case of a wallet stored on his/her personal computer, or a private key stored on an USB storage device, the relevant data, as such, are part of his/her estate and, upon his/her death, are transferred to the heir(s) ipso iure. 82 If, by contrast, the relevant cryptocurrency are stored online in a wallet operated by an intermediary, the heir(s) succeed the deceased in his/her claims against the provider.83 d) Trust The concept of a trust, as recognised by Common Law jurisdictions, does not, as such, exist in German private law. Technically speaking, it is therefore not possible to create a trust in relation to crypto-assets under German law. As a matter of principle, however, it is possible to hold legal title in relation to property on behalf of another party in a fiduciary capacity, whereby the fiduciary agrees to exercise his/her rights as a full owner only in such ways as directed by, or in the interest of, the beneficiary. It is generally agreed that relationships thus structured, known as ‘Vollrechtstreuhand’, constitute a functional equivalent to 82  83 

E.g., Amend-Traut/Hergenröder, ZEV 2019, 113, 117; Medler, ZEV 2020, 262, 264. Medler, ibid.

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trusts established in Common Law and offer a similar protection for the legal position of the beneficiary, e.g., in the insolvency of the fiduciary, 84 resulting, effectively, in a specific form of ownership where the exercise of the corresponding rights is restricted in the interest of a person other than the owner. Whether or not a ‘Vollrechtstreuhand’ with identical or similar characteristics would be recognised in relation to cryptocurrency is far from settled, however. Given that the regular means of legal transfer of title do not apply with regard to crypto-assets (supra, IV.1.b) aa)), the doctrinal basis for the structure of such relationships would have to be adjusted substantially. While it is certainly conceivable to structure the relationship between a ‘beneficiary’ and the ‘fiduciary’ in a way that binds the latter, the relationship would be dominated by the corresponding obligations, while the recognition of the arrangement for the purposes of property law would be less clear. Case law in this respect does not appear to exist. Just as with regard to other aspects, the residual difficulties relating to the classification of crypto-assets for the purposes of general property law translate into a substantial degree of legal uncertainty also in this regard. 2. Procedural aspects a) Enforcement of titles Case example 9: X has 60 Bitcoins registered in his/her wallet. A creditor of X wants to assert a claim to the Bitcoin to satisfy X’s debt.

The enforcement of titles against debtors, including the seizure of objects of value owned by the debtor, is governed by Book 8, on ‘Compulsory enforcement’, of the Code of Civil Procedure (‘Zivilprozessordnung’, hereafter: ‘ZPO’). Following general procedural provisions applicable to all enforcement proceedings in Chapter 1 (sections 704–802 ZPO), the Code then lays down special provisions, inter alia, for the ‘enforcement of monetary claims’ (i.e., claims for the payment of a certain amount of money, see Chapter 2, sections 802a-63 ZPO), which would apply also to the sort of claim relevant for case example 9 above. Importantly, the applicable provisions within this chapter then distinguish between enforcement directed against different categories of object of value, such as ‘physical objects’ (sections 808–27 ZPO) on the one hand and ‘claims and other property rights’ (sections 828–63) on the other hand. 85 In order for enforcement actions to be initiated, the relevant creditor must meet a number of general requirements applicable to all enforcement proceedings, as 84  E.g. Oberlandesgericht Celle, 27.10.2010 – Case 3 U 84/10, reported in BeckRS (database) 29670; C. Wendehorst, commentary on Art.  43 EGBGB, in: J. Säcker et al. (eds.), Münchener Kommentar zum Bürgerlichen Gesetzbuch, 8th ed., 2021, para.  49. 85  In terms of the applicable terminology, this subsection follows the inofficial translation of the Code available at https://www.gesetze-im-internet.de/englisch_zpo/englisch_zpo. html#p2536.

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summarised in section 750(1) ZPO, namely: an enforceable legal title (e.g., a judgment by a court), a formal certificate of enforceability (‘Vollstreckungs­ klausel’) and, finally, a formal service of that title against the debtor. With regard to the specific requirements laid down in sections 808–27 and 828–63 ZPO, respectively, the Code follows effectively the categorisation of objects of value characteristic of the Civil Code. In consequence, the difficulties to classify the entitlement of a holder of cryptocurrency within the traditional framework of German property law diagnosed above (supra, IV.1.b)) reappear also within the procedural realm. Given that cryptocurrency tokens, for reasons discussed before, cannot be classified as ‘claims’ for the purposes of German law (supra, II.3.b)), the corresponding provisions for enforcement actions directed against ‘claims’ (sections 828–56 ZPO) do not apply directly.86 Likewise, the regime applicable to the enforcement against ‘physical objects’ (sections 808–27 ZPO) does not fit the purpose, as the relevant provisions are tailored to the need to obtain physical possession of the relevant objects. 87 According to the majority view in the academic literature, section 857 ZPO, which provides for a modified application of sections 853–55 ZPO to enforcement actions against ‘other property rights’ cannot be applied either, as that provision, according to prevailing opinion, applies only in relation to such objects of value which are recognised as ‘rights’ in general property law.88 Against this backdrop, it has been discussed whether either the provisions on enforcement actions directed against ‘physical objects’89 or those governing enforcement actions against ‘other property rights’90 could – and should – be applied by analogy. Given, on the one hand, the structural differences between virtual currency and tangible objects (which sit somewhat squarely with the provisions on the seizure of tangible objects) and, on the other hand, the structural proximity with other objects of value covered by section 857 ZPO, the latter approach is certainly commendable. It should be noted, however, that the usual result of an enforcement action under that provision, i.e., the legal attachment (known as ‘Pfändungspfandrecht’), would not be feasible in relation to cryptocurrency, because, again, such attachment, according to prevailing principles of procedural law, can only arise with regard to recognised ‘things’ or ‘rights’. As a result, owing, again, to the unspecified status of cryptocurrency in 86  E.g., Boehm/Pesch, MMR 2014, 75, 78; Effer-Uhe, ZZP (2018) 131, 513, 517; Kütük/ Sorge, MMR 2014, 643, 644. 87  E.g., Spiegel, Blockchain-basiertes virtuelles Geld (2020), 117–18; Badstuber, DGVZ 2019, 246, 250; Boehm/Pesch, MMR 2014, 75, 78; Effer-Uhe, ZZP 131 (2018), 513, 517; Kütük/ Sorge, MMR 2014, 643, 644. 88  E.g., Spiegel, Blockchain-basiertes virtuelles Geld (2020), 118; Badstuber, DGVZ 2019, 246, 250; Kütük/Sorge, MMR 2014 , 643, 644–645. 89 See, e.g., Spiegel, Blockchain-basiertes virtuelles Geld (2020), 118–119. 90 See, e.g., Badstuber, DGVZ 2019, 246, 250–251; Effer-Uhe, ZZP 131 (2018), 513, 524– 526.

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general property law, the standard consequences of an enforcement, which safeguard the creditor’s right to realise the value of the seized property, cannot arise in the same way with regard to cryptocurrency.91 As a consequence, even if an enforcement directed against (a portfolio of) cryptocurrency token is, in principle, both imaginable and feasible within the framework established by section 857 ZPO, the practical use for the creditor would thus be limited. Specifically, neither regime provides for means for the creditor (or, for that matter, the bailiff carrying out the enforcement) to obtain the relevant keys (public and private) which would be required to realise the value of the tokens at issue.92 It should be noted that the situation would be different if the relevant crypto keys are held within an (online) wallet provided by an intermediary. In this case, as noted elsewhere (supra, IV.1.c)), the ‘owner’s’ position would be characterised by a claim against the intermediary which, as such, would fall directly within the scope of section 857 ZPO. In summarising the foregoing, the position of cryptocurrency in the German law framework for the enforcement of ‘monetary claims’ can best be described as uncertain.93 While the initiation of enforcement actions directed against cryptocurrency token is at least conceivable within the received framework, the legal and, hence, the economic consequences of such actions for creditors fall short of those for similar actions directed against traditional categories of property law. Just as diagnosed before with regard to the position of cryptocurrencies in inheritance law (supra, 4.1.3.), or with regard to pledges (supra, 4.1.1.2.), their uncertain status in property law translates directly into substantial difficulties of classification for the purposes of other areas of substantive or procedural law which, as the procedural framework for the enforcement of claims, effectively build on received categories of property law and are tailored to cater for their respective characteristics. The resulting uncertainty, again: just as diagnosed before, substantially weakens the legal and economic position not just of the ‘owner’ of crypto tokens, but also of other interested parties. b) Insolvency law Case example 10: X opened an account with MontC and has 60 Bitcoins registered in his/her account. MontC becomes insolvent. – Can X, and under what conditions, bring a claim in the insolvency procedure in respect of his/her 60 Bitcoins? 91 

See, for further discussion, Effer-Uhe, ZZP 131 (2018), 513, 524–525. See, for further discussion, ibid., 525–526. 93  It should be noted, in this context, that the situation would be different if a party (e.g., a purchaser of Bitcoin or other crypto token) seeks to enforce a claim for the delivery of cryptocurrency against another party (e.g., the seller). In this case, the enforcement action would be governed by the framework for the enforcement of specific actions, in particular: sections 887 and 888 ZPO (see Oberlandesgericht [Regional Court of Appeals] Düsseldorf, 19 January 2021 – Case 7 W 44/20, reported in ZIP 2021, 2120–21). 92 

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– How would the claim of X be classified (proprietary, personal, or other) in the insolvency procedure? Could X claim the return of the deposited Bitcoin or only their value in cash? – What relevance would the specific terms of the agreement between X and MontC have in relation to X’s claim?

Just as within the procedural framework for executions of judgments (supra, 4.2.1.), there are currently no specific provisions governing the treatment of cryptocurrencies in the insolvency of the ‘owner’ or, indeed, the insolvency of an intermediary under German insolvency law. In principle, German law does not distinguish between the insolvency of individuals and corporations and applies in the same way also to licensed financial intermediaries, for which no distinct (administrative or court-based) insolvency regime exists. While BaFin, in its capacity as both supervisory and resolution authority, retains a set of specific administrative powers in relation to insolvent licensed intermediaries, these amount merely to a pre-liquidation administration during which the intermediary’s assets are frozen, before the authority then has to apply for the initiation of formal insolvency proceedings under general insolvency law. Hereafter, the firm will then be liquidated by a private-sector insolvency liquidator (‘Insolvenzverwalter’) under the auspices of the general insolvency court.94 Against this backdrop, for both scenarios, cryptocurrency token (potentially) affected by the insolvency thus have to be treated in accordance with general principles of insolvency as set down in the Insolvency Code (‘Insolvenzord­ nung’, hereafter: ‘InsO’). Under the Code, the treatment of claims against the insolvent estate generally depends on the nature of the claim in question. As a rule, in rem claims related to assets held by the insolvent debtor but owned by a third party will be enforceable irrespective of the initiation of insolvency proceedings by virtue of section 47 InsO. The scope of that right is restricted to rights in rem or in per­ sonam rights of a similar standing in insolvency. Creditors secured by mortgages, pledges or similar rights in the debtor’s assets will, instead, receive a preferential payment out of the proceeds of the liquidation of the relevant assets, but not the assets themselves, as stipulated by sections 49–52 InsO (‘abgesonderte Befriedigung’). However, none of these alternatives applies with regard to claims against intermediaries offering safekeeping accounts for cryptocurrency, since these, as discussed above (supra, 2.3.2. and 4.1.2.2., respectively), do not qualify as objects which could be ‘owned’ in a legal sense and do not qualify as objects of a

94  See, for details, sections 46a and 46b KWG and section 79 WpIG. For a detailed description of the interplay between supervisory law and insolvency in the case of licensed credit institutions, see J.-H. Binder, ‘Insolvenzbewältigung bei nicht systemrelevanten Banken’, in: Glos/Riepe (eds.), Handbuch Bankenaufsichtsrecht (2nd ed., 2020), Ch. 17.

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pledge.95 As the relationship between the investor and the intermediary – in case example 10 above, X and MontC – can only be qualified as giving rights to an obligation, the only option for the investor is to assert a claim for damages caused by the unavailability of his/her Bitcoin against the insolvent estate, which would rank pari passu with all other unsecured claims and, hence, be satisfied only pro rata out of the proceeds of the liquidation. In this regard, the terms of the contract between X and MontC would be entirely irrelevant. Specifically, as it would be doctrinally impossible to create full ownership in law of the relevant crypto token, the concept of ‘ownership’ being restricted to tangible property under German law (supra, 4.1.2.1.), the contractual terms could not put X in a position which would merit the application of section 47 InsO. Case example 11: Z is a company which opened an account with MontC as it accepts payments in Bitcoin and other cryptocurrencies. Z’s wallet is worth US$200.000 in different cryptocurrencies. Z becomes insolvent. – How would Z’s account be dealt with in the insolvency proceedings? Could some creditors claim priority over the cryptocurrencies registered in Z’s account? – What relevance would the specific terms of the agreement between Z and MontC have in relation to the creditors’ claims?

In principle, the treatment of cryptocurrency portfolios in the investor’s insolvency would follow the general principles governing the composition and, indeed, the liquidation of the insolvent estate, as well as the distribution of the proceeds among the unsecured creditors. The insolvency estate, and thus the scope of the insolvency proceedings in terms of assets covered by the procedure, is defined in sections 35 and 36 of the Insolvency Act, and encompasses, as a rule, all assets of the debtor (section 35(1) InsO). Only assets which cannot be seized by way of an enforcement subject to exemptions in procedural law are excluded (section 36(1) InsO). As ‘other objects of value’, cryptocurrency token ‘owned’ by the debtor will generally be considered part of the insolvent estate, irrespective of the difficulties of classification for the purposes of general property law.96 As established forms of security rights cannot be created over crypto-assets (supra, 4.1.2.2.), insolvency courts, for the time being, are not likely to recognise the priority of some (‘secured’) creditors over cryptocurrencies registered in the debtor’s account. None of these principles would be contingent on the specific terms of the agreement between the debtor (‘Z’) and the wallet provider (‘MontC’). Even though, in principle, cryptocurrencies are thus covered by the general procedural framework for the liquidation of the insolvent estate, it should be noted that the actual realisation of their value for the benefit of the creditors as 95 See,

e.g., Badstuber, DGVZ 2019, 246, 253; Kütük/Sorge, MMR 2014, 643, 645. E.g., Badstuber, DGVZ 2019, 246, 253; Effer-Uhe, ZZP 131 (2018), 513, 530; Kütük/ Sorge, MMR 2014, 643, 645; Schmittmann/Schmidt, DZWir, 2021, 648, 649; Skauradszun, ZIP 2022, 2610, 2611–2613. 96 

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a whole would meet practical difficulties. In order to get access to the account, and to be able to sell the crypto-assets registered therein, the insolvency liquidator would have to obtain the relevant keys from the debtor. However, unlike the uncertain position in the enforcement process in this regard (supra, 4.2.1.), the insolvency liquidator can make use of his general powers to request information from the debtor also in this regard, which should facilitate the effective seizure in the process.97 3. Taxation There are currently no specific provisions in German tax law addressing the taxation of cryptocurrencies. Upon completion of the present manuscript, the taxation of activities related to cryptocurrencies has been discussed mainly with regard to the treatment of gains generated out of transactions in such assets for the purposes of income tax. Specifically, the applicability of income taxation, in the absence of more specific provisions, rests on the classification of cryptocurrencies as ‘other economic assets’ (‘anderes Wirtschaftsgut’) as defined by section 23(1) sentence 1 no.  2 of the Law on Income Tax (‘Einkommen­ steuergesetz’, ‘EStG’). In view of a number of dissenting decisions by first-instance fiscal courts in this regard,98 the issue is currently under appeal before the Bundesfinanzhof, the Federal Fiscal Court.99 In May 2022, the Federal Ministry of Finance has meanwhile clarified its position regarding the taxation of virtual currencies.100 Significantly, the unresolved question of how relevant transactions should be treated for the purposes of income taxation can be attributed, again, to the uncertainties diagnosed above with regard to the position of cryptocurrencies under general property law, as the taxation of assets and transactions generally reflects the private law treatment of objects of value.

97  See section 97(1) and (2) InsO and, for further discussion of potential scenarios in this regard, d’Avoine/Hamacher, ZIP 2022, 6, 10–12; Skauradszun, ZIP 2022, 2610, 2615–2616. 98 Contrast, e.g., supporting the application, Finanzgericht (Fiscal Court) Berlin-Brandenburg, 20 June 2019 – Case 13 V 13100/19, reported in BB 2020, 176 and Finanzgericht Baden-Württemberg, 11 June 2021 – Case 5 K 1997/19, reported in BB 2021, 2977, with Fi­ nanz­gericht Nuremberg, 8 April 2020 – Case 3 V 1239/19, reported in DStR 2020, 1243 (expressing doubts in a summary judgment). 99  Bundesfinanzhof, Case IX R 27/21 (pending). See, for further discussion, e.g., Andres, DStR 2021, 1630; Gessner, BB 2022, 1367; Henningfeld, DB 2022, 1037; Schroen, BetriebsBerater 2020, 2133, 2199 and 2263; Moritz/Strohm, DB 2018, 3012. 100  Bundesministerium der Finanzen, ‘Einzelfragen zur ertragssteuerrechtlichen Behandlung von virtuellen Währungen und von sonstigen Token’ (10 May 2022), reported in Bundessteuerblatt I 2022, p. 668.

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V. Current litigation and arbitration cases In the absence of a central register for pending cases before German courts, it is impossible to provide a comprehensive account of relevant pending cases for present purposes. Other than the federal courts, courts generally do not report pending litigation either, so that it is impossible to collect relevant information from decentral sources. Upon completion of the present manuscript, the author is unaware of any major litigation that would have been reported in other sources, e.g., public media, with the exception of the pending appeal on the classification of cryptocurrencies for the purposes of income taxation referred to supra, 4.3. As far as the recognition of foreign arbitration awards is concerned, despite the difficulties concerning the treatment of cryptocurrencies in various areas of substantive and procedural German law discussed before, there is nothing to suggest that such recognition would be denied on the grounds of public policy concerns, as it is obvious from the foregoing that transactions in cryptocurrencies would not be treated as illegal or conflicting with public policy under German law.

VI. Conclusions In summarising the findings developed above, the treatment of cryptocurrencies in German law, as noted from the start, can best be described as a moving target. As far as the current state of affairs in private law (and, consequently, civil procedure) is concerned, the degree of legal uncertainty, in the absence of specific provisions governing the treatment of such assets for the purposes of property law is remarkable. In this regard, the German Civil Code is illustrative of both the strengths and the weaknesses of a traditional private law codification, which combines abstract principles for application to an unspecified range of objects of value and transactions therein, with more detailed menus for specific types of transactions, in the light of technological developments, which transcend traditional categories. In general, it is particularly the statutory law of obligations that proves sufficiently flexible for adaptation also to virtual assets. It is, in fact, certainly possible to apply general principles of contract law as well as the BGB rules governing specific types of contracts (e.g., sales or loan contracts). However, the absence of a reliable basis for the classification of crypto-assets generally for the purposes of property law comes with wide, and drastic, ramifications that substantially weaken the position of both investors and other interested parties by comparison with owners of tangible property or other recognised rights. As a result, both the legal treatment of transactions related to cryptocurrencies and the treatment of crypto-assets for the purposes of

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areas of substantive law, such as security interests and inheritance law, and procedural aspects, including the enforcement of titles and insolvency law, remain ill-defined and leave relevant parties with a high degree of legal uncertainty – which inevitably also affects the economic value of such assets to the extent that the relevant position is governed by German law. By comparison, the development of the regulatory framework for services related to cryptocurrencies – attributable, to a large extent, to incoming EU legislation – is considerably more advanced. Notably, the introduction of the first statutory definition of ‘virtual currencies’ in the German Banking Act has paved the way for a transparent and predictable application of most existing regulatory frameworks to providers of relevant services. Even in this regard, however, the current state of affairs cannot yet be described as providing a fully comprehensive and consistent framework comparable to the situation with regard to traditional forms (and objects) of financial services. As noted before, residual deficiencies exist, in particular, with regard to the inapplicability of statutory prospectus regimes, to the uncertain classification of cryptocurrencies for the purposes of payment services, and the absence of conduct-of-business rules governing the interactions between intermediaries and investors. Nonetheless, it is certainly conceivable that the statutory recognition of cryptocurrencies, and, in particular, the introduction of a statutory definition of such assets, in the area of financial law could, over time, reinforce claims for the legislator to follow suit by corresponding adjustments also to the Civil Code. As discussed, the need for a statutory definition that would clarify the treatment in property law, as well as a bespoke regime for the classification of transactions in crypto-assets that would facilitate also a transparent and reliable treatment across other areas of substantive and procedural law, is particularly pressing. Upon completion of the present manuscript, however, the dynamic evolution of the regulatory framework in recent years has yet to disseminate into the area of general private law.

Legal Perspectives on the Streaming Industry Christina Möllnitz

I. Introduction The legal streaming industry in Germany is developing rapidly and with steady growth. While the revenue of Germany’s largest video streaming platforms was EUR 715 million in 2017, it already reached around EUR 1.9 billion in 2021 with a forecast revenue of EUR 3.15 billion in 2026; almost one in three Germans regularly uses video streaming platforms.1 Nevertheless, illegal streaming is putting the industry under increasing pressure. Especially at the time of the Covid19-pandemic lockdown in Germany in March 2020, access to illegal streaming platforms increased by almost 36 %.2 German law is currently in a state of flux to offer the streaming industry a legally secure framework and counter the dangers of illegal streaming. Especially regarding the regulation of content sharing platforms, it is also significantly influenced by European legislation. This has led to considerable fragmentation of rules across different bodies of law, some of which are applicable alongside each other.3

II. General Information and Applicable Law 1. Different Forms of Streaming and the affected Copyrights There is neither a legal definition of streaming nor a uniform, self-contained set of regulations governing streaming in German law. The term “streaming” does not currently exist as a legal concept. Instead, the respective technical process must be subsumed separately under the legal terms of the individual laws. Therefore, the use of the word “streaming” can be misleading since it covers a variety of technical processes that differ quite fundamentally in their legal (especially copyright) assessment in common usage. Nevertheless, all primary 1 https://de.statista.com/outlook/dmo/digitale-medien/video-on-demand/video-stream ing-svod/deutschland#umsatz (30.03.2022). 2 https://www.muso.com/magazine/film-tv-piracy-surge-during-covid-19-lockdown (30.03.2022). 3  Cf. sub. II.3.

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forms of streaming have in common that digitized works are transmitted via the Internet.4 In the first form – live streaming – audio and video data are transmitted to all users simultaneously.5 This often involves broadcasting events such as major sporting events or concerts. The data is not permanently stored on the user’s terminal device, so the original copyright protection is significantly minimized. The unauthorized retransmission of a broadcaster’s TV signal through a live stream alone constitutes an infringement of the broadcasting right according to Sec. 20, 87 (1) No.  1 Copyright Act, so that the prior consent of the rights holder is required. 6 In Germany, this is particularly relevant in the case of significant sporting events that are not broadcast on free TV but only on private pay TV. In the case of on-demand streaming, users initiate the download themselves, and no complete independent copy of the work is stored on the user’s device.7 Here, the right of making available to the public may be affected according to Sec. 19a Copyright Act. Whether the triggering of the streaming process and the associated storage of fragments of the work on the user’s computer, which may only be temporary, constitutes a reproduction according to Sec. 16 Copyright Act is disputed.8 Progressive downloading or podcasting, on the other hand, starts by storing the data on the user’s device. The user can then retrieve the data from the storage on its device at times of its choosing (often even during the transfer process).9 Saving the recording on the provider’s server (upload) is a reproduction in the sense of Sec. 16 Copyright Act;10 depending on the technical design, the same also applies to the download or intermediate storage on the user’s device. 2. Different Types of Platforms German law hardly distinguishes between platform types geared towards legal, semi-legal, or illegal streaming concerning copyright protection. There are only

4  Wandtke/v. Gerlach, GRUR 2013, 676, 677 et seq.; Heerma, in: Wandtke/Bullinger, Praxiskommentar Urheberrecht, 5th edn. 2019, §  16 para.  22. 5 Heerma, in: Wandtke/Bullinger, Praxiskommentar Urheberrecht, 5th edn. 2019, §   16 para.  22. 6  Bischoff/Brost, MMR 2021, 303, 304; cf. also EJC, Case C-607/11, ITV Broadcasting Limited v. TV Catch Up Limited, ECLI:EU:C:2013:147 = MMR 2013, 459 para.  19 et seq. 7 Heerma, in: Wandtke/Bullinger, Praxiskommentar Urheberrecht, 5th edn. 2019, §   16 para.  22. 8  Cf. sub V.3.a). 9  For the different forms see Knies, CR 2014, 140; Busch, GRUR 2011, 498. 10  Cf. Heerma, in: Wandtke/Bullinger, Praxiskommentar Urheberrecht, 5th edn. 2019, §  16 para.  22; BGH 12.11.2009, GRUR 2010, 616 para.  36 – marions-kochbuch.de; OLG Düsseldorf 16.6.2015, GRUR-RS 2015, 11667; OLG München 29.4.2010, MMR 2010, 704, 705. See also Ensthaler, NJW 2014, 1553, 1554; Ernst, GRUR 1997, 592, 593.

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a few regulations that limit, for example, exemptions of liability for such platforms whose primary purpose is to engage in copyright infringements.11 However, the origin and the relationship of the parties involved for the potentially copyright-infringing content is significant for the copyright assessment. Here, a distinction can be made between platforms that select and provide content on their own responsibility, like paid streaming platforms (e.g., Netflix, Amazon Prime, Hulu). For such platforms, the user will regularly be able to assume the legality of the stream offered.12 In addition, there are platforms whose primary purpose is to enable their users to upload and download their own content (content-sharing platforms such as YouTube). Whether there is a presumption of legality of the offer in favor of the user can only be decided in individual cases.13 However, illegal and legal streaming platforms often differ in technical design, which has implications for the copyright assessment. While legal streaming platforms regularly offer content directly for streaming from their own websites, illegal streaming portals in Germany have used a different model in the past. The websites Kino.to and kinox.to, for example, did not make any content available themselves but provided more than 1 million links to copyrighted movies and TV shows publicly for free to any user of the Internet. For each link, a pirated copy of a film was stored separately on servers outside of kino.to and kinox.to.14 Until decided by the courts, it was disputed in Germany whether this system of mere linking already leads to copyright liability.15 Peer-to-peer systems are a secondary form of file sharing. In a peer-to-peer file-sharing system, participants who download a file simultaneously offer it for download to other participants in the system.16 Unique problems arise as participants in a peer-to-peer system are not always aware of their role as active providers of the respective work within the system.17 3. Sources of Law in Germany The copyright assessment of streaming models becomes a challenge in Germany due to the fragmentation of the law. While the basic provisions on copyright and copyright infringement can be found in the Copyright Act, liability for intermediaries in particular also partly finds its origin in the Copyright Service Pro11 

Cf. e.g. Sec. 1 (4) Copyright Service Provider Act. See sub V.3.b). 13  See sub V.3.b). 14  See for the facts of the case AG Leipzig 21.12.2011, NZWiST 2012, 390, 391. 15  See sub. V.4.b). 16  For a description of a peer-to-peer-system see EJC, Case C-597/19, Microcom International Content Management Ltd. v. Telenet BVBA, ECLI:NL:PHR:2021:1181 = GRUR 2021, 1067, 1068. 17  See sub V.2. 12 

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vider Act,18 which did not come into force until August 2021. The German Telemedia Act also contains exemptions from liability for certain intermediaries.19 German copyright law is strongly influenced by the provisions of the Info­ Soc-Directive20 and the DSM-Directive,21 which must be taken into account when interpreting the national provisions. Concerning the management of rights by collecting societies, the Collecting Societies Act 22 applies.

III. Registration Requirements In principle, streaming providers in Germany do not require a registration or a license, see Sec. 4 (1) Telemedia Act. However, an exception may exist for live streaming. While it was unclear in the past whether specific private live streaming offerings (especially private Internet radio stations and live streaming on YouTube) require a broadcasting license under the Interstate Broadcasting Treaty23 or whether they should be classified as telemedia not requiring a permit, 24 this issue has been clarified by the entry into force of the new State Media Treaty on November 7, 2020.25 Accordingly, there is no basic exemption from the licensing requirement for private live streaming services, see Sec. 52 (1) State Media Treaty. However, a broadcasting license is only required if the contribution is broadcasted at a predetermined time (broadcast schedule), the contribution has a journalistic-editorial design, the offer is regular and reaches more than 20,000 simultaneous users on average over six months, cf. Sec. 2, 54 State Media Treaty.

18  Copyright Service Provider Act (Gesetz über die urheberrechtliche Verantwortlichkeit von Diensteanbietern für das Teilen von Online-Inhalten), 31.5.2021, BGBl. 2021/I, 1204. 19  Telemedia Act (Telemediengesetz), 26.2.2007, BGBl. 2007/I, 179. 20  Directive 2001/29/EC of the European Parliament and of the Council of 22 May 2001 on the harmonisation of certain aspects of copyright and related rights in the information society. 21  Directive (EU) 2019/790 of the European Parliament and of the Council of 17 April 2019 on copyright and related rights in the Digital Single Market and amending Directives 96/9/ EC and 2001/29/EC. 22  Collecting Societies Act (Gesetz über die Wahrnehmung von Urheberrechten und verwandten Schutzrechten durch Verwertungsgesellschaften), 24.5.2016, BGBl. 2016/I, 1190. 23  Treaty between the states for broadcasting and telemedia (Staatsvertrag für Rundfunk und Telemedien), https://recht.nrw.de/lmi/owa/br_text_anzeigen?v_id=1000000000000000 0502 (30.03.2022). Replaced by the State Media Treaty since November 7, 2020 (cf. footnote 25). 24  See for the whole problem Leeb/Seiter, ZUM 2017, 573. 25 Treaty between the states for the modernization of the media order in Germany (Staatsvertrag zur Modernisierung der Medienordnung in Deutschland), https://www.rlp.de/ fileadmin/rlp-stk/pdf-Dateien/Medienpolitik/Medienstaatsvertrag.pdf (30.03.2022).

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IV. Collecting societies26 The 13 collecting societies play a unique role in exploiting copyright in Germany, especially since the obligation to seek to conclude a license agreement for copyright service providers under the new Copyright Service Provider Act would hardly be manageable for the service providers without rights management by central bodies.27 In Germany, a collecting society is an organization authorized by law or based on a contractual agreement and whose exclusive or principal purpose is to administer copyrights or related rights for the collective benefit of several rightsholders, whether in its own name or the name of another, cf. Art.  2 (1) Collection Societies Act. In principle, collecting societies are obliged to administer the rights on behalf of a rightsholder at his request and on reasonable terms, cf. Sec. 9 Collecting Societies Act. At the same time, they are obliged, based on the rights administered by it, to grant rights of use to anyone upon request and on reasonable terms. In particular, the conditions must be objective and non-discriminatory and provide for reasonable remuneration, cf. Sec. 34 (1) Collecting Societies Act. Under certain conditions, collecting societies have been able since August 2021 to effectively grant rights to works that have not been transferred to them by the owner of the rights using so-called collective licenses with extended effect, cf. Sec. 51 Collecting Societies Act. For this purpose, the collecting society must be representative, i.e., it must administer the rights on a contractual basis for a sufficiently large number of rightsholders, and it must be unreasonable for the user or the collecting society to obtain permission to use the work; the rightsholder has a right of objection, see Sec. 51a Collecting Societies Act.

V. Liability for Copyright Violations 1. The Interaction of Liability and Enforcement Liability for copyright infringement and the enforcement of claims are closely connected in Germany. In this context, claims against the operators of content sharing platforms, but also host or access providers, are of particular importance, as the enforcement of claims against the often anonymous users who uploaded the content in most cases is not efficient.

26 Overview over the existing collecting societies in Germany: https://www.dpma.de/ dpma/wir_ueber_uns/weitere_aufgaben/verwertungsges_urheberrecht/aufsicht_verwer tungsges/listederverwertungseinrichtungen/index.html (30.03.2022). 27  See sub V.4.a) i.

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According to the legal situation applicable until August 2021, intermediaries were, in principle, not responsible for the content uploaded by their users.28 However, liability as an interferer regularly arose if the intermediaries did not prevent access to the respective content despite knowledge of its illegality (notice-and-action-requirement). The procedure actually intended for the enforcement of rights by the rightsholder is thus transformed into a factual prerequisite for the direct liability of the respective intermediary to a particularly efficient enforcement of rights. 2. Liability of the Uploader The upload and the making available to the public of the streams constitutes in principle an infringement of the rights reserved to the author contained in Sec. 16 I 1 and 19a Copyright Act by the person responsible for the technical process.29 However, problems arise if not the entire work is downloaded permanently or where the responsible party is unaware of the process. This may be the case in peer-to-peer systems when the user is not aware that, as a participant in the system, it also regularly makes the downloaded content available for others.30 a) Making available parts of the work It is problematic for copyright infringement if not the complete work, but only fragments of the work are made available (e.g., in peer-to-peer systems).31 According to the prevailing opinion in Germany, copyright protection only exists if the work fragment embodied in a file fragment is executable and reaches a certain quality, i.e., if it has a certain level of creation and an individuality that can be separated from the main work.32 Determining the minimum requirements is problematic as German courts apply different requirements depending on the type of work.33 However, to circumvent this problem, the Bundesgerichtshof has assumed that providing non-copyrighted fragments of works also leads to the provider’s liability if several providers cooperate and provide the entire work; the fact that the users may be anonymous and not known to each other should not prevent liability.34 Thus, the decision of the ECJ in Mircom 28 

See sub V.4. Hegemann/Nadolny, in: Hoeren et al., May 2021, Handbuch Multimediarecht, Part 7.3 para.  15. See also sub. II.1. 30  See sub. V.2.b). 31  Cf. for the whole problem Zühlsdorff, BayZR 2021, 180, 183. 32 Bullinger, in: Wandtke/Bullinger, Praxiskommentar Urheberrecht, 5th edn. 2019, §   2 para.  23 et seq.; Schulze, in: Dreier/Schulze, Urheberrechtsgesetz, 6th edn. 2018, §  2 para.  24 et seq. 33  Cf. Schulze, in: Dreier/Schulze, Urheberrechtsgesetz, 6th edn. 2018, §  2 para.  24 et seq. 34  BGH 6.12.2017, ZUM 2018, 293 – Konferenz der Tiere. 29 

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International35 might lead to changes in the dogmatic way in German law on determining the liability of the uploader but may not change the result of the liability of the uploader. b) Subjective Requirements Section 19a Copyright Act only describes the scope of the right but does not regulate the conditions for its infringement; in particular, it does not contain a subjective component, so that in principle, users who unknowingly make the works available for download would also be responsible for copyright infringement. However, the decisions of the ECJ indicate the necessity of a subjective component for copyright infringement. Accordingly, in light of the meaning and purpose of the exploitation rights, an act of use of a work would require that the user uses the work intentionally or at least knowingly.36 Therefore, it is discussed in the German academic writing whether the provision of Sec. 19a Copyright Act is to be interpreted restrictively and therefore requires intent or negligence for copyright infringement.37 Nevertheless, others interpret the decisions of the ECJ in a way to not require a subjective component since the ECJ, when assessing whether a communication to the public within the meaning of Art.  3 (1) InfoSoc Directive also uses a whole range of other criteria in addition to knowledge for the assessment.38 Accordingly, the subjective component does not constitute a prerequisite but may be used to assess possible fault concerning a claim for damages.39 German courts have not yet ruled on this subject.

35  The ECJ stated that the segments that users initially download are not small parts of works, but parts of files, i.e. works in digital form. It is sufficient for the act of reproduction if a work is made available to the public in such a way that its members can access it freely, regardless of time and place. The actual use is not important. Therefore, any kind of transmission of protected works is sufficient, i.e. also the prior downloading and subsequent uploading of a part of a file, regardless of the technical means or procedure used, cf. ECJ, Case C-597/19, Mircom International Content Management & Consulting Ltd. v. Telenet BVBA, ECLI:EU:C:2021:492 = GRUR 2021, 1067. 36  Cf. EJC, Case C-162/10, Ireland v. Phonographic Performance Ltd., ECLI:EU:C:2011:432 = GRUR 2012, 597 para.  31, 37, 40; EJC, Case C-135/10, Società Consortile Fonografici v. Marco Del Corso, ECLI:EU:C:2011:432 = GRUR 2012, 593 para.  82, 91, 94 – SCF; BGH 16.05.2013, GRUR 2013, 818 para.  16 – Die Realität I; Adam, MMR 2015, 783, 787. 37  Cf. v. Ungern-Sternberg, in: Schricker/Loewenheim, Urheberrecht, 6th edn. 2020, §  19a para.  79. 38  Zühlsdorff, BayZR 2021, 180, 186. 39  Zühlsdorff, BayZR 2021, 180, 186.

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3. Liability of the Streaming-User It is also currently unclear in German law whether downloading copyrighted content by the end-user infringes copyright. This depends on the particular technological design of the streaming process. a) Act of Reproduction in Violation of the Copyright Law Depending on the technological design, it is questionable whether protectable parts of the work are copied and stored at all and therefore triggering copyright protection. Reproduction in the sense of civil and criminal law only occurs when physical fixation takes place that is suitable for somehow making the work directly or indirectly perceptible to the human senses.40 This should not be the case, for example, if only very short sequences of a work are stored or if the streaming process is interrupted prematurely.41 Borderline cases arise, however, when not the entire work is loaded at once, but – as it is often the case with streaming – in several parts one after the other – successively. If the work is finally downloaded entirely in the cache, such a “progressive download” shall be presumed to be a reproduction.42 However, it is particularly problematic if the work is not entirely loaded in buffer storage but only individual parts of the work are loaded and then deleted so that the work is never entirely stored at any time during the stream. This applies, above all, to real streaming, in which only data fragments are stored in the cache and deleted after playback.43 Some authors in Germany argue that the individual parts are to be regarded as a unit in their entirety. Accordingly, reproduction should be assumed because the work as a whole was copied and stored at least once.44 The opposing view rejects such an approach as fictional45 so that there is no copyright-relevant act of reproduction. According to the ECJ,46 at least “the unit composed of the fragments reproduced simultaneously – and therefore existing at a given moment – should be examined in order to determine whether it contains such elements. If it does, it 40 BGH 18.5.1955, NJW 1955, 1276, 1277 – Grundig-Reporter; BGH 3.7.1981, GRUR 1982, 102, 103 – Masterbänder; BGH 4.10.1990, GRUR 1991, 449, 453 – Betriebssystem. 41  Busch, GRUR 2011, 496, 497; Dustmann, in: Fromm/Nordemann, Urheberrecht, 12th edn. 2018, §  4 4a para.  24; Koch, GRUR 2010, 574, 575. 42  Busch, GRUR 2011, 496, 497; Dustmann, in: Fromm/Nordemann, Urheberrecht, 12th edn. 2018, §  4 4a para.  24; Koch, GRUR 2010, 574, 575. 43  Cf. Oğlakcıoğlu, ZIS 2012, 431, 435 et seq.; Wagner, GRUR 2016, 874, 876. 44  Ensthaler, NJW 2014, 1553, 1554; Knies, CR 2014, 140, 141; Schulze, in: Dreier/Schulze, Urheberrechtsgesetz, 6th edn. 2018, §  16 para.  9; Stolz, MMR 2013, 353, 355. 45  Oğlakcıoğlu, ZIS 2012, 431, 436; Kudlich, in: Schricker/Loewenheim, Urheberrecht, 6th edn. 2020, §  106 para.  13. 46  EJC, Case C-429/08, Football Association Premier League Ltd. v. QC Leisure, ECLI: EU:C:2011:113 = MMR 2011, 817, 823.

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must be classified as partial reproduction […].” The court, therefore, does not focus on whether the entire work is reproduced as a whole but on the fragments that are present at the same time. The prevailing view in Germany takes this case law as an opportunity to assume that the streaming of films constitutes an act of reproduction relevant under copyright law.47 b) Exceptions from liability for temporary copies or private use, Sec. 53, 44a Copyright Act German law restricts copyright in two respects. On the one hand, acts of reproduction are permissible without the permission of the rightsholder as temporary acts if they are transient or incidental and form an integral and essential part of a technical process and whose sole purpose is either to enable transmission in a network between third parties by an intermediary or to enable lawful use of a work and which have no independent economic significance, cf. Sec. 44a Copyright Act. On the other hand, individual reproductions of a work by a natural person for private use on any medium are permissible, provided that they do not serve either directly or indirectly for commercial purposes, unless an obviously unlawfully produced or publicly accessible original is used for the reproduction, cf. Sec. 53 Copyright Act. aa) Restriction of copyright for temporary copies, Sec. 44 Copyright Act At least in the case of progressive streaming48 , a privilege under Sec. 44a Copyright Act will not regularly be considered since the work is available entirely and not only temporarily in the cache.49 However, Sec. 44a Copyright Act can privilege the private user in cases of on-demand streaming. Whether the provision applies to these cases has long been disputed in Germany and has not been fully clarified by the ECJ’s 2017 ruling in Stichting Brein.50 Here, the ECJ ruled that there is no copyright infringement if Art.  5(1)(b) InfoSoc Directive covers (on-demand) streaming. For this to be the case, the acts of reproduction must be cumulative, merely temporary, ephemeral or incidental, forming an integral and essential part of a technical process, the sole purpose of which is to enable lawful use of the work; in addition, they must have 47  Wagner, GRUR 2016, 874, 877. Cf. also Wandtke/v. Gerlach, GRUR 2013, 676, 678; Galetzka/Stamer, MMR 2014, 292, 295; opposing opinion Koch, GRUR 2010, 574, 575. 48  See sub. II.1. 49  Reinbacher, in: Wandtke/Bullinger, Praxiskommentar Urheberrecht, 5th edn. 2019, §  106 para.  14a; Loewenheim, in: Schricker/Loewenheim, Urheberrecht, 6th edn. 2020, §  4 4a Copyright Act para.  18. 50  EJC, Case C-527/15, Stichting Brein v. Jack Frederik Wullems, ECLI:EU:C:2016:938 = GRUR 2017, 610.

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no independent economic significance.51 In principle, the requirements are to be interpreted narrowly.52 The first three conditions regularly are fulfilled in the case of on-demand streaming.53 At the same time, on-demand streaming does not have any economic significance of its own, insofar as the data is automatically deleted after use and thus does not enable any use beyond mere listening to or viewing of the work.54 However, the fourth condition – enabling lawful use – is problematic, especially when streaming from illegal sources. The copyright restriction relates to Art.  5(2)(b) InfoSoc-RL, which provides in Art.  5(5) that the exceptions and limitations contained therein may only be applied in certain exceptional cases in which the work’s normal exploitation is not impaired, and the legitimate interests of the rightsholder are not unduly prejudiced. Article 5 (5) of the InfoSoc Directive is not expressly included in German law, since the German legislator assumed that the conception of the German exceptions and limitations already took into account the three-step test laid down by European law and that this was in any case primarily an instruction to the national legislature.55 Opinions in academia concerning the applicability are divided among Germany. In part, enabling lawful use is rejected if the stream’s source is itself unlawful.56 Another view always assumes legal use in cases of genuine streaming, regardless of whether the source is recognizably illegal or not57 , as, in the case of works in digital form, the receptive enjoyment of the work is already associated with automatic temporary reproductions. However, the mere viewing of a film is not covered by the exploitation rights of Sec. 15 et seq. and is, therefore, a lawful use of the work.58 The wording of Sec. 44a No.  2 does not contain any 51  The German §  4 4a Copyright Act is literally consistent with the European provision and is to be interpreted in conformity with EU law. 52  EJC Case C-527/15, Stichting Brein v. Jack Frederik Wullems, ECLI:EU:C:2016:938 = GRUR 2017, 610 para.  62. 53  Reinbacher, in: Wandtke/Bullinger, Praxiskommentar Urheberrecht, 5th edn. 2019,§  106 para.  14c. See also Wandtke/v. Gerlach, GRUR 2013, 676, 678 et seq. 54 Cf. EJC, Case C-429/08, Football Association Premier League Ltd. v. QC Leisure, ECLI:EU:C:2011:113 = MMR 2011, 817 para.  175 et seq.; Fangerow/Schulz, GRUR 2010, 677, 680 et seq.; Oğlakcıoğlu, ZIS 2012, 431, 437; Stieper, MMR 2012, 12, 16. 55  Draft of a law to regulate copyright in the information society of the German Federal Government, BT-Drs. 15/38, 15; Draft of the second law to regulate copyright in the information society of the German Federal Government, BT-Drs. 16/1828, 21. 56  Busch, GRUR 2011, 496, 502; Wandtke/v. Gerlach, GRUR 2013, 676, 680 et seq.; LG Köln 24.1.2014, MMR 2014, 193, 194 – Offensichtliche Rechtsverletzung bei Streaming – Redtube. 57  Dustmann, in: Fromm/Nordemann, Urheberrecht, 12th edn. 2018, §  4 4a para.  27; Fangerow/Schulz, GRUR 2010, 677, 681 Galetzka/Stamer, MMR 2014, 292, 296 ; Gercke, in: Spind­ ler/Schuster, Recht der elektronischen Medien, 4th edn. 2019, §  106 para.  10; Oğlakcıoğlu, ZIS 2012, 431, 437; Reinbacher, NStZ 2014, 57, 62; Stieper, MMR 2012, 12, 16. 58  Cf. also EJC, Case C-429/08, Football Association Premier League Ltd. v. QC Leisure, ECLI:EU:C:2011:113 = MMR 2011, 817 para.  171.

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restriction to originals that are obviously unlawfully produced or made available to the public. Recital (33) to the InfoSoc Directive does not necessarily indicate otherwise either, because the receptive enjoyment of works is “not restricted by law”.59 The Bundesgerichtshof has not yet ruled on this question. How­ ever, case law in Germany has tended to apply Sec. 44a Copyright Act as long as the source is not obviously illegal. 60 The ECJ ruling has given new impetus to the discussion of this topic in Germany. The ECJ61 assumes that the sale of a multimedia media player for the free and easy viewing of films illegally accessible on the Internet on a television screen is contrary to copyright. Furthermore, the temporary reproduction of a copyrighted work on such a media player through streaming is not exempt from the reproduction right. Authors in Germany tend to suggest that the basic idea of this judgment will also apply to the streaming of websites with illegal works.62 As a result, anyone who watches illegally accessible streams on the Internet acts in violation of copyright law. 63 Some of the authors do not (at this time) make a distinction according to the recognizability of the illegality for the consumer;64 However, others assume that illegal streaming that is not obviously recognizable to the user continues to be subject to Sec. 44a Copyright Act. 65 bb) Restriction of copyright for private copying, Sec. 53 Copyright Act Under certain conditions, German law permits the production of private copies without the copyright holder’s permission. However, according to Sec. 53 (1) Copyright Act, this only applies if the reproduction of the work does not involve the use of a master copy that has obviously been produced unlawfully or made available to the public. 59 

P. Hilgert/S. Hilgert, MMR 2014, 85, 87. LG Hamburg 19.12.2013, ZUM 2014, 434, 435; LG Köln 24.1.2014, MMR 2014, 193, 194 – Offensichtliche Rechtsverletzung bei Streaming – Redtube; AG Hannover 27.5.2014, ZUM-RD 2014, 667, 668 – Nutzung des Streamingportals “Redtube“. 61  EJC, Case C-527/15, Stichting Brein v. Jack Frederik Wullems, ECLI:EU:C:2016:938 = GRUR 2017, 610. 62  Cf. Loewenheim, in: Schricker/Loewenheim, Urheberrecht, 6th edn. 2020, §  4 4a para.  19; Stollwerck, in: Beck’scher Online-Kommentar Urheberrecht, 32. edn. 2021, Europäisches Urheberrecht, para.  94; Dreier, in: Dreier/Schulze, Urheberrechtsgesetz, 6th edn. 2018, §  4 4a para.  8; Reinbacher, in: Wandtke/Bullinger, Praxiskommentar Urheberrecht, 5th edn. 2019, §  106 para.  14c. 63  Stollwerck, in: Beck’scher Online-Kommentar Urheberrecht, 32. edn. 2021, Europäi­ sches Urheberrecht, para.  94. 64  Loewenheim, in: Schricker/Loewenheim, Urheberrecht, 6th edn. 2020, §   4 4a para.  19; Stollwerck, in: Beck’scher Online-Kommentar Urheberrecht, 32. edn. 2021, Europäisches Urheberrecht, para.  94. 65 Wiebe, in: Spindler/Schuster, Recht der elektronischen Medien, 4th edn. 2019, §   44a Copy­r ight Act para.  14; Dreier, in: Dreier/Schulze, Urheberrechtsgesetz, 6th edn. 2018, §  4 4a para.  8; Hegemann/Nadolny, in: Hoeren et al., May 2021, Handbuch Multimediarecht, Part 7.3 para.  12. 60 

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Whether the German restriction to “obviously unlawful” sources is in accordance with EU law is judged differently. In addition to the deviation of Sec. 53 (1) from the wording of Art.  5 (2) of the InfoSoc Directive66 , the different opinions are primarily related to the fact that the ECJ in several of its judgments has not clearly defined the requirements of Art.  5. On the one hand, the Court has held that the national legislation created to implement it must distinguish “between private copies made on the basis of lawful sources and those […] made on the basis of counterfeit or pirated works”.67 The German regulation implements this separation. However, the judgment also states that Art.  5(2)(b) Info­ Soc Directive must be interpreted as not applying to the case where private copies are made on the basis of an unlawful source.68 4. Liability of the Operator of a Streaming-Platform a) Liability of Online Content-Sharing Service Providers The liability of content-sharing providers for works violating copyright protection uploaded by users on the platforms changed tremendously in Germany in August 2021 when the new Copyright Service Provider Act69 came into force. Germany therewith dedicated an individual Act to the transformation of Art.  17 DSM-Directive instead of incorporating it into the German Copyright Act.70 The amendments are intended to take account of market developments and strike a balance between access to online content providing services, consumer protection, and competitiveness.71 According to academic writing in Germany, the “Störerhaftung”, a specific German form of an injunctive remedy previously developed by case law and based on the general principle of the actio negatoria, is not applicable anymore as soon as the Copyright Service Provider Act is to be applied.72 Service providers are now generally responsible for copyright infringements committed by their users, which reverses the standard-exception relationship as

66 Especially

v. Ungern-Sternberg, GRUR 2015, 205, 213. EJC, Case C-435/12, ACI Adam BV v. Stichting de Thuiskopie, ECLI:EU:C:2013:145 = GRUR 2014, 546 para.  37, 58. 68  EJC, Case C-435/12, ACI Adam BV v. Stichting de Thuiskopie, ECLI:EU:C:2013:145 = GRUR 2014, 546 para.  41. Cf. for Art.  5 Abs.  2 InfoSoc-RL EJC, Case C-572/13, HewlettPackard Belgium SPRL v. Reprobel SCRL, ECLI:EU:C:2015:389, GRUR 2016, 55 para.  57, 62 et seq. 69  Cf. above sub. II.3. 70  For reasons and alternatives cf. Metzger/Pravemann, ZUM 2018, 288, 290. 71  Draft of a law to regulate copyright in the information society of the German Federal Government, BT-Drs. 15/38, 14. 72  Cf. Metzger/Pravemann, ZUM 2018, 288, 290. While commenting the drafts cf. Hofmann, ZUM 2020, 665, 666. Cf. regarding the Directives Leistner, ZUM 2020, 897, 901. Spind­ler, GRUR 2020, 253. For the “Störerhaftung“ cf. sub. V.5. 67 

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it was previously known.73 To avoid liability under copyright law for the communication to the public, the service provider has to fulfill its obligations under Sec. 4 and Sec. 7 to 11 (most of them are notice-and-action requirements) in accordance with high standards customary in the industry, taking into account the principle of proportionality. A service provider with the primary purpose to participate in or facilitate copyright infringements may not rely on this exemption, cf. Sec. 1 (4) Copyright Service Provider Act. The new rules are only applicable to service providers that have as their primary purpose exclusively, or at least also, to store and make publicly available a large amount of copyrighted content uploaded by third parties and therefore the “classic” content-sharing providers, cf. Sec. 2 (1) No.  1 Copyright Service Provider Act. They do not apply to providers of electronic communication services (e.g., Host- and Access-Providers), cf. Sec. 3 No.  4 Copyright Service Provider Act.74 aa) Licensing attempts and allowed use In an attempt to address the existing value gap,75 the new rules require the service providers to make the best possible efforts to obtain a license according to Sec. 4. They must try to enter into a contractual arrangement with the authorized user. In this context, they do not have to accept offers from every right holder within the meaning of Sec. 4 (2) no.  2 Copyright Service Provider Act, but in particular only if the rights of use offered comprise “a substantial repertoire in terms of works and right holders”. Therefore, the service provider is not required to actively search for licensing offers of individual rightsholders.76 In practice, the offerings will most likely be handled through the collecting societies.77 However, it is unclear in German law whether there is a duty for the service providers to contract and, therefore, if there is the possibility of suing for the conclusion of a licensing contract.78 According to Sec. 5 Copyright Service Provider Act, the already previously allowed use of copyrighted material without a license remains possible for quotation, parody, caricature, and pastiche. However, in these cases, the service

73 

For the previously known system cf. e.g. BGH 17.12.2010, MMR 2011, 480. Regarding the applicable rules for these providers see sub. V.5. 75  Cf. Draft of a law to adapt copyright law to the requirements of the digital single market of the Federal Government, BT-Drs. 19/27426, 57. 76  Draft of a law to regulate copyright in the information society of the German Federal Government, BT-Drs. 15/38, 86. Hofmann, ZUM 2020, 665, 667. 77  See sub. V.5. 78  For an enforeable duty Draft of a law to regulate copyright in the information society of the German Federal Government, BT-Drs. 15/38, 86 Against Metzger/Pravemann, ZUM 2018, 288, 291; Hofmann, ZUM 2020, 665, 667. 74 

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provider is obliged to remunerate the author (Sec. 5 (2) Copyright Service Provider Act).79 For publications of works that consist of less than half of third-party works (i.e., that combine third-party content with their own content) and so-called “minor uses” (Sec. 10 Copyright Service Provider Act),80 it is rebuttably presumed that their use is permitted by law according to Sec. 5. This rule has received considerable criticism in Germany as it is not incorporated in the DSM-Directive, and the scope of this “de minimis” limit is extremely narrow.81 The German Ministry of Justice explicitly sees no barrier in the new mechanism but describes it merely as a “procedural instrument” for a “non-final” legal legitimation; it is therefore considered to be “unobjectionable under EU law”.82 If permission is granted to the service provider or exists already via law, this permission extends to the users who uploaded the work in accordance with Sec. 6 (1) Copyright Service Provider Act. This does not apply to commercial users or users generating “significant revenue”. The German legislator has so far not set a specific value here. According to Sec. 6 (2) Copyright Service Provider Act, this exception applies vice versa also to service providers if users have the permission to upload copyrighted material. It is unclear right now if this exception is only granted for contractual permission or also for permitted use by law.83 bb) Procedural requirements The most significant change is the replacement of the previously existing noticeand-take-down procedure by the system of qualified and simple blocking (“take down and stay down”). Thus, if an author generally does not wish to license his or her work, the service provider must ensure that the content is not available now and also in the future (“stay down,” Sec. 7 Copyright Service Provider Act). If the rightsholder provides a justified indication that content that has already been published may be illegal, the service provider must block or delete it (“take down,” Sec. 8 Copyright Service Provider Act). This requires the service provider to pre-check content users wants to upload on their platforms. In doing so, the service providers will have to check whether a blocking request and the information required for this request are available for matching (Sec. 7 (1) 79 

Cf. also sub V.4.a) iv. Such minor use is deemed to exist in the case of non-commercial or only insignificantly commercial content consisting of no more than 15 seconds of video sequences or audio tracks, 160 characters of text or 125 kB of a photograph, photographic work or graphic. 81  Cf. Metzger/Pravemann, ZUM 2018, 288, 294. 82  Draft of a law to regulate copyright in the information society of the German Federal Government, BT-Drs. 15/38, 47. Cf. also Hofmann, ZUM 2020, 665, 668 et seq. Critizing Metzger/Pravemann, ZUM 2018, 288, 29 et seq. 83  Metzger/Pravemann, ZUM 2018, 288, 292. 80 

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Copyright Service Provider Act) or whether the service provider has already acquired a license for the copyrighted content. If there is a sufficient blocking request and no license is available, the platform further checks whether the upload is initially permitted for other reasons. The terminology and the specific mechanism of the indemnification have been modified during the legislative proceedings and were weakened from an “obligation to block and remove” to an obligation to “best ensure unavailability through blocking and removal” in favor of the platforms.84 The subtle difference recognizes the problem that flawless blocking or removal is factually impossible, and even a very short availability would then, in principle, have led to liability.85 For the technical implementation of these regulations, the service providers will presumably resort to the – much-criticized86 – upload filters even though the new rules do not explicitly require them to do so. But, due to a large amount of material and data, realistic handling should only be possible in this way. That raises concerns about the phenomenon of overblocking and, therefore the adequate protection of the freedom of opinion.87 To prevent overblocking by upload filters, a “presumably permitted” upload should initially remain on the platform, Sec. 9 Abs.  1 Copyright Service Provider Act. The existence of an allowed use is rebuttably presumed under three conditions. First, the content must contain less than half of another’s work and combine these parts of the work with other content. Secondly, it must either be a minor use, or the uploader must mark the content as permitted. A user can mark the upload as “legally permitted” by the platform (so-called pre-flagging, Sec. 11 Abs.  1 Copyright Service Provider Act) – but only if the content is to be blocked after the pre-check. If content that was initially not blocked after the pre-check and has already been uploaded is to be blocked only subsequently, the uploader can also mark the content as “legally permitted” only subsequently within 48 hours after notification (post-flagging, Sec. 11 Abs.  2 Copyright Service Provider Act). Furthermore, the German legislator implemented a kind of “kill switch”88 with which even presumably permitted uses can be blocked directly in any case until the conclusion of the complaint procedure and thus cannot be reproduced publicly at all. The prerequisite is that a “trustworthy” rightsholder declares to

84 

Metzger/Pravemann, ZUM 2018, 288, 291. Metzger/Pravemann, ZUM 2018, 288, 291. 86  Hofmann, ZUM 2020, 665, 669 et seq. Considering this rule as a violation of EU-Law Lennartz/Möllers, GRUR 2021, 1109. For conformity with EU-Law Frey/Rudoplh, MMR 2021, 671, 676. 87  Cf. Kastl, GRUR 2016, 671; Spindler, CR 2019, 277; Suwelack, MMR 2018, 582. 88  Metzger/Pravemann, ZUM 2018, 288, 298. 85 

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the platform that the presumption of legally permitted use is to be rebutted and that the economic exploitation of the work concerned is significantly impaired. i. Complaint procedures for copyright holders and users Section 14 Copyright Service Provider Act obliges service providers to implement a mandatory internal complaint procedure for users wanting to complain about a blocking or copyright holders complaining about a copyright violation. The proceeding has to be effective, speedy and with no associated costs for copyright holders and users of the service. The complaints have to be justified. The platform must inform the parties involved without delay, give them the opportunity to comment, and decide on the complaint within one week latest. These decisions cannot be made in an automated process but have to be made by a natural and impartial person. If the rightsholder assumes unauthorized use that significantly impairs its economic exploitation of the work in question, the service provider must block the corresponding content immediately and in any case until the complaint procedure has been completed. Nevertheless, any alleged copyright holder who repeatedly uses this possibility unlawfully can be excluded from its further use for an appropriate period of time, Sec. 18 Copyright Service Provider Act. In addition, the unlawfully acting rightsholder is obligated to compensate the affected user for damages if it acted intentionally or negligently. The service provider may use an external complaints body for the complaint procedure, Sec. 15 Copyright Service Provider Act. Such complaint bodies shall be recognized by the Federal Office of Justice in agreement with the German Patent and Trademark Office. ii. Obligation to pay remuneration Based on the principle of “remuneration instead of prohibition”,89 three remuneration claims of authors were implemented in the Copyright Service Provider Act. Section 4 (3) contains a direct remuneration claim of the author against the service provider. According to the German legislator, this claim is necessary to achieve one of Art.  17 DSM-Directive’s new liability regime objectives to support the use of copyrighted content on platforms primarily on a licensing basis.90 Particularly in the case of complex digital exploitation, copyright contract law is alleged to not automatically ensure that creators receive a fair share of the revenues that exploiting companies generate as derivative rights holders through licensing so that the direct remuneration claim can provide a remedy: It guaran89 

Stieper, ZUM 2021, 387. Draft of a law to adapt copyright law to the requirements of the digital single market of the Federal Government, BT-Drs. 19/27426, 133. 90 

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tees the participation of the creators in the revenues of the service providers, which in practice is to be realized via contracts between collecting societies and the service providers.91 It is in dispute in Germany if this direct claim against the service provider violates EU Law.92 According to Sec. 5 (2) Copyright Service Provider Act, the service provider must, in any case, pay the author appropriate remuneration for the public reproduction of caricatures, parodies, and pastiches that fall under the allowed uses of Sec. 51a Copyright Act. This rule has been criticized for establishing a contradiction as the use based on Sec. 51a Copyright Act is free of remuneration outside the scope of the Copyright Service Provider Act.93 Section 12 Copyright Service Provider Act obliges service providers to pay the author an appropriate remuneration for the communication to the public of presumably permitted uses. This means that a user remains liable even during the complaint procedures. This obligation to pay compensation is intended to balance the interests here for the fact the work is publicly reproduced within the scope of the presumably permitted use until the end of a complaint procedure, which may last up to one week. b) Peculiarities for platforms only providing links A platform has to make content publicly available to fulfill the definition of a service provider of Sec. 2 Copyright Service Provider Act. One could question if a platform that only provides links to other websites meets this criterion. The question of a copyright-relevant act of making works available to the public within the meaning of Sec. 19a Copyright Service Provider Act has not yet been answered. Section 19a Copyright Act already arose before the Copyright Service Provider Act came into force and depends on the specific technical design. According to the prevailing opinion in Germany, the setting of hyperlinks or deep links to works that are freely accessible on another website does not trigger Sec. 19a Copyright Act, 94 since it is not the person who sets the link, but the person who places the content on the website, who makes the work publicly

91  Draft of a law to adapt copyright law to the requirements of the digital single market of the Federal Government, BT-Drs. 19/27426, 134. 92  Against a violation Wandtke/Hauk, ZUM 2021,763, 770; Metzger/Pravemann, ZUM 2018, 288, 298. For a violation Houareau, MMR 2019, 635, 636. 93  Wandtke/Hauk, ZUM 2021,763, 771. 94 EJC, Case C-466/12, Nils Svensson v. Retreiver Sverige AB, ECLI:EU:T:2015:151 = GRUR 2014, 360 para.  14; BGH 17.7.2013, GRUR 2003, 958, 962 – Paperboy; Conrad, CR 2013, 305, 309; Nolte, ZUM 2003, 540,541; Bullinger, in: Wandtke/Bullinger, Praxiskommentar Urheberrecht, 5th edn. 2019, §  19a Copyright Act para.  29; Dreier, in: Dreier/Schulze, Urheberrechtsgesetz, 6th edn. 2018, §  19a para.  6; v. Ungern-Sternberg, in: Schricker/Loewenheim, Urheberrecht, 6th edn. 2020, §  19a Copyright Act para.  19; opposing opinion Wiebe, Anmerkung zu BGH, 17.7.2003 – I ZR 259/00, MMR 2003, 724  et seq.

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available.95 However, it is crucial that providing a direct link does not circumvent any access restrictions on the target page.96 It has also been disputed whether the presentation of third-party content in a frame (embedding of a third-party work made publicly available on a third-party website in one’s own website) can trigger Sec. 19a Copyright Act by the party providing the link.97 Following the case-law of the ECJ on the interpretation of Art.  3 InfoSoc Directive, the Bundesgerichtshof now concludes that the mere linking of a work made available on a third-party website to one’s own website by means of “framing” does not constitute making the work publicly available.98 Here, too, it is solely the third-party website provider who decides whether the work made available on the website remains accessible to the public. It does not matter whether the website owner has made the linked content his own by embedding it in his own website.99 The act of making a work available to the public is realized by actually making the work available for retrieval and not by the fact that the person responsible for the Internet presence creates the – incorrect – impression that he himself makes the work available for retrieval. However, according to the prevailing opinion, this only applies to links to works that have been made accessible on the target website in a manner that complies with copyright law – i.e., regularly with the permission of the copyright holder.100 If this is not the case, the ECJ differentiates in the interpretation of Art.  3 (1) InfoSoc Directive according to whether the use serves a profit-making purpose, among other things.101 The Bundesgerichtshof expressly left open

95  BGH 17.7.2013, GRUR 2003, 958, 962 – Paperboy; Wiebe, in: Spindler/Schuster, Recht der elektronischen Medien, 4th edn. 2019, §  19a Copyright Act para.  5. 96  BGH 17.7.2013, GRUR 2003, 958, 962 – Paperboy. The ECJ, too, has decided whether a communication to the public within the meaning of Art.  3 of the InfoSoc Directive exists, based on whether the hyperlink results in a communication that is directed at a “new audience” that the copyright holder did not intend to cover when he permitted the original communication to the public, cf. EJC, Case C-466/12, Nils Svensson v. Retreiver Sverige AB, ECLI:EU:T:2015:151 = GRUR 2014, 360 para.  24. 97  Cf. the order for reference of the BGH 16.5.2013, GRUR 2013, 818 para.  26. Rejecting a violation: EJC, Case C-348/13, BestWater International GmbH v. Michael Mebes, ECLI:EU:C:2016:221 = GRUR 2014, 1196 para.  17; BGH 16.5.2013, GRUR 2013, 818 para.  9 – Die Realität I; Ott, ZUM 2004, 357, 363. Deciding in favor of a violation of §  19a Copyright Act Dreier, in: Dreier/Schulze, Urheberrechtsgesetz, 6th edn. 2018, §  19a para.  14; OLG Düsseldorf 18.8.2011, MMR 2012, 118; LG München I 10.1.2007, ZUM 2007, 224, 225 et seq. 98  BGH 9.7.2015, GRUR 2016, 171 para.  27 – Die Realität II. 99  BGH 9.7.2015, GRUR 2016, 171 para.  27 – Die Realität II. In the order for reference, the BGH had still argued otherwise, cf. BGH 16.5.2013, GRUR 2013, 818 para.  26. 100  Case C-348/13, BestWater International GmbH v. Michael Mebes, ECLI:EU:C:2016:221 = GRUR 2014, 1196 para.  17; BGH 16.5.2013, GRUR 2013, 818 para.  9 – Die Realität I. Cf. also Ott, ZUM 2004, 357, 363. For a violation cf. Dreier, in: Dreier/Schulze, Urheberrechtsgesetz, 6th edn. 2018, §  19a para.  14; OLG Düsseldorf 18.8.2011, MMR 2012, 118; LG München I 10.1.2007, ZUM 2007, 224, 225 et seq. 101 EJC, Case C-306/05, Sociedad General de Autoresy Editores Espana v. Rafael,

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whether it follows this differentiation.102 According to the ECJ, the decisive factor for non-profit users is whether they knew or could reasonably have known that the work was published on the Internet without the copyright holder’s permission.103 The German academia currently tends to rely on the criterion of obviousness of the infringement known in German copyright law from Sec. 53 (1) Copyright Act.104 In the case of users with the intention of making a profit, on the other hand, there is a rebuttable presumption that they have set the link with knowledge of the lack of permission of the right holder.105 However, since a large proportion of website owners are in some way concerned with monetization, according to German academia the characteristic of profit-making intent is to be interpreted narrowly.106 5. Liability of other parties The liability of others, such as third-party intermediaries like host or access providers, is of considerable importance for platforms targeting illegal activities. In particular, a liability of these providers is often the only possibility for authors and rightsholders to effectively enforce claims, as these providers are not involved in the illegal activities like the platform users or the platform itself. The liability requirements for third-party intermediaries basically followed the notice-and-action procedure;107 however, there is no general obligation to monitor the content provided or stored by users, see Sec. 7 (2) of the German Telemedia Act. An obligation to act thus arises as a rule only after an indication of a violation of the law.108 In addition, intermediaries are regularly obligated to ensure that there are no further similar infringements of rights.109 However, the specific conditions for liability vary depending on the function and activity of the provider claimed against.

ECLI:EU:C:2006:479 = GRUR 2007, 225 para.  4 4; EJC, Case C-429/08, Football Association Premier League Ltd. v. QC Leisure, ECLI:EU:C:2011:113 = MMR 2011, 817 para.  204. 102  BGH 9.7.2015, GRUR 2016, 171, 174 para.  36. 103  EJC, Case160/05, GS Media BV v. Sanoma Media Netherlands BV, ECLI:EU:C:2016:221, GRUR 2016, 1152 para.  47, 49. 104  Bullinger, in: Wandtke/Bullinger, Praxiskommentar Urheberrecht, 5th edn. 2019, §  19a Copyright Act para.  29; Dreier, in: Dreier/Schulze, Urheberrechtsgesetz, 6th edn. 2018, §  19a para.  6a; Grünberger, ZUM 2015, 273, 281. 105  EJC, Case160/05, GS Media BV v. Sanoma Media Netherlands BV, ECLI:EU:C:2016:221, GRUR 2016, 1152 para.  51. Critizing Ohly, Comment on EJC, Case160/05, GS Media BV v. Sanoma Media Netherlands BV, ECLI:EU:C:2016:221, GRUR 2016, 1155. 106  Bullinger, in: Wandtke/Bullinger, Praxiskommentar Urheberrecht, 5th edn. 2019, §  19a Copyright Act para.  29; Jani/Leenen, NJW 2016, 3135, 3137. 107  Hofmann, NJW 2021, 274, 275. 108  BGH 5.2.2015, GRUR 2015, 485 para.  52 – Kinderhochstühle im Internet III. 109  BGH 12.7.2007, NJW 2008, 758 para.  43 – Jugendgefährdende Medien bei eBay; BGH 12.7.2012, NJW 2013, 784 para.  29 – Alone in the dark.

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a) Liability of the Access-Provider According to existing principles in German law, an access provider can be held liable by a copyright holder as a “Störer” (interferer) for preventing access to websites on which copyrighted works are made publicly available in an unlawful manner.110 Since “Störerhaftung”111 cannot be extended unduly to third parties, who have not themselves carried out the unlawful interference, the liability of the “Störer” requires, according to the case-law of the Bundesgerichtshof, the breach of duties of verification.112 The extent of this obligation is determined by whether and to what extent the party claimed to be the interferer can be expected to carry out an inspection under the circumstances; there is no general obligation to carry out an inspection.113 The fundamental rights under EU law and national law affected, namely the protection of property rights of copyright holders, the freedom of profession of telecommunications companies, and the freedom of information and informational self-determination of Internet users, must be included in the balancing process to be carried out in the context of the reasonableness test.114 However, “Störerhaftung” on the part of the access provider can only be considered if the rightsholder has first made reasonable efforts to take action against those parties who – like the operator of the website – have committed the infringement themselves or – like the host provider – have contributed to the infringement by providing services.115 Recourse against the access provider as an interferer is only reasonable if recourse against these parties fails or lacks any prospect of success and would therefore otherwise result in a gap in legal protection.116 When determining the parties to be claimed against with priority, the right holder shall conduct investigations to a reasonable extent. In this context, blocking is not only reasonable if just infringing content is made available on the website, but already if, according to the overall relationship, lawful content does not outweigh illegal content.117 The fact that a blocking covers protected subject matter not only for the claiming right holder but also for third parties, which the right holder is not authorized to enforce, does not prevent its reasonableness.118 110  BGH 26.11.2015, MMR 2016, 180 – Störerhaftung des Access-Providers. Confirmed by BGH 15.10.2020, NJW 2021, 311 para.  25 – Störerhaftung des Registrars. 111  Cf. sub. V.4.a). 112  Cf. e.g. BGH 17.12.2010, MMR 2011, 480 para.  15 et seq. 113  BGH 30.4.2008, MMR 2008, 531 para.  50 – Internetversteigerung III; BGH 12.5.2010, MMR 2010, 565 para. 19 – Sommer unseres Lebens; BGH 12.7.2012, NJW 2013, 784 para.  19 – Alone in the dark. 114  BGH 26.11.2015, MMR 2016, 180 – Störerhaftung des Access-Providers. 115  BGH 26.11.2015, MMR 2016, 180 – Störerhaftung des Access-Providers. 116  BGH 26.11.2015, MMR 2016, 180 – Störerhaftung des Access-Providers. 117  BGH 26.11.2015, MMR 2016, 180 – Störerhaftung des Access-Providers. 118  BGH 26.11.2015, MMR 2016, 180 – Störerhaftung des Access-Providers.

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The principles of “Störerhaftung” of access providers, which for a long time were only developed by case law, were transferred by the German legislator to Sec. 7 (4) of the German Telemedia Act.119 b) Liability of Hostproviders According to the principles developed by case law to date, host providers can be liable for injunctive relief for infringing content of the websites they host if they have been notified of an apparent infringement of rights.120 In the case of the operator of an Internet platform in which users have posted illegal offers, “Störerhaftung” offers particularly adequate legal protection, according to case law, because the infringed party does not have to take action against a large number of individual providers.121 However, the principles developed are currently the subject of two referrals to the ECJ.122 Among other things, the ECJ is to clarify whether the YouTube platform, by publishing copyright-infringing videos, makes a representation within the meaning of Art.  3 (1) of the Copyright Directive 2001/29/EC and whether the host provider privilege provided for in the E-Commerce Directive applies to YouTube.

VI. Conclusion Despite incipient efforts to create a legally secure framework for streaming, much is still unresolved in this area in Germany – especially with regard to the important question of liability. Now that the legislature has provided a legal framework at least for the liability of content sharing providers, it is largely up to the courts in Germany and in the European Union to provide the necessary clarification.

119 

Cf. BGH 15.10.2020, NJW 2021, 311 para.  27 – Störerhaftung des Registrars. 15.10.2020, NJW 2021, 311 para.   25 – Störerhaftung des Registrars; BGH, 13.9.2018, GRUR 2018, 1132 para.  49 – YouTube. 121  Cf. BGH, 26.11.2015, MMR 2016, 180 para.  82 – Störerhaftung des Access-Providers. 122  Cf. BGH, 13.9.2018, GRUR 2018, 1132 para.  46 – YouTube; BGH, 20.9.2018, GRUR 2018, 1239 para.  37 – uploaded. 120 BGH

The Legal Regulation of Drones Stephan Hobe International legal instruments that apply to the function of drones are among others the Chicago Convention of 1944 and its associated annexes, the Mont­real Convention of 1999 on second-party liability and the Rome Convention of 1952 on third-party liability. Germany is a state-party to the first two of the aforementioned international Conventions but not to Rome Convention. The European Union regulates extensively issues in reference to the use of drones (or UAS/UAV). The above can be verified by the plethora of regulations that are drafted up until now or are under the process of drafting. In EU, EASA creates the mandatory standards for drones operating in EU airspace. Of course, in international level there are also the ICAO SARPs (Annex 8) which were recently amended in order to address the issues concerning the drones (ICAO refers to them as RPAS) better. Furthermore, there are standards that are not necessary for operation in EU (like those EUROCAE drafts) but most of the significant players in the industry choose to follow them. Regulations 1139/2018, 945/2019 and 947/2019 all regulate issues in reference to the function of drones in the European Union. Reg. 947/2019 categorises drone operations into three categories: the Open, the Specific and the Certified Category, according to the posed risk the said operation of the drone creates. Furthermore, it provides inter alia important provisions on Rules and procedures for the competency of remote pilots (rules that every pilot needs to follow, and the ways and means to achieve the drone pilot status in accordance with Articles 8 and 9 of the said Regulation etc.). In theEU, for remote pilots operating a drone under the “Open” and “Specific” category the minimum age prerequisite is the 16 years. Also, problems of rules and procedures for the airworthiness of AUS, of cross-border operations or operations outside the state of registration are regulated. In reference to flight authorisation for EU, EASA is the competent authority and for Germany in particular the Luftfahrt-Bundesamt (LBA, “Federal Aviation Office”) as the national civil aviation authority. In reference to operational requirements, the above-mentioned EU laws restrict the function of drones over certain areas (e.g., airports, military areas, protected areas under nature conservation law etc.) The “UAS geographical zone” as it is underlined in Reg. 947/2019 refers to a portion of airspace established by the competent authority that facilitates, restricts or excludes UAS operations in order to address risks pertaining to safety, privacy, protection of personal data,

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security or the environment, arising from UAS operations; of course, each state can define which areas it considers to be a restricted territory. In reference to drone insurance in the EU, regulation 785/2004 applies and of course the Montreal Convention 1999 with its Art.  50. Insurance for drones that are above 20 kg is necessary in EU, but since the EU legislation does not enforce liability insurance to lighter drones, it is a state matter whether or not such insurance should apply. Germany demands that operators must have liability insurance even for drones lighter than 20 kg. Since Germany is not a member-state of the Rome Convention 1952, it addresses third-party liability issues by its national law (e.g., sections 823 et seq. of the National Civil Code). As far as Personal Data Protection and Privacy Protection is concerned, there is political effort from the EU to regulate the issue in accordance to drones particularly and not just in accordance to the GDPR rules that apply in the Union and its member-states.

Freedom of Speech and Regulation of Fake News Eva Ellen Wagner

I. Introduction The following article deals with the legal framework for the regulation of disinformation in Germany. First, an overview is given on the legal bases that can be of decisive importance in contexts characterised by the spread of disinformation (II.). Afterwards, the roles of the administrative authorities (III.), media outlets and Internet service providers (IV.) are discussed in more detail. This is followed by brief observations on the regulation of disinformation in specific contexts (V. Elections, VI. Pandemic), before a statement on disinformation as a legal problem concludes the article (VII.).

II. Disinformation and Freedom of Expression: Legal Framework Neither the term “fake news” nor the more precise term “disinformation” is defined by German law.1 Understood as the utterance of an untruth against one’s better knowledge – usually with the intention of deception or manipulation – 2 disinformation as a phenomenon is, however, addressed by several provisions concerning a large variety of communicative contexts. As all specifications in statutory law need to be seen and interpreted against the backdrop of the constitutional demands on the communication process, the constitutional foundations will be briefly described first (1.). Subsequently, the legal requirements for the concrete communicative contexts are discussed (2. to 4.), before a brief overview is also given on the mechanisms for safeguarding media pluralism (5.) and fostering media literacy (6.) as well as on some selected academic work on the topic of disinformation (7.).

1 See also Löber/Roßnagel, in: Steinebach/Bader/Rinsdorf/Krämer/Roßnagel (eds.), Desinformation aufdecken und bekämpfen, 2020, 149. 2 See Ingold, in: Oppelland (ed.), Propaganda als (neue) außen- und sicherheitspolitische Herausforderung, 2018, 81 (85 et seq.).

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1. Constitutional foundations The basic right to freedom of opinion is enshrined in Article 5 (1) first sentence of the German Basic Law (Grundgesetz – hereinafter GG). It guarantees the right to express and disseminate one’s opinion freely and regardless of its form or the means of communication.3 The importance of freedom of opinion for the democratic process in an open society has been consistently emphasized by the Federal Constitutional Court (hereinafter FCC) from the very beginning. Already in the so called “Lüth” decision issued in 1958 the Court stated with reference to Benjamin N. Cardozo that “[t]he basic right to freedom of expression, the most immediate aspect of the human personality in society, is one of the most precious rights of man […]. In a certain sense it is the basis of freedom itself, ‘the matrix, the indispensable condition of nearly every other form of freedom’ (Cardozo)”.4 It is recognized, that Article 5 of the Basic Law not only protects the individual, but also demands safeguarding a free communication and opinion-forming process. And yet the relationship between truth and freedom of opinion is of some ambivalence. According to the FCC, the fundamental right of freedom of opinion does not want to serve the ascertainment of truth at any costs; it also ensures that everyone can freely say what he/she thinks, even if he/she does not or cannot give verifiable reasons for his/her judgement.5 As will also become clearer in the further course of this report, there is, in principle, no protection of truth per se in the German legal system. If (deliberate) falsehood is sanctioned or prevented from disseminating, it is not because “truth” is regarded as a moral value as such or legally protected interest by itself but because important further individual or collective interests are affected by spreading disinformation. 6 In this respect, the violation of truth alone does not constitute a violation of rights without the addition of those circumstances that make it, e.g., a defamatory statement within the meaning of Sec. 186 of the Criminal Code or a statement misleading consumers within the scope of the Act against Unfair Competition.7 Subject of the scope of protection of Article 5 (1) first sentence GG are “opinions”. They are characterised by the subjective relationship between the individual and the content of his or her statement, i.e., statements characterised by the element of taking a position and making one’s own assessment.8 Political and private opinions enjoy the same protection. Whether an opinion is well-founded or groundless, emotional or rational, evaluated as valuable or valueless, danger3 

See BVerfGE 85, 1 (12 et seq.); 124, 300 (320). BVerfGE 7, 198 (208). 5  See BVerfGE 42, 163 (171). 6  So aptly Hoven, ZStW129 (2017), 718 (739 et seq.) with reference to Becker, Der Tatbestand der Lüge, 1948, 49. 7  BVerfG, NJW 1982, 2655. 8  See BVerfGE 7, 198 (210); 61, 1 (8); 90, 241 (247). 4 

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ous or harmless, is irrelevant.9 Furthermore, the FCC specifically stated that opinions advocating a fundamental change in the political order, regardless of whether and to what extent they could be realized within the framework of fundamental rights, are not, from the outset, excluded from the scope of protection of Article 5 (1) GG.10 According to the FCC “[t]he Basic Law trusts in the power of the free debate as the most effective weapon against the dissemination of totalitarian, inhumane ideologies. […] Within the free system of the Basic Law, it is primarily civil commitment in the free political debate, as well as state education and upbringing in schools […] which are entrusted with countering the dangers lying therein”.11 Factual claims in general only enjoy protection under the right to freedom of opinion, if their dissemination serves as a “prerequisite” for the formation of opinions.12 Therefore, a factual claim is not protected within the scope of Article 5 (1) GG if it does not contribute to the constitutionally protected process of opinion formation. According to the FCC, this is the case when the factual claim has been proven untrue or is made in knowledge of its falsehood (deliberately untrue factual claim).13 Accordingly, fake news – understood as deliberate lies – are not protected by the constitutional umbrella of free speech,14 whereas factual assertions that turn out to be untrue at a later point in time enjoy protection.15 The FCC recognizes that drawing a line between statements of opinion and factual claims can be challenging as they are often connected and that the meaning of a statement can often only be discerned by considering both aspects. Nonetheless, the FCC maintains in a well-established case law that distinctions must be made. In doing so, the Court considers the overall context of the statement in question to be decisive for in determining whether a statement must be regarded as of a factual nature or as a value judgement (opinion).16 The isolated consideration of a disputed part of a statement regularly does not meet the re9 

BVerfGE 33, 1 (14); 61, 1 (7); 90, 241 (247); 124, 300 (320). BVerfGE 124, 300 (320). 11  BVerfGE 124, 300 (320 et seq.). 12  For more detailed information see II.1.b). 13  See BVerfGE 54, 208 (219); 61, 1 (8); 90, 241 (247). 14  For a critique of this supposedly flawed approach from a liberal perspective, see Hain, in: Spindler/Schuster (eds.), Recht der elektronischen Medien, 4th. ed. 2019, C. Verfassungsrecht, at para 9. It is argued that if the scope of protection of Article 5 (1) sentence 1 GG is considered to be open to factual allegations at all, it cannot be justified that even highly defamatory statements of opinion fall within the scope of protection, but that this should not apply to factual allegations. 15  BVerfGE 90, 241 (254); 99, 185 (197). The FCC argues here with possible chilling effects. If only irrefutable truths would be allowed to be expressed without risk the communication process would suffer. Moreover, the media could not adequately fulfil its information and control function if it were prohibited from reporting on facts that have not yet been sufficiently clarified, BVerfGE 97, 125 (149). 16  See BVerfGE 93, 266 (295). 10 

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quirements for a reliable determination of its meaning.17 A separation of the factual and the evaluative component of a statement is only permissible if the separation does not distort its meaning.18 If this cannot be ensured, the statement in dispute must be regarded in its entirety as a statement of opinion.19 Otherwise, according to the FCC, there is a risk of a substantial reduction of the protection of fundamental rights.20 The meaning and scope of freedom of opinion might therefore be misunderstood if a statement is incorrectly classified as an assertion of fact.21 In daily practice, difficult questions of demarcation arise again and again, especially in the layman’s use of legal terms, ambiguous and hidden statements or satire.22 The classification of the accusation of spreading “fake news” has also already been disputed in court.23 Article 5 (2) alternative 1 GG states that the basic right to freedom of opinion is constitutionally guaranteed only within the limits of ‘general laws’. Accordingly, encroachments on freedom of opinion can be justified in a constitutionally permissible manner on the grounds of a statutory law that qualifies as a ‘general law’. This includes all laws which “do not prohibit an opinion as such, which are not directed against the utterance of the opinion as such, but which serve to protect a legal interest which is to be protected per se without regard to a specific opinion”.24 However, an exception to the requirement of a general law pursuant to Article 5 (2) GG was recognized in the so called “Wunsiedel” decision. It applies to the glorification of the injustice and horror during the Nazi regime and allows the legislator to create provisions that are not neutral when it comes to opinions, but an directed specifically against the glorification and justification of the National Socialist rule of arbitrary force.25 The so-called doctrine of reciprocity directs the relationship between the right to freedom of opinion and the limiting general laws. With respect to their limiting effect, general laws must be viewed “in light of” the fundamental right which they limit, and must be interpreted in a way that preserves the particular 17 

See BVerfGE 93, 266 (295). See BVerfGE 93, 266 (295). 19  See BVerfGE 90, 241 (248), BVerfG, NJW 2018, 2858 (2859). 20  See BVerfGE 61, 1 (9); 90, 241 (248). 21  See BVerfGE 85, 1 (14); 93, 266 (294). 22  See for example BGH, NJW 1997, 2513 (statement in a flyer); BGH, NJW 1993, 930 (defamatory statement); BGH, NJW-RR 1994, 1242 (concealed statement); BGH NJW 2017, 482 (rhetorical question); BGH, GRUR 2020, 886 (assessments of the legal situation). 23  The expression was qualified as a statement of fact, LG Hamburg, ZUM-RD 2018, 240. 24  BVerfGE 7, 198 (209–210); 28, 282 (292); 71, 162 (175–176); 93, 266 (291); 124, 300 (321 et seq.). 25  BVerfGE 124, 300 (327 et seq.). Section 130 (4) of the Criminal Code imposes a penalty of imprisonment for a term of up to three years or a fine on whoever publicly or in a meeting disturbs the public peace in a manner which violates the dignity of the victims by approving of, glorifying, or justifying National Socialist tyranny and arbitrary rule. The denial of the Holocaust is already excluded from the protection of the basic right to freedom of opinion as it qualifies as a factual claim proven to be untrue. 18 

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value of this right.26 The doctrine of reciprocity therefore affects the interpretation of the law and the subsumption of a concrete factual situation under the applicable law. If the freedom of opinion is restricted, also the principle of proportionality must be observed. Derogations must therefore pursue a legitimate aim and have to be suitable, necessary, and proportionate. This also often means that when applying provisions of statutory law, freedom of opinion must be weighed against and balanced with other rights or legally protected interests. In terms of disinformation contexts, this has the effect that, on the one hand, courts may not, in the interest of freedom of opinion, impose requirements on the duty to tell the truth that reduce the willingness to use the fundamental right and thus constrict the free communication process Article 5 (1) sentence 1 GG has in mind.27 On the other hand, however, courts must also take into account that the duty to tell the truth is an expression of the state’s duty to protect, which follows from individual rights, for example, from the general right of personality.28 Thus, the more seriously a statement affects another person’s right of personality, the higher are the requirements for the fulfilment of the duty of care. 2. Dissemination of falsehood within specific contexts Germany has not introduced any general provision concerning disinformation per se, e.g., a general criminal or administrative offence of “lying” or spreading false information. However, several provisions address the dissemination of false statements within a broad variety of specific contexts. Only some of those have a closer connection to the topic of fake news/disinformation and will be examined in more detail. The use of the Internet and the specific dissemination effect associated with it, is, in principle, 29 not explicitly addressed as an aggravating circumstance in any of these provisions but may be included in the assessment of the legal consequences, for example by taking into consideration the publicity effect of an Internet publication and the findability via search engines.30 26 

BVerfGE 7, 198 (207 et seq.). BVerfGE 54, 208 (219 et seq.); 61, 1 (8); 85, 1 (15 and 17); 99, 185 (198); 114, 339 (353). 28  BVerfGE 12, 113 (130); 99, 185 (198); 114, 339 (353). 29  This has, however, recently changed with regard to some criminal offences in the recourse of the so called Act on Combating Right-Wing Extremism and Hate Crime which came into force in April 2021. In the course of this act, the Criminal Code was amended to the effect that an offensive statement committed by disseminating a content within the means of Sec. 11 (3) (which is seen as given when the respective statement is available on the Internet) is now regarded as a criminal offense with increased penalty. This change was made explicitly with reference to the increasing occurance of hate crime disseminated via social media platforms. 30  In criminal law, the “effects of the offence” can be taken into account as an aggravating factor when assessing the penalty. In the areas of press law and the right to free speech, the 27 

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a) Procedural lies Pursuant to Sec. 138 of the Code of Civil Procedure, the parties to a legal dispute must make their statements about factual circumstances exhaustively and in accordance with the truth.31 This provision is understood as a prohibition of procedural lies, i.e. statements against one’s better knowledge in the course of civil proceedings.32 No party may make an assertion of which it is aware that it is false, nor may it dispute an assertion of the opponent of which it is convinced that it is true. Section 138 of the Code of Civil Procedure also applies in proceedings before the administrative courts because of a reference in Sec. 173 of the Code of Administrative Procedure.33 Similar provisions concerning the prohibitions of misleading statements or the obligation to provide truthful information can be found in administrative procedures governed by special legislation ([unfair] competition law, food law, patent law, trademark law, finance and tax law). b) Unfair competition Section 5 of the Unfair Competition Act prohibits misleading consumers by advertising with objectively untrue statements. According to Sec. 16 of the Unfair Competition Act, whoever, with the intent of creating the impression of a particularly favourable offer, misleadingly advertises while using false statements in public announcements, or in communications directed towards a wider audience, shall be liable to imprisonment (not exceeding two years) or to a fine. c) Claims for injunctive relief under civil law While the publication of true facts is generally34 acceptable, even if they are detrimental to the person concerned, untrue factual claims that are defamatory or damaging to one’s reputation may face a dissemination ban. If the dissemination of proven untrue statements of fact results in a violation of a person’s right, the infringed party may seek judicial protection before civil courts via claims for injunctive relief (removal/deletion) or claims for retraction or correction. Those claims were developed by the courts based on the respective general tort and injunction provisions in the German Civil Code (Sec. 823 and 1004 BGB) dissemination effects of Internet communication can be taken into account while assessing how seriously the rights of the person concerned are affected by the statement in question. 31  Defendants in criminal proceedings are not obliged to tell the truth. Witnesses, on the other hand, have to tell the truth if they do not exercise a right to refuse to give evidence. 32  Stadler, in: Musielak/Voit, ZPO, 18.  Aufl. 2021, §  138 Rn 2. 33  BVerwG, NJW 1964, 786. 34  An exception may be the publication of true sensitive healthrelated data or data concerning sexual preferences.

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and are – unlike claims for damages – not dependent on fault. The claim for injunctive relief obliges the respondent to refrain from disseminating the statement at issue, while a judgement to publish a retraction or correction35 forces the media to admit in their own publication that they got it wrong. The latter, however, will only be granted after completing a principal proceeding and cannot be quickly enforced with the help of an interim injunction.36 d) Criminal law The dissemination of deliberately untrue or not demonstrably true statements of fact is not a criminal offence per se, but can be the subject of criminal law under certain circumstances, mainly during proceedings before a court or in situations, where individualised persons or a group of persons have become victims of false statements of fact that bring them into disrepute or disparage them in public opinion. False reports on events without personal reference, e.g., on the economy, health information, humanitarian catastrophes or climate protection, are not covered by criminal law.37 Section 153 et seq. of the Criminal Code (StGB) concern false statements in court as well as perjury. The offender’s intent must extend to the objective untruthfulness of his statement. In the case of false unsworn testimony under Sec. 153 StGB or perjury under Sec. 154 StGB, prison sentences up to five years may be imposed. Section 187 StGB concerns the dissemination of untrue, defamatory38 facts “against one’s better knowledge” (Verleumdung). In doing so, the offender must have acted with knowledge of the untruth. Section 186 StGB punishes “üble Nachrede”, a criminal offence where it is sufficient that a fact suitable for exposing a person to contempt or negatively affecting the public opinion about that person, is “is not demonstrably true”. The subjective element of the “üble Nach­ rede” requires at least conditional intent regarding the assertion and dissemination of a fact that can make another person contemptible or disparaging in public opinion. However, the intention does not have to extend to the untruthfulness or the non-provability of the fact. Even the person acting in good faith can be held liable.39 35 

See II.3. for further information. A judgement to publish a correction or retraction is only enforceable after it has become final and no further appeal is available. 37 See Hoven, ZStW 129 (2017), 718 (719); Kusche, in: Beck/Kusche/Valerius (eds.), Digita­ lisierung, Automatisierung, KI und Recht, 2020, 421 (424). 38 It may be difficult to assess whether the statements disseminated are defamatory or merely untruthful. This is especially the case when the false allegation concerns legally permissible, but nevertheless – in the eyes of a certain group – reprehensible behaviour, see ­Hoven, ZStW 129 (2017), 718 (724 et seq.). 39  BGH NJW 1958, 797. According to a widespread opinion in the literature, the “wrong36 

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Section 188 StGB provides for an aggravation of the penalty if a statement within the meaning of Sec. 186 and 187 StGB is directed against a person involved in the political life, the offence is suitable for making that person’s public activities substantially more difficult and the statement is made “publicly, during an assembly or by disseminating writings”. Sections 267 et seq. StGB criminalise different types of document or data forgery, Sec. 164 StGB different types of false suspicion. “Fake news” may also be addressed under Sec. 130 StGB (“Volksverhetzung” – sedition), especially according to Sec. 130 (2) no.  1 a), if the dissemination of false, distorted or de-contextualised statements leads to hatred against a national, racial, religious or ethnic group, or against an individual because of his or her membership of such a group.40 Not every untrue statement about the beforementioned groups meets this criterion. Rather, the dissemination of untrue statements must be aimed at creating or nourishing a hostile attitude. Section 130 (3) StGB penalises the so-called Auschwitz-Lie. Whoever publicly or during an assembly denies an act committed under the rule of National Socialism of the kind indicated in Sec. 6 (1) of the Code of Crimes against International Law in a manner which is suitable for causing a disturbance of the public peace incurs a penalty of imprisonment for a term up to five years or a fine. Recently, Sec. 126 (2) StGB has drawn some attention in connection with disinformation and the phenomenon of clickbaiting.41 The provision concerns “the disturbance of the public peace”. According to this provision, a person incurs a penalty of imprisonment (for a term not exceeding three years) or a fine, who, despite knowing better and in a manner which is suitable for causing a disturbance of the public peace, pretends that the commission of an unlawful act referred to in subsection 1 is imminent. Subsection 1 refers, inter alia, to murder, grievous bodily harm and offences against personal liberty. In 2019, a blogger disseminated a fake report about an alleged terrorist attack with 136 dead and 237 injured under the heading “News and Information” and was therefore sentenced to a fine of 12,000 euros by the Mannheim District Court.42 The invented text referred to 50 attackers responsible for a “bloodbath of apocalyptic proportions”. It also said that the police had imposed a news blackout. Only after passing a paywall, readers were informed that the story was madeup. The blogger compared his post to Orson Welles’ radio play “The War of the Worlds” and stated that he had wanted to create awareness for a lack of media fulness” of the “üble Nachrede” is to be affirmed only if the offender has at least failed to exercise due care, see the references in Hoven, ZStW 129 (2017), 718 (726 et seq.). 40 See Hoven, ZStW 129 (2017), 718 (731 et seq.). 41  The term describes a mechanism in online communication, which is characterised by a headline that arouses curiosity, but does not contain further contextualising information, inducing recipients to click on the link to the offer (and thereby exploiting the so-called curiosity-gap) and thus increasing its retrieval figures. 42  AG Mannheim, 07.01.2019 – 20 Cs 806 Js 10181/18, MMR 2019, 341–342.

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literacy and to address the problem of “fake news”. The appeal is pending at the Mannheim Regional Court. All in all, criminal law de lege lata is mainly used to sanction particularly dangerous deceptions and manipulations that affect individuals or definable groups. There are ongoing discussions, though, on the necessity of a more comprehensive approach concerning the regulation of “Fake News” and whether it makes sense in terms of criminal policy to tighten up the personal users’ liability under criminal law.43 Thought is being given to expanding existing criminal provisions so that they can cover a disturbance of the public peace through false reports on other topics but crimes (e.g., within the scope of Sec. 130 StGB44), but also to introducing new criminal offences. At the political level attempts to criminalise targeted disinformation campaigns aiming to destabilise the state have been made from time to time but have so far remained on a rather abstract level. They have not yet moved to the stage of concrete legislative proposals debated in parliament. Consideration was also given to a kind of “review board” that would uncover and label propaganda sites.45 In the course the Covid-19 pandemic political calls for a change in the legal situation have increased. For example, the Minister of the Interior of Lower Saxony, Boris Pistorius, demanded fines and “threats of punishment” against those who published health related disinformation. He spoke in favour of a legal ban to publicly spread untrue claims about the supply situation of the population, medical care or the cause, infection routes, diagnosis and therapy of the Covid-19 disease.46 In view of the risks to the formation of public opinion in the wake of elections, it has been considered to introduce a criminal offence for disinformation that is likely to influence the voters’ will in the run-up to an election.47 A broad agreement can be witnessed, however, on the premise that it is not a viable way to make journalistic due diligence the yardstick for citizens’ statements.48

43  Hoven, ZStW 129 (2017), 718 et seq.; Schünemann, GA 166 (2019), 620 et seq.; Kusche, in: Beck/Kusche/Valerius (eds.), Digitalisierung, Automatisierung, KI und Recht, 2020, 421 (427–437). 44  Hoven, ZStW (129) 2017, 718 (742); Mafi-Gudarzi, ZRP 2019, 65 (68). 45 See Welt, Unionspolitiker fordern Strafregelungen gegen “Fake-News”, available at https://www.welt.de/politik/deutschland/article160239509/Unionspolitiker-fordern-Strafregelungen-gegen-Fake-News.html (last accessed on 12.01.2022). 46  See Süddeutsche Zeitung, Es gibt längst Regeln gegen die Infodemie, available at https:// www.sueddeutsche.de/medien/fake-news-coronavirus-gesetze-1.4849743 (last accessed on 12.01.2022). 47  Mafi-Gudarzi, ZRP 2019, 65 (68); Löber/Roßnagel, in: Steinebach/Bader/Rinsdorf/ Krämer/Roßnagel (eds.), Desinformation aufdecken und bekämpfen, 2020, 149 (181–182). See V. for further information on the topic “Disinformation and Election”. 48  Kusche, in: Beck/Kusche/Valerius (eds.), Digitalisierung, Automatisierung, KI und ­Recht, 2020, 421 (433).

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e) Standards of good journalistic work The duty to report truthfully is part of the traditional standards of good journalistic work. Violations of these standards as such cannot be punished as criminal or administrative offences. They can be used, however, as a standard of care to be considered in the course of civil or criminal proceedings or lead to complaints and supervisory measures under media law, exercised by the German Press Council (self-regulatory body for the printed as well as the online press), internal institutional control bodies of the broadcaster (public service broadcasters) or by the State Media Authorities (private broadcasters and telemedia49).50 f) Social bots Social bots – defined as an automated software agent that simulates human behaviour in automated interactions on social network sites – offer the possibility of spreading false information very widely in a very short time. The obligation to identify and label the use of social bots can therefore be seen as a contribution to the authenticity of the communication process and the protection of the individual and public opinion forming process from disinformation.51 According to Sec. 18 (3) of the Interstate Media Treaty, telemedia providers in social networks are obliged to indicate the fact of automation in the case of automatically generated content or messages by means of a computer programme, provided that the account used for this purpose has been made available for use by a natural person in terms of its external appearance. The shared content or the message must be preceded by a clearly legible notice that it was created and sent automatically using a computer programme that controls the user account. A “creation” in the sense of this regulation is not only considered if content and messages are automatically generated immediately before transmission, but also if a pre-prepared content or a pre-programmed message is automatically used. Media intermediaries52 offering social networks have the obligation under Sec. 93 (4) of the Interstate Media Treaty to ensure the labelling of social bots operating on their social networks.

49  Telemedia are understood as all electronic information and communication services, unless they can be regarded as telecommunications services or telecommunications-supported services or broadcasting. 50  See for further information III., IV.1–3. 51 See Löber/Roßnagel, MMR 2019, 493. 52  See for futher information II.5.c).

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3. Remedies for a rectification of false news or information disseminated by media outlets The German legal system provides two options for a rectification of false information disseminated by media outlets: the right of reply and the (aforementioned – II.1.c)) claim for retraction, correction, or supplementation of an inaccurate factual allegation. In the former case, the person concerned contrasts the statement made by the media outlet with a statement of his or her own, which must then be disseminated in the same manner as the initial statement. In the latter, the media outlet will be obliged to retract or correct its own statement. The claim for retraction thus interferes more intensively with the rights of the media outlet, as it requires the publisher of the initial statement to document publicly that the report was not, or at least not entirely, accurate. The claim for correction or retraction, which finds its legal basis in the general tort and injunction provisions in the German Civil Code (Sec. 823, 1004 BGB), can only be justified if the published statement or information is proven to be false, violates53 the claimants legally protected interests, cannot be remedied in any other way, and if it is necessary to remedy the damage to reputation in the individual case.54 It is, however, not dependent on fault. The right of reply in the media, on the other hand, can be enforced under considerably less demanding conditions. It is stipulated in the respective State Press/Media Acts (for the printed press and broadcasting) as well as in Sec. 20 of the Interstate Media Treaty (for telemedia “with journalistic editorial content”55). The publication of any fact56 is enough to trigger the right. Neither does the claimant have to prove that the published factual claim is actually false, nor is a further differentiation between allegedly defamatory, or critical, or miscellaneous factual statements necessary.57 Thus, the right of reply is designed as a 53  Not every report that is inaccurate can therefore trigger a claim for retraction or correction. Rather, a balance must be struck between the rights conveyed by the freedom of the press and broadcasting on the one hand, and the rights of the persons affected by the reporting on the other. 54  This requirement of a continuing damage to reputation may no longer be met if the reporting in question took place some time ago and may already have been forgotten. 55  Apart from electronic editions of newspapers or Internet presences of newspapers and magazines, it is disputed when these conditions are met in detail. See for the discussion Held, in: Binder/Vesting (eds.), Beck’scher Kommentar zum Rundfunkrecht, 4.  Aufl. 2018, §  54 RStV, para 48. The content in question may be characterised by a certain level of selectivity and structuring according to its assumed significance for the information and opinion-forming process, a perceptible degree of professionalism and organisational consolidation that guarantees a certain continuity. 56  Sometimes, it may be difficult to assess wether a statement is actually a statement of fact or opinion, see, e.g., BVerfG, NJW 2021, 1585, where the FCC concluded that the right of reply only requires media outlets to publish counter statements in cases where the disputed statements are presented as irrefutable conclusions. 57  Only completely insignificant/trivial assertions are exempted from the right of reply.

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specification of the audiatur et altera pars-principle. Typically, the Press/Media Acts stipulate that the request must be made within a certain time frame (“without delay” and an absolute limitation period of three months) and must be limited to a reply to the facts contained in the publication. The counterstatement is to be published, in principle free of charge,58 in the next possible issue of a publication, in the same section and in the same type as the original statement. If the person responsible refuses the request, claims for reply can (and may only) be filed as part of fast-track proceedings (“einstweiliges Verfügungsverfahren”) before a civil court. 4. Legal consequences depending on whether false information is spread through the use of the Internet The use of the Internet and the particular dissemination effect associated with it may be included in the assessment of the legal consequences – for example by taking into consideration the publicity effect of an Internet publication and the findability via search engines.59 When it comes to the balancing exercise between conflicting fundamental rights in cases concerning media reports or the dissemination of information relating to one’s person as a result of communication processes over the Internet, the FCC also often refers to the specific conditions of Internet communication. For instance, in the “Right to be forgotten I”-decision, in which the complaint challenged a judgment of the Federal Court of Justice that had rejected the complainant’s action seeking injunctive relief against the availability of press articles from more than 30 years ago in an online archive,60 the FCC stated that “the present day realities of information technology and the dissemination of information on the Internet add a new legal dimension”. In the respective case particular consideration was given to the fact that information, once it is digitalised and published online, remains permanently retrievable by a large audience and can easily be combined with other data. 61 Although it was not the task of constitutional law to stop or neutralise such developments by the means of a distinct re-interpretation of the Basic Law, the new risks for the protection of fundamental rights that come with the rationalities, the specifics and the habits of Internet communication, must nevertheless be taken into consideration when interpreting and applying the Basic

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Exception: Counterstatement in the advertising section. Payments may be due here. In criminal law, the “effects of the offence” can be taken into account as an aggravating factor when assessing the penalty. In the areas of press law and the right to free speech the dissemination effects of Internet communication can be taken into account while assessing how seriously the rights of the person concerned are affected by the statement in question. 60  The respective articles lawfully covered the complainant’s conviction for murder and thereby also revealed his name. 61  BVerfGE 152, 152 (para 102 and 103). 59 

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Law as well as other legal standards that have to be interpreted in accordance with these standards. 62 5. Laws protecting media pluralism The need to safeguard media pluralism and the recognition of the public function of media outlets have always been cornerstones of the FCC’s jurisprudence and therefore be regarded as well-established constitutive goals in the German legal system. Safeguarding efforts are particularly pronounced in the broadcasting sector. The FCC assumes here that market mechanisms – unlike in the press market – are not sufficient to establish a pluralistic media order and therefore calls for active legislative measures to secure pluralism in this media sector. a) Constitutional law and public broadcasting In its so-called FRAG ruling, the FCC expressed its view that, in contrast to other fundamental rights like the freedom of the press, freedom of broadcasting is not only granted to its bearer for the purpose of exercising his or her own freedom, but is rather intended to serve the free formation of individual and public opinion. 63 Since then, the freedom of broadcasting is referred to as a “freedom in service” in settled case-law. This exceptionalism is routed in the FCC’s assumption that communication via broadcast is of extraordinary communicative importance in a democratic society due to its broad impact, topicality and the suggestive power of moving images.64 As mentioned before, the Court also assumes that the degree of media diversity required by the constitution cannot be guaranteed by the free market alone. 65 As a consequence, the requirements to ensure media pluralism in the broadcasting sector are overall more demanding than in the press sector. This, in turn, finds its reflections in corresponding legislative duties. The legislator is under the obligation to shape this field of communication with a tighter regulatory grip and may not, in particular, rely solely on the outcome of market processes as they most likely will fail to achieve the goal of broadcasting freedom: ensuring a free individual and public opinion-forming process. 66 Public and private broadcasting may be assigned different tasks in this regulatory framework. 67 But the overall mandate 62 

BVerfGE 152, 152 (para 96 et seq.). BVerfGE 57, 295 (319). 64  BVerfGE 90, 60 (87). 65  BVerfGE 73, 118 (158 et seq.); 74, 297 (324 et seq.); 83, 238 (297 et seq.); 90, 60 (90); 114, 371 (388 et seq.); 119, 181 (215 et seq.); 136 9 (299); 149, 222 (260). 66  BVerfGE 119, 181 (217); 136, 9 (29); 149, 222 (260). 67  The highest regulatory demands are placed on public service broadcasters in terms of ensuring diversity, but private broadcasters also must meet certain minimum requirements with their programmes. According to Sec. 26 of the Interstate Media Treaty, it is task and purpose of the public service broadcasters to act as a medium and factor in the process of free 63 

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to guarantee freedom of broadcasting must be aimed at ensuring that the diversity of existing opinions is represented in broadcast media with the greatest possible breadth and completeness. 68 In a dual broadcasting system, public broadcasters are considered to be the main guarantor of diversity and therefore an essential contribution to media pluralism, as long as it is ensured that all relevant social forces can have their say in the overall programme and that the content of the programme is governed by binding principles that guarantee a balance in terms of variety, objectivity and mutual respect. 69 These requirements, as well as the requirement of distance from the state, must be secured by legal provisions.70 In 2018 and 2021 the FCC ruled that the requirements related to the legislative design of the broadcasting system for safeguarding media pluralism are not rendered obsolete by the development of communication technology and the changing media markets. On the contrary, in the FCC’s eyes the potential impact of the services and content provided by public service broadcasters might be more important than ever.71 The Court does not call into question that new technologies have increased the amount and variety of available information and have enabled additional forms and ways of transmission and innovative programme-related services, and that there is now an unprecedented quantity of information only a few clicks away. However, the FCC raises doubts that this development has fostered journalistic quality and diversity and significantly enhanced the individual and public opinion-forming process. Further, the Court assumes that digitalisation of the media and in particular the focus on Internet individual and public opinion formation by producing and disseminating a wide variety of offers and thereby meeting the democratic, social and cultural needs of society. In their offers, public service broadcasters have to provide a comprehensive over-view of international, European, national and regional events in all major areas of life. In this way, they should promote international understanding, European integration and social cohesion in the federal and state governments. Their offers are used for education, information, advice and entertainment. They have to offer contributions in particular to culture. Entertainment should also correspond to a public service profile. When fulfilling their mandate, public service broadcasters must follow the principles of objectivity and impartiality of reporting, the diversity of opinions and the balance of their offers. The content-related requirements for programmes of private broadcasters are laid down in Sec. 51 of the Interstate Media Treaty. The programmes need to respect human dignity as well as the moral, religious and ideological beliefs of others. They should promote togetherness in a united Germany as well as international understanding and work towards non-discriminatory cooperation. The provisions of the general laws and the legal regulations for the protection of personal honour are to be observed. The programmes should contribute to the representation of diversity in the German-speaking and European area with an appropriate amount of information, culture and education. 68  BVerfGE 57, 295 (319  et seq.); 73, 118 (152  et seq.); 90, 60 (88); 114, 371 (387  et seq.); 136, 9 (28); BVerfG, NVwZ 2021, 1283 (1285 para 76). 69  BVerfGE 73, 118 (158 et seq.); 74, 297 (324 et seq.); 83, 238 (297 et seq.); 90, 60 (90); 114, 371 (388 et seq.); 119, 181 (215 et seq.); 136 9 (29); 149, 222 (260). 70  BVerfGE 12, 205 (262). 71  BVerfGE 119, 181 (214 and 215); 136, 9 (28); 149, 222 (261).

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networks and platforms, including social media, might have fostered tendencies of concentration and monopolisation in respect of content providers, disseminators, and intermediaries. The increase in non-journalistic providers that do not prepare and refine information in a journalistic manner, has, in the eyes of the Court, not only enriched the world of information, but also made it more confusing and therefore more difficult to handle for the purpose of forming one’s individual as well as the public opinion.72 Therefore, the FCC considers the mission of public service broadcasting to be essential, especially in times of increased complex information on the one hand and one-sided representations, filter bubbles, fake news and deep fakes on the other.73 b) Law on media concentration Because the FCC – as mentioned above – continues to stress the intolerable consequences of a possible market failure for the opinion forming process, and points out that the means of competition law alone could not satisfy the objective of freedom of broadcasting to be achieved, the German approach to restricting concentration in the media sector is not limited to the instruments of competition law 74 addressing the abuse of economic power (Act against Restraints of Competition – GWB),75 but provides also for a specific media concentration regulation by the means of the Interstate Media Treaty.76 While the Act against Restraints of Competition mainly focusses on cartels, abusive practices by dominant companies and merger control, the legal regime of the Interstate Media Treaty primarily aims at preventing a predominant influence on public opinion based on journalistic and communicative criteria. A special commission, which acts as a body of the competent State Media Authorities, is responsible for the application of these rules: the Commission on Concentration in the Media (Kommission zur Ermittlung der Konzentration im Me­ dienbereich – KEK).77 The KEK examines whether a media company has gained 72 

BVerfGE 149, 222 (262). BVerfG, NVwZ 2021, 1283 (1286 para 81). 74  The latest innovations in the field of media related competition law include a set of special provisions for the assessment of mergers (Sec. 38 (3) of the Act against Restraints of Competition), an exception to the general ban on cartels in the case of economic cooperation of newspaper and magazine publishers if it serves to protect am economic base within cross-media competition (Sec. 30 (2 b) of the Act against Restraints of Competition) as well as a clarification that a “market” within the meaning of competition law also exists if the exchange relationship between the transacting parties does not involve monetary payments. 75  For the system-induced limits to the protection of media pluralism through competition law see Paal, GRUR Int. 2017, 481 (483 et seq.). 76  Under the German Basic Law, the States have exclusive legislative competences concerning the regulation of media content and media diversity. Media-linked commercial law, however, may be passed by the federal legislator. 77 For further information see https://www.kek-online.de/en/about-us#c3692 (last accessed on 12.01.2022). The commission consists of experts in broadcasting and commercial 73 

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or will by the way of fusion gain predominant influence on public opinion. Subsequently, a whole range of different measures can be taken, including a ban on mergers or the obligation to make broadcasting time available to independent third parties or to include so-called “regional windows” in one’s own programme. However, this approach in his present form has a significant flaw when it comes to tackling the danger of predominant influence on public opinion: it is “television-based”, which means that the provisions refer to the audience share in German television as the key factor for assessing the threshold for regulatory orders addressing potential impairments to media pluralism by certain media outlets (Sec. 60–62 of the Interstate Media Treaty). The influence on other media sectors can only be captured if a certain threshold of audience share in television is already met, which means that the media outlet in question or at least one of the merging companies must be engaged in nationwide private broadcasting. Otherwise, the regulations for the control of media concentration do not apply in the first place. This focus is understandable from a historical point of view, but is unlikely suited to address the current challenges. Even though television is still a significant source of information and has an important impact on the formation of private as well as public opinion, one cannot help but notice that the potential power over the opinion-forming process exercised by onlineplatforms and online intermediaries cannot be addressed properly through the current regulatory scheme. Non-broadcasting-linked influences on public opinion have constantly increased in the last two decades and are not to decrease any time soon. Nowadays, it’s the online platforms that establish contact between individual users and available communication and information services and thus shape a large area in which public communication takes place.78 Approaches to reform the television centred regulatory scheme and to adequately address cross-media effects on horizontal and vertical markets proved to be politically highly controversial and have not been successful so far. c) Securing pluralism through the implementation of regulations for digital service providers A consensus that could be reached successfully concerns another area important for ensuring media pluralism: since 2020, the Interstate Media Treaty contains fundamentally new requirements which aim at securing pluralism through the implementation of regulations for Internet providers that act as gatekeepers for media content. To create a more suitable legal framework for the changed media landscape, the previous State Treaty on Broadcasting, that covered televilaw as well as some directors of the State Media Authorities. The members of the Commission are independent in the performance of their duties and are not bound by instructions. 78  G. Wagner, GRUR 2020, 329 (331).

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sion, radio and certain telemedia79, was replaced with the ‘State Treaty on the modernisation of media legislation in Germany’ (short: “Interstate Media Treaty” – MStV), which has come into force November 7th, 2020 after contentious legal debates and two public consultations. 80 In addition to some adjustments in the field of broadcasting, 81 the Interstate Media Treaty now has an extended scope of application in order to fit more suitably into the overall aim of further developing a legal framework that preserves pluralism and promotes diversity in a rapidly changing digital media landscape – an approach also reflected by the Treaty’s new designation: it is no longer the “Interstate Broadcasting Treaty” but the “Interstate Media Treaty”. The regulatory path taken complements the approach pursued so far in the Telemedia Act, which relates to content removal in relation to Internet service providers.82 The Interstate Media Treaty contains fundamentally new requirements aimed at securing pluralism through the implementation of regulations for Internet providers that act as gatekeepers for media content (e.g., search engines, smart TVs, virtual assistants, app stores, social media). These services are accounted for as “media platforms”83, “user interfaces”84 or “media intermediaries”85 and are now, inter alia, subject of transparency obligations (Sec. 85 and Sec. 93 of the Interstate Media Treaty) and the principle of non-discrimination when it comes to journalistic and editorial content, on whose perceptibility they have a special influence (only for media intermediaries, Sec. 94 of the Interstate Media Treaty). 86 The Treaty also subjects them to an oversight by the State Media Authorities.87 79  Telemedia are understood as all electronic information and communication services, unless they are telecommunications services or telecommunications-supported services or broadcasting. 80  An English translation of the Interstate Media Treaty can be obtained here https://ec. europa.eu/growth/tools-databases/tris/en/search/?trisaction=search.detail&year=2020& num=26 (last accessed on 12.01.2022). 81  Due to the constitutional requirements already mentioned above, broadcasting still has a special position within the regulatory framework. 82  For this approach IV.6.a). 83  Any telemedium that combines broadcasting, broadcast-like telemedia or telemedia in accordance with Sec.  19 (1) [online-press] to create an overall offer determined by the provider, Sec. 2 (2) No.  14 MStV. 84  Pursuant to Sec. 2 (2) No.  15 MStV defined as the “textually, visually or acoustically mediated” display and control level of or for media platforms. 85  Are pursuant to Sec. 2 (2) No.  16 MStV defined as any telemedia which also aggregates, selects and presents journalistic and editorial offers of third parties in a generally accessible way without combining them into an overall offer. 86  The Interstate Treaty applies to media intermediaries, media platforms and user interfaces insofar as they are intended for use in Germany. They are regarded as intended for use in Germany if they are aimed at users in Germany, in particular through the language used, the content or marketing activities offered, or if they aim to refinance a substantial part of such in Germany. 87  These authorities are and have ever been independent and non-governmental and were

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Under the new transparency scheme, intermediaries are required to provide information in an accessible language about the criteria that determine how content is accessed and found and how the content is aggregated, selected, presented and weighted. In view of the complexity of the algorithmic selection it remains to be seen how these requirements can be put in practice. Confidentiality interests worthy of protection could also be affected here. A discrimination within the meaning of the law is assumed if the criteria that determine the access of a content or the criteria regarding the aggregation, selection and presentation of content and their weighting are systematically deviated in favour or at the expense of a certain content, or if these criteria systematically hamper particular contents directly or indirectly. It is not yet clear to what extent this will limit forms of algorithmic selection that are also based on individual user histories and preferences or whether the provisions on non-discrimination can be practicably applied in the face of many different manifestations of intermediaries. An infringement of the provisions on non-discrimination can be asserted by providers of journalistic-editorial content at the competent State Media Authority. In obvious cases, the infringement can also be followed ex officio. Notwithstanding the preceding restrictions, the Interstate Media Treaty leaves it up to the Internet providers to determine the access and ordering criteria for their services. Consequently, the operators can also regulate the handling of disinformation largely according to their own concepts. Moreover, according to the explanatory memorandum to the Interstate Media Treaty, the dissemination of (unlawful) disinformation can also provide an objective reason for discriminating against an offer. They must, however, disclose the requirements.88 6. Media literacy campaigns Imparting media literacy and informing the public about disinformation are two of the State Media Authorities’ primary remits outside of their legal supervisory activities. They publish media literacy reports89 and initiate various projects to promote media education, particularly in the responsible handling of media, and develop guides and information resources for parents, teachers and educators.90 Recently, a study on various types of disinformation and misinformation was published on behalf of the Committee Chairperson Conference of previously mainly responsible for the supervision of private broadcasters, see also below under III. 88 See Ferreau, ZUM 2021, 204 (208 et seq.). 89  Available at https://www.die-medienanstalten.de/publikationen/jugendschutz-medien kompetenzbericht/fakt-oder-fake-jugendschutz-medienkompetenz-und-desinformation (last accessed on 12.01.2022). 90  Projects organised by the State Media Authorities can be found here https://www.diemedienanstalten.de/en/areas-of-interest/media-literacy (last accessed on 12.01.2022).

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the German Media Authorities encompassing both the communication science and the legal perspective alike.91 7. Research addressing the issue of disinformation For about five to seven years, a strong increase in scientific discussions on the topic of disinformation can be observed. A compilation with the claim to completeness cannot be provided here but references to some of the larger contributions. Several large-scale interdisciplinary scientific studies on disinformation have been published in the last two years.92 Within the framework of the broadbased research project “Detecting and Combating Disinformation (DORIAN)” it was found, for example, that the topics of “internal security” and “migration” clearly dominated the agenda of German-language “fake news” during the period under study (2017–2019) and that the misinformation examined was largely characterised by populist argumentation patterns. Furthermore, most fake news did not even come close to meeting the quality standards of professional journalism in terms of text structure and internal consistency of facts.93 The question of which of the features that have been described as characteristics of disinforming content increase the impact of fake news and the effectiveness of warning notices and other interventions have been investigated by media psychologists.94 From a computer science perspective, possibilities for automated detection of disinformation on the Internet were highlighted. The researchers concluded that although high hit rates in the recognition of texts containing disinformation with linguistic methods and machine learning procedures are possible, error rates of sometimes 30 % make a final assessment by humans absolutely necessary. With regard to the recognition of images and components of image montages, the technology has matured to such an extent that error rates are now only in the range of less than one per thousand. However, the complexity of deep fakes is still pushing the technology to its limits.95 From a legal perspective, the study promotes a combination of various interacting approaches 91  Möller/Hameleers/Ferreau, Typen von Desinformation und Misinformation, 2020. An executive summary in English is available here https://www.die-medienanstalten.de/filead min/user_upload/die_medienanstalten/Publikationen/Weitere_Veroeffentlichungen/GVK_ Summary_EN_final_web.pdf (last accessed on 12.01.2022). 92 See inter alia Steinebach/Bader/Rinsdorf/Krämer/Roßnagel (eds.), Desinformation aufdecken und bekämpfen, 2020; Möller/Hameleers/Ferreau, Typen von Desinformation und Misinformation, 2020; Vodafone Stiftung Deutschland (eds.), Desinformation in Deutschland, Düsseldorf 2021. 93  Bader/Jansen/Rinsdorf, in: Steinebach/Bader/Rinsdorf/Krämer/Roßnagel (eds.), Des­ information aufdecken und bekämpfen, 2020, 49 et seq. 94  Högden/Krämer/Meinert/Schaewitz, in: Steinebach/Bader/Rinsdorf/Krämer/Roß­ nagel (eds.), Desinformation aufdecken und bekämpfen, 2020, 77 et seq. 95  Halvani/v.Zuydtwyck/Herfert/Kreutzer/Lui/Simo Fhom/Steinbach/Vogel/Yannikos/ Zmudzinski, in: Steinnach/Bader/Rinsdorf/Krämer/Roßnagel (eds.), Desinformation aufdecken und bekämpfen, 2020, 101 et seq.

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from the areas of state regulation and co- and self-regulation as well as the combination of technical and regulatory measures for a legally compatible, effective handling of disinformation. It is rightly emphasised that constitutional law sets limits to the approach of linking legal consequences at the automated detection of false news and that in case of statements that are not illegal, the power of social debate must be relied upon. Law can only make a limited contribution in this context. The main issue here is maintaining the conditions for the self-organisation of social communication.96 The study sees no major need for correction with regard to the substantive legal situation in Germany. A new, general legal regulation on disinformation in addition to the already existing criminal offences is neither regarded as necessary nor practically feasible. However, the protection of authors whose contributions have been wrongly blocked or deleted should be improved.97 The aim of the study by Möller, Hameleers and Ferreau was to define and distinguish between various phenomena of disinformation from the perspective of communication science and to provide them with a legal classification in a second step. The authors differentiate between misinformation and disinformation and thereby depict two types of misinformation (inaccurate, unintentionally decontextualised reporting and unintentionally misleading content) as well es five types of disinformation (intentional decontextualization of real information, intentional false information, manipulative (political) advertisement, unauthentic and misleading pseudo-journalism and last but not least propaganda). They propose to increase the transparency of institutions of voluntary self-control within the meaning of Sec. 19 (3) sentence 1 of the Interstate Media Treaty,98 to introduce labelling obligations for paid political advertisements on social networks, to prohibit domestic as well as foreign state authorities and political parties from using social bots and to obligate operators of media intermediaries to delete or block content that illegally mimics journalistic-editorially designed offers and is thus capable of misleading users. Furthermore, domestic and foreign state authorities should be prohibited from offering journalistic-editorial telemedia (telemedia offers which inform the public on relevant processes falling within the scope of responsibility of a state authority are permissible). And finally, the authors propose that general fact-check institutions such as the EU East StratCom Task Force should be designed free of state control.99

96  Löber/Roßnagel, in: Steinebach/Bader/Rinsdorf/Krämer/Roßnagel (eds.), Desinfor­ mation aufdecken und bekämpfen, 2020, 149 (187). 97  Jansen/Johannes/Krämer/Kreutzer/Löber/Rinsdorf/Roßnagel/Schaewitz, in: Steinebach/Bader/Rinsdorf/Krämer/Roßnagel (eds.), Desinformation aufdecken und bekämpfen, 2020, 207. 98  For further information see IV.6.c). 99  Möller/Hameleers/Ferreau, Typen von Desinformation und Misinformation, 2020.

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In a recently published article, Yoan Hermstrüwer evaluates different regulatory approaches that deal with disinformation. In doing so, he assumes that there is still a lack of empirically reliable knowledge about the actual preconditions of the opinion-forming process and that the suitability of regulatory steps remains therefore somewhat unclear. He favours regulatory instruments that strengthen user autonomy and reduce monetary incentives to produce and distribute disinformation.100 In the run-up to the 2017 federal election, Sängerlaub, Meier and Rühl analysed the originators, distribution channels and effects of online false reports with a national reach on behalf of the Stiftung Neue Verantwortung.101 In 2021 the Stiftung Neue Verantwortung also published a study on digital news and information literacy.102

III. Disinformation: Administrative Authorities There is no public authority in Germany that is competent to “censor” disinformation. As will be described under IV.6.c), the Federal Office of Justice is responsible for monitoring compliance with the so-called Network Enforcement Act, that seeks to specify more precisely how the operators of popular social networks must act in connection with the dissemination of (allegedly) illegal content, which, under very narrow conditions, may include disinformation.103 However, the Federal Office of Justice is not competent to delete or block illegal content itself. Blocking orders must be issued by the competent courts. The State Media Authorities are the only public agencies competent to impose prohibition and blocking orders on private broadcasters and some providers of audio-visual and/or journalistically edited content available online that infringes journalistic due diligence standards.104 They are, however, as a matter of constitutional necessity created as independent regulatory agencies which are not integrated into the general administrative structure and therefore not part of the state administration.105 They check, inter alia, whether media content 100  Hermstrüwer, in: Hermstrüwer/Lüdemann (eds.), Der Schutz der Meinungsbildung im digitalen Zeitalter, 2021, 149–188. 101  Sängerlaub/Meier/Rühl, Fakten statt Fakes, 2018, available under https://www. stiftung-nv.de/sites/default/files/snv_fakten_statt_fakes.pdf (last accessed on 12.01.2022). The Stiftung Neue Verantwortung describes itself as a non-profit think tank for the current political and social issues of new technologies. 102  Meßmer/Sängerlaub/Schulz, „Quelle: Internet“? 2021, available under https://www. stiftung-nv.de/sites/default/files/studie_quelleinternet.pdf (last accessed on 12.01.2022). 103  See for further information IV.6.c). 104  There is no supervisory authority for the press sector which is only subject to self-regulatory mechanisms, see IV.3. for further details. 105  The FCC explicitly called for supervision of media outlets performed by independent authorities, BVerfGE 73, 118 (161). Media regulation falls under the legislative competence of

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complies with the legal provisions on the protection of minors in the media, advertising and general “programming principles”, which also include due diligence standards for journalistic work. Since 2020, they have been able to monitor compliance with journalistic due diligence obligations laid down in Sec. 19 of the Interstate Media Treaty for certain commercially offered, journalistically-editorially designed telemedia,106 but only if these content providers have not joined a voluntary self-regulation body. So, in principle, the State Media Authorities may reassess within the framework of a supervisory procedure whether the content of private broadcasters and some online providers has been created in compliance with journalistic due diligence obligations, i.e., has been correctly researched, aggregated and produced. Proceedings have been initiated in this regard, but so far there have hardly been issued any orders to delete disinformation on this basis. All in all, the State Media Authorities take a very cautious approach to questions of “truth control” within the framework of their supervisory activities.

IV. Actors: Media Outlets and Internet Service Providers 1. Responsibility of traditional media outlets Traditional media outlets are legally responsible for all content that can be regarded as their own (which may include third-party content disseminated by them). Depending on the specific legal circumstances, the mere disseminator of a statement may be regarded just as responsible as the person making the assertion. In other cases, a media outlet may not be seen as a responsible actor because it discernibly dissociated itself from the reported third-party content or has observed all journalistic duties of care while reporting on a topic with a still uncertain factual basis. According to the FCC’s established case law, broadcasters – private or public – are obliged to provide “comprehensive and truthful information” in their programming.107 Regarding the freedom of the press (Article 5 (1) sentence 2 GG) the FCC also decided from very early on, that the press is obliged to report truthfully when it exercises its constitutional right to inform the public.108 The the Länder and is therefore regulated by the individual federal states. There are 14 State Media Authorities, corresponding to one for nearly every federal state. Berlin and Brandenburg share a joint media authority, as do Hamburg and Schleswig-Holstein. To ensure their independence, the State Media Authorities are not financed from tax revenues but from the broadcasting fee. 106  See for further information IV.2. 107  BVerfGE 57, 295 (326); 73, 118 (158, 200); 90, 60 (87); 97, 228 (267); BVerfG, NVwZ 2021, 1283 (1285). 108  BVerfGE 12, 113 (130): “Freedom of the press […] goes hand in hand with obligations which must be taken all the more seriously the higher one assesses the fundamental right of

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Court routed its findings in the importance of public opinion-forming in the “overall organism of a liberal democracy” and pointed out that “public opinion can only be formed correctly if the reader is correctly informed – within the bounds of what is possible.”109 This duty of verification and truthfulness should not be overstretched, though. E.g., the media would be unable to adequately fulfil neither its information nor its control function if it were prohibited from reporting on matters that have not yet been adequately clarified.110 Specially to avoid “chilling effects” courts may not impose requirements that reduce the willingness to use the fundamental rights and thus constrict the free communication process.111 Journalistic duties of care are also embodied in sub-constitutional law, which is now presented in more detail for the different media sectors, including the respective structures to control their compliance. a) Press Regarding the press, further elaboration and enforcement of journalistic standards of care is pre-eminently subject to voluntary self-regulation,112 but can also be found in most of the state press/media acts. For example, Sec. 6 of the Press Act of North Rhine-Westphalia states that “(t)he press shall check all news for content, origin and truth with the due diligence required by the circumstances before disseminating it.” However, both the state press/media acts as well as established case law only oblige the media to strive for truth, but not to provide an absolute guarantee of correctness. Furthermore, it has to be noted that the observance of the journalistic standards of care, as they are laid down in the respective press acts, can only be subject of review by courts in the context of concrete legal proceedings concerning a possible infringement of legally protected interests, i.e. when the publication in question also constitutes a criminal offence or violates individual rights. Journalistic duties of care for the press sector therefore primarily serve to protect legal interests and are not oriented towards an abstract truth control. A violation of the journalistic principles as such, including the obligation to verify the truth of news, cannot be independently sanctioned by public authorities,

freedom of the press. When the press exercises its right to inform the public, it is obliged to report truthfully.” 109  BVerfGE 12, 113 (130). See also BVerfG, ZUM-RD 2009, 565 (571). 110  BVerfGE 97, 125 (149). 111  BVerfGE 54, 208 (219 et seq.); 61, 1 (8); 85, 1 (15, 17); 99, 185 (198); 114, 339 (353), BVerfG, ZUM-RD 2009, 565 (571). 112  A detailed definition and differentiation of journalistic due diligence standards takes place within a framework of voluntary self-regulation of the German press, see for detailed information IV.3.

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but only in connection with specific infringements of criminal law or the plaintiffs’ rights.113 The mere disregard of journalistic due diligence can only be addressed within the self-regulatory framework of the German Press Council, which will be the subject of further consideration in a moment (IV.3.). b) Broadcasting In the context of broadcasting, selected journalistic standards are prescribed by statutory law and can be monitored by the internal supervisory bodies of the public broadcasters and the State Media Authorities within the framework of their supervision of private broadcasters. Under the German broadcasting regulation all114 nationwide115 broadcasters, public or private, are subject to the due diligence obligations set out in Sec. 6 of the Interstate Media Treaty.116 It states that reporting and information programmes must comply with recognised journalistic principles and that they must be independent and factual. Facts are to be checked for truth and origin before being disseminated with due diligence. Comments shall be clearly separated from the reporting and marked as such with the author’s name. When reproducing opinion polls, it must be expressly stated whether they are representative. Further particular regulations for public broadcasters can be found both in the Interstate Media Treaty and the respective legislative bases of the individual public broadcasters.117 According to Sec. 26 of the Interstate Media Treaty public service broadcasters must inter alia “follow the principles of objectivity and impartiality of reporting, the diversity of opinions and the balance of their offers”. With regard to the legal basis of the individual public service broadcasters, for example, the State Treaty on the South-West German Broadcasting (SWR) 113  See II.2.-3. Here, for example, the justification of a reporting that interferes with personal rights could depend on compliance with journalistic standards. 114  This mirrors the FCC’s case-law where private broadcasters, however not required by the constitution to provide all-encompassing coverage, are obliged to provide “comprehensive and truthful information and a minimum of mutual respect” in their programming too, see, e.g., BVerfGE 73, 118 (153). 115  The Interstate Media Treaty is only applicable to nationwide broadcasting. However, there are also comparable regulations for local broadcasting in the individual federal states. 116  Section 6 of the Interstate Media Treaty reads als follows: (1) Reporting and information programmes must comply with recognised journalistic principles, including when using virtual elements. They must be independent and factual. Messages are to be checked for truth and origin before being distributed with due diligence. Comments must be clearly separated from the reporting and marked as such with the author’s name. (2) When reproducing opinion polls carried out by broadcasters, it must be expressly stated whether they are representative. 117  However, these provisions often rather emphasise once again the obligation to report truthfully and therefore seldom go beyond the requirements of the Interstate Media Treaty in normative terms.

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states in Sec. 6 (1) that the SWR is “committed to the truth”. According to Sec. 5 (6) of the Act on the West German Broadcasting news must be general, independent and factual and be checked for content, origin and truth before dissemination with the due diligence standard required by the circumstances. 2. Journalistic due diligence obligations for online offers with journalistic and editorial content The Interstate Media Treaty also encompasses provisions introducing journalistic due diligence obligations for providers of content published online (telemedia118) that is assumed to be particularly relevant to the process of forming free individual and public opinion. These requirements not only apply to content disseminated by traditional media outlets, but also in specific cases to content generated outside of these structures. According to Sec. 19 of the Interstate Media Treaty, telemedia with content that is to be regarded as journalistic and editorial must comply with recognised journalistic principles.119 Therefore, the information presented must be checked by the provider for its content, origin, and substance before being distributed with the due diligence required by the circumstances. While these obligations initially primarily120 applied to offers, in which the full or partial content of periodical print products was reproduced in text or images online (now Sec. 19 (1) sentence 1 of the Interstate Media Treaty), the same applies since November 2020 to commercially121 offered, journalistically-editorially designed telemedia in which news or political information is regularly contained. Therefore, certain “online-only” news portals as well a as particular blogs, vlogs, podcasts, YouTube channels and social media profiles must now adhere to acknowledged journalistic principles (Sec. 19 (1) sentence 2 of the Interstate Media Treaty). Furthermore, compliance with these requirements is now monitored by the State Media Authorities unless the provider has submitted to an accredited self-regulatory body, e.g. the Press Council.122 In the event of violations, the 118  Telemedia are understood as all electronic information and communication services, unless they qualify as telecommunications services or telecommunications-supported services or broadcasting. The latter requires linear distribution and thus does not cover on-demand services, even if they contain audiovisual content. These are rather regarded as telemedia. 119  According to the intention of the legislator, the Press Code (see for detailed information IV.3.) is to serve as a “guideline” in the interpretation of the indeterminate legal terms of Sec. 19 (1) of the Interstate Media Treaty. 120  Outside the digital versions of newspapers (“online-press”), the scope of the provision has always been disputed. 121  Content is considered to be commercial if it contains material intended for other than private use and is not maintained only occasionally. Journalistic-editorial offers are thus usually “commercially offered” telemedia. 122  This new supervision on the observance of journalistic due diligence of online media is considered unconstitutional by some authors, see Fiedler, in: Gersdorf/Paal (eds.), BeckOK Informations- und Medienrecht, 33rd ed., 2021, §  109 MStV para 9–14.

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competent State Media Authority can – again since 2020 – impose different measures, including, in particular, complaints, prohibition, and blocking orders (Sec. 109 (1) of the Interstate Media Treaty). The imposition of a fine in the context of administrative offence proceedings is, however, still not possible.123 This new supervisory mechanism with the State Media Authorities as competent actors was and still is highly controversial because it drivates from the approach that prevailed with traditional press, i.e. to prosecute violations of journalistic due diligence only in connection with the violation of individual rights.124 As a consequence, in the event of a dispute, the scope and limits of the journalistic duties of care will no longer be reviewed only by the civil and criminal courts, as it previously has always been the case, but may also be addressed by administrative courts while deciding on the lawfulness of supervisory measures. However, such proceedings have not yet taken place with regard to the reproach of disinformation. 3. Self-regulatory measures and ethical codes of conduct implemented by media outlets More detailed definition and differentiation of journalistic due diligence standards for the printed and the online press are taking place within a framework of voluntary self-regulation of the German press. They are laid down in the German Press Code compiled by the German Press Council (Deutscher Presserat). The Press Council is a voluntary self-regulatory body formed of journalists and publisher associations. It deals with all kinds of journalistic work that has been published in newspapers, magazines or their online appearances. It was founded in 1956 as a registered non-profit association under private law.125 The Press Code was first published in 1973 and is updated since then on a regular basis. Most German publishers have committed themselves to respecting its guidelines.126 The Press Code contains publishing rules that are intended to ensure journalistic quality standards. They include inter alia the observation of truth and the preservation of human dignity, the presumption of innocence, differentiation between advertising and editorial content, guidelines for election campaign and medical reporting, as well as guidelines for avoiding one-sided reporting, respecting the rights of individuals and preventing discrimination. The concrete requirements depend on the respective individual case. Demands are 123  Such sanctions are nevertheless possible, for example, in the case of violations of advertising regulations (see Sec. 115 of the Interstate Media Treaty). 124  On the critisism see Lent, ZUM 2020, 593 et seq. 125 For further information see https://www.presserat.de/en.html (last accessed on 12.01.2022). 126  Such a commitment is necessary as the Press Code and the sanctions imposed by it are provisions of a self-regulatory nature and therefore only apply if the publishing body has submitted to the Code by voluntary commitment.

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higher if it comes to serious allegations against persons or if incorrect reporting could pose a high risk for goods worth protection (e.g., a health issue). Three elected complaints committees staffed by publishers and journalists may impose several sanctions: a public reprimand (obligation to publish), a non-public reprimand (in the interest of victims’ protection), a notice of censure or an advice notice. The activities of the Press Council itself are not subject to state control. 4. Press cards and register of journalists There is no legal basis in federal or state law for the issuing and recognition of press cards with constitutive effect and there exists no register of journalists with constitutive effect. However, the Conference of the Ministers of the Interior of the Länder has created the basis for a nationwide press card in an agreement with the German Press Council. This agreement also regulates the requirements and the issuing procedure. The national press card introduced on the basis of this agreement on 1 January 2018 is intended to make it easier for full-time members of the press to prove that they are representatives of the press, i.e. to legitimise them when exercising their right to information under press law. At the same time, the verification of press affiliation is to be simplified and accelerated for authorities and emergency services. A standing commission at the German Press Council has the task of recognising the press associations entitled to issue the national press card. This commission has so far recognised six associations.127 Journalists who present a federal press card to public institutions are recognised as journalists by these institutions on that basis alone. Journalists who do not have a standard federal press card must prove in each individual case that they are engaged in journalistic activities. That aside, neither associations whose press cards do not receive the same recognition due to different issuing practices nor journalists with a smaller scope of activity without a federal press card are restricted in their exercise of fundamental rights.128 Authorities and courts may accept the federal press card as proof of entitlement to demand information but are not obliged to do so. 5. Fact-checking mechanisms In the field of fact-checking, there is no such thing as a central office for identifying and correcting disinformation or a mandatory fact-checking mechanism. Specific legal requirements for fact-checking institutions such as expertise, procedural requirements or a transparent organisational and funding structure do not exist either. This area is mainly left to the civic sphere, with state institutions 127 

128 

BDZV, DJU, DJV, VDZ, Freelens and Verband Deutscher Sportjournalisten (VDS). See VG Düsseldorf, NVwZ 2019, 498 et seq.

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also offering advice on how to deal with false news. The independent non-profit organisation Correctiv gGmbH is very active in this respect, not least because of its cooperation with Facebook. The organisation is supported by private donors as well as donations from foundations and institutions. Occasionally, even courts refer to the findings of Correctiv, e.g., when assessing the truth about health claims in the context of the Covid-pandemic.129 The fact checking activities of Correctiv on Facebook have, however, also been the subject of legal disputes themselves. For example, the Higher Regional Court in Karlsruhe ruled that a check entry by Correctiv on Facebook was misleading for an average Facebook user and must therefore be deleted.130 In another decision, the respective Court reiterated that a posted fact check reference could be unfair in the sense of competition law if it is misunderstood by a relevant part of the platform users.131 The question as to whether references like “Lack of context – According to independent fact-checkers this information could be misleading”, which are not aimed at designating misinformation, but only seek to indicate additional facts, may permissibly be labelled with the term “fact-checking” at all, was left open.132 Public service broadcasters have created several fact checking portals, too, for example the so-called factfinder, where users can access verified information on certain topics of high relevance (disinformation upfront elections, pandemic, flood disaster, vaccinations, climate change).133 Likewise, several publishing houses, foundations, organizations, and political parties engage in “fact checking” or at least use this label. The ministries’ and authorities’ websites also frequently contain fact checks on the topics from their respective areas of responsibility.134 During the Covid-19 pandemic the authorities as well as public service media, other established publishers and institutions or political parties have significantly increased their efforts to raise awareness about disinformation.

129  Higher Administrative Court Berlin, order from 23.04.2021 – OVG 11 S 56/21, para 68 et seq. 130  Higher Regional Court Karlsruhe, judgement from 27.05.2020 – 6 U 36/20. 131  The Court assumes that the fact-checker acting in a commercial capacity, in this case Correctiv, which is paid by Facebook, is in competition with the company affected by the fact-check. Facebook in turn promotes Correctiv through linking. 132  Higher Regional Court Karlsruhe, judgement from 14.07.2021 – 6 W 8/21. 133  See https://www.tagesschau.de/faktenfinder/ (last accessed on 12.01.2022). 134  See for example the “Factcheck: ‘Prejudices against wind energy’” provided by the Federal Ministry for Economic Affairs and Energy (https://www.bmwi.de/Redaktion/DE/ FAQ/Windenergie/faq-windenergie.html) or the guidance on dealing with disinformation on the website of the Federal Government (https://www.bundesregierung.de/breg-de/themen/ umgang-mit-desinformation/falschmeldungen-erkennen-1750146), where the use of factchecks by public service broadcasters and institutions like Correctiv is recommended.

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6. Liability of Internet service providers The German liability scheme for Internet service providers is shaped by the requirements of European Union law,135 but also displays some national characteristics. Pursuant to Sec. 7 of the Telemedia Act, Internet service providers are responsible for their own content according to the general rules (“content providers”). Ownership in this context includes “adopted” contend, i.e., third party contend which is subject to some sort of editorial control exercised by the Internet service provider. Therefore, the “content” within the meaning of the law might be self-produced or appropriated third-party content. Does the provider’s service consist of the storage of information generated by users, the legal assessment changes. This is where the so-called liability filters come into play, which are stipulated in Sec. 8–10 of the Telemedia Act. They contain a system of rules limiting the liability of online intermediaries and digital platforms depending on the type of service provider. However, this filter mechanism only concerns tort liability136 but shall not affect obligations to terminate an infringement by removal or disabling access based on claims for injunctive relief and removal pursuant to Sec. 7(3) of the Telemedia Act. In this regard, the courts apply a different approach to evaluate the provider’s accountability: the concept of “Störerhaftung” (interferer accountability/breach of duty of care). Because the liability standards under the Telemedia Act and the notice and take down obligations within the scope of application of the Störerhaftung concept only apply to “illegal information”, false content disseminated on the respective platforms may only be affected if it simultaneously amounts to a criminal or administrative offence or infringes subjective rights. False content that does not meet these criteria, e.g., content that “only” violates journalistic standards, is not to be considered “illegal information” in this respect. a) Liability filters Access providers are exempted from responsibility for third-party content, which they make accessible for use or transmit through communication networks. This is only the case, though, if they actually perform only passive, automatic procedures (Sec. 8 of the Telemedia Act) and do not wilfully collude with their user. According to Sec. 10 of the Telemedia Act, host providers – as such, for example, operators of social networks are indisputably regarded – are obligated to check on the lawfulness of third-party content that has been uploaded to their platform only if they have gained knowledge of its (potential) illegality. Whether ‘knowledge’ within the meaning of Sec. 10 of the Telemedia Act has been 135 

They represent the national implementation of the E-Commerce Directive. Thus, these provisions limit the liability only with regard to compensation claims and criminal offenses. 136 

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obtained is to be determined according to the circumstances of the individual case. Once a dissemination of illegal content on the platform was brought to the operator’s attention, intervention duties occur, and measures to eliminate the respective content must be taken.137 Otherwise, the Internet service provider may be held liable for the illegal third-party content. b) Störerhaftung Especially in the case of injunction and removal claims, which have the greatest actual relevance of all remedies, the concept138 named “Störerhaftung” (interferer accountability) deals with the oftentimes indirect causation of unlawful actions by Internet service providers. It was developed in case law and can be ranged between infringement liability and a socially accepted and legally unaddressed mere facilitation of a third-party infringement.139 The “Störer” (interferer) is seen as an actor who has in some way causally contributed to an unlawful act of a third party.140 To limit this rather broad approach in terms of liability, the concept of Störerhaftung requires a breach of reasonable duties of care, which refer in case of Internet service providers to the degree they are reasonably obliged to examine third-party content. Furthermore, any obligation to check on third-party content only arises after the Internet service provider has become aware of the violation, for example because the injured party brought it to the provider’s attention. The scope of reasonable scrutiny and the measures required are – often under an intense debate – further elaborated in case law, especially by the different senates of the Federal Court of Justice (BGH).141 The obligations derived herefrom depend on the legal area and type of infringement (copyright, criminal offence, infringement of the general right to protection of personality) as well as on the performed role142 of the Internet service provider (rather active or rather passive) and the technical and economic capability to prevent the infringement. 137 

BGHZ 191, 219 para 25; BGHZ 202, 242 para 28–29. See for an overview of the concept Hoeren/Yankova, Int. Review of Intellectual Property and Competition Law 2012, 501 (502 et seq.). 139  Peifer, Int. Review of Intellectual Property and Competition Law 2017, 623 (625). 140  Constant court practice since BGH, GRUR 1955, 97 (99 et seq.). 141  BGH, GRUR 2013, 370; BGH, NJW 2016, 2106; BGH, GRUR 2009, 1142. 142  In order to avoid liability as indirect interferer, host providers are generally not obliged to check the contributions posted by users on the network for possible infringements of the law before publication. However, they are responsible as soon as they become aware of the infringement. If a person concerned informs a host provider of an infringement of his or her individual right by an other user, the host provider may be obliged to prevent such infringements in the future, BGH, NJW 2018, 2324 para 32; NJW 2016, 2106 para 23; NJW 2012, 148 para 24; GRUR 2011, 1038 para 21; NJW 2008, 758 para 41 et seq; NJW 2004, 3102. These principles are to some extent also applied to operators of Internet search engines. However, less stringent requirements are placed with regard to their duties of conduct. The operator of a search engine is therefore only subject to specific duties of conduct after beeing given a spe138 

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The provider’s profit from the service may also be taken into account as well as the significance of the violation or other legally protected interests involved, e.g., the freedom of opinion or freedom of the press. However, due to Sec. 7 (2) sentence 1 of the Telemedia Act, neither access nor host providers may be obliged to preventively143 check all uploaded content prior to its publication to ensure that it is harmless.144 The Federal Court of Justice differentiates in principle between the “unmit­ telbarer Störer” (“direct interferer”, i.e. disseminator in the narrower sense) and the “mittelbarer Störer” (“indirect interferer”) and refers with respect to the latter to the technical distributors or host providers who do not exercise direct editorial control over the content they make available. For the purpose of illustrating this distinction, reference should be made to the case in which Federal Court of Justice ruled on whether the display of unlawful content in the search results makes Google a direct or an indirect interferer. Google could be classified as a “direct interferer” if the search result pages were to be qualified as the search engine operator’s “own” content. Ownership in this sense requires that the Internet service provider has recognisably assumed responsibility for the content published on the website, which is to be assessed from the perspective of a reasonable average user on the basis of an overall consideration of all relevant circumstances.145 The Federal Court of Justice assumed that the objectionable content on the third party websites that Google makes detectable through links cannot be considered Google’s own content. In particular Google had not appropriated this content by including it in the search index.146 Google may, however, be seen as a “indirect interferer”. In principle, anyone who, without being a direct interferer, in any way intentionally and causally contributes to the disputed impairment of a legal interest, is liable as an indirect interferer. In this context, the support or exploitation of an autonomous act of a third party may suffice as a contribution, provided that the person/service procific notice of an obvious infringement that is clearly recognisable at first glance, BGH, NJW 2018, 2324 para 36. 143  After a notice has been given, however, there is an obligation to prevent further infringements insofar as this is possible and reasonable, see BGH, MMR 2015, 674 para 49. What is to be regarded as reasonable effort is to be determined based on the circumstances of the individual case, taking into account and weighing all affected interests and relevant legal evaluations. 144  A slightly different liability regime applies in the case of copyright infringements since Art.  17 of the DSM Directive was implemented through the Copyright Service Providers Act (Urheberrechts-Diensteanbieter-Gesetz – UrhDaG) in 2021. In this course, increased due diligence obligations for providers of content sharing services were stipulated, which go beyond the platform liability standards established under the Telemedia Act. 145  BGH, NJW 2018, 2324 para 28 – Suchergebnisse; NJW 2017, 2019 para 18 – klinikbe­ wertungen.de; BGH, NJW 2016, 2106 para 17 – jameda.de II; NJW 2015, 3443 para 25 – Hotelbewertungsportal; NJW 2012, 2345 para 10 et seq. – RSS-Feeds; NJW-RR 2009, 1431 para 19 – Domainverpächter. 146  BGH, NJW 2018, 2324 para 29.

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vider held accountable had the legal and factual possibility to prevent the unlawful act.147 According to settled case law, accountability as an indirect interferer may not be extended unduly, though. The Federal Court of Justice therefore presupposes the violation of duties of conduct, in particular duties of examination. The scope of these duties is determined by whether and to what extent the party claimed to be an indirect interferer can reasonably be expected to prevent the infringement under the circumstances of the individual case.148 There are numerous court decisions concerning the role of Internet service providers while handling allegedly false information and content disseminated via their services.149 Since the truthfulness of the alleged fact is decisive in cases of infringement based on false factual allegations, the courts generally assume that Internet service providers, especially search engine operators, typically do not have any knowledge about the factual circumstances and that it is therefore regularly not possible for them to validate the submission of the affected party. c) Platform liability under the Network Enforcement Act Increased due diligence obligations for Internet service providers, which go beyond the platform liability standards described above, were stipulated with the Act to Improve Enforcement of the Law in Social Networks (Network Enforcement Act – NetzDG), which came into force in October 2017. With this law the German federal legislator seeks to specify more precisely how the operators of popular social networks must act in connection with the dissemination of (allegedly) illegal content that falls within the scope of hate speech and – even only marginally – disinformation. It therefore stipulates how knowledge about third-party content is to be acquired (“flagging”) and how fast content confirmed as unlawful needs to be removed or blocked (“take down” and “stay down”). It also obliges social networks to publish a report150 on their handling of complaints every six months when they receive more than 100 complaints about illegal content in a calendar year. According to the legislative materials, the Network Enforcement Act aims at a faster and more comprehensive handling of complaints, especially from users, 147 

BGH, NJW 2016, 2106 para 22; NJW 2016, 56 para 34; NJW 2012, 148 para 21. BGH, NJW 2018, 2324 para 31; NJW 2018, 772 para 74; NJW 2016, 2106 para 22; NJW 2012, 148 para 22; NJW 2011, 753 para 15; NJW 2004, 2158; NJW 2004, 3102. 149  E.g. BGH, ZUM-RD 2019, 203; BGH, MMR 2016, 210; LG München I, ZUM-RD 2019, 278; OLG Frankfurt a.M, GRUR-RR 2018, 168; OLG Hamm, ZUM-RD 2018, 496; OLG München, ZUM-RD 2017, 626; OLG Stuttgart, NJW-RR 2014, 423; KG Berlin, K&R 2013, 593; LG Köln, MMR 2004, 183. 150  See Sec. 2 of the Network Enforcement Act. When Facebook failed to sufficiently fulfil its reporting duty, the German Federal Office of Justice (Bundesamt für Justiz – BfJ) issued a 2 million Euro fine against Facebook Ireland Limited (the BfJ is the competent prosecuting authority for administrative offences under the Network Enforcement Act). 148 

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about hate crime and other punishable content.151 It does so by, inter alia, creating an obligation to implement an effective complaint, deletion, blocking and reporting management intended to address previously observed deficits. The NetzDG shall apply to Internet service providers which, for profit-making purposes, operate online platforms which are designed to enable users to share any content with other users or to make such content available to the public (social networks). Platforms offering their own journalistic or editorial content and platforms which are designed to enable individual communication are not considered as social networks. The same goes for platforms for specific content, such as professional networks, online games or sales platforms. Social networks that have fewer than two million registered users in the Federal Republic of Germany are also excluded from the scope of the law. The NetzDG does not introduce any new criminal offences but aims to improve the enforcement of selected offences already existing.152 Concerning the combating of disinformation, the NetzDG can thereby, however, only make a very limited contribution, because only some of the criminal offences that amount to the definition of “unlawful content” within the scope of the Network Enforcement Act concern the dissemination of false factual allegations.153 The procedure for submitting complaints must be easily recognisable, directly accessible, and permanently available for the users. The providers are obliged to immediately check the complaints received and to remove the reported content if it is unlawful. In the case of a ‘manifestly unlawful content’, this must be done within 24 hours. If a post does not meet this threshold, the social networks generally have seven days to investigate and delete the content. If the decision on the unlawfulness of the content depends on the falsity of a factual allegation, the time limit may be exceeded. Besides the specific problems, that come with the task of assessing whether the published content is ‘manifestly’ unlawful, it is debatable whether social network operators as private actors are competent to assess the lawfulness of the content on a case-by-case basis, or whether that is desirable at all. Identification and qualification of illegal content is not a trivial task, especially so in the field of fact-checking. Besides this, one cannot ignore

151 

BT-Drs. 18/12356, 19. to the prevailing, but not undisputed opinion the obligations under the NetzDG are triggered by the actus reus of the listed offences (objektiver Tatbestand). The user‘s intent or other subjective characteristics are therefore irrelevant, see with further references Hoven/Gersdorf, in: Gersdorf/Paal (eds.), BeckOK Informations- und Medienrecht, 34th ed., 2021, §  1 NetzDG para 41. 153  Section 1 (3) of the Network Enforcement Act lists the offences according to the German Criminal Code that qualify as “unlawful content” within the meaning of the Network Enforcement Act. Among them are the beforementioned Sec. 126, 130, 186 and 187 of the Criminal Code. 152 According

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that the imposed responsibilities are accompanied by a transfer of power that, in turn, must be counterbalanced for the sake of users’ fundamental freedoms.154 The latter problem has recently been adressed by the German legislator. Since July 2021 the Network Enforcement Act contains provisions concerning a “counterstatement procedure”.155 The provider of a social network must have an effective and transparent procedure in place by which both, the complainant and the user whose content is disputed, can challenge the providers removal or blocking decision. They therefore have to submit a substantiated request for review within two weeks after being informed of the original decision, stating the reasons (remonstrance). The provider’s renewed decision must be justified on a case-by-case basis and communicated to the parties involved. Access to courts will remain unaffected. Section 3c of the Network Enforcement Act also opens up the possibility of establishing a private-law arbitration board. According to Sec. 3a of the Network Enforcement Act, which entered into force on 01.02.2022, social network providers subject to the Network Enforcement Act are obliged to report certain criminal content to the Federal Criminal Police Office (BKA), so that prosecution can be initiated by the competent law enforcement agencies.156 From the outset, the Network Enforcement Act has been highly contested157 in German scholarship, thereby deemed unconstitutional for a variety of reasons158 and seen at odds with European Union Law, first and foremost with the principle of origin laid down in Article 3 (1) of the E-Commerce-Directive.159 It is assumed that the threat of regulatory fines160 and the tight timelines for removal or blocking decisions might foster hasty verdicts and increase the danger of over-reporting and over-blocking that could ultimately lead to private censorship in disguise. However, the evaluation report on the NetzDG was unable 154 

G. Wagner, GRUR 2020, 329 (330). See Sec. 3b of the Network Enforcement Act. 156  Section 3a is intended to ensure that content removed or blocked by providers in response to complaints about unlawful content is not only deleted, but that the authors of the content can also be prosecuted, see BT-Drs. 19/17741, 43. Google Ireland Limited, which operates YouTube, has already filed a complaint with the Cologne Administrative Court, VG Köln, 6 L 1277/21 and 6 K 3769/21. 157  A prematurely filed constitutional complaint by a Facebook user was dismissed as inadmissible on formal grounds (duty to exhaust other legal remedies first), see BVerfG, NVwZ 2019, 1125 et seq. 158  Inter alia lack of competence of the federal legislature, infringement of the freedoms of communication due to a risk of overblocking and of the principle of legal certainty. 159  See with further references Hoven/Gersdorf, in: Gersdorf/Paal (eds.), BeckOK Informations- und Medienrecht, 34th ed. 2021, §  1 NetzDG para 5–11. 160  The Network Enforcement Act does not impose fines for an individual unlawful removal of rightful content but only if social networks do not comply with their reporting duties or fail to set up a complaints management system or do not so properly – especially where this means that they do not delete criminal content completely, on time or at all. 155 

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to identify any empirical evidence of excessive deletion or blocking.161 From the perspective of combating fake news, the requirements of the NetzDG are not of outstanding importance, because its liability rules only apply in cases where a false statement of fact simultaneously fulfils one of the criminal offences mentioned above. d) Implementation of Article 28a and Article 28b of the revised Audiovisual Media Services Directive The requirements of Art.  28a and 28b of the Audiovisual Media Service Directive (Directive 2010/13/EU, as amended by Directive (EU) 2018/1808) for video-sharing platform providers have been implemented in the total of five different sets of regulations, whose relationship to each other is still partly unclear: in Sec. 3d-f of the Network Enforcement Act (principal implementation within the scope of the Network Enforcement Act, responsibility for the violation of certain offences), in Sec. 10a-c of the Telemedia Act (procedure for the handling and resolution of users’ complaints; terms and conditions relating to audio-visual commercial communications, outside the scope of application of the Network Enforcement Act; only “activated” by a reference in another legal provision of federal or state law162; concerning “unlawful” content without further qualifying requirements), in Sec. 97–99 of the Interstate Media Treaty (with respect to audio-visual commercial communications), in Sec. 24a of the Youth Protection Act (service providers with at least one million domestic users; protection of minors, age verification systems; procedure for reporting and addressing user complaints) and in Sec. 5a-b of the Interstate Treaty on the Protection of Human Dignity and the Protection of Minors in Broadcasting and in Telemedia (protection of minors , age verification systems; content rating systems).

V. Disinformation and Elections 1. Legislation regarding elections and propaganda The German Basic Law guarantees equal opportunities for political parties and thus ensures free competition between those parties and free participation in the formation of the political will (Article 21 GG in conjunction with Article 3 GG). These constitutional requirements are also reflected in several provisions of statutory law. 161 

Eifert, Evaluation des NetzDG, 2020, BT-Drs. 19/22610, 33 (74). At present, this is only the case with Sec. 5b of the Interstate Treaty on the Protection of Human Dignity and the Protection of Minors in Broadcasting and in Telemedia. 162 

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Germany has so far not amended its electoral legislation to adress disinformation explicitly. However, the electoral laws at state and federal level provide for prohibitions of “undue influence” on elections. Theoretically, such influence as a result of a disinformation campaign could be affirmed within the framework of an electoral review procedure if the influence could be proven and considered as severe.163 In 2003, the Federal Administrative Court declared a mayoral election invalid because the person ultimately elected, who had previously held a public office (city councillor), had withheld important information regarding a land transaction for which he was responsible in this public function. The Court considered this an “official” election interference according to the relevant Election Act because of a deliberate deception of voters by withholding information relevant to the election campaign and therefore a violation of the constitutional principle of freedom of choice in the context of elections.164 In 2009, the Higher Administrative Court of Lüneburg ruled that an inadmissible election interference does not already exist if untrue allegations about a candidate are spread by private parties.165 Thus, unlike official influence, the partisanship of private parties is in principle not objectionable under electoral law, unless the statement in question is to be qualified as a serious impairment of the freedom to vote and therefore an inadmissible influence on the election by private interference.166 This can, however, according to the case law of the FCC only be assumed, if the actions taken have influenced the electoral decision by means of coercion or pressure or if the voters’ will has been influenced in a similarly serious manner without there having been a sufficient possibility of defence or compensation.167 Section 108a of the German Criminal Code criminalises voter deception. Unlike for example in Austria, where the dissemination of false news during an election or referendum is a punishable offence according to Sec. 264 (1) of the Criminal Code168 , the offence of voter deception in Sec. 108a of the German Criminal Code does not apply if a voter is deceived by disinformation in the formation of his/her will. The provision only refers to constellations in which deception causes a person to be mistaken about the content of his or her declaration when voting, or to vote against his or her will by not voting or by voting invalidly. Section 108a of the Criminal Code thus only protects the voter’s free163  According to the practice of electoral law, an inadmissible influence on the election, which constitutes an electoral defect, only exists if the influence in question significantly violates the principles of freedom or equality of the vote, BVerfGE 103, 111 (127 et seq.). 164  BVerwG, NVwZ 2003, 983 (985). 165  ÖVG Lüneburg, NdsVBl 2009, 137 et seq. 166  BVerfG 103, 111 (132 et seq.). 167  BVerfG 103, 111 (132 et seq.). 168  However, only a person who disseminates a false information at a time when a counterstatement can no longer be effectively spread can be sentenced. The scope of this provision is therefore limited to the period immediately before an election or referendum.

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dom of choice,169 but not his freedom of will. Pre-election deceptions, such as untrue election propaganda, may only result in an error of motive not addressed by criminal law.170 In view of the risks to the formation of public opinion, thought is being given in legal scholarship to introducing a new criminal offence for disinformation that is likely to influence the voters’ will or poison the political climate in the run-up to an election.171 Section 68 (2) of the Interstate Media Treaty grants political parties a legal claim to the granting of broadcasting time in private broadcasting only prior to federal elections. Outside these times commercials for political parties are not permitted according to Sec. 8 (9) of the Interstate Media Treaty. With regard to state parliamentary elections, the state media laws predominantly provide comparable regulations. For the public broadcasters, corresponding provisions can be found in the laws that apply to their scope of activity.172 As public service broadcasters are bound by the principles of objectivity and impartiality and must ensure that their offerings are balanced (Sec. 26 (2) of the Interstate Media Treaty), they have to design their media content in a politically balanced, fair and non-partisan manner at any time and may never favour any party or make election recommendations. In the run-up of elections they are usually subject to special public scrutiny and oftentimes criticized for not being impartial enough. In the totality of all the election-related broadcasts, all political parties must be subject of reporting according to their importance.173 Therefore, public service broadcasters lay down an overall editorial concept for their reporting, which they sometimes also make available to the public for transparency reasons.174 Every now and then disputes about whether broadcasters have to broadcast certain spots whose content they consider illegal175 or whether political parties have been sufficiently considered in the editorial programme176 lead to court proceedings. Broadcasters are allowed to check an election advertisement for violations of criminal law or other legally protected interests, while the right of 169  The provision is of practical importance in the case of infirm or disabled persons or persons otherwise dependent on advice or assistance. 170 See Eser, in: Schönke/Schröder (eds.), Strafgesetzbuch, Kommentar, 30th ed., München 2019, §  108a para 2. 171 See Mafi-Gudarzi, ZRP 2019, 65 (68); Löber/Roßnagel, in: Steinebach/Bader/Rinsdorf/Krämer/Roßnagel (eds.), Desinformation aufdecken und bekämpfen, 2020, 149 (181 et. seq.). 172 See, e.g. Sec. 11 (1) of the ZDF Interstate Treaty. Most public broadcasters are obliged to grant broadcasting time free of charge. 173  BVerfG, NJW 2002, 2939. 174 The concept of the Norddeutscher Rundfunk is available at https://www.mdr.de/un ternehmen/wahkonzept-bundestagswahl-zweitauseneinundzwanzig-100.html (last accessed on 12.01.2022). 175  BVerfG, NVwZ 2019, 963; BVerfG, NVwZ-RR 2006, 369; BVerfG, NVwZ 1995, 577; BVerfG, order from 10.03.1994 – 2 BvQ 6/94. 176  BVerfG, NJW 2002, 2939; Constitutional Court of the Saarland, LVerfGE 28, 281.

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review must be handled generously, i.e. in cases of doubt it must be decided in favour of the political party and its submitted election advertisement.177 However, this does not hinder a later legal assessment of the facts by the criminal courts and thus the criminal responsibility of the political party for the content of the election advertisement is not affected. In the allocation of broadcasting time and the number of election spots made available, equal opportunities for the political parties must be ensured. Differentiations according to the importance of the parties are possible, as long as a minimum amount of broadcasting time for the parties with the relatively lowest importance is not undercut. In order to ensure equal opportunities, the broadcaster has an obligation to disclose the distribution of broadcasting times and the cost price as well as an obligation to provide information on the distribution criteria of number, duration, placement and precise dates.178 With regard to election advertising in press products, there are no special regulations under press law. No law prohibits the press from taking a political position and speaking out for or against one or more political parties. In contrast to the aforementioned provisions for broadcasting, the press is not legally obliged to be non-partisan. However, the Press Code179 states that accurate informing of the public during election campaigns requires the publishers reporting on opinions and political views that they do not support. Furthermore, according to guideline 7 of the Press Code, (political) advertising must be separated from the editorial part and be marked as such. In the case of telemedia, advertising of a political nature must clearly indicate the advertiser or the commissioning party in an appropriate manner (Sec. 22 (1) of the Interstate Media Treaty). In so-called broadcast-like telemedia180 (e.g. audio or audio-visual media services on demand) the regulations applicable to private broadcasting shall apply, without there being any exemption provisions in relation to pre-election advertising spots. Therefore, advertising of a political nature is not permitted at all. 2. Electoral commissions dealing with disinformation and elections Elections to the German federal parliament (Bundestag) are supervised and managed by electoral bodies prescribed in the Federal Elections Act and the 177 

BVerfGE 47, 198 (232). Cornils, in: Gersdorf/Paal (eds.), BeckOK Informations- und Medienrecht, 34 ed. 2021, §  68 MStV para 10 et seq. 179  See IV.2. 180  According to Sec. 2 (2) Nr.  13 of the Interstate Media Treaty “telemedia with content that is similar in form and design to radio or television and that is provided from a catalogue specified by a provider for individual access at a time selected by the user (audio and audiovisual media services on demand); Contents are in particular radio plays, feature films, series, reports, documentaries, entertainment, information or children’s programmes.” 178 

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Federal Electoral Regulations: the Federal Returning Officer (Federal Election Commissioner) and the Federal Electoral Committee, which are responsible for the entire electoral area, one State Returning Officer and one State Electoral Committee per federated state, a constituency returning officer and a constituency electoral committee per constituency, an electoral officer and an electoral board per polling district and at least one electoral officer and one electoral board per constituency to establish the result of the postal ballot. The electoral bodies are not authorities or public agencies of the federal government, but institutions of social self-organisation of the electorate. They are entrusted with preparing and conducting the federal elections in accordance with the relevant legal provisions, but are not bound by instructions of public authorities or agencies. The main responsibilities of the Federal Returning Officer are, inter alia, the supervision of the proper organisation and conduct of the election, appointing the members to the Federal Electoral Committee and act as its chairperson, accepting and pre-examining notices of participation, determining and announcing the provisional general election result, declaring the final election result for the electoral area and verifying the proper conduct of the election. The Federal Returning Officer and the State Returning Officers are also responsible for identifying and combating disinformation where such information concerns their area of responsibility or the election procedure. Therefore, the Federal Returning Officer publishes disinformation that came to his/her knowledge on the official website (see the special page “Facts against Fake News”) and corrects it under individual headings, such as “Fake News often shared in social media channels”, “Facts on how the election is protected against cyber-attacks” or “Facts regarding the security of the postal ballot”.181

VI. Disinformation and the Pandemic There have been occasional political proposals to amend the current legal status on the dissemination of certain information in the light of the particular challenges of a pandemic situation. For example, the Minister of the Interior of Lower Saxony demanded fines and “threats of punishment” against those who publicly spread untrue claims about the supply situation of the population, medical care or the cause, infection routes, diagnosis, and therapy of the disease Covid-19, because such lies could cause panic.182 The legal framework, how­ever, has not been changed so far and Germany has neither established any hard or 181  Available in English at https://www.bundeswahlleiter.de/en/bundestagswahlen/2021/ fakten-fakenews.html#b1f77833-c1f9-4167-9e83-51019b667552 (last accessed on 12.01.2022). 182 See the article “SPD-Innenminister Pistorius fordert Strafen gegen Fake News”, available here https://www.spiegel.de/politik/deutschland/coronavirus-boris-pistorius-

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soft law measures for countering the dissemination of false information in the context of the Covid-19 pandemic nor appointed ad hoc committees dealing with health related disinformation. Notwithstanding the above, public authorities as well as public service media, other established publishers and institutions or political parties have significantly increased their efforts to raise awareness about false information and the damage it could do in the course of a health crisis.183

VII. Tackling Disinformation: a Delicate Task in a Liberal and Democratic Society It cannot be reasonably disputed that freedom of expression as a fundamental right is to be regarded as a cornerstone of liberal democracy. It comes, however, with a risk of (deliberate) falsehood, which, in turn, jeopardises another essential prerequisite of every community that organises the establishment and exercise of power according to democratic rules: the recognisability of an accurate factual basis, without which informed decision-making is simply not possible. A functioning democratic society needs a rational discourse based on a shared reality. Consequently, the mass dissemination of fake news poses considerable dangers to a democratic order, which of course becomes even more apparent in times of uncertainty and crisis. Media, especially those organised under public law, can and should to a certain extent be placed in the service of battling disinformation. However, in a liberal society, it must never slip the focus that regulatory control of communication in general and content regulation in particular always carries the danger of damaging the openness of discourse, which must be regarded as a value in itself. Therefore, regarding truth as a problem of regulation is an extremely delicate task to handle. Regulatory interventions to correct misinformation should never give rise to the perception that the state is exercising a version of truth control. Extra-legal approaches like fostering media literacy or fighting outright lies with accurate facts and bogus expertise with professional skill on the marketplace of ideas, are rather unsuspicious in this respect and undoubtedly vital, but find their practical limits not least in the recipients’ attention span, which cannot be extended boundlessly. As the FCC has rightly stated,184 one of the greatfordert-strafen-gegen-fake-news-a-ed5050b5-c194-4890-a4c3-c713290134f3 (last accessed on 12.01.2022). 183  E.g., with “Facts for Friends” and “CoVerified”, the Federal Ministry of Education and Research is supporting projects to combat false information that emerged from the “WirVs­ Virus” (WeVsVirus) hackathon in March 2020. 184  BVerfGE 149, 222 (262).

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est difficulties for users today is that they can choose from a variety of information that often has not undergone the very filters of professional journalistic treatment. Of course, this does not mean that this information is unlikely to be accurate. However, recipients may have to do further research, decide what is to be considered a reliable source, confront themselves with information from other sources and possibly change the information channel in the process. All of this can be time-consuming, inconvenient and may promote the tendency for recipients to get stuck in the bubble of an easy to access personalised and thus already pre-selected information supply.185 Or as Yoan Hermstrüwer puts it: Lack of diversity is not in supply, but in consumption.186 This consumption is now increasingly taking place under the particular communication conditions of networked platform media, whose market conditions are characterised by a direct link between the redistribution of popular content and economic profit through advertising revenue.187 These elevated risks of a distorted communication process must be addressed in one way or another. In particular, it cannot be ignored that the content in question has its harmful effect on a democratic society especially because it is spread quickly, widely and all too often inconsiderately via social media.188 If ‘alternative facts’ are out there everywhere, damage is likely already been done. Corrections by established reputable media, responsible individuals or so-called fact-checkers may help to straighten things out, but are also likely to fizzle out in public attention.189 This finding, in turn, not only raises awareness for the responsibility of all individual users who share content, but also sheds a light on the contribution of media intermediaries and social networks as providers of a central means of communication. The risks associated with the possibility of a “viral” dissemination of unlawful content is something social network providers should – to a reasonable degree – be held responsible for. How this can be done without unduly interfering in the free battle of opinions and violating the fundamental rights of the protagonists involved, is going to be a constant struggle. The approach to scrutinize the respective business models, which, as was mentioned before, currently tend to link the spread of disinformation with economic profit through advertising revenue, and to aim at making the dissemination of disinformation economically unattractive, e.g., by changing the regulatory framework for advertisements, appears

185 

See therefore Pennycook/Rand, Cognition 188 (2019), 39 et seq. Hermstrüwer, in: Hermstrüwer/Lüdemann (eds.), Der Schutz der Meinungsbildung im digitalen Zeitalter, 2021, 149 (153). 187  Presented in detail by Hermstrüwer, in: Hermstrüwer/Lüdemann (eds.), Der Schutz der Meinungsbildung im digitalen Zeitalter, 2021, 149 (173). 188  Kusche, in: Beck/Kusche/Valerius (eds.), Digitalisierung, Automatisierung, KI und ­Recht, 2020, 421 (434 et seq.); Paal/Hennemann, JZ 2017, 641; Hoven, ZStW 129 (2017), 718. 189  Holznagel, MMR 2018, 18 (19). 186 

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promising.190 There have already been corresponding initiatives by the market and civil society, for example in the context of the advertising ban campaign “Stop Hate for Profit”.191 Germany has decided to structurally involve popular social network operators in the fight against those who use this platforms for committing crimes and violating their fellow man’s legally protected interests. If this path paved by the Network Enforcement Act holds up to its expectations and whether it will be considered permissible under constitutional and European Union law by the competent courts remains to be seen. It leads – this much can be said already – to the crucial question to whom the framework conditions and the basic rules of this sphere of communication should be left to elaborate: to the democratic legislator or to the private companies? In search of answers, it is important to bear in mind that platforms are in an increasingly powerful position when defining the codes of conduct for communication, which can also be used in favour of business goals. This need not to be a bad thing, as long as striving for the common good and striving for profit do not diverge too much. Transparency and non-discrimination are essential here.

190  Hermstrüwer, in: Hermstrüwer/Lüdemann (eds.), Der Schutz der Meinungsbildung im digitalen Zeitalter, 2021, 149 (178 et seq.). 191  Further information available at https://www.adl.org/stop-hate-for-profit-0 (last accessed on 12.01.2022).

Artificial Intelligence Accountability of Public Administration Nikolaus Marsch/Sofía María Fölsch Schroh

I. Introduction and Initial Overview 1. Conceptual: Algorithmization of Administrative Action as a Section of Digitalization The acquisition and processing of information have always formed the basis and core of all state action, especially administrative activity.1 For this reason, the process of digitalization also presents special challenges and opportunities for the administration. As a result, the digitalization of administration and admi­ nistrative action has been one of the central areas of discussion in German administrative law for some time. With the algorithmization of administrative action or the use of artificial intelligence by the state administration, topic XV.A of the XI General Congress of the International Academy of Comparative Law is currently dedicated to a particularly intensively discussed section of digitalization. Determining what exactly is to be understood by the topic poses a first difficulty. The two linguistic versions of the title from the panel already differ in that the English title uses the term Artificial Intelligence, while the French title speaks of Algorithms. This corresponds to a discussion in Germany about where the more promising conceptual approach lies: in focusing on AI or in addressing algorithmically controlled, automated decision-making.2 For the present contribution, a middle course between a (too) narrow concept of AI and a (too) broad understanding of algorithms seems appropriate for several reasons. In the German discussion, at least, the term artificial intelligence is largely associated with the learning ability of systems using large amounts of data.3 This ability to learn raises special questions and challenges, which also 1  Vesting, in: Voßkuhle/Eifert/Möllers (eds.), Grundlagen des Verwaltungsrechts I, 3rd ed. 2022 (forthcoming), §  20 para 1. 2 See Wischmeyer/Rademacher, in: Wischmeyer/Rademacher (eds.), Regulating Artificial Intelligence, 2020, Preface paras 5–6. 3  The group of experts set up by the Federal Government under the name “Data Ethics Commission” (Datenethikkommission) defines AI as a “collective term for those technologies and their applications which, by means of digital methods on the basis of potentially very large and heterogeneous data sets, in a complex machine processing process that mimics hu-

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play a particularly prominent role in the rapporteur’s questionnaire. Under the broad collective term of accountability, they concern in particular the democratic control of administrative action4 as well as the transparency of decision-making and the justifiability of decisions required for reasons of the rule of law.5 However, such adaptive systems have, so far, been used rather rarely by the German administration, and administrative regulations that refer specifically to adaptive systems hardly exist at all. 6 Their use is mostly limited to decision-pre­ paring activities, i.e. largely to purely internal administrative action, as well as to non-formal administrative action that does not result in administrative decisions or administrative contracts.7 However, if one also wants to include the process of decision-making and the norms that regulate it, then it is more appropriate to refer to the concept of the algorithm as a central component of automated decision-making.8 Again, the term algorithm should not be understood broadly to include every step-by-step guide to solving a problem in a structured way; rather, in the following it refers only to computer algorithms as the centrepiece of the automation of administrative decision-making.9 Such a broad approach to the topic seems appropriate, among other reasons, because from an external perspective it is not always possible to say with certainty whether the systems used by the administration are capable of learning or not.10 In addition, the norms regulating the issuing of automated decisions often also cover the use of AI.11 Moreover, from a legal perspective, there is often only a difference in degree between the use of particularly complex but still deterministic decision-making systems and the use of AI, since the risks and dangers are similar.12 Finally, it is good comparative law practice to initially draw the scope of a coun-

man intelligence as it were, determine a result that may be applied automatically.”, see Datenethikkommission der Bundesregierung, Gutachten, 2019, 34. 4 See Martini, in: Kahl/Ludwigs (eds.), Handbuch des Verwaltungsrechts I, 2021, §  28 paras 86–87. 5  On this in detail Wischmeyer, in: Wischmeyer/Rademacher (eds.), Regulating Artificial Intelligence, 2020, 75–101. 6  Wischmeyer, in: Ebers et al. (eds.), Künstliche Intelligenz und Robotik, 2020, §  20 para 4. 7  Wischmeyer, in: Ebers et al. (eds.), Künstliche Intelligenz und Robotik, 2020, §   20 para 66. 8  This is also the approach of the Data Ethics Commission, see Datenethikkommission der Bundesregierung, Gutachten, 2019, 34; on the distinction between AI and a full automation of administrative processes see Wischmeyer, in: Ebers et al. (eds.), Künstliche Intelligenz und Robotik, 2020, §  20 para 39. 9  On the notion of algorithm Martini, Blackbox Algorithmus, 2019, 17–19. 10  Wischmeyer, in: Ebers et al. (eds.), Künstliche Intelligenz und Robotik, 2020, §  20 para 4. 11 Ibid. 12  Britz/Eifert, in: Voßkuhle/Eifert/Möllers (eds.), Grundlagen des Verwaltungsrechts II, 3rd ed. 2022 (forthcoming), §  26 para 103; Wischmeyer, in: Ebers et al. (eds.), Künstliche Intelligenz und Robotik, 2020, §  20 para 4.

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try report rather broadly in order to enable a functional legal comparison by the general rapporteur.13 2. Empirical? As a topic of discussion, the algorithmization of administrative action and the use of AI by the public administration is undoubtedly very important in Germany. However, it is difficult to provide direct empirical evidence of this significance. As far as can be seen, there are no meaningful figures on the percentage of automated decision-making processes in the administration or the extent to which the administration makes use of AI. For this reason, the following is only an attempt to shed light on the significance of the algorithmization of administrative action in a selective manner and from different perspectives. a) Legal Scholarship: Automation and Algorithmization as Discourses In German administrative law, since the late 1950s and especially in the 1960s, intensive thought was given to the possibility of whether and in what way administrative action could be automated.14 As in computer science, this first spring was followed by a winter of disappointment, as the expectations associated with technological development were not fulfilled.15 In contrast, the second springtime of technological AI research in the early 1980s does not find a similarly euphoric counterpart in German administrative law scholarship, as the dangers of automation and, in particular, the idea of data protection were more influential at that time. The current third spring of AI has been widely accompanied by German legal scholarship for several years, with the general question of appropriate state regulation regarding the use of AI at the centre.16 The increased algorithmization of administrative action and the use of AI by the state administration form a sub-discourse of their own.17 13 See Michaels, in: Reimann/Zimmermann (eds.), The Oxford Handbook of Comparative Law, 2nd ed. 2019, 345–389. 14  In her study on the different discourses regarding the communication of the administration, Anna-Bettina Kaiser speaks of an “automation discourse” (Kaiser, Die Kommunikation der Verwaltung, 2009, 111–135). 15 Cf. Wischmeyer, in: Ebers et al. (eds.), Künstliche Intelligenz und Robotik, 2020, §  20 para 9. 16  See for instance Hoffmann-Riem, in: Wischmeyer/Rademacher (eds.), Regulating Artificial Intelligence, 2020, 1–29; Martini, Blackbox Algorithmus, 2019; Wischmeyer, AöR 143 (2018), 1–66. 17  See for instance Britz/Eifert, in: Voßkuhle/Eifert/Möllers (eds.), Grundlagen des Verwaltungsrechts II, 3rd ed. 2022 (forthcoming), §  26 paras 84–147; Bull, DVBl 2017, 409–417; Djeffal, DVBl 2017, 808–816; Guckelberger, Öffentliche Verwaltung im Zeitalter der Digita­ lisierung, 2019, paras 79–127; Guckelberger, DÖV 2021, 566–574; Hermstrüwer, in: Wisch­ meyer/Rademacher (eds.), Regulating Artificial Intelligence, 2020, 199–223; Hermstrüwer, AöR 145 (2020), 479–521; Herold, Demokratische Legitimation automatisiert erlassener Ver-

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An important aspect of the discussions has always been the realization that administrative law should not only control and limit the use of information technology, but that the legal norms themselves must also be adapted as far as possible to the requirements of the technology used.18 This is not contradicted by the fact that the starting point for these considerations should always be the necessities of the administrative task and not the possibilities of the devices, if one does not want to provoke avoidable data protection concerns.19 Ultimately, the debates always bring to bear the dual function of administrative law, which at the same time aims to discipline administrative action and make it more effective.20 b) The Legislator: Digitalization as a Focal Point At the centre of legislative activity is the enabling of the issuing of partially or fully automated administrative acts. This is because the concept of the “administrative act” forms the pivotal point in German administrative law thinking. For example, the administrative procedure acts of the Federation and the Länder (APA), which are largely identical, are only applicable to administrative procedures aimed at issuing an administrative act or concluding an administrative contract. In terms of content, the term administrative act includes all binding individual decisions of a public authority that have legal effects.21 Administrative rulemaking, on the other hand, is not covered by the scope of application of the APA and is also largely unregulated in Germany as far as the procedure is concerned. Already at the time of its entry into force in 1977, the Administrative Procedure Act (APA) provided for procedural simplifications for administrative acts issued “with the help of automatic equipment”. According to Section 28(2)(4) of

waltungsakte, 2020; Hill, VM 2018, 287–294; Martini/Ruschemeier/Hain, VerwArch 112 (2021), 1–37. 18  Britz/Eifert, in: Voßkuhle/Eifert/Möllers (eds.), Grundlagen des Verwaltungsrechts II, 3rd ed. 2022 (forthcoming), §  26 para 19. On a first level, this concerns the norms on administrative procedure, which have to be adapted to the particularities of a digital administration; further considerations aim at also formulating the norms of substantive administrative law linguistically in such a way that they can be executed algorithmically, on this Seckelmann, Die Verwaltung 54 (2021), 251–272. 19  So rightly Bull, CR 2019, 478 para 18. 20 See Schmidt-Aßmann, Das allgemeine Verwaltungsrecht als Ordnungsidee, 2nd ed. 2006, Chap.  1 paras 30–32. 21  Cf. Sect. 35 Federal Administrative Procedure Act (APA, Verwaltungsverfahrensgesetz): “An administrative act shall be any order, decision or other sovereign measure taken by an authority to regulate an individual case in the sphere of public law and intended to have a direct, external legal effect.” All laws mentioned in this article are available in their current version on the following homepage: https://www.gesetze-im-internet.de/index.html; an English translation of the APA as of 2004 can be found at https://bit.ly/3GrsBHz.

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the APA, these can be issued without a hearing and, according to Section 39(2) (3) of the APA, no reasons need to be given.22 From 2002 and ultimately until today, electronic communication between citizens and the administration was the focus of the legislator under the catchword of e-government. Pursuant to Section 3a(1) of the APA, the administration can transmit electronic documents to citizens, provided they have given their consent. The authorities, on the other hand, are now largely obliged to open access for the transmission of electronic documents.23 While the legislator developed intensive legislative activity in the area of electronic communication with public authorities, but also in the digitalization of the administration itself, the topics of algorithmization and the use of AI that are of interest here remained largely untouched.24 A general exception is Section 35a, which was added to the APA in 2017, as well as the parallel regulations in the laws on the procedure of the social authorities and the tax authorities,25 which now also allow for fully automated issuing of administrative acts. Together with an addition to the principle of investigation in Section 24(1) of the APA,26 these regulations, therefore, form a central subject of this report (see III. 2.). c) Administrative Practice I: Actual and Discussed Fields of Application of Algorithmic Decision-Making and Decision Preparation The administration is also named in the Federal Government’s “Artificial Intelligence Strategy” from 2018 as one of twelve highlighted fields of action.27 It is emphasized that the use of AI can contribute to increasing the efficiency and quality of administrative services. Specifically, the areas of internal and external security are also named as central fields of application.

22  Furthermore, according to Section 37(5) APA, such an administrative act does not require a signature and the name of the case officer does not have to be indicated, see IV. 2. a) bb). 23  Initially, this resulted from Section 2(1) of the Federal E-Government Act (E-Govern­ ment-Gesetz, EGovG), which applies not only to federal authorities, but also to state authorities when they implement federal law, Section 1(1) and (2) of the E-Government Act; in the meantime, Section 1 of the Online Access Act (Onlinezugangsgesetz, OZG) obliges all federal, state and local authorities to also offer their administrative services electronically by 31 December 2022 at the latest. 24  Britz/Eifert, in: Voßkuhle/Eifert/Möllers (eds.), Grundlagen des Verwaltungsrechts II, 3rd ed. 2022 (forthcoming), §  26 para 1.6. 25  Section 31a of the Social Code X (SGB X, Zehntes Buch Sozialgesetzbuch – Sozialver­ waltungsverfahren und Sozialdatenschutz); Section 155(4) of the Fiscal Code (Abgabenord­ nung). 26  Parallel provisions in Section 31a of the Social Code X; Section 155(4) of the Fiscal Code. 27  https://bit.ly/3JLNFuw, 31–33.

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In fact, however, the use of AI and the algorithmization of administrative action has so far been more of a marginal phenomenon.28 This applies both to the partial or complete automation of the decision itself and to the use of these technologies in the preparation of decisions. In this respect, no relevant difference can be found between the administrative levels of the Federal Government, the States, or the municipalities. As far as automated decision-making is concerned, these are used (apart from simple fully automated traffic facilities such as traffic lights or route control systems) primarily in cases of number-driven mass administration, as is typical for social and financial administration; here they contribute in a special way to the effectiveness and efficiency of the administration.29 The tax administration plays a pioneering role in this regard (for more on this, see III. 2. g)).30 In general, the use of fully automated decisions is always considered an obvious option when citizens themselves enter data into electronic application forms (as in the case of automated vehicle registration, see III. 2. f))31 or when data already held by the authorities can be merged automatically with the consent of the applicant.32 As far as decision preparation and support in decision-making by algorithmic processes and artificial intelligence are concerned, these are largely unregulated by law and are actually only being practised in rudimentary form.33 As emphasised by the Federal Government in its strategy paper, the security sector plays a particularly important, but also particularly sensitive role. The goal of the use of algorithmic processes and artificial intelligence is usually the automated detection of suspicious behaviour.34 As examples of the application of predictive policing, pilot projects have been carried out in several Federal States that use data on recent residential burglaries to make predictions about whether and where further burglaries are to be expected in the near future.35 Care was taken to ensure that only spatial, but not personal, data is processed and that no parcel-specific predictions are made, so that data protection law did not apply.36 The use of smart video surveillance systems, which are supposed to be able to 28  Britz/Eifert, in: Voßkuhle/Eifert/Möllers (eds.), Grundlagen des Verwaltungsrechts II, 3rd ed. 2022 (forthcoming), §  26 paras 92, 95; Guckelberger, DÖV 2021, 566, 578 („rarity“). 29  Britz/Eifert, in: Voßkuhle/Eifert/Möllers (eds.), Grundlagen des Verwaltungsrechts II, 3rd ed. 2022 (forthcoming), §  26 para 92. 30 Thus Berger, NvWZ 2018, 1260, 1264; cf. also Maier, JZ 2017, 614–619. 31  Britz/Eifert, in: Voßkuhle/Eifert/Möllers (eds.), Grundlagen des Verwaltungsrechts II, 3rd ed. 2022 (forthcoming), §  26 para 92. 32 Cf. Prell, NVwZ 2018, 1255, 1257. 33  Britz/Eifert, in: Voßkuhle/Eifert/Möllers (eds.), Grundlagen des Verwaltungsrechts II, 3rd ed. 2022 (forthcoming), §  26 paras 93, 95. 34  Rademacher, in: Wischmeyer/Rademacher (eds.), Regulating Artificial Intelligence, 2020, 225 para 2. 35  For details see Rademacher, AöR 142 (2017), 366–416 and Guckelberger, Öffentliche Verwaltung im Zeitalter der Digitalisierung, 2019, paras 95–98. 36  Rademacher, AöR 142 (2017), 366, 369.

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detect helpless persons, stray pieces of luggage or robberies, for example, has also been limited to pilot projects so far.37 This is due to, among other things, a fundamentally critical attitude of parts of public opinion towards a widespread use of video surveillance compared to other countries; the constitutional requirements for the use of state video surveillance technology are also quite strict. In principle, the German legislator is also rather reluctant to allow the use of personal data for pattern recognition by state authorities.38 An exception in this respect is Section 4 of the German Law of Passenger Name Record (Flug­ gastdatengesetz), which authorises the Federal Criminal Police Office to compare passenger data transmitted by airlines with patterns in order to identify (potential) criminals and terrorists.39 Other examples of the use of AI by government agencies (some of which are only in the scientific test phase) are the support of the police in searching for and recognizing child pornography material,40 the monitoring of suicidal prisoners through intelligent video surveillance,41 and software used in the Ministry of Foreign Affairs for early crisis detection.42 Only theoretically discussed are the opportunities and risks of using adaptive AI for the admission to higher education and the allocation of university places, insofar as this is also intended to make predictions about the probable success of studies.43 Finally, the use of chatbots in communication with citizens, which function as a kind of first-level support for citizen enquiries, is repeatedly mentioned as a conceivable field of application for AI.44

37  See for example the pilot project of a “Security Station – Berlin Südkreuz”, https://bit. ly/333bWvF. 38  Rademacher, in: Wischmeyer/Rademacher (eds.), Regulating Artificial Intelligence, 2020, 225 para 7, who at the same time points out that the reluctance of the legislator is not very great when it comes to obliging private individuals to carry out data mining (para 8); an example is the fight against money laundering, see Schemmel, in: Wischmeyer/Rademacher (eds.), Regulating Artificial Intelligence, 2020, 255 para 12. 39  On this: Guckelberger, Öffentliche Verwaltung im Zeitalter der Digitalisierung, 2019, paras 93–94. 40  The aim here is also to relieve police officers of the psychologically stressful task of viewing material, see https://bit.ly/3zE35fB. 41  The aim is to do away with the practice, which is stressful for the prisoners, of switching on the light every 15 minutes in order to be able to check on them, see https://bit.ly/3q11 KMQ. 42 https://bit.ly/33fQEeb. 43  In detail Rademacher, RdJB 69 (2021), 254–276. 44  Guggenberger, NVwZ 2019, 844, 847; Guckelberger, Öffentliche Verwaltung im Zeit­ alter der Digitalisierung, 2019, paras 116–118.

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d) Administrative Practice II: The Digitalization of the German Administration in Comparison – Lagging Behind the Private Sector and Other European Countries While it is difficult to quantify the extent of the algorithmization of administrative action and the use of AI by the German public administration, a double backlog can be observed with regard to the general digitalization of the German administration: Not only is it significantly behind the private sector, which has already digitalized its processes to a much greater extent. Rather, the German administration regularly finds itself at the bottom of international rankings, also in comparison to other European administrations.45 The reasons why the digitalization of the German administration lagged behind the high expectations associated with technological progress for many years are manifold and complex. Insufficient coordination of political efforts as well as a lack of centralisation in the use of digital tools have contributed significantly; however, both problems have been recognized in the meantime and are being addressed through appropriate measures.46 Also, with regard to the use of more complex algorithms and AI by the state and the administration in particular, a clear backwardness compared to the private sector is stated. In addition to the lack of competitive pressure (which has not yet been compensated for by the corresponding political will to act) and the administration’s commitment to the rule of law,47 the lack of the necessary data volumes, of a sufficiently powerful IT infrastructure and of internal administrative expertise are also cited as reasons.48 The latter is attributed in particular to the fact that the salaries paid by the state are not attractive enough compared to the private sector.49 As a result, the state administration – not only in the area of AI, but in the entire area of digitalization – is increasingly forced to resort to external expertise, which does not correspond to its self-image of completing administrative tasks with its own resources.50 The dependence of the administration on external manufacturers and service providers that arises here is criticised, especially with regard to the use of algorithms, and it is rightly emphasised that the administration is also fully responsible for the use of algorithms if it has them developed by private parties.51 However, since it can be assumed that the administration will remain dependent on the involvement of external exper45  See the compilation of different rankings by the “Normenkontrollrat”, an advisory body to the Federal Government, in: “Monitor Digitale Verwaltung 6 (2021)”, https://bit.ly/ 3to5FW5, 24–25. 46  Britz/Eifert, in: Voßkuhle/Eifert/Möllers (eds.), Grundlagen des Verwaltungsrechts II, 3rd ed. 2022 (forthcoming), §  26 paras 6–8. 47  Guggenberger, NVwZ 2019, 844, 846. 48  Wischmeyer, in: Ebers et al. (eds.), Künstliche Intelligenz und Robotik, 2020, §  20 para 5. 49  Wischmeyer, in: Ebers et al. (eds.), Künstliche Intelligenz und Robotik, 2020, §  20 para 5. 50  Thus, from the perspective of a ministry official, Prell, NVwZ 2018, 1255, 1258. 51  Bieker/Bremert/Hansen, DuD 2018, 609, 612.

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tise in the short and medium term, there is a need for a more intensive pragmatic and differentiated legal treatment of the problem at an institutional and procedural level, which goes beyond a mere fundamental critique and simple allocation of responsibility. e) Outlook: Algorithmization of the Administration as a (Constitutional) Obligation? Finally, a one-sided emphasis on the risks associated with an advancing algorithmization of the administration does not do justice to the citizens’ expectations of a modern administration.52 These were particularly disappointed at the beginning of the Corona pandemic, as the weaknesses of the German administration with regard to digitalization were openly revealed in the crisis situation (as in the refugee crisis of 2015/2016); at the same time, however, the pandemic also triggered a massive digitalization push.53 A broad constitutional obligation to make a greater use of algorithms could be derived from constitutional principles such as the rule of law (in the form of the administrative procedural law requirement of acceleration 54) and the right to good administration (as it is being discussed for the general digitalization of the administration 55); even so, given the current state of technology, this seems rather doubtful. However, it becomes clear in this context that the automation of administrative action is not only a mode of task fulfilment, but also a task of the administration itself.56

II. Overall Context 1. The AI-Strategy The goal of the following section is to depict the AI strategy of the government and thus to give the reader an impression of the governmental point of view regarding the usage of AI in the public sector. For this purpose, it is meaningful to take a step back and to have a short overview of the governmental digital strategy. Either way, when it comes to German governmental strategies, it is important to bear the federal system in mind; hence, the existence of the Federal State and that of the States. The present text chooses to focus on the Federal Government. For the sake of completeness, however, it should be noted that 52 Cf. Martini, in: Kahl/Ludwigs (eds.), Handbuch des Verwaltungsrechts I, 2021, §   28 para 1. 53  Guckelberger, DÖV 2021, 566, 566–567. 54  Cf. Section 10 APA: “It [the administrative procedure] shall be carried out in an uncomplicated, appropriate and timely fashion.” 55  On this: Schröder, VerwArch 110 (2019), 328, 329–331. 56 Cf. Schliesky, in: Seckelmann (ed.), Digitalisierte Verwaltung, 2nd ed. 2019, Chap.   8 para 11.

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some States already started to develop digital strategies in 2015.57 Hereinafter, as of 2020, Germany had, at a State level, 16 digital strategies existing.58 a) The Digital Governmental Strategy As early as 1971, for the then Home Secretary Genscher, the use of information technology by the public administration promised an improvement for governmental services; moreover, efficiency, effectiveness as well as a more citizen-friendly administration were expected.59 Interestingly, almost all of these ideals can be found in contemporary governmental programs, such as the “Di­ gitale Verwaltung 2020” of 2014, whereby, the potential of digitalization is described with adjectives such as effectiveness, transparency and efficiency. Besides, making the public administration barrier-free, digitalization leads to a more citizen-friendly, as well as to a more business-friendly public administration. 60 Also, the “Nationale E-Government-Strategie Fortschreibung” of 2015 sets transparency and efficiency once again as guiding principles. Additionally, the latter project adds new principles; among those, information security, data protection and sustainability are worth to mention.61 b) The Government’s AI Strategy When it comes to AI and its entrance in the governmental strategy from 2018, it should be noted that the main goal of this strategy is to promote the economy.62 Hence, for the purpose of this paper, its relevance is little. To complete the picture, however, it is worthwhile to mention the intentions behind, nature and function of the governmental AI-strategy. Crowned with the bright title “AI made in Germany”,63 the Federal State plans to focus on three main goals.64 First, Germany has to play a key role in the world of AI. Second, the usage and the development of AI must be responsible and oriented towards the common good. Third, the state aims to incorporate AI in and with the society. Regarding the nature of the AI-strategy, it is worth to emphasize that it is not a regulation nor a legislative proposal, but a strategy. Therefore, its function consists in integrating AI in an ethical, legal and cultural manner, 65 so that, 57 

Hölzel, DVBl 2017, 1015, 1016. Bayerisches Forschungsinstitut für Digitale Transformation, Digitalisierungsstrategien bundesdeutscher Länder, 2020, 21. 59  Genscher, ÖVD 1971, 4. 60  Bundesministerium des Innern, Digitale Verwaltung 2020, 2014, 10. 61  IT-Planungsrat, Nationale E-Government-Strategie Fortschreibung 2015, 7. 62  Köver, KI-Strategie der Regierung, Netzpolitik, 11.14.2018, https://bit.ly/3KS60q5. 63  Bundesregierung, Strategie Künstliche Intelligenz, 2018, 6. 64  Ibid., 6–7. 65  Kau, ZG 2021, 217, 236. 58 

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maybe in the future, AI will find its way into the legal system as well as into society. Furthermore, fears about the use of AI shall be overcome and future governments prepared for it. 66 In addition, it is in the political interest of the current government to guarantee that future generations will not look back and ask themselves why AI wasn’t of interest in the past.67 c) AI and its Benefits – A Currently Beneficial Situation (?) AI vows many benefits for the public administration. In the first place, an efficiency improvement is expected.68 By reducing the number of cases that require a human element, the decision-making process will be rationalized. In this sense, just complex decisions shall be taken by persons, while routine cases will be left for machines to solve.69 Consequently, the public administration will be able to focus on the complicated cases, while the rest of them will be solved in a prompter way.70 Besides, in contrast to non-algorithmic procedures, AI represents a lower-cost alternative.71 For instance, having digital access to administrative services makes it possible for individuals to skimp transport costs. Also, a reduction of cases that require a human element72 leads to a decrement of the number of employees and thus to a cut in public spending.73 In spite of all the benefits and even though the coalition agreement between CDU, CSU and SPD of 2018 aimed to direct the public administration towards digitalization;74 it should be noted that, unlike the private sector which is a digital pioneer,75 when it comes to e-government, Germany stays far in the back.76 In fact, as of 2017, an overwhelming 67 % of the public administrative decision-makers saw no potential in the usage of AI.77 Thusly, it is not surprising that, at least at the moment, just a few learning systems are being deployed by 66 Ibid. 67 Ibid. 68 

Guggenberger, NVwZ 2019, 844, 846. Martini, DÖV 2017, 443, 452; Guggenberger, NVwZ 2019, 844, 846–847. 70  Wischmeyer, in: Ebers et al. (eds.), Künstliche Intelligenz und Robotik, 2020, §  20 para 3; Martini, DÖV 2017, 443, 444; Institut für den öffentlichen Sektor, Public Governance, Automatisierung und digitale Assistenzsysteme, Winter 2018/19, 6. 71  Hölzel, DVBl 2017, 1015, 1016. 72  Mohabbat Kar/Parycek, in: Mohabbat Kar et al. (eds.), (Un)Berechenbar? Algorithmen und Automatisierung in Staat und Gesellschaft, 2018, 7, 16. 73  Wischmeyer, in: Ebers et al. (eds.), Künstliche Intelligenz und Robotik, 2020, §  20 para 3; Martini, DÖV 2017, 443, 444; Institut für den öffentlichen Sektor, Public Governance, Automatisierung und digitale Assistenzsysteme, Winter 2018/19, 6. 74  Koalitionsvertrag 2018, 45. 75  Martini, DÖV 2017, 443, 444; Bundesregierung, Eckpunkte der Bundesregierung für eine Strategie Künstliche Intelligenz, 2018, 3; for an overview of the usage of AI in the German private sector, see Bundesministerium für Wirtschaft und Energie, Einsatz von Künst­ licher Intelligenz in der Deutschen Wirtschaft, 2020, 5. 76  Guckelberger, Öffentliche Verwaltung im Zeitalter der Digitalisierung, 2019, para 158. 77  Sopra Steria Consulting, Potenzialanalyse Künstliche Intelligenz, 2017, 51. 69 

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the public administration. Furthermore, fully and partly automated administrative acts are usually produced by programs, whereby, in order to function, the algorithm depends on a human factor.78 Nevertheless, such systems, also described as deterministic, open up new legal challenges that must be addressed.79 2. Open-Data – Integral for the Development and Employment of AI a) The Concept of Open Government Data Described as a paradigm, 80 the concept of open government is mutating into a vague term. 81 This, however, was not always the case. Indeed, between the years of 1945 and 2008,82 the concept of open government seemed to equate with the ideal of transparency. 83 Nonetheless, such a narrow understanding has been subject of criticism, because, on the one hand, open data does not automatically lead to more transparency and, on the other hand, transparency means much more than just open government data.84 Either way, when the Obama era started in 2008, the meaning of open government changed. 85 For instance, the ability of the state to interact with the society is also embedded. 86 In this vein, the Federal Government has listed transparency, participation as well as cooperation as aspects of an open government.87 For the Federal State, which has shown a comprehensive approach, open government data means having a model which, through transparency, will lead to more participation, cooperation, liability as well as to innovation. 88 b) A Commitment Towards an Open Government Data Concept Since Germany has gone its first steps towards an open government data concept in 2010, 89 the interest in opening government datasets has been demonstrated on 78 

Wischmeyer, in: Ebers et al. (eds.), Künstliche Intelligenz und Robotik, 2020, §  20 para 4.

79 Ibid. 80 

Herzberg, VM 2013, 40. Yu/Robinson, UCLA Law Review Discourse 178 (2012), 178, 182. 82  Herzberg, VM 2013, 40, 41. 83  Ibid., 40. 84  Krabina, in: Stember et al. (eds.), Handbuch E-Government, 471, 478. 85  Herzberg, VM 2013, 40, 40–41; v. Lucke, VM 2016, 171, 175; also in this vein: Bun­des­ ministerium des Inneren, Nationaler Aktionsplan der Bundesregierung zur Umsetzung der Open-Data-Charta der G8, 2014, 6. 86  Guckelberger, Öffentliche Verwaltung im Zeitalter der Digitalisierung, 2019, para 60; Herzberg, VM 2013, 40, 41. 87  Bundesministerium für Wirtschaft und Technologie, Dresdener Vereinbarung, Fünfter Nationaler IT-Gipfel Dresden, 2010, 8. 88  BT-Drs. 18/11614, 11. 89  Bundesministerium für Wirtschaft und Technologie, Dresdener Vereinbarung, Fünfter Nationaler IT-Gipfel Dresden, 2010, 8. 81 

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multiple occasions.90 After signing the G8 Open Data Charter – whereby, the importance of open data for society and its economy is highlighted91 and an “open data by default” promoted92 – the Federal Government expressed explicitly its commitment towards the concept of open government data.93 Aiming to put the goals of the mentioned Charter into action, the Federal Government published a strategic plan in the following year;94 whereby, the desire to make Germany a pioneer in the field of open data is communicated.95 Consequently, the Federal Government has incorporated open data regulations. Among these and excluding European influenced norms such as Section 9(1) Geodata Access Act (Geodatenzugangsgesetz, GeoZG),96 the present paper takes a closer look at Section 12a E-Government Act (E-Government-Gesetz, EGovG). c) Section 12a E-Government Act aa) Peculiarities of Section 12a E-Government Act Before delving into the details, there are some peculiarities of Section 12a E-Govern­ment Act to be considered: its proactive character, its relationship towards other norms and its nature. Section 12a E-Government Act is not the first regulation that enables access to governmental information. Yet, it distinguishes itself from other norms such as Section 3 Environmental Information Law (Umweltinformationsgesetz, UIG) and Section 1 Freedom of Information Act (Informationsfreiheitsgesetz, IFG). For instance, Section 12 E-Government Act also deals with publicly accessible governmental data, but with the difference that it does not establish a duty for the state to make such data available. Moreover, in most of the cases,97 prior existing norms do not conceive a proactive information supply system, but rather provide a reactive right to access to information; thus, the latter type of claims requires, beforehand, a respective application.98 This proactive characteristic of Section 12a E-Government Act makes a continuous review of infor90  E.g., ibid.; Bundesministerium des Inneren, Open Government Data Deutschland, 2012; Bundesministerium des Inneren, Nationaler Aktionsplan der Bundesregierung zur Umsetzung der Open-Data-Charta der G8, 2014. 91  G8 Open Data Charter, 2013, Principle 1(11). 92  Ibid., Principle 1(12). 93 Bundesministerium des Inneren, Nationaler Aktionsplan der Bundesregierung zur Umsetzung der Open-Data-Charta der G8, 2014, 8. 94 Bundesministerium des Inneren, Nationaler Aktionsplan der Bundesregierung zur Umsetzung der Open-Data-Charta der G8, 2014. 95  Ibid., 8. 96  Background: Directive 2007/2/EC of the European Parliament and of the Council of March 14th 2007 establishing an Infrastructure for Spatial Information in the European Community (INSPIRE). 97  E.g., for an exception: Section 11 Geodata Access Act. 98  Martini, in: Kahl/Ludwigs (eds.), Handbuch des Verwaltungsrechts I, 2021, §  28 para 69.

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mation necessary.99 Interestingly, Section 12a(3)(1) E-Government Act, the core exception clause,100 refers – in a dynamic way – to exception clauses from other legal frameworks. Whereby, a special mention to the Freedom of Information Act is being made. What makes it even more odd, Section 12a(3) E-Government Act aims to achieve coherence with the Freedom of Information Act.101 In other words, Section 12a E-Government Act determines a proactive duty for the state to give access to open datasets and has thus a fundamental different conception than the one of a reactive right; nonetheless, Section 12a E-Government Act not only remits to legal frameworks that are reactive, but, regarding its exception clause, also aims to be coherent with one of them. Another oddity concerns the nature of Section 12a E-Government Act. During the legislative process some parliamentarians advocated for the conception of Section 12a E-Government Act as an entitlement.102 Nevertheless, Paragraph 1 clarifies that the duty to provide data does not correspond to a claim. This means, strictly speaking, that the non-compliance with Section 12a E-Government Act does not have – a priori – any legal consequences. Therefore, it is not surprising that, concerning this aspect, the norm has been criticized.103 bb) The Legal Preconditions If we take a closer look at the obligors of Section 12a E-Government Act it is worth mentioning that, since its entry into force in 2017 and until its legal modification in 2021,104 this Section only recognized the direct federal administration as obligors; having so – in comparison with other legal frameworks such as Section 1 Freedom of Information Act and even Section 1 E-Government Act – a narrow application.105 It was later on, in 2021, that the target group grew with Section 19(2) E-Government Act. Now, also the indirect federal administration is referred as an obligor. To be more precise, the legislative change establishes that the indirect federal administration shall be ready in 12 months (after the 23rd of July 2021) to keep raw data in a machine-readable form. Recognizing the complexity of this extension, however, Section 19(2) E-Government Act opens up the possibility to delay the application of this scope-expansion for another two years. 99 

Richter, NVwZ 2017, 1408, 1410.

100 Ibid. 101 

BT-Drs. 18/12406, 7. BT-Drs. 18/11614, 23114 D and 23115D. 103  Denkhaus/Richter/Bostelmann, Kommentar zum EGovG und zum OZG, 2019, §  12a para 4; Richter, NVwZ 2017, 1408, 1410. 104  Gesetz zur Änderung des E-Government-Gesetzes und zur Einführung des Gesetzes für die Nutzung von Daten des öffentlichen Sektors v. 16.07.2021, BGBl. 2021 I 46, 2941–2946. 105  Denkhaus/Richter/Bostelmann, Kommentar zum EGovG und zum OZG, 2019, §  12a para 11. 102 

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Section 12a(2) E-Government Act restricts its applicability also by specifying which data shall be allocated. In substance, there are some qualifications that stand out. Paragraph 2(1) establishes that the data must be electronically saved and structured. Within, on the one hand, Section 12a E-Government Act does not introduce an obligation to digitalize information,106 and, on the other hand, the data shall be interconnected. In addition, Paragraph 2(2) makes clear that solely the data concerning external relations of the administration must be allocated. Aiming to achieve the highest transparency standard,107 Paragraph 2(4) establishes that, in general, only raw data shall be accessible; the data shall not be edited or revised after its collection. Not all data that complies with the qualifications of Paragraph 2 shall be made accessible. The main exception is, the already mentioned, Paragraph 3(1) which makes a reference to other legal frameworks and especially to Section 3, 4 and 6 of the Freedom of Information Act. Besides, Paragraph 3(2) determines that the data acquisition must have been intentional. Thus, data collected without an instruction from the obligor will not be recognized. Furthermore, it is interesting to know that Paragraph 3(3) also makes an exception for “science” data. The purpose of this is to not compromise the creation process of special norms that concern the publication of this type of information.108 Finally, Paragraph 3(4) recognizes the interest to protect bank secrecy by introducing a derogation. cc) The Manner Regarding the renumeration aspect, Paragraph 6 specifies that the data retrieval shall be free of charge.109 Even so, it is pertinent to bear in mind the subsidiary character of Section 12a E-Government Act. This means that, if another norm determines that the data shall be retrievable only in exchange for payment, then this rule will take precedence over Section 12a E-Government Act.110 When it comes to the question “when” the data shall be made available, it is important to note Paragraph 7 which enhances the principle of “open data by design”.111 Moreover, Paragraph 4 establishes that the data provision shall occur immediately after the data was collected. This, however, does not apply as long as the purpose of the data collection would be compromised. In order to comply with Paragraph 4, it is necessary to exempt the obligor of an auditing du-

106 Ibid.;

Richter, NVwZ 2017, 1408, 1409. BT-Drs. 18/11614, 18. 108  Ibid., 19. 109  Regarding the relationship between Section 12a E-Government Act and intellectual property rights: Richter, NVwZ 2017, 1408, 1412–1413. 110  BT-Drs. 18/11614, 21. 111  Ibid., 22. 107 

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ty.112 In this vein, Paragraph 8 stipulates that the obligor is not mandated to verify the accuracy, completeness nor plausibility of the data before making it available. Consequently, the question arises whether or not the obligor shall also be exempt of liability. The answer to this is still unclear and the call for a clear regulation has been made.113 While the lawmakers explicitly advocated for an exemption,114 some scholars do not want, due to the general duty of care, to completely exempt the obligor of liability.115 To complete the picture, it is worth noting that some scholars have drawn, in this context, parallels with environmental law.116 3. The Institutional Implementation – Essential and Challenging a) Digitalization and Federalism – A Charged Relationship Due to the federal structure of Germany, the unified implementation of AI in the public sector represents a challenge for the system. This situation can be attributed to the fact that while digitalization tends to centralize117 the task fulfilment, the work organization, the interface design, the data files118 and thus aims for standardization and harmonization, the federal system, which implies assigning different competences to the Federal State, the States and the community, promotes isolated solutions.119 Not surprisingly, therefore, some regard the federal structure as an obstacle in the digital era;120 whereas, others see in plurality an efficiency potential to transform the traditional administration into a digital one.121 Either way, among other aspects,122 the federal system which, in general terms, accepts a decrease of efficiency and effectiveness, is set, especially regarding the expected gains of digitalizing the public administration, under pressure to change.123 112  Denkhaus/Richter/Bostelmann, Kommentar zum EGovG und zum OZG, 2019, §  12a para 28. 113  Richter, NVwZ 2017, 1408, 1411. 114  BT-Drs. 18/11614, 22. 115  Hoffmann/Schulz, KommJur 2014, 126, 130. 116  Denkhaus/Richter/Bostelmann, Kommentar zum EGovG und zum OZG, 2019, §  12a para 28. 117  Bull, Verwaltung durch Maschinen, 1964, 89; Schrödter, VerwArch 51 (1960), 79, 86. 118  Britz/Eifert, in: Voßkuhle/Eifert/Möllers (eds.), Grundlagen des Verwaltungsrechts II, 3rd ed. 2022 (forthcoming), §  26 para 26. 119  Peuker, in: Hill/Schliesky (eds.), Auf dem Weg zum Digitalen Staat – auch ein besserer Staat?, 2015, 59, 62–63. 120  Rüscher, DVBl 2017, 1530; Schliesky/Hoffmann, DÖV 2018, 193; Koenzen, Föderalismus als Digital-Bremse, Wirtschaftswoche, 03.11.2016, https://bit.ly/33ZRGLJ. 121  Härtel, in: Europäisches Zentrum für Föderalismus-Forschung Tübingen (ed.), Jahrbuch des Föderalismus 2018, 2018, 227, 236–237. 122  Hölzel, DVBl 2017, 1015, 1017. 123  Britz/Eifert, in: Voßkuhle/Eifert/Möllers (eds.), Grundlagen des Verwaltungsrechts II, 3rd ed. 2022 (forthcoming), §  26 para 28.

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As a consequence, the Basic Law of Germany has faced some digital related changes which are worth to note. But, before analyzing them, one should know the dynamic of the division of administrative competences. Following the Federal Constitutional Court, the German Constitution establishes, due to the principle of democracy which demands a clear attribution of responsibility, a system, whereby, either the Federal State or the States are responsible to execute law.124 Hence, the citizens are able to identify the responsible government entity for every act of the state.125 Incidentally, according to Article 83 of the Basic Law of the Federal Republic of Germany, the States usually have the task to execute law, including federal law.126 Under specific and restrictive127 circumstances, however, the Federal Constitutional Court considers exemptions to this clear and strict division of competences to be permitted, when there is an objective reason that suggests this and the collaboration is only for a narrow administrative area.128 With reference to digitalization, it is questionable if federal cooperation can be accepted as an (unwritten) exception. For some, federal cooperation in this field does not even violate the principle of the division of competences.129 Furthermore and with Article 91c Basic Law in mind, one could consider it to be a written exception130 or, at least, a confirmation that federal cooperation in this field is constitutionally accepted.131

124 Federal Constitutional Court, Judgment of 19 th February 2002, ECLI:DE:BVerfG: 2002:gs20020219.2bvg000200, para 48. 125 Federal Constitutional Court, Judgment of 20 th December 2007, ECLI:DE:BVerfG: 2007:rs20071220.2bvr243304, para 157; Peuker, in: Hill/Schliesky (eds.), Auf dem Weg zum Digitalen Staat – auch ein besserer Staat?, 2015, 59, 64; Schliesky, ZSE 2008, 304, 320. 126  Kirchhof, in: Dürig/Herzog/Scholz (eds.), Grundgesetz-Kommentar, 95th ed. 2021, Art.  83 para 1. 127  Heun/Thiele, in: Dreier (ed.), Grundgesetz-Kommentar III, 3rd ed. 2018, Art.   91c para 6. 128  Federal Constitutional Court, Judgment of 12th January 1983 – 2 BvL 23/81, para 156; Judgment of 20th December 2007, ECLI:DE:BVerfG:2007:rs20071220.2bvr243304, para 159, 169. 129  Schliesky, ZSE 2008, 304, 321. 130  Heun/Thiele, in: Dreier (ed.), Grundgesetz-Kommentar III, 3rd ed. 2018, Art.   91c para 6; Siekmann, in: Sachs (ed.), Grundgesetz, 9th ed. 2021, Art.  91c para 5; Härtel, LKV 2019, 49, 52; Siegel, DÖV 2009, 181. 131  Sichel, DVBl 2009, 1015.

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b) Constitutional Amendments aa) First Round: Article 91c(1)–(4) Basic Law of the Federal Republic of Germany Regarding the constitutional amendments, one has to start with Article 91c(1)– (4) of the Basic Law of the Federal Republic of Germany, the first132 and only133 explicit constitutional rule about digitalization. Before this amendment came into force on the 1st of August 2009, a broad range of incompatible IT infrastructures was already circulating. Thusly, the calls for legitimacy and coordination were getting louder.134 During its legislative discussion process, two divergent points of views were raised concerning the modality of the collaboration between the Federal State and the States.135 On the one hand, the Federal Government wanted to make collaboration mandatory while granting the Federal State exclusive legislative power over the subject. On the other hand, the States wanted cooperation to be facultative and to specify the details in a separate treaty. The final result of this discussion followed, generally, the position of the States.136 In this sense, Article 91c(1) and (2) Basic Law establishes that the Federal State and the States are able – but not mandated – to work together in planning, constructing and operating information technology systems. Even so, Article 91c(4) Basic Law recognizes the necessity of linking information networks of the Federation and those of the States; hence, the Federation shall establish by a federal law, but with the consent of the Bundesrat, a connection network. On the base of Article 91c(1) and (2) Basic Law, the Federal State and the States were able to enter into a contract. Consequently, the IT State Contract was signed.137 In its Section 1(1), the contract includes the setting up of an IT planning council which was expected to be a central actor for the advancement of e-government.138 In addition, Article 91c(3) of the German Constitution 132  Peuker, in: Hill/Schliesky (eds.), Auf dem Weg zum Digitalen Staat – auch ein besserer Staat?, 2015, 59, 64. 133  Härtel, LKV 2019, 49, 52. 134  Die gemeinsame Kommission von Bundestag und Bundesrat zur Modernisierung der Bund-Länder-Finanzbeziehungen, 2010, 175; Peuker, in: Hill/Schliesky (eds.), Auf dem Weg zum Digitalen Staat – auch ein besserer Staat?, 2015, 59, 77. 135  Gröpl, in: Dürig/Herzog/Scholz (eds.), Grundgesetz-Kommentar, 95th ed. 2021, Art.  91c para 3; Heun/Thiele, in: Dreier (ed.), Grundgesetz-Kommentar III, 3rd ed. 2018, Art.  91c para 1; for more details see: Die gemeinsame Kommission von Bundestag und Bundesrat zur Modernisierung der Bund-Länder-Finanzbeziehungen, 2010, 199–204. 136  Heun/Thiele, in: Dreier (ed.), Grundgesetz-Kommentar III, 3rd ed. 2018, Art.  91c para 1. 137  Vertrag über die Errichtung des IT-Planungsrats und über die Grundlagen der Zusammenarbeit beim Einsatz der Informationstechnologie in den Verwaltungen von Bund und Ländern – Vertrag zur Ausführung von Artikel 91c GG v. 27.05.2010, BGBl. 2010 I 26, 662– 667. 138  Peuker, in: Hill/Schliesky (eds.), Auf dem Weg zum Digitalen Staat – auch ein besserer Staat?, 2015, 59, 79.

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should be stressed. This Paragraph enables and encourages horizontal cooperation among the States.139 For instance, Hamburg and Schleswig-Holstein announced the 29th of May 2018 that both States wanted to provide an attractive access to digital administrative services together.140 bb) Second Round: Article 91c(5) Basic Law of the Federal Republic of Germany Despite the efforts, however, Article 91c of the German Constitution was, in its original shape, not enough to fulfil the needs and expectations of the citizens regarding digital administration. This was mainly because a common starting page was missing. Indeed, instead of a central homepage, the States launched their own digital services. Consequently, a patchwork of digital offers was developed, leading so to a certain lack of clarity.141 Aiming to address this issue and to improve the digital offer of public administration services,142 the constitution-amending legislature of 2017 introduced a fifth paragraph to Article 91c of the German Constitution which came into force on the 20th of July 2017. This Paragraph represents the legal basis for the launch of a single portal, which means that a one-stop-shop principle is constitutionally accepted.143 Based on Article 91c(5) of the German Constitution, which establishes that the “porta digitalis”144 shall be regulated by a federal law with the consent of the Bundesrat, the parliament enacted the Online Access Act which came into force on the 14th of August 2017.145 In its Section 1(1) it is mandated that, until the 31st of December 2022, the Federal State as well as the States shall link all their digital services and benefits within a portal network. Interestingly, concerning the scope of this duty, it is not clear whether or not146 this linking-duty goes beyond that and requires also the creation of new online services.147 139  Guckelberger, Öffentliche Verwaltung im Zeitalter der Digitalisierung, 2019, para 264; also including Paragraph 1 and 2: Gröpl, in: Dürig/Herzog/Scholz (eds.), Grundgesetz-Kommentar, 95th ed. 2021, Art.  91c para 8. 140 Presseerklärung des Landes Schleswig-Holstein, Für einen digitalen Norden, 29.05.2018, https://bit.ly/35sUv8l. 141  Guckelberger, Öffentliche Verwaltung im Zeitalter der Digitalisierung, 2019, para 266; Martini, in: Kahl/Ludwigs (eds.), Handbuch des Verwaltungsrechts I, 2021, §  28 para 22; Rüscher, DVBl 2017, 1530, 1530–1531. 142  BT-Drs. 18/11131, 12. 143  Guckelberger, Öffentliche Verwaltung im Zeitalter der Digitalisierung, 2019, para 267. 144  Martini, in: Kahl/Ludwigs (eds.), Handbuch des Verwaltungsrechts I, 2021, §   28 para 23. 145  Gesetz zur Verbesserung des Onlinezugangs zu Verwaltungsleistungen v. 14.08.2017, BGBl. 2017 I 57, 3122, 3138–3139. 146  Martini, DÖV 2017, 443, 449; Rüscher, DVBl 2017, 1530, 1531; Schliesky/Hoffmann, DÖV 2018, 193, 195. 147  Gröpl, in: Dürig/Herzog/Scholz (eds.), Grundgesetz-Kommentar, 95th ed. 2021, Art.  91c para 56; Guckelberger, Öffentliche Verwaltung im Zeitalter der Digitalisierung, 2019, para 275.

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III. Legal Bases and Limits of Automated Decision-Making by the Administration The core of the legislation and the jurisprudential debate with regard to automated decision-making by the administration are the legal bases for fully automated administrative acts created in 2017 in the three major procedural codes, namely Section 35a of the APA, Section 155(4) of the Tax Code (Abgabenord­ nung, AO) and Section 31a of the Social Code X (Sozialgesetzbuch X). Before the first two of the three provisions and the additions to the provisions on the investigation principle in these Codes are discussed in more detail below (see 2.), for the sake of completeness, the Union law requirements resulting from Article 22 GDPR will also be briefly outlined (see 1.). 1. Article 22 GDPR Insofar as personal data are processed, which will regularly be the case, the issuing of fully automated administrative acts falls within the scope of Article 22 GDPR. The provision establishes a prohibition in principle of automated individual decisions that have an adverse effect on a data subject.148 The European and national legislators may make exceptions to this prohibition by means of legal provisions, whereby these provisions must contain appropriate measures to safeguard the rights and freedoms as well as the legitimate interests of the data subject, Article 22(2)(b) GDPR. The Data Protection Directive 95/46/EC already contained a comparable provision; at the time, the European legislator was inspired by a French regulation that, remarkably, concerned the automated issuing of administrative decisions.149 The provision addresses the problem that with automated individual decisions there is a risk that the special circumstances of the individual case are not sufficiently taken into account; it is seen as a protection against the individuality of the person concerned being lost from view and the addressee of the decision being turned into a mere object of state action.150

148  The limitation to “adverse” consequences follows from the spirit and purpose of the provision, see v. Lewinski, in: Wolff/Brink (eds.), BeckOK Datenschutzrecht, 38th ed. 11/2021, Art.  22 GDPR para 33. 149  Ernst, JZ 2017, 1026, 1031. 150  v. Lewinski, in: Wolff/Brink (eds.), BeckOK Datenschutzrecht, 38th ed. 11/2021, Art.  2 2 GDPR para 2; Ernst, JZ 2017, 1026, 1030–1031.

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2. Legal Provisions on the Automated Administrative Act in Section 35a of the APA and in Section 155(4) of the Tax Code a) Regulatory Objective: Automated Administrative Acts as Acts Attributable to the Administration Since 2017, automated decision-making by the administration has been regulated in a central place, namely in the Administrative Procedure Act (APA), which applies if no special procedural rules exist, Section 1(1) APA. The newly inserted Section 35a APA reads as follows: “An administrative act may be issued entirely by automatic means if this is permitted by law and the administration has no discretionary power.” The aim and core of the provision is primarily to clarify that fully automated decisions can also be attributed to the administration and thus fall under the concept of an administrative act, although there is no declaration of the will of a human being in the specific individual case.151 b) Scope of Application The provision, like Article 22 GDPR, only applies to fully automated, but not to merely partially automated administrative decisions.152 The decisive factor in this context is that the automated equipment functionally takes over the actual decision-making; systems that support the case handler in decision-making therefore do not fall within the scope of the provision.153 The qualitative difference to the administrative acts issued “with the help of automatic equipment” (see above I. 2. b) and below IV. 2. a)) is essentially that not only the stage of applying the law and formulating the decision, but also the upstream stage of collecting, evaluating and verifying the factual data is automated.154 The fact that the administrative procedure is initiated by a public authority employee, on the other hand, does not deprive the decision of the character of a fully automated decision, provided the person does not influence the decision-making process itself.155 It is also irrelevant how a decision, once made automatically, is made known to the addressee: even if an administrative act is printed out and sent by an administrative employee without the employee checking the content of the administrative act, it can be a fully automated deci151  For this, see the explanatory memorandum to the law, BT-Drs. 18/8434, 122; for a detailed discussion of this question see Herold, Demokratische Legitimation automatisiert erlassener Verwaltungsakte, 2020, 181–187. 152  Guckelberger, DÖV 2021, 566, 567. 153  Hornung, in: Schoch/Schneider (eds.), Verwaltungsrecht – Verwaltungsverfahrensgesetz, 2020, §  35a para 28. 154  U. Stelkens, in: Stelkens/Bonk/Sachs (eds.), Verwaltungsverfahrensgesetz, 9 th ed. 2018, §  35a para 21. 155  U. Stelkens, in: Stelkens/Bonk/Sachs (eds.), Verwaltungsverfahrensgesetz, 9 th ed. 2018, §  35a para 25; in detail Bull, DVBl 2017, 409, 410–411.

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sion to which Section 35a APA applies.156 This is in line with the interpretation of Article 22 GDPR, which is also intended to be inapplicable only if a review of the content is carried out by a human being; in contrast, in the case of a mere take-over of the automated decision by an employee, the provision remains applicable.157 c) Necessity of a Specific Legal Basis While the provision clarifies that fully automated decisions can also be administrative acts within the meaning of the APA, it also makes the issuance of such a fully automated administrative act dependent on the existence of a specific legal basis in the respective sector-specific law. Section 35a of the APA thus has, in addition to the clarification function, also a limitation and competence allocation function (to the legislator of the sector-specific law), as it prohibits fully automated administrative acts unless a specific legal basis exists.158 The provision thus repeats the prohibition of automated individual decision-making already enshrined in Article 22(1) of the GDPR; it does not itself constitute a legal provision of a Member State within the meaning of Article 22(2)(b) of the GDPR that permits such a decision, but refers to sector-specific law in this respect.159 This has rendered provisions in sector-specific law superfluous which, like Section 114(4) of the Federal Civil Servants Act (Bundesbeamtengesetz, BBG), prohibit the fully automated issuing of specific decisions, such as the hiring or promotion of civil servants in this case. It is disputed in German legal literature whether the specific legal basis in the sense of Section 35a APA must be a parliamentary act or whether statutory instruments can also be considered as a legal basis for fully automated administrative acts. While for Article 22(2)(b) GDPR it is clarified in recital 41 that the legal provision of the Member State does not have to be a parliamentary act, for Section 35a APA some authors assume that the authorisation of an automated administrative act must be made by the parliamentary legislator for constitutional reasons.160 However, this seems somewhat strict insofar as the full automation of very simple administrative procedures, such as the granting of a re156  Guckelberger, DÖV 2021, 566, 567; Hornung, in: Schoch/Schneider (eds.), Verwal­ tungs­recht – Verwaltungsverfahrensgesetz, 2020, §  35a para 29. 157  Helfrich, in: Sydow/Marsch (eds.), DS-GVO/BDSG, 3rd ed. 2022 (forthcoming), Art.  2 2 DSGVO paras 43–44. 158 Concisely U. Stelkens, in: Stelkens/Bonk/Sachs (eds.), Verwaltungsverfahrensgesetz, 9th ed. 2018, §  35a para 1. 159  v. Lewinski, in: Wolff/Brink (eds.), BeckOK Datenschutzrecht, 38th ed. 11/2021, Art.  2 2 DSGVO para 65. 160  Hornung, in: Schoch/Schneider (eds.), Verwaltungsrecht – Verwaltungsverfahrensgesetz, 2020, §  35a para 4; Windoffer, in: Mann/Sennekamp/Uechtritz (eds.), Verwaltungsverfahrensgesetz, 2nd ed. 2019, §  35a para 26.

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quested motor vehicle registration (see below c)), does not prove to be particularly sensitive to fundamental rights.161 d) Discretion of the Administration as a Negative Criterion On the other hand, the fully automated issuance of an administrative act pursuant to Section 35a APA is excluded in those cases in which the administration has discretionary powers. However, this exclusion must be put into perspective to the extent that the provisions of parliamentary sector-specific law, which permit the issuance of a fully automated decision in the first place, may also deviate from this requirement of Section 35a APA (lex specialis derogat legi gen­ erali).162 The exclusion of discretionary decisions regulated in Section 35a of the APA thus only has a warning function, as the parliamentary163 legislature, when enacting sector-specific law, is supposed to consider whether a fully automated decision is really possible from a rule of law point of view. In this respect, the provision expresses a presumption that discretionary norms are generally not suitable for application by fully automated systems. This presumption expressed in Section 35a APA first of all takes into account the current technological state of the art, since algorithmic systems have difficulties in the application of law precisely when they are dealing with questions of interpretation or value.164 However, the administrative discretion as a point of reference of the provision is criticized with good reasons in two respects. Fundamentally, the discretionary aspect is an ex-post consideration from a judicial perspective, which is concerned with how intensive the control by the administrative courts is or to what extent the administration is to be granted leeway that is only subject to limited control by the courts. In the opinion of many, however, this is the wrong starting point for the question of whether an administrative decision is suitable for complete automation or not; this question should rather be answered from the ex-ante perspective of the authorities.165 Thus, automation is also out of the question in the case of so-called bound decisions, where the administration has no discretionary power and its decisions are therefore fully reviewed by the courts, but where the applicable provision con161  The situation is different, for example, if the German Federal Intelligence Service uses algorithms in foreign telecommunications surveillance; this is to be regulated by the parliamentary legislature, see Federal Constitutional Court, Judgment of 19th May 2020, ECLI:DE:BVerfG:2020:rs20200519.1bvr283517, para 192. 162  Ziekow, NVwZ 2018, 1169, 1171. 163  A deviation by statutory instruments, on the other hand, is out of the question due to the norm hierarchical precedence of the parliamentary law, U. Stelkens, in: Stelkens/Bonk/ Sachs (eds.), Verwaltungsverfahrensgesetz, 9th ed. 2018, §  35a para 35. 164  Wischmeyer, in: Ebers et al. (eds.), Artificial Intelligence and Robotics, 2020, §   20 para 65. 165  Berger, NVwZ 2018, 1260, 1263; U. Stelkens, in: Stelkens/Bonk/Sachs (eds.), Verwaltungsverfahrensgesetz, 9th ed. 2018, §  35a paras 44–46.

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tains open and vague terms. As an example, Section 35 of the Industrial Code (Gewerbeordnung, GewO) obliges the administration (no discretion!) to prohibit a business if the person responsible for the business is “unreliable” (vague term, the interpretation and application of which, however, is fully controlled by the courts). While the presumption is too narrow in this very fundamental respect, it proves to be too broad in another respect. For there are certainly cases in which the administration has discretion, but its discretion is already so strongly bound in the abstract that automation could come into consideration. This is the case, on the one hand, if the discretion of the authorities is limited by internal administrative regulations; on the other hand, a reduction of discretion through the use of an automated decision is also conceivable.166 The expert group “Data Ethics Commission” set up by the Federal Government has therefore proposed to expand the scope of application of Section 35a APA in this respect or to regulate differentiated specifications in sector-specific law.167 e) Principle of Investigation: Continuation of the Principle and Special Features in the Determination of Facts Decision-making through fully automated administrative acts also raises procedural issues: Particularities with regard to the hearing and the obligation to state reasons are discussed in more detail in the section on accountability (see IV. 2. a)). At this point, we will initially only deal with the principle of investigation binding the administration, which is enshrined in Section 24 of the APA and states: “The authority shall determine the facts of the case ex officio.” Since full automation within the meaning of Section 35a APA also concerns the collection, processing and verification of the information relevant for the decision, the legislator also made an addition to Section 24 APA at the same time as enacting Section 35a APA. Section 24(1) now states: “If the authority uses automatic devices to issue administrative acts, it must take into account factual information of the person concerned that is significant for the individual case and that would not be determined in the automatic procedure.” The new sentence inserted into Section 24(1) APA focuses on the “blindness to the individual case” of generalised decision-making programs.168 First of all, the provision only clarifies that the duty of official investigation also applies in fully automated administrative procedures.169 This clarification is not absolutely necessary, but in a sense it contains a warning by the legislature.170 In this 166  Hornung, in: Schoch/Schneider (eds.), Verwaltungsrecht – Verwaltungsverfahrensgesetz, 2020, §  35a para 32; Stegmüller, NVwZ 2018, 353, 357. 167  Datenethikkommission der Bundesregierung, Gutachten, 2019, 214. 168  Berger, NVwZ 2018, 1260, 1263. 169  Schneider, in: Schoch/Schneider (eds.), Verwaltungsrecht – Verwaltungsverfahrensgesetz, 2020, §  24 para 133. 170  Ziekow, NVwZ 2018, 1169, 1172.

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way, the provision safeguards the duty to carry out official investigations, which makes sense insofar as especially in automated procedures, which are based on standardised ideas about reality, there is an increased risk that the special circumstances of an individual case will not be taken into account.171 This is also seen as a suitable measure to safeguard the data subject’s rights and freedoms and legitimate interests within the meaning of Article 22 (2) (b) GDPR.172 At the same time, Section 24(1) APA emphasizes the special responsibility of the person concerned to point out the particularities of the individual case.173 If special circumstances do not arise in a specific individual case, the administration may, in the absence of a contrary indication by the person concerned, rely on the fact that it is a standard case that does not require any further investigation of the facts.174 It is still unclear whether the special circumstances presented by the person concerned may be checked by the algorithmic system itself to determine whether they are of importance in the specific procedure or whether a human being must carry out this check in every case.175 If the check of the special circumstances by a human being has led to the result that they are not significant for the procedure, then the fully automated procedure can be continued.176 f) Fields of Application, Especially Internet-Based Vehicle Registration The assignment of tasks to the legislator of sector-specific law contained in Section 35a of the APA to identify procedures in which decisions could be made by fully automated administrative acts has hardly borne fruit so far.177 In this context, it is symptomatic of Germany’s backwardness with regard to the digitalization of the administration that the internet-based vehicle registration, which is often cited as a prime example of a fully automated procedure, could not initially be used in many places after its introduction.178 In addition, for technical reasons, not all application procedures related to vehicle registration can be carried out as fully automated procedures, but only applications for decommissioning, applications for transfer to another holder (if the vehicle registration number is retained) and notification of change of residence (if the previous reg171  Schneider, in: Schoch/Schneider (eds.), Verwaltungsrecht – Verwaltungsverfahrensgesetz, 2020, §  24 para 133. 172  Ziekow, NVwZ 2018, 1169, 1172. 173  Schneider, in: Schoch/Schneider (eds.), Verwaltungsrecht – Verwaltungsverfahrensgesetz, 2020, §  24 para 134. 174 Ibid. 175 Cf. Kallerhoff/Fellenberg, in: Stelkens/Bonk/Sachs (eds.), Verwaltungsverfahrensgesetz, 9th ed. 2018, §  24 para 57e. 176 Ibid. 177  Guckelberger, DÖV 2021, 566, 571. 178 Ibid.

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istration number is retained).179 The legal basis for the fully automated issuing of administrative acts in the area of vehicle registration is Section 6g(2) of the Road Traffic Act (Straßenverkehrsgesetz, StVG). According to this, administrative acts can be issued completely by automatic devices “if 1. the automatic examination of the prerequisites for the decision is carried out on the basis of an automated examination program that is set up at the competent authority and is operated exclusively by it, and 2. it is ensured that the result of the examination can only be the decision in accordance with the application or the rejection of the application”. However, an administrative act issued in this manner is subject to a possible review for a period of one month in accordance with Section 6(2) of the Road Traffic Act and may be revoked or amended at any time during this period. Pursuant to Section 15f(3) of the Vehicle Registration Ordinance (Fahrzeug-Zulassungsverordnung, FZV), the registration authorities must ensure that “1. a sufficient number of automated decisions are selected by random checks for manual review and, if the decisions are selected automatically, decisions are also selected manually at regularly set intervals and 2. the operation of the automatic device can be made visible and verifiable”. While new fields of application for fully automated administrative procedures (with the exception of tax law, see below f)) have hardly been discovered so far and therefore only a few sector-specific legal bases in the sense of Section 35a APA have been created, simple fully automated systems such as traffic lights and intelligent traffic guidance systems have existed for a long time. For these, no new legal bases have been created that explicitly allow automation.180 Whether such explicit legal bases are necessary or whether the scope of application of Section 35a of the APA should be teleologically reduced in view of simple, fully automated systems that have existed for a long time is disputed.181 The example of the automatic correction of multiple-choice exams at universities, which was also mentioned in this context, shows in any case that the use of algorithms is not always associated with a substantial increase in risk and that the requirement of a sector-specific legal basis proves to be too strict. Therefore, in our opinion, we cannot follow the too undifferentiated assessment of the Data Ethics Commission, which considers the use of algorithmic systems by the state administration to be particularly sensitive in principle (at least on the third of the five levels identified by the Commission in the criticality pyramid) and 179  See the explanatory memorandum to the ordinance, BT-Drs. 18/19, 41, which cites as a reason the fact that it has not yet been possible to technically map the testing of certain initial registration requirements for first-time registrations. 180 Therefore, Stegmüller, NVwZ 2018, 353, 356, is critical of the requirement of a sector-specific legal basis demanded by Section 35a APA. 181  For a reduction of the scope of application U. Stelkens, in: Stelkens/Bonk/Sachs (eds.), Verwaltungsverfahrensgesetz, 9th ed. 2018, §  35a para 22; against Windoffer, in: Mann/Sennekamp/Uechtritz (eds.), Verwaltungsverfahrensgesetz, 2nd ed. 2019, §  35a para 27.

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therefore demands a comprehensive risk impact assessment as a mandatory prerequisite for any ethically justifiable use of AI systems by the administration.182 g) Tax Law as a Driver of Automated Administration: The Provisions in Section 155(4) and Section 88(5) of the Tax Code Tax law has proven to be the real driver of automation in German administrative law. Thus, the introduction of Section 35a of the APA was inserted late and for reasons of uniformity of the three important procedural codes (APA, Fiscal Code, Social Code X) in a legislative project to modernise the taxation procedure, which, among other things, created the possibility of a fully automated tax assessment with the provision of Section 155(4) of the Fiscal Code. According to this provision, the tax assessment can be made fully automatically on the basis of the information available to the tax authorities and the information provided by the taxpayer in his electronic tax return.183 The prerequisite for this, according to Section 155(4) of the Tax Code, is that there is no reason for the individual case to be processed by public officials. Such a reason exists in particular if the taxpayer provides information in a free text field provided for this purpose which, in his or her opinion, is a reason for processing by public officials, Section 155(4) in conjunction with Section 170(7). In this case, the fully automatic procedure is exited and the application for tax assessment is examined by an officer. However, this is not the only scenario in which a manual examination by an official takes place. For at the same time as the enactment of Section 155(4) of the Fiscal Code, a new paragraph was also added to the provision on the principle of official investigation in tax law (Section 88 of the Fiscal Code), which is particularly interesting in the present context. Here, too, it is apparent that the special nature of automated administrative procedures essentially concerns the determination of the facts and that in many cases information provided by the parties involved is taken over without being checked by an official.184 Section 88(5) of the Fiscal Code now allows the tax authorities to implement automation-supported risk management systems, which are used, among other things, to assess whether further investigations or audits are necessary. The aim of the provision is to ensure a uniform and lawful assessment of taxes, whereby, according to the explicit intention of the legislator, the principle of administrative efficiency is also to be taken into account. The risk management systems 182 Datenethikkommission der Bundesregierung, Gutachten, 2019, 212 in conjunction with 177 and 179. 183  Other decisions of the tax authorities can also be made fully automatically, see Braun Binder, in: Wischmeyer/Rademacher (eds.), Regulating Artificial Intelligence, 2020, 295 para 4. 184  U. Stelkens, in: Stelkens/Bonk/Sachs (eds.), Verwaltungsverfahrensgesetz, 9 th ed. 2018, §  35a para 7.

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used must fulfil four requirements according to Section 88(5) of the Tax Code: they must ensure that 1. a sufficient number of randomly selected cases are sorted out for examination by a civil servant, that 2. the cases sorted out as requiring examination are examined by a civil servant, that 3. the civil servants can select cases for comprehensive examination on their own initiative and that 4. the risk management system is regularly checked for its fulfilment of objectives. In particular, the random selection of cases is intended to ensure that the functioning of the system can be monitored and that system errors do not become entrenched. This is particularly interesting because it can probably be assumed that the tax authorities also use artificial intelligence as part of the risk management systems.185 However, this cannot be ascertained with certainty, as Section 88(5) of the German Fiscal Code explicitly prohibits the publication of details of the risk management systems insofar as this could endanger the uniformity and legality of taxation. This is intended to prevent conclusions from being drawn about the functioning of the risk management systems through publication, which would make it possible to circumvent them. h) Discussion Points From the multitude of discussion points that are debated with regard to the fully automated administrative act, only two are briefly mentioned here. On the one hand, many authors demand that the addressees of such administrative acts should always have an easily accessible possibility to initiate an intra-administrative objection procedure, within the framework of which a control of the administrative act by the administration itself takes place.186 This procedure must not be completely automated but must be carried out by an official. It is rightly emphasized that such procedures, in addition to the individual legal protection function in favour of citizens, also fulfil a quality assurance function with regard to the algorithmic system.187 On the other hand, some authors consider Section 155(4) of the Fiscal Code to be incompatible with EU law because the provision does not contain sufficient safeguards within the meaning of Article 22(2)(b) of the GDPR.188 It is true that in tax law, via the objection procedure pursuant to Sect. 347 et seq. Fiscal Code, it is ensured that the data subject can present his or her own point of view, challenge the decision and thus obtain 185 See Braun Binder, in: Wischmeyer/Rademacher (eds.), Regulating Artificial Intelligence, 2020, 295 paras 16–27; Wischmeyer, in: Ebers et al. (eds.), Künstliche Intelligenz und Robotik, 2020, §  20 para 27. 186  In this sense Berger, DVBl 2017, 804, 808; Bull, DVBl 2017, 409, 414; Guckelberger, Öffentliche Verwaltung im Zeitalter der Digitalisierung, 2019, para 576; U. Stelkens, in: Stelkens/Bonk/Sachs (eds.), Verwaltungsverfahrensgesetz, 9th ed. 2018, §  35a para 63–65. 187  U. Stelkens, in: Stelkens/Bonk/Sachs (eds.), Verwaltungsverfahrensgesetz, 9 th ed. 2018, §  35a para 63. 188 So in particular Hornung, in: Schoch/Schneider (eds.), Verwaltungsrecht – Verwaltungsverfahrensgesetz, 2020, §  35a paras 20–21.

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the intervention of an official. However, according to the criticism, the specific information required by recital 71 GDPR that the administrative act has been fully automated is missing.

IV. Accountability 1. Accountability – A Definition from the German Perspective Accountability, also described as the “administrative law’s central obsession”189, is a core concept of comparative law,190 which promises to be a solution for many problems.191 Over time,192 accountability has become an extensive idea,193 encompassing ideals such as explainability, participatory and transparency,194 which – apropos of AI – represent a challenge for the public administration.195 The academic discourse has gone so far to even depict accountability as a “dustbin with good ideas”.196 After all, despite the ambiguity, one might state that accountability entails – at least – a social aspect.197 Indeed, accountability has been defined as a “specific social relation”.198 In this vein, the role of accountability is described as the ability to demand justification and thus to draw consequences.199 a) Algorithmic Accountability The concept of accountability on which this paper focuses on is that of algorithmic accountability. Therefore, it is pertinent to take a closer look at the scientific project “algorithmic accountability”, funded by the Federal State, which – among other goals – aims to promote an effective algorithmic accountability.200 189 

Metzger, Law and Contemporary Problems 78 (2015), 129, 130. Psygkas, in: Cane et al. (eds.), The Oxford Handbook of Comparative Administrative Law, 2021, 443. 191  Dubnick, Public Performance & Management Review 28 (2005), 376. 192  Mulgan, Public Administration 78 (2000), 555. 193 Ibid.; Bovens, European Law Journal 13 (2007), 447, 449; Psygkas, in: Cane et al. (eds.), The Oxford Handbook of Comparative Administrative Law, 2021, 443. 194  Ibid., 449. 195  Regarding the ideal of explainability: Britz/Eifert, in: Voßkuhle/Eifert/Möllers (eds.), Grundlagen des Verwaltungsrechts II, 3rd ed. 2022 (forthcoming), §  26 para 118; regarding the ideal of participation: ibid., para 108; regarding the ideal of transparency: Ananny/Crawford, New Media & Society 20 (2018), 973, 977. 196  Bovens, European Law Journal 13 (2007), 447, 449. 197  Psygkas, in: Cane et al. (eds.), The Oxford Handbook of Comparative Administrative Law, 2021, 443, 448. 198  Bovens, European Law Journal 13 (2007), 447, 450. 199  Rubin, Michigan Law Review 103 (2005), 2073, 2119. 200  Busch, Algorithmic accountability, Abida Gutachten, 2018, 8. 190 

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Subsequently, the project tries to offer, separately,201 a definition for “algorithm” and “accountability”. However, recognizing the difficulty of defining an algorithm, the author prefers to describe it as a special form of generating knowledge and decisions.202 When it comes to “accountability”, a reference to Article 5(2) GDPR is made, which uses the exact same term. Yet, because a responsible deployment of an algorithmic decision-making-system not only requires transparency, but also ethical standards,203 a wider definition than that of Article 5(2) GDPR is preferred.204 Nevertheless, due to the nature of AI, which essentially205 consists of solving problems206 independently, 207 based on correlation and not causation, 208 faster than humans, as well as in an opaque manner, 209 transparency – a principle related to other principles such as the one of non-discrimination 210 – has been notably in the center of the debate.211 For instance, the AI-strategy of the Federal Government of 2018 emphasizes that transparency must be ensured when making usage of AI by the public administration.212 The opacity of AI, also described as a “Black-Box”, has moreover become a recurrent subject in the academic field.213 Hence, against this background, it is appropriate to take a closer look into the concept of transparency, which – by the way – changes depending on the jurisdiction,214 from the German perspective.

201 Ibid.,

9–10. 10: in this context, the author refers to Gillespie, in: Peters (ed.), Digital Keywords 2016, 18, 22. 203  Regarding the ethical dilemma, the project refers to Mittelstadt et al., Big Data & Society, 2016, 1–21. 204  Busch, Algorithmic accountability, Abida Gutachten, 2018, 11. 205  Britz/Eifert, in: Voßkuhle/Eifert/Möllers (eds.), Grundlagen des Verwaltungsrechts II, 3rd ed. 2022 (forthcoming), §  26 para 88. 206  Buchholtz, JuS 2017, 955; Felfernig et al., in: Stember et al. (eds.), Handbuch E-Government, 2019, 491, 493. 207  Etscheid, in: Mohabbat Kar et al. (eds.), (Un)Berechenbar? Algorithmen und Automatisierung in Staat und Gesellschaft, 2018, 126, 141; Braun Binder, in: Wischmeyer/Radema­ cher (eds.), Regulating Artificial Intelligence, 2020, 301 para 17. 208  Britz/Eifert, in: Voßkuhle/Eifert/Möllers (eds.), Grundlagen des Verwaltungsrechts II, 3rd ed. 2022 (forthcoming), §  26 para 45. 209  Wischmeyer, in: Wischmeyer/Rademacher (eds.), Regulating Artificial Intelligence, 2020, 76 para 1; Finck, in: Cane et al. (eds.), The Oxford Handbook of Comparative Administrative Law, 2021, 657, 664. 210 Ibid. 211  Hofmann, in: Iliopoulos-Strangas et al. (eds.), The Challenges of Digital Communication for the State and its Democratic State Form, 2021, 175, 184. 212  Bundesregierung, Eckpunkte der Bundesregierung für eine Strategie Künstlicher Intelligenz, 2018, 9. 213  Britz/Eifert, in: Voßkuhle/Eifert/Möllers (eds.), Grundlagen des Verwaltungsrechts II, 3rd ed. 2022 (forthcoming), §  26 para 38; e.g., Wischmeyer, in: Wischmeyer/Rademacher (eds.), Regulating Artificial Intelligence, 2020, 75–101; Martini, Blackbox Algorithmus, 2019. 214  Finck, in: Cane et al. (eds.), The Oxford Handbook of Comparative Administrative Law, 2021, 657, 663. 202  Ibid.,

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b) Transparency Although the German Constitution contains some transparency related norms,215 it does not entail a comprehensive nor explicit transparency principle.216 Nevertheless, in light of the principle of the rule of law, the principle of democracy and the principle of the republican form of government, the German Constitution promotes an open state.217 Described as an “informational dimension of accountability”, 218 transparency is – or at least promises to be219 – a form of control.220 The latter results to a logical chain of events: without knowledge, reviewing a decision is quasi-impossible.221 Therefore, it is not surprising that transparency, being one of the promises of accountability,222 has been categorized as a prerequisite for the exercise of other rights.223 For instance, whenever a decision-making process is opaque, not only its legitimacy is undermined,224 but also, the concerned individual cannot take a genuine decision whether or not he/she wants to take the risk of violation of his/her personal data right arising from the software-based-system. Furthermore, the same individual is not able to realize if a discrimination against him/her took place.225 In order to prevent such a situation, various instruments have been introduced, under which one could highlight the right to demand information.226 Regarding the aim of transparency regulations, it has been argued that it is not to achieve full transparency, but rather to facilitate a decision review by informing different groups of stakeholders on the one hand, and, on the other hand, to give a “sense of agency”.227 Withal, one could say that transparency facilitates the creation of trust.228 Incidentally, transparency knows different actors, such as the media 215 

E.g., Article 42(1), 52(3), 82(1) Basic Law for the Federal Republic of Germany. Bröhmer, Transparenz als Verfassungsprinzip, 2004, 34; Martini, Blackbox Algorithmus, 2019, 69; Gurlit, DVBl 2003, 1119, 1121. 217  Bröhmer, Transparenz als Verfassungsprinzip, 2004, 34; Meinel, KJ 2004, 413, 421. 218  Wischmeyer, in: Wischmeyer/Rademacher (eds.), Regulating Artificial Intelligence, 2020, 94 para 43. 219  Ananny/Crawford, New Media & Society 20 (2018), 973, 975. 220  Wischmeyer, in: Wischmeyer/Rademacher (eds.), Regulating Artificial Intelligence, 2020, 94 para 43. 221  Ananny/Crawford, New Media & Society 20 (2018), 973, 974. 222  Dubnick, Public Performance & Management Review 28 (2005), 376. 223  Finck, in: Cane et al. (eds.), The Oxford Handbook of Comparative Administrative Law, 2021, 657, 664. 224  Etscheid, in: Mohabbat Kar et al. (eds.), (Un)Berechenbar? Algorithmen und Automatisierung in Staat und Gesellschaft, 2018, 126, 148–149. 225  Martini, Blackbox Algorithmus, 2019, 176; generally speaking, the lack of transparency affects the legal protection of the individual: Hoffmann-Riem, AöR 142 (2017), 1, 32–33; Buch­holtz, JuS 2017, 955, 959. 226  Martini, Blackbox Algorithmus, 2019, 177. 227  Wischmeyer, in: Wischmeyer/Rademacher (eds.), Regulating Artificial Intelligence, 2020, 78 para 6. 228  Diakopoulos, Communications of the ACM 59 (2016), 56, 61; Martini, Blackbox Algo216 

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and the parliament, as beneficiaries; subsequently, the scarcity of transparency affects – beyond the individual case – also the society.229 c) The Approach Finally, there are many ways to delve into the topic “algorithmic accountability.” For instance, one could choose an ex-ante and an ex-post modus operandi. Following this logic, some scholars discuss solutions to the black-box-problem.230 Moreover, dimensions could be implemented as an orientation.231 Among the possible structures, the present paper decides to approach the sub-topic “algorithmic accountability” focusing on what has been done (2.) and on what is currently in discussion (3.). 2. What Has Been Done When analyzing what has been done in the context of algorithmic accountability, there are some aspects that stand out. Firstly, procedural rights have been, in the same vein as the federal structure (see II. 3. a)), perceived as hindrances for the digitalization of the public administration. In consequence, some legal amendments were, in order to stay abreast of changes, necessary.232 This paper wants, therefore, to focus on these legal adjustments. Secondly and as already highlighted, the transparency aspect is crucial in the accountability discussion. Hence, it is important to evaluate the non-transparency dilemma from the data subject perspective and thus in the light of the GDPR. In addition, because algorithmic processes are not always individual related, it is necessary to expand the view.233 In this context, the Freedom of Information Act is remarkable. a) Procedural Rights – A Hindrance for Digitalization Public acts that were produced by an AI-based-system are, like any other action of the state, subject to legal requirements.234 In context of digitalization and its promise of effectiveness and quality improvement, some procedural guarantees rithmus, 2019, 176; Hoffmann-Riem, in: Wischmeyer/Rademacher (eds.), Regulating Artificial Intelligence, 2020, 17 para 53. 229  Hoffmann-Riem, in: Wischmeyer/Rademacher (eds.), Regulating Artificial Intelligence, 2020, 17 para 53; Finck, in: Cane et al. (eds.), The Oxford Handbook of Comparative Administrative Law, 2021, 657, 667. 230  E.g., Martini, Blackbox Algorithmus, 2019, 177. 231  Hofmann, in: Iliopoulos-Strangas et al. (eds.), The Challenges of Digital Communication for the State and its Democratic State Form, 2021, 175, 184. 232  Britz/Eifert, in: Voßkuhle/Eifert/Möllers (eds.), Grundlagen des Verwaltungsrechts II, 3rd ed. 2022 (forthcoming), §  26 para 31. 233  Martini, Blackbox Algorithmus, 2019, 156. 234  Wischmeyer, in: Ebers et al. (eds.), Künstliche Intelligenz und Robotik, 2020, §   20 para 42.

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began to be seen as obstacles;235 because of this, the German legislature began to introduce derogations in 1977. At first, these clauses were only directed towards partly automated administrative acts.236 Thus, such acts were, already then and without more ado, admissible.237 Regarding fully automated administrative acts and the resulting concern of not being compatible with humanity,238 its permissibility was contentious.239 Then, on the 1st of January 2017, everything changed when Section 35a APA entered into force (see III. 2.). The derogations which the German legislature adopted, at least in the beginning, for partly automated administrative acts are: Section 28(2)(4), Section 37(5) and Section 39(2)(3) APA.240 Whereby, focusing on algorithmic accountability, Section 28(2)(4) and Section 39(2)(3) APA are of paramount importance. In this context it should be noted, however, that the applicability of these provisions for fully automated administrative acts has become a point of discussion.241 While some scholars have a skeptical posture and thus tend to deny it, 242 others, following an argumentum a maiore ad minus, advocate, under certain conditions, for its application.243 To complete the picture, before illustrating these legal provisions, it is pertinent to underline the difference between fully and partly automated administrative acts. The quality difference between both acts relies on the distinct involvement of the government official during the execution.244 While the person responsible of a partly automated administrative act has, on the one hand, to 235  Britz/Eifert, in: Voßkuhle/Eifert/Möllers (eds.), Grundlagen des Verwaltungsrechts II, 3rd ed. 2022 (forthcoming), §  26 para 31. 236  U. Stelkens, in: Stelkens/Bonk/Sachs (eds.), Verwaltungsverfahrensgesetz, 9 th ed. 2018, §  35a para 20; Guckelberger, VVDStRL 78 (2019), 235, 274. 237  In this context, the Federal Constitutional Court did not question (at least indirectly) the admissibility of such acts: Federal Constitutional Court, Judgment of 08th December 1992, 1 BvR 326/89; U. Stelkens, in: Stelkens/Bonk/Sachs (eds.), Verwaltungsverfahrensgesetz, 9th ed. 2018, §  35a para 20. 238  Scathingly critical: Schreiter, DÖV 1956, 692, 693; furthermore: Ernst, JZ 2017, 1026, 1030; Bull, Der Staat 58 (2019), 57, 69. 239  Britz/Eifert, in: Voßkuhle/Eifert/Möllers (eds.), Grundlagen des Verwaltungsrechts II, 3rd ed. 2022 (forthcoming), §  26 para 11; Stegmüller, NVwZ 2018, 353, 354–355. 240  Britz/Eifert, in: Voßkuhle/Eifert/Möllers (eds.), Grundlagen des Verwaltungsrechts II, 3rd ed. 2022 (forthcoming), §  26 para 20. 241  Stuhlfauth in: Obermayer/Funke-Kaiser (eds.), Verwaltungsverfahrensgesetz, 6th ed. 2020, §  35a, para 9. 242  Siegel, DVBl 2017, 24, 28; Berger, NVwZ 2018, 1260, 1264; Braun Binder, DÖV 2016, 891, 895. 243  Hornung, in: Schoch/Schneider (eds.), Verwaltungsrecht – Verwaltungsverfahrensgesetz, 2020, §  35a para 40; Windoffer, in: Mann/Sennekamp/Uechtritz (eds.), Verwal­t ungs­ verfahrensgesetz, 2th ed. 2019, §  35a para 10, 33; Glaesner/Leymann, in: Fehling/Kastner/ Störmer (eds.), Handkommentar Verwaltungsrecht, 5th ed. 2021, §  35a para 6; regarding the requirement of information and consultation: Braun Binder, NVwZ 2016, 960, 964. 244  U. Stelkens, in: Stelkens/Bonk/Sachs (eds.), Verwaltungsverfahrensgesetz, 9 th ed. 2018, §  35a para 21.

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collect and verify the data before introducing it into the automatic system and, on the other hand, exercise its right to discretion;245 the data acquisition, evaluation and verification of fully automated administrative acts happens automatically.246 aa) Requirement of a Hearing Section 28(1) APA establishes the requirement of a hearing before issuing an administrative act that affects the rights of a participant. Notwithstanding, this procedure may be omitted when the authority wishes to issue an administrative act using automatic equipment.247 Regarding the applicability of this derogation, the number of persons that must be affected by the administrative act is controversial. Future orientated and based on the wording of Section 28(2)(4) APA which does not require a minimum of concerned people by the act, some scholars are of the opinion that a large number of affected people is not a prerequisite for the applicability of this derogation.248 Conversely, due to the special circumstances of mass operations, 249 others require a large number of people affected by the administrative act in order to apply Section 28(2)(4) APA.250 bb) The Form For the sake of completeness, the exemption to the form of a written administrative act issued by means of an automatic equipment is worth mentioning. In this matter, Section 37(5) APA allows the omission of the signature and the name of the head of the authority. However, due to the technological evolution and thus the improvement of storage capacity of data processing systems, some scholars have baptized this regulation as “dead law”.251 cc) The Obligation to State Reason Moving forward, Section 39 APA deals with the obligation to state reason. As a rule, Section 39(1) APA establishes that a written or electronic administrative act shall be – among others – accompanied by a statement of reasons. As an exception, Section 39(2)(3) APA establishes that no statement of reasons is re245 

Ibid., para 19. Ibid., para 21. 247  Section 28(2)(4) APA. 248  Schneider, in: Schoch/Schneider (eds.), Verwaltungsrecht – Verwaltungsverfahrensgesetz, 2020, §  28 para 74. 249  Ramsauer in: Kopp/Ramsauer (eds.), Verwaltungsverfahrensgesetz, 22th ed. 2021, §  28 para 68a. 250 Ibid.; Kallerhoff/Mayen, in: Stelkens/Bonk/Sachs (eds.), Verwaltungsverfahrensgesetz, 9th ed. 2018, §  28 para 62. 251  U. Stelkens, in: Stelkens/Bonk/Sachs (eds.), Verwaltungsverfahrensgesetz, 9 th ed. 2018, §  37 paras 131–132. 246 

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quired when, firstly, the authority issues an administrative act with the help of an automatic equipment and, secondly, the individual case does not merit a statement of reasons. In the same vein of Section 37(5) APA, some scholars have also categorized Section 39(2)(3) APA as “dead law”.252 Contrariwise, others plead for a modern interpretation. As a result of the latter approach and without making an explicit differentiation between fully and partly automated administrative acts, Section 39(2)(3) APA shall address automatically produced administrative acts.253 b) Transparency Against the background of algorithmic accountability and therefore the great relevance of transparency, it is pertinent to mention some regulations from the GDPR, but mainly the entitlement to information arising from the Freedom of Information Act. aa) The GDPR Perspective From the GDPR perspective, Articles 13, 14 and 15 play a crucial role in the transparency discussion. In general terms, Article 13(1) GDPR establishes that, where personal data relating to a data subject are collected from the data subject, the controller shall provide the data subject with (some) information. In terms of algorithm-based decisions, Article 13(2)(f) GDPR is of major significance, because, at least for those decisions that are based solely on automated processing, a further duty to inform is established.254 Subsequently, the controller shall provide the data subject with information regarding the existence of automated decision making. Furthermore, the controller shall provide the data subject with meaningful information about the logic involved, as well as the significance and the envisaged consequences of such processing for the data subject. This additional duty of information applies, if – but only if – there is, in the sense of Article 22 GDPR (see III. 1.), a decision based solely on automated processing. In the same vein as Article 13(1) GDPR, Article 14(1) GDPR also contains a legal duty for the controller to inform the data subject, but with the difference that the data has not been obtained from the data subject. A similar provision as Article 13(2)(f) GDPR can be found in Article 14(2)(g) GDPR. Moreover, Article 15(1) GDPR introduces a right of access by the data subject. An identical wording to Article 13(2)(f) GDPR and Article 14(2)(g) GDPR can be found in 252 

Ibid., §  39 para 97. Schuler-Harms, in: Schoch/Schneider, Verwaltungsverfahrensgesetz, 2020, §   39 para 88; Ramsauer, in: Kopp/Ramsauer (eds.), Verwaltungsverfahrensgesetz, 22th ed. 2021, §  39 para 47. 254  Martini, Blackbox Algorithmus, 2019, 178. 253 

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Article 15(1)(h) GDPR. For the sake of completeness, it should be noted that some disagree with the opinion that Article 15(1)(h) GDPR only applies when, in the sense of Article 22 GDPR, an automated decision-making is given. Thus, a wider scope is preferred.255 bb) The General Perspective – The Freedom of Information Act Irrespective of AI, the Bundestag and most of the Landtage have enacted Freedom of Information Acts. In terms of content, the Freedom of Information Acts establish, as a rule, that everyone is entitled to have access to official information from the authorities. Nonetheless, exceptions are made where public interests must be protected. For this reason, before deciding about the access to information, a balance of interests must be reached. Regarding the applicability of the Freedom of Information Act, it is of paramount importance to distinguish between the entitlement arising from the federal law, which applies against the federal administration, and the claim to information provided by the States, which applies to state authorities, and the municipalities. The latter is stipulated – if existing – in the respective Freedom of Information Act by the State. In this context it is worth to mention that, as of January 2022, 256 Bavaria, Lower Saxony and Saxony have not yet issued a Freedom of Information Act. Algorithms which constitute a prerequisite for a public authority’s decision shall fall under the scope of this Regulation, when provided that they are held by public authorities.257 During the, already mentioned, weighing of interests, it must be considered that, on the one hand, when deploying algorithms, the state might have a genuine interest to keep certain areas opaque; while, on the other hand, the democratic society has an interest to figure out which aspects were relevant for a state’s decision.258 In this context, a typical obstacle for transparency arises when privately designed algorithms are treated as a business secret259 and – in the case of the state – as an official secret.260 Furthermore, it should be noted that the public’s interest in information is particularly in sensitive areas preponderant. Withal, the aspect of law enforcement can lead to a result in favor of the state.261 In this vein and in order to guarantee the consistency and lawfulness of taxation, Section 88(5) of the Federal Code of Germany (see III. 2. g)) establishes that details of risk management systems must not be made public. 255 

Edwards/Veale, Duke Law & Technology Review 16 (2017), 18, 53.

257 

Martini, Blackbox Algorithmus, 2019, 40.

259 

E.g., Federal Court of Justice, Judgment of 28th January 2014, VI ZR 156/13, para 27 and

256 https://bit.ly/32IAkCp. 258 Ibid.

32.

260  Hoffmann-Riem, in: Wischmeyer/Rademacher (eds.), Regulating Artificial Intelligence, 2020, 17 para 52. 261  Martini, Blackbox Algorithmus, 2019, 40 et seq.

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Moreover, there are several legal policy reasons for obliqueness,262 such as the risk of manipulation.263 For instance, the Bavarian government decided, aiming to prevent malpractice, to keep the algorithm used for the COVID-19 vaccine registration confidential.264 Incidentally, when algorithms are used, the extent of information which shall be provided has been a matter of discussion among scholars.265 Due to the lack of knowledge of the general public in terms of AI, some do not perceive any benefit of giving the public access to the source code.266 According to another opinion, facilitating the access to the source code enables members of the public to reveal loopholes in the code. Additionally, providing access to such information can lead to a gain in trust and acceptance of algorithm-based decisions.267 3. The Upcoming a) Overview With respect to algorithmic accountability, it is important to note that the academic approaches are rarely sector specific. For this reason, some of them are unsuitable for the public sector. Notwithstanding the above, the following section will depict the whole discussion concerning algorithmic accountability. In this vein, there are many ways to present the different proposals coming from the academic field. For instance, one could choose an ex-ante and an ex-post perspective on the matter.268 Another suggestion would be to focus on the solutions of concrete problems which arise from the use of AI.269 Either way, when analyzing the future of algorithmic accountability, there are some ideas that pop up again and again. Because the discussion on the topic of algorithmic accountability is still in its initial stages, it is difficult to gain an overview of the different proposals. Nonetheless, one could depict the discussions regarding the control aspect – from a preventive and a retrospective point of view – as well as the idea of having a riskbased system. Before delving into that, there are some approaches worth mentioning:

262 

Guckelberger, VVDStRL 78 (2019), 235, 271. Wischmeyer, AöR 143 (2018), 1, 48. 264 https://bit.ly/3KXx6w0. 265  Barczak, DÖV 2020, 997, 1001 gives a short overview. 266  Maritini, Blackbox Algorithmus, 2019, 181; Martini, DÖV 2017, 443, 453; Wischmeyer, AöR 143 (2018), 1, 53. 267  Guckelberger, VVDStRL 78 (2019), 235, 271 fn.  211. 268  E.g., Martini, Balckbox Algorithmus, 2019, 339. 269  E.g., Zech, ZfPW 2019, 198, 205. 263 

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– The introduction of a mandatory labelling, so that individuals know that they have been subject of an algorithmic decision-making.270 – The establishment of a technical auditing system, whereby, the state authorizes private bodies to control algorithms.271 – The introduction of an “in-camera-process”. When addressing the non-transparency problem, solutions shall not neglect programmer’s interests.272 Thus, it is important to find a balance. With this in mind, some scholars support the idea to introduce an “in-camera-process” which permits experts – instead of everyone – to take a closer look at the algorithm.273 – A strict liability regime governing the creation and the use of algorithms.274 In the best-case scenario, this could foster the further development of technology,275 but, in the worst-case, this could hinder the technology progress.276 – A wider scope of existing legal frameworks as well as institutions.277 Aiming to make the existing legal system fit for AI, some scholars plead, for example, to expand the scope of applicability of the General Equal Treatment Act.278 b) The Control Aspect – Prevention and Remedy In order to prevent a violation of personal rights, some scholars propose to introduce a certificate duty. Thereby, experts would be able to verify if the decision-making system could be affected by discriminatory factors or not.279 Furthermore, in context of prevention, the GDPR – as the first legislation to address the algorithmic discrimination problem explicitly – has been credited with the potential to promote “more accountable algorithms”.280 Hence, the GDPR could entail some starting points for the legal development.281 In this regard and especially with Article 25 GDPR and its principle of “data protection by de270  Busch, Algorithmic accountability, Abida Gutachten, 2018, 58; Martini, JZ 2017, 1017, 1020. 271  Martini, Grundlinien eines Kontrollsystems für algorithmenbasierte Entscheidungs­ prozesse, 2019, 34. 272  Martini, JZ 2017, 1017, 1020. 273  Hill, in: Hill/Schliesky (eds.), Auf dem Weg zum Digitalen Staat – auch ein besserer Staat?, 2015, 267, 284; Paal, AfP 2011, 521, 531; Martini, DVBl 2014, 1481, 1486. 274  Eidenmüller, Oxford Business Law Blog 2018, https://bit.ly/3r99tcc; Wischmeyer, AöR 143 (2018), 1, 38. 275  Zech, ZfPW 2019, 198, 214. 276  Schäfer/Ott, Lehrbuch der ökonomischen Analyse des Zivilrechts, 2020, 256. 277  Martini/Ruschemeier/Hain, VerwArch 112 (2021), 1, 5–6. 278  Martini, Grundlinien eines Kontrollsystems für algorithmenbasierte Entscheidungs­ prozesse, 2019, 23–24; Martini, JZ 2017, 1017, 1021. 279  Martini/Nink, NVwZ-Extra 10/2017, 1, 12. 280  Goodman, 29th Conference on Neural Information Processing Systems, 2016, 1, https://bit.ly/3ubhDTb. 281  Hill, in: Hill/Schliesky (eds.), Auf dem Weg zum Digitalen Staat – auch ein besserer Staat?, 2015, 267, 283.

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sign” in the background, the program code has been pointed out as the right place to plant rules.282 When it comes to learning algorithms, however, a preventive control will not be fruitful. This is to be attributed to the fact that learning algorithms operate in a dynamic way, meaning that they are designed to react independently283 to new situations284 and are thus unpredictable.285 Consequently, an explainability and a predictability286 problem emerge.287 What is worse, traditional mechanisms are insufficient 288 to deal, in a proper way, with undesirable developments which may occur.289 In this context, control algorithms could serve as a tool to clear up the question if the result of the algorithm-based decision has taken forbidden criteria into account.290 c) Risk-Based System Regarding the consequences of an algorithm-based decision, some scholars plead to restrict the use of algorithms which result in an irreversible or a critical situation for humans.291 The reason for this is the ever-ubiquitous humans fear of being subjects of machines.292 To give an example, the Data Ethics Commission, which was set up by the Federal Government, has expressed right at the beginning of its expert opinion that technology shall serve humans and not vice versa.293 This apparent concern arises, among other reasons, on account of the working method of machines which are not able to show empathy.294 Moreover, in the context of learning algorithms, it is its incalculable functioning, but also its overall approach to problems295 that disturb us. Yet, scholars have also pointed out some positive aspects of having machines and not humans taking deci282 

Herberger, NJW 2018, 2825, 2828. Zech, ZfPW 2019, 198, 200–201. 284  Hill, in: Hill/Schliesky (eds.), Auf dem Weg zum Digitalen Staat – auch ein besserer Staat?, 2015, 267, 275; Schmitz/Prell, NVwZ 2016, 1273, 1277. 285  Tutt, Administrative Law Review 69 (2017), 83, 87. 286  Presented as a fact, the programmer cannot always predict the algorithm results: Her­ berger, NJW 2018, 2825, 2827. 287  Stiemerling, CR 2015, 762, 764; Tutt, Administrative Law Review 69 (2017), 83, 102; Herberger, NJW 2018, 2825, 2827–2828. 288  Herberger, NJW 2018, 2825, 2828. 289  Martini/Nink, NVwZ-Extra 10/2017, 1, 12. 290  Ibid., 12–13. 291  Ibid., 13. 292  Britz/Eifert, in: Voßkuhle/Eifert/Möllers (eds.), Grundlagen des Verwaltungsrechts II, 3rd ed. 2022 (forthcoming), §  26 para 11; Schreiter, DÖV 1956, 692, 693; Jonas, Das Prinzip der Verantwortung, 1984, 388; Bull, Der Staat 58 (2019), 57, 70. 293  Datenethikkommission der Bundesregierung, Gutachten, 2019, 14. 294  Martini/Nink, NVwZ-Extra 10/2017, 1, 13. 295  Tutt, Administrative Law Review 69 (2017), 83, 87–88; “Computers ‘tick’ differently than humans”: Hill, in: Hill/Schliesky (eds.), Auf dem Weg zum Digitalen Staat – auch ein besserer Staat?, 2015, 267, 273. 283 

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sions. In this sense, besides being faster and leading to a cut in the public spending, it has been said that, without a human element, decisions tend to be more neutral 296 and objective.297 Concerned about the negative outcomes of using learning algorithms for the individual, some scholars appeal for the establishment of a system based on the risk assessment of fundamental rights.298 In this context, the idea of strict liability should be limited to sensitive application areas.299 Because a “one-size” solution does not fit for all learning systems, one should make a differentiation on the basis of the degree of risk.300 Thereby, the severity of the interference will depend on the injurious potential of the algorithmic system. The latter shall be determined in relation to the seriousness of the expected damage as well as the probability of its realization.301

V. Conclusion and Outlook Many of the instruments for establishing accountability in the use of algorithms and artificial intelligence discussed in the general legal literature in Germany are now also found in the EU Commission’s proposal for an AI Act.302 AI systems from the area of public administration are classified as high-risk AI systems if, for example, they decide on public assistance benefits and services or if they take on the activities listed in Annex III to the Regulation for the purpose of law enforcement and in the area of migration management. At the same time, recital 38 of the proposed regulation emphasizes that AI systems specifically intended for administrative procedures in tax and customs authorities should not be considered high-risk AI systems. By assessing the risks posed by AI on a sector-specific basis, the Commission is in principle following an approach similar to Section 35a of the APA, which forces the legislator to enact sector-specific regulations. In our view, such a differentiated approach is convincing: although the general problems associated with the use of AI can be identified well on a very abstract level in a first step, a detailed sector-specific analysis is always required in a second step, which Section 35a APA and the proposal for an AI Act assign to the legislator and the administration as a task. 296  Free of manipulation: Hill, in: Hill/Schliesky (eds.), Auf dem Weg zum Digitalen Staat – auch ein besserer Staat?, 2015, 267, 274. 297  Schmitz/Prell, NVwZ 2016, 1273, 1277; Guggenberger, NVwZ 2019, 844, 847. 298  Also in this vein: EPRS, Digital services act, 2020, 200. 299  Martini, Grundlinien eines Kontrollsystems für algorithmenbasierte Entscheidungs­ prozesse, 2019,36–37. 300  Martini, Blackbox Algorithmus, 2019, 339. 301  Datenethikkommission der Bundesregierung, Gutachten, 2019, 173. 302  COM, 21.4.2021, Proposal for a regulation laying down harmonised rules on artificial intelligence, COM/2021/206.

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In fact, however, it must be stated that the algorithmization of the German administration is rather in its infancy and that a broad use of artificial intelligence by the administration is not to be expected in the short term, at least not as a means of fully automated issuing of individual administrative decisions. Nevertheless, it is important that a broad jurisprudential debate is conducted and that sector-specific deployments of fully automated administrative action are also intensively and critically monitored in the future. In this context, the question of whether the enforcement of law by algorithms can and must also have an impact on the law to be enforced itself may become virulent.303

303  Should the use of algorithms make possible a complete and exceptionless enforcement of the law in a certain area, this raises the question, for example, whether the regulations to be enforced are designed for such a “total enforcement” at all and whether a right to violate the law is to be recognized, see in this regard the contribution by Rademacher, European Journal for Security Research 5 (2020), 39–58, entitled “Of New Technologies and Old Laws: Do We Need a Right to Violate the Law?“.

Administrative Silence Hermann Pünder/Jens Gerlach

I. Introduction German law has neither a doctrinal understanding nor a standard definition of administrative silence.1 Often, scholars must be satisfied with a mere statement that administrative silence cannot be seen as a statement with any legal value.2 Therefore our interest is particularly piqued by the idea of taking a more intense look at the notion and concept of administrative silence in terms of how it is dealt with in German law. The following article is written to include readers who are not familiar with German administrative law, and thus includes an overview of administrative actions and judicial remedies available under administrative law (II.).3 We follow this with a definition of the term administrative silence (III.) and examine how it is dealt with in German law (IV.). The analysis concludes with a brief evaluation of the rules governing administrative silence (V.) and a summary (VI.).

II. Overview of administrative action and judicial protection in German law 1. Forms of administrative action German law has various forms of action available for an authority to interact with members of the population or with other administrative bodies.4 Of these, regulatory actions, i.e., those which establish, change, transfer, or remove rights

1  This also applies for silence in private law communication, see Canaris, in: FS für Walter Wilburg, 1975, 77 (98). 2 For example, Oberverwaltungsgericht Magdeburg, Decision dated 08.02.2006 – 2 M 211/05, BeckRS 2008, 32706 (note 6); Gurlit, in: Ehlers/Pünder (eds.), Allgemeines Verwaltungsrecht, 15th edition, Berlin 2016, §  28 note 4; Beaucamp, DÖV 2016, 802 (806); Guckel­ berger, DÖV 2010, 109 (112). Similarily, Jachmann, Die Fiktion im öffentlichen Recht, Berlin 1998, 241. 3  For more detail, Pünder/Klafki, in: Seerden (ed.), Comparative administrative law, 4th edition, Cambridge 2018, 49 et seq. 4  In detail, Remmert (footnote 4), §  17.

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or duties (a) must be distinguished from actions not intended to have legal consequences (b).5 a) Regulatory administrative action The first group contains a further distinction: where the administration is seeking to regulate a number of cases in an abstract and general way, it may do so through the enactment of a general legal rule (executive regulations or bylaws – Rechtsverordnungen or Satzungen), where such an enactment is expressly permitted by parliament. 6 Individual cases may be regulated unilaterally via “administrative acts” (Verwaltungsakte) or cooperatively by contracts. In the following, we examine these two forms of action. aa) Unilateral administrative action An administrative act is the instrument an authority can use to unilaterally impose legal consequences on citizens or other legal entities (§  35 Administrative Procedure Act, Verwaltungsverfahrensgesetz – VwVfG).7 The content of administrative acts may vary widely. The most important distinction is that between beneficial or onerous administrative acts. Beneficial acts are those which grant rights or legal advantages (see §  48 (I) 2 Administrative Procedure Act). These rights may include, for example, an approval for a course of action, like constructing a building (building approval – Baugenehmigung). Onerous administrative acts are those that withdraw rights or impose duties, for example an obligation to tear down a building (demolition order – Abbruchverfügung). Administrative acts may also simultaneously burden or benefit different individuals: a third-party may draw some legal benefit from a demolition order issued against another. Conversely, a third party may experience some form of detriment from the award of a building approval to another individual. One key characteristic of an administrative act is that it remains effective for as long as it is not withdrawn, annulled or otherwise cancelled or has expired, regardless of whether or not it is lawful (§  43 (II) Administrative Procedure Act). German administrative law describes this characteristic as legal effectiveness independent of errors (fehlerunabhängige Rechtswirksamkeit).8 Administrative acts are only void (nichtig) with ipso iure no legal effect (§  43 (III) Administrative Procedure Act) in the exceptional case of a grave legal error (§  44 (I) 5 

Remmert (footnote 4), §  17 note 2. On this, Pünder/Klafki (footnote 3), 70 et seq. From a comparative perspective, Pünder, International and Comparative Law Quarterly (ICLQ) 58 (2009), 353 et seq. 7  Pünder/Klafki (footnote 3), 67 et seq. 8  Pünder/Klafki (footnote 3), 68. See also Robbers, An Introduction to German Law, 7th edition, Baden-Baden 2019, note 249; Ruffert, in: Ehlers/Pünder (eds.), Allgemeines Verwaltungsrecht, 15th edition, Berlin 2016, §  22 note 1. 6 

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Administrative Procedure Act). If this is not the case, then the illegal administrative act must be withdrawn or annulled by the public authority itself or by the court to be rendered ineffective (§  43 (II) Administrative Procedure Act). A second significant characteristic is that administrative acts are binding (and enforceable). That means, following the appeal period (one month according to §  70 and §  74 Code of Administrative Court Procedure, Verwaltungsgericht­ sordnung – VwGO), the administrative act becomes non-appealable, and remains binding, even if it contains legal errors (Bestandskraft).9 bb) Cooperative administrative action An administrative authority may also constitute, amend, or annul rights and duties via an agreement (§  54 Administrative Procedure Act).10 Such a public law contract (Verwaltungsvertrag) may govern a matter arising under public administrative law.11 Besides that, administrative authorities may conclude contracts on the basis of private law like any private person.12 These agreements are governed by the principles and provisions of the German Civil Code (Bürgerliches Gesetzbuch – BGB). However, authorities may not “take flight into private law” (Flucht ins Privatrecht). Thus, civil law provisions are superimposed by the public law obligations of the authority, producing a “administrative private law” (Verwaltungsprivatrecht).13 b) Non-regulatory administrative action In addition to these “regulatory” administrative actions, an authority may also engage in non-regulatory administrative activity (schlicht-hoheitliches Han­ deln).14 There are two categories. The first refers to mere factual acts (Realakte). These are actions which only have a factual consequence, producing a direct effect on reality,15 for example, if a police officer shoots at a bank robber, or the fire department extinguishes a fire.16 Factual acts must be separated from official statements which do not have a regulatory character, such as information, warnings, reports, or recommendations.17 These actions, in contrast to factual 9 

Pünder/Klafki (footnote 3), 68, 83. Gurlit (footnote 2), §  29 note 2. 11  Gurlit (footnote 2), §  29 note 1; Rozek, in: Schoch/Schneider (eds.), Verwaltungsrecht VwVfG, Kommentar, Grundwerk, München 2020, §  54 note 38. 12  Gurlit (footnote 2), §  30 notes 1 et seq. For the distinction between private law and public law, see Pünder/Klafki (footnote 3), 61 et seq. 13  Ehlers, in: Ehlers/Pünder (eds.), Allgemeines Verwaltungsrecht, 15th edition, Berlin 2016, §  3 notes 88 et seq. 14  Remmert (footnote 4), §  36 note 1. 15  Pünder/Klafki (footnote 3), 72. 16  Remmert (footnote 4), §  36 note 1. 17  Pünder/Klafki (footnote 3), 72. 10 

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acts, do not directly alter reality, but rather bring about change by altering the conduct of the individual(s) to whom the statement is addressed.18 2. Administrative procedures According to §  9 Administrative Procedure Act, an administrative procedure is the activity of an authority for the examination of basic requirements, the preparation and the adoption of an administrative act, or the conclusion of an administrative agreement under public law. However, the provisions of the Administrative Procedure Act must be applied in the same way to other forms of administrative action not regulated by the Act.19 Administrative acts intended to benefit an individual usually begin with an individual lodging an application for the issuance of a desired right or advantage (§  22 sentence 2 no.  1 Administrative Procedure Act). In contrast, administrative acts intended to impose a duty or restriction may also be instigated on the authority’s own accord (§  22 sentence 1, sentence 2 no.  1 Administrative Procedure Act). 3. Influence of constitutional principles on administrative procedures The Basic Law (Grundgesetz) explicitly states that the executive is bound “by law and justice” (Article 20 (III) Basic Law). This limitation of the administrative authorities applies not only to laws enacted by parliament, but also to the provisions of the Basic Law.20 Most importantly, the executive is bound to fulfil its tasks effectively according to the law.21 In addition, the administrative procedure should contribute to the democratic legitimacy – namely, the acceptance – of administrative action for the general public. This is closely related to structuring decision-making processes to protect the rights of affected parties already within the administrative procedure and not shift protection of rights onto judicial proceedings.22 This “protection of fundamental rights through procedures” (Grundrechtsschutz durch Verfahren) plays an important role in German law.23 To ensure democratic legitimacy and to protect the rights of affected parties from early in the process, administrative procedural law provides numerous

18 

Remmert (footnote 4), §  36 note 1. Pünder, in: Ehlers/Pünder, Allgemeines Verwaltungsrecht (eds.), 15th edition, Berlin 2016, §  13 note 6. 20  Pünder/Klafki (footnote 3), 56. 21  Pünder (footnote 19), §  13 note 13 et seq. 22  BVerfGE 53, 30 (65). 23  Pünder (footnote 19), §  13 note 15. From a comparative perspective, Pünder, in: Kahl/ Ludwigs (eds.), Handbuch des Verwaltungsrechts, Heidelberg 2022, §  117 note 14; Pünder, in: Pünder/Waldhoff (eds.), Debates in German Public Law, Oxford and Portland, Oregon, 2014, 239 et seq. 19 

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participation rights.24 These include the right to a hearing (§  28 (I) Administrative Procedure Act), the right to inspect documents (§  29 (I) Administrative Procedure Act) and the right to information (§  25 (I) Administrative Procedure Act). The authority is also obliged to provide grounds for an administrative act (§  39 (I) 1 Administrative Procedure Act).25 The Administrative Procedure Act explicitly states that administrative acts must be carried out in an uncomplicated, appropriate, and timely fashion (§  10 sentence 2 Administrative Procedure Act). This rule is an expression of the general principle of efficiency which should underlie all administrative procedures, so they require the minimum possible use of time, human, material, and financial resources.26 Ultimately however, administrative procedure must ensure legal certainty (Rechtssicherheit). Private individuals should know what conditions apply, and what they can legitimately expect. This fundamental requirement stems primarily from the binding nature of administrative acts as mentioned above27: the parties affected by an administrative act can rely on its binding nature and the effects of such. The administrative proceeding must be designed in a way so that members of the public may, to a certain extent, anticipate what the outcome of their application may be, and not have to wait for an unreasonable amount of time for that outcome. This is what gives rise to the rights of participation and the requirement for administrative power to be exercised without delay. 4. Judicial remedies against administrative action The Basic Law explicitly provides that recourse to the courts is open to anyone whose rights have been violated by public authority (Article 19 (IV) 1 Basic Law). Courts must comprehensively assess the actions of the authority both in terms of fact and law.28 This protection of rights must also be provided within a reasonable amount of time.29 A distinction must be made between the primary and secondary protection of rights. a) Primary protection of rights Primary protection of rights aims to protect and maintain the rights of the citizens. Violations of these rights must be prevented and reversed. 24  From a comparative perspective, Pünder, International Journal of Constitutional Law (ICon) 2013, 940 et seq.; Pünder (footnote 23), §  117. 25  On the requirements of legitimacy and protection of fundamental rights through procedures, see Pünder (footnote 19), §  13 notes 15 et seq. From a comparative perspective, Pünder (footnote 23), §  117 note 14 et seq. 26  Pünder (footnote 19), §  13 notes 19 et seq. 27  Ruffert (footnote 8), §  2 2 note 24. 28  From a comparative perspective, Pünder/Klafki, in: Backes/Eliantonio (eds.), Judicial Review of Administrative Action, Oxford and Portland, Oregon, 2019, 441 et seq. 29  BVerfGE 54, 39 (40 et seq.); 55, 349 (369).

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aa) Types of court actions and standing Primary protection of rights under administrative law is predominantly provided by the Code of Administrative Court Procedure, which provides for a range of potential court actions in reaction to the various forms of action available to the authority and the different types of cases. Legal protection against illegal administrative acts which impose a duty or restriction is available by means of a rescissory action (Anfechtungsklage – §  42 (I) Code of Administrative Court Procedure).30 A successful rescissory action will result in the court rescinding the administrative act (§  113 (I) 1 Code of Administrative Court Procedure). If an authority refuses to grant a beneficial administrative act, the individual may file an enforcement action (Verpflichtungsklage – §  42 (I) Code of Administrative Court Procedure).31 If the citizen is entitled to have the administrative act granted, the court then compels the authority to issue it (§  113 (V) 1 Code of Administrative Court Procedure). An individual requesting the undertaking or cessation of a factual act oder a non-regulatory statement may file a general action for performance (Allgemeine Leistungsklage). In principle, these court actions will only be successful insofar as they serve to remedy a violation of the applicant’s individual public rights (subjektivöffent­liche Rechte – §  42 (II), §  113 (I), (V) Code of Administrative Court Procedure). Otherwise, the plaintiff has no standing (Klagebefugnis). As a rule, there is no general review of whether the authority has merely acted against a general public interest.32 bb) Intra-administrative objection proceeding Prior to lodging a rescissory or enforcement action in court, the applicant must seek legal redress from the authority itself, i.e., by lodging an intra-administrative objection (Widerspruch – §  68 Code of Administrative Court Procedure). The authority can then first review its own decision, and either remedy the objection (§  72 Code of Administrative Court Procedure) or confirm its decision in a ruling on the objection (Widerspruchsbescheid – §  73 Code of Administrative Court Procedure). Filing periods for intra-administrative objections and rescissory or enforcement actions in court are fixed (for each one month, §  70 (I) 1 and §  74 Code of Administrative Court Procedure), to ensure the administrative act or rejection can be rendered binding and establish legal certainty.

30 

On this, Pünder/Klafki (footnote 3), 91 et seq. On this, Pünder/Klafki (footnote 3), 91 et seq. 32  Pünder/Klafki (footnote 3), 81, 91 et seq.; Schoch, in: Ehlers/Schoch (eds.), Rechtsschutz im Öffentlichen Recht, München 2021, §  22 notes 21 et seq. In a comparative perspective, Wegener, in: Pünder/Waldhoff (eds.), Debates in German Public Law, Oxford and Portland, Oregon, 2014, 219 et seq. 31 

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cc) Standards of review The review standards for intra-administrative objection proceeding and for judicial proceedings differ widely: while the administrative court is restricted to assessing whether an authority’s decision was lawful (§  113 (I) 1, (V) Code of Administrative Court Procedure), the administrative authority must also consider the expedience (Zweckmäßigkeit) of the administrative decision (§  68 (I) 1, (II) Code of Administrative Court Procedure). This then leads to significant differences when the law grants the administrative authority special legal scopes such as discretion (Ermessen) to chose between different actions or a margin of interpretation (Beurteilungsspielraum) in respect to indefinite legal terms (un­ bestimmte Rechtsbegriffe).33 In this instance, the administrative court may not implement its own decision, but is limited to reviewing whether the authority’s decision was unlawful. For enforcement actions, that means that the court can only compel the authority to issue the desired administrative act where the authority has no legal scope in the making of that decision (§  113 (V) 1 Code of Administrative Court Procedure). For this to be the case, the administrative authority must have had no discretion or margin of interpretation from the beginning, or whatever discretion or margin of interpretation did exist is limited to a single decision by the specific circumstances of the case at hand. Otherwise, the administrative authority can only be obliged to (re)decide on the plaintiff’s application, taking the legal view of the court into consideration (§  113 (V) 2 Code of Administrative Court Procedure).34 b) Secondary protection of rights Secondary protection of rights aims to provide financial compensation for any violation of rights. The law governing official liability provides for a range of claims subject to a broad variety of conditions.35 The key consideration in the further analysis is liability for breaches of official duty (Amtshaftungsanspruch – §  839 Civil Code in connection with Article 34 sentence 1 Basic Law). The provisions grant a right to compensation against an authority which, through the actions of its officers, has intentionally or negligently breached the official duty incumbent upon it in relation to a third party.36 However, the claim only 33  From a comparative perspective, Pünder/Klafki (footnote 28), 441–553. For more details to the German law Pünder/Klafki (footnote 3), 89 et seq.; Robbers (footnote 8), notes 259 et seq.; Gerlach, Die Lehre vom einheitlichen administrativen Entscheidungsspielraum und ihre Ausprägungen im Kartellvergaberecht, Baden-Baden 2018, 106 et seq. 34  Ehlers, in: Ehlers/Schoch (eds.), Rechtsschutz im Öffentlichen Recht, München 2021, §  28 notes 58 et seq. 35 For a comparative perspective on the liability of the administration, Pünder/Klafki (footnote 28), 879 et seq. 36  For an overview, see Pünder/Klafki (footnote 3), 98 et seq.; Robbers (footnote 8), note 268.

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exists, as with secondary legal protections in general,37 under the condition that the damages could not have been prevented under primary protection of rights by the affected individual lodging a court action (Vorrang des Primärrechts­ schutzes).

III. Definition of the term “administrative silence” The following deals with developing a definition for the term administrative silence (1.). It will then turn to explaining the relationship between the term administrative silence and the terms inactivity (Untätigkeit) and delay (Verzug) (2.). 1. Developing a definition of administrative silence a) Silence as a failure to issue an expected statement If we consult the dictionary on the meaning of the term silence, we find it variously defined as “a period without any sound; complete quiet”, “a state of not speaking or writing or making a noise” and even “a state of refusing to talk about something or answer questions, or a state of not communicating”.38 To look into the nature of silence is therefore, to deal in a negative, something which is an absence of another thing. Anyone analysing silence must clarify the point at which they would usually expect some form of statement.39 Therefore, an initial definition would be: Administrative silence occurs when an authority does not issue a statement where such a statement was expected.

b) Silence in respect to statements with and without regulatory character The administrative authority can express itself in a range of ways. We described non-regulatory statements above (see II.1.b), in which the authority is speaking without legal effect. In contrast, when an authority makes a statement intended to bring about legal effect, one speaks more of a declaration of intent (Willens­ erklärung),40 particularly as the basis of an administrative act.41 Assurances 37 

See Bundesverfassungsgericht, NJW 2000, 1402. Cambridge Dictionary, https://dictionary.cambridge.org/, search term: “silence”. 39 Similarily, Ernst, Die Verwaltungserklärung – Die einfache verwaltungsrechtliche Willenserklärung als Handlungsform der Verwaltung, Berlin, 2008, 476. 40  Gurlit (footnote 2), §  28 note 1. 41  Kluth, NVwZ 1990, 608; Ernst (footnote 39), 86; Ruffert (footnote 8), §   21 note 15; Stelkens, in: Stelkens/Bonk/Sachs (eds.), Verwaltungsverfahrensgesetz, Kommentar, 9th edition, München 2018, §  35 note 31; Maurer/Waldhoff, Allgemeines Verwaltungsrecht, 20th edition, München 2020, §  9 note 6. See also BVerwGE 13, 1 (7). 38 

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with which the authority commits itself to issuing an administrative act in the future (Zusicherung according to §  38 (I) 1 Administrative Procedure Act) are also issued in the form of a written declaration of intent.42 To conclude a contract there must be a unanimous declaration of intent from both parties, the administrative authority and the citizen.43 This applies equally to private law contracts (§§  145 et seq. Civil Code) and to contracts based on administrative law (§  62 sentence 2 Administrative Procedure Act in connection with §§  145 et seq. Civil Code). In a second step therefore, the definition of administrative silence may be rendered more precise when formulated as: Administrative silence occurs when an authority does not issue a declaration of intent or a non-regulatory statement where one of the two types of statement was expected.

The conditions for creating these two types of administrative statement differ markedly. Declarations of intent must become effective in order to have legal effect, requiring that the party making the declaration44 specifically make that intent known (Kundgabe).45 What form that declaration takes is open.46 Intent can also be made known through conclusive action, as exemplified by §  37 (II) Administrative Procedure Act for administrative acts.47 Some declarations of intent however must be made in writing to be effective. This often applies to approvals (for example, building approvals pursuant to §  58 (IV) of the Hamburg Building Regulation [Hamburgische Bauordnung – HBauO]), to licences 42 

Ernst (footnote 39), 117 et seq. Gurlit (footnote 2), §  31 note 2. 44  On the attribution of the declaration of intent of an official administrator to the administration, see Ernst (footnote 39), 343 et seq. In terms of administrative acts, fully automated decisions have come to be deemed permissible in some cases. In this case, it is not a human being but a programmed system that expresses itself. This predominantly affects mass decisions in tax and social law, in which the authority has no discretion. The relevant provisions can be found in §  35a Administrative Procedure Act, §  155 (IV) General Fiscal Law (Abgab­ enordnung – AO) and §  31a Tenth Book of the Social Code (Sozialgesetzbuch X – SGB X). Since human volition in such cases is anticipated in the programming of the system (Bunde­ stags-Drucksache 18/8434, 122) and a pronouncement which can be attributed to the authority is issued as a function of a system, these cases are not considered as instances of administrative silence. For such fully automated administrative acts, see Braun Binder, DÖV 2016, 891 et seq.; Berger, NVwZ 2018, 1260 et seq.; Stegmüller, NVwZ 2018, 353 et seq. 45  Flume, Allgemeiner Teil des Bürgerlichen Rechts, Zweiter Band – Das Rechtsgeschäft, 4th edition, Berlin 1992, 62; Gomille, in: Gsell/Krüger/Lorenz/Reymann (eds.), beck-online. Großkommentar BGB, München 2021, §  130 note 2. If external expression (declaration) and intent separate, the declaration of intent is not rendered ineffective under German law, but can be put aside in some cases. For private law, this is regulated by the German Civil Code in §§  104 et seq., 116 et seq. For more on this, see de la Durantaye, Erklärung und Wille, Tübingen 2020, 30 et seq. 46 See de la Durantaye (footnote 45), 119 et seq. 47  Gurlit (footnote 2), §  28 note 5. See also Oberverwaltungsgericht Magdeburg, Decision dated 08.02.2006 – 2 M 211/05, BeckRS 2008, 32706 (note 6). 43 

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under §  10 (VII) of the Federal Immission Control Act (Bundesimmissionss­ chutzgesetz – BImSchG), to the assurance that an administrative act will be issued (§  38 (I) 1 Administrative Procedure Act) and for declarations of intent forming the basis of agreements under public law (§  57 Administrative Procedure Act). Declarations of intent issued by an administrative authority are almost always addressed to one or multiple specific parties, in such cases, the declaration of intent is subject to receipt (empfangsbedürftig).48 For declarations of intent which require receipt to be effective, there must not only be a declaration of intent itself, but this declaration must also reach the addressee. This is explicitly stated by §  130 (I) 1 Civil Code, which applies to administrative law beyond the realm of private law.49 Reception of administrative acts is called notification (Bekanntgabe) and governed by §  43 (I) 1 and §  41 Administrative Procedure Act.50 In terms of content, a declaration of intent must allow clear conclusions to be drawn (Bestimmtheit). If this is not the case, i.e., if the declaration is ambiguous, indeterminate, or contradictory, and the content cannot be determined through interpretation, then the declaration of intent is ineffective.51 There are never direct legal consequences for non-regulatory statements. This means they may not, and cannot, be legally “effective”. The law therefore does not set requirements for such statements like those it sets for legal declarations of intent. However, non-regulatory statements are often intended to reach specified recipients, in order to contribute to achieving a certain result. If we expand our definition of administrative silence to include the conditions by which an official statement can be deemed made, we provide the definition with a third and final step: Administrative silence occurs when an authority does not issue a declaration of intent or non-regulatory statement where one of the two types of statement was expected. A declaration of intent does not exist where the authority has not made its intent known, not even in the form of conclusive conduct, in a way that is able to be received by the addressee as required by the applicable regulations, or where specific content cannot be extracted from the declaration. A non-regulatory statement does not exist when the authority 48  Gomille (footnote 45), §  130 note 3. With regard to administrative acts, see Jachmann (footnote 2), 236 et seq. 49  Bundestags-Drucksache 7/910, 62. See also Gurlit (footnote 2), §  28 note 7. 50  Gurlit (footnote 2), §  28 note 7. 51 Oberverwaltungsgericht Münster, NVwZ 1986, 580 et seq.; Verwaltungsgerichtshof München, NVwZ-RR 1990, 407 (408); Jachmann (footnote 2), 247. An invalid administrative act is also an invalid declaration of intent (§  43 (III) Administrative Procedure Act). An administrative act is invalid where it is gravely erroneous (§  4 4 (I) Administrative Procedure Act). Where the administrative act is invalid from the outset, the declaration of intent cannot ever be valid. However, we are not including these cases in administrative silence, as the recipient has usually received a statement from the authority with at least a certain intelligible, albeit erroneous, content. Similarly, Guckelberger (footnote 2), 112 et seq.

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does not release a statement into the world, or such statement cannot be received by the intended recipient.

2. Silence in relation to inactivity and delay When the authority is silent, it remains inactive. The term inactivity (Untätig­ keit) is however distinct from silence. This is because there are factual acts, in which the authority does not issue any statement, but merely acts (see II.1.b) above). Although there can also be an expectation that the authority will act with factual effect, it is meaningless to speak of silence in this context. Inactivity in terms of factual acts should therefore not be considered here. We will only look at inactiviy in terms of expected statements on behalf of the authority. Delay (Verzug) refers to a lag in fulfilment of a duty; to speak of a delay means to make something happen at a later time than planned or expected.52 Delay therefore requires that a specific conduct remains undone within the specific timeframe within which such conduct was expected. If an official statement is expected from an authority within a certain period of time, then, delay could be said to exist after that period has ended. The term delay becomes more significant when looking at administrative silence, as the law can only react appropriately to the silence once the required time has elapsed.53 This is because silence is an act that does not affect reality: it ends only when a statement is made. If the law would like to make the silence itself a precondition of a particular legal consequence, it must therefore specify a timeframe, the expiry of which converts the yet unmade (but potentially ‘make-able’) statement into a legally significant silence.

IV. Ways in which German law deals with administrative silence In the following, we will look at how German law deals with administrative silence. We begin by asking whether and to what extent the law compels the authority to not be silent, i.e., to issue a statement (1). This reveals a range of legal effects from administrative silence (2.). Finally, we turn to the protection of rights against administrative silence (3.). 1. Duty to issue a statement When investigating the legal obligations for an administrative authority to issue statements, it is helpful to remember the two forms in which an authority can express itself: through declarations of intent, and by non-regulatory statements. From this point, one can comb through the law seeking duties that contain an 52  53 

Cambridge Dictionary, https://dictionary.cambridge.org/, search term: “delay”. Flume (footnote 45), 67; Ernst (footnote 39), 482.

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obligation to issue a statement, such as releasing administrative acts, concluding contracts, or issuing non-regulatory statements (a). Once identified, the content of these duties can be more closely defined (b). a) Legal origin of the duty to issue a statement aa) Declarations of intent An administrative authority is obliged to issue a declaration of intent where the agency is obliged to issue an administrative act. This requires there be no discretion or margin of interpretation under the law, or that the discretion or margin of interpretation is limited to one decision in light of the specific circumstances of that specific case. Should an applicant have a claim to the issuance of an administrative act, then that individual may demand that the administrative authority issue an administrative act in response to the application. These duties are found in numerous regulatory areas of administrative law.54 One example is the claim to the issuance of a building approval (§  72 (I) Hamburg Building Regulation). In contrast, German law usually does not compel the authority to use con­ tracts as a form of action. Consequently, there is generally no obligation to issue a declaration of intent aimed at concluding a contract.55 bb) Non-regulatory statements Duties to issue a non-regulatory statement are not uncommon in administrative law. For example, market surveillance authorities usually have a legal obligation to provide information on products which pose safety or health risks to the public (§  19 (II) 1 Market Surveillance Act, Marktüberwachungsgesetz – MÜG). In addition, the responsible higher federal authority may be required under the Medicinal Products Act to issue an official warning in the case of a drug recall for individual cases where the authority has limited discretion (§  69 (IV) Medicinal Products Act, Arzneimittelgesetz – AMG). Generally, those involved in an administrative procedure have a right to information about their rights and duties in an administrative procedure (§  25 (I) 2 Administrative Procedure Act). Outside of the administrative procedures covered by the Administrative Procedure Act, there are also duties for an authority to issue statements. These duties arise from the constitutional right to petition (Petitionsrecht), which grants 54  The duty to issue an administrative act may also arise when the applicant is actually seeking a non-regulatory statement. In particular, the authority must issue an administrative act (§  7 (I) 1 and §  9 Freedom of information act, Informationsfreiheitgesetz – IFG and §  5 (II) 1 Consumer information act, Verbraucherinformationsgesetz – VIG) to determine claims to access official information (§  1 (I) 1 Freedom of information act) and access to consumer information (§  2 (I) Consumer information act). 55  Gurlit (footnote 2), §  32 note 6; Rozek, in: Schoch/Schneider (footnote 11), §  5 4 note 28.

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everyone the right to address written requests or complaints to the competent authorities and the legislature (Article 17 Basic Law). Every person is entitled to an assessment and a response to their petition from the competent authority.56 b) Specifying the content of the duty to issue a statement Even when the duty to issue a statement exists, two decisive questions remain unanswered. Firstly, is the authority obliged to explicitly reject an application if the applicant has no material claim (subjektives Recht)? Or may the authority simply remain silent in this case? Secondly, how long may the authority be silent before it violates its duty to issue a statement? The law must provide an answer to this question by establishing the period within which the administrative authority must issue a statement, whether through the statement originally sought by the applicant or, where appropriate, through a rejection of the application. aa) Explicit regulations In some instances, the law has explicit responses to these questions. A decision for a building approval must be issued within a period of two months after the application and all relevant documents have been submitted (see, for example, §  61 (III) 1 Hamburg Building Regulation). This means that a decision, positive or negative, must be actively made,57 within the time frame. Similar explicit conditions, stipulating a range of time frames, can be found in other approval procedures58 as well as in terms of access to consumer information.59 bb) Obligations in case law Even outside of such explicit regulations, case law provides that the administrative authority must decide on an application within a certain period of time, i.e., issue a statement approving or rejecting the application. In terms of approval procedures, case law presumes that the submission of an application forms the basis of a specific relationship between the applicant and the authority, which 56 

BVerfGE 2, 225 (230). Reimer, DVBl 2017, 333 (336). 58  For example: Approvals under the air pollution prevention legislation (§  10 (VIa) Federal Immisions Control Act), licenses for the transportation of persons (§  15 (1) sentence 2 Transport of persons act, Personenbeförderungsgesetz – PbefG) and approvals for pharmaceutical products (§  27 (I) 1 Medical Products Act). In the field of services, Article 13 (III) 1 of Directive 2006/123/EC of the European Parliament and of the Council of 12 December 2006 on services in the internal market (OJ 2006 L 376 36 – Services Directive) already compels Member States to ensure applications are dealt with promptly and determined within a reasonable period and published in advance. In asylum law, the Federal Administrative Court has identified a general decision period of six months based on Art.  31 (III) of Directive 2013/32/EU, (BVerwGE 162, 331 [note 20]). 59  Section 5 (II) 1 Consumer information act. 57 

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compels the authority to process the application conscientiously and appropriately, refraining from any avoidable harm to the applicant.60 In any administrative procedure the authority is obliged to process applications swiftly and to decide without delay (if necessary rejecting the application) as soon as the assessment is over. 61 The basis of these duties has not yet been conclusively clarified. Case law provides a broad range of justifications. The Federal Constitutional Court (Bundesverfassungsgericht) has left open whether an obligation for the administrative authority to issue a statement within a reasonable time can be derived from the constitutional principle of equal treatment (Article 3 (I) Basic Law), from the fundamental right to freedom in Article 2 (I) Basic Law, from the constitutional principle of the rule of law (Article 20 (III) Basic Law), or from a individual procedural right held by the applicant.62 The Federal Court of Justice (Bundesgerichtshof) has referred to the principle of the rule of law, 63 and, in a recent decision, 64 to the requirement to process the application in a timely fashion in §  10 sentence 2 Administrative Procedure Act,65 as well as to the provision in §  839 (II) 2 Civil Code which stipulates that a delay in executing official tasks constitutes a breach of official duties. However, the argument that a general decision-making period of three months can be drawn from §  75 sentence 2 Code of Administrative Court Procedure must be dismissed.66 While this regulation is central to the protection of rights against administrative silence (for more on this see below D.III.1.b), it does not regulate the administrative procedure or the duration of that procedure itself. For those cases for which there is no explicit period for processing and issuing applications in administrative law, the length of a reasonable period must be determined based on the individual circumstances. These circumstances include the completeness and quality of the application and thus the need for fur60  Bundesgerichtshof, Decision dated 11.07.1963 – III ZR 81/62, BeckRS 1963, 31190689; decision dated 18.06.1970 – III ZR 13/67, BeckRS 1970, 30397597; NVwZ 1993, 299; NJW-RR 1994, 1171. 61  Bundesgerichtshof, NJW 1959, 1219 (1220); NJW 2007, 830 (note 17). See also Reimer (footnote 57), 336; Papier/Shirvani, in: Säcker/Rixecker/Oetker/Limperg (eds.), Münchener Kommentar zum Bürgerlichen Gesetzbuch, volume 7, 8th edition, München 2020, §  839 note 273; Steege/Muthers, in: Dauner-Lieb/Langen (eds.), BGB Schuldrecht, volume 2, 4th edition, Baden-Baden 2021, §  839 note 146. 62  BVerfGE 60, 16 (41 et seq.); Bundesverfassungsgericht, NJW 1985, 2019 (2020). 63  Bundesgerichtshof, NJW 1959, 1219 (1220). 64  Bundesgerichtshof, NJW 2007, 830 (note 17). 65  Also referring to this, Reimer (footnote 57), 336. 66  For this perspective, Bundesgerichtshof, NVwZ 1993, 299; Biermann, Zeitschrift für Öffentliches Recht in Norddeutschland 2009, 377 (379); Reimer (footnote 57), 39; Porsch, in: Schoch/Schneider (eds.), Verwaltungsrecht VwGO, Kommentar, 41. Ergänzungslieferung, München 2021, §  75 note 4. For a different opinion, Leisner, VerwArch 91 (2000), 227 (241 et seq.); Weides, NVwZ 1988, 673 (674).

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ther clarification, the need to involve additional parties or the general public, and the complexity of the factual and legal questions involved. 67 2. Direct legal effects of administrative silence We will now look at the direct legal effects of administrative silence, beginning with unilateral actions on behalf of the authority (a). After that, we will examine cooperative administrative action in the form of public law contracts (b). 68 a) Silence in the context of unilateral administrative action German administrative law deals with administrative silence in the context of unilateral administrative action in a range of ways. In principle, silence does not have a direct legal effect (aa). Administrative law does however recognise exceptions to this principle, drawing a distinction between the legal fiction of a statement (bb) and the authority’s loss of the right to issue a statement (cc). aa) In principle: administrative silence lacking legal effect Declarations of intent must be effective to have legal effect (see III.1.c) above). When an administrative authority fails to declare its intent by issuing an admin­ istrative act, the legal situation does not change.69 For a citizen who had submitted an application for a beneficial administrative act, this outcome means the application has been neither rejected nor approved. The application remains in a state of legal uncertainty, a “state of limbo”: the application is open until it is either approved or rejected. This applies regardless of whether the applicant is seeking an administrative act for their own benefit (e.g., building approval) or an administrative act designed to impose duties upon another person (e.g., demolition order). Non-regulatory statements do not carry any direct legal effects. This continues to be the case when the administration is silent instead of issuing a statement.

67 

Porsch (footnote 66), §  75 note 4. For the following, we exclude silence within the administration. That said, we have observed that the law deals with silence within the administration in a very similar way as silence with an individual. Thus, even in the internal administrative sphere, silence has no direct legal effect. We find examples for the legal fiction of a statement from the authority in §  36 (I), §  6 (IV) 4, and §  10 (II) 2 Federal Building Code (Baugesetzbuch – BauGB) and cases in which silence by the authority would result its losing the right to issue a statement in §  4a (VI) 1 Federal Building Code and §  73 (IIIa) Administrative Procedure Act (on this so-called preclusion, see Quaas, Behördenpräklusion – Behördenbeteiligung und Verfahrensbeschleunigung, München 2006). 69  Ernst (footnote 39), 476 et seq. 68 

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bb) Legal fiction of a statement In specific cases, when an authority has failed to issue a statement within the required period, administrative law creates the legal fiction of an official statement, and thus gives rise to the attached legal effects. As only declarations of intent can create legal effects, this kind of legal fiction only makes sense with regard to administrative acts. Fictitious administrative acts (fiktive Verwaltung­ sakte) may lead to a fictitious rejection of an application for an administrative act, or to a fictitious approval. One example of a fictitious rejection of an application is found in §  75 (III) 2, 3 Energy Industry Act (Energiewirtschaftsgesetz – EnWG). This stipulates that if the authority has not issued a statement in response to an application within a reasonable period of time without providing justification, then the legal uncertainty arising from the silence is ended by the fictitious rejection.70 In contrast, the law also recognises fictitious approvals.71 The general requirements and legal consequences of such a fictitious approval (Genehmi­ gungsfiktion), also referred to as tacit authorisation, are laid out in §  42a Administrative Procedure Act. This implements Article 13 (IV) of the Directive on services in the internal market72 which requires that member state law must deem an authorisation granted when a response is not issued before the end of the set time period.73 A fictitious approval requires that the citizen’s application was complete and submitted in sufficient detail. Silence on the part of the authority means the content of the fictitious approval can only be inferred from the application in connection with the legal provisions governing the authorisation.74 The citizen’s application must therefore fulfill all the relevant requirements of certainty that §  37 (I) Administrative Procedure Act would normally require for an administrative approval.75 Secondly, the administration must have failed to issue a decision within a certain period of time after all the documents were received, i.e., it has not effectively expressed its opinion by notifying the applicant pursuant to 70  In substance, the provision in §  75 (III) 2, 3 Energy Industry Act is similar to §  75 Code of Administrative Court Procedure. The special provision is necessary because the Energy Industry Act provides for independent provisions on protection of rights and thus supersedes the Code of Administrative Court Procedure. 71  On other fictitious declarations of intent than approvals, see Caspar, AöR 125 (2000), 131 (134 et seq.). 72  Services Directive 2006/123/EC (footnote 58). 73  On this, Bernhardt, GewArch 2009, 100 et seq. For a comparative overview on the implementation of a fictitious approval in the Netherlands, Germany, and France, see de Graaf/ Hoogstra, Review of European Administrative Law, volume 6 (2013), no.  2, 7 (14 et seq.). 74  Bundestags-Drucksache 16/10493, 16. See also Guckelberger (footnote 2), 114; Uechtritz, DVBl 2010, 684 (688); Broscheit, GewArch 2015, 209 (210). 75  On this, Guckelberger (footnote 2), 114; Ernst/Pinkl, Jura 2013, 685 (687). However, the legal question of whether an application is sufficiently detailed and complete is not always clear and certain: on the related problems, see Broscheit (footnote 74), 209 et seq.

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§  41 Administrative Procedure Act.76 The legislator has provided for a decision-making period of three months which the authority may extend only once for a reasonable period where the complexity of the matter requires.77 The law may provide for longer or shorter periods in individual areas.78 The fictitious approval comes into being on expiry of the deadline. This applies even when the legal conditions for the desired approval are not met, as the legal fiction pertains to the existence of the approval and not its legality.79 The regulations governing legal effectiveness independent of errors and binding nature of administrative acts (see II.1.a) above) apply accordingly (§  42a (I) 2 Administrative Procedure Act). That means the fictitious approval remains effective insofar and for as long as it is not withdrawn, annulled or otherwise cancelled, or has expired (§  43 (II) Administrative Procedure Act). The authority may only cancel the fictitious approval under very strict conditions, which protect the legitimate expectations of the applicant (§  48 and §  49 Administrative Procedure Act). The mere fact that the benefit arose without an explicit decision from the authority does not justify its cancellation.80 Which approvals are granted as a fiction is not regulated in §  42a Administrative Procedure Act. This question must be determined by the legislator seperately. Examples of cases provided for by law can be found in construction law (e.g., §  61 (III) 4 Hamburg Building Regulation), in trade law (§  6a (I) German Trade Regulations Act, Gewerbeordnung – GewO), in craftsmen law (§  10 (I) 3, 4 Handicrafts Regulation Code, Handwerksordnung – HwO), in passenger transport law (§  15 (I) 5 Passenger Transport Act, Personenbeförderungsgesetz – PBefG) and in energy law (§  23a (IV) 2 Energy Industry Act).81 Examining the regulatory areas in which the law provides for a fictitious approval, it becomes clear that, generally, the administrative authority in these cases has no discretion in its decision to grant the approvals.82 On the one hand, this seems appropriate as fictitious approvals would always be unlawful in dis76  Uechtritz (footnote 74), 691; Broscheit, Rechtswirkungen von Genehmigungsfiktionen im Öffentlichen Recht, Berlin 2016, 67. 77  On the requirements for such an extension, Uechtritz (footnote 74), 690. 78  Section 61 (III) 1 Hamburg Building Regulation and §  15 (I) 4 Transport of Persons Act for example provide a decision-making period of three months, §  23a (IV) 2 Energy Industry Act a period of six months. 79  Bundestags-Drucksache 16/10493, 16. For a detailed analysis, see Broscheit (footnote 76), 153 et seq. 80  Bundestags-Drucksache 16/10493, 16. 81  Additional examples in Knauff, VerwArch 109 (2018), 480 (484) and Baer, in: Schoch/ Schneider (eds.), Verwaltungsrecht VwVfG, Kommentar, Grundwerk, München 2020, §  42a note 29. Abromeit/Droste, DÖV 2013, 133 (137 et seq.) are however of the opinion that the German legislator has not fulfilled its obligation under Article 13 (IV) Services Directive 2006/123/EC (footnote 58) to introduce a fictitious approval in all areas of regulation, and therefore want to allow an approval to be deemed without a special order in the individual areas of regulation. 82 Similarly, Broscheit (footnote 76), 17 et seq.

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cretionary cases because the authority would be in breach of its obligation to take discretionary considerations into account (§  40 Administrative Procedure Act).83 On the other hand however, the law on fictitious approvals accepts in principle that the situation which arises from a fictitious approval may be unlawful, i.e., that the administrative authority is not allowed to make that decision at all. Therefore, a fictitious approval is only problematic if discretion is granted in order to ensure that the administrative authority can make an appropriate selection between different applicants.84 This refers to situations where there is actual scarcity in terms of the activity requiring an approval, or where the state is seeking to restrict the levels of the activity in question. For instance, where an approval is sought to set up a stand in a marketplace with limited space, a large number of fictitious approvals from a broad range of applicants would result in applicants not being able to utilise their approvals, due to a lack of physical space. cc) Loss of the right to issue a statement Administrative law can also provide that the public authority loses its right to issue a statement if it does not do so within a specific period of time, i.e., it was silent during this time. In the context of unilateral administrative actions, this refers specifically to the right to issue an onerous administrative act. Should the administration lose this power, it would still be in a position to make an effective administrative act, but that act would be unlawful. We can find such a stipulated timeframe and consequence for exceeding it in §  48 (IV) 1 Administrative Procedure Act. This provides that a (disadvantageous) cancellation (Rücknahme) of a previously issued beneficial administrative act is only permissible within a year of the administrative authority learning the facts which render the administrative act able to be cancelled. If the authority is silent for one year, cancellation via a new administrative act will be too late, and thus, unlawful. Prevailing opinion holds that this provision guarantees legal certainty and protects the legitimate expectations of the persons affected by the administrative act.85 However, the exact date on which this period begins is still open for debate. Case law is not satisfied merely with the authority knowing that the original administrative act was unlawful. It also requires that the administrative authority be aware of all material facts relevant to 83 

Schröder, Genehmigungsverwaltungsrecht, Tübingen 2016, 561. Schröder (footnote 83), 561. 85  Schoch, in: Schoch/Schneider (eds.), Verwaltungsrecht VwVfG, Kommentar, Grund­ werk, München 2020, §  48 note 221. According to the Federal Social Court case law, §  45 Tenth Book of the Social Code (SGB X) applies an absolute preclusion period of 30 years from the issue of an unlawful beneficial administrative act for the withdrawal of this administrative act in social law , including for the case in which the beneficiary has obtained the administrative act fraudulently (BSGE 72, 139 [145 et seq.]). 84 

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the decision to withdraw the administrative act, i.e., the facts that render the applicant’s interests worthy of protection or not, and any facts significant for the exercise of discretion.86 The authority generally only has this knowledge after completely processing the facts of the case. It is only at this point that the one-year period, which then only concerns the decision itself, begins. Beyond these explicit regulations, the administrative authority may forfeit its right to issue an onerous administrative act (Verwirkung).87 The principle of acting in good faith derived from §  242 Civil Code, which also applies in administrative law88 , may result in a delayed administrative act presenting as an unlawful exercise of power, and that the authority may no longer make use of its power to intervene.89 However, inactiviy and the lapse of the time period alone are not sufficient,90 there must be additional circumstances which allow the affected party to draw the justified conclusion that the administrative authority will no longer exercise its power to intervene (basis of trust – Vertrauensgrund­ lage). This requires specific (active) conduct on the part of the authority.91 Additionally, the affected party must be relying on the fact that the authority is not going to exercise its power to act (situation of trust – Vertrauens­tatbestand), and must have acted on this trust in such a way that issuing the onerous administrative act would result in unreasonable disadvantage (act of trust – Vertrauens­ betätigung).92 Forfeiture of the right to intervene is therefore not a legal consequence linked purely to the mere silence of the authority over a specific period of time.93 86  BVerwGE 70, 356 (362 et seq.). Criticial of this position, Ruffert (footnote 8), §  24 note 22; Schoch (footnote 85), §  48 note 259. 87  In contrast, the private law limitation period in §  194 Civil Code does not apply to the right to issue an onerous administrative act. The limitation period applies to claims according to §  194 (1) 1 Civil Code. The right to issue an administrative act in contrast is not a claim, but a right to unilaterally establish the legal situation (Schoch (footnote 85), §  48 note 268). Case law has explicitly declared private law limitation inapplicable, at least with regard to the provisions on the cancellation of administrative acts by means of an administrative act pursuant to §§  48, 49 Administrative Procedure Act (BVerwGE 143, 230 (notes 23 et seq.); Bundesverwaltungsgericht, Decision dated 07.08.2017 – 10 B 14.16, BeckRS 2017, 122571 (note 6). 88  BVerwGE 163, 36 (note 18). 89  Schoch (footnote 95), §  48 note 269. In detail on the institute of forfeiture in private law, Kähler, in: Gsell/Krüger/Lorenz/Reymann (eds.), beck-online.Großkommentar BGB, Mün­ chen 2021, §  242 note 1639 et seq. 90 Bundesverwaltungsgericht, NVwZ 1995, 703 (706); NVwZ-RR 2018, 875 (note 50); Schoch (footnote 85), §  48 note 271. See also Bundesgerichtshof, Decision dated 18.02.2020 – XI ZR 390/19, BeckRS 2020, 5351 (note 8); Kähler (footnote 89), §  242 note 1668. 91  Bundesverwaltungsgericht, Decision dated 29.08.2018 – 3 B 24/18, BeckRS 2018, 22055 (note 18). Beaucamp (footnote 2), 803 speaks of “active tolerance” or “active communicated tolerance”. 92  Bundesverwaltungsgericht, NVwZ-RR 2018, 875 (note 50); Sachs, in: Stelkens/Bonk/ Sachs (eds.), Verwaltungsverfahrensgesetz, Kommentar, 9th edition, München 2018, §  53 note 23; Schoch (footnote 85), §  48 note 270. 93 Explicitly, Sachs (footnote 92), §  53 note 24.

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b) Silence in the context of cooperative administrative action In terms of cooperative actions, the direct legal effects of silence come from private law. This is because the administrative authority uses the rules of private law either directly in the formation of private law contracts, or by means of §  62 sentence 2 Administrative Procedure Act for public law contracts. The declaration of intent also plays a central role in private law,94 allowing for the conclusion of contracts, and the unilateral exercise of rights, such as the rights to contest and terminate contracts. aa) In principle: administrative silence lacking legal effect As in administration law, the principle that silence cannot be accorded any legal value holds in private law.95 Silence may therefore not be seen as an acceptance of an offer to conclude a contract (qui tacet consentire non videtur), if a declaration of intent cannot be drawn from conclusive related action.96 However, private law does recognise exceptions to the principle of ineffectiveness. bb) Legal fiction of a statement The first group of exceptions is related to cases concerning a fictitious declaration of intent similar to those found in administrative law.97 If, for example, an individual concludes a contract in the name of another, without the power or agency to do so (Vertreter ohne Vertretungsmacht), this contract is only effective for the parties involved when it is subsequently ratified by the principal (§  177 (I) Civil Code). The other party may request that the principle declare whether or not they will ratify the contract, however, if the principal does not make a declaration within two weeks, then the contract is deemed refused (§  177 (II) Civil Code), and is not effective. Thus, any legal uncertainty created by the unauthorised agent ends after at least two weeks.98 Another example comes from §  640 (II) 1 Civil Code, in the fictitious acceptance of performance completed under a contract to produce a work. Such contracts, which oblige a contractor to create a specific “work” as opposed to a service, require the other party to accept the work as produced according to the contract when it does not have any significant defects. This acceptance is important for the contractor, as without it, the contractor’s obligations cannot be seen 94 See

de la Durantaye (footnote 45), 23 with further references. Flume (footnote 45), 64 et seq.; Canaris (footnote 1), 77; de la Durantaye (footnote 45), 138 et seq.; Wendtland, in: Hau/Poseck (eds.), BeckOK BGB, München 2021, §  133 note 10. 96  Bundesgerichtshof, NJW-RR 1994, 1163 (1165); NJW 2018, 296 (note 21). 97  Wendtland (footnote 95), §  133 note 11. In addition to the examples provided here, there are other examples in private law (see de la Durantaye [footnote 45], 126 et seq.), however these are either insignificant or do not apply to public authorities. 98  de la Durantaye (footnote 45), 131. 95 

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as fulfilled.99 To prevent the customer from postponing acceptance in perpetuity, the work is deemed accepted when the contractor has set a reasonable period for acceptance, and the customer does not reject it reporting at least one defect. The fiction of a declaration of intent also arises in cases where an individual acts on a claim on behalf of another individual to grant a declaration of intent, by successfully suing that other person to provide such a declaration in the civil courts. The declaration of intent is deemed to arise as soon as the judgment has attained legal force (§  894 sentence 1 Code of Civil Procedure, Zivilprozes­ sordnung, ZPO). cc) Loss of the right to issue a statement The second group of exceptions to the lack of legal effect of silence in the case of unilateral administrative actions are also found in private law, and take a similar form: those who do not issue a statement within a specific period of time, may lose the right to issue a statement with the intended legal effect. For example, an offer made in the presence of a person may only be accepted immediately (§  147 (I) 1 Civil Code). If the person is not present, it can only be accepted until such time as the person making the request can expect to receive a response under ordinary circumstances (§  147 (II) Civil Code) or a fixed period for acceptance has expired (§  148 Civil Code). If the other party remains silent, or issues acceptance too late, the offer expires (§  146 Civil Code), meaning that the declaration of the other party is not effective as acceptance.100 A declaration of intent may be avoided where the person who made the declaration was mistaken about its contents (§  119, §  142 (I) Civil Code). This must occur immediately, i.e., without culpable delay, after the person entitled to avoid the declaration learns of the grounds for avoidance (§  121 (I) 1 Civil Code). Avoidance carried out at a later date is ineffective. Similarly, a contract may no longer be revoked for a lack of performance or a performance not in keeping with the contract (§  323 Civil Code) if the claim associated with the contract is statute-barred, and this is invoked by the party obliged to provide said performance (§  218 (I) 1 Civil Code). Rights for unilateral action, such as avoidance, termination, and withdrawal may also be forfeited.101 However, as with unilateral administrative acts, mere silence over a certain period of time is not sufficient102 , requiring instead special circumstances to justify a basis of trust (see IV.2.a) above). 99  Kögl, in: Gsell/Krüger/Lorenz/Reymann (eds.), beck-online.Großkommentar BGB, München 2021, §  6 40 note 10. 100  A later declaration of acceptance constitutes a new application (§  150 (I) Civil Code). 101 Bundesgerichtshof, Decision dated 18.02.2020 – XI ZR 390/19, BeckRS 2020, 5351 (note 8); Kähler (footnote 89), §  242 note 1648. 102 Bundesgerichtshof, Decision dated 18.02.2020 – XI ZR 390/19, BeckRS 2020, 5351 (note 8).

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3. Protection of rights against administrative silence In terms of protection of rights against administrative silence, we distinguish between primary and secondary protection of rights (see II.4. above). Emphasis should be given to the special features of legal remedies in the context of unilateral administrative actions. a) Primary protection of rights aa) General legal remedies Administrative court procedural law does not contain any special rules for those cases in which administrative law creates a fictitious official statement, or where the authority loses its right to issue statements with legal effect. In principle, the general opportunities for protection of rights apply, resulting in the following constellations. An applicant may seek legal remedy against a fictitious rejection of an application for an administrative act pursuant to the general rules, i.e., intra-administrative objection and subsequent enforcement court action.103 In the case of a fictitious approval, the provisions on legal remedies expressly apply (§  42a (I) 2 Administrative Procedure Act). A third party burdened by the approval may similarly take action against the fictitious approval using the same legal remedies as against an actual approval.104 However, in order to achieve this, the third party must be aware of the fictitious approval. As there is no formal notification (Bekanntgabe) of a fictitious act, the party who should have been notified of the administrative act must request, and be provided with, a written confirmation (Bescheinigung) of the fictitious approval (§  42a (III) Administrative Procedure Act). The beneficiary can also take steps to ensure that third parties burdened by the approval are informed.105 Receipt of certification and information on the available legal remedies then set in motion the deadlines for legal remedies pursuant to §  70 (I) 1 or §  74 (I) 2 Code of Administrative Court Procedure.106 The fictitious approval only becomes binding after these deadlines have passed. For situations in which, due to its silence, the administrative authority loses its right to act, i.e., to issue an onerous administrative act, the individual who was to have been burdened does not require any legal remedy against the authority. As long as the authority remains silent, the individual does not suffer any legal disadvantage. If, however, the authority does issue the onerous admin103  Particularly in the case of the fictitious rejection in §  75 (III) 2, 3 Energy Industry Act, however, there are sector-specific special provisions on protection of rights. These supercede the Code of Administrative Court Procedure. 104  Bundestags-Drucksache 16/10493, 16. 105  Guckelberger (footnote 2), 117; Kluth, JuS 2011, 1078 (1081); Broscheit (footnote 76), 255. 106  Ernst/Pinkl (footnote 75), 693; Broscheit (footnote 76), 253 et seq.; Knauff (footnote 81), 489 et seq.

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istrative act at a later date, even though it has lost the right to do so, although the administrative act is unlawful, it is still effective. The burdened party can take action against the administrative act according to the general rules (see II.4. above). bb) Procedural waiver of the intra-administrative objection proceeding In §  75, the Code of Administrative Court Procedure specifically considers the fact that administrative silence in principle carries no legal effect and that the administrative procedure begun by a citizen’s application remains open, in a state of legal uncertainty (see IV.2.a) above). In this sense, from a procedural perspective, §  75 Code of Administrative Court Procedure is thus the law’s most significant reaction to administrative silence. It begins with the fact that in certain situations an applicant does not have an admissible legal remedy, i.e. no right to intra-administrative objection or rescissory or enforcement court action. This lies in the fact that where an applicant has applied for an administrative act to which the administrative authority responded with silence, an intra-administrative objection is not admissible, as §  68 (II) Code of Administrative Court Procedure requires that the application have been rejected. Mere silence on the part of the authority, in principle, is not a rejection. An enforcement action may be admissible, as §  42 (I) Code of Administrative Court Procedure speaks not only of “rejected” (abgelehnt), but also “omitted” (unterlassen) administrative acts. However, if the applicant has not previously (unsuccessfully) pursued an intra-administrative objection, admissibility in principle would be precluded (§  68 (II) Code of Administrative Court Procedure). The same problem arises when it is not the original authority which is silent, but rather the authority facing the intra-administrative objection.107 The intra-administrative objection must have been conducted and a negative decision issued, i.e., a ruling on the intra-administrative objection, before a rescissory or enforcement court action is brought (§  68 (I), (II) Code of Administrative Court Procedure). The Code of Administrative Court Procedure responds to this situation with §  75 sentence 1108: if the authority has not decided on the merits of the application for an administrative act or an intra-administrative objection within a reasonable period of time (in angemessener Frist), a court action is admissible in derogation from §  68 Code of Administrative Court Procedure even without a completed intra-administrative objection proceeding. Even though the proce107 

Bettermann, NJW 1960, 1081; Brenner/Witt, DVBl 2020, 977 (978). Similar provisions are found in §  27 (I) 1 Introductory Act to the Courts Constitution Act (Einführungsgesetz zum Gerichtsverfassungsgesetz – EGGVG) for judicial proceedings against judicial administrative acts before the ordinary courts, §  46 (I) 1 Code of procedure for Fiscal Courts (Finanzgerichtsordnung – FGO) for proceedings in the fiscal courts, and §  88 (I) 1 Social Courts Act (Sozialgerichtsgesetz – SGG) for proceedings under social law. 108 

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dural situation regulated by §  75 Code of Administrative Court Procedure in German is often described as an “action against inactivity” (Untätigkeitsklage), it is important to emphasise that §  75 Code of Administrative Court Procedure does not regulate a separate type of court action,109 only making it procedurally easier for an applicant to bring a rescissory or enforcement action. Thus, §  75 sentence 1 Code of Administrative Court Procedure prevents either the original authority or the authority facing an intra-administrative objection from using silence to block the applicant from obtaining a court decision at the very least. This ensures that protection of rights guaranteed by the constitution is available within a reasonable period of time.110 Generally,111 the applicant must wait at least three months before being able to file this court action in an admissible way (§  75 sentence 2 Code of Administrative Court Procedure). During this time, the silence of the authority has no legal consequences, at least under the primary legal remedies.112 On expiry of this period, a number of procedural situations become possible:113 – In the absence of an “adequate reason” (zureichender Grund) for silence on the part of the authority, the process will follow its usual path. If the administrative act being objected to is unlawful and violates the applicant’s rights, the court will rescind the administrative act (§  113 (I) 1 Code of Administrative Court Procedure). If the applicant has a right to the issue of the desired administrative act (§  113 (V) 1 Code of Administrative Court Procedure), i.e., the authority has no discretion or margin of interpretation in making the decision, the court decision thus compels the authority to issue it. If there is any discretion or margin of interpretation, the court obliges the administration to (re-)decide the plaintiff’s application, taking the legal view of the court into consideration (§  113 (V) 2 Code of Administrative Court Procedure).114

109 

Bettermann (footnote 107), 1088; Weides (footnote 66), 673; Wittmann, JuS 2017, 842. Bundesverwaltungsgericht, NVwZ 2018, 1229 (note 13); on §  27 (1) sentence 1 Introductory Act to the Courts Constitution see BVerfGE 40, 237 (257). See also Bettermann (footnote 107), 1081; Weides (footnote 66), 673. 111  Shorter periods may be required, but only due to special circumstances in exceptional cases. These include special circumstances of severe and disproportionate disadvantage for the affected party or where a shorter decision-making is required by law. See Bundesverwaltungsgericht, NVwZ 2018, 1229 (note 13); Porsch (footnote 66), §  75 note 6. 112  Reimer (footnote 57), 339. 113  In detail, there are a lot of constellations, this is only intended to provide a brief outline. For more detail, see Weides (footnote 66), 674 et seq. and Porsch (footnote 66), §  75 notes 7 and 19 et seq. 114  There is no uniform answer to the question of whether an applicant can also claim that the authority facing the intra-administrative objection rule on this objection where this authority has remained silent. For detailed analysis, see Schenke, DÖV 1996, 529 et seq. und Brenner/Witt (footnote 107), 977 et seq. 110 

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– In contrast, if there is an “adequate reason” for silence, the authority will get a second chance:115 the court may set a deadline and suspend the proceedings until the expiry of that deadline (§  75 sentence 3 Code of Administrative Court Procedure). If the authority still fails to issue a decision, or if the application for an administrative act or the intra-administrative objection is rejected, the proceeding is continued. If, in contrast, the authority issues the administrative act or remedies the objection, the case is declared to have been settled (§  75 sentence 4 Code of Administrative Court Procedure). The authority carries the costs if the applicant could anticipate the decision would have been made known before the action was brought (§  161 (III) Code of Administrative Court Procedure). What constitutes a “reasonable” decision-making period for the authority is determined by substantive administrative law (see IV.1.b) above): the purely procedural provisions in §  75 sentence 2 Code of Administrative Court Procedure say nothing on the matter. Case law requires that an “adequate reason” for not issuing a decision before the deadline be consistent with the law and considered sufficient according to the values of the Basic Law, particularly the fundamental rights it guarantees.116 Every individual case requires the interests of the affected individuals be considered (for example, in cases of particular urgency) against the circumstances which may serve to justify a delayed decision by the authority.117 In this process, the authority must organise itself such that it can handle the multitude of cases that arise, while also dealing with difficult legal questions within a reasonable period of time.118 However, “adequate reasons” may include the authority being briefly burdened in an exceptional manner due to a “temporary flood of applications”119 or that the facts of a specific case are particularly extensive or difficult to determine.120 b) Secondary protection of rights Secondary protection of rights are essentially claims that compensate for a legal disadvantage that can be traced back to the authority’s silence. A potential basis

115 

Bettermann (footnote 107), 1085. Bundesverfassungsgericht, NVwZ-RR 2017, 393 (note 9) with further references. 117  BVerwGE 162, 331 (note 16); Weides (footnote 66), 674; Porsch (footnote 66), §  75 note 8. 118  Leisner (footnote 66), 248 et seq., 255 et seq.; Wittmann (footnote 109), 844. 119  Bundesverfassungsgericht, NVwZ-RR 2017, 393 (note 9) with further references. Critical of this, Leisner (footnote 66), 257. An example of a “temporary flood of applications” occurred with the large number of asylum applications to the German Ministry of Migration and Refugees following the mass migration seen in 2015, see Reimer (footnote 57), 335. Case law provides a range of ruling, with some finding there was permanent overload. For more, including examples from case law, see Polzin, DVBl 2017, 551. 120  BVerwGE 162, 331 (note 16). 116 

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for this can be found in the liability for breaches of official duty (§  839 Civil Code in connection with Article 34 sentence 1 Basic Law).121 The first requirement is that, in its silence, the authority is in breach of its official duty to issue a statement. Here again, it is the specific content of the duty to issue a statement which determines the duty, particularly in terms of determining the period of time within which the authority must issue its decision (see IV.1.b) above). If the law stipulates a specific period for the issuance of a decision, on the expiry of which a fictitious approval is said to exist, the authority generally only violates an obligation with its silence if the result of that silence, in this instance, a fictitious approval or the fictitious rejection of an application for an administrative act is unlawful. If the resulting situation however is lawful, then the authority is therefore acting in accordance with the law by allowing the situation to emerge automatically, i.e., with the legal fiction, as opposed to expressly issuing an approval or rejection during the decision-making period. This is because the law does not require a decision any earlier. If the law does not explicitly provide a period of time in which a decision must be issued, the authority is only violating its duty when it does not process the application “swiftly” and without due delay once the assessment has concluded.122 If a breach of duty can be substantiated, the damage claimed must then be attributable to the breach of duty, i.e. the silence. The claim is excluded if the injured party intentionally or negligently failed to avert the damage by way of primary protection of rights (§  839 (III) Civil Code). If, according to all the above, a claim for damages can be established, the administration must restore the situation that would have existed if it had not violated its duty to issue a statement, i.e. if it had issued the statement at the last possible moment (§  249 (I) of the Civil Code).

V. Evaluation of the German law on administrative silence Silence brings uncertainty for the individual who had applied for a decision. In terms of administrative silence, the applicant may know that a failure to issue a decision does not lead to any legal consequences. However, anyone who has an interest in obtaining or stopping a decision, is waiting for the law to react to the uncertainty that silence brings. In this light, the rules governing administrative silence must first and foremost measure the degree to which they allow legal certainty, the protection of fundamental rights, and effective and efficient administrative action.

121 

122 

Reimer (footnote 57), 340. Reimer (footnote 57), 340.

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1. Evaluation of the rules for a legal fiction The rules which allow for a fictitious statement must be evaluated in a differentiated manner. They can require an authority to swiftly check an application if it wishes to prevent a legal fiction from coming to be.123 In simple or clear-cut cases, the authority may also find it efficient to remain silent, deliberately allowing a fictitious approval.124 Both variations generally result in the administrative procedure being dealt with swiftly, and to a timely resolution of the legal uncertainty that silence would otherwise produce.125 For the applicants, this generally means swift legal certainty and a realisation of their rights.126 That said, the provisions also hide risks. These risks first and foremost affect the general public. If an authority fails to assess an application, this may result in a fictitious approval, which may in turn give rise to an unlawful administrative act. That compromises the constitutional principle requiring the authority to act in accordance with “law and justice” (Article 20 (III) Basic Law),127 and making the authority’s actions ineffective. The requirement to issue an approval is also often intended to ensure that the authority has assessed in advance whether specific activities on the part of the applicant can be reconciled with the interests of third parties. In the case of a fictitious approval, the rights of third parties are unprotected in the administrative procedure, in stark contrast with the requirements for a protection of fundamental rights through procedure.128 This ultimately results in subsequent court proceedings, and, depending on the area of regulation, a range of different opportunities and duties for the authority to subsequently ensure lawful conditions.129 But fictitious approvals are not always advantageous for applicants either. If an authority resorts to refusing an application due to time restraints to prevent the fiction effect from occurring, the applicant may be forced to seek unneces123 

Biermann (footnote 66), 382. Caspar (footnote 71), 151. It is however debated whether this practice is legally permissible, or whether the authority must not explicitly decide before the end of the decision-making period as soon as the application has been fully assessed. See Guckelberger (footnote 2), 117. 125  Ernst/Pinkl (footnote 75), 685. 126  Guckelberger (footnote 2), 111, 116. This was also the assumption of the EU legislator in Recital 43 of the Services Directive 2006/123/EC (footnote 58). 127  Jachmann (footnote 2), 399, 883. 128  Fehling, in: Fehling/Grewlich (eds.), Struktur und Wandel des Verwaltungsrechts – Symposium zum 80. Geburtstag von Prof. Dr. h.c. Martin Bullinger, Baden-Baden 2011, 43 (51); de Graaf/Hoogstra (footnote 73), 9; Biermann (footnote 66), 383. Similarly, Caspar (footnote 71), 150 and Guckelberger (footnote 2), 110. 129  Caspar (footnote 71), 151. Cancik, DÖV 2011, 1 (4) is sceptical in, as the authority may be predominantly focused on preventative control in approval procedings, to prevent the creation of a fictitious approvals which may result in a lack of capacity for ex-post control. 124 

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sary primary legal remedies.130 Similarly, for the applicant, it is not always clear whether the application contains sufficient information to meet the requirements for detail and completeness and trigger a fictitious approval.131 Even once the fictitious approval enters into force, the applicant cannot always be sure of its benefits: the applicant cannot be absolutely certain whether the application was actually checked, and thus sufficient for a lawful fictitious approval, or whether it will be withdrawn at a later date (albeit subject to more stringent conditions).132 Similarly disadvantageous is the fact that third parties with a right to take action against the approval only become aware of the approval later, meaning that the approval only becomes binding later than had it been disclosed under normal circumstances.133 In these cases, the provisions not only fail to deliver their goal, they may also create additional legal uncertainty and make administrative action less efficient. 2. Evaluation of the rules for the loss of the right to issue a statement Rules governing the loss of the right to issue a statement may contribute to increasing legal certainty. That said, the period for withdrawing an administrative act (§  48 (IV) Administrative Procedure Act) begins so late, it fails to achieve a large part of its intended impact.134 Generous treatment in case law means the authority is not compelled to clarify the facts of the case within a year, rather only to decide on a full investigation of the factual basis within a year. For those outside of the authority, the significant dates are virtually impossible to identify. Apart from §  48 (IV) 1, the Administrative Procedure Act contains barely any examples of the authority losing the right to issue a decision after the expiry of set decision-making periods. The requirements for forfeiture are very stringent, and mere silence for a certain period of time is not sufficient. 3. Evaluation of the rules for waiving the intra-administrative objection proceeding The provisions governing the waiver of the intra-administrative objection proceeding pursuant to §  75 Code of Administrative Court Procedure do not prevent the applicant from losing time and exposing themselves to potential court action when seeking legal remedies for administrative silence. However, the ability to lodge a court action, even in the face of legal uncertainty, does provide

130 

BVerwGE 31, 274 (278 et seq.); Biermann (footnote 66), 383; Fehling (footnote 128), 53. Fehling (footnote 128), 54; Knauff (footnote 81), 487, 491 et seq. 132  Caspar (footnote 71), 152; Biermann (footnote 66), 383; Fehling (footnote 128), 53. 133  Caspar (footnote 71), 152; Biermann (footnote 66), 383; Fehling (footnote 128), 52 et seq. 134  Sachs (footnote 92), §  48 note 231; Schoch (footnote 85), §  48 note 259. 131 

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a means of effectively putting pressure on the authority135 and balances the interests of the parties, in that the court may suspend an individual proceeding and set a deadline for the authority to make a decision.

VI. Summary In principle, administrative silence in German law does not carry legal consequences. In certain cases however, there is a legal fiction if the authority fails to issue a declaration of intent within a specified period. Sometimes, the authority loses the right to issue a declaration of intent if it fails to do so within a certain period. Any declaration of intent issued subsequent to this period is therefore unlawful as a unilateral administrative action, and legally ineffective as part of cooperative administrative action. If the law does not ascribe any legal consequences to the authority’s silence, this results in a state of uncertainty, during which those affected may be waiting for some kind of decision. In such cases, court procedural law allows for primary legal remedies against this silence after a period of three months, thus bringing about a judicial decision. In addition, silence may give rise to a claim for damages as a secondary legal remedy, if the authority does not issue a decision within the allotted period of time.

135 

Leisner (footnote 66), 259; Reimer (footnote 57), 339.

Fiscal Policies to Mitigate Climate Change1 Hanno Kube

I. Mitigating climate change as a goal of German public policy The cross-cutting goal of mitigating climate change permeates all areas of public policy in Germany. In addition to regulatory measures, fiscal measures are an important instrument of climate protection policy. There is no explicit legal definition of climate change in Germany. But §  1 of the Federal Climate Protection Act of 2019 (Bundes-Klimaschutzgesetz, KSG) 2 recognizes climate change as a fact and links national climate action to the commitments under the Paris Agreement based on the United Nations Framework Convention on Climate Change. Regarding the factual bases of climate change, which are hardly controversial in Germany, the Federal Constitutional Court (Bundesverfassungs­ gericht, FCC) largely relies on the reports of the Intergovernmental Panel on Climate Change (IPCC).3 With regard to fiscal policies to mitigate climate change, the notion of “steering provisions” plays a major role in German law. The notion refers to provisions that do not primarily pursue fiscal purposes but rather substantive policy objectives by creating incentives or disincentives. “Steering taxes” implementing climate policy objectives are one of the most important subsets of steering provisions in Germany. They are likely to become even more significant in the future. There is no general statutory framework for a tax policy aimed at mitigating climate change. Instead, there are numerous steering taxes and particular steering provisions in larger tax codes that aim at mitigating climate change.

1  I would like to thank Moritz Teichmann and Noah Zimmermann for their great support in preparing this national report. 2 Cf. Art.   1 of the Act on the Implementation of a Federal Climate Protection Act of 12.12.2019, BGBl. I 2019, 2513 and Art.  1 of the First Act Amending the Federal Climate Protection Act of 12.08.2021, BGBl. I 2021, 3905. 3 Cf. Federal Constitutional Court (FCC), Order of 24.03.2021 – 1 BvR 2656/18 et al. (non-authoritative English version available at http://www.bverfg.de/e/rs20210324_1bvr265 618en.html).

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II. Legal Framework 1. Constitutional law a) Constitutional law obligations to protect the environment aa) Article 20a of the Basic Law In Germany, the environmental crisis has been discussed since the beginning of the 1970s.4 In 1983, an expert commission proposed the constitutional implementation of the state objective of environmental protection.5 However, the political process was at that time shaped by fundamental conflicts about how such a provision should be structured in detail. In particular, it was controversial whether the provision should encompass only the natural foundations of life “of humankind” (anthropocentric approach) or whether it should equally protect all elements of nature (ecocentric approach).6 When finally adopted in 1994,7 the wording of Art.  20a of the Basic Law (GG) was thus the result of a compromise. The provision first related to the “natural foundations of life”; by an amendment in 20028 it was extended to encompass animal welfare. Art.  20a GG today states: “Mindful also of its responsibility towards future generations, the state shall protect the natural foundations of life and animals by legislation and, in accordance with law and justice, by executive and judicial action, all within the framework of the constitutional order.”9 Art.  20a GG contains a state objective that is of a binding legal nature. The provision constitutes the objective state duty to protect and preserve the natural foundations of life. The state has to refrain from harmfully interfering with the environment. But it is also obliged to take climate action.10 Since Art.  20a GG is a provision of objective law, it cannot be used as a basis for individual claims. The individual can therefore demand judicial review under Art.  20a GG only indirectly in conjunction with invoking infringements of fundamental rights.11 4  Murswiek, in: Sachs (ed.), Grundgesetz, 9th ed. 2021, Art.  20a no.  2 with further referen­ ces. 5 German Federal Ministry of the Interior/German Federal Ministry of Justice (eds.), Staatszielbestimmungen, Gesetzgebungsaufträge. Bericht der Sachverständigenkommission, 1983, 84 et seq.; Murswiek, in: Sachs (ed.), Grundgesetz, 9th ed. 2021, Art.  20a no.  2. 6  Schulze-Fielitz, in: Dreier (ed.), Grundgesetz, 3rd ed. 2015, Art.  20a no.  7. 7  Art.  1 of the Act amending the Basic Law of 27.10.1994, BGBl. I 1994, 3146. 8  Art.  1 of the Act amending the Basic Law of 26.07.2002, BGBl. I 2002, 2862. 9  Translated by Chr. Tomuschat et al on behalf of the German Ministry for Justice and Consumer Protection (available at http://www.gesetze-im-internet.de/englisch_gg/). 10  FCC, Order of 24.03.2021 – 1 BvR 2656/18 et al, para.  198; Schulze-Fielitz, in: Dreier (ed.), Grundgesetz, 3rd ed. 2015, Art.  20a no.  24, 50 et seq. 11  In Germany, infringements of fundamental rights are justified only if the infringing law is compatible with the whole of substantive constitutional law (including Art.  20a GG); cf. FCC, Order of 24.03.2021 – 1 BvR 2656/18 et al, paras. 189 et seq.

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With regard to the state’s duty to take climate action under Art.  20a GG, the Federal Constitutional Court held that this duty requires the state to mitigate man-made global warming by reducing greenhouse gas emissions.12 The Court further acknowledged “constitutionally relevant limits of global warming” and held that – because global warming is largely irreversible – the constitution ultimately demands the achievement of climate neutrality. To this end, there is also a state duty to engage in international efforts in order to effectively reduce global warming.13 However, Art.  20a GG does not prescribe specific means to achieve this objective. It is the task of the legislator to concretize these means. The legislator therefore has a prerogative for interpreting and specifying Art.  20a GG in view of the ever-changing reality.14 Against this background, the Federal Constitutional Court held that by adopting the objective of the Paris Agreement to limit global warming to well below 2° C and preferably to 1.5° C above pre-industrial levels within the framework of §  1 cl. 3 of the Climate Protection Act, the German legislator has concretized Art.  20a GG in a lawful way, thereby implementing the temperature limit as the relevant benchmark under constitutional law and establishing the basis of the Court’s scope of judicial review.15 bb) State obligation to protect the environment arising from fundamental rights In German constitutional law, the fundamental rights to freedom and equality do not only protect the individual from state interference, but they also oblige the state to actively promote and protect the individual’s freedom and equality. This is specifically the case for the fundamental right to life and health accor­ ding to Art.  2 (2) cl. 1 GG. This provision contains the state’s duty to protect the individual against the risks of climate change. It obliges the state to implement measures aimed at alleviating the consequences of global warming that we are already confronted with.16 Similarly, the fundamental right to private property (Art.  14 (1) GG) entails the state’s obligation to protect such property against the risks of climate change.17 However, the legislator has a wide margin of appreciation when determining the legal instruments that are to be used in order to fulfill the state’s duties to protect fundamental rights.18 The FCC’s scope of review is limited; it will only 12 

FCC, Order of 24.03.2021 – 1 BvR 2656/18 et al, para.  198. FCC, Order of 24.03.2021 – 1 BvR 2656/18 et al, paras. 200 et seq. 14  Scholz, in: Dürig/Herzog/Scholz, Grundgesetz, 94th supplement 01.2021, Art.   20a no.  35. 15  FCC, Order of 24.03.2021 – 1 BvR 2656/18 et al, para.  208. 16  FCC, Order of 24.03.2021 – 1 BvR 2656/18 et al, paras. 144 et seq., 150; Lang, in: Epping/ Hillgruber (eds.), BeckOK Grundgesetz, 48th ed. 08.2021, Art.  2 no.  83a. 17  FCC, Order of 24.03.2021 – 1 BvR 2656/18 et al, paras. 171 et seq. 18 Cf. Starck, in: v. Mangoldt/Klein/Starck (eds.), Grundgesetz, 7th ed. 2018, Art.  2 no.  233. 13 

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intervene if the legislator does not take any action at all or if the legislator implements completely inadequate measures (prohibition of insufficient action).19 In its 2021 judgment on the climate crisis, the FCC additionally – and for the first time – held that the fundamental rights also protect the citizen against future infringements by the state that can already be anticipated today.20 The reasoning is the following: If the state does not take sufficient action against global warming today and if this has the consequence that freedom will have to be curtailed very significantly in the future in order to reach the climate goals agreed upon under international law, then the state violates the fundamental rights of young people already today. In other words, the FCC emphasizes the intertemporal dimension of freedom and the constitutional law requirement to adequately balance degrees of freedom today and in the future. b) Relationship between the constitutional mandate to mitigate climate change and the constitutional principles of taxation Under German constitutional law, the imposition of any tax burden is considered to interfere with the tax payer’s fundamental rights. Therefore, it has to be justified under constitutional law. In general, tax laws are held to be constitutional, if they follow the so-called ability to pay principle. Every taxpayer should pay taxes according to his or her economic ability to do so. At the same time, the legislator is always bound by constitutional law in its entirety regardless of whether he enacts laws in the area of taxation or in other areas. In this sense, there is no exemption from the legislator’s obligation to protect the environment and to mitigate climate change in the field of taxation. Any tax law has to be compatible with Art.  20a GG in particular.21 However, as tax law’s primary objective is to generate revenue for the general state budget, there is no conceptual conflict between taxes that have a purely fiscal objective and principles of environmental protection. The legislator could decide to structure the law of taxation solely in pursuance of the fiscal objective and pursue substantive policy objectives such as environmental and climate protection by enacting regulatory law. In fact, this has been and continues to be supported in parts of the academic literature. On the other hand, the tax legislator may pursue social, ecological and other substantive policy objectives by means of steering tax provisions.22 Such provisions set a specific incentive to act in a particular way by deviating from the 19 

FCC, Order of 24.03.2021 – 1 BvR 2656/18 et al, para.  152. FCC, Order of 24.03.2021 – 1 BvR 2656/18 et al, para.  182 et seq. (“intertemporal guarantee of freedom”). 21  Cf. FCC, Order of 24.03.2021 – 1 BvR 2656/18 et al, paras. 189 et seq. 22  Established case law, cf. FCC, Order of 22.06.1995 – 2 BvL 37/91, BVerfGE 93, 121 (147) (wealth tax); FCC, Judgment of 17.12.2014 – 1 BvL 21/12, BVerfGE 138, 136 (181 et seq.) (inheritance tax). 20 

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ability to pay principle. This deviation is constitutionally justified by the constitutional mandate to take climate action. In this sense, Art.  20a GG and the fundamental rights obligations to protect the environment define public goods that may be balanced against the constitutional ability to pay principle. The more the concrete tax rule deviates from the ability to pay principle, the more important the pursued policy goal has to be. However, (ecological) steering taxes are constitutionally justifiable only if they can be regarded as taxes in a legal sense. This requires that they pursue fiscal objectives at least as a secondary motive. A “tax” which has the effect of not generating any revenue at all is not considered to be a tax anymore, but rather a regulatory prohibition. In German case law and literature, this is referred to as a “throttling tax” or “strangulating tax” (Erdrosselungssteuer), because it would make the use of a specific fundamental freedom impossible. Throttling taxes are unconstitutional, because the legislator – as tax legislator – lacks the legislative power to enact regulatory prohibitions.23 Furthermore, the tax legislator enacting a steering tax has to avoid substantive contradictions between the effects of the steering tax and other regulatory provisions. In this regard, the FCC held that steering taxes on waste disposal implemented by the states (Länder) 24 and also a steering tax on non-reusable packaging and tableware adopted by a municipality25 ran counter to substantive environmental law regulations at the federal level that emphasized the principle of cooperation. Therefore, the distribution of legislative powers and the rule of law principle prohibit the implementation of steering taxes that contradict the concepts of regulatory law on the same subject matter.26 c) Application of the polluter pays principle in tax law The polluter pays principle is an important principle of German environmental law.27 It attributes responsibility to the person who causes adverse effects, hazards or risks to the environment. As a cost allocation principle it provides for the polluter to bear the costs of avoiding, eliminating and compensating for envi23 Cf.

Englisch, in: Tipke/Lang (eds.), Steuerrecht, 24th ed. 2021, no.  7.114. FCC, Judgment of 07.07.1998 – 2 BvR 1876/91 et al, BVerfGE 98, 83 (waste disposal tax). 25  FCC, Judgment of 07.05.1998 – 2 BvR 1991/95 et al, BVerfGE 98, 106 (packaging tax). 26  FCC, Judgment of 07.07.1998 – 2 BvR 1876/91 et al, BVerfGE 98, 83 (98) (waste disposal tax); cf. Kube, Finanzgewalt in der Kompetenzordnung, 2004, 226 et seq. 27  In environmental liability law, general strict liability for installations is stipulated in §  1 of the Environmental Liability Act (Umwelthaftungsgesetz, UmweltHG); specific strict liability is regulated, inter alia, by §  89 of the Water Resources Act (Wasserhaushaltsgesetz, WHG) and by §§  25 et seq. of the Atomic Energy Act (Atomgesetz, AtG). Furthermore, §  4(2)(6) of the Federal Soil Protection Act (Bundesbodenschutzgesetz, BBodSchG) regulate the responsibility for contaminated soil. §  15 of the Federal Nature Protection Act (Bundesnatur­ schutzgesetz, BNatSchG) contains both the duty to avoid as well as the obligation to compensate for impairments of nature and landscape. 24 

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ronmental pollution.28 Furthermore, the polluter pays principle can justify state interventions such as prohibitions, restraints and injunctions against the party responsible for environmental impairment.29 In a way, the polluter pays principle shares common grounds with steering taxes. Both deviate from the ability to pay principle and can have incentivizing effects by financially burdening behavior that the legislator deems undesirable.30 Thus, environmental steering taxes will often burden a taxpayer according to the polluter pays principle in its dimension as a cost allocation principle.31 d) Compliance and non-compliance with steering provisions Steering tax provisions generally impair fundamental freedoms to a lesser extent than regulatory prohibitions, because the taxpayer has the choice of either following the steering incentive (thereby avoiding increased financial burdens or benefitting from reduced burdens) or of willingly accepting the increased costs of not changing his behavior. However, it also has to be considered that steering taxes can appear as a very severe infringement into fundamental rights in cases, in which the taxpayer’s choice is restrained by factual or economic limits. The poor owner of an old building with oil heating or the employee who depends on his old car have no real choice; they have to bear the increased costs resulting from the implementation of fiscal measures with regard to the use of fossil energy products. Correspondingly, steering tax provisions cannot guarantee that the underlying policy objectives will be reached. Instead, they may just lead to an increase in fiscal revenue. On the other hand, a perfectly functioning steering tax will ultimately result in a loss of any fiscal revenue; from the taxing perspective, this can be seen as a conflict of interests. 2. International and European law a) German obligations to mitigate climate change under international law Germany is party to the Montreal Protocol, the United Nations Framework Convention on Climate Change, the Kyoto Protocol and the Paris Accord. The Paris Accord is being implemented by the “Climate Protection Plan 2050”32 28  Fischer, in: Steiner/Brinktrine (eds.), Besonderes Verwaltungsrecht, 9th ed. 2018, §   7 no.  32. 29  Kloepfer, in: Ehlers/Fehling/Pünder (eds.), Besonderes Verwaltungsrecht, vol.  2 , 4th ed. 2020, §  4 4 no.  91. 30 Cf. Fischer, in: Steiner/Brinktrine (eds.), Besonderes Verwaltungsrecht, 9th ed. 2018, §  7 no.  32. 31 Cf. Kloepfer, in: Ehlers/Fehling/Pünder (eds.), Besonderes Verwaltungsrecht, vol.  2 , 4th ed. 2020, §  4 4 no.  95. 32  For the full text: bmu.de/fileadmin/Daten_BMU/Download_PDF/Klimaschutz/klima

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and, building on it, by the more detailed “Climate Protection Program 2030”.33 These programs do not have the character of binding legal acts. However, the “Climate Protection Program 2030” proposes various acts of legislation in order to fight climate change. These acts include measures such as carbon pricing and measures with regard to the energy industry, mainly in the sectors of transport, building, as well as agriculture and forestry. In addition, the international obligations led to the promulgation of the Federal Climate Protection Act of 2019,34 which includes binding emission targets. b) EU climate targets and the European Green Deal The European Union has a key role in the area of climate protection, as combating climate change is only possible through joint action. As a supranational organization, the EU is able to actually enforce coordinated action to some extent, unlike in the area of international law. The EU possesses comprehensive competences in the field of environmental protection, especially according to Art.  191 and Art.  192 para.  1 TFEU. As a result, binding climate targets have been set by means of EU legislation. In particular, a path leading to a gradual reduction of greenhouse gas emissions has been codified by the Emission Trading System Directive,35 the Land Use Regulation 36 and the Climate Protection Regulation.37 However, these legislative acts only set emission caps until 2030 and do not specify any binding goals beyond that date. Additionally, the Commission has committed itself to the goal of greenhouse gas neutrality by 2050. This has been reaffirmed in the so-called EU Green Deal38 and in an additional framework regulation from July 2021, the European Climate Law.39 Art.  1 para.  2 and Art.  2 of this regulation now require climate neutrality by 2050 as a mandatory objective. After Germany had hesitated to set climate targets beyond 2030 for a long time, it ultimately did so in mid-2021 (§  3 para.  1, 2 of the Federal Climate Pro-

schutzplan_2050_bf.pdf; English summary: bmu.de/fileadmin/Daten_BMU/Download_ PDF/Klimaschutz/klimaschutzplan_2050_kurzf_en_bf.pdf. 33 See bmu.de/fileadmin/Daten_BMU/Pools/Broschueren/klimaschutzprogramm_2030 _bf.pdf. 34  See above I. 35  Directive 2003/87/EC of 13.10.2003. 36  Regulation (EU) 2018/841 of 30.05.2018. 37  Regulation (EU) 2018/842 of 30.05.2018. 38  Cf. COM (2019) 640 final of 11.12.2019, 2. 39  Regulation (EU) 2021/1119 of 09.07.2021.

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tection Act)40 because of the pressure from EU legislation and also the March 2021 decision by the FCC.41 c) EU secondary law on fiscal measures to mitigate climate change With regard to fiscal measures to mitigate climate change, some directives at the level of EU secondary law have to be observed by the Member States. In the area of excise duties, the Directive 2003/96/EC42 on the taxation of energy products and electricity (Energy Taxation Directive) complementing the general Directive 2008/118/EC43 (Excise Duties Directive) is relevant. The Energy Taxation Directive requires the Member States to levy excise duties on energy products and electricity. Accordingly, in Germany such taxes are levied in the form of the energy tax and the electricity tax.44 Furthermore, Art.  2 no.  5 and Art.  4 para.  1 of the Renewable Energy Directive II45 indicate that fiscal measures may – among others – be used by the Member States in order to achieve the share of energy from renewable sources as stipulated in the Directive. Finally, the emission trading system according to the Emission Trading System Directive46 can also be considered as a fiscal measure aiming at mitigating climate change. d) EU primary law requirements All Member States’ fiscal measures for climate protection have to comply with the requirements of EU primary law. With regard to Member States’ taxes, the fundamental freedoms and the prohibition of state aid are of particular relevance. In addition, the prohibition of tariff-like levies according to Art.  28 TFEU and the prohibition of discriminatory levies on goods according to Art.  110 TFEU do also play a role in some cases. In the following chapter, a brief overview of the relevance of the provisions with regard to fiscal measures related to climate protection will be given.

40  Cf.

Act.

41 

Legislative draft of 11.05.2021, 15 et seq. to amend the Federal Climate Protection

FCC of 24.03.2021 – 1 BvR 2656/18 et al. Council Directive 2003/96/EC of 27.10.2003 restructuring the Community framework for the taxation of energy products and electricity, OJ L 283, 51. 43  Council Directive 2008/118/EC of 16.12.2008 concerning the general arrangements for excise duty and repealing Directive 92/12/EEC, OJ L 9, 12. 44  See below III. 1. b). 45  Directive 2018/2001/EU of 11.12.2018. 46  Directive 2003/87/EC of 13.10.2003. 42 

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aa) Prohibition of customs duties and charges having equivalent effect (Art.  30 TFEU) According to Art.  30 TFEU, customs duties and also levies with equivalent effect are prohibited. An effect equivalent to a customs duty exists if the levy is linked to the crossing of the state border.47 With regard to environmental levies, compensatory levies on imported products, which are intended to neutralize a competitive disadvantage caused by levies on domestic products, could be incompatible with Art.  30 TFEU.48 However, the linkage to crossing the state border is doubtful in this case. Because on closer examination, the same substantive criteria are applied to domestic and foreign goods.49 Therefore, in the end, Art.  30 TFEU has in general no particular relevance for the levying of environmental charges. bb) Prohibition of discriminatory taxation (Art.  110 TFEU) and fundamental freedoms According to Art.  110 TFEU, discriminatory taxes on products of other Member States are prohibited. The provision mainly concerns excise duties. Just as Art.  30 TFEU, it is not particularly relevant for environmental levies. Even in the case that CO2-heavy products are predominantly imported from abroad and taxed because of the CO2 factor, it has to be borne in mind that the ECJ does not see any discrimination when a legitimate steering objective is pursued.50 Only if protectionism is actually practiced under the guise of environmental protection, Art.  110 TFEU could come into play.51 Similarly, the fundamental freedoms will generally not prohibit fiscal measures aimed at mitigating climate change, because environmental protection is recognized as a legitimate reason of justification.52 cc) EU state aid regime (Art.  107 TFEU) According to Art.  107 para.  1 TFEU, “any aid granted by a Member State or through state resources in any form whatsoever which distorts or threatens to distort competition by favouring certain undertakings or the production of certain goods shall, in so far it affects trade between Member States, be incompatible with the internal market”. This provision is the most important among the primary law requirements applying to fiscal measures to mitigate climate 47 

ECJ of 01.07.1969 – C-2/69 et al, ECLI:EU:C:1969:30 at 11 et seq. – Diamantarbeiders. Wasmeier, Umweltabgaben und Europarecht, 1995, 125. 49  Cf. ECJ of 25.01.1977 – C-46/76, ECLI:EU:C:1977:6 at 7/11 – Bauhuis. 50 ECJ of 14.01.1981 – C-140/79, ECLI:EU:C:1981:1 at 14 – Chemial Farmaceutici; of 05.04.1990 – C-132/88, ECLI:EU:C:1990:165 at 18 – Commission/Greece. 51 Cf. Freytag, Europarechtliche Anforderungen an Umweltabgaben, 2001, 243. 52  ECJ of 07.02.1985 – C-240/83, ECLI:EU:C:1985:59 at 13 et seq. – ADBHU. 48 

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change. The prohibition of state aid is of relevance to tax relief for climate protection reasons in the context of income taxation. Also, it has to be considered in the context of environmental taxes that benefit climate-friendly behavior by lower tax rates or tax exemptions.

III. Instruments to mitigate climate change 1. Taxation aimed at mitigating climate change a) Income taxation In the area of income tax law, there are numerous tax benefits in Germany aiming at the mitigation of climate change. They all have the character of rewards for climate-friendly behavior. Technically, these benefits are implemented by exempting income from taxation, by favorable valuation and depreciation rules or by granting a tax credit. In contrast, the option of imposing tax sanctions like deduction prohibitions on climate-damaging, harmful behavior is generally not used in the area of income tax law. Therefore, Germany clearly prefers “positive instruments” over “negative instruments” in income tax law in this sense. There are tax incentives for both individuals and companies. aa) Non-profit status for entities promoting climate protection In Germany, entities promoting the common good can obtain a special status called “non-profit status”, if they meet a number of requirements. This status leads to several major tax benefits like an exemption from corporate income tax. One major substantive requirement is the advancement of the public good. According to §  52 para.  2 cl. 1 no.  8 of the Fiscal Code (Abgabenordnung, AO) environmental protection is recognized as a public good in this sense. An amendment to the Fiscal Code from the end of 2020 53 explicitly added that this includes climate protection. The amendment was essentially of a clarifying nature, as court rulings had already previously regarded climate protection as a subcategory of environmental protection.54 Accordingly, associations for environmental and climate protection are very much supported by the general non-profit organizations tax regime.

53 

54 

Tax Act 2020 of 21.12.2020, BGBl. I 2020, 3096. See BFH of 20.03.2017 – X R 13/15, BStBl. II 2017, 1110 (1116).

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bb) Income tax exemptions and flat-rate taxation for employer contributions promoting environmentally-friendly transportation The German Income Tax Act (Einkommensteuergesetz, EStG) contains several measures that favor employer contributions promoting environmentally-friendly transportation. These rules stipulate that such contributions are not subject to income taxation at all or that they are subject to flat-rate taxation only. §  3 no.  15 EStG declares cash benefits and the issue of reduced-price or free tickets by the employer to employees for the use of public transport to be tax-free. Public transport refers to buses, trains and ferries, but not aircraft. The exemption does not only cover travel for business purposes, but also includes employer contributions for purely private travel. However, the subsidies granted to the employees are deducted from the commuter allowance55 according to §  9 para.  1 cl. 3 no.  4 EStG. §  3 no.  32 EStG exempts the financial benefits granted to employees by collective transports organized by the employer. §  3 no.  37 EStG exempts the benefits granted by the provision of a company bicycle.56 §  3 no.  46 EStG exempts the benefits granted to the employee by letting him or her charge an electric vehicle or hybrid vehicle at an immobile charging station of the employer or an affiliated company. According to §  40 para.  2 cl. 1 no.  6 EStG a flat rate taxation of 25 percent can be applied in the framework of the payroll tax57 to be withheld by the employer for the free or discounted transfer of ownership of charging devices for electric vehicles as well as subsidies for their purchase. According to no.  7, the same applies to transfer of ownership of a company bicycle to the employee. cc) Favorable valuation and depreciation rules regarding electric cars and bicycles If a business asset is used for private purposes, this is referred to as a “withdrawal of use” (Nutzungsentnahme). Expenses for this asset cannot fully reduce the taxable profit, as they are partly not caused by the company’s business activities. Therefore, the costs incurred in relation to the private use of the asset are readded and thereby neutralized for tax purposes. However, pursuant to §  6 para.  1 no.  4 cl. 2 EStG, the private use of a motor vehicle that is used more than 50 percent for business purposes is generally subject to a flat-rate valuation of 1 percent of the domestic list price at the time of initial registration for each calendar month. If the vehicle is an electric or hybrid vehicle, the resulting withdrawal value can be reduced by up to 75 percent, depending on when the car was purchased and how high its emissions are. A similarly favorable treatment of 55  Under German income tax law, costs for commuting are deductible and are assessed at a fixed sum of 30 cents (35 cents as of 2021; 38 cents as of 2024) per kilometer in principle. 56  This does not include a possible benefit by the transfer of ownership. 57  The payroll tax is a special form of collection of income tax.

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electric and hybrid vehicles also applies if the taxpayer opts against this flat-rate valuation and uses the “driver’s logbook method”.58 The private use of a company bicycle is even entirely disregarded pursuant to §  6 para.  1 no.  4 cl. 6 EStG. According to §  8 para.  2 cl. 2 et seq. EStG, similar rules apply to the valuation of an employee’s income through the supply of a car for private purposes. §  7c EStG provides for a special depreciation allowance for electric utility vehicles and electrically powered cargo bicycles. Regularly, assets are depreciated on a linear basis over the period of their standard useful life. According to §  7c EStG, however, 50 percent can be written off in the first year in addition to the regular linear depreciation. As this regulation could constitute prohibited state aid in the sense of Art.  107 TFEU, the German legislator has stipulated that it will only be applied once the EU Commission has deemed the measure to be compatible with Art.  107 TFEU. dd) Income tax credit for energy efficiency measures in owner-occupied buildings Thus far, the subsidy measures presented all relate to taxable economic activity. However, these instruments do not help if tax incentives shall be created for climate-friendly behavior in the private sphere. In this regard, tax credits can be effective. This approach has been adopted by the legislator in §  35c EStG with regard to energy efficiency measures in buildings used for own residential purposes. According to §  35c EStG, the amount of tax can be reduced in the calendar year of completion of an energy efficiency measure as well as in the next calendar year by 7 percent of the taxpayer’s expenses respectively (but not by more than 14,000 euros each), and in the following calendar year by 6 percent of the taxpayer’s expenses (but not by more than 12,000 euros). The subsidy can be claimed for several individual measures on one object, but there is an overall cap of tax reduction of 40,000 euros per benefited object. ee) Exclusion of hidden profit distribution in the case of maintenance of a public permanent loss business for environmental policy reasons An activity is taxable under income tax law only if there is an intention to generate income. Consequently, losses are generally not relevant under income tax law if there is no discernible intention to generate positive income. However, since corporations do not have a private sphere in the sense of income tax law, activities by a corporation that are not intended to generate positive income are classified as a hidden profit distribution pursuant to §  8 para.  3 cl. 2 of the Corporation Tax Act (Körperschaftsteuergesetz, KStG). However, according to §  8 58  In this case, a logbook is kept in order to determine the ratio of private journeys to business journeys.

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para.  7 KStG, this rule does not apply to state59 or state-controlled businesses, if the economic activity that is maintained without cost-covering remuneration aims at certain public purposes such as environmental protection. In addition, the losses can be offset against the profits of profitable state businesses according to §  4 Abs.  6 KStG under certain conditions (transverse tax network/steuer­ licher Querverbund). It has to be added that it is unclear whether these rules constitute prohibited state aid in the sense of Art.  107 TFEU. ff) Exemption from trade tax for small solar panels In Germany, commercial businesses are subject not only to income or corporate tax, but also to an additional tax on income60 called trade tax (Gewerbesteuer). The trade tax can be credited against income tax for sole traders and partnerships up to a certain limit. In the case of corporations, both taxes are levied in full. In principle, even small power generation units could be subject to trade tax. §  3 no.  32 of the German Trade Tax Act (Gewerbesteuergesetz, GewStG) exempts businesses from trade tax that exclusively operate a solar panel installed on a building with a capacity of up to 10 kilowatts. This exemption could in principle constitute state aid in the sense of Art.  107 TFEU, but in any case it remains below the de minimis threshold. 61 gg) Reduced readdition of rental expenses for electric cars and bicycles in trade tax law In trade tax law, some expenses in the sense of income tax law are readded in order to ensure the object tax character62 of trade tax. In particular, financing costs are (partially) readded, based on the assumption that a company operates with its own capital and its own assets. 63 One fifth of the rent and leasehold interest for the use of movable fixed assets owned by another person is readded according to §  8 no.  1 lit.  d) GewStG. In principle, this could also include such expenses for electric cars, hybrid cars and bicycles. However, the federal legislator has decided to halve the addition of such expenses on these means of transportation for incentive purposes.

59 

A “state” business in this sense is also the business of a municipality. This is shown by the fact that §  8 cl. 1 GewStG generally links the trade tax to the profit determined under the EStG/KStG. 61  Cf. Art.   3 para.  1 and 2 subpara.  1 of the Commission Regulation (EU) 1407/2013 of 18.12.2013 on the application of Articles 107 and 108 of the Treaty on the Functioning of the European Union to de minimis aid with EEA relevance. 62  The trade tax is also referred to as an object tax, as it does not cover the entire income of a person, but only the object “business establishment”. 63  Hey, in: Tipke/Lang (eds.), Steuerrecht, 24th ed. 2021, no.  12.40. 60 

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hh) Innocuousness of income from electricity supply for the extended deduction under trade tax law According to §  9 no.  1 cl. 2 et seq. GewStG, the income generated by companies that exclusively manage and use their own real estate is not taken into account for trade tax purposes (so-called extended deduction/erweiterte Kürzung). This is aimed at achieving equal treatment of all asset-managing real estate companies. 64 Other activities of the company besides the pure management and use of own real estate principally lead to losing the benefit of the extended deduction. However, there are exceptions. These exceptions traditionally include the management of capital assets and the construction and sale of real estate. Recently, the legislator has included a new exception that covers the sale of electricity derived from renewable energy sources and the operation of charging stations for electric vehicles as well as electric bicycles against payment, if these earnings are related to property management. This is intended to ensure that real estate corporations can construct and operate this kind of infrastructure without losing the highly significant extended deduction. b) Energy Tax and Electricity Tax Energy tax and electricity tax are the most important “stand-alone taxes” within the German legal tax order that are designed to have climate-friendly incentive effects. They are therefore labeled as “eco-taxes”.65 However, they also have outstanding fiscal importance. The revenue generated by the energy tax is exceeded only by VAT, income tax and trade tax. 66 In 1999 (“ecological tax reform”), the federal tax legislator created a wholly new electricity tax and raised the mineral oil tax rates for the use of fossil energy products. 67 The objective was to make the use of energy products that are detrimental to the environment more expensive and also to reduce the financial burden on the factor labor by using the additional revenue from energy taxation to finance the reduction of social security contributions. 68 The Federal Constitutional Court held that this earmarking of the tax revenue is compatible with the constitutional law notion of tax. 69 64 

FCC, Judgment of 24.03.2010 – 1 BvR 2130/09, NJW 2010, 2116 (2116 et seq.). Englisch, in: Tipke/Lang (eds.), Steuerrecht, 24th ed. 2021, no.  18.116. 66  According to the Federal Ministry of Finance, the revenue of the energy tax in 2020 amounted to 37,634,million euros (https://www.bundesfinanzministerium.de/Content/DE/ Standardartikel/Themen/Steuern/Steuerschaetzungen_und_Steuereinnahmen/2021-0129-steuereinnahmen-kalenderjahr-2020.pdf?__blob=publicationFile&v=2). Due to its high importance for the fiscal budget, the energy tax is by some authors also labeled as a fiscal tax with only additional steering purposes, cf. Bongartz, in: Bongartz/Jatzke/Schröer-Schallenberg (eds.), EnergieStG, 17th supplement 08.2020, Vorbemerkung (preliminary notes) no.  2. 67  Act on the introduction of the ecological tax reform of 24.03.1999, BGBl. I 1999, 378. 68  Bill on the introduction of the ecological tax reform of 17.11.1998, BT-Drs. 14/40, 1, 9, 10. 69  FCC, Judgment of 20.04.2004 – 1 BvR 1748/99 et al, BVerfGE 110, 274 (294 et seq.). 65 Cf.

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In 2006, the Mineral Oil Tax Act was superseded by the Energy Tax Act (Energiesteuergesetz, EnergieStG).70 The Energy Tax Act and the Electricity Tax Act (Stromsteuergesetz, StromStG)71 implement the Energy Taxation Directive 2003/96/EC into the domestic legal order. These taxes are further harmonized by the Excise Duties Directive 2008/118/EC. As excise taxes,72 they are designed to be passed on through the price,73 ultimately burdening consumption. However, unlike VAT, both the energy and the electricity tax do not only burden private consumption, but also the comsumption by businesses.74 aa) Energy Tax The Energy Tax Act imposes taxes upon the use of specified energy products – mainly coal, mineral oil (gasoline/petrol) and natural gas (§  1 EnergieStG) – as motor fuels or as heating fuels. Most energy products are subject to the provisions of §§  4 to 30 EnergieStG regarding tax incurrence, tax exemptions and procedures. These provisions in large part implement the provisions of the Excise Duties Directive and of the Energy Taxation Directive. Energy tax generally becomes chargeable at the time of release for consumption by departure of the energy product from the duty suspension arrangement (§§  4 to 14 EnergieStG).75 The tax warehousekeeper is the obligor (§  8 (1) and (2) EnergieStG). Alternatively, the tax becomes chargeable at the time of production outside the duty suspension arrangement (§  9 (1) and (2) EnergieStG).76 Specific provisions apply to the use of coal (§§  31 to 37 EnergieStG) and natural gas (§§  38 to 44 EnergieStG) as they are not covered by the framework of §§  4 et seq. EnergieStG. 70  Energy Tax Act of 15.07.2006, BGBl. I 2006, 1534; 2008, 660; 2008, 1007, last amended by Art.  4 of the Act amending Excise Tax Acts of 30.03.2021, BGBl. I 2021, 607. 71  Electricity Tax Act of 24.03.1999, BGBl. I 1999, 378; 2000, 147, last amended by Art.  6 of the Act amending Excise Tax Acts of 30.03.2021, BGBl. I 2021, 607. 72  Cf. §  1 (1) cl. 3 EnergieStG; §  1 (1) cl. 3 StromStG. 73  The energy tax is levied directly in the exceptional cases of §  16 (2) cl. 2 and §  38 (2) no.  2 EnergieStG. 74 Cf. Schaumburg, in: Schaumburg (ed.), Internationales Steuerrecht, 4. ed. 2017, no.  11.41 and 11.63. In German literature, the levying of excise taxes on means of production has been criticized as to not conform with the constitutional concept of excise duty in Art.  106 GG. Since Directive 2003/96/EC partially requires the taxation of the use of energy products and electricity also for production purposes, there are calls for the necessity of constitutional amendment (cf. Englisch, in: Tipke/Lang (eds.), Steuerrecht, 24th ed. 2021, no.  18.130). The FCC however has not shared this criticism: FCC, Judgment of 20.04.2004 – 1 BvR 1747/99 et al, BVerfGE 110, 274 (296). 75  Implementation of Arts. 17 et seq. of Directive 2008/118/EC. 76 Implementation of Arts. 7 et seq. of Directive 2008/118/EC, Art.   21 of Directive 2006/96/EC. Specific provisions apply for transportation of energy products within the internal market after release for consumption: §§  15–18a EnergieStG (cf. Arts. 32 et seq. of Directive 2008/118/EC) and for importation of energy products: §§  19–19b EnergieStG (cf. Art.  7 (2) (d), Art.  8 (1) (d) of Directive 2008/118/EC).

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The tax rate is set out in §  2 EnergieStG as a fixed sum per unit (volume, weight, energy content in MWh or GJ) of a specific energy product consumed. The domestic tax legislator has made use of the possibility to set out differentiated tax rates in accordance with Art.  5 et seq. of the Energy Taxation Directive. Hence, §  2 (3) EnergieStG privileges the use of specific mineral oils and gases for purposes as heating fuels or for the operation of gas turbines and combustion engines in privileged plants pursuant to §§  3, 3a EnergieStG.77 These are plants whose mechanical energy is used exclusively for the generation of electricity (no.  1),78 which serve exclusively for the combined heat and power generation (no.  2)79 or which are used exclusively for pipeline gas transport or gas storage (no.  3). Other privileged plants subject to §  3a (1) EnergieStG are machines and vehicles used for cargo handling in seaports.80 §  2 (2) EnergieStG sets out temporarily staggered reduced tax rates for the use of natural gases, gaseous hydrocarbons and liquid gases for purposes as motor fuels due to their lower pollutant emissions. 81 In other cases, the general tax rates of §  2 (1) EnergieStG apply – in particular for the use of gasoline and other mineral oils for purposes as motor fuels as well as for the use of coal. Regarding gasoline and gas oils, the tax rate depends – for environmental reasons – on the energy product’s sulfur content. Numerous tax exemptions are provided for in §§  24 to 29, 37 and 44 Energie­ StG. Full or partial tax reliefs are granted upon request pursuant to §§  45 to 60 EnergieStG. This is due to Art.  6 of the Energy Taxation Directive, which gives the domestic legislator significant leeway regarding the implementation of exemptions and reductions. Regarding the implementation of optional measures, Art.  26 (2) and (3) of the Energy Taxation Directive clarifies that such measures remain subject to scrutiny under state aid law. By virtue of Arts. 3 and 44 of Regulation (EU) No 651/201482 however, most tax exemptions and tax reliefs are deemed as compatible with the internal market and are exempted from the formal notification requirement of Art.  108 (3) TFEU. Most prominently, §§  25 (1), 37 (2) cl. 1 no.  1 EnergieStG exempts any use of energy products other than for purposes as motor fuels or as heating fuels, effectively limiting the energy tax to only burdening such uses. 83 This exemption 77  Compatible with state aid law pursuant to Arts. 3, 44 of Regulation (EU) No 651/2014, cf. SA.39552. 78  Cf. Art.  14 (1) (a), Art.  21 (5) subpara.  3 of Directive 2003/96/EC. 79  Cf. Art.  15 (1) (c) of Directive 2003/96/EC. 80  Cf. Art.  8 (2) (b) and (d) of Directive 2003/96/EC. 81  Cf. Art.  15 (l) (i) of Directive 2003/96/EC; Bongartz, in: Bongartz/Schröer-Schallenberg (eds.), Verbrauchsteuerrecht, 3rd ed. 2018, no. H 16. 82  Commission Regulation (EU) No 651/2014 of 17.06.2014 declaring certain categories of aid compatible with the internal market in application of Articles 107 and 108 of the Treaty, OJ L 187, 1. 83  This is due to Art.  2 (4) (b) of the Energy Taxation Directive limiting its scope to the energetic use of energy products; the national legislator is free to design tax exemptions for other, non-energetic uses; cf. Pohl, in: EnergieStG – eKommentar, 01.07.2021, §  25 no.  5.

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is considered to be inherent in the system of the energy tax as a use-oriented excise tax.84 Regarding the ecological steering incentive, it seems counterintuitive that by virtue of §§  27, 52 EnergieStG the use of energy products for sea and air navigation except for private pleasure purposes is exempt from energy tax or subject to tax reliefs respectively. Insofar as the supply of energy products for use as fuel is concerned, the provision is however an obligatory implementation of Art.  14 (1) (b) and (c) of the Energy Taxation Directive. According to Recital 23 of the Directive, this shall maintain the competitive position of EU companies. By acknowledging the adverse environmental effects, the Commission stated already in 2019 that it will “look closely at the current tax exemptions including for aviation and maritime fuels”.85 Pursuant to §  28 (1) cl. 1 no.  1 EnergieStG, the use of gaseous biomass is exempted from energy tax, if used for heating purposes or in privileged plants set out in §  3 (1) cl. 1 no.  1 and no.  2 EnergieStG.86 Similarly, §  28 (1) cl. 1 no.  2 EnergieStG exempts the use of gaseous hydrocarbons obtained from the biodegradable fraction of wastes that are produced during the storage of waste (landfill gas) or during wastewater management (sewage gas), if used in privileged plants according to §  3 (1) cl. 1 no.  1 EnergieStG. This exemption shall incentivize for harmful methane contained in landfill and sewage gas to be oxidized before its release into the atmosphere.87 The use of energy products for heating purposes falling within CN code 2705, such as coal gas and water gas, 88 is exempt according to §  28 (1) cl. 1 no.  3 EnergieStG. 89 Furthermore, §  51 (1) no.  1 EnergieStG exempts specific uses of energy products by businesses in the manufacturing industry. The exemption includes (a) mineralogical processes90 such as the manufacture of glass, ceramic, bricks, ce84 

Milewski, in: Möhlenkamp/Milewski (eds.), EnergieStG, 2nd ed. 2020, §  25 no.  1. Commission, Communication on The European Green Deal of 11.12.2019, COM (2019) 640 final, 10. 86  Implementation of Art.  15 (1) (b), Art.  16 (1) and (2) of Directive 2003/96/EC. 87  Cf. Recommendation and report of the Finance Committee on the Bill amending the Energy Tax Act and the Electricity Tax Act of 15.12.2010, BT-Drs. 17/4234, 12. Already the previous, broader exemptions subject to §  28 (1) cl. 1 no.  1 and no.  2 EnergieStG have been approved with limitations under state aid law, cf. Commission Decisions of 14.11.2013 C (2013) 7727 and of 09.07.2014 C (2014) 4864 final. On the basis of the Commission’s Decisions, the legislator has further restricted the exemptions’ scope, cf. Bill on the Second Act amending the Energy Tax Act and the Electricity Tax Act, BT-Drs. 18/11493, 51 and §  28 (2) Ener­ gieStG. 88  Milewski, in: Möhlenkamp/Milewski (eds.), EnergieStG, 2nd ed. 2020, §  28 no.  12. 89  Implementation of Art.  15 (1) (l) of Directive 2003/96/EC. 90  Cf. NACE DI 26 ‘manufacture of other non-metallic mineral products’ in Council Regulation (EEC) No 3037/90 of 09.10.1990 on the statistical classification of economic activities in the European Community, OJ L 293, 1 (11) as last amended by Commission Regulation (EC) No 29/2002, OJ L 6, 3. The Energy Taxation Directive 2003/96/EC explicitly refers to this classification in Art.  2 (4) (b). 85  EU

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ment and cutting of stone as well as (b) metallurgical processes, (c) chemical reduction and (d) dual use of energy products.91 According to §  53 EnergieStG, the tax debtor may obtain a full tax relief for the tax levied on the use of energy products to produce electricity. The provision is the obligatory implementation of Art.  14 (1) (a) of the Energy Taxation Directive.92 EU law thus, in principle, provides for the taxation of the output (electricity), while not burdening the input. In light of its objective to avoid double taxation,93 §  53 (1) EnergieStG however restricts the tax relief to cases, in which the use of output electricity is not exempted under §  9 of the Electricity Tax Act.94 Only if the produced electricity is consumed for the production of further electricity, §  53 (1) EnergieStG and §  9 (1) no.  2 StromStG provide for tax reliefs and tax exemptions respectively for both the energy and the electricity tax; the German tax legislator found this to be inherent in the underlying reasons of Art.  14 (1) (a) of Directive 2003/96/EC.95 §  53a EnergieStG stipulates complete or partial tax reliefs for the use of energy products for the combined heat and power generation, if the plant achieves a monthly or annual utilization rate of at least 70 %.96 According to §  54 EnergieStG, businesses in the manufacturing industry or in agriculture and forestry may claim tax reliefs regarding the use of specific energy products as heating fuels for business purposes or in privileged plants pursuant to §  3 EnergieStG.97 This may be accompanied by the tax capping of §  55 EnergieStG, that has been implemented with the ecological tax reform in 91  Art.  2 (4) (b) of Directive 2003/96/EC exempts from its scope the use of energy products for mineralogical processes and for dual use of energy products which (by fiction) also include the use for chemical reduction and metallurgical processes, thereby generally allowing the exemption provision of §  51 (1) EnergieStG. The EU Commission approved the regulation as to not constitute state aid, Letter of 07.02.2007, C (2007) 298 final. 92  Optional implementation of Art.  21 (5) subpara.  3 of Directive 2003/96/EC regarding smaller producers of electricity. 93  Cf. ECJ, Judgment of 07.03.2018, C-31/18, ECLI:EU:2018:168, para 30. 94  Glockner regards §  53 (1) EnergieStG as violating Art.  14 (1) (a) of Directive 2003/96/EC where large producers of electricity are not subject to the tax relief under the energy tax due to being exempted from the electricity tax. He points out the difference in the wording between Art.  14(1)(a) and Art.  21(5) subpara.  3 of the Directive and concludes that the use of energy products for the production of electricity (input) is to be exempted from taxation irrespective of whether the produced electricity (output) is itself subject to taxation or not when large producers of electricity are concerned, cf. Glockner, in: EnergieStG – eKommentar, 01.07.2019, §  53 no.  4 and 20.l. 95  Bill on the revision of electricity tax exemptions and for amending the Energy Tax Act of 27.02.2019, BT-Drs. 19/8037, 42; Möhlenkamp, in: Möhlenkamp/Mielwski (eds.), StromStG, 2nd ed. 2020, §  9 no.  5. 96  Implementation of Art.  15 (1) (c) of Directive 2003/96/EC. 97  Art.  5, Annex I Table C of Directive 2003/96/EC allows for lower taxation of business use of energy products. The possibility to privilege certain plants is provided for in Art.  8 (2) (b), Annex I Table B and Arts. 14 and 15 of the Directive. This is compatible with state aid law pursuant to Arts. 3, 44 of Regulation (EU) No 651/2014; cf. §  54(5) EnergieStG.

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1999 aiming at making energy consumption more expensive while reducing the financial burden on the labor factor.98 The additional tax relief is based on the share of the additional tax burden introduced by the ecological tax reform; it is offset against the corresponding relief from the employer’s pension insurance contribution.99 §  55 EnergieStG implements Art.  17 (1) (b) of the Energy Taxation Directive, which permits tax reductions for specific uses of energy products, if they lead to the achievement of environmental protection objectives or to improvements in energy efficiency. The fulfillment of these criteria is ensured by §  55 (4) EnergieStG, according to which the tax relief is granted only if the business operates an energy management system100 or is a registered organization pursuant to Art.  13 of Regulation (EC) No.  1221/2009.101 In both cases, the Federal Government has further to determine that a set target value for a reduction in energy intensity has been achieved. Since the reduced tax rates comply with the minimum level of taxation in Annex I Table C of the Energy Taxation Directive, the provision only required an exemption notification pursuant to Regulation (EU) No 651/2014 under state aid law.102 §  56 EnergieStG provides for a partial tax relief for the use of energy products as motor fuel for local public transport.103 Concerning agricultural and forestry establishments, tax reliefs may be granted for diesel fuels and biofuels used for the operation of specific machines and vehicles pursuant to §  57 EnergieStG.104 §  59 EnergieStG provides for a full tax relief regarding gasoline and diesel fuel purchased by diplomatic and consular representations and their employees.105 bb) Electricity Tax The Electricity Tax Act implements the Energy Taxation Directive and the Excise Duties Directive regarding the taxation of the use of electricity. Pursuant to §  5 (1) and (2) StromStG electricity tax generally incurs at the time of withdrawal of electricity from the supply network by the final consumer. The supplier is the tax obligor. With a general tax rate of 20.50 EUR per MWh (§  3 StromStG), 98  Bongartz, in: Bongartz/Schröer-Schallenberger (eds.), Verbrauchsteuerrecht, 3rd ed. 2018, no. H 184a. 99  Möhlenkamp, in: Möhlenkamp/Mielwski (eds.), EnergieStG, 2nd ed. 2020, §  55 no.  2 ; Glockner, in: EnergieStG – eKommentar, 01.07.2019, §  55 no.  1. 100  The energy management system must comply with DIN EN ISO 50001. 101 Regulation (EC) No 1221/2009 of the European Parliament and of the Council of 25.11.2009 on the voluntary participation by organisations in a Community eco-management and audit scheme (EMAS). 102  Cf. §  55 (9) EnergieStG; Glockner, in: EnergieStG – eKommentar, 01.07.2019, §  55 no.  3. 103  Implementation of Art.  15 (1) (e) of Directive 2003/96/EC; compatible with state aid law pursuant to Arts. 3, 44 of Regulation (EU) No 651/2014; cf. §  56 (5) EnergieStG. 104  Implementation of Art.  8 (2) (a) and Art.  15 (3) of Directive 2003/96/EC; compatible with state aid law pursuant to Arts. 3, 44 of Regulation (EU) No 651/2014; cf. §  57 (9) Ener­ gieStG. 105  Implementation of Art.  12 (1) no.  1 of Directive 2008/118/EC.

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the minimum tax rates required by the Energy Taxation Directive are exceeded by a multiple.106 Tax exemptions and tax reliefs are mainly set out in §  9 (1), (2) and (3) StromStG, inter alia privileging environmentally friendly methods of production or uses of electricity. For example, §  9 (1) no.  1 StromStG exempts the use of electricity generated from renewable energy sources in larger plants (electrical output of more than two megawatts), if used at the place of production for self-consumption.107 Similarly, §  9 (1) no.  3 StromStG exempts the use of electricity produced in smaller plants either from renewable energy sources or in highly efficient plants for combined heat and power generation, if used for self-consumption or supplied to final consumers in the plant’s geographical vicinity.108 Electricity used for the production of electricity is exempted by virtue of §  9 (1) no.  2 StromStG, implementing the principle of output taxation according to Art.  14 (1) (a) of the Energy Taxation Directive. For purposes of avoiding disproportionate administrative costs,109 electricity generated by emergency power systems (§  9 (1) no.  4 StromStG) and electricity generated on and consumed by watercraft or aircraft as well as on rail vehicles used for the operation of railway traffic (§  9 (1) no.  5 StromStG) is also exempted from electricity taxation. Finally, §  9 (1) no.  6 StromStG provides for a subsidiary tax exemption regarding electricity produced by smaller plants and used therein for self-consumption in cases where input taxation is verifiably taking place.110 Tax reliefs for environmental purposes are set out in §  9 (2) StromStG, granting reduced tax rates111 for electricity used by trolleybuses and for the operation of railways.112 Furthermore, §  9 (3) StromStG provides for the application of minimum tax rates113 for shore-side electricity directly provided to commercial vessels at berth in port. This regulation shall incentivize the use of shore-side electricity rather than the environmentally adverse on-board production of electricity from fossil energy products.114 The tax relief is based on Council 106  By virtue of Art.  10 (1), Annex I Table C of Directive 2003/96/EC, minimum levels of taxation are 0,50 EUR/MWh for business use and 1,00 EUR/MWh for non-business use. 107  Implementation of Art.  15 (1) (b) of Directive 2003/96/EC; compatible with state aid law pursuant to Arts. 3, 44 of Regulation (EU) No 651/2014; cf. §  9 (9) StromStG. 108  Implementation of Art.  21 (5) subpara.  3 and Art.  15 (1) (b) and (d) of Directive 2003/96/ EC; compatible with state aid law pursuant to Arts. 3, 44 of Regulation (EU) No 651/2014; cf. §  9 (9) StromStG. 109  Cf. BT-Drs. 14/440, 14. 110  Implementation of Art.  21 (5) subpara.  3 of Directive 2003/96/EC regarding the general principle of avoiding taxation both of the input and the output within the energy production process; cf. Schröer-Schallenberg, in: Bongartz/Jatzke/Schröer-Schallenberg (eds.), StromStG, 17th supplement 08.2020, §  9 no.  97 et seq., 102. 111  11.42 EUR per MWh. 112  Implementation of Art.  15 (1) (e) of Directive 2003/96/EC; compatible with state aid law pursuant to Arts. 3, 44 of Regulation (EU) 651/2014; cf. §  9 (9) StromStG. 113  0.50 EUR per MWh; cf. Art.  11, Annex I Table C of Directive 2003/96/EC. 114  Cf. BT-Drs. 483/10, 21.

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Decision (EU) 2020/1436115 pursuant to Art.  19 of the Energy Taxation Directive. The manufacturing industry is further privileged by §§  9a, 9b and 10 StromStG. While §  9a StromStG provides for a full tax relief for the electricity tax levied on the use of electricity for purposes of electrolysis, mineralogical and metallurgical processes and for chemical reduction,116 §  9b and §  10 StromStG grant partial tax reliefs for specific other uses of electricity of businesses of the manufacturing industry and in agriculture and forestry.117 §  9c StromStG provides for a partial tax relief for the use of electricity for local public transport.118 c) Air Traffic Tax The air traffic tax is an indirectly levied tax on the legal transaction that entitles an aircraft passenger to depart from a domestic airport (§  1 (1) of the Air Traffic Tax Act [Luftverkehrsteuergesetz, LuftVStG]). The air traffic tax was implemented in 2010 with the objective to provide for environmentally friendly incentive effects in the field of commercial aviation which is exempted from the energy tax.119 The air traffic tax incurs with departure from a domestic airport. It burdens the air transport company (§§  4, 6 (1) LuftVStG) on the basis of the number of passengers carried (§  10 LuftVStG). Since there is no direct link between the consumption of motor fuel and the tax burden, the air traffic tax does not levy the consumption of the fuel itself and thus does not violate Art.  14 (1) (b) of the Energy Taxation Directive.120 In light of its ecological objective however, the tax rate distinguishes between three categories of destination states depending on their distance to Frankfurt airport121 and has recently been increased significantly in order to enhance the ecological incentive effects122 (§  11 (1) LuftVStG). The Federal Ministry of Finance is authorized to reduce the tax rates by statutory order based on the revenue gener115  Council Implementing Decision (EU) 2020/1436 of 12.10.2020 authorizing Germany to apply a reduced rate of taxation to electricity directly provided to vessels at berth in port, OJ L 331, 30 as corrected by the Corrigendum of 16.10.2020, OJ L 342, 31. 116  §  9a StromStG corresponds to §  51 EnergieStG. 117  §§  9b, 10 StromStG correspond to §§  5 4, 55 EnergieStG. 118  Implementation of Art.  15 (1) (e) of Directive 2006/96/EC; compatible with state aid law pursuant to Arts. 3, 44 of Regulation (EU) No 651/2020. 119 Cf. Bill on the Budget Accompanying Act 2011 of 27.09.2010, BT-Drs. 17/3030, 36; some argue that the air traffic tax is largely fiscally motivated; cf. Englisch, in: Tipke/Lang (eds.), Steuerrecht, 24th ed. 2021, no.  18.99. 120  Cf. ECJ, Judgment of 16.06.1999, C-346/97, ECLI:EU:C:1999:291, no.  23 – Braathens; Schaumburg, in: Schaumburg/Englisch (eds.), Internationales Steuerrecht, 2nd ed. 2020, no.  11.38; G. Real, LZW 2011, 460 (471 et seq.) regards the air traffic tax as a hidden energy tax. 121  BT-Drs. 17/3030, 39 et seq. 122 Act Amending the Air Traffic Tax Act of 12.12.2019, BGBl. I 2019, 2492; BT-Drs. 19/14339, 8.

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ated from the inclusion of aviation in the Emission Trading System123 (§  11 (2) LuftVStG). Accordingly, tax rates in 2021 amounted to 12.88 EUR, 32.62 EUR and 58.73 EUR respectively.124 d) Motor Vehicle Tax In Germany, the holding of motor vehicles is generally subject to motor vehicle tax. The tax is strongly based on environmental considerations, such as greenhouse gas emissions. For example, under §  3d of the Motor Vehicle Tax Act (Kraftfahrzeugsteuergesetz, KraftStG), electric cars registered today are fully exempt from tax until 2030. With regard to the tax level for internal combustion engines for first registrations from mid-2009 onwards, only carbon dioxide emissions are of relevance in addition to cylinder capacity and the question of whether it is a gasoline or diesel vehicle. For cars registered starting in 2021, the carbon dioxide emissions-based component was changed from a linear to a progressive tax rate, thus sharpening it significantly. In addition, according to §  10b KraftStG, a benefit of 30 EUR per year applies for five years if the car is particularly emission-reduced with regard to carbon dioxide. e) Road Tolls A truck road toll has been in place in Germany since 2005. The toll applies to vehicles used for the carriage of goods by road of at least 7.5 tons. The toll relates to the usage of roads that fall into the category “Autobahn” and, since mid-2018, generally also to trips on roads that fall into the category “Bundesstraße”. The amount of the toll is determined by three components, namely the infrastructure costs, the air pollution costs caused, and the noise pollution costs caused. However, since the share for air pollution costs is only based on the emission class, for which greenhouse gas emissions are irrelevant, the toll has at most a small direct effect in terms of mitigating climate change. Although electric vehicles are exempt from toll, electric trucks are still playing a minor role in practice. In addition, liquified natural gas trucks are fully exempted until the end of 2023, although the German Federal Environment Agency criticized that these trucks have hardly any advantage over diesel trucks in terms of carbon dioxide emissions (approximately only 8 %), which is why the exemption is unjustified in terms of climate protection from their point of view.125 Nevertheless, it has to be mentioned that it is unclear whether the inclusion of CO2 emissions in the calculation of the toll amount would be compatible 123 

Cf. Arts. 3a et seq. of Directive 2003/87/EC. Statutory Order on the Reduction of Tax Rates for the year 2021 pursuant to §  11 (2) of the Air Traffic Tax Act, BGBl. I 2020, 2762. 125 Cf. https://www.umweltbundesamt.de/themen/fluessigerdgas-lkw-haben-kaum-einen-klimavorteil. 124 

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with the EU Directive on the charging of heavy goods vehicles for the use of certain infrastructures.126 A general toll for passenger cars was to be introduced as well. However, the toll amount would have been based on emission classes too, which is why only the exemption of e-cars would have had a direct effect in terms of combating climate change. Ultimately, however, the toll was never introduced because residents should have been relieved from the motor vehicle tax at the same time, which the ECJ considered a prohibited discrimination against EU foreigners under Art.  34, 56, 18, 92 TFEU.127 f) Local Packaging Taxes Plastic packaging is not only problematic in terms of resource consumption and environmental pollution, but also in terms of global warming. Even if the exact extent of this factor is still unclear, it is certain that greenhouse gases are released when plastic is produced and when plastic waste decomposes.128 As a result of these manifold problems associated with plastic packaging, the first local packaging tax was introduced to reduce the use of plastic packaging around 30 years ago. However, the tax was held unconstitutional by the FCC because it contradicted the federal legislator’s regulatory concept with regard to waste management.129 At the time of the judgment, the federal regulatory law provided that the key focus to combat plastic packaging is on cooperation with the companies concerned rather than strict legal requirements. However, the federal regulations in question have been comprehensively amended several times in the meantime. As a result, there is a high degree of controversy as to whether local packaging taxes are permissible today.130 The issue will likely be the subject of judicial clarification soon, as local packaging taxes are currently being reintroduced by some municipalities.131

126 

Directive 1999/62/EC of 17.06.1999. Cf. ECJ of 18.06.2019 – C-591/17, ECLI:EU:C:2019:504 – Austria/Germany. 128  Fuhr/Franklin (ed.), Plastic Atlas, 2nd ed. 2019, 26 et seq.; see also https://www. deutschlandfunk.de/klimawandel-plastikmuell-im-meer-verursacht-treibhausgase.676.de. html?dram:article_id=431970. 129  FCC of 07.05.1998 – 2 BvR 1991/95 et al., BVerfGE 98, 106. 130  For the admissibility Klinger/Krebs, ZUR 2015, 664 (666 et seq.); Kalscheuer/Harding, NordÖR 2017, 113 (114 et seq.); Kahl, EurUP 2019, 321 (325); Kalscheuer/von Rochow, DÖV 2019, 955 (956 ff.); against the admissibility Kropp, in: von Lersner/Wendenburg/Kropp/Rüdiger, Recht der Abfall- und Kreislaufwirtschaft, §  1 KrWG (2012) at 21; Uschkereit, GewArch 2020, 438 (440 et seq.). 131  See, for example, the local packaging tax of the City of Tübingen (the tax statute is available at https://www.tuebingen.de/verwaltung/formular/591.pdf). 127 

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2. Other instruments a) Emission Trading Systems Besides environmental steering taxes, there are other economic fiscal means to incentivize ecological behavior.132 These include tradable emission certificates used to control the quantity of environmentally harmful substances emitted. With regard to the European Emission Trading System, the Greenhouse Gas Emission Trading Act (Treibhausgas-Emissionshandelsgesetz, TEHG), first enacted in 2004133 and revised in 2011134, implements Directive 2003/87/EC135 as the legal basis of the EU ETS. In light of the continuous harmonization of European emission trading, the TEHG largely implements EU law in the domestic legal order and creates a national legal framework for the enforcement of emission trading.136 Regarding the auctioning of emission allowances and the corresponding reduction in the allocation of free allowances that started in the second trading period of 2008 to 2012, the Federal Constitutional Court held that there was no violation of the Basic Law; the EU ETS was found generally to be a constitutional levy on the availment of specific benefits (Vorteilsabschöp­ fung).137 The TEHG is accompanied by the Project Mechanisms Act (ProjektMechanismen-Gesetz, ProMechG)138 that establishes a link between the Kyoto Protocol’s project mechanisms and the EU ETS.139 In 2019, the German legislator introduced an additional national emission trading system regarding the greenhouse gas emissions of fossil heating and motor fuels in the transport and heating sectors that are not covered by the EU ETS140 (Fuel Emission Trading Act [Brennstoffemissionshandelsgesetz, ­BEHG]).141 The technical implementation of tradable emission certificates 132 

For an overview see Storm, Umweltrecht, 11th ed. 2020, §  18 no.  324 et seq. Art.  1 of the Act Implementing Directive 2003/87/EC Establishing a System for Greenhouse Gas Emission Allowance Trading within the Union of 08.07.2004, BGBl. I 2004, 1578. 134  Art.  1 of the Act Amending the Legal Basis for the Further Development of Emission Trading of 21.07.2011, BGBl. I 2011, 1475. 135  Directive 2003/87/EC of the European Parliament and of the Council of 13.10.2003 establishing a system for greenhouse gas emission allowance trading within the Union, OJ L 275, 32, last amended by the Commission Delegated Regulation (EU) 2021/1416 of 17.06.2021, OJ L 305, 1. 136 Cf. Weinreich, in: Landmann/Rohmer (eds.), Umweltrecht, TEHG, 95th supplement 05.2021, Vorbemerkung (preliminary notes) no.  47 et seq. 137  FCC, Order of 05.03.2018 – 1 BvR 2864/13, NVwZ 2018, 972 (974 no.  31 et seq.). 138  Act on Project-Based Mechanisms under the Kyoto Protocol to the United Nations Framework Convention on Climate Change of 22.09.2005, BGBl. I 2005, 2826. 139  Cf. Directive 2004/101/EC of the European Parliament and of the Council of 27.10.2004 amending Directive 2003/87/EC in respect of the Kyoto Protocol’s project mechanisms, OJ L 338, 18. 140  Bill on an Act on a National Trading System for Emission from Heating and Motor Fuels, BT-Drs. 19/14746, 1 et seq. 141 Act on a National Trading System for Emission from Heating and Motor Fuels of 12.12.2019, BGBl. I 2019, 2728. 133 

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largely follows the European ‘cap and trade’ system. During the introductory phase until 2026 however, emission certificates are issued at fixed prices (§  10 (1) and (2) BEHG) and quantitative limits on annual fuel emissions are not absolute (§  5 (1) BEHG). The trading system applies to the fossil energy products set out in Annex I, which largely cover the mineral oils, coals and natural gases subject to energy taxation, but it further contains a general clause as to encompass all other goods intended for use as motor fuel or goods made of hydrocarbons intended for use as heating fuel.142 The national emission trading system is also distinct from its EU counterpart in its intended pricing effects, as the domestic scheme is not designed to directly achieve emission savings at the level of the company; instead, it is designed to increase the costs that are passed on to the consumer who ultimately shall be incentivized to engage in more climate friendly conduct.143 In light of this objective and due to not imposing absolute quantity limitations on emissions yet, some authors regard the BEHG as being a hidden tax beyond the tax legislator’s law-making authority, thus as being unconstitutional.144 Also, the entry price of 25 EUR per ton of carbon dioxide equivalent is sometimes regarded as not having meaningful steering effects.145 The revenues both from the auctioning of emission allowances under the EU ETS and from the national emission trading system accrue to the ‘Energy and Climate Fund’ that has been established in 2010146 for implementing national and international climate measures. b) Renewable Energy Reallocation Charge (EEG-Umlage) According to §§  8 para.  1 cl. 1, 11 para.  1 cl. 1, 19 et seq. of the Renewable Energies Expansion Act (Gesetz für den Ausbau der erneuerbaren Energien, EEG), grid operators have an obligation towards renewable energy producers to connect their plants to the grid, to purchase the energy generated, and to pay compensation according to fixed prices set by law. 142 Cf. Zenke/Telschow, CO -Bepreisung durch nationalen Emissionshandel, EnWZ 2020, 2 157 (159); see also §  2 (2) BEHG, which draws a direct link between the national emission trading system and the energy tax. 143  ‘Upstream ETS’, cf. BT-Drs. 19/14746, 21; Zenke/Telschow, CO -Bepreisung durch na2 tionalen Emissionshandel, EnWZ 2020, 157 (157, 160). 144 Cf. Wernsmann/Bering, Verfassungsrechtliche Anforderungen an Vorteilsabschöpfungsabgaben, NVwZ 2020, 497 (499 et seq.). In an Order regarding the EU ETS, the FCC held that the quantitative limitation of the specific resource is necessary for the functioning of such a trading system; FCC, Order of 05.03.2018 – 1 BvR 2864/13, NVwZ 2018, 972 no.  35. 145 E.g. the Committee recommendations of the Bundesrat stated that the entry price should have been at least 40 EUR, BR-Drs. 533/1/19, 3 et seq.; cf. Zenke/Telschow, CO2-Be­ preisung durch nationalen Emissionshandel, EnWZ 2020, 157 (162). 146  Act Establishing a Special Fund ‘Energy and Climate Fund’ of 08.12.2010, BGBl. I 2010, 1807.

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Although this ensures that the production of renewable energies appears more attractive, the danger was seen that these obligations would make the business with electricity from renewable energies uneconomical for the grid operators. Therefore, §  60 para.  1 EEG establishes the so-called Renewable Energy Reallocation Charge (EEG-Umlage), according to which the network operators can demand the costs for their obligations which are not covered by revenues from the electricity supply companies, which in turn pass these costs on to the consumers. The EU Commission had originally raised numerous objections against this system, but in the end did not prevail. The ECJ ruled that the Renewable Energy Reallocation Charge did not constitute state aid because the payments made by electricity supply companies to network operators cannot be considered as payments granted from state resources.147 According to German case law, the Renewable Energy Reallocation Charge does not constitute an unconstitutional special levy (Sonderabgabe) for the same reason.148 Nevertheless, it remains politically controversial whether the Renewable Energy Reallocation Charge is unnecessarily high149 and whether the relief for electricity-intensive companies pursuant to §§  63 et seq. EEG is appropriate. Currently, the abolition or comprehensive reform of the Renewable Energy Reallocation Charge is being discussed. The Länder Ministries for Energy recently called for the Renewable Energy Reallocation Charge to be eliminated until 2025.150 3. Acceptance by the taxpayer and tax justice In Germany, there has been little resistance to environmental tax reforms in the past. This may be due to the fact that the measures described do regularly not burden the taxpayer too much. Also, the taxpayer often has the choice to opt for tax relief by behaving in an environmentally friendly way. A rather controversial point, however, is the impact of the energy tax on car fuel prices.151 At the same time, the political movement demanding more climate protection measures has gained a more and more significant role in recent years. Compensation measures for burdens caused by fiscal climate protection measures are rare; it 147  ECJ of 13.03.2001 – C-379/98, ECLI:EU:C:2001:160 at 54 et seq. – PreussenElektra; of 28.03.2019 – C-405/16 P, ECLI:EU:C:2019:268 at 48 et seq. – Germany/Commission. 148  BGH of 25.06.2014 – VIII ZR 169/13, BGHZ 201, 355. 149 At the moment, however, the Renewable Energy Reallocation Charge is dropping sharply due to skyrocketing electricity prices; see https://www.bmwi.de/Redaktion/DE/ Pressemitteilungen/2021/10/20211015-altmaier-EEG-umlage-2022-sinkt-auf-den-niedrigs ten-stand-seit-10-jahren.html. 150 https://www.umwelt.niedersachsen.de/startseite/aktuelles/pressemitteilungen/ener gieministertreffen-in-berlin-fordert-absenkung-der-eeg-umlage-auf-null-204714.html. 151  Recently https://www.br.de/nachrichten/deutschland-welt/aufreger-spritpreis-wahlkampfauf-klimakosten,SZNjutm; https://www.focus.de/auto/ratgeber/kosten/neue-umfrage-co2steuer-hammer-kommt-2021-deutsche-lehnen-hoehere-spritpreise-ab_id_12757162.html.

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should be mentioned, however, that with regard to rising gasoline prices, an increase of the commuter allowance in the framework of the Income Tax is sometimes demanded. Regarding evasion of environmental taxes, there are only few known major incidents.152 However, the Federal Audit Office considered the evasion of the energy tax by the use of “designer fuels” to be a problem.153 In this respect, it should also be noted that in Germany environmental taxes are regularly indirect taxes, which normally cause much less tax resistance than direct taxes.

IV. Effects In 2020, environment-related tax revenues amounted to 57.1 billion EUR, which is 5.9 % less than in the previous year.154 The tax revenue in 2020, however, was significantly impacted by Covid-19, as for example the air traffic tax revenues were 75 % lower than in 2019. The overall marginal loss in revenue of environmental taxes between 2005 and 2010 could indicate that the ecological steering incentives are generally successful.155 However, the energy tax and the electricity tax have recently been subject to criticism; it is argued that they are not having significant steering effects; therefore, reforms have been discussed both at the European156 and at the national157 level. The most prominent criticism is directed against the minimum tax rates of the Energy Taxation Directive that have not been amended since 2003 and that are not directly linked to a CO2 benchmark.158 In order to foster ecological 152 For example LG München II of 07.05.2013 – W5 KLs 68 Js 26914/11 and BGH of 25.04.2017 – 1 StR 696/16 regarding energy tax; https://www.spiegel.de/politik/tengelmannsoll-steuern-hinterzogen-haben-a-87ba2fa2-0002-0001-0000-000067871636 regarding electricity tax. 153 Cf. https://www.bundesrechnungshof.de/de/veroeffentlichungen/produkte/bemerkun gen-jahresberichte/jahresberichte/2017/einzelplanbezogene-pruefungsergebnisse/bundesmi nisterium-der-finanzen/06. 154  German Federal Statistical Office (Statistisches Bundesamt), https://www.destatis.de/ DE/Themen/Gesellschaft-Umwelt/Umwelt/UGR/steuern-weitere-abgaben/umweltbezo gene-steuereinnahmen.html; the revenue includes the energy tax, electricity tax, allowances for emission certificates, motor vehicle tax and air traffic tax. 155 German Federal Environmental Agency (Umweltbundesamt), https://www.umwelt bundesamt.de/daten/umwelt-wirtschaft/umweltbezogene-steuern-gebuehren#entwicklungumweltbezogener-steuern. 156 EU Commission Staff Working Document of 11.09.2019 on the Evaluation of the Council Directive 2003/96/EC, SWD (2019) 329 final; General Secretariat of the Council, Draft Council conclusions on the EU energy taxation framework of 29.11.2019, Doc. 14608/19. 157  Frontier Economics/FiFo Institute for Public Economics at the University of Cologne, Study commissioned by the Mineralölwirtschaftsverband e. V. (MWV) and the Institut für Wärme und Mobilität e. V. (IWO), 03.2021 (https://www.fifo-koeln.org/images/projekte/ 2021/frontier-fifo_2021_energiesteuer_auf_co2_bezug_bericht-final.pdf). 158  Cf. EU Commission, SWD (2019) 329 final, 23; Expert Commission on the Monitor-

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steering incentives and to provide for meaningful effects combatting climate change, a reformed energy tax has been proposed with a uniform tax base applicable to all energy products in the form of fossil carbon atoms.159 This would allow to further privilege climate-friendly energy products, incentivizing their use, and provide for a Europe-wide cost increase of the use of hazardous fossil energies. Regarding the effects of the Emission Trading System, it can generally be perceived as an instrument with the capability of having significant climatefriendly effects; this, however, will require further amendments. Consequently, the Commission has recently proposed to include emissions from the sectors of maritime transport, road transport and buildings in the EU ETS.160 This would be in line with the German legislator’s intentions for the national emission trading system to be ultimately replaced by an all-encompassing EU ETS.161 The EU Emission Trading System’s positive effects should also be secured against carbon leakage by implementing the Carbon Border Adjustment Mechanism.162

ing-Process ‘Energy of the Future’, 02.2021 (https://www.bmwi.de/Redaktion/DE/Down loads/S-T/stellungnahme-der-expertenkommission-zum-achten-monitoring-bericht.pdf?__ blob=publicationFile&v=12), 46 et seq. 159  Expert Commission on the Monitoring-Process ‘Energy of the Future’, 02.2021, 47 et seq.; Frontier Economics/FiFo Institute for Public Economics at the University of Cologne, 03.2021, 43. 160  EU Commission, Proposal of 14.07.2021 for a Directive of the EU Parliament and of the Council amending Directive 2003/87/EC establishing a system for greenhouse gas emission allowance trading within the Union, COM (2021) 551 final. 161  BT-Drs. 19/14746, 32. 162  Cf. EU Commission, Proposal of 14.07.2021 for a Regulation of the EU Parliament and of the Council establishing a carbon border adjustment mechanism, COM (2021) 564 final.

The Criminalisation of Hate Speech Brian Valerius

I. Introduction Hate crime is a current and enormously important challenge for politics, for (not only legal) science and for society. The effects of such crimes reach far beyond the victim of the specific crime. Because the perpetrator selects his victim only on the basis that he or she belongs to a certain social group, against which the perpetrator harbours prejudices,1 the other members of this group are also affected.2 Furthermore, hate crime can therefore lead to tensions between the individual population groups and ultimately even affect the pluralistic society as a whole.3 These concerns apply not least to hate speech in particular. The modern forms of communication made possible by the internet, which are characterised not only by speed and convenience, but also by their wide and cross-border dissemination and potential anonymity, lend this phenomenon a highly worrying dimension. The following considerations deal with the criminalisation of hate crime from a German perspective. The article is based on the questionnaire sent by Prof. Dr Eric Heinze to the national rapporteurs in preparation for his general report, and I am very grateful to him for the enlightening and inspiring questions.

II. Hate Speech and German Law For a legal academic, the first thing to look at when assessing a social phenomenon like hate speech is, of course, the current legal situation. Following the structure of Prof. Dr Eric Heinze’s questionnaire, I would like to begin with the 1 

Keiser, ZRP 2010, 46, 46. On the terms ‘hate crime’ and ‘hate speech’ see also under V. Hate crime is therefore also referred to as a message crime, which aims to harm the entire population group to which the victim belongs; Schneider, in: Stiftung Deutsches Forum für Kriminalprävention (ed.), Endbericht der Arbeitsgruppe „Primäre Prävention von Gewalt gegen Gruppenangehörige – insbesondere: junge Menschen“, 2003, 34, 36, available at https:// www.kriminalpraevention.de/files/DFK/dfk-publikationen/2003_endbericht_arbeits gruppe.pdf (last accessed on 15.10.2021). 3  Schneider (n. 2), 34, 39–40. 2 

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relevance of constitutional and other law for hateful expressions and their application by the courts and the administrative authorities. Since even hate speech is also an expression, it is of particular interest in this context what significance is accorded to freedom of expression under German law and what conflicting rights can be referred to here to combat hateful expressions. 1. German constitutional law a) Freedom of expression and its limits The right to freedom of expression is enshrined in Article 5 (1) sentence 1 of the Basic Law (‘Grundgesetz’). According to this, everyone has the ‘right freely to express and disseminate his opinions in speech, writing and pictures’. However, according to Article 5 (2) of the Basic Law, freedom of expression ‘shall find their limits in the provisions of general laws, in provisions for the protection of young persons and in the right to personal honour’. Thus, even the Basic Law does not guarantee unlimited freedom of expression which is rather restricted in favour of conflicting interests, not least fundamental rights or other values of constitutional rank. There is a reciprocal interaction (‘Wechselwirkung’) that the general laws may set limits to freedom of opinion, but must themselves be restricted in their effect of limiting the fundamental right.4 This fact does not mean, however, that freedom of opinion is accorded only a minor value. Rather, the Federal Constitutional Court has expressly stated that ‘the fundamental right to freedom of expression … as the most direct expression of the human personality in society [is] one of the noblest human rights of all [and] for a liberal-democratic state order … absolutely constitutive, because it only enables the constant intellectual debate, the battle of opinions, which is its life element’.5

Of the triad of restrictions in Article 5 (2) of the Basic Law, the first-mentioned ‘general laws’ are the most important. A law can only be described as ‘general’ in this sense if it is not directed against freedom of opinion per se or against the expression of a particular opinion, but seeks to protect a legal interest (such as honour or public peace). 6 In each case, however, the legal interest concerned has to be protected in general, i.e. not only against violations through expressions of opinion, but also against impairments in other ways.7 Accordingly, a regulation restricting opinions would be illegitimate if it is not formulated in a sufficiently open manner and is instead a priori directed only against certain convictions, attitudes or ideologies. 8 Article 5 (2) of the Basic Law thus expresses that free4 

BVerfGE 7, 198, 208–209; 59, 231, 265. BVerfGE 7, 198, 208. 6  See only BVerfGE 7, 198, 209–210; 93, 266, 291. 7  BVerfGE 111, 147, 155; 124, 300, 322. 8  BVerfGE 124, 300, 323, 326–327; but see below VI. on the controversial section 130 (4) of the German Criminal Code (‘Strafgesetzbuch’). 5 

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dom of expression is basically independent of the content of statements. Whether a statement appears valuable or worthless or right or wrong, whether it is justified emotionally or rationally, is therefore irrelevant to the scope of protection of freedom of opinion.9 Rather, polemical and hurtful expressions are also covered by freedom of expression.10 b) Freedom of expression and hate speech In the case of hateful expressions, the provisions of the Basic Law must also be considered to determine the scope of freedom of expression and to weigh up the conflicting interests. For instance, one may refer to the ‘incitement of masses’ under section 130 of the German Criminal Code, which is the prime example of a criminal offence in Germany intended to combat hate crime, including hateful expressions. According to its paragraph 1, it is punishable to incite hatred against a national, racial, religious group or a group defined by their ethnic origin, against sections of the population or individuals on account of their belonging to one of the aforementioned groups or sections of the population, or to call for violent or arbitrary measures against them (No.  1) or to violate the human dignity of others by insulting, maliciously maligning or defaming one of the aforementioned groups, sections of the population or individuals on account of their belonging to one of the aforementioned groups or sections of the population (No.  2). However, this had to be done in each case in a manner which is suitable for causing a disturbance of the public peace. This offence thus demands a violation of human dignity as the highest value of the German constitution or some other attack on the individual or a group or a section of the population. In addition, through the requirement of being suitable for causing a disturbance of the public peace, the legal peace within society is ultimately sought as an object of protection.11 Current amendments to the law also proceed in a similar ‘two-track’ manner to refer both to the individual interest of the person affected by hate speech and to the effects of such expressions on society as a whole. For example, the explanatory memorandum of the Act to Combat Right-Wing Extremism and Hate Crime of 30 March 202112 states that the ‘increasing roughening of communication … not only attacks and calls into question the general right of personality of the person concerned, but also the political discourse in the democratic and pluralistic social order’.13 Furthermore, it can be noted that both the legislature and the courts focus on the protected interests of the specific provision when dealing with restrictions 9 

BVerfGE 61, 1, 7. BVerfGE 93, 266, 289; BVerfG NJW 2020, 2622, 2623; NJW 2020, 2629, 2629. 11 LK-Krauß, StGB, 13. edit. 2021, Entstehungsgeschichte §  130. 12  BGBl. I, 441. 13  BT-Drs. 19/17741, 1. 10 

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on freedom of expression. However, the consequence of this orientation is that other legal interests not protected by the respective norm are not considered in the balancing process. This applies not only to the right to non-discrimination in Article 3 (3) sentence 1 as well as to the freedom of association in Article 9 (1) of the Basic Law. This does not mean, however, that the legislature as well as the courts would fail to recognise the discriminatory character of such statements. But to include the right to non-discrimination in the consideration of how far freedom of expression can be restricted, a general anti-discrimination offence would have to be enacted that elevates this very right to an object of protection. A new offence of inciting insult in section 192a of the German Criminal Code, established by the Criminal Code Amendment Act of 14 September 2021,14 which came into force on 22 September 2021, ventures somewhat in the direction of a general anti-discrimination offence. The norm is a reaction in particular to the increasing open anti-Semitism in Germany15 and covers content that insults, maliciously maligns or defames a group defined by its national, racial, religious or ethnic origin, its ideology, its disability or its sexual orientation or an individual because of his or her membership in one of these groups and is therefore suitable for an violation of human dignity. It is now a punishable offence to let these inciting contents to reach a member of the mentioned groups. According to the explanatory memorandum, the legal interest of the provision is the honour of the recipient.16 However, it is also stated that the content in question ‘affects the right of those concerned to participate in social and political life on equal terms’,17 and thus the right to non-discrimination is likewise referred to. 2. German National statutory and administrative law a) Importance of administrative agencies In Germany, as far as can be seen, no administrative agency plays an important role in the legal handling of hate speech. This is because hate speech can be prosecuted in Germany under certain circumstances and therefore the public prosecutors and the courts are primary responsible for combating hateful expressions. Although there is a Federal Anti-Discrimination Agency, its objective is to protect against discrimination in general and not specifically against hateful expressions. In addition, its tasks are essentially limited to counselling,

14 

BGBl. I, 4250. 19/31115, 8. 16  BT-Drs. 19/31115, 15. 17  BT-Drs. 19/31115, 14. 15  BT-Drs.

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public relations work, conducting scientific research and submitting reports to the German Bundestag every four years.18 b) Criminal laws applied to hateful expressions Consequently, the most significant legal and administrative regulations applied to hateful expressions in Germany to be mentioned are criminal provisions. The currently most important criminal offence to combat hateful expressions is ‘incitement of masses’ according to section 130 of the German Criminal Code. A current special effort to fight hate crime is the as well already quoted criminal offence of inciting insult in section 192a of the German Criminal Code (see under II. 1. b.). Furthermore, there are many criminal provisions that were not enacted specifically to combat hateful expressions, but cover such matters among other things. These include the offences of insult under sections 185 et seq. of the German Criminal Code, coercion (section 240 of the German Criminal Code) and threatening commission of serious criminal offence (section 241 of the German Criminal Code), the dissemination of propaganda material and the use of symbols of unconstitutional organisations (sections 86, 86a of the German Criminal Code), public incitement to commit offences (section 111 of the German Criminal Code) and offences relating to religion and ideology (sections 166 et seq. of the German Criminal Code). The fact that a statement is made of hatred can likewise be taken into account on the side of the legal consequences. According to section 46 (2) sentence 2 of the German Criminal Code, the numerous circumstances that the courts have to consider in sentencing include ‘the offender’s motives and objectives, in particular including racist, xenophobic, anti-Semitic or other motives evidencing contempt for humanity’. The explicit enumeration of the motives ‘racist, xenophobic or other motives evidencing contempt for humanity’ was only introduced in 2015 by the Act to Implement Recommendations of the NSU Investigation Committee of the German Bundestag of 12 June 2015,19 to sensibilise the prosecution authorities and the courts to these hate-driven motives.20 Through the Act to Combat Right-Wing Extremism and Hate Crime (see II. 1. b.), the attribute ‘anti-Semitic’ was finally added. However, there was already agreement beforehand that such motives could be considered in sentencing to the disadvantage of the perpetrator.21 Since August 2015, the public prosecutor’s offices have also been explicitly encouraged in the Guidelines for Criminal Proceedings and Administrative 18 https://www.antidiskriminierungsstelle.de/EN/about-us/our-tasks/our-tasks-node. html (last accessed on 15.10.2021). 19  BGBl. I, 925. 20  Cf. BT-Drs. 17/8131, 4. 21  Keiser, ZRP 2010, 46, 48; see also BT-Drs. 17/3124, 8 and BT-Drs. 18/3007, 14.

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Fines (‘Richtlinien für das Strafverfahren und das Bußgeldverfahren’) to extend investigations to ‘racist, xenophobic or other motives evidencing contempt for humanity’ if there are relevant indications, as these can be relevant for determining the legal consequences (No.  15 para.  5); the characteristic ‘anti-Semitic’ has not yet been added to the list. These guidelines are administrative regulations that address the public prosecutor’s office to ensure that criminal proceedings are handled as uniformly as possible. But these guidelines are not binding on judges. c) Non-Criminal laws applied to hateful expressions In addition to criminal provisions a second, non-criminal law approach is being pursued to combat hateful expressions. This approach reflects the fact that hateful statements are becoming increasingly widespread, not least in social media. On 1 October 2017, the Law to Improve Law Enforcement in Social Networks (Network Enforcement Act; ‘Netzwerkdurchsetzungsgesetz’, NetzDG) came into force.22 One of its aims is to effectively combat and prosecute hate crime as a ‘major threat to peaceful coexistence in a free, open and democratic society’.23 The Network Enforcement Act obliges providers of social networks to remove unlawful content immediately, i.e. usually within seven days of becoming aware of it, or to block access to it (section 3 (2) no.  3 NetzDG). If the unlawfulness is obvious, i.e. its determination does not require an in-depth examination,24 the time limit is only 24 hours (section 3 (2) no.  2 NetzDG). The Act to Combat Right-Wing Extremism and Hate Crime (see II. 1. b.) also introduced a reporting obligation in section 3a NetzDG, which came into force on 1 February 2022. As of this date, the providers of social networks are obliged to transmit content to the Federal Criminal Police Office, if there are concrete signs of the commission of listed criminal offences to enable prosecution. The listed criminal offences include, among others, sections 86, 86a, 130 and 241 of the German Criminal Code and thus also norms that are regularly committed by hateful expressions.

III. The Significance of international Conventions regarding Hate Speech in Germany In a global community of states, relevant international conventions and their influence on the national legal situation must not be disregarded, especially when assessing a worldwide phenomenon such as hate speech. In this respect, it 22 

BGBl. I, 3352. BT-Drs. 18/12356, 1. 24  BT-Drs. 18/12356, 22. 23 

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should generally be noted that Germany has signed and ratified many such conventions, in particular human rights treaties of the United Nations. However, their significance – at least in dealing with hate speech – is limited. An exception are legal instruments of the European Union and – somewhat less important – of the Council of Europe. 1. International Covenant on Civil and Political Rights (ICCPR) (The Federal Republic of) Germany signed the International Covenant on Civil and Political Rights (ICCPR) of 16 December 1966 in 1968 and ratified it by law on 15 November 1973.25 The Covenant entered into force in Germany on 23 March 1976,26 albeit initially without Article 41 on state complaints, the entry into force of which followed on 28 March 1979.27 a) Concluding observations for Germany on hateful expressions The last concluding observations (on the sixth periodic report of Germany) of the United Nations Human Rights Committee (UNHRC) were published in 2012.28 This already explicitly addressed the phenomenon of hate speech under section 17 and 18. Among other things, it was recommended that Germany ‘should take concrete measures to increase the effectiveness of its legislation and to investigate all allegations of racially-motivated acts and to prosecute and punish those responsible. … [Germany also] should take the necessary steps to effectively prohibit and prevent hate speech and racist propaganda in particular through the Internet’.

b) Individual complaints procedure The (first) Optional Protocol to the ICCPR of 19 December 1966, which in particular provided for individual complaints, was not initially acceded to by (the Federal Republic of) Germany in order to avoid conflicts of jurisdiction with the organs of the legal protection system of the (European) Convention for the Protection of Human Rights and Fundamental Freedoms (ECHR) of 4 November 1950. Accession to the Optional Protocol therefore took place only by Act of 21 December 1992,29 but with the reservation, inter alia, with regard to Article 5 (2) (a) of the Optional Protocol, that the UNHRC does not consider any communications from an individual already examined under another procedure of international investigation or settlement. The Optional Protocol en25 

BGBl. II, 1533. BGBl. II, 1068. 27  BGBl. II, 1218. 28  The Concluding Observations (on the seventh periodic report of Germany) are currently (as of 15.10.2021) still pending. Germany’s report (due on 30 July 2019, initially even in 2018) was not received by the UNHRC until March 2020. 29  BGBl. II, 1246. 26 

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tered into force for Germany on 25 November 1993.30 It may be noted on this occasion that Germany also has declared reservations to the ICCPR itself. Again, however, these reservations do not relate specifically to hateful expressions. The reservation to the Optional Protocol explains why only few individual complaints are generally made to the UNHRC. Of the communications published in this regard, as far as can be seen, not even one has involved hateful expressions. c) Application of ICCPR to hateful expressions It is admittedly true that with regard to offences of utterance on the Internet in particular, some changes were made by the 60th Criminal Law Amendment Act of 30 November 2000.31 The amendments aimed in particular to apply German criminal law even if illegal content is disseminated on the internet from abroad (and thus also made accessible to the public in Germany).32 However, the legislator was merely reacting to a change in the case law of the Federal Court of Justice.33 So, neither the ICCPR nor the latest concluding observations were mentioned at all in the explanatory memorandum. Otherwise, as far as can be seen, the legislator also does not refer to the ICCPR when fighting hate speech. 2. International Convention on the Elimination of All Forms of Racial Discrimination (ICERD) (The Federal Republic of) Germany signed the International Convention on the Elimination of All Forms of Racial Discrimination (ICERD) of 7 March 1966 on 10 February 1967 and ratified it by law on 9 May 1969.34 The Convention entered into force in Germany on 15 June 1969.35 No reservations were made to the ICERD, either in general or specifically in relation to hateful expressions. a) Concluding observations for Germany on hateful expressions The last concluding observations (on the combined nineteenth to twenty-second periodic reports of Germany) date back to 201536 and explicitly addressed 30 

BGBl. 1994 II, 311. BGBl. I, 2600. 32  See BT-Drs. 19/19859, 22–24. 33  According to BGH NStZ 2015, 81, 82, the offence of using symbols of unconstitutional organisations (section 86a of the German Criminal Code) could not be applied to a case in which the accused uploaded pictures of swastikas to YouTube from the neighbouring Czech Republic. 34  BGBl. II, 961. 35  BGBl. II, 2211. 36  Germany did not submit its combined 23rd to 26th state report (due on 15 June 2018) until April 2020. 31 

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the phenomenon of hate speech particularly in section 9. Among other things, the Committee recommended ‘that the State party: … ensure that any act that may contain racist motives is investigated effectively and that, where appropriate, perpetrators of such acts are charged and punished; … Implement appropriate measures to combat the proliferation of acts and manifestations of racism on the Internet, including by blocking websites devoted to inciting racial discrimination and hatred’.

b) Individual complaints procedure On 30 August 2001, Germany declared to the Secretary-General of the United Nations, in accordance with Article 14 of the Convention, to recognize the competence of the Committee to receive and consider communications from individuals or groups of individuals within its jurisdiction claiming to be victims of a violation by Germany of any of the rights set forth in the Convention.37 Nonetheless, Communications of the Committee on the Elimination of Racial Discrimination are rare. In the UN’s online database, there are only two communications from the years 2006 (38/2006) and 2013 (48/2010). However, each of them dealt with discriminatory as well as hateful statements. The latter case in particular caused quite a stir. In this case, Thilo Sarrazin, a former finance senator of Berlin, had made derogatory and discriminatory remarks in an interview about what he called the lower classes of the population, who were not productive and lived on welfare and would have to disappear over time to create a city of the elite. A large group of Arabs and Turks could not be expected to develop either. Among other things, they were said to be largely unwilling to integrate, not to finish school, but to be characterised by a higher birth rate and to support a collective mentality that was aggressive and outdated. The public prosecutor’s office discontinued preliminary proceedings for incitement of masses under section 130 and for insult under section 185 of the German Criminal Code for legal reasons. In their view, no criminal conduct was apparent, also regarding freedom of expression. Rather, the statements in question were seen as a contribution to a public discussion. Among other things, the Committee criticised Germany for ‘concentrating on the fact that Mr. Sarrazin’s statements … were not capable of disturbing the public peace. … The Committee further considers that the criterion of disturbance of the public peace … does not adequately translate into domestic legislation the State party’s obligation under article 2, paragraph 1 (d), in particular as neither article 2, paragraph 1 (d), nor article 4 contain such a criterion. The Committee therefore concludes that the absence of an effective investigation … amounted to a violation of articles 2, paragraph 1 (d), 4 and 6 of the Convention’. 37 

BGBl. II, 1278.

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c) Application of ICERD to hateful expressions After the Sarrazin case, the 49th Criminal Law Amendment Act of 21 January 201538 amended, among other things, the offence of incitement of masses under section 130 of the German Criminal Code. However, according to the subtitle of the law, this was due to the implementation of European guidelines on sexual criminal law. It was also intended as a reaction to the increasing dissemination of incitement to hatred in broadcasting, telemedia and the internet.39 However, neither the Convention nor the above-mentioned individual complaints procedure were referred in the explanatory memorandum. The criterion of public peace which was criticised by the Committee also remained unchanged (until today). In general, it can be noted that legislation refers to the ICERD only rarely and in passing. This was the case, for example, in the explanatory memorandum to the Act on the Implementation of Recommendations of the NSU Investigation Committee of the German Bundestag which amended section 46 (2) sentence 2 of the German Criminal Code (see II. 2. b.). Here it was pointed out that the ‘explicit naming of racist motives … corresponds to the recommendations of several international bodies concerned with combating racism and xenophobia’. In this context, reference was also made to the concluding observations of the Committee on the Elimination of Racial Discrimination (CERD) of the United Nations on the 16th to 18th State Reports of Germany.40 3. Further human rights treaties There are some other human rights treaties that, at first glance, could be relevant to German laws or policies regarding hateful expression. This applies first of all to the Convention on the Prevention and Punishment of the Crime of Genocide (Genocide Convention) of 9 December 1948, which (the Federal Republic of) Germany acceded by law on 9 August 1954.41 The Convention entered into force in Germany on 22 February 1955.42 Its implementation in Germany initially led to the enactment of a criminal offence of genocide in section 220a of the German Criminal Code (now section 6 of the Code of Crimes against International Law; ‘Völkerstrafgesetzbuch’), without at first becoming significant for combating hateful expressions. However, this provision was referred almost 40 years later by the Act Amending the Criminal Code, the Code of Criminal Procedure and Other Laws

38 

BGBl. I, 10. Cf. BT-Drs. 18/2601, 16. 40  BT-Drs. 18/3007, 14. 41  BGBl. II, 729. 42  BGBl. II, 210. 39 

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(Crime Control Act) of 28 October 1994.43 Since then, the criminal offence of incitement of masses in section 130 (3) of the German Criminal Code punishes with imprisonment of up to five years or a fine ‘whoever … approves of, denies or downplays an act committed under the rule of National Socialism of the kind indicated in section 220a (1) of the German Criminal Code [nowadays section 6 (1) of the Code of Crimes against International Law] in a manner which is suitable for causing a disturbance of the public peace’. This was intended to make the denial of Holocaust (the so-called ‘Auschwitz lie’) a punishable offence. However, the concrete reason for this amendment was a wave of hatred and violence against foreign citizens and asylum seekers at the beginning of the 1990s, which resulted in right-wing extremist motivated arson attacks on houses in Mölln and Solingen, which were inhabited by people of Turkish descent. The Genocide Convention, which had been in force for more than 40 years at that time, probably played no role in this respect, is at least not mentioned in the explanatory memorandum.44 Secondly, reference may be made to the Convention on the Elimination of All Forms of Discrimination against Women of 18 December 1979 which was signed by (the Federal Republic of) Germany on 17 July 1980. Ratification was made by law of 25 April 1985;45 the Convention entered into force for Germany on 9 August 1985.46 The Optional Protocol of 6 October 1999 was approved by Germany by law of 3 December 2001;47 it entered into force in Germany on 15 April 2002.48 As far as can be seen, however, the Convention has not affected German legislation on hate speech, even though the legislature noted in the explanatory memorandum of the Act to Combat Right-Wing Extremism and Hate Crime (see II. 1. b.) that women are particularly affected by hate crime and hate speech.49 4. Regional law and organisations While the influence of UN conventions on German law is limited, European law has a much greater impact. This applies above all to legal instruments of the Council of Europe and, in particular, of the European Union (EU), which can enact law in certain areas defined in the Treaty on the Functioning of the European Union (TFEU), including directives in the areas of criminal law to combat particularly serious crime with a cross-border dimension (Article 83 (1) TFEU).

43 

BGBl. I, 3186. See BT-Drs. 12/8588. 45  BGBl. II, 647. 46  BGBl. II, 1234. 47  BGBl. II, 1237. 48  BGBl. II, 1197. 49  BT-Drs. 19/17741, 15 and 32. 44 

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a) Legal instruments of the Council of Europe The Council of Europe has already dealt with hate speech in its Recommendation on Combating Hate Speech of 30 October 1997. According to his understanding ‘hate speech’ is ‘covering all forms of expression which spread, incite, promote or justify racial hatred, xenophobia, anti-Semitism or other forms of hatred based on intolerance, including: intolerance expressed by aggressive nationalism and ethnocentrism, discrimination and hostility against minorities, migrants and people of immigrant origin’.

In combating such expression, recourse to criminal sanctions is not ruled out. In addition, the member states were already explicitly pointed out to the dissemination of such statements in the new media and the resulting need to adapt legal measures. Of major importance, however, was the Additional Protocol to the Convention on Cybercrime concerning the criminalisation of acts of a racist and xenophobic nature committed through computer systems of 28 January 2003,50 which provided that signatory states would prosecute certain acts of racism and xenophobia, especially on the Internet. The Protocol specifically mentions the dissemination of racist and xenophobic material through computer systems (Article 3), racist and xenophobic motivated threat (Article 4) and insult (Article 5), as well as denial, gross minimisation, approval or justification of genocide or crimes against humanity (Article 6). As far as can be seen, there were also two rulings of the European Court of Human Rights (ECtHR) against Germany which mentioned hate speech at least incidentally. However, neither the case Annen v. Germany51 nor the case Nix v. Germany52 did constitute a prime example of statements that are commonly referred to as hateful expressions. So it is not known, but also not probably that the rulings had any impact on German law and policy. b) Legal instruments of the European Union Regarding the European Union in the context of hate speech, one should refer in particularly to the Council Framework Decision 2008/913/JHA of 28 November 2008 on combating certain forms and expressions of racism and xenophobia by means of criminal law.53 According to its Article 1 (1) (c), Member States shall criminalise

50  ETS 189. Germany signed the Additional Protocol on 28.1.2003 and approved it by Act of 16.3.2011 (BGBl. II, 290). 51  ECtHR NJW 2016, 1867 – Annen v. Germany. 52  ECtHR MMR-Aktuell 2018, 405392 (summary). 53  ABl. EU L 328, 55.

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‘publicly condoning, denying or grossly trivialising crimes of genocide, crimes against humanity and war crimes … directed against a group of persons or a member of such a group defined by reference to race, colour, religion, descent or national or ethnic origin when the conduct is carried out in a manner likely to incite to violence or hatred against such a group or a member of such a group’.

c) Implications on Germany’s laws or policies on hate speech The recommendation of the European Council from 1997, as far as can be seen, did not have any implications on Germany’s laws. But both the Additional Protocol to the Council of Europe Convention on Cybercrime and the Framework Decision 2008/913/JHA were implemented by law of 16 March 2011,54 which already refers to these legal acts in its title. However, the modifications were marginal and limited on the one hand to the clarification that the national, racial, religious groups or groups defined by their ethnic origin mentioned in the European legal documents are also to be regarded as sections of the population within the meaning of section 130 (1) and (2) of the German Criminal Code. On the other hand, section 130 (1) and (2) of the German Criminal Code was expanded in accordance with the European guidelines, as the offences, including incitement to hatred and incitement to violent or arbitrary measures, are now also punishable if they are directed against individuals who are the target of the offence because they belong to one of the aforementioned groups or sections of the population.55 The legislator did not consider further amendments necessary because, in his opinion, the German legal situation already complied with the other requirements of the Framework Decision.56

IV. The Significance of Comparative national law regarding Hate Speech in Germany 1. References of the national Lawmaker to the law of other national jurisdictions Even though looking at other national legal systems is becoming increasingly important in German legal research, not least in many dissertations and post-doctoral theses, the German legislator in general only occasionally resort to this. Also regarding hateful expressions the German lawmaker, as far as can be seen, has neither referred to other national jurisdictions to orientate itself on their legal system nor to reject them as an alternative approach. This is at least the case with the legislative materials cited in this report which are likely to in54 

BGBl. I, 418. BT-Drs. 17/3124, 6. 56  BT-Drs. 17/3124, 6–9. 55 

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clude the most important documents on combating hate crime and hateful expressions. The lack of using comparative law as a source of knowledge concerning hate speech may also due to the fact that the described amendments to the law usually only addressed specific issues, such as certain events, court rulings or European guidelines to be implemented. In the materials cited in this report, comments on comparative law by the legislature are thus limited to a passage in the explanatory memorandum of the 60th Criminal Law Amendment Act (see III. 1. c.). This Act extended the German criminal jurisdiction in section 5 no.  5a lit.  b of the German Criminal Code – irrespective of the law that is applicable at the place where the offence was committed – to certain acts of incitement of masses abroad under section 130 of the German Criminal Code, provided that the inciting content is perceptibly disseminated in Germany or made accessible to the public in Germany in a manner likely to disturb the public peace and the offender is a German national or has his or her livelihood in Germany. According to the explanatory memorandum, because of the required suitability of the inciting content, it is primarily offences that are directed against persons who are in Germany that are covered. Without this criterion a US-American would also be liable to prosecution under German law if he posts inciting content on the internet that only refers to a group living in the USA where he would presumably be exempt from prosecution.57 This reference is thus limited to a brief and not even conclusively researched description of the punishability of expressing inciting content in another state without drawing any conclusions for Germany’s own approach to combating hate crime. Instead, the comment is only intended to counter concerns that Germany’s criminal jurisdiction is being extended too far to foreign offences and that the principle of non-interference under international law is thus being given too little consideration. 2. References of the national courts to the law of other national jurisdictions Such concerns have indeed been expressed in Germany, not least by the courts. In the past, the courts tended to apply German criminal law quite willingly to expressions made abroad if the statements as such are – often differently than at the place of the offence – punishable in Germany. This can be exemplified by the Toeben case of the Federal Court of Justice of 12 December 2000.58 Toeben, an Australian citizen, was convicted of incitement of masses under section 130 (3) of the German Criminal Code because he denied the Holocaust on an English website, although he had uploaded his statements from Australia to a server also located in Australia. However, since the content was freely accessible and could also be read in Germany, the Federal Court of Justice considered the statements 57  BT-Drs. 58 

19/19859, 46. BGHSt 46, 212.

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to be specifically suitable for disturbing public peace in Germany, so that German criminal law was applicable.59 This ruling was widely criticised in academic legal literature, especially because it could ultimately establish universal jurisdiction of German authorities for all expressions on the internet, if the content could only be accessed in Germany and was (maybe even exclusively) punishable under German law. 60 From this point of view already, comparative legal statements would certainly be desirable. However, neither in the Toeben case nor in the later, more restrictive rulings (see already III. 1. c.) 61 does the Federal Court of Justice look in detail at the case law or the legal system in other states to gain insights or suggestions for the assessment of the German legal situation. In general, it can be observed that the courts only rarely consider other national jurisdictions. This could be since courts have to decide on concrete facts and therefore focus on the interpretation of the relevant (national) provisions.

V. Judicial rulings in Germany and Hateful Expressions The courts could make a significant contribution to defining or clarifying the problem of hate crime or hate speech. For instance, there is neither complete agreement in Germany on the definition of hate crime nor on the concept of hateful expressions. 62 According to the most common view, however, contrary to the first impression of the term ‘hate crime’, it is less important that the perpetrator acts out of hatred. Rather, it is decisive that the act is directed against victims whom the perpetrator has chosen only because of their membership of a social group he rejects. The motive for the offence thus appears to be the prejudices of the offender against certain sections of the population, which do not necessarily have to turn into hatred. 63 Similarly, when assessing an expression as ‘hateful’, the decisive criterion is that belonging to a certain population group is the reason for the perpetrator to verbally disparage or attack the group as a whole or one of its members. 64 The courts has not made any obvious contribution to the development of these definitions. However, this is probably because the courts in Germany concentrate on the interpretation of the relevant elements of the offence as well as the assessment of the actual case (cf. already D. II.). But the criteria that are 59 

BGHSt 46, 212, 221. Hilgendorf, NJW 1997, 1873, 1878. 61  BGH NStZ 2015, 81; NStZ 2017, 146. 62  In summary Valerius, ZStW 132 (2020), 666, 667–668 and 678–679. 63  Sotiriadis, KJ 2014, 261, 264. 64  In detail on the motivation of the perpetrator Krupna, Das Konzept der „Hate Crimes“ in Deutschland, 2010, pp.  30 et seq. 60 

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crucial for hate crime or hate speech have hardly been considered in the formulation of the relevant criminal offences. For example, the offence of incitement of masses under section 130 of the German Criminal Code lists some groups and sections of the population, namely ‘national, racial, religious or defined by their ethnic origin’, against which the inciting behaviour must be directed. However, the law does not refer to the prejudice-related motive of the offence. Likewise, the characteristic ‘hatred’ is mentioned in the German Criminal Code, but not as a motivation of the perpetrator, but as one of the alternative modalities of the offence of ‘incitement of masses’, which can also be committed by ‘inciting hatred’. In this context, the courts understand ‘hatred’ as ‘an intensified hostile attitude against the concerned parts of the population that goes beyond mere rejection and contempt’. 65 At most, on the legal consequences side, the courts might have to distinguish hateful expressions from otherwise motivated statements. Finally, ‘racist, xenophobic, anti-Semitic or other motives evidencing contempt for humanity’ as well as such objectives of the perpetrator are explicitly mentioned in section 46 (2) sentence 2 of the German Criminal Code and must be considered when sentencing. In this context, however the courts didn’t have yet to deal more closely with hateful expressions. 66 Till now the courts, as far as can be seen, have also not had to adopt definitions of hate crime or hateful expressions proposed by third parties nor even to refer to a discussion in this regard. Only in some civil law rulings was indirect reference made to the understanding of third parties, namely to the guidelines of video platforms or to the community standards of social media. If a user violates these guidelines, for example, so that his or her published content is deleted or his or her user account is blocked, the courts must consider whether the content in question is to be classified as hateful. 67 However, neither the definitions of the providers are checked for their appropriateness nor are these definitions used as a basis for later rulings as a generally accepted definition. The decisions are usually limited to reviewing the legal validity of such guidelines and standards of the providers and to assessing the content in question according to these guidelines.

65 

BGHSt 40, 97, 102. So far, the Federal Court of Justice has only criticised if the Court of First Instance has not included an obvious xenophobic motivation in the sentencing, emphasising that such an attitude of the offender is only relevant for the sentencing if it is expressed in the concrete act; BGH BeckRS 2020, 23538 paras. 14–15. 67  See e.g. BGH GRUR-RS 2021, 23970; KG NJW-RR 2019, 1260; OLG Dresden NJWRR 2020, 426; OLG Hamm K&R 2020, 841; OLG München MMR 2021, 79. 66 

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VI. Germany’s history and the effects on its approach to hateful expressions Due to the Holocaust under the Nazi regime, which claimed the lives of around six million Jews during the Second World War, Germany has a more than painful historical background. This background also has an impact on the way hate crime and hateful expressions are dealt with. For example, the extension of the grounds for sentencing in section 46 (2) sentence 2 of the German Criminal Code to include ‘anti-Semitic’ motives of the perpetrator was justified in the explanatory memorandum by the special historical responsibility that Germany has because of the crimes of the National Socialist reign of violence and arbitrariness. 68 Also the courts sometimes refer to this historical background. For instance, in the Toeben case (see above IV. 2.), the Federal Court of Justice stated that the offence of incitement of masses under section 130 of the German Criminal Code seeks to counteract the setting in motion of a momentum of its own that has historically been proven to be dangerous.69 In conclusion, the Federal Court of Justice considered Germany’s gruesome history and the uniqueness of the crimes committed against the Jews under National Socialism to be a legitimising connecting factor under international law to apply German criminal law also to Holocaust denials committed abroad.70 In the so-called Wunsiedel ruling,71 the Federal Constitutional Court also justified the constitutionality of Section 130 (4) of the German Criminal Code by referring to Germany’s history. Since 1 April 2005, section 130 (4) of the German Criminal Code has made it a punishable offence to disturb the public peace publicly or in a meeting in a manner which violates the dignity of the victims by approving of, glorifying or justifying National Socialist tyranny and arbitrary rule. The Federal Constitutional Court has stated that this criminal provision only covers statements of opinion that express a certain attitude towards National Socialism, and that the legislature was thus reacting to concrete political opinions that were judged to be particularly dangerous in the public debate.72 Even if the provision is therefore not a general law within the meaning of Article 5 (2) of the Basic Law, it is nevertheless said to be constitutional.73 After all, ‘in view of the injustice and horror that elude general categories, which the National Socialist rule brought upon Europe and large parts of the world, and the emergence of 68  BT-Drs.

19/17741, 19. BGHSt 46, 212, 224. 70  BGHSt 46, 212, 224. 71  BVerfGE 124, 300. 72  BVerfGE 124, 300, 326. 73  BVerfGE 124, 300, 326. 69 

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the Federal Republic of Germany understood as a counter-draft to this an exception to the prohibition of the special right for opinion-related laws is immanent in Article 5 (1) and (2) of the Basic Law for provisions that set limits to the propagandistic approval of the National Socialist regime in the years between 1933 and 1945’.74

VII. Final Remarks Combating hate crime is a major challenge for the state and for society in view of its consequences, which go far beyond the victim and can also affect the respective victim group and finally the entire society. This is not only a national task, but a concern that needs to be taken up worldwide. Not least in view of the increasing dissemination of hate speech especially in social networks, there is an acute need for action here, which has not yet been satisfied, at least in Germany. It is true that the German lawmaker have been quite active in combating hate crime. However, it has so far reacted to specific issues and individual events than addressing this matter comprehensively and considering the approach of other states on this occasion.

74 

BVerfGE 124, 300, 327 f.

Limits of Freedom of Public Authorities with Respect to Obtaining Evidence at the Stage of Investigation Anne Schneider

I. A presentation of the main and most distinctive features of evidence system in the light of the applicable model of criminal procedure and major procedural principles of examining and evaluating evidence German criminal procedure is based on the inquisitorial system. Criminal proceedings can be divided into three phases.1 The first phase is the investigation phase (Ermittlungsverfahren) which starts when the prosecuting authorities obtain knowledge of a suspected offence (§  160(1) Code of Criminal Procedure (Strafprozessordnung – StPO).2 If the public prosecution office decides to indict the suspect (§  170(1) StPO), there is an intermediate phase (Zwischenverfahren) in which the court decides, on the basis of the evidence submitted, whether or not to open main proceedings. The main proceedings (Hauptverfahren) are the phase in which witnesses are subpoenaed for trial and the trial takes place. The public prosecution office (Staatsanwaltschaft) is solely responsible for leading criminal investigations and gathering both incriminating and exonerating evidence (§  160(1, 2) StPO). During the investigative phase, it is the public prosecution office’s task to examine evidence gathered and to decide which further investigative measures to take. It is also the public prosecution office that decides whether to indict the suspect or to terminate proceedings (§  170 StPO). Although the court may become involved in the investigation to some extent (infra III.2.), it typically fully assesses the evidence for the first time at the intermediate phase. In the intermediate phase of criminal proceedings, the court has to decide whether there are sufficient grounds to suspect that the indicted suspect (Angeschuldigter)3 has committed an offence (§  203 StPO). This rule serves 1 See, also, Weigend, in: Gleß/Richter (eds.), Do exclusionary rules ensure a fair trial? A comparative analysis of evidentiary rules, 2019, 61, 67 et seq. 2  An English translation of the StPO can be found on a webpage operated by the Ministry of Justice and Consumer Protection at https://www.gesetze-im-internet.de/englisch_stpo/ englisch_stpo.html#p1432 (last access on 7 January 2022). Unless otherwise indicated, all references to the code are taken from this official translation. 3  German law distinguishes between persons who are suspected of an offence (Beschul­ digte), persons suspected of an offence that have been indicted (Angeschuldigte) and indicted

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to protect the suspect from arbitrary indictments.4 The court sends the bill of indictment to the suspect and asks them whether they want to raise objections to the indictment or apply for new evidence to be taken (§  201(1) StPO). The court may also take evidence itself (§  202 StPO). In practice, the overwhelming majority of indictments is accepted by the court and new evidence is very rarely taken.5 Subsequently, it has been argued that the control function of the intermediate phase has derogated.6 In the following main proceedings, the same court decides on whether or not the defendant is guilty. In order to do so, the court decides which evidence is brought into trial and assesses it (§  244 StPO). The main proceedings are governed by the principle of immediacy which means that the court has to hear all the evidence itself and cannot rely on hearsay or on the public prosecutor’s file.7 Therefore, witness statements are always heard directly in trial. The court is free to evaluate the evidence (§  261 StPO). The fact that the court that has decided on opening main proceedings is the same one that decides on a possible conviction is criticized in German law.8 This criticism is based on psychological effects that show that people prefer evidence agreeing with their hypothesis to evidence disagreeing with it (confirmation bias).9 Accordingly, judges who have already found that there is sufficient evidence for opening proceedings might be more likely to convict than neutral judges. However, others point out that the assessment in the intermediate phase is very superficial and does not construct such a bias.10 It should also be noted that German criminal courts have large discretion in admitting or excluding evidence, even if it was illegally gathered. German law distinguishes between independent exclusionary rules (selbständige Beweisver­ wertungsverbote) and dependent exclusionary rules (unselbständige Beweisver­ wertungsverbote).11 The former concerns evidence that was acquired legally. In this case, the exclusion of the evidence is still possible. The latter concerns evipersons against which main proceedings have been opened (Angeklagte), see §  157 StPO. The official translation translates “Beschuldigter” with “accused person”, “Angeschuldigter” with “indicted accused” and “Angeklagter” with “defendant”. However, in my opinion, this translation is misleading because EU law uses the term “accused” for indicted suspects. Therefore, this report will use the term “suspect” for the person that is the focus of criminal investigations in the pre-trial phase. 4  Vormbaum, ZIS 2015, 328, 328 et seq. with further references. 5  Ibid. 329 et seq.; Weigend, in: Gleß/Richter (eds.), Do exclusionary rules ensure a fair trial? A comparative analysis of evidentiary rules, 2019, 61, 67. 6  Vormbaum, ZIS 2015, 328, 329. 7 See Eser et al., GA 2014, 1. 8  Vormbaum, ZIS 2015, 328, 329; Schünemann, StV 2000, 159, 159 et seq. 9  Schünemann, StV 2000, 159, 160 et seq. 10  On this argument (disagreeing) Vormbaum, ZIS 2015, 328, 329; see also Wenske, in: MüKo-StPO, StPO §  199 margin no.  36 et seq. 11  Gleß, in: Thaman (ed.), Exclusionary rules in Comparative Law, 2013, 113, 116 et seq. See also the overview in Jahn, Beweiserhebungs- und Beweisverwertungsverbote im Spannungs-

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dence that was acquired illegally. Such evidence can be excluded but this is by no means an automatic result of a violation of the law.

II. Public authorities are entitled to acquire evidence in a criminal action at the stage of investigation 1. Notion: public authorities are entitled to carry out investigations a) Please indicate legal grounds or other sources giving rise to the competence of appropriate authorities to carry out investigations, within which to examine evidence. In addition to the traditional law enforcement authorities of the prosecutor and the police, are any other entities admissible, such as special forces or specialized administrative authorities? What is the scope of their procedural competence and how can their procedural position be defined vis-à-vis the traditional enforcement authorities? Can a growing significance be found in the participation in criminal investigations of specialized law enforcement authorities, other than the traditional group of investigation bodies? Can the phenomenon of normative disintegration be observed, paving the way for numerous public authorities to conduct investigations in criminal cases? The competent authority for carrying out investigations is the public prosecution office. When it obtains knowledge of a suspected offence, the prosecution office is “obliged to take action in relation to all prosecutable criminal offences, provided there are sufficient factual indications” (§  152(1) StPO, see also §  160(1) StPO). This means it must be possible, according to experience, that a crime has been committed.12 The factual indications can come from the report of an offence or by other means (§  160(1) StPO). The public prosecution office is entitled to request information from any authority and to make investigations of any kind. This general principle is laid down in §  160(1) StPO, but there are numerous provisions with detailed requirements for certain investigative measures (e.g., surveillance, search and seizure etc.). The police have the same right but need to report their findings to the public prosecution office because only the public prosecution office can decide whether or not to indict a person (§  163(1, 2) StPO). In practice, investigations are mainly led by the police because the police are primarily competent for measures that cannot be deferred. Apart from the traditional criminal law enforcement authorities (police and public prosecution office), there are other administrative authorities that have the competence to lead criminal investigations. The most important is the tax investigation service (Steuerfahndung), an investigative body for tax crime feld zwischen den Garantien des Rechtsstaates und der effektiven Bekämpfung von Krimina­ lität und Terrorismus, Gutachten C für den 67. Deutschen Juristentag, 2008, C 51–56. 12  Peters, in: MüKo-StPO, StPO §  152 margin no.  35.

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(§  386(1) Fiscal Code [Abgabenordnung – AO]). However, the public prosecution office can decide to take over investigations for tax crime.13 It should also be noted that punitive administrative proceedings follow the rules of criminal proceedings (§  46(1) Act on Regulatory Offences [Ordnungswidrigkeitengesetz – OWiG]). This means that, for instance, the rules of criminal procedure apply to investigations by the Federal Cartel Office or the Commission in competition law cases, although the investigating authorities are not criminal, but administrative bodies. Overall, the public prosecution office and the police remain by far the most important criminal law enforcement authorities in German law. Although there are other competent bodies, especially in the area of financial crime, their authority is limited in scope. They also apply the same rules as the public prosecution office. This means that the criminal courts would be asked to grant prior judicial authorization and, later on, decide on the admissibility of evidence, regardless of which body has been investigating it. Accordingly, there is no evidence of normative disintegration. b) Do public law enforcement authorities enjoy a monopoly (exclusivity) of investigation rights in criminal cases, or do they share this competence with private entities (e.g., as part of private investigations or in the case of less serious actions being brought by private prosecution)? Where a given legal system envisages separate proceedings in actions brought by private prosecution, can public law enforcement authorities participate in them and if yes, what is the extent of that participation? Does it cover the right to examine evidence? In principle, only the public prosecution office and the police are authorized to conduct investigations as part of the pre-trial proceedings (§§  160(1), 163 StPO). The Code of Criminal Procedure does not allow the outsourcing of criminal investigations to private persons. Neither are there provisions on socalled internal investigations. These are investigations led by a company into violations of the law that occurred within the company itself. Many countries grant lower sentences in exchange for receiving the final report of internal investigations, which might be considered as a privatisation of criminal investigations. However, there are no such rules in Germany, which means that such a report is treated as any other document (see §§  94 et seq. StPO).14 German law also allows private prosecution for minor offences such as trespass or (simple) bodily harm (§  374(1) StPO): 13 See Große Strafrechtskommission des Deutschen Richterbunds, Das Verhältnis von Gericht, Staatsanwaltschaft und Polizei im Ermittlungsverfahren, strafprozessuale Regeln und faktische (Fehl?)Entwicklungen, 2008, 126 et seq., available at: http://www.bmjv.de/Shared Docs/Downloads/DE/Fachinformationen/Das_Verhaeltnis_von_Gericht_Staatsanwalt schaft_und_Polizei_im_Ermittlungsverfahren.pdf?__blob=publicationFile (last access on 7 January 2022). 14  See, on the applicable law on seizures in these cases, Schneider, 89 Revue Internationale de Droit Pénal, 2018, 311, 313 et seq.

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§  374 StPO – Admissibility; persons entitled to bring private prosecution (1) An aggrieved person may bring a private prosecution in respect of the following offences without first needing to have recourse to the public prosecution office: 1. trespass (section 123 of the Criminal Code), 2. insult (sections 185 to 189 of the Criminal Code), unless it is directed against one of the political bodies specified in section 194 (4) of the Criminal Code, 2a. violation of intimate privacy by taking photographs or other images (section 201a (1) and (2) of the Criminal Code), 3. violation of the privacy of correspondence (section 202 of the Criminal Code), 4. bodily harm (sections 223 and 229 of the Criminal Code), 5. coercion (section 240 (1) to (3) of the Criminal Code) or threatening commission of a serious criminal offence (section 241 of the Criminal Code), 5a. taking or giving of a bribe in commercial practice (section 299 of the Criminal Code), 6. criminal damage (section 303 of the Criminal Code), 6a. an offence under section 323a of the Criminal Code if the offence, having been committed in a state of intoxication, is a less serious criminal offence as referred to in nos. 1 to 6, 7. an offence pursuant to section 16 of the Act against Unfair Competition (Gesetz gegen den unlauteren Wettbewerb) and section 23 of the Act on the Protection of Trade Secrets (Gesetz zum Schutz von Geschäftsgeheimnissen), 8. an offence under section 142 (1) of the Patent Act (Patentgesetz), section 25 (1) of the Utility Models Act (Gebrauchsmustergesetz), section 10 (1) of the Semi-Conductor Protection Act (Halbleiterschutzgesetz), section 39 (1) of the Plant Variety Protection Act (Sortenschutzgesetz), section 143 (1), section 143a (1) and section 144 (1) and (2) of the Trade Mark Act (Markengesetz), section 51 (1) and section 65 (1) of the Design Act (Designgesetz), sections 106 to 108 and section 108b (1) and (2) of the Copyright Act (Urheberrechtsgesetz) and section 33 of the Act on the Copyright of Works of Fine Art and Photography (Gesetz betreffend das Urheberrecht an Werken der bildenden Künste und der Photographie).

If private prosecution is admitted, the victim can bypass the public prosecution office completely. In this respect, the rules on private prosecution are an exception to the legality principle set out in §  152(1) StPO that requires the public prosecution office to start investigations. Indeed, the indictment of the suspect for one of the offences listed in §  374(1) StPO is only allowed if this is in the public interest (§  376 StPO). As long as the prosecution is private, the public prosecution office is not involved in proceedings.15 However, it may take over prosecution at any time (§  377(1) StPO). Also, the court can transfer the file to the prosecution service when it feels that the prosecution service should take proceedings over (§  377(2) StPO). If the public prosecution office takes over private proceedings, the general rules on criminal investigations apply.

15 

Walther, in: KK-StPO, StPO §  377 margin no.  1 et seq.

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2. Court’s right to acquire evidence at the investigation stage or its controlling activities in relation to evidence examined by other entities a) Is the court entitled to examine evidence at the stage of investigation and if yes, can it admit evidence ex officio or only at the parties’ request, or are both those solutions possible simultaneously? Does the format of court investigation apply? Pre-trial investigations are the exclusive competence of the public prosecution office and its auxiliary authorities (mainly the police). The courts do not lead investigations. However, this does not mean that courts do not have any influence in the investigative phase. Some investigative measures require prior judicial authorization (see infra II.2.b)). As a form of ex ante judicial review, it is one of the core competences of the court. Furthermore, individual evidence can be challenged independently before the court in the pre-trial phase (infra II.2.c)). Apart from that, German law allows the court to undertake investigative measures, but only if the public prosecution office asks for support by the court (§  162(1) StPO). This happens often regarding the examination of victims of domestic violence. The reason for this is that, according to well-established case-law, only the examination led by a judge may be used in trial if the witness later refuses to testify.16 According to §  165 StPO, the judge may undertake the necessary investigatory acts if a public prosecutor is not available in exigent circumstances (Gefahr im Verzug). Nonetheless, the courts do not have the original competence to undertake investigations but are only a stand-in for the public prosecution office. Altogether, the role of the courts in the investigative phase is rather limited.17 b) At the investigation stage, does the court or another body hold the controlling rights in relation to evidentiary activities taken by law enforcement authorities and if yes, what controlling measures are afforded (e.g., does the examination of a specific piece of evidence require the court to give its prior consent)? What are the consequences of a failure to satisfy the condition of the court’s or another entity’s consent and other conditions from the perspective of the validity and effectiveness of the evidence examined? Can the specification of such pieces of evidence and the conditions of their admissibility established by the law be viewed as sufficient? Many investigative measures require prior judicial authorization. This means that the public prosecution office must apply for judicial authorization before executing the investigative measure in question. The requirement of prior judicial authorization is set down in the law. Such rules are found for the following investigative measures: physical examination of the suspect (§  81a(2) StPO) or other persons (§  81c(5) StPO), molecular and genetic analysis (§  81f(1) StPO), 16 

17 

See only BGHSt 61, 221, 221 et seq. margin no.  25 et seq. Große Strafrechtskommission des Deutschen Richterbunds (fn.  13), 130.

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DNA profiling (§  81g(3) StPO), serial DNA screening (§  81h(2) StPO), seizure (§  98(1) StPO) and seizure of postal items (§  100(1) StPO), dragnet investigation (§  98b(1) StPO), telecommunications surveillance, covert remote search of information technology systems and acoustic surveillance of private premises (all §  100e(1) StPO), acoustic surveillance outside of private premises (§  100f(4) StPO), technical investigation measures in respect of mobile terminals (§  100i(3) StPO), and searches (§  105(1) StPO). This overview shows that these are either the more intrusive measures (e.g., physical examination) or those undertaken by stealth because ex post judicial review is less effective in these cases (e.g., surveillance). Most of the provisions also allow the public prosecution office or the police to undertake the investigative measure themselves in exigent circumstances (Gefahr im Verzug). If the investigating authorities have failed to comply with the requirement of prior judicial authorization (either by not applying or by wrongly interpreting “exigent circumstances”), the question arises of what happens to the evidence that was gathered in breach of this requirement. The general rule in German criminal procedure law is that a violation of the law in collecting evidence does not necessarily lead to its exclusion as evidence in trial.18 The court must assess the admissibility of evidence according to the circumstances of the individual case, in particular according to the nature of the prohibition and the weight of the violation, weighing up the conflicting interests.19 The same is true vice versa for legally gathered evidence, which still might be excluded for a violation of fundamental rights.20 Written provisions on the consequences of a violation of procedural law are mostly missing. Accordingly, the consequences of a failure to receive judicial authorization are decided on a case-by-case basis. In cases of physical examination, searches and seizure, the evidence is only excluded in case of serious, deliberate or arbitrary procedural violations in which the fundamental rights safeguards were disregarded in a planned or systematic manner.21 This would require an intentional disregard of the requirement of judicial authorization or a blatant violation of its prerequisites.22 German courts have also accepted the argument that the prosecuting authorities would have received judicial authorization if they had asked for it (hypothe­ tischer Ersatzeingriff) and, therefore, that the evidence should be admitted.23 18  Weigend, in: Gleß/Richter (eds.), Do exclusionary rules ensure a fair trial? A comparative analysis of evidentiary rules, 2019, 61, 73 et seq. 19 BVerfG, Deutsches Autorecht 2008, 691 margin no.  9. 20  Weigend, in: Gleß/Richter (eds.), Do exclusionary rules ensure a fair trial? A comparative analysis of evidentiary rules, 2019, 61, 73 et seq. 21  BVerfG NJW 2009, 3225. 22  BGH NStZ-RR 2019, 94, 95. 23  BGH NStZ 2016, 551, 552 et seq.; Jahn/Dallmeyer, NStZ 2005, 297; Gleß, in: Thaman (ed.), Exclusionary rules in Comparative Law, 2013, 113, 122 et seq.

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To sum up one can say that the law clearly sets out in which cases prior judicial authorization is required and that the list of investigative measures that require such an authorization is mostly convincing. However, the results of a violation of this requirement are not clear in German law. This is because the way in which the courts deal with evidence that was illegally obtained is, in general, unpredictable. c) Is there a procedure at the investigation stage that enables the parties and their counsels to challenge the evidence examined in violation of the applicable principles? If yes, please present it briefly, taking into account the procedural consequences of its usage (the application of the principle of automatic exclusion of evidence; the recognition of invalidity of evidence; the judge’s right to assess the consequences of a method adopted to acquire evidence and evidence content) as well as the legal consequences for those who violated the law; please indicate the level of imperativeness of responses to a violation concerning the acquisition and examination of evidence, based on the applicable law and standpoints of doctrine and judicature. The question of the admissibility of evidence is usually discussed in the trial phase and decided upon by the court. The defendant and their lawyer can object to the usage of evidence during the trial. If the judgment is based on evidence that one of the parties considers to be inadmissible, they can appeal the court’s judgment on grounds of law (Revision, §§  333 et seq. StPO). It should be noted that, according to the well-established case law of the Federal Court of Justice, the defence counsel must object to the taking of inadmissible evidence at trial in order to make an appeal on these grounds possible (Rügepräklusion, Wider­ spruchslösung).24 In the investigative phase, there are procedures for challenging specific investigative measures, seizure (§  98(2)2 StPO) and surveillance measures (§  101(7)2 StPO).25 Any person concerned with a legitimate interest can apply for judicial review. This includes, e.g., third parties who have talked by phone to a suspect under telecommunication surveillance. Because a general provision on judicial review in the investigative phase is lacking, the procedure laid down in §  98(2)2 StPO is applied not only to seizure, but to any other non-judicial investigative measure.26 Judicial investigative measures such as judicial authorization or judicial interrogation can be appealed against by a complaint (§  304 StPO). If, e.g., the court holds that a seizure was unlawful, the seized objects must be returned.27 Corresponding data must be deleted (§  489(2) StPO). Nonetheless, 24 BGHSt 38, 214, 225; BGH NJW 1997, 2893; See also Böse/Schneider, in: Giuffrida/ Ligeti (eds.), Admissibility of OLAF Final Reports as Evidence in Criminal Proceedings, 2019, 132, 136, available at http://hdl.handle.net/10993/40141 (last access on 7 January 2022). 25 See Singelnstein, NStZ 2009, 481 et seq. 26  For an overview, see Laser, NStZ 2001, 120 et seq. 27  BVerfGE 44, 353, 384; Menges, in: Löwe-Rosenberg, 2019, StPO §  98 margin no.  63.

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the unlawfulness of an investigative measure does not necessarily mean that the evidence gathered is not admissible in trial.28 This result would depend on the court’s assessment when balancing the defendant’s interest with the public interest in prosecution. However, it has been suggested that the decision that a certain investigative measure was illegal can be of benefit for the defendant even if the evidence is not included because it puts psychological pressure on the prosecutor.29 In principle, the police officers or prosecutors executing illegal investigative measures can be criminally liable. Most investigative measures would constitute criminal offences if they were not justified by the Code of Criminal Procedure.30 Accordingly, the courts have held that police officers should be given more leeway in order to avoid individual criminal liability for persons trying to do what is right.31 This question is still under debate.32 In practice, individual liability of police officers is of minor importance. Overall, the incitement to strictly follow the law and prevent the illegal gathering of evidence does not seem to be big. Faults in acquiring evidence do not necessarily make the evidence inadmissible. Neither is the fruit of a poisonous tree doctrine applicable.33 Even if evidence is excluded in trial (Beweisverwer­ tungsverbot), the exclusion is usually restricted to its use as evidence. Prohibitions to use evidence also for other investigative purposes (Beweisverwen­ dungsverbot) are rare. Individual criminal liability has a marginal role and does not seem to serve as a deterrent.

III. Principles of acquiring evidence at the stage of investigation 1. Normative grounds for evidentiary activities in a criminal action (the Constitution, procedural criminal law, police law, administrative law, regulations, instructions, guidelines, common law, others). Can a multitude of sources of regulations in this area be referred to or is there normative homogeneity in place? The most important legal source for evidentiary activities in criminal law is the Code of Criminal Procedure (Strafprozessordnung). It contains information on the whole criminal procedure including the competences of the judicial authorities, the rules on gathering evidence and assessing evidence. It also includes 28 

Schlothauer, MAH Strafverteidigung 2014, §  3 margin no.  121.

29 Ibid.

30  Schneider, Strafprozessuale Ermittlungsmaßnahmen und Zeugnisverweigerungsrechte, 2020, 70 et seq. 31  BGH NStZ 2015, 574 margin no.  25 et seq. 32 See Engländer, NStZ 2015, 577; Rönnau/Hohn, in: LK-StGB, StGB §  32 margin no.  116 et seq. 33 See, Gleß, in: Thaman (ed.), Exclusionary rules in Comparative Law, 2013, 113, 128 et seq.

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the police’s competences in criminal investigations, whereas the police laws of the Länder 34 deal with preventing danger for individuals and society, i.e., administrative proceedings. Additional information on criminal investigations can be found in the Guidelines on criminal proceedings and fine proceedings (Richtlinien für das Strafverfahren und das Bußgeldverfahren – RiStBV). These guidelines are adopted by the Federal Ministry of Justice and Consumer Protection and aid the prosecuting authorities in interpreting the law. As administrative guidelines, they rank lower than the Code of Criminal Procedure. The Code of Criminal Procedure is a formal law that was adopted by the German Parliament. As such, it must comply with higher-ranking law. This is, first, the Basic Law (Grundgesetz – GG), the German Constitution. The Basic Law plays a huge part in the German legal system and has to be taken into account when interpreting the law. This is especially true for criminal investigations. Although some guarantees in the Basic Law are rather vague (human dignity, Article 1(1) GG), others are quite specific (inviolability of the home, Article 13 GG): Article 13 [Inviolability of the home] Basic Law (1) The home is inviolable. (2) Searches may be authorised only by a judge or, when time is of the essence, by other authorities designated by the laws and may be carried out only in the manner therein prescribed. (3) If particular facts justify the suspicion that any person has committed an especially serious crime specifically defined by a law, technical means of acoustical surveillance of any home in which the suspect is supposedly staying may be employed pursuant to judicial order for the purpose of prosecuting the offence, provided that alternative methods of investigating the matter would be disproportionately difficult or unproductive. The authorisation shall be for a limited time. The order shall be issued by a panel composed of three judges. When time is of the essence, it may also be issued by a single judge. (4) To avert acute dangers to public safety, especially dangers to life or to the public, technical means of surveillance of the home may be employed only pursuant to judicial order. When time is of the essence, such measures may also be ordered by other authorities designated by a law; a judicial decision shall subsequently be obtained without delay. (5) If technical means are contemplated solely for the protection of persons officially deployed in a home, the measure may be ordered by an authority designated by a law. The information thereby obtained may be otherwise used only for purposes of criminal prosecution or to avert danger and only if the legality of the measure has been previously determined by a judge; when time is of the essence, a judicial decision shall subsequently be obtained without delay. 34  The Federal Republic of Germany consists of 16 provinces which are called “Länder”. The Federal state has competences in some legal areas, the Länder in others. Criminal law and criminal procedure law are federal competences and, therefore, the same in all Länder.

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(6) The Federal Government shall report to the Bundestag annually as to the employment of technical means pursuant to paragraph (3) and, within the jurisdiction of the Federation, pursuant to paragraph (4) and, insofar as judicial approval is required, pursuant to paragraph (5) of this Article. A panel elected by the Bundestag shall exercise parliamentary oversight on the basis of this report. A comparable parliamentary oversight shall be afforded by the Länder. (7) Interferences and restrictions shall otherwise only be permissible to avert a danger to the public or to the life of an individual or, pursuant to a law, to confront an acute danger to public safety and order, in particular to relieve an accommodation shortage, to combat the danger of an epidemic or to protect young persons at risk.

Many investigative measures foreseen in the Code of Criminal Procedure have been challenged before the German Federal Constitutional Court (Bundesver­ fassungsgericht) by constitutional complaint (Verfassungsbeschwerde).35 The competences set out in the Code of Criminal Procedure are also influenced by the European Convention on Human Rights and EU law. The European Convention on Human Rights has been transposed by formal law and does, accordingly, not rank higher than the Code of Criminal Procedure. However, it is universally acknowledged that the Convention must be taken into account when interpreting national law as well as possible.36 The most important guarantees for criminal proceedings are Articles 6, 8 and 10 ECHR. EU law has become particularly important since the EU has adopted six directives on defendant’s rights in criminal proceedings in order to further harmonization and, thereby, mutual recognition.37 These directives have, insofar as they relate to criminal investigation, been implemented in the Code of Criminal Procedure. When criminal proceedings are implementations of EU law,38 the guarantees of 35  E.g., BVerfGE 32, 373; BVerfGE 113, 29 (§  97 StPO); BVerfGE 109, 279 (§  100c StPO); BVerfGE 129, 208 (§§  100a, 160a StPO). 36  Meyer-Ladewig/Nettesheim, in: Meyer-Ladewig/Nettesheim/Raumer (eds.), Europäische Menschenrechtskonvention, 2017, margin no.  19. 37  Directive 2010/64/EU of the European Parliament and of the Council of 20 October 2010 on the right to interpretation and translation in criminal proceedings, OJ L 280/1; Directive 2012/13/EU of the European Parliament and of the Council of 22 May 2012 on the right to information in criminal proceedings, OJ L 142/1; Directive 2013/48/EU of the European Parliament and of the Council of 22 October 2013 on the right of access to a lawyer in criminal proceedings and in European arrest warrant proceedings, and on the right to have a third party informed upon deprivation of liberty and to communicate with third persons and with consular authorities while deprived of liberty, OJ L 294/1; Directive (EU) 2016/343 of the European Parliament and of the Council of 9 March 2016 on the strengthening of certain aspects of the presumption of innocence and of the right to be present at the trial in criminal proceedings, OJ L 65/1; Directive (EU) 2016/800 of the European Parliament and of the Council of 11 May 2016 on procedural safeguards for children who are suspects or accused persons in criminal proceedings, OJ L 132/1; Directive (EU) 2016/1919 of the European Parliament and of the Council of 26 October 2016 on legal aid for suspects and accused persons in criminal proceedings and for requested persons in European arrest warrant proceedings, OJ L 297/1. 38 See Schneider, Strafprozessuale Ermittlungsmaßnahmen und Zeugnisverweigerungs­

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the Charter of Fundamental Rights also apply. Despite these influences, the main legal framework for criminal investigation is the Code of Criminal Procedure. 2. Does the applicable law regulate the principles of evidentiary activities taken by law enforcement authorities restrictively (on a tight-rein basis) and, similarly – determine the consequences of violations committed by the investigators, or does it leave to them a broad discretion in the search for evidence followed by the court’s right to discretionarily assess the collected evidentiary material and by the confrontation of evidence during a verbal and contradictory trial at court? German law has specific provisions on most major investigative measures, providing rules on applicability, procedure and procedural safeguards. Although the prosecuting authorities are allowed to use any means to investigate criminal offences (§§  161, 163 StPO), they are bound by these special provisions when applicable. This means that there is not much discretion in executing, e.g., acoustic surveillance (§  100c StPO). In contrast, the consequences of violations are hardly regulated. Here, the courts have broad discretion in deciding on the admissibility of evidence and in assessing its evidentiary value. In this context, the fundamental rights set out in the Basic Law and the human rights from the European Convention on Human Rights are often used as arguments for excluding evidence that was gathered in violation of the law. The case-law is not in all parts clear. However, the underlying rationale is that the more the defendant’s rights are impaired, the more likely it is that evidence will be excluded. For example, courts have refused to exclude a witness testimony in cases in which the witness had – contrary to the law (§  55(2) StPO) – not been informed of their right to refuse to answer any questions the reply to which would subject them or one of their relatives to the risk of being prosecuted (§  55 StPO) because this right only impaired the witness’s rights, not the defendant’s.39 3. Are there any criteria of the legality of evidence and criteria that disqualify the same established by the law? What role does the judicature play in establishing such criteria? German law gives mostly detailed information on how certain evidence should be gathered. Violations of these rules make the acquisition of evidence illegal. Moreover, general principals and fundamental rights can render the gathering of evidence illegal even if it is done by the rules set out in the Code of Criminal Procedure. Criteria for disqualifying evidence are also established by the law, but only on a piece-by-piece basis. There are no general rules on the legality of evidence and its use in trial. Therefore, it is often up to the courts to rechte, 2020, 408 et seq. 39  BGHSt 11, 213, 218.

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decide on whether a piece of evidence, gathered illegally or legally, can be admitted as evidence. Due to the lack of regulated overarching principles, the jurisprudence by the criminal courts and the Federal Constitutional Court plays a crucial role in determining the limits to the freedom of the public authorities. Although the courts are foremost responsible for deciding a single case, there have been attempts to develop general principles on the admissibility of evidence:40 Evidence is to be excluded only if the violation of procedural law affected the legal position of the defendant substantially (Rechtskreistheorie).41 The exclusion must serve the purpose of the procedural guarantee (Schutzzwecktheorie).42 The courts also balance the public interest in prosecution with the defendant’s interest in protecting their individual rights (Abwägungslehre).43 The problem with these principles is that they are open to interpretation and do not make the law much more predictable. Accordingly, case-law is of utmost importance in this respect. This is unusual for the German legal system which places more emphasis on written statutes than case-law and does, in principle, not recognize binding precedents. It should also be noted that the courts have developed an important restriction on the possibility to appeal against the admission of evidence. A defendant who has a lawyer must object to the use of evidence in trial (Widerspruchslösung, supra II.3). A failure to do so makes this point irrelevant for the appellate court. 4. Does the principle of freedom, meaning that any evidentiary measure and any evidentiary method are admissible (except those that a limine are unacceptable in civilized world), apply to the acquisition of evidence at the investigation stage? Or is it restricted by the applicability of general principles of the law, e.g., legalism, reliability, proportionality, necessity, and values such as human dignity, bodily inviolability, or the right to privacy? Where references are explicite missing in the law to the aforesaid standards, on what basis are those standards applied? How do doctrine and case law understand the notion of “fair evidentiary procedure”? Is this notion autonomous or does it constitute a part of the notion of “fair trial”? German constitutional law strongly protects the citizens’ fundamental rights. These rights include more specific rights like the privacy of correspondence, post and telecommunication (Article 10 GG), but also personal freedoms (Article 2 GG). Article 2 GG reads as follows: Article 2 [Personal freedoms] 40  See, also, Gleß, in: Thaman (ed.), Exclusionary rules in Comparative Law, 2013, 113, 119 et seq. 41  Knauer/Kudlich, in: MüKo-StPO, StPO §  337 margin no.  27 et seq.; See, also, BGHSt 11, 213; Paul, NStZ 2013, 489, 490 et seq. 42  BGHSt 24, 125. 43  Paul, NStZ 2013, 489, 490 et seq.; see, also, BGHSt 51, 285.

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(1) Every person shall have the right to free development of his personality insofar as he does not violate the rights of others or offend against the constitutional order or the moral law. (2) Every person shall have the right to life and physical integrity. Freedom of the person shall be inviolable. These rights may be interfered with only pursuant to a law.

Article 2 GG contains several rights that might be important in criminal investigations, i.e., the right to physical integrity and the right to freedom. The “right to free development of [their] personality” is understood to include the right to personal privacy and the general freedom of action (allgemeine Handlungsfrei­ heit). At least the latter right is impaired upon by any investigative measure; often, more specific rights which take precedence are impaired, too. If there is an impairment of fundamental rights with any investigative measure, these measures need to be justified by law. Such a justification requires a legal rule (often a law) that in itself must be proportionate. The principle of proportionality requires the law impairing fundamental rights to be suitable for reaching its purpose, necessary and appropriate.44 The same is true for individual measures. This shows that criminal procedure law is, indeed, “constitutional law in practice” (angewandtes Verfassungsrecht).45 Accordingly, criminal investigations are to a large extent influenced by fundamental rights such as human dignity (Article 1 GG) and the right to privacy (Art.  2(1) and 1(1) GG) and the principle of proportionality. This balancing between different interests is understood to be a part of the fair trial principle. There is no separate meaning of “fair evidentiary procedure”. 5. Is the acquisition of evidence at the investigation stage restricted by concrete prohibitions, e.g., the prohibition to use specific sources of evidence or evidentiary methods (please indicate the level of subordination of evidentiary activities to strict law; or maybe this situation depends on the nature of evidence, e.g., its interference in human rights and freedoms, or on the type of crime)? Please indicate examples of evidentiary activities that are subject to the strictest legal restrictions. There are three different ways in which the acquisition of evidence can be restricted.46 First, there are facts that cannot be the object of an evidentiary method (Beweisthemaverbot). These are facts that have to be kept secret (e.g., discussions by the panel of judges, §  43 German Judge Law [Deutsches Richter­ gesetz – DRiG]) or have already been bindingly established before.47 44 

On this principle Voßkuhle, JuS 2007, 429; Klatt/Meister, JuS 2014, 193. Jahn, JuS 2005, 1057. 46 See Eisenberg, Beweisrecht der StPO, 2017, margin no.  338 et seq. 47  It is rare that judgments are binding on other courts in Germany. However, if the defendant only appeals against the sentence in a judgment, not the conviction, the facts that form the basis of the conviction become binding. 45 

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Secondly, there are forbidden evidentiary methods. The most important provision in this context is §  136a StPO: Section 136a Prohibited examination methods; prohibited evidence (1) The accused’s freedom to make up his mind and to manifest his will must not be impaired by ill-treatment, induced fatigue, physical intervention on the body, the administration of drugs, torture, by means of deception or hypnosis. Compulsion may be used only insofar as this is permitted by criminal procedure law. Threatening the accused with measures not permitted under the provisions of criminal procedure law and holding out the prospect of an advantage not envisaged by statute shall be prohibited. (2) Measures which impair the accused’s memory or his capacity to understand the wrongfulness of an act shall not be permitted. (3) The prohibitions under subsections (1) and (2) shall apply irrespective of the accused’s consent. Statements which were obtained in breach of this prohibition shall not be used, even if the accused consents to their use.

§  136a StPO refers to the examination of the suspect and protects them from a variety of methods of interrogation that violate their human rights.48 It even provides an explicit and absolute exclusionary clause (§  136a(3)2 StPO). While most forbidden methods listed in §  136a StPO are clear, it is often problematic to determine what constitutes a forbidden deception and what is only cunning.49 It is also possible to exclude evidentiary methods that cannot guarantee reliable evidence. For example, evidence by a polygraph has been considered to be without evidentiary value and thus excluded.50 Thirdly, there are sources of evidence that are off-limits. The most important example is witness privilege (§§  52, 53 StPO). Relatives of the defendant and persons who had contact with the defendant in their professional capacity and are sworn to professional secrecy (e.g., lawyers, doctors, clergymen) can refuse to testify: In the sense of §  52 StPO, relatives are: 1. the accused’s fiancé or fiancée; 2. the accused’s spouse, even if the marriage no longer exists; 2a. the accused’s life partner, even if the life partnership no longer exists; 3. a person who is or was lineally related or related by marriage, collaterally related to the third degree or related by marriage to the second degree to the accused. The professional witnesses named in §  53 StPO are: 1. clergy, concerning that information which was confided to them or which became known to them in their capacity as spiritual advisers; 48 

For an overview, see Jahn, JuS 2005, 1057. Diemer, in: KK-StPO, StPO §  136a margin no.  19 et seq.; Jahn, JuS 2005, 1057, 1059 et seq. 50  BGHSt 44, 308, 319; BGH NStZ 2011, 474, 475; see also Kargl/Kirsch‚ JuS 2000, 537. 49 See

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2. defence counsel of the accused, concerning that information which was confided to them or which became known to them in this capacity; 3. lawyers and non-lawyer providers of legal services who have been admitted to a bar association, patent attorneys, notaries, certified public accountants, sworn auditors, tax consultants (Steuerberater) and tax representatives (Steuerbevollmächtigte), doctors, dentists, psychological psychotherapists, psychotherapists specialising in the treatment of children and juveniles, pharmacists and midwives, concerning that information which was confided to them or which became known to them in this capacity; subject to section 53a, the same shall not apply to in-house lawyers (section 46 (2) of the Federal Code for Lawyers) and in-house patent attorneys (section 41a (2) of the Federal Code for Patent Attorneys [Patentanwaltsordnung]) in respect of that which was confided to them or became known to them in this capacity; 3a. members or representatives of a recognised counselling agency under sections 3 and 8 of the Act on Pregnancies in Conflict Situations (Schwangerschaftskonfliktgesetz), concerning that information which was confided to them or which became known to them in this capacity; 3b. drug dependency counsellors in a counselling agency recognised or set up by an authority, a body, an institution or a foundation under public law, concerning that information which was confided to them or which became known to them in this capacity; 4. Members of the Bundestag, of the Federal Convention, of the European Parliament from the Federal Republic of Germany or of a Land parliament, concerning persons who have confided certain facts to them in their capacity as members of these bodies or to whom they have confided facts in this particular capacity, as well as concerning the facts themselves; 5. individuals who are or have been professionally involved in the preparation, production or dissemination of printed matter, broadcasts, film documentaries or in the information and communication services involved in instruction or in the formation of opinion. The persons designated in sentence 1 no.  5 may refuse to testify concerning the author or contributor of comments and documentation or concerning any other informant or the information communicated to them in their professional capacity, including its content, as well as concerning the content of materials which they have produced themselves and matters which have received their professional attention. This shall only apply insofar as this concerns contributions, documentation, information and materials for the editorial element of their activity or information and communication services which have been editorially reviewed.

Interrogations are then forbidden. Nor is it allowed to read out a former witness statement in court or ask the interviewing person to give evidence from hearsay (§  252 StPO).51 Several other provisions refer to witness privileges in order to limit the investigating possibilities of the prosecuting authorities. §  97 StPO prohibits the sei51  BGH NStZ 2015, 710, 711; Diemer, in: KK-StPO, StPO §  252 margin no.  1; Farthofer/ Rückert, HRRS 2017, 123.

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zure of written communication, notes and other objects which are covered by the right to refuse to testify under certain circumstances and for certain witnesses.52 §  100d(5) StPO has a similar rule for professional witnesses only with regard to acoustic and telecommunication surveillance and covert remote searches of information technology systems. Provisions on witness privileges are also found in §  81c(3) (physical examination), 95(2)2 (obligation to surrender) and §  100g(4) StPO (traffic data capture). While these rules only apply to certain specific investigative measures, there is a provision in §  160a StPO that can limit any investigative measure: §  160a Measures directed at persons entitled to refuse testimony on professional grounds (1) An investigation measure directed at a person designated in section 53 (1) sentence 1 no.  1, 2 or 4, a lawyer or a non-lawyer provider of legal services who has been admitted to a bar association shall be inadmissible if it is expected to produce information in respect of which such person would have the right to refuse to testify. Any information which is obtained nonetheless may not be used. Any recording of such information is to be deleted without delay. The fact that the information was obtained and deleted shall be included in the records. If information about a person referred to in sentence 1 is obtained through an investigation measure which is not aimed at such person and in respect of which such person may refuse to testify, sentences 2 to 4 shall apply accordingly. (2) Insofar as a person designated in section 53 (1) sentence 1 nos. 3 to 3b or no.  5 might be affected by an investigation measure and it is to be expected that information would thereby be obtained in respect of which the person would have the right to refuse to testify, this shall be given particular consideration in the context of examining proportionality; if the proceedings do not concern an offence of substantial significance, then, in principle, no overriding interest in prosecuting the offence is to be presumed. Insofar as is expedient, the measure should be dispensed with or, to the extent possible for this type of measure, restricted. Sentence 1 shall apply accordingly to the use of information for evidential purposes. Sentences 1 to 3 shall not apply to lawyers and non-lawyer providers of legal services who have been admitted to a bar association. (3) Subsections (1) and (2) shall apply accordingly insofar as the persons designated in section 53a would have the right to refuse to testify. (4) Subsections (1) to (3) shall not apply if certain facts give rise to the suspicion that the person who is entitled to refuse to testify participated in the offence or in handling stolen data, aiding after the fact, obstruction of prosecution or punishment, or handling stolen goods. If the offence may be prosecuted only upon request or only upon authorisation, sentence 1 shall apply in the cases under section 53 (1) sentence 1 no.  5 as soon as and insofar as the request to prosecute has been filed or the authorisation granted. (5) Section 97, section 100d (5) and section 100g (4) shall remain unaffected.

52  Many details on this paragraph are unclear. For an overview, see Schneider, Strafprozessuale Ermittlungsmaßnahmen und Zeugnisverweigerungsrechte, 2020, 33 et seq.

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This long and complicated provision is fairly new but has already given rise to many questions.53 For example, it is unclear why it only applies to professional witnesses and not to other witnesses who have a right to refuse to testify.54 Moreover, the relationship to the other rules on witness privilege is unclear. Although some rules are to remain unaffected (§  160a(5) StPO), others are not named in the provision and it is not clear whether §  160a StPO remains applicable in addition to other more specific rules on witness privilege.55 Overall, the limits to investigative activity depend on the addressee of the measure. If it is a member of a parliament or a defence lawyer, investigative measures are the most limited (see, e.g., §§  160a(1), 97(4) StPO). The protection becomes noticeably less pronounced for other professional witnesses and journalists (see §  160a(2), 97(5) StPO) and is at its lowest for relatives of the defendant, who are not protected by §  160a StPO. Some investigative measures have extra rules on witness protection. These include investigative measures that are considered to be the most intrusive (§§  100b, 100c StPO) but also standard measures such as seizure and surrender (§§  97, 95 StPO). The law also offers a special protection of privacy rights, especially of the core area of private conduct of life. This has been accepted case-law of the Federal Constitutional Court for a long time.56 Following this approach, mutterings of a person to oneself in the hospital room are not admitted as evidence.57 Diaries have been admitted in a controversial decision.58 Whether this judgment still holds today remains to be seen. In order to provide better transparency, the legislator has adopted a provision on surveillance measures that is based on the constitutional law on the protection of privacy:

Section 100d Core area of private conduct of life; persons authorised to refuse to give evidence (1) If there are factual indications to assume that a measure under sections 100a to 100c will only lead to findings in the core area of the private conduct of life, the measure shall be inadmissible. (2) Findings in the core area of the private conduct of life which are made on the basis of a measure under sections 100a to 100c may not be used. Recordings of such findings 53 

For an overview, see ibid., 56 et seq. Hauck, Heimliche Strafverfolgung und Schutz der Privatheit, 2014, 444; Kölbel, in: MüKo-StPO, StPO §  160a margin no.  6; Kretschmer, HRRS 2010, 551, 556; Wolter, GA 2007, 183, 189; Zöller, ZStW 2012, 411, 433. 55  On the discussion Schneider, Strafprozessuale Ermittlungsmaßnahmen und Zeug­n is­ verweigerungsrechte, 2020, 64 et seq., 707 et seq. with further references. 56  BVerfGE 33, 367; BVerfGE 80, 367, 379; BVerfGE 109, 279; BVerfGE 125, 260. 57  BGHSt 57, 71; BGHSt 50, 206. 58  BVerfGE 80, 367, 376 et seq. 54 

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must be deleted without delay. The fact that such findings were made and their deletion shall be documented. (3) Where possible in the case of measures under section 100b, technical means shall be employed to ensure that data concerning the core area of the private conduct of life are not captured. Findings made on the basis of measures under section 100b which concern the core area of the private conduct of life shall be deleted without delay or submitted to the court ordering the measure by the public prosecution office for a decision as to their usability and deletion. The court’s decision concerning the usability of the data shall be binding in respect of the further proceedings. (4) Measures pursuant to section 100c may be ordered only if on the basis of factual indications it may be assumed that statements concerning the core area of the private conduct of life will not be covered by the surveillance. The interception and recording is to be interrupted without delay if during the surveillance indications arise that statements concerning the core area of the private conduct of life are being recorded. Where a measure has been interrupted, it may be recommenced subject to the conditions of sentence 1. In cases of doubt, the public prosecution office shall seek a decision from the court without delay concerning the interruption or continuation of the measure; section 100e (5) shall apply accordingly. If it is considered a possibility that the use of findings already made pursuant to subsection (2) will be prohibited, the public prosecution office must also apply to the court for a decision without delay. Subsection (3) sentence 3 shall apply accordingly. (5) In the cases under section 53, measures under sections 100b and 100c shall be inadmissible; if during or after implementation of the measure it becomes apparent that a case under section 53 exists, then subsection (2) shall apply accordingly. In the cases under sections 52 and 53a, information acquired through measures under sections 100b and 100c may be used only if, taking into consideration the significance of the underlying relationship of trust, this is not disproportionate to the interest in establishing the facts or determining the whereabouts of an accused person. Section 160a (4) shall apply accordingly.

This provision provides many details on the consequences of a violation of the core area of private conduct of life. According to the Federal Constitutional Court, “[t]he development of personality in the core area of private conduct of life includes the possibility of expressing inner processes such as feelings and emotions as well as considerations, views and experiences of a highly personal nature […]. In particular, non-public communication with persons of the highest personal trust, which is conducted in the justified assumption that it will not be monitored, as is the case in particular with conversations in the area of the home, is protected.”59 By this, German law protects conversations between lovers in private surroundings. Whether this protection extends to a confession of a crime is disputed in German law. 60 Nonetheless, the protection of privacy rights is very high. 59 

BVerfGE 141, 220, 276 margin no.  121. Translation by the author. 141, 220, 277 margin no.  122; Rottmeier, Kernbereich privater Lebensge­stal­ tung und strafprozessuale Lauschangriffe, 2017, 42 et seq. 60  BVerfGE

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German law also recognizes the privilege against self-incrimination, although there is no explicit rule on the principle. This means that the defendant has the right to remain silent and must be informed accordingly (§  136(1)2 StPO). It is understood to apply to active participation in criminal law only.61 Therefore, it prohibits forcing the defendant to surrender objects but not a seizure. Similarly, the defendant cannot be coerced to use a breathalyser in order to determine the alcohol level, although it is possible to get a blood sample (§  81a StPO). 6. Does the applicable law sufficiently define the boundaries of evidence acquisition admissibility, or maybe too categorically? What is the potential extent of the non-normative sphere in shaping such boundaries (general rules, pragmatism, habits)? Are the proportions between the two spheres (normative and non-normative) appropriate? The overview on the most important provisions and guarantees limiting investigations above (supra III.5.) has shown that, while the investigative measures are mostly laid out in detail in the law, the limits are often not clearly regulated. Witnesses are strongly protected in Germany, but the reason for this is unclear and the law is chaotic.62 The privilege against self-incrimination is hardly regulated but undisputedly recognized in German criminal law. The same is true for the protection of the core area of private conduct of life. In this respect, German law relies too much on general rules instead of a normative approach. On the other hand, the normative approach taken with witness protection is not convincing and might limit the investigation activities too severely, e.g., by allowing victims of domestic abuse to refuse to testify. 63 In my opinion, German criminal law has not yet found the perfect balance between procedural safeguards and the necessities of investigation. 7. As regards the acquisition of evidence during investigation, how at this stage is the deficit of the inapplicability of principles of equality of parties, equality of arms, and the contradictory principle compensated for, also taking into account the fact of general primacy of law enforcement authorities, in order to ensure a fair evidentiary procedure? Can the suspect and other entities share in this? The public prosecution office is obliged to search for both incriminating and exonerating evidence (§  160(2) StPO). The suspect must be interrogated before an indictment is filed (§  163a(1) StPO) and can apply for evidence to be taken in their defence (§  163a(2) StPO). However, the suspect has no legal way to force 61  BGH NStZ-RR 2018, 319; Amelung, DNotZ 1984, 195, 218; Dallmeyer, StV 1997, 606, 608; Eckstein, Ermittlungen zu Lasten Dritter, 2013, 423 et seq.; Kasiske, JuS 2014, 15, 16; Schuhr, in: MüKo-StPO, StPO Vor §§  133 et seq. margin no.  91 et seq.; Weißer, GA 2006, 148, 155. 62 In detail Schneider, Strafprozessuale Ermittlungsmaßnahmen und Zeugnisverwei­ge­ rungs­rechte, 2020, passim. 63  Ibid., 481 et seq.; Kremer, Strafprozessuale Angehörigenprivilegien im Rechtsvergleich, 2018, 76.

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the public prosecution office to do so. 64 Accordingly, it has been argued that the suspect is at a disadvantage in the investigative phase.65 Only at the trial phase does an appealable right to apply for evidence exist (§  244(3) StPO). Moreover, the defendant has the right to object to the use of evidence that is inadmissible. 8. Is there a balance between the freedom of law enforcement authorities’ actions, on which the crime combating efficiency depends, and limitations of that freedom arising from the need to ensure appropriate standards of evidentiary procedure? Does a comparison of those antagonistic to some extent perspectives show that the purpose of repression dominates at the expense of the procedural guarantees and the rights of individuals, or rather the purpose of the reliability of evidence at the expense of its effectiveness in the detection of the truth? The German legal approach is based on the idea of balancing the need for effective criminal proceedings with the protection of individual rights. Each provision on criminal procedure restricts the suspect’s constitutionally guaranteed freedoms and must justify this restriction. Overall, the German legal system does this fairly well. More intrusive investigative measures such as acoustic surveillance of private premises (§  100c StPO) or covert remote search of information technology systems (§  100b StPO) go hand in hand with stronger procedural safeguards (§  100d StPO). Although some parts of German criminal procedural law do not seem to be well-balanced (e.g., massive protection of the suspect’s relatives66 , fragmentary protection of legal professional privilege67) and it is sometimes difficult to predict the outcome of the prevailing balancing approach for the admissibility of evidence, the result is a system that is neither too repressive nor too lenient. 9. How can the fairness of evidentiary procedure be ensured in view of the conditions imposed by the commonly used consensual procedures, methods directed towards accelerating or shortening criminal proceedings, and the usage of alternative methods for criminal prosecution? Those measures not only fail to eliminate the issue of the boundaries of legal acquisition of evidence, but bring this issue into focus in connection with the conclusiveness of evidence being examined at the investigation stage. In these circumstances, are procedural guarantees ensured during the evidentiary procedure, together with due control over its legality at the investigation stage, bearing in mind the pressure for attaining the goal and swiftly end the proceedings? The German legal system places a huge emphasis on the main proceedings. All evidence must be renewed in the trial phase, i.e., all witnesses and experts 64 

Schlothauer, MAH Strafverteidigung 2014, §  3 margin no.  121. Schünemann, StV 2000, 159, 163. 66 See Schneider, Strafprozessuale Ermittlungsmaßnahmen und Zeugnisverweigerungs­ rechte, 2020, 263 et seq. 67  Schneider, 89 Revue Internationale de Droit Pénal, 2018, 311, 312 et seq. 65 

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must be interviewed again, all other evidence must be presented and so on.68 This takes a lot of time and effort. Therefore, faster ways to terminate criminal proceedings have become an important part of criminal proceedings. The public prosecution office can make use of its competences under §§  153 et seq. StPO to terminate proceedings when there is a likelihood of conviction, but the prerequisites of these rules are met. Non-prosecution is possible for, e.g., petty offences (§  153 StPO), active remorse (§  153e StPO) or offences committed abroad (§  153c StPO). Proceedings can also be terminated subject to the imposition of conditions (§  153a StPO). In this case, the suspect’s consent is required. Another commonly used way to terminate proceedings is the summary penalty order (Strafbefehl, §§  407 et seq. StPO). A summary penalty order imposes a sanction (a fine or, if the indicted suspect has a defence lawyer, up to one year of imprisonment suspended on probation) on written application by the public prosecution office (§  407(1) StPO). There is no main hearing and no consent required. Nonetheless, the indicted suspect can lodge an objection against the order that will lead to a trial with main hearing (§  410(1) StPO). All these procedures have in common that there is no main hearing at which the evidence is gathered again and evaluated by the court. This might disadvantage the suspect for several reasons: First, they have no possibility to force the public prosecution office to gather exonerating evidence. Only at the main hearing does the defendant have a right to apply for taking evidence which would have to be rejected by court order, thus allowing judicial review (§  244(6) StPO). Secondly, the defence counsel’s right to inspect the file can be limited in the investigative phase. Only when proceedings have been concluded, full access to the file is guaranteed (§  147(2) StPO). The proceedings explained above take this into consideration by ensuring a system of checks and balances. Whenever a sanction or another condition is imposed upon the suspect, the court must agree (e.g. §§  153a(1), 407(1) StPO). When criminal proceedings are dispensed with (§§  153 et seq. StPO), the suspect’s consent is often required. This is not true for the summary penalty order which is in practice often used when the defendant has not appeared to the main proceedings. However, the law provides a special form of judicial review, the objection, in order to allow the suspect to get a hearing in main proceedings. Nonetheless, summary penalty orders are written proceedings in which the suspect’s right to be heard might be impaired. There are also two non-standard procedures which should not have a negative effect on the evaluation of evidence. In accelerated proceedings (Beschleunigtes Verfahren – §§  417 et seq. StPO), the time limit for summoning is dispensed with, which means that the main hearing can start immediately (§  418(1) StPO). Because the main hearing gives the defendant rights to participate and to dis68 

Eser et al., GA 2014, 1, 1 et seq.

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pute all evidence, their situation is not worse from an evidentiary point of view in these proceedings. The second proceeding is the proceeding on a negotiated agreement (Verständigungsverfahren – §  257c StPO). A negotiated agreement is a deal on the outcome of the case and the legal consequences for the defendant (see §  257c(1, 2) StPO). It is part of the main proceedings, not the investigative phase. 69 According to §  257c(1)2 StPO, the crucial provision on the court’s obligation to take evidence and examine the facts, §  244(2) StPO, remains unaffected. This means that the court still has to take evidence on the question of guilt, regardless of the negotiated agreement.70 §  257c(1)2 StPO has been criticized severely. Scholars have pointed out that the whole purpose of a deal is to (partly) free the judicial authorities from the lengthy process of taking and evaluating evidence and that a law requiring the same evidentiary standard as without such an agreement defeats its purpose.71 Which standards actually apply is still under debate in German law.

IV. Identifications of risks of violating freedom in the acquisition of evidence by law enforcement authorities 1. Narrow focus of enforcement authorities to acquire evidence of being guilty; oppressive investigative methods; violation of human dignity; use of measures compelling individuals to meet certain evidentiary obligations, or use of a passive tactic consisting in provoking the suspect or other entities into providing evidence. What measures are taken to counteract such practices? Criminal investigations are strongly regulated in German law. Due to the close connection between criminal procedure law and constitutional law, all investigative measures are subject to scrutiny and could, in the end, be subject of a constitutional complaint (Verfassungsbeschwerde).72 Oppressive investigative measures, violations of human dignity and the use of measures compelling individuals to meet evidentiary obligations are therefore only admissible unless they unjustifiably violate constitutional rights. These considerations are not the prerogative of the Federal Constitutional Court but need to be undertaken by any court deciding on the matter, including the court of first instance. As has been explained above, it is possible to file a complaint against individual investigative measures and also to object to their use as evidence in trial.

69 

Kindhäuser/Schumann, Strafprozessrecht, 2019, §  19 margin no.  12. See BVerfGE 133, 168, 207 et seq. 71 See, e.g., Jahn/Kudlich, in: MüKo-StPO, StPO §   257c margin no.  39 et seq.; Knauer/ Lickleder, NStZ 2012, 366, 367. 72  Anyone can lodge a complaint alleging that one of their basic rights has been infringed by public authority after judicial review was without success, Article 93(1) no.  4a GG. 70 

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The narrow focus of enforcement authorities on incriminating evidence can be problematic. The public prosecution office is obliged to ascertain both incriminating and exonerating circumstances by law (§  160(2) StPO). Accordingly, in theory, there should be no such focus. The suspect can apply for evidence to be taken in their defence, but only if it is of importance (§  163a(2) StPO). It is unclear whether this provision is merely a clarification of §  160(2) StPO or whether it grants a right to have evidence taken.73 In any case, there is no legal way to force the public prosecution office to take evidence.74 The question of to what extent subjects may be provoked into providing incriminating evidence is much debated in German law, due to several convictions by the European Court of Human Rights.75 §  136a StPO prohibits the deception of the suspect. The line between legal undercover missions and forbidden deceptions is small.76 So far, the discussion focusses on the consequences of the provocation for the defendant during main proceedings – either a reduction of the sentence or the termination of proceedings.77 However, the constitutional background laid out above also applies to illegal provocation. 2. A tendency to hierarchize evidence in favour of scientific evidence and at the expense of other pieces of evidence. Can an a priori privileged treatment of such evidence be seen as a threat to the legality and fairness of evidentiary procedure in connection with unsatisfactory motivation of enforcement authorities to verify and critically evaluate the same, and with the limited opportunities for private parties to challenge the same? There is no rule giving higher probatory value to scientific evidence in German law. All methods of evidence available for the question of guilt (Streng­ beweisverfahren) – witnesses, expert witnesses, documents and inspection – are of equal value. To my knowledge, there is no debate about giving precedence to scientific evidence. However, it is true that some evidence is regarded as more reliable than others. For example, it has been claimed that witnesses that are related to the suspect have been given the right to refuse to testify because their testimony was unreliable.78 Even if this was true, it does not explain why professional witness73 

Krekeler, NStZ 1991, 367. Schlothauer, MAH Strafverteidigung 2014, §  3 margin no.  121. 75  Furcht v. Germany App no.  5 4648/09 (ECtHR, 23 October 2014); Akbay v. Germany App no.  40495/15 (ECtHR, 15 October 2020). 76 See, e.g., OLG Jena Beck-Rechtsprechung 2019, 24214, in which the undercover police officers offered to find a third person with cancer to take the fall for the suspect in a murder case. 77 See, e.g., BGH NStZ 2018, 355; BGH NStZ 2016, 52; Sinn/Maly, NStZ 2015, 379. 78  Baier, Strafprozessuale Zeugnisverweigerungsrechte außerhalb der Strafprozessordnung als Ergänzung der §§  53 et seq. StPO, 1996, 64 et seq.; Jansen, Das Zeugnisverwei­ gerungsrecht aus §  52 StPO für besondere persönliche Nähe- und Vertrauensverhältnisse, 2004, 153 et seq.; Rengier, Die Zeugnisverweigerungsrechte im geltenden und künftigen Strafverfahrensrecht, 1980, 56 et seq.; Schmidt, JZ 1958, 596, 599 et seq. 74 

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es can refuse to testify, too. Nor does it explain why the seizure of documents and surveillance measures are also limited, although these measures are much more reliable.79 Accordingly, the reliability of evidence does not seem to be a dominant factor in German criminal procedure law. It should also be noted that the evidence is assessed by legal professionals because there are no jury trials in Germany, so a “CSI effect”80 is less likely. Therefore, the risk of such a priorization is rather low. 3. Different boundaries for the freedom of law enforcement authorities to acquire evidence depending on the crime type; a failure by legal regulations to keep up with new technologies to be used in cases for most serious crimes gives rise to a threat of abuse and potentially easier excuse of such practices. How can the present legal regulation be assessed from this perspective (e.g. as to cyber or biological evidence) in the context of threats to the fairness of evidentiary procedure? Are other regulatory standards in place or are any such standards tolerated, being different from those as in the case of traditional evidence? The strict corset of rules in which German criminal law enforcement authorities operate makes it difficult to abuse gaps in the legislation. If it is unclear whether or not a certain technological invention is covered by a specific provision and if the investigative authorities use it nonetheless, the matter will almost certainly be subject to judicial review. Generally, the German legislator takes action when biological or technological innovations make new law necessary. A good example for this is the covert remote search of information technology systems (Online-Durchsuchung). Before the adoption of §  100b StPO, there was a debate about the admissibility of a remote computer search. Some were arguing that the existing provisions could apply to a remote computer search.81 However, in 2007 the Federal Court of Justice decided that this was not true and that an explicit provision allowing this investigative measure was necessary.82 The general rule allowing any investigative measure (§§  161(1), 163(1) StPO) can only apply to slight impairments of fundamental rights and does not cover highly intrusive measures such as a covert remote search of a computer.83 This led to the adoption of §  100b StPO in 2017.84 There are similar developments in the area of biological evidence.

79  Schneider, Strafprozessuale Ermittlungsmaßnahmen und Zeugnisverweigerungsrechte, 2020, 338 et seq. 80 See Chin/Workewych, in: Oxford Handbooks Online 2016, DOI: 10.1093/oxfordhb/ 9780199935352.013.28, available at https://www.oxfordhandbooks.com/view/10.1093/oxford hb/9780199935352.001.0001/oxfordhb-9780199935352-e-28 (last access on 11 January 2022). 81  E.g., Hofmann, NStZ 2005, 121 et seq. 82  BGHSt 51, 211. 83  BGHSt 51, 211 margin no.  2 2. 84  Gesetz zur effektiveren und praxistauglicheren Ausgestaltung des Strafverfahrens vom 17.8.2017, Federal Law Gazette (Bundesgesetzblatt) 2017 I, 3202.

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V. Inviolable boundaries in the acquisition of evidence by law enforcement authorities 1. Please indicate violations in the acquisition of evidence that make the evidence definitely invalid (i.e. indicate prohibited methods of proving facts) The most important provision concerning the method of acquiring evidence is §  136a StPO. It forbids ill-treatment, induced fatigue, physical intervention on the body, the administration of drugs, torture, deception or hypnosis. Threats and compulsion must be based on the measures provided for in criminal procedure law. Measures which impair the suspect’s memory or his capacity to understand the wrongfulness of an act are also forbidden, §  136a StPO also applies to the interrogation of witnesses (§  69(3) StPO). The evidence is excluded by law (§  136a(3)2 StPO). Evidence by a polygraph is also excluded for lack of evidentiary value.85 In some cases, evidence is excluded if the person concerned was not properly informed of their rights. This is true for the testimony of witnesses who are related to the suspect (§  52 StPO) and for the suspect who was not informed of their right to remain silent (§  136(1), 163a(3)2, (4)2 StPO), but not for witnesses who were not informed of their right to remain silent (§  55 StPO). There are also exceptions when people did know their rights without being informed. These rules come from case-law.86 2. Please indicate evidence the acquisition of which is definitely prohibited If a witness refuses to testify (§§  52, 53 StPO), they cannot be coerced to testify. It is also, in principle, forbidden to read out an earlier testimony at trial or ask the interviewing person to give evidence from hearsay (§  252 StPO). 87 The exclusion of this evidence is based on case-law.88 Similarly, according to §  160a(1) StPO, “[a]n investigation measure directed at a person designated in section 53 (1) sentence 1 no.  1, 2 or 4, a lawyer or a non-lawyer provider of legal services who has been admitted to a bar association shall be inadmissible if it is expected to produce information in respect of which such person would have the right to refuse to testify.” This means that all investigative measures directed against clergymen, defence counsels, lawyers or members of a parliament are prohibited if they are expected to produce information that falls within the scope of the individual’s right to refuse to testify. The same is true for measures that are not aimed at the witness (§  160a(1)5 StPO). 85 

BGHSt 44, 308, 319; BGH NStZ 2011, 474, 475. Heger/Pohlreich, Strafprozessrecht, 2018, margin no.  398. 87 See Heger/Pohlreich, Strafprozessrecht, 2018, margin no.  400 et seq. 88  BGH NStZ 2015, 710, 711. 86 

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Another important provision in this context is §  100d(1) StPO: “If there are factual indications to assume that a measure under sections 100a to 100c will only lead to findings in the core area of the private conduct of life, the measure shall be inadmissible.” This prohibition is flanked by an explicit exclusionary rule in §  100d(2)2 StPO: “Findings in the core area of the private conduct of life which are made on the basis of a measure under sections 100a to 100c may not be used.” Although these rules only apply to §§  100a-100c StPO, the general principle behind it is accepted in German law. This means that any evidence that leads to findings in the core area of the private conduct of life is prohibited and excluded from trial.89 Another example is the prohibition of seizure (§  97 StPO). Although there is considerable discussion about what falls within the scope of this prohibition, people agree that the consequence of a violation of this rule is that the evidence will be inadmissible.90 However, it should be noted that the applicability of §  97 StPO sometimes depends on a balancing test (see §§  97(5), 53(1) sentences 1 no.  5, 2, 3 StPO). Expunged previous convictions may not be utilized (§  51 Federal Central Register Law = Bundeszentralregistergesetz – BZRG). Nor is it allowed to take evidence on the judges’ deliberations (§§  43, 45 DRiG). 3. Please indicate a category of interests and values that are decisive for excluding evidence or restricting its examination The theoretical background of exclusionary rules has already been explained above (supra I and III.3). The main concern with independent exclusionary rules is the balance between a violation of fundamental rights and the public interest in effective prosecution. The more individual rights are impaired, the higher ranking has the public interest to be in order to prevent the exclusion of the evidence. There are some explicit independent exclusionary rules. For example, if a medical doctor’s practice is searched and objects are seized that point at an illegal abortion by a patient, §  108(2) StPO states that these objects cannot be used as evidence against the patient. Other rules limiting the use of or excluding evidence that has been found by chance are §§  161(3), 479(2), 100e(6) no.  1 and 81a(3) StPO. Dependent exclusionary rules require a violation of the law when collecting evidence. However, not all violations lead to the exclusion of the evidence. When evidence is to be excluded is much under debate and has been the subject of different theoretical approaches (supra III.3.). Generally, an intentional and purposeful violation of the law will lead to the exclusion of the evidence, e.g., a 89 

90 

BVerfGE 129, 208, 245. Heger/Pohlreich, Strafprozessrecht, 2018, margin no.  398.

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refusal to ask for judicial authorization.91 Another factor that may be taken into account is the hypothetical possibility to acquire the evidence legally: if it had been possible to collect the evidence legally at the time, its exclusion is considered too formalistic.92

VI. Conclusion The area of criminal procedure law is strongly regulated in Germany. There are detailed provisions for the most common investigative measures. Although there is a catch-all competence for the prosecuting authorities to apply any investigative measure (§§  161, 163 StPO), it effectively only applies to minor impairments. Investigative measures based on new technologies such as source telecommunication surveillance (Quellen-Telekommunikationsüberwachung) or covert remote searches of information technology systems (Online-Durchsu­ chung) are usually so serious and bear such risks to the fundamental rights of the persons concerned that they require a special provision and higher procedural safeguards. The reason for this is that German criminal procedure law is very much influenced by the Constitution (supra III.4). Criminal investigations and certainly coercive measures impair the fundamental rights of the suspect and the addressee of the coercive measure, which might also be a witness. The Code of Criminal Procedure justifies these impairments, but, in turn, must comply with the principle of proportionality. This legal set-up is the key that opens the door to arguments based on the Constitution and to the jurisdiction of the Federal Constitutional Court, which has influenced criminal procedure law considerably. The experience of taking constitutional law into account also serves as a basis for including other sources of law such as the European Convention on Human Rights. The impact of constitutional law is also obvious in the balancing approach that is predominantly used in order to decide on the exclusion of evidence. Confronting and balancing the public interest in prosecution and the individual’s fundamental rights is a classic part of German constitutional law doctrine. This approach to exclusionary rules is very flexible. On a positive side, the flexibility makes it easy to dismiss evidence that has been collected legally if its use would violate fundamental rights gravely. On a negative side, the flexibility leads to intransparency, particularly when dealing with evidence that was collected illegally and that is not automatically excluded in German law. It has been pointed out that the reason for this flexible approach is that the German criminal proce91 

92 

Kindhäuser/Schumann, Strafprozessrecht, 2019, §  23 margin no.  10, 30. Kindhäuser/Schumann, Strafprozessrecht, 2019, §  23 margin no.  31 et seq.

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dure tries to establish the truth which is hampered by excluding evidence and that exclusionary rules are therefore “anomalies”.93 Whatever the reason, the current law on exclusionary rules is complicated and intransparent and, therefore, in need of reform. It is also odd that the law on the one hand sets strict boundaries for the investigation and limits the investigating authorities’ freedom considerably, but on the other hand does not provide for clear consequences when these boundaries are violated. Another aspect that is noteworthy is that the roles of the suspect and the public prosecution office seem to be particularly ill-balanced in the investigative phase. Although the investigating authorities are limited by the Code of Criminal Procedure and the Basic Law, they still can avail themselves of substantive investigative powers. In contrast, the suspect has limited influence on the investigation. They are less well informed and, despite arguably having such a right, cannot force the prosecuting authorities to take evidence. The idea in German criminal procedure law is that the public prosecution service objectively tries to establish what really happened (the truth) and, therefore, takes incriminating and exonerating evidence (§  160(2) StPO). Control-mechanisms are the intermediate procedure and especially the fact that the court must directly have access to the evidence. It often happens that the defendant tells a different narrative than the bill of indictment. However, if criminal proceedings are terminated without main proceedings, these checks do not come into effect. It is therefore necessary to have a closer look at the investigative phase and to try to establish more equality.

93  Weigend, in: Gleß/Richter (eds.), Do exclusionary rules ensure a fair trial? A comparative analysis of evidentiary rules, 2019, 61, 87 et seq.

Extraterritorial Application of Statutes and Regulations1 Sören Segger-Piening

I. Introduction Extraterritoriality of statutes and regulations is a topic widely discussed in Germany.2 In this respect, it first appears necessary to define the term in the sense used here. This is followed by some subject matter delimitations of the topic, and finally by an explanation of the concept behind this country report. 1. Definition of the term extraterritoriality It should be pointed out right at the beginning that the term “extraterritoriality” itself is not clearly defined.3 In part, the term is associated in international writing with a valuation in the sense that a certain element of illegality or illegitimacy is inherent to an extraterritorial regulation, especially under consideration of recognised principles of international law.4 On the other hand, there is 1  For helpful comments I would like to thank Professor Dr. Oliver Remien, Professor Dr. Hannah Buxbaum and Leon Uebel­hör. All web pages were last accessed on 18.07.2022. This country report is based on the Questionnaire of the General Rapporteur Professor Dr. Hannah Buxbaum. 2  A few numbers taken from relevant German legal databases shall demonstrate the sheer number of “results” when searching for “extraterritorial”: Beck-online: over 4,000 results; juris: 2,906 results; Nomos e-Library: 1,201 results; Duncker & Humboldt eLibrary, 304 results. However, if you take a look at the U.S. journals and conduct a search via Westlaw you find more than 10,000 results. Furthermore, some of the German results refer to identical cases that are published in different journals. Nevertheless, these numbers demonstrate at least two things: 1. Extraterritoriality is a topic widely discussed in Germany. 2. It is impossible to take account of all the developments in all the different fields of law. Thus, this report naturally does not cover all the different fields of law; the subject matter delimitations are further spelled out below at 2. 3  Recently in German writing on this subject, Kurkin, Extraterritorialität, 2021, 44 et seq.; see further i.a. Meng, Extraterritoriale Jurisdiktion im öffentlichen Wirtschaftsrecht, 1994, 73 with different potential meanings; in international writing with further references Ryngaert, Jurisdiciton in International Law, 2nd ed. 2015, 7; early discussion of the notion in German writing by Schlochauer, Die extraterritoriale Wirkung von Hoheitsakten nach dem öffentlichen Recht der Bundesrepublik Deutschland und nach internationalem Recht, 1962, 10 et seq. 4  Ryngaert (fn.  3), 7; however, this does not seem to be the common approach to this notion; Kurkin (fn.  3), 47 refers in this context to a naturalistic understanding (naturrechtliches Begriffsverständnis).

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also an understanding of the term according to which an extraterritorial regulation is precisely one that constitutes a lawful regulation due to certain connecting factors legitimised under international law.5 This ambiguity in the understanding of the term is also emphasised in international literature. 6 In the following, extraterritoriality is understood in a technical sense, following questions 6 and 7 of the Questionnaire. An extraterritorial regulation is one that is factually linked to a situation that occurs either wholly or in part outside the territory of the law-making state and/or prescribes a legal consequence for such a situation. 7 Thus, the extraterritorial application of the law is important, be it by means of a connection to a circumstance located abroad in the broadest sense or a legal consequence pronounced on such a circumstance. Such an understanding of extraterritoriality is on the one hand restrictive, because it excludes a number of areas such as enforcement by focusing on the application of rules and regulations, and on the other hand boundless, especially against the background of private international law. Therefore, the need arises to initially clarify the areas not covered by this study and also to add a demarcation from private international law in general. Finally, it should be noted that the foregoing definition of extraterritoriality does not so much lead to the formation of a legal term, but rather circumscribes a legal phenomenon. 2. Subject matter delimitations a) Exclusion of the jurisdiction to enforce and adjudicate In accordance with the delimitations of the questionnaire, the issue of the jurisdiction to enforce is not addressed. 8 It is true that there is a scattered opinion in German writing that only such an extraterritorial enforcement of the law justifies speaking of an extraterritorial legal practice.9 However, as seen, this does not correspond to the prevailing opinion and should rather be qualified as an individual opinion. Excluded as well is the limitation of the jurisdiction to adjudicate in matters involving certain foreign persons, such as diplomats.10 5  Herdegen, Völkerrecht, 20 th ed. 2021, sect. 26 n.  3; Kurkin (fn.  3), 47 et seq. refers in this context to a positivistic understanding (positivistisches Begriffsverständnis). 6 See i.a. Buxbaum, 57 Am. J. Comp. L 631, 635 (2009). 7 Cf. Meng (fn.   3), 73 et seq.; Schnyder, Wirtschaftskollisionsrecht, 1990, 58 et seq.; Schlochauer (fn.  3), 10; comp. also Dornis, in: BeckOGK, Internationales und europäisches Finanzmarktrecht, ed. 1.3.2020, n.  166. 8 Comp. in this regard however i.a. Mössle, Extraterritoriale Beweisbeschaffung, 1990, passim; Remien, Rechtsverwirklichung durch Zwangsgeld, 1992, passim; Meng (fn.  3), 248 et seq. 9  Wengler, in: RGRK, 12th ed. 1981, Bd.  6 1. Teilband, 13, 21. 10  Comp. sects. 18–20 of the Courts Constitution Act (Gerichtsverfassungsgesetz) in this sense.

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b) Exclusion of non-special interest based private international law While the two preceding limitations of this report result at least indirectly from the choice of subject matter, the demarcation from private international law in general is much more difficult to accomplish. According to the common continental European understanding of modern conflict-of-law rules developed by Savigny, these rules aim to reveal the closest connection of a legal relationship to a legal system.11 Thus, the facts of the case may occur at least partly abroad and German law is still applicable – or vice versa foreign law in Germany.12 For example, Art.  4 para.  1 Rome II Regulation13 is based on the place of the damage, so that German law applies to a person acting abroad if the place where the damage occurs is situated in Germany. If one also takes a look at the numerous other conflict-of-law rules, it quickly becomes clear that there can be virtually innumerable cases in which conduct takes place exclusively or partly abroad and is nevertheless subject to a German rule, since the conflict-of-law rule leads to the application of German law. The background to this is the search for a connecting factor that best realises the interests from a private international law point of view, in other words, the search for the legal order that appears to be the most suitable from a territorial point of view. In principle, the consideration of state interests is not in the foreground. However, in today’s modern conflict of laws, there are a number of rules whose connecting factors also take state interests into account.14 Particularly in the field of international economic regulation, there are many examples of this, which will be considered infra, II.15 For the following report, only those norms of private international law will be examined with regard to their extraterritorial effect that at least also serve the realisation of state interests. The focus will be on the broad field of economic regulation.

11  Instead of all Kegel/Schurig, Internationales Privatrecht, 9 th ed. 2004, 131 and 181 et seq. on the history of modern conflict of laws. 12 Cf. Meng (fn.  3), 161 et seq.; 468 et seq.; Siehr, Internationales Privatrecht, 2001, 368 et seq.; Schnyder (fn.  7), 59 n.  78. 13  Regulation (EC) No 864/2007 of the European Parliament and of the Council of 11 July 2007 on the law applicable to non-contractual obligations, hereafter: Rome II, OJ L 199 from 31.7.2007, 40 et seq. This regulation unifies private international law for non-contractual obligations within the Union; it also contains rules on applicable (private) antitrust law (see infra II.1.a)aa)), unfair competition (see infra II.1.a)bb)) and intellectual property (see infra II.1.b)). 14  See esp. Schnyder (fn.  7), 121 et seq.; comp. further i.a. Kurkin (fn.  3), 56 et seq.; Basedow, RabelsZ 52 (1988), 8, 20 et seq. 15  However, state interests can also play a role in the field of international family law, i.a. Art.  10 Rome III Regulation, cf. Rademacher, in: Rupp et al., IPR zwischen Tradition und Innovation, 2019, 121 et seq.

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c) Exclusion of fundamental rights and constitutional law This country report also does not address the possible extraterritorial effects of human rights in particular and fundamental rights or constitutional law in general; these areas were excluded by the Rapporteur General. Comparable questions arise, however, in part in criminal law, taking into account the principle of universal jurisdiction, see infra VII. 4. 3. Outline of the report – methodology Section II. first provides an overview of the current practice and trends. In addition to a brief introduction into each subject-matter, particular attention is paid to the connecting factors in question and the impact of European law. In the following sections, certain principles related to the issue of extraterritoriality will be examined in relation to several different areas of law, i.e. cross-cutting. On the one hand, this refers to principles or rules that lead to a limitation of an extraterritorial application of the law, see IV.–VI. On the other hand, it is also conceivable to examine the various connecting factors for an extraterritorial applicability, such as the active and passive personal principle, the effects doctrine or the principle of universality, see VII. and VIII. Furthermore, the topics of corporate nationality, presumption against extraterritoriality and blocking statutes are to be dealt with under IX.–XI.

II. Overview of the current practice and trends In Germany, there are a number of very different regulations that are applied extraterritorially. International economic regulation plays a particularly prominent role. The relevant sub-areas are presented below under 1. without claiming to be exhaustive; the term economic regulation is understood broadly here and also includes, for example, intellectual property and data protection law. Subsequently, the important field of criminal law is to be dealt with under 2. Finally, some current trends will be discussed in subsection 3. 1. Extraterritoriality and economic regulation The extraterritorial application of law is particularly important in economic regulation. In the course of the ever increasing globalisation during the 20th century, the question also came to the fore in Germany to what extent regulations should be applied extraterritorially.16 Today, a broad practice has developed in this respect: 16 See for the historical development i.a. Erler, Grundprobleme des internationalen Wirtschaftsrechts, 1956, 5 et seq. and passim.

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a) Competition law The term competition law (Wettbewerbsrecht) in Germany is twofold.17 First, competition law can be understood in the sense of antitrust law. Thus, protection is provided for the creation and preservation of a relevant market, i.e. competition as an institution. However, it is also conceivable to understand competition law in the sense of fair-trading practices law. This aims at regulating behaviour on a market, for example in the sense of prohibiting misleading advertising. aa) Competition law in the sense of antitrust Antitrust law played a very subordinate role in Germany until the end of the Second World War.18 The Reichsgericht (Supreme Court of the German Reich) contributed significantly to this by expressly describing cartels as permissible in a decision from 1897.19 The German Reich also actively promoted cartels, not least to be able to intervene in economic processes in a simplified way. Although a “decree against the abuse of economic positions of power” (Verordnung gegen den Missbrauch wirtschaftlicher Machtstellungen) was issued in 1923 as a result of hyperinflation, this in no way led to a curtailment of the previous practice. The National Socialists then increasingly used cartels as a way for the state to intervene in the economy. Following earlier German academic endeavours20 and against this background, it was an important endeavour of the Western Allies to transform Western Germany into a market economy system and to end the practice of cartels. After the founding of the Federal Republic of Germany, however, it took until 1957 for today’s Act against Restraints of Competition 21 (Gesetz gegen Wettbewerbsbeschränkungen, hereafter: GWB) to be passed, whereas in the Soviet zone and the German Democratic Republic a centrally planned socialist economy was established. From the beginning, the GWB established a prohibition of agreements restricting competition (Verbot wettbewerbsbeschränkender Vereinbarungen, sect. 1 GWB) as well as a section regarding prohibited conduct of dominant undertakings (Verbotenes Verhalten von marktbeherrschenden Unternehmen, sect. 19 GWB). Later, merger control was added as well as a whole series of other amendments. Since the end of the 1950s, European antitrust law has also become increasingly important, but its applicability depends on “agreements and practices on the part of undertakings 17  For a demarcation, see i.a. Remien, in: Soergel, BGB Bd.  27/1, 13th ed. 2019, Art.  6 n.  10; Thorn, in: Palandt, BGB, 80th ed. 2021, Art.  6 n.  5. 18 On this and the following in particular Mäsch, in: Berg/Mäsch, Kartellrecht, 3rd ed. 2018, Einl. n.  3 et seq.; Bechtold/Bosch, GWB, 9th ed. 2018, Einf. n.  1 et seq. 19  RGZ 38, 155. 20  See esp. Böhm, Wettbewerb und Monopolkampf, 1933. 21  Translation available at https://www.gesetze-im-internet.de/englisch_gwb/.

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which ‘may affect trade between Member States’”.22 This criterion is traditionally interpreted broadly.23 In particular, in cases of lack of appreciability (Spür­ barkeit, the translation appreciability is used by the EU-Commission, one could also refer to a lack of a material impact), national law remains applicable, for example in the case of market shares of less than 5 per cent and a turnover of no more than 40 million euros.24 The international applicability of the GWB is governed by sect. 185 para.  2. The effects doctrine is established by stipulating that the [relevant] “provisions of […] this Act shall be applied to all restraints of competition having an effect within the area of application of this Act, even if they were caused outside the area of application of this Act”. For example, the GWB applies to a cartel agreement or a merger of foreign companies, which have an effect in Germany. The wording of the provision has remained unchanged since the entry into force of the GWB.25 The extent to which sect. 185 para.  2 GWB is to be interpreted restrictively, also against the background of international law considerations, the extent to which principles of comity play a role and, finally, whether there is a need for a balancing requirement in the case of conflicting interests in the sense of reasonableness, is disputed and frequently discussed. All these questions will be returned to infra, IV.-VI. Furthermore, it should be noted that the substantive scope of application of sect. 185 para.  2 GWB is limited.26 The provision governs the applicability of the GWB only in constellations in which German authorities enforce German antitrust law, i.e. cases of antitrust administrative law. Private antitrust law, which is also becoming increasingly important for private enforcement in Germany as well as the European Union, is not covered by sect. 185 para.  2 GWB. Instead, Art.  6 para.  3 Rome II is applied here in a harmonised manner across Europe. However, Art.  6 para.  3 Rome II is also based on the effects principle or marketplace principle and thus a similar approach is taken.27 Furthermore, the interna22  See Commission Notice, Guidelines on the effect on trade concept contained in Art.  81 and 82 of the Treaty, OJ C 101, 27/04/2004 P. 0081, n.  1, quoting Art.  81, 82 EC treaty, now 101, 102 TFEU. 23 See i.a. EuGH 30.6.1966, Rs. 56/65, Slg. 1966, 281, 303; Zimmer, in: Immenga/Mestmäcker, Wettbewerbsrecht, Bd.  1, 6th. ed. 2019, Art.  101 Abs.  1 n.  173 et seq. 24  See Commission Notice (fn.  2 2), n.  51 et seq., esp.  53. 25 See i.a. Klees/Stoll/Holterhus/Schebstadt, in: Kölner Kommentar zum Kartellrecht, 2014, sect. 130 GWB, n.  6 4 et seq. 26  On this and the following i.a. Mäsch, in: Berg/Mäsch (fn.  18), sect. 185 n.  27, 36; Klees/ Stoll/Holterhus/Schebstadt (fn.  25), sect. 130 GWB, n.  78 et seq., 82 et seq.; comp. also Remien, in: Soergel (fn.  17), Art.  6 n.  34, 35. 27 See i.a. Remien, in: Soergel (fn.  17), Art.  6 n.  51; Illmer, in: Magnus/Mankowski, ECPIL – Rome II, 2019, Art.  6 n.  129 (speaking of a “market effects principle”). There are also some differences esp. with regard to multi state scenarios; furthermore sect. 185 para.  2 GWB is a unilateral rule, whereas Art.  6 para.  3 Rome II also leads to the application of foreign law (all­ seitige Kollisionsnorm).

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tional applicability of the European prohibitions of cartels (Art.  101 et seq. TFEU) is not determined by sect. 185 para.  2 GWB, but derives from the corresponding norms themselves;28 the Rome II Regulation is not applicable either.29 bb) Unfair competition Besides antitrust law, unfair competition law is also part of competition law. Pursuant to a memorandum of the EU commission regarding the Rome II regulation unfair competition includes “acts calculated to influence demand (misleading advertising, forced sales, etc.), acts that impede competing supplies (disruption of deliveries by competitors, enticing away a competitor’s staff, boycotts), and acts that exploit a competitor’s value (passing off and the like)”.30 Many of those acts are governed by European directives.31 These are implemented into the Act against Unfair Competition32 (Gesetz gegen den unlauteren Wettbewerb, hereafter: UWG). With regard to the international dimensions of unfair competition, the Rome II Regulation again plays an important role. Article 6 para.  1 and para.  2 Rome II contain the conflict-of-law rules for claims resulting from a violation of fair competition practices. The connecting point pursuant to para.  1 is the place “where competitive relations or the collective interests of consumers are, or are likely to be, affected”. Even though the term “market” is not directly mentioned, the rule is associated with the “effects” or “market effects principle”.33 It has a number of similarities to the effects doctrine pursuant to Art.  6 para.  3 Rome II. However, most authors agree that Art.  6 para.  1 Rome II is to be differentiated from Art.  6 para.  3 Rome II.34 The former refers to the market where the be­ haviour takes effect towards competitors and consumers, the latter asks whether free competition is restricted because of the anti-competitive act.35 In practice however, differences are rather minimal and thus Art.  6 para.  1 Rome II will be dealt with when looking at the effects principle, infra VII. 3. 28 See

i.a. Rehbinder, in: Immenga/Mestmäcker (fn.  23), II. A. esp. n.  6 et seq. Mankowski, RIW 2008, 177, 179; Remien, in: Soergel (fn.  17), Art.  6 n.  33. 30  Com (2003), 427 15; the exact definition of the term varies from member state to member state, however in the sense of the Rome II Regulation a coherent and autonomous interpretation of the term is called for, with the CJEU as authoritative instance. 31  For an overview see Ohly, in: Ohly/Sosnitza, Gesetz gegen den unlauteren Wettbewerb, 7th ed. 2016, Einf. C. 32  Translation available at https://www.gesetze-im-internet.de/englisch_uwg/. 33 See i.a. Illmer, in: Magnus/Mankowski (fn.  27), Art.  6 n.  69; Remien, in: Soergel (fn.  17), Art.  6 n.  16. 34 Esp. Mankowski, in: MünchKomm-Lauterkeitsrecht, 3rd ed. 2020, A. II. n.  142 et seq.; doubting Remien, in: Soergel (fn.  17), Art.  6 n.  16 with whom it must be agreed that many similarities exist. 35  Mankowski, in: MünchKomm-Lauterkeitsrecht, (fn.  34), A. II. n.144; Illmer, in: Magnus/Mankowski (fn.  27), Art.  6 n.  70. 29 

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By focusing on the place where the interests are affected, it also becomes clear that actions abroad can also be covered by German regulations. If, for example, advertising is placed on the German market from abroad, the admissibility of this advertising is determined according to the German regulations on unfair competition.36 b) Intellectual property Extraterritoriality is also discussed in the domain of intellectual property.37 Regarding substantive law, a distinction is traditionally made in Germany between copyright (Urheberrecht), including the law of related rights (verwandte Schutz­ rechte), and industrial property (gewerblicher Rechtsschutz), although intellectual property (Geistiges Eigentum) is increasingly accepted as a generic term in the specific legal context, especially for questions of applicable law.38 While copy­right arises informally and ipso iure and serves to protect cultural achievements, industrial property protection comprises rights that, generally, must be registered and serve commercial activity, such as patent and trade mark rights as well as utility model and design rights. The international dimensions of intellectual property in Germany are a web of national and European regulations. Traditionally, the law of the state for which protection is sought (Schutzlandprinzip), the lex loci protectionis, has prevailed as the conflict rule in Germany, both in the field of copyright and industrial property rights.39 According to the prevailing opinion, this results from national conflict of laws principles and/or international conventions for the question of whether a protected right exists at all.40 The question of which law applies to the legal consequences of the infringement (remedies) as well as the scope of protection, on the other hand, is decided with recourse to Art.  8 Rome 36 See i.a. Remien, in: Soergel (fn.  17), Art.  6 n.  16; Thorn, in: Palandt (fn.  17), Art.  6 n.  9; from case law i.a BGH GRUR 2004, 1035; OLG Hamm, MMR 2014, 17. 37 See i.a. Drexl, in: MünchKomm-BGB, Bd.  13, 8th ed. 2021, Art.  8 Rome II n.  306 et seq.; Beckstein, Einschränkungen des Schutzlandprinzips, 2010, 152 et seq.; comp. also Dornis, Trademark and Unfair Competition Conflicts, 2017, 381 et seq. 38  For a closer look at the term intellectual property from the German perspective, see Götting, GRUR 2006, 353. 39 Essential Ulmer, Die Immaterialgüterrechte im internationalen Privatrecht, 1975, 12; from today’s commentary literature, for example Drexl, in: MünchKomm-BGB (fn.  37), Art.  8 n.  199; from the case law BGH, IIC 1999, 227, 229; see below on the partly divergent conception for the partly universally conceived copyright. 40  I.a. Thorn, in: Palandt (fn.  17), Art.  8 n.  9; Drexl, in: MünchKomm-BGB (fn.  37), Art.  8 n.  176 et seq.; v. Bar/Mankowski, Internationales Privatrecht/2, 2nd ed. 2019, sect. 2 n.  356, 358 et seq.; Metzger, in: Magnus/Mankowski (fn.  27), Art.  8 n.  50; the opposing opinion, i.a. Grünberger, ZvglRWiss 108 (2009), 134, 157 et seq.; Ahrens, WRP 2011, 945, 948–950 wants to apply the Rome II reg. to the question of the existence of the property right as well and in this respect denies the construction via a preliminary question. This is less convincing; after all, it is not evident why the impairment of intellectual property should be treated differently from the impairment of physical property.

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II. The latter, however, also refers to the lex loci protectionis in paragraph 1 for intellectual property rights that are not standardised throughout the Union, such as copyright. In this respect, there is, in principle, a parallelism between the question of the applicable law regarding the existence of an IP-right as well as the applicable law for questions regarding infringements.41 If, for example, protection of a trademark is sought in Germany, then German substantive law must decide how far the protection of the trademark extends. For both copyright law and industrial property rights, it is generally assumed in Germany that the so-called territoriality principle applies in this respect – at the level of substantive law.42 Accordingly, intellectual property rights are only valid for the state that grants or recognises the right.43 Such an understanding conceptualises all intellectual property rights as objects of a national state, which are only protected within its borders, and thus initially stands in the way of an extraterritorial application. However, it should not be concealed at this point that in the field of copyright, a universalistic and thus inevitably extraterritorial approach is also advocated,44 although this approach has not prevailed, either in case law or in the prevailing doctrine. The consequence of this principle of territoriality is also that an act of infringement must in principle take place within domestic territory, since according to the ideas of the principle of territoriality the protected right does not exist abroad and therefore cannot be infringed.45 However, the limits of this approach became apparent at an early stage. A first step was taken to the effect that even a partial impairment of an IP-right in Germany – and partly abroad – was considered a sufficient act of infringement under certain conditions. The details in this regard are dealt with infra, VIII. Another significant development in the present context was to consider acts abroad as domestic acts of infringement and/or to allow them to fall under the principle of territoriality while defining certain limitations.46 Initially, these were in particular cases where television broadcasts were deliberately transmit41  Deviations may occur, as under German private international law the renvoi is still applicable, Art.  4 para.  1 s. 1 EGBGB, whereas it is excluded by Art.  24 Rome II, see further v. Bar/Mankwoski (fn.  40), 369. 42 See i.a. McGuire, in: BeckOGK, ed. 1.12.2016, Art.  8 n.  30; Drexl, in: MünchKomm-BGB (fn.  37) Art.  8 n.  14; Beckstein (fn.  37), 113 et seq.; Fezer, Markenrecht, 4th ed. 2009, part H n.  11. However, this is disputed. 43  McGuire, in: BeckOGK, Art.  8 n.  28. 44  I.a. Drobnig, RabelsZ 1976, 195 et seq.; Schack, Urheber. und Urhebervertragsrecht, 9 th ed. 2019, n.  1026 et seq.; Oppermann, Die kollisionsrechtliche Anknüpfung internationaler Urheberrechtsverletzungen, 2011, 83 et seq. and passim. 45 Very clear already Ulmer (fn.   39), 9; from the current writing i.a. Fezer/Koos, in: Staudinger, Internationales Wirtschaftsrecht, ed. 2019, n.  897; from case law i.a. BGH GRUR 1994, 798, 799. 46 See i.a. Beckstein (fn.  37), 51 et seq.; Fezer/Koos, in: Staudinger (fn.  45), n.  898 et seq.; Drexl, in: MünchKomm-BGB (fn.  37), Art.  8 n.  287 et seq.

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ted from abroad to domestic territory in order to take advantage of weaker copy­right protection at the place of the act.47 Based on the so-called Bogsch theory,48 the courts gradually accepted that the law of the receiving state should also be taken into account.49 Similar to the effects doctrine, the extent to which an act abroad could also affect domestic IP rights was increasingly taken into account. In the context of the internet, it was gradually recognised that the mere accessibility of an internet page would, in principle, be sufficient to meet the criterion of using/offering within the meaning of i.a. sect. 14 para.  2 of the Act on the Protection of Trademarks and other Signs50 (Gesetz über den Schutz von Marken und sonstigen Kennzeichen) or sect. 17 para.  1 of the Act on Copyright and Related Rights51 (Gesetz über Urheberrecht und verwandte Schutzrechte). At the same time, however, German courts have always been aware that such a broad understanding requires limitation. The Hotel Martime case of the Federal Court of Justice (Bundesgerichtshof) concerning trademark law is significant in this respect.52 First, the Federal Court of Justice stated that offering services in Germany using the trademark was sufficient in principle. However, a restriction was then made to the effect that “not every offer of foreign services on the internet that can be accessed in Germany may justify claims under trademark law if there is a risk of confusion with a domestic trademark”. Rather, it is necessary “that the offer has a sufficient economically relevant domestic connection (referred to by WIPO as ‘commercial effect’)”. This is ultimately a criterion similar to the requirement of appreciability53 or a de minimis rule54 which is also known in antitrust law.55 In the case at hand, the Federal Court of Justice denied such a connection even though the website was also directed at Germans, but only had a minimal impact on the plaintiff’s economic activity. Furthermore, on the legal consequences side, it must be taken into account that possible claims under German law can only relate to infringements in Germany, so claims for 47  From case law i.a. OLG München ZUM 1995, 328, 332 et seq.; LG Stuttgart GRUR Int 1995, 412, 413; comp. also Fezer/Koos, in: Staudinger (fn.  45), n.  1102. 48 Originally Katzenberger, GRUR Int 1983, 895, 913 et seq.; today i.a. Drexl, in: MünchKomm-BGB (fn.  37), Art.  8 n.  289 et seq. 49  For trademark law i.a. BGH GRUR Int 2005, 433, 434 (Hotel Martime); OLG München MMR 2005, 608, 609; BGH, GRUR 2018, 417 Rn 37; comp. Fezer/Koos, in: Staudinger (fn.  45), n.  1019. Especially for internet cases and the field of copyright law, for example OLG München ZUM-RD 2012, 88, 91; LG Hamburg GRUR-RR 2004, 313, 314; comp. Fezer/Koos, in: Staudinger (fn.  45), n.  1113. 50 Translation available at https://www.gesetze-im-internet.de/englisch_markeng/eng lisch_markeng.html. 51 https://www.gesetze-im-internet.de/englisch_urhg/englisch_urhg.html. 52  BGH, GRUR Int 2005, 433, it concerned advertising of a Danish hotel; all the following quotations are taken from the decision, translation by author. 53  In this sense Fezer/Koos, in: Staudinger (fn.  45), n.  1116; comp. also Drexl, in: MünchKomm-BGB (fn.  37), Art.  8 n.  318 et seq. 54  In this sense Metzger, in: Magnus/Mankowski (fn.  27), Art.  8 n.  28. 55 See infra, IV.2.b)aa).

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damages are limited to the domestic infringement and claims for injunctive relief should be limited to the legal order of the country for which protection was sought after.56 c) Financial regulation and supervision Extraterritorial application of the law also takes place in so-called international financial regulation (internationales Finanzmarktrecht). The regulation of financial markets from a German perspective is a complex interplay of international standards,57 European law58 and national German legislation 59. Of the many different subareas of the regulation of the financial market, two shall be looked at more closely. One subarea is the institutional regulation and supervision of banks and financial service providers in terms of a prudential supervision, i.a. minimum capital, risk management and so forth.60 In Germany this is governed by the Banking Act61 (Gesetz über das Kreditwesen, hereafter: KWG). Another area is the regulation and supervision of stock exchanges and other (electronic/virtual) trading venues. From a German perspective this is mostly governed by the Securities Trading Act62 (Wertpaphierhandelsgesetz, hereafter: WpHG), which is also referred to as the basic law of capital market law (Grund­ gesetz des Kaptialmarktrechts) 63. According to this, there are, inter alia, organi-

56 See

i.a. Drexl, in: MünchKomm-BGB (fn.  37), Art.  8 n.  324 et seq. standards are often set by soft law instruments, thus non-binding rules, for a current overview see i.a. Kronke/Haubold, in: Kronke/Melis/Kuhn, Handbuch Internationales Wirtschaftsrecht, 2nd ed. 2017, part. L. n.  8; Freis-Janik, in: Kümpel/Mülbert/Früh/ Seyfried, Bankrecht und Kapitalmarktrecht, 6th ed. 2022, Bankaufsichtsrecht, n.  2.3. Comp. further Marauhn, in: Grothe/Marauhn, The Regulation of International Financial Markets, 2006, 10 et seq. 58  Since the financial crises of 2008 the amount of European directives and regulations has substantiality grown; many of the German acts referred to hereafter implement European directives. Good overview by Kronke/Haubold (fn.  57), n.  9 et seq., with n.  26 giving an overview about all the different directive and regulations; more recent but with a focus on the trading of securities Assmann, in: Assmann/Schneider/Mülbert, Wertpapierhandelsrecht, 7th ed. 2019, Einleitung n.  1 et seq., n.  26. 59  Complete overview i.a. Kümpel/Mülbert/Früh/Seyfried (fn.  57), passim; see also Kron­ ke/Haubold (fn.  57), n.  57 et seq. 60  For an overview see i.a. Köhler, in: Schwintowski, Bankrecht, ch. 5 part. B. (Gegenstand der Aufsicht); more academic and transatlantic point of view – still from German scholars – by Faia/Hackethal/Haliassos/Langenbucher, Financial Regulation, 2015, passim, with a focus on micro- and macro-prudential regulation as well as investor and borrower protection. 61 Translation available at https://www.bafin.de/SharedDocs/Downloads/EN/Aufsichts recht/dl_kwg_en.html. 62 Translation available at https://www.bafin.de/SharedDocs/Veroeffentlichungen/EN/ Aufsichtsrecht/Gesetz/WpHG_en.htm. 63  Kronke/Haubold (fn.  57), n.  63; Hirte/Möllers, in: Hirte/Heinrich, WpHG, 2nd ed. 2014, Einl. n.  3. 57  International

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sational and conduct rules for certain trading platforms (sects. 72 et seq. WpHG); a special licensing requirement arises from the KWG. 64 The problem of the international regulation of the capital market is the increasing globalisation and digitalisation.65 This makes it much easier for credit institutes or electronic trading platforms to look for a location in an offshore centre or a “tax haven”, for example, and thus circumvent regulatory requirements. However, there are also counter-strategies of the law-making state by extending the scope of its law extraterritorially. As with antitrust law and fairtrading law, the effects doctrine respectively the marketplace principle is applied. 66 An example is sect. 102 WpHG, according to which “markets in financial instruments whose registered office is outside the European Union […], or their operators, require written authorisation from BaFin if they grant trading participants whose registered office is in Germany direct market access by means of an electronic trading system”. This is also referred to as the target market principle, whereby this is synonymous with the effects doctrine. 67 The foreign provider therefore does not formally have to meet the requirements of sects. 72 et seq. WpHG and does not regularly require an authorisation pursuant to the KWG,68 but similar standards are applied when granting the authorisation pursuant sect. 102 WpHG. In practice, 17 companies have already received an authorisation according to sect. 102 WpHG or the identical predecessor standard of sect. 37i WpHG.69 A similar approach is taken by sect. 32 KWG for banks or other finical service providers that aim for national consumers from foreign territory. However, here a closer connection is needed since financial services need to be provided in Germany, sect. 32 para.  1 S.  1 KWG. The Federal Administrative Court 64 

See sect. 1 para.  1a no.  1b, d, sect. 2 para.  6 no.  16 para.  12 KWG. These risks have been discussed already before the financial crises of 2008, see i.a. Ma­ rauhn (fn.  57), 14 et seq.; more recently esp. Dornis, in: BeckOGK (fn.  7), n.  91 et seq. with further references; comp. also Lehmann, in: MünchKomm-BGB, Internationales Finanzmarktrecht, Bd.  13, 8th ed. 2021, n.  9 et seq.; discussed also by Meng (fn.  3), 331 et seq. 66 See i.a. Spindler, WM 2001, 1689 et seq.; Christoph, ZBB 2009, 117, 119; Lehmann, in: MünchKomm-BGB (fn.  65), n.  121 et seq.; Dornis, in: BeckOGK (fn.  7), n.  171 et seq. 67  Lehmann, in: MünchKomm-BGB (fn.  65), n.  207; v. Hein, in: Schwark/Zimmer, WpHG, 5th ed. 2020, sect. 102 n.  4. 68 On the problematic overlap regarding a so-called Organised Trading Facility while pleading for a teleological reduction Döhmel, in: Assmann/Schneider/Mülbert (fn.  58), before sects. 102–105 WpHG n.  9. 69  The authorisation must be published in the Federal Gazette (Bundesanzeiger) pursuant to sect. 102 para.  3 WpHG. The Bundesanzeiger is available at www.bundesanzeiger.de and is fully searchable. The authorisations are published as follows: BAnz AT 31.08.2021 B4; for the following citations the addition “BAnz AT” has been sparred out: 20.08.2020 B2; 20.09.2019 B5; 06.05.2019 B3; 06.05.2019 B4; 03.05.2019 B4; 03.05.2019 B6; 03.05.2019 B7; 03.05.2019 B5; 10.11.2017 B6; 16.05.2017 B7; 16.05.2017 B8; 03.09.2014 B2; 22.08.2014 B3; 28.03.2014 B3; eBAnz AT 116 2009 B3; eBAnz AT 45 2007 B1. 65 

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(Bundesverwaltungsgericht) decided in the FIDIUM Case that such a provision of services can also take place virtually, especially by disseminating a credit application formula via the internet.70 This is very similar to a marketplace principle.71 d) Data protection and data economy A more and more emerging field in terms of the extraterritorial application of the law is the protection of personal data and as an underlying goal the protection of privacy. Of course, this also entails the regulation of companies whose business model lies in the processing of such personal data and thus the regulation of the most valuable companies worldwide.72 Against this background, the overriding economic importance of data protection law in the age of the information society becomes apparent. At the European level, the General Data Protection Regulation, which is applicable since May 2018, is particularly relevant. Even though this instrument covers a number of regulatory areas, it only aims for a general data protection regulation. Thus, a number of areas is left for the member states to further specify and regulate.73 In Germany, such national regulations can be found in the Federal Data Protection Act74 (Bundesdaten­ schutzgesetz, herafter BDSG) as well as in the data protection laws of the states (Bundesländer). With regard to the international and extraterritorial applicability of both the GDPR and the BDSG, the active personality principle in the form of the establishment principle and the effects doctrine in the form of the marketplace principle apply. The former will be dealt with infra, VII.1, the latter is scrutinized here. Sect. 1 para.  4 sentence 2 no.  3 BDSG refers in this respect to the rules of the GDPR. Article 3 of the GDPR governs the geographical – and thus international – applicability, whereby para.  2 refers to the marketplace principle. First of all, Art.  3 para.  2 lit.  a) GDPR establishes a link to the offering of goods or services to persons in the Union; they do not need to be residents or citizens. This is comparable to the principle of targeting/directing, as it is also laid down in the extraterritorial provisions of international consumer protection law in Art.  6 para.  1 Rome I and Art.  17 para.  1 Brussels Ia Regulation.75 Thus, it is decisive, whether, for example, a website specifically offers goods or 70 

BVerwGE 133, 358; see also ECJ ECLI:EU:C:2006:631. discussion of the international dimension of sect. 32 KWG and references to the FIDIUM-case with further references i.a. by Dornis, in: BeckOGK (fn.  7), n.  349 et seq. 72 See i.a. https://www.statista.com/statistics/263264/top-companies-in-the-world-bymarket-capitalization/. 73  Depending on how one counts up to 70 opening clauses in the GDPR can be found, see Hornung/Spiecker gen. Döhmann, in: Simitis/Hornung/Spiecker genannt Döhmann, Datenschutzrecht, 1st. ed. 2019, Einl. n.  226. 74  Translation available at https://www.gesetze-im-internet.de/englisch_bdsg/. 75  See for this and the following i.a. Brkan, EDPL 2016, 324, 338; EDPB, Guidelines 3/2018 71  Profound

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services to persons within the Union; according to the 23rd recital, criteria for this can be a special linguistic design (offer of a U.S. company in German) or an offer in the currency of an EU citizen. Against this background, Art.  3 para.  2 lit.  a) GDPR is considered to be less problematic and, with its 23rd recital, is obviously aimed at offers that are directed at persons within the Union and not merely offers that can be accessed via a website from the Union. The situation is completely different – and much more problematic – with regard to the behavioural monitoring provided for in Art.  3 para.  2 lit.  b) GDPR. According to this provision, it is sufficient for the GDPR to apply that the behaviour of individuals in the Union is – for example – monitored by tracking internet activities through the placing and/or reading of cookies.76 All thirdcountry websites that provide access to their content, for example on the basis of behavioural advertising – and thus monitor the behaviour via cookies –, would therefore be covered by the GDPR according to the prevailing view.77 Hence, press companies from non-EU countries partly exclude Europeans from their websites since data protection standards would be too expensive to comply with – extraterritorial data protection is paid for by means of a restricted offer of information for Europeans.78 More recently, attempts have been made to interpret the GDPR in this sense contrary to its wording and contrary to the systematics arising from the recitals,79 in part also by invoking international law arguments; the latter will be returned to under IV. Although such a restrictive interpretation is quite understandable, even welcome, in terms of its underlying policy, this seems impossible in my opinion; the wording and recitals are clear-cut. Against the background of the actual economic dimensions of international data protection in an information society, the fundamental rights debate about the status of data protection in Germany and the European Union, and the doubtful connecting factors of the GDPR regarding behavioural monitoring this sub-area appears to me to be the one with the greatest need for future discussion. In this report, the problems under international law are dealt with under IV., a possible conflict-of-law rule in the sense of a balancing requirement under VI. and the connecting factors again under VII. and VIII. on the territorial scope of the GDPR, 17; Segger-Piening, in: Duden et. al., IPR für eine bessere Welt?, 2022, 114. 76  Comp. further the 24th recital as well as Segger-Piening (fn.  75), 114 et seq. with further references. 77 See i.a. Segger-Piening (fn.   75), 114 et seq. with a critical evaluation; Däubler, in: Däubler/Wedde/Weichert/Sommer, DSGVO/BDSG, 2nd ed. 2020, Art.  3 n.  20; Zerdick, in: Ehmann/Selmayr, DSGVO, 2nd ed. 2018, Art.  3 n.  20; Klar, in: Kühling/Buchner, DSGVO/ BDSG, 3rd ed. 2020, Art.  3 n.  101. 78  On this with a number of examples Segger-Piening (fn.  75), 109 et seq. 79  Jotzo, Der Schutz personenbezogener Daten in der Cloud, 2nd ed. 2020, 167; Oster, ZEuP 2021, 275, 287; Herrmann, Völkerrechtliche Jurisdiktionsgrundlagen für den Datenschutz im Netz, 2021, 336 et seq.

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e) Foreign trade law and sanctions An important domain for questions of extraterritorial application of the law is, by its very nature, foreign trade law and the sanctions associated with it. Foreign trade law is codified in Germany in the Foreign Trade and Payment Act80 (Außenwirtschaftsgesetz, hereafter: AWG) and the complementary Foreign Trade and Payments Ordinance81 (Außenwirtschaftsverordnung, hereafter: AWV). The structure of the German system is based on the principle of free trade,82 although restrictions are expressly permitted.83 However, these restrictions are mainly linked to domestic actions, such as the prohibition to export or import certain goods. 84 The active personality principle is only implemented in isolated cases, with the consequence of extraterritorial application, which will be discussed later. 85 Consequently, foreign trade law is less extraterritorial than it might initially appear.86 With regard to the important field of sanctions, but also otherwise, it should be noted that European Union law is becoming increasingly important. 87 Union law comprehensively regulates trade within the internal market, see only Art.  26 et seq. TFEU. In relations with third countries, the EU also has an exclusive competence in the field of foreign trade, Art.  206 et seq. TFEU. Therefore, the imposition of economic sanctions and embargo measures is in principle within the exclusive competence of the European Union, Art.  215 TFEU. Only smaller residual fields, in which limited member state competence exist, remain. 88 It should be noted, however, that foreign trade sanctions are of particular importance within the European Union. In the recent past, the extensive sanctions against Russia in the context of the war against Ukraine stand out in particu-

80 

Translation available at https://www.gesetze-im-internet.de/englisch_awg/. available at https://www.bmwi.de/Redaktion/DE/Downloads/A/awv-eng lisch.html. 82  Sect. 1 para.  1 s. 1 AWG; comp. further Remien, RabelsZ 54 (1990), 431, 442 et seq. 83  See sect. 4 et seq. of the AWG. 84  Export control is especially governed by sects. 8 et seq. AVV; imports are governed by sect. 29 et seq. AVV 85 See infra VII.1. 86  Comp. also Remien, RabelsZ 54 (1990), 431, 446 et seq. esp.  454. 87  See in this regard and for the following Herrmann/Niested, in: Krenzler/Herrmann/ Niestedt, EU-Außenwirtschafts- und Zollrecht, ed. 2021, Einl., n.  10 et seq.; Thoms, in: Rüsken, Zollrecht, ed. 2020, Einf. n.  29 et seq.; Benicke, in: Kronke/Melis/Kuhn (fn.  57), part B. n.  46 et seq. 88  Especially in the case of weapons embargoes, there is also a competence of the member states, cf. Art.  346 para.  2 lit.  b) TFEU; see also Niested, in: Krenzler/Herrmann/Niestedt (fn.  87), part 50. n.  57. 81  Translation

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lar.89 There are also numerous other sources that illustrate the extent of the sanctions currently imposed.90 2. Extraterritoriality and criminal law The extraterritorial application of criminal law norms can be seen as the beginning of the debate on the permissibility of such a practice under international law with the International Court of Justice’s Lotus decision,91 which was rather favourable towards an extraterritorial application in its outcome.92 In Germany, the principle of territoriality applies pursuant to sect. 3 StGB of the German Criminal Code93 (Strafgesetzbuch, hereafter StGB), according to which “German criminal law applies to offences committed on German territory”.94 However, there is a large number of criminal law provisions that can be applied extraterritorial, some of which will be exemplified infra. A discussion from the point of international law can be found infra at IV. The different connecting factor will also be analysed infra, VII. focussing not only on criminal law. Due to the definition of the place of commitment in sect. 9 StGB an extraterritorial application may also take place on the basis of partly foreign conduct as will be demonstrated infra, VIII. Questions of corporate nationality will be answered separately infra at IX. a) General Part of the German Criminal Code The provisions of the General Part (Allgemeiner Teil) of the StGB apply in principle to all provisions of the Special Part; they are, so to speak, placed in front of the parenthesis. The territorial scope of German criminal law is codified in sects. 3 – 7 StGB. As already seen, sect. 3 StGB refers to the principle of territoriality (also called the principle of the place of the offence). Extraterritorial regulations are to be found in sects. 4 – 7 StGB, the basic structure and special features of which are to be illustrated in the following. Section 4 StGB establishes the flag principle (Flaggenprinzip) 95; German criminal law applies “regardless of which law is applicable at the place where the 89  See https://www.consilium.europa.eu/en/policies/sanctions/restrictive-measures-againstrussia-over-ukraine/; from a legal point of view i.a. Schwendinger/Göcke, EuZW 2022, 499. 90  For an overview see https://www.sanctionsmap.eu/#/main; see also https://www.bundesbank.de/de/service/finanzsanktionen/sanktionsregimes. 91  PCIJ, Ser. A., No.  10 (1927). 92  For a discussion of the decision in German criminal law writing see i.a. Werle/Jeßberger, in: LeipzigerKommentar (hereafter: LK), 13th ed. 2020, before sects. 3, n.  24 et seq.; for a broader and most recent perspective from the German writing i.a. Kurkin (fn.  3), 38 et seq. 93 Translation available at https://www.gesetze-im-internet.de/englisch_stgb/englisch_ stgb.html. 94  The place of the commission of offences is defined in sect. 9 StGB; this provision is discussed infra, VIII. 95 See i.a. Fischer, StGB, 68th ed. 2021, sect. 4 n.  2.

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offence was committed” “to offences committed on a ship or an aircraft which is entitled to fly the federal flag or to carry the national insignia of the Federal Republic of Germany”. Section 5 StGB refers to “Offences committed abroad with specific domestic connection”; German criminal law applies “regardless of which law is applicable at the place where the offence was committed” for a variety of specifically enumerated crimes, no.  1 – 17. Each number refers to one or more criminal offences from the special part of the StGB (sects. 80 et seq. StGB) and stipulates the method of connecting these crimes to behaviour abroad. The individual connecting measures can then be assigned to different well recognized connecting factors and principles.96 This shall be demonstrated hereafter; however, the list will not be complete:97 – principle of state protection (Staatsschutzprinzip): refers to offences abroad that particularly endanger the interests of the German state; aims to protect these state interests;   examples: crimes such as high treason (sect. 5 no.  2 StGB with reference to sects. 81 to 83 StGB); treason and endangering external security (sect. 5 No.  4 StGB with references to sects. 94 to 100a StGB); offences against national defence (sect. 5 No.  5 lit a) with references to sects. 109 as well as 109e to 109g StGB); – passive personality principle: refers to offences abroad that particularly endanger and / or violate the individual rights (Individualrechtsgüter) of German natural and in some instances also juridical/legal persons (juristische Person such as corporations); aims to protect these individual interests; connecting factor is the nationality of the victim;   example: “violation of the business or trade secrets of a business which is physically located within the territorial scope of this statute or of an enterprise which has its seat therein or of an enterprise which has its seat abroad and which is dependent on an enterprise which has its seat within the territorial scope of this statute and which forms a corporate group with the latter” (sect. 5 No.  7 StGB) 98; however, it would also be possible to understand this as an example of the effects doctrine or the principle of state protection. – passive domicile principle: refers to offences abroad that particularly endanger and / or violate the individual rights of natural persons, who’s domicile or 96  A good overview of the different principles, also in respect of delimitations derived from international law is provided i.a. by: Eser/Weißer, in: Schönke/Schröder, StGB, 30th ed. 2019, before sect. 3, n.  17 et seq.; Ambos, in: MünchKomm-StGB, 4th ed. 2020, before sect. 3 n.  10 et seq.; Werle/Jeßberger, in: LK (fn.  92), before sect. 3, n.  235 et seq. For the following, reference is made to these sources. 97  For a rather complete overview see Eser/Weißer, in: Schönke/Schröder (fn.  96), sect. 5 n.  2; Werle/Jeßberger, in: LK (fn.  92), sect. 5, n.  10. 98  For the last alternative regarding a corporate group comp. further infra, IX.

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habitual residence is in Germany at the time of the offence; connecting factor is the domicile or habitual residence of the victim;   example: offences against personal liberty (sect. 5 no.  6 lit.  c) second alternative StGB with reference to sect. 237 StGB regarding forced marriages); – active personality principle: refers to offences abroad committed by a German national; thus, connecting factor is the nationality of the perpetrator;   example: sect. 5 No.  8 StGB: “offences against sexual self-determination in the cases under sect.174 (1), (2) and (4), sects.176 to 178 and sect.182 if the offender is a German national at the time of the offence”; – combination of these principles: i.a. combination of active personality principle and active domicile principle in case of an offence endangering the democratic state under the rule of law (sect. 5 no.  3 lit.  c StGB regarding “a German national whose livelihood is based within the territorial scope of this statute” with reference to sects. 89, 90a para.  1 and 90b StGB). Sect. 6 StGB refers to “offences committed abroad against internationally protected legal interests”. In this respect, the principle of universality is established. The catalogue of individually covered crimes is exemplified infra, VII. 4. In contrast to sects. 5 and 6 StGB, sect. 7 StGB does not refer to a specific catalogue of offences but covers certain specific victim- or offender-related situations. The common prerequisite for all paragraphs and variants of this section is that “the act is a criminal offence at the place of its commission or […] that place is not subject to any criminal law jurisdiction”.99 Furthermore, the following must be cumulatively fulfilled: According to para.  1, the offence must be directed against a German, thus again establishing the passive personality principle.100 Pursuant to para.  2 no.  1 the offender must be “a German national at the time of the offence or became a German national after its commission”, thus the active personality principle is established.101 Para. 2 no.  2 refers to a special situation where extradition would be permissible, but the offender “is not extradited because no request for extradition is made within a reasonable period, is rejected or the extradition is not feasible”. This is referred to as Prinzip der stellvertrenden Strafrechtspflege (vicarious criminal justice).102

99  Thus, the provision is to be regarded in conformance with international law, see i.a. Werle/Jeßberger, in: LK (fn.  92), sect. 7, n.  3 et seq. 100 See i.a. Fischer (fn.  95), sect. 7 n.  1. 101 See i.a. Fischer (fn.  95), sect. 7 n.  1. 102 See i.a. Eser/Weißer, in: Schönke/Schröder (fn.  96), sect. 7 n.  1.

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b) Further criminal law provisions (Nebenstrafrecht) Furthermore, there are numerous acts and provisions outside the Criminal Code that stipulate their own extraterritorial applicability. A few examples shall illustrate this:103 – According to sect. 1 s. 1 of the Code of Crimes against International Law104 (“Völkerstrafgesetzbuch”), German criminal law applies to genocide (sect. 6 of the International Criminal Code), crimes against humanity (sect. 7 of the International Criminal Code) and war crimes (sects. 8 to 12 of the International Criminal Code) “even when the offence was committed abroad and bears no relation to Germany”. The provision implements (again) the principle of universality. – Regarding foreign trade law there is also a number of specific criminal provisions, such as sects. 17, 18 AWG. These provisions mostly refer to domestic conduct and a domestic place of action.105 However, in sects. 17 para.  7, 18 para 10, 79 AWV the active personality principle applies. This will be further analysed infra, VII.1. – There are also a number of criminal law provisions in the field of international financial market law.106 However, their applicability is usually determined by the applicability of the corresponding administrative provisions, which is why reference can be made to this. 3. Trends a) Dominance of European law Questions of extraterritorial application of law have been increasingly discussed in Germany since the second half of the 20th century. Parallel to this, there have been a number of significant developments, for example with regard to the increase in economic sanctions,107 or the recent increase in considerations about an end to concepts of territoriality and extraterritoriality althogether since global challenges to humanity such as climate change or migration can only be solved in a global sense.108 From a German perspective, however, all these topics 103  For a more detailed overview see i.a. Werle/Jeßberger, in: LK (fn.  92), before sect. 3, n.  476 et seq. 104  Translation available at http://www.iuscomp.org/wordpress/wp-content/uploads/ 2014/03/voestgb.pdf. 105 See Stein/von Rummel, in: Rüsken (fn.  87), before sect. 17 et seq. AWG, n.  19 106  See for this and the following i.a. Lehmann, in: MünchKomm-BGB (fn.  65), n.  487 et seq.; Dornis, in: BeckOGK (fn.  7), n.  506 et seq. 107 See supra, II.1.e). 108  See in this regard i.a. the recent presentations of Ralf Michaels and Peter Zumbansen at the international conference “Extraterritoriality and International Law”, Indiana Law School, 15th to 17th of September 2021 via Zoom.

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are characterised by a very special trend: the dominance of European law regarding questions of extraterritoriality. As has been seen, the subject area of international economic regulation under consideration here are more or less dominated by European regulations. The unification achieved in this respect strengthens the European internal market and reduces trade barriers. But also externally, the concentrated power of 27 member states allows for a strong presence in a variety of economically relevant fields. The Brussels Effect described by Ann Bradford has illustrated this,109 including negative downsides such as in international data law.110 On the other hand, or at the same time, the special constitution of the European Union still allows for a multitude of member state competences, so that for many questions a veritable thicket of national and European regulations exists. It is the task of European legal scholars in the 21th century to maintain an overview here, also with regard to the international dimensions and obligations under international law. b) Regulation of cyberspace – The Netzwerkdurchsetzungsgesetz Another trend concerns the regulation of cyberspace and the respective online intermediaries, i.e. platforms, social networks or instant messaging services. This area is also shaped by European regulations111 and at the same time the subject of current reform considerations as well as national laws.112 Subject of the current discussion – and of particular interest from a German perspective – is the extraterritorial application of the German Network Enforcement Act113 (Gesetz zur Verbesserung der Rechtsdurchsetzung in sozialen Netzwerken, hereafter: NetzDG) of 2017 to the Dubai-based messenger service Telegram.114 This service is inter alia used by large user groups to incite violence against state authorities as a reaction to the current policy in connection with 109 

Bradford, 107 Nw. U. L. Rev., 1 (2012). supra, II.1.d). 111  I.a. Regulation (EU) 2019/1150 of 20 June 2019 on promoting fairness and transparency for business users of online intermediation services, OJ 2019 L 186, 57 et seq., comp. for the extraterritorial applicability Art.  1 para.  2. 112  See esp. Proposal for a Regulation on a Single Market for Digital Services (Digital Services Act) and amending Directive 2000/31/EC; see for an analysis i.a. Kettmann/Schulz/ Fertmann, ZRP 2021, 138. 113 Translation available at https://www.bmj.de/SharedDocs/Gesetzgebungsverfahren/ Dokumente/NetzDG_engl.pdf;jsessionid=9A33778EE7EC52F92BC2016C54C5F47E.2_ cid289?__blob=publicationFile&v=2. 114  For the facts of the case see the good report of the Handelsblatt, available at https:// www.handelsblatt.com/politik/deutschland/messengerdienst-corona-radikalisierung-in nenminister-nehmen-telegram-ins-visier/27888986.html?ticket=ST-807063-QYWZglLlVv JZQxRezoOp-cas01.example.org as well as the report of the Spiegel available at https://www. spiegel.de/netzwelt/telegram-was-die-politik-gegen-die-gefaehrliche-chat-app-unterneh men-kann-a-7245e6fd-b057-41b9-9b50-69095458cd54. 110 See

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the containment of the Corona pandemic. The German Federal Office of Justice (Bundesamt für Justiz) has recently initiated proceedings to impose a fine on Telegram. The NetzDG obliges platform providers115 to delete illegal content according to certain requirements and to provide reporting mechanisms for this purpose. Illegal content is defined by reference to certain provisions of the German Penal Code (StGB); according to sect. 1 para.  3 NetzDG, this includes for example insults, denial of the Holocaust, but also child pornography. The obligations under the NetzDG also apply to foreign providers, as long as these have no “fewer than two million registered users in the Federal Republic of Germany”, sect. 1 para.  2 NetzDG. Furthermore, it is important to note, that it is not necessary to scrutinize whether or not German criminal law is applicable to the offense at hand, since the criminal law provisions referred to by sect. 1 para.  3 NetzDG are only the substantial criterion for determining whether or not the content is unlawful.116 If a provider of a social network does not comply with the duties of the NetzDG a regulatory fine can be imposed pursuant to sect. 4 NetzDG, even if the offence is not committed in Germany, sect. 4 para.  3 NetzDG.117 It will be very interesting to see, whether Telegram will cope with the German authorities and / or Germany will be able to enforce an eventual fine against telegram. The international regulation of cyberspace is a particularly pressing and significant issue for the future development of both European and German law.

III. Multiple interconnections with the law of the European Union As has already been made clear several times, European Union law has a great influence on the extraterritorial application of German law. In part, German rules implement European law, i.e. directives, and thus extraterritorial application orders, such as in the field of capital market law and banking supervision.118 In part, there is a broad convergence between extraterritorial applicability according to European principles and German practice, such as in the field of antitrust (administrative) law.119 In part, it is European conflict-of-law rules that lead to German law being applied extraterritorially, as in the field of private 115 

For a closer definition see sect. 1 para.  1 NetzDG. See further Hoven/Gersdorf, in: BeckOK Info- u. MedienR, ed. 1.5.2021, NetzDG §  1 n.  45; however, this is also questioned, see i.a. Liesching, Netzwerkdurchsetzungsgesetz, 1st ed. 2018, sect. 1 n.  11. 117  Thus, pursuant to the prevailing opinion, also foreign companies can be fined, see in this regard infra, IX. 118 See supra, II.1.c). 119 See supra, II.1.a)aa). 116 

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enforcement of antitrust law and fair trading law.120 In part, reference is also made to European regulations, as in the field of data protection law.121 Overall, there is considerable interaction between German and European law at the regulatory level, particularly in the field of economic regulation.122 This is far less often the case in the field of criminal law, although some of the extraterritorial provisions there must also be seen against the background of European requirements.123

IV. Role of international law in general, as a limitation and as a foundation International law in general has a high significance within the German legal system, as will be briefly clarified infra, 1. This is also evident in connection with the question of an extraterritorial application of domestic law. International law has both a negative, limiting function and a positive, enabling function. The former function refers to the classical understanding of international law as a limit to extraterritorial applicability and will be clarified infra under 2. In addition, international law itself also serves as a basis for extraterritorial applicability, as will be explained infra under 3. It should be noted at the outset that there is some discussion of the extent to which international law also contains a conflict of laws rule for the case of conflicting extraterritorial laws. This question is dealt with infra, under VI. 1. Preliminary: The Basic Law’s friendliness towards International Law The law of the Federal Republic of Germany is governed by the principle of friendliness towards international law.124 The principle is decisively derived from Art.   25 of the Basic Law125 (Grundgesetz für die Bundesrepublik Deutschland, hereafter: “GG”). Pursuant to sentence 1 “[t]he general rules of international law shall be an integral part of federal law”. Therefore, customary international law is directly incorporated into the German legal system; an implementing act is not needed.126 This is an important provision, as international 120 See

supra, II.1.a). supra, II.1.d). 122  See also in terms of intellectual property and foreign trade law supra, II.1.b),e). 123  For example, sect. 5 no.  8 StGB, see in this regard Werle/Jeßberger, in: LK (fn.  92), before sect. 5, n.  125. 124  I.a. BVerfGE 6, 309, 362 f; BVerfGE 111, 307, 317 et seq.; Herdegen (fn.  5), sect. 22 n.  8; Wollenschläger, in: Dreier, Grundgesetz, 3rd ed. 2015, Art.  25 n.  51. 125 Translation available at: https://www.gesetze-im-internet.de/englisch_gg/englisch_ gg.html. 126  BVerfGE 6, 309, 363. 121 See

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law itself does not demand such a result.127 However, a restriction must be made insofar as international treaties require implementation in accordance with Art.  59 para.  2 GG for their domestic validity. Pursuant to Art.  25 sentence 2 GG general rules of international law “shall take precedence over the laws and directly create rights and duties for the inhabitants of the federal territory”. Accordingly, general rules of international law rank below the Basic Law but above federal law;128 this is also significant and by no means self-evident, as practice in many common law countries shows.129 Thus, Art.  25 GG clearly illustrates the principle of friendliness towards international law. This is also reflected in the decision-making practice of the courts in Germany, as considerations of international law are taken into account in a large number of cases.130 2. International law as a limit to the extraterritorial application of law a) General requirement: genuine link Against the backdrop of the Basic Law’s friendliness towards international law there is a basic consensus in Germany that limits under international law must be observed when applying law extraterritorially. This is predominantly linked to the principle of non-interference or prohibition of intervention under international law (völkerrechtliches Einmischungs- bzw. Interventionsverbot).131 From this, the Federal Constitutional Court (Bundesverfassungsgericht) derives the requirement of a “reasonable connecting point”;132 this corresponds to a genuine link. However, there are also other lines of reasoning for requiring such

127  Comp. further in this respect Koenig/König, in: v. Mangoldt/Klein/Starck, Grundgesetz, 7th ed. 2018, Art.  25 n.  3; Wollenschläger, in: Dreier (fn.  124), Art.  25 n.  7 with references to the international writing, left out in this country report. 128  BVerfGE 6, 309, 363; 37, 271, 279; 141, 1, 17 n.  41; Koenig/König, in: v. Mangoldt/Klein/ Starck (fn.  127), Art.  25 n.  4. 129  Comp. for example Sect. 115 para.  1 lit.  (a), comment a) and Reporters’ Note 2, Restatement (Third) of the Foreign Relations Law of the United States (Congress has the power to enact laws that “are inconsistent with the law as previously represented by a self-executing international agreement”, Reporters Note 2); comp. further the constitution of South Africa, Art.  232; on this point from the German writing Wollenschläger, in: Dreier (fn.  124), Art.  25 n.  11. 130 See infra, 2., for matters of extraterritoriality. See in general, with the formation of case groups and further references to case law i.a. Wollenschläger, in: Dreier (fn.  124), Art.  25 n.  40 et seq.; Herdegen, in: Düring/Herzog/Scholz, Grundgesetz, ed. 2021, Art.  25 n.  50 et seq. 131  BVerfGE 3, 343, 369; BVerfG NJW 2001, 1848, 1852 at III. 6.; from the literature i.a. Herdegen (fn.  5), sect. 26 n.3; Koenig/König, in: v. Mangoldt/Klein/Starck (fn.  127), Art.  25 n.  6 4; comp also. Engel, RabelsZ 52 (1988), 271, 281 et seq.; see further infra with references for different fields as antirust, data protection and criminal law. 132  BVerfGE 63, 343, 369; BVerfG NJW 2001, 1848, 1852 at III. 6.; from the writing i.a. Meng (fn.  3), 541 et seq.; Sandrock, ZVglRWiss 115 (2016), 1, 79.

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a genuine link, such as the prohibition of abuse of rights133 or the principle of good faith/equity.134 In the opinion of the Federal Constitutional Court, the definition of a reasonable connecting point needs to be established for each specific field of law separately.135 In this respect, some areas are to be exemplified hereafter, i.e. antitrust law, data protection law and criminal law. In other areas also considered above, however, an incipient discussion of international law limits takes place,136 even though the case law rather tends to discuss any limits only against the implicit background of international law considerations and does not link them directly to international law.137 The restrictions on extraterritorial applicability discussed there are therefore discussed infra, VII., in connection with the effects doctrine. b) Sector specific analysis aa) Principle of non-interference and de minimis rule in antitrust law Of particular interest is (administrative) antitrust law.138 There, as seen, the socalled effects doctrine has always applied – for German antitrust law pursuant to sect. 185 para.  2 GWB – which by its very nature also covers conduct abroad as long as it only has an effect on the domestic market.139 Thus, the admissibility of the effects doctrine under international law was discussed early on.140 In principle, there is a general agreement that the effects principle is also a suitable connecting factor under international law.141 Both in practice and in academic 133 

Veelken, Interessenabwägung im Wirtschaftskollisionsrecht, 1988, 138 et seq. Meng (fn.  3), 587 et seq. 135  BVerfG NJW 2001, 1848, 1852 at III. 6. 136 For the starting discussion in intellectual property law see Drexl, in: MünchKomm-BGB (fn.  37), Art.  8 n.  308. In matters of financial regulation there is acceptance of the requirement of a genuine link, Lehmann, in: MünchKomm-BGB (fn.  65), n.  118; Dornis, in: BeckOGK (fn.  7), n.  102; Mülbert, in: Assmann/Schneider/Mülbert (fn.  58), Art.  12 VO (EU) Nr.  596/2014 n.  4 4; for trademarks and unfair competition see Dornis (fn.  37), 436 et seq. For package travel see Weber, in: BeckOGK, ed. 2020, BGB, sect. 651v n.  32.1 with references to the Lotus case. 137  See for intellectual property i.a. BGH GRUR Int. 2005, 433 Hotel Martime with a discussion supra, II.1.b). 138  As seen, Art.  6 para.  2 Rome II applies to so-called private antitrust law, supra II.1.a)aa). There, a requirement of appreciability is controversially discussed, comp. Remien, in: Soergel (fn.  17), Art.  6 n.  53 with further references. 139  Supra, II.1.a)aa). 140  Particularly noteworthy in this regard is the Habilitationsschrift, postdoctoral thesis, by Meessen, Völkerrechtliche Grundsätze des internationalen Kartellrechts, 1975; for further references see i.a.: Rehbinder/von Kalben, in: Immenga/Mestmäcker, Wettbewerbsrecht, Bd.  2, 6th ed. 2020, sect. 185 n.  124 GWB; Stadler, in: Langen/Bunte, Kartellrecht, 13th ed. 2018, sect. 185 n.  141 et seq. 141  From case law see i.a, BGH, GRUR 1979, 790, 792; KG, WuW/E OLG 3051, 3052 et seq.; 5580, 5592; OLG Düsseldorf, WuW/E DE-R 2477 n.  31 et seq.; from the writing i.a. 134 

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writing, the principle of non-interference under international law is often used as a limit.142 However, other principles are also mentioned in some cases.143 It also remains somewhat unclear which criteria should be used to determine the extent from which on interference appears inadmissible.144 Insofar as the literature, in particular, refers to a balancing of interests in this respect,145 this seems to me to be a subordinate second step towards a possible solution of a conflict between different legal systems that are applied parallel, but not as a criterion for the exclusion of the application of one’s own law per se. More promising – and favoured by the courts – seems to be the approach of excluding effects that are not very appreciable, i.e. a de minimis rule;146 in part, foreseeability is also required as well as an immediate, in part also significant effect.147 However, with all these criteria, ambiguities remain, which can also be explained against the background of a largely lacking practice of a restriction of the impact principle based on international law. With regard to the criterion of appreciability, completely marginal domestic effects are excluded.148 In the case of restrictions of competition, for example, a low domestic turnover of less than 2 to 3 million euros is sometime referred to, however, others want to differentiate according to the respective legal standard in question.149 In the case of mergers, it is usually referred to a certain domestic turnover of the companies involved.150 Wagner-von Papp/Wurmnest, in: MünchKomm-Wettbewerbsrecht, Bd.  1, 3rd ed. 2020, Grdl. n.  1339 et seq.; Fezer/Koos, in: Staudinger (fn.  45), n.  145; Stadler, in: Langen/Bunte (fn.  140), sect. 185 GWB, n.  143; Meng (fn.  3); 526 et seq., 541 et seq.; Wiedemann, Kartellrecht, 4th ed. 2020, sect. 5 n.  6. 142  OLG Düsseldorf, WuW/E DE-R 2-477 n.  31 et seq.; KG WuW/E OLG 2419, 2420; KG WuW/E OLG 3051, 3052 n.  9, 14; OLG Frankfurt a. M. WuW /E DE-R 801; Stadler, in: Langen/Bunte (fn.  140), sect. 185 GWB, n.  142; Wiedemann (fn.  135), sect. 5 n.  7. 143  For example, the so-called prohibition of abuse of rights, OLG Düsseldorf, WuW/E DE-R 2-477 n.  31 et seq.; for a broad overview comp. further Wagner-von Papp/Wurmnest (fn.  141), n.  1353 et seq. 144 Discussed i.a. by Stadler, in: Langen/Bunte (fn.  140), sect. 185 n.  144 et seq., 149 et seq. with further references; see in this regard also BGH WuW/E DE-R 2133 n.  19. 145  Meessen (fn.  140), 198 et seq.; Meng, ZaöRV 1984, 675, 765 et seq.; comp. also Stadler, in: Langen/Bunte (fn.  140), sect. 185 n.  147 et seq. with reference to extreme cases, that could need such an interest balancing; from case law see KG WuW/E OLG 3051, 3053, 3061 et seq. 146 BGH, GRUR 1979, 790, 791; WuW/E DE-R 2133 n.   19; OLG Düsseldorf WuW /E DE-R 2477 n.  28; Rehbinder/von Kalben, in: Immenga/Mestmäcker (fn.  140), sect. 185 n.  128; Stadler, in: Langen/Bunte (fn.  140), sect. 185 n.  135 et seq. with further references. 147 See i.a. Herdegen, Internationales Wirtschaftsrecht, 12th ed. 2020, sect. 3 n.  69; Wagnervon Papp/Wurmnest (fn.  141), n.  1348 et seq. 148  In this sense Stadler, in: Langen/Bunte (fn.  140), sect. 185 n.  136. 149 See Bechtold/Bosch (fn.  18), sect. 185 n.  20; Stadler, in: Langen/Bunte (fn.  140), sect. 185 n.  136. 150  See for a detailed discussion i.a. Wagner-von Papp/Wurmnest (fn.  141), n.  1438 et seq.; today specific values can also be found in sect. 35 GWB. However, these values refer to substantive law and not the question of applicable law; the result will be the same, though.

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From a practical point of view, it is significant that although authorities and courts do refer to the limits of the effects doctrine under international law with recourse to the prohibition of interference, German antitrust law is nevertheless often applied to foreign cases on the basis of the effects doctrine.151 However, an exception is made in this respect in the field of merger control. In particular, there are some decisions in which the prohibition was limited to the domestic part of a divisible merger.152 bb) Discussion in the field of data protection For data protection law, it has already been pointed out that Art.  3 para.  2 lit.  b) GDPR, to which German law refers, is very far-reaching.153 If the provision were not to be interpreted restrictively, a violation of international law would be established in the opinion of parts of the literature;154 case law is missing so far. This is linked to a lack of limitation of the effects doctrine by criteria such as a direction of the activity towards a specific country or a “direct, substantial and reasonably foreseeable” effect. Although this criticism is shared here in the result, it seems to me that it is still completely open which preconditions international law requires in detail with regard to data protection. After all, one must also take into account that behavioural monitoring via cookies enables the creation of far-reaching personality profiles of persons within the Union. At least in the case of a limitation de lege ferenda to EU citizens – and thus the establishment of the passive personality principle in combination with the effects doctrine –, the current legal situation seems to me to be not at all certain from a purely international law perspective. However, this does not change the fact that the current connecting factor is clearly too far-reaching and should be corrected de lege ferenda, even though international law might not require this.155 cc) Criminal law In the field of criminal law, the principle of non-interference and the resulting requirement of a reasonable connecting factor (“genuine link”) are also taken into account. In this context, the Federal Constitutional Court has classified a number of connecting factors as reasonable in matters of criminal law, namely: active and passive personality principle, the protection principle, the principle of vicarious criminal justice (stellvertretende Strafrechtspflege) as well as the 151 

Comp. further Wagner-von Papp/Wurmnest (fn.  141), n.  1425. i.a. KG WuW/E OLG 3051, 3052; KG WuW/E OLG 2419, 2420 et seq. and with further references Wagner-von Papp/Wurmnest (fn.  141), n.  1449. 153 See supra, II.1.d). 154  See esp. Herrmann (fn.  79), 336 et seq. and passim; comp. also Uecker, ZD 2019, 67, 68 et seq. 155  For a proposal see Segger-Piening (fn.  75), 121 et seq. 152 See

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universality or world law principle.156 Thus, the connecting factors discussed above157 are justified under international law. However, the conformity with international law is doubted by parts of the German writing with regard to the passive personality principle if the requirement of criminal liability at the place of commission is waived.158 The same holds true for the active personality principle. Against the background of the rather clear decision of the Federal Constitutional Court, however, this view hardly seems to play a role in practice. Furthermore, if the Federal Supreme Court considers the mere stay of the victim in the country to be insufficient,159 it is questionable whether this also applies to the place of residence/domicile. In recent years, the connection to habitual residence has increased considerably, especially in private international law.160 3. International law as a foundation for the extraterritorial application of law Partly, international law also serves as a foundation for the extraterritorial application of law. Especially in the field of criminal law several examples can be found. First of all, the active personality principle is now linked to the idea of international solidarity.161 Crimes committed by Germans abroad should not go unpunished despite the ban on extradition that applies in principle. Sect. 7 para. no.  1 StGB must be seen against this background. Some sections of the StGB also serve to implement obligations under international law, as for example sect. 5 no.  8 regarding certain offences against sexual self-determination162 or sect. 5 no.  15 regarding certain corruption offences.163 Furthermore, the whole concept of universal jurisdiction can also be regarded as being based on international law.164

156 

BVerfG, NJW 2001, 1848, 1852. Supra, II.2. 158 See i.a. Ambos, in: MünchKomm-StGB (fn.  96), before sect. 3, n.  40 et seq. However, there are also strong voices that do not see a conflict with international law see i.a. Werle/ Jeßberger, in: LK (fn.  92), before sect. 3 n.  249. 159  BGH NStZ 1999, 236. 160 See i.a. Rentsch, Der gewöhnliche Aufenthalt im System des Europäischen Kollisionsrechts, 2017. 161 See Werle/Jeßberger, in: LK (fn.  92), before sect. 3, n.  254; Eser/Weißer, in: Schönke/ Schröder (fn.  96), before sect. 3–9 n.  20. 162  Partly a result of the implementation of the Council of Europe Convention on the Protection of Children Against Sexual Exploitation and Sexual Abuse (CETS No.  201), see i.a. Eser/Weißer, in: Schönke/Schröder (fn.  96), sect. 5. n.  20. 163  Partly a result of the implementation of the Criminal Law Convention on Corruption (ETS No.  173), see i.a. Eser/Weißer, in: Schönke/Schröder (fn.  96), sect. 5. n.  32. 164 See i.a. Werle/Jeßberger, in: LK (fn.  92), before sect. 3, n.  258 et seq.; for a discussion of the concept of universal jurisdiction see infra VII.4. 157 

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V. Limited role of international comity 1. Comity in general The principle of “comity” is also known in German legal discourse. However, this institution does not have the same significance here as it does in U.S. law and is rather studied from a comparative legal, academic point of view. Historically, the practice of “comity” goes back to the 17th century.165 There, it was used by Paul Voet, Ulrich Huber and Johannes Voet, all from the Netherlands, among others, under the name of comitas as a basic rule for the application of foreign law.166 The application of foreign law was seen as a kind of concession. In Germany, the concept of comity is associated with the requirement of mutual consideration under international law (völkerrechtliches Rücksichtnah­ megebot), i.e. some sort of reasonableness also termed as international cour­ toise.167 According to this, foreign interests must be taken into account, for example, when applying the law extraterritorially. However, the concept of the comity of nations or courtoise tends not to be considered as customary international law.168 Regarding subject matter, comity is discussed in particular in the field of antitrust law, which will be discussed in more detail below. However, certain approaches can also be found in the areas of data protection law,169 intellectual property170 and financial market law.171 There, it is being considered to what extent comity can help with conflicts of application of the law or serve as a limitation to the effects doctrine, although predominantly other instruments are used for this purpose.172 2. Comity and antitrust law The principle of comity is repeatedly emphasised in antitrust law, especially in the academic writing. Generally, it is understood as a manifestation of the prin165 Cf.

Kegel/Schurig (fn.  11), 175 et seq.; Kurkin (fn.  3), 203 et seq. supra fn.  165, and v. Hoffmann/Thorn, Internationales Privatrecht, 9th ed. 2007, sect. 2 n.  18 et seq. 167 See i.a. Herdegen (fn.  147), sect. 3 n.  72; from case law regarding international courtoise i.a. BVerfGE 66, 39; BVerwGE 37, 116; NJW 1984, 574; NJW 1989, 678. In this regard also Meng (fn.  3), 101. 168  Herdegen (fn.  5), sect. 14 n.  6; Meng (fn.  3), 101; comp. also Stockmann, in: Loewenheim/Meessen/Riesenkampff/Kersting/Meyer-Lindemann, sect. 185 para.  2 n.  18; from the U.S. writing i.a. Doge, 115 Colum. L. Rev. 2071, 2140 et seq. (2015). 169 See Melcher, in: Gössl et al., Politik und Internationales Privatrecht, 2017, 141 et seq.; discussed also by Herrmann (fn.  79), 377 et seq. 170  Drexl, in: MünchKomm-BGB (fn.  37), Art.  8 n.  308. 171  Dornis, in: BeckOGK (fn.  7), n.  107 et seq. 172  For limits pursuant to international law see supra, IV.2.; methods for solving conflicts are discussed infra, VI. 166 S.

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ciple under international law for nations to treat each other in a friendly manner.173 The common view is that this is not a duty under international law, but rather a requirement of mutual consideration.174 As far as it can be seen, it is not used in the practice of the German cartel authorities and courts. They rather rely on the principle of non-interference under international law. Regarding content, the principle of comity or the comity of nations is initially discussed in the academic writing with regard to the effects doctrine.175 Even if a conduct has an effect on the German or the European market, a balancing of the interests of the law-applying state and the foreign state should take place under the aspect of comity. This form of comity is also referred to as negative comity and has the overall effect of limiting the effects principle.176 In this respect, comity is attributed a function that is already fulfilled by other instruments.177 In addition, so-called positive comity is recognized in German and European antitrust law.178 This describes a special type of cooperation between two states. According to this, the state concerned about the effects of an antitrust infringement in its territory informs the state from which the behaviour originates about the possible infringing practices. It is then up to the state of origin to prevent the practices, so that the first state does not have to apply its antitrust law extraterritorially. Such an understanding of positive comity can be found in particular in a number of international antitrust treaties, such as the EC-US Agreement179 or the Agreement between the EU and Switzerland.180 However, 173 See i.a. Bunte, in: Langen/Bunte (fn.  140), Einl. zum EU-Kartellrecht, n.  7 7; Rudolf, in: Jaeger/Kokott/Pohlmann/Schroeder, Frankfurter Kommentar zum Kartellrecht, AT des Europ. Kartellrechts, ed. 2021, C. n.  9; Benedikt-Bückenleib, NZKart, 2021, 89, 95; specifically on the limits of international law and the principle of comity in the context of European merger control, for example Körber, in: Immenga/Mestmäcker (fn.  23), Art.  1 FKVO n.  62. 174 See i.a. Rudolf, in: Jaeger/Kokott/Pohlmann/Schroeder (fn.   173), n.  9; Käseberg, in: Langen/Bunte (fn.  140), Art.  1 FKVO n.  50; Bunte, in: Langen/Bunte (fn.  140), Einl. zum EU-Kartellrecht, n.  77. 175  Bunte, in: Langen/Bunte (fn.  140), Einl. zum EU-Kartellrecht, n.  7 7; Rudolf, in: Jaeger/ Kokott/Pohlmann/Schroeder (fn.  173), n.  9. 176  See for the European case claw EuG, Rs. T-102/96, Slg. 1999, 753 – Gencor; from the writing i.a. Klees/Stoll/Holterhus/Schebstadt (fn.  25), sect. 130 n.  117; comp. also Späth, IPRax 2006, 184, 188. 177 See supra, IV.2.b)aa), and infra VI.2. 178 See i.a. Fezer/Koos, in: Staudinger (fn.   45), n.  325; Klees/Stoll/Holterhus/Schebstadt (fn.  25), sect. 130 n.  117; Lange/Reimers, in: Jaeger/Kokott/Pohlmann/Schroeder (fn.  173), AT des Europ. Kartellrechts D. n.  45 et seq.; Käseberg, in: Langen/Bunte (fn.  140), Art.  1 FKVO n.  52. 179  See for the original agreement OJ 1995 L 95/47 and for the addition regarding comity see OJ 1998 L 173/28; see further Käseberg, in: Langen/Bunte (fn.  140), Art.  1 FKVO n.  52; Völcker, in: Immenga/Mestmäcker (fn.  23), II. Int. Wettbewerbsrecht, n.  55 et seq. 180  See Art.  5 of the agreement, available at https://ec.europa.eu/competition/internation al/bilateral/agreement_eu_ch_en.pdf; and regarding comity i.a. Völcker, in: Immenga/Mestmäcker (fn.  23), II. Int. Wettbewerbsrecht, n.  101 et seq.

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despite such principles at the European level, the Commission has already re-examined a merger approved by the US antitrust authorities according to the standards of European antitrust law and imposed additional conditions181 or, in one case, even prohibited182 it. Positive comity does not seem to be relied upon in antitrust practice.

VI. Requirement of reasonableness as a conflict rule 1. Reasonableness as a conflict rule in general In German writing, it is discussed how to deal with the case of a jurisdictional conflict.183 If one agrees with the predominant national as well as international opinion – and thus in accordance with customary international law – that there are rather few restrictive requirements of international law with regard to an extraterritorial application of the law,184 an important question arises: To what extent are conflicts of law to be resolved between, for instance, two national states, where state A extends its laws, with regard to antitrust law for the respective individual case, to state B and state B to state A. For it is clear: The more states extend their rules extraterritorially (and unilaterally), the greater the danger that a legal subject will find itself exposed to different and possibly also contradictory legal systems. In U.S. practice, such conflicts are partly avoided by the requirement of reasonableness, which also provides for consideration and, if necessary, balancing of the different interests. However, there is by no means a uniform practice either.185 In Germany, such reasonableness is most commonly associated with the discussion concerning a balancing of interests. Thus, it is discussed to what extent the interests of foreign states can also be taken into account in the question of whether extraterritorial application of the law should take place. At present, no clear legal status can be discerned for Germany in this regard. Nevertheless, this will be clarified a bit further for some areas of law.

181  Boeing/McDonnell Douglas, Kommission, 30.07.1997, WuW/E EU-V 7, see Käseberg, in: Langen/Bunte (fn.  140), Art.  1 FKVO n.  52. 182  General Electric/Honeywell, Kommission 03.07.2001, WuW/E EU-V 631, see Käse­ berg, in: Langen/Bunte (fn.  140), Art.  1 FKVO n.  52. 183 From a broader perspective i.a. Meng (fn.   3), 648 et seq.; Kurkin (fn.  3), 193 et seq.; Schnyder (fn.  7), passim; Schwarze, Die Jurisdiktionsabgrenzung im Völkerrecht, 1994, passim; comp. also Hector, Das völkerrechtliche Abwägungsgebot, 1992, passim; for a sector specific discussion see infra. 184 See supra, IV. 2. 185  Comp. further Sect. 403, Restatement (Third) of the Foreign Relations Law of the United States vs. sect. 402 restatement (Fourth); the latter being far more reserved towards a balancing of interests.

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2. Sector specific analysis For antitrust law, a balancing requirement is demanded in part,186 but also firmly rejected by others.187 The details are again not very clear. As already seen, a requirement to weigh up interests is partly derived from the requirement of comity188 and is thus not regarded as a duty, but partly a duty to balance interests under international law is also assumed.189 Others want to understand the balancing requirement in terms of conflict of laws or substantive law.190 It is also postulated that a balancing of interests should be carried out solely in extreme cases of conflict.191 In particular, in cases where the predominant focus of the competition restriction is abroad, it is assumed that the domestic interest should then recede.192 In this case, however, it might be more appropriate to assume a lack of appreciability.193 It would also be conceivable to carry out a kind of cost-benefit analysis, taking into account the resulting welfare aspects in each case,194 although there is probably no sufficient legal basis for this. In the field of financial market law too, such a balancing of interests is sometimes seen as a solution for conflicts of jurisdiction.195 In this context, the respective welfare gains and losses are again taken into account, even though these are still rather preliminary considerations. In data protection law, such an approach oriented towards economic interests usually fails. If a balancing requirement is nevertheless discussed, an attempt is made to solve any conflicts through 186  I.a. Meessen (fn.   140), 198 et seq.; Rehbinder/von Kalben, in: Immenga/Mestmäcker (fn.  140), sect. 185 n.  129; Stadler, in: Langen/Bunte (fn.  140), sect. 185 n.  147, 153 et seq.; Ru­ dolf, in: Jaeger/Kokott/Pohlmann/Schroeder (fn.  173), sect. 185 GWB, n.  224; Wiedemann (fn.  141), sect. 5 n.  7. 187  Fezer/Koos, in: Staudinger (fn.  45), n.  149 et seq.; Wagner von Papp/Wurmnest (fn.  141), n.  1361 et seq. 188 See supra V. 2. a). 189  See esp. Meessen (fn.  140), 198 et seq.; Meng, ZaöRV 1984, 675, 771; comp. Wiedemann (fn.  141), sect. 5 n.  7; comp. also KG WuW/E OLG 2419, 2420  et seq.; BKartA WuW/E BKartA 2521, 2539  et seq.; however, it is unclear from which principles of customary international law such a balancing of interests can be derived, for an overview Hector (fn.  183), 133 et seq.; Schuster, Die internationale Anwendung des Börsenrechts, 1996, 683 thus speaks of a rule of customary international law in statu nascendi; see also Dornis, in: BeckOGK (fn.  7), n.  113 in this context. 190 See i.a. KG WuW/E OLG 3051, 3059; Rehbinder/von Kalben, in: Immenga/Mest­ mäcker (fn.  140), sect. 185 n.  129; Deville, Die Konkretisierung des Abwägungsgebots im internationalen Kartellrecht, 1990, 15 et seq.; Schwarze (fn.  183), 52 et seq. 191  I.a. Basedow, NJW 1989, 638; Stadler, in: Langen/Bunte (fn.   140), sect. 185 n.  148; Veelken (fn.  133), 153. 192  Rehbinder/von Kalben, in: Immenga/Mestmäcker (fn.  140), sect. 185 n.  132; comp. also Stadler, in: Langen/Bunte (fn.  140), sect. 185 n.  157; OLG Düsseldorf, WuW/E DE-R 2477, 2484. 193  In this sense Fezer/Koos, in: Staudinger (fn.  45), n.  152; see also supra IV.2.b)aa). 194 Comp. Deville (fn.  190), 101 et seq. 195  Dornis, in: BeckOGK (fn.  7), n.  102, 113; Schuster (fn.  189), 691 et seq.

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technical solutions such as geo-blocking196 or otherwise to focus on the intensity of the link, for example with regard to the focus of a website.197 Insofar as a balancing of interests is also discussed in the field of intellectual property, one could also ask, whether a website is directed at the domestic market. However, in the case of multi-state infringements it seems to be more reasonable to consider a general limitation of the connecting factor.198 3. Comparative sum On the whole, the principle of a balancing of interests derived from international law in the sense of a requirement of reasonableness is certainly discussed in Germany and is also partly applied by courts and authorities in antitrust law. Nevertheless, there is a high degree of different opinions in this field in particular. The basis of a balancing requirement remains largely unclear: should it derive from international law or from conflict of laws or substantive law? The substantive criteria of the balancing are also unclear or specific to the respective legal area. Nevertheless, there is a general trend across legal areas to weigh interests in questions of extraterritorial application of the law. Further developments remain to be seen.

VII. Wholly foreign conduct – connecting factors There is a number of different connecting factors for establishing an extraterritorial application of the law. These shall be summed up hereafter. References will be made to areas discussed supra. 1. Nationality of the actor – active personality principle The active personality principle refers to conduct abroad, committed by a German national.199 In the field of criminal law in particular, its introduction goes back to an authoritarian view of the state during the National Socialist era, which is why its importance steadily declined after 1945.200 Today, the active personality principle is mostly used in criminal law for reasons of international solidarity.201 Some examples are listed above,202 i.a. sect. 5 no.  8 StGB or sect. 7 196 

Herrmann (fn.  79), 419 et seq. Herrmann (fn.  79), 419 et seq. 198 See supra, II.1.b). 199  For a general description see i.a. Herdegen (fn.  5), sect. 26 n.  9 et seq.; broad analysis from the international literature esp. by Ryngaert (fn.  3), 104 et seq. 200  Comprehensive overwiew Eser/Weißer, in: Schönke/Schröder (fn.  96), before sect. 3–9, n.  20. 201 See supra, IV.3. 202 See supra, II.2. 197 

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para.  2 No.  1 StGB. Sect. 5 no.  15 lit.  a) StGB establishes the active personality principle for crimes as accepting benefits or taking bribes and thus establishes an extraterritorial effect for anti-corruption laws. The active personality principle can also be found in matters of foreign trade law.203 Pursuant to sect. 5 para.  5 AWG “[r]estrictions or obligations to act pursuant to Section 4 subsection 1 [this section referrers generally to restrictions that are further specified in the AWV] can also be imposed with regard to legal transactions or actions of Germans abroad which refer to goods within the meaning of subsection 1 including their development and manufacture”. The mentioned goods consist of military goods, weapons and the like. The provision aims to prevent problematic military and commercial activities regarding arms of “Germans living abroad” from being politically attributed to Germany.204 The reference to the active personality principle in sects. 17 para.  7, 18 para.  10 AWG regarding criminal offences in connection with foreign trade law must also be seen against this background.205 Within the framework of sect. 1 para.  4 s. 2 no.  2 BDSG as well as Art.  3 para.  1 GDPR, there is a link to the active personality principle, as these provisions refer to a domestic establishment.206 Although the data processing must take place “in the context of the activities of an establishment”, this requirement is interpreted very broadly.207 It is sufficient that the establishment only economically promotes the business purpose. In this respect, companies with their headquarters in the Union must also observe European data protection regulations, even if they act abroad. The active personality principle is also codified in other fields of law, such as tax law.208 2. Nationality of the person harmed – passive personality principle The passive personality principle refers to conduct abroad that particularly endangers and/or violates the interests/rights of a German national.209 It is a more 203 See

i.a. Remien, RabelsZ 54 (1990), 431, 447. Stein, in: Rüsken (fn.  87), sect. 5 AWG n.  43; comp. also BT-Drs. 11/7218, 6. 205 See Junck/Kirch-Heim, in: Achenbach/Ransiek/Rönnau, Handbuch Wirtschafts­straf­ recht, 5th ed. 2019, II. Räumlicher Anwendungsbereich, n.  11. 206 See Herrmann (fn.  79), 251 et seq.; comp. in general Ambos, in: MünchKomm-StGB (fn.  96), before sect. 3 n.  34. 207  Comp. with further references to the case law of the CJEU Segger-Piening (fn.  75), 114 et seq. 208  See sect. 1 para.  1 EStG, according to which “natural persons who have a domicile or habitual residence in Germany are subject to unlimited income tax liability”, so actually this is more the active domicile principle; see further Herrmann (fn.  79) 250; Ryngaert (fn.  3), 106 et seq. 209  For a general description see i.a. Herdegen (fn.  5), sect. 26 n.  11; broad analysis from the international literature esp. by Ryngaert (fn.  3), 110 et seq. 204 See

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or less common connecting factor in criminal law.210 This has already been exemplified in terms of trade secrets.211 It is also worth mentioning in this context that the protection of trade secrets is now regulated in a separate law with its own sanctions, the Act on the Protection of Trade Secrets (Gesetz zum Schutz von Geschäftsgeheimnissen, hereafter: GeschGehG). There, sect. 23 Gesch­ GehG also specifically regulates criminal liability; sect. 23 Para. 7 GeschGehG then refers to sect. 5 no.  7 StGB. Thus, the passive personality principle is referred to again.212 A further example is sect. 5 no.  14 StGB regarding “acts committed against public officials, persons entrusted with special public service functions or soldiers in the Federal Armed Forces in the discharge of their duties or in connection with their duties”. However, this is also connected with the principle of state protection.213 Some voices in the academic writing doubt the conformity with international law, unless the act is also punishable abroad.214 However, this is not the prevailing view. A certain variation of the passive personality principle is the use of or combination with the domicile principle. Some examples have already been illustrated.215 Further examples refer to “offences against physical integrity in the cases under sect. 226a [covering female genital mutilation] if the […] offence is directed against a person whose domicile or habitual residence is in Germany”, sect. 5 no.  9a lit.  b) alternative 2 StGB. Finally, it should be noted that companies are also partly covered by the passive personality principle, for example in the field of the protection of trade secrets, infra, IX. 3. Effects doctrine and comparable approaches Domestic effects of the conduct in question are an important connecting factor for the extraterritorial application of statutes and regulations in Germany. Such a practice is called most often Auswirkungsprinzip, which represents more or less an equivalent to the so called “effects doctrine”. As it is the case in the United States, the effects doctrine has its roots in antitrust law.216 In Germany, it is now codified in sect. 185 para.  2 GWB. Regarding the private enforcement of antitrust law Art.  6 para.  3 Rome II applies, which also establishes the effects

210 See

supra, II.2. Supra, II.2.a). 212  See also Alexander, in: Köhler/Bornkamm/Feddersen, 39 th ed. 2021, GeschGehG sect. 23 n.  94. 213  Eser/Weißer, in: Schönke/Schröder (fn.  96), sect. 5 n.  31; Ambos, in: MünchKomm-StGB (fn.  96), sect. 5 n.  39. 214 See supra, IV.2.b)cc). 215  Supra, II.2.a). 216 See supra, II.1.a)aa). 211 

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principle. The effects doctrine is believed to be in accordance with international law, however, the details are disputed.217 The effects doctrine as a connecting factor can also be found in a number of further fields of law: Regarding unfair commercial practices Art.  6 para.  1 Rome II establishes the so called “market effects principle”.218 Even though it is not identical with the effects doctrine in antitrust law it is very similar. A limitation of the connection in the sense of a requirement of appreciability is controversially discussed.219 The argument in favour of such a requirement is that in the absence of appreciability, neither the market nor the market participants are likely to be adversely affected. However, the question then arises as to which law applies to the effects that are not appreciable. In this respect, a substantive law solution seems more appropriate. The effects doctrine is also known in the area of data protection, 220 Art.  3 para.  2 lit.  a) GDPR in connection with sect. 1 para.  4 BDSG. Regarding the monitoring of behaviour pursuant to lit.  b) it seems rather questionable to refer to the effects doctrine since a criterion such as a direction of the activity towards a specific country is missing. One could speak of an extended market principle.221 In the field of the regulation of the financial market the effects doctrine is also know. This has already been illustrated with a few examples regarding sect. 102 WpHG and sect. 32 KWG. Further examples can be found in terms of prospectus liability222 , insider trading223 and short selling224. However, these examples all refer to European legislation and are thus spared out in this report. In the field of intellectual property, as already mentioned, the country of protection principle is applied.225 However, with the possibility of taking into account certain foreign acts of infringement in the sense of the Bogsch-theory, there are certainly similarities to an effects principle.226 This is evident not least in the restrictions discussed, such as the requirement of appreciability.

217 See

supra, IV.2.b)aa). supra, II.1.a)bb). 219  In favour i.a. Mankowski, in: MünchKomm-Lauterkeitsrecht (fn.  34), A. II. n.  211 et seq.; declining i.a, Remien, in: Soergel (fn.  17), Art.  6 n.  17. 220 See supra, II.1.d). 221  In this sense Segger-Piening (fn.  75), 114 et seq. 222  See Art.   3 para.  1 Regulation (EU) 2017/1129 and Lehmann, in: MünchKomm-BGB (fn.  65), n.  306 et seq. 223  See Art.   2 Regulation (EU) 569/2014 and Lehmann, in: MünchKomm-BGB (fn.  65), n.  363, 367. 224  See Art.  1 Regulation (EU) 236/2021 and Lehmann, in: MünchKomm-BGB (fn.  65), n.  467. 225  Supra, II.1.b). 226  Supra, II.1.b) and Fezer/Koos, in: Staudinger (fn.  45), n.  1116; Drexl, in: MünchKommBGB (fn.  37), Art.  8 n.  318 et seq. 218 See

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4. Universal jurisdiction The concept of universal jurisdiction is known in Criminal law.227 On the one hand, it is realised in the Code of Crimes against International Law, which has already been pointed out above. This means that offences such as genocide, crimes against humanity and war crimes are encompassed by the concept of universal jurisdiction. On the other hand, sect. 6 StGB refers to “offences committed abroad against internationally protected legal interests”. Such offences include i.a. “no.  2. serious crimes involving nuclear energy, […]; no.  3. attacks on air and maritime traffic (sect. 316c); no.  4. human trafficking (sect. 232); […] no.  9. offences which, based on an international agreement which is binding on the Federal Republic of Germany, are to be prosecuted even though they are committed abroad”. Regarding these offences German criminal law is applicable, “regardless of which law is applicable at the place where they are committed”, sect. 6 StGB, and thus the concept of universal jurisdiction is realised.

VIII. Partly foreign conduct – territorial links In the German legal system, various situations are conceivable in which conduct takes place partly in Germany and partly abroad and nevertheless falls within the scope of application of a German statute. In the field of economic regulation, one might refer to antitrust law first. For example, a cartel agreement could be entered into by both a German and a foreign company and could be agreed upon in the course of several meetings both at home and abroad. Both sect. 185 para.  2 GWB and Art.  6 para.  3 Rome II are only concerned with the domestic effects and would therefore cover this conduct as long as domestic effects appear. Sect. 185 para.  2 GWB explicitly states that German antitrust law also applies if restraints of competition are “caused outside the area of application of this Act”. Conversely, conduct that only partially takes place abroad is of course also covered. With regard to a limitation of the coverage of foreign conduct, the comments above on a general limitation of the effect principle apply.228 The situation in antitrust law can in principle also be applied to other fields of economic regulation. In data protection law sect. 1 para.  4 s. 2 no.  2 BDSG as well as Art.  3 para.  1 GDPR only require “the processing of personal data in the context of the activities of an establishment”. If the data processing takes place both domestically as well as abroad, this is sufficient in any case. No restrictions apply in this respect. In the field of intellectual property, it is recognised that 227 

228 

Supra, II.2., IV.3. Supra, IV.2.

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partial acts abroad may also be sufficient to qualify as domestic infringement.229 In trademark law, for example, it is sufficient for domestic use within the meaning of sect. 26 MarkenG if goods are exported abroad; in particular, use abroad may have to be taken into account.230 The same is true for copyright 231 and patent 232 law. The link to acts abroad is limited insofar as mere preparatory acts in Germany cannot be the basis for a link to a further infringing act abroad.233 However, this does not apply if the mere act abroad qualifies as a domestic act because of its economic effects.234 Finally, situations may arise in criminal law where parts of the offence are committed abroad. According to sect. 3 StGB “German criminal law applies to offences committed on German territory”. Section 9 StGB specifies the place of commitment as follows: “[a]n offence is deemed to have been committed at every place where the offender acted […] or in which the result […] occurs”. In the case of offences where the place of the act and the place of the result differ – so-called distance offences (Distanzdelikte) – it can therefore happen that part of the offence is committed abroad and another part in Germany and German criminal law is nevertheless applicable.235 This is particularly problematic in cases involving the internet, since for offences such as insult or incitement of the masses, a result could also be seen in the mere possibility of retrieving content which was uploaded abroad.236 Against the background of this potential broadness of the scope of application of German criminal law in the case of the fulfilment of even partial acts of the offence domestically, it is generally agreed upon that there is a need for a certain reduction of this scope of application.237 However, the details are controversial. In a significant case, the Federal Court of Justice has determined the extent to which “a weighty domestic legal interest which, moreover, objectively has a special reference to the territory of the Federal Republic of Germany” is given.238 In the case at hand, the Holocaust was denied by means of a website operated from Australia. The negation of this crime naturally has a special connection to Germany, so that German criminal 229 

For an overview see i.a. Drexl, in: MünchKomm-BGB (fn.  37), Art.  8 n.  310 et seq. BGH GRUR 1980, 52; Fezer/Koos, in: Staudinger (fn.  45), n.  1024; BeckOK MarkenR/ Bogatz, 2021, sect. 26 MarkenG n.  93.1. 231 BGH GRUR 1994, 798, 799; Fezer/Koos, in: Staudinger (fn.   45), n.  1025; Drexl, in: MünchKomm-BGB (fn.  37), Art.  8 n.  311. 232  Fezer/Koos, in: Staudinger (fn.  45), n.  1051, Drexl, in: MünchKomm-BGB (fn.  37), Art.  8 n.  286. 233  BGH GRUR 1994, 798, 799; Drexl, in: MünchKomm-BGB (fn.  37), Art.  8 n.  315. 234  Supra, II.1.b). 235 See i.a. Ambos, in: MünchKomm-StGB (fn.  96), StGB sect. 9 n.  26 et seq.; Eser/Weißer, in: Schönke/Schröder (fn.  96), sect. 9 n.  3. 236  See esp. Mey, Die Anwendbarkeit des deutschen Strafrechts bei Straftaten via Internet, 2020; Werle/Jeßberger, in: LK (fn.  92), sect. 9 n.  73 et seq. 237 See Werle/Jeßberger, in: LK (fn.  92), sect. 9, n.  91 et seq.; BGHSt 46, 212, 224. 238  BGHSt 46, 212, 224, translated by the author. 230 

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law could be applied. In the meantime, however, another criminal senate of the Federal Supreme Court has questioned whether there can be a specific success in such cases at all.239 While parts of the academic writing want to make the application of German criminal law dependent on a special domestic reference also in the future, 240 others see a place of success in Germany only in the case of a German top-level domain (.de), for example, and otherwise want to rely on sect. 7 of the Criminal Code, whereby generic domains such as .com are to be classified as crime locations not subject to any criminal jurisdiction.241 Further developments remain to be seen.

IX. Corporate nationality Corporate nationality and extraterritoriality are especially discussed against the background of sanctions.242 The United States has enacted laws that exercise jurisdiction over corporations abroad that are controlled by a U.S. (natural) person. This has been criticized by European courts and thus the European Union does not pursue such an approach. Insofar as European sanctions also apply to legal persons, these must be legal persons “incorporated or constituted under the law of a Member State” or related to transactions carried out in the Union.243 Control by an EU person is not sufficient, as the persons acting are legally independent.244 Otherwise, German law has the special feature that there is no criminal law relating to associations (Verbandsstrafrecht). Legal persons are thus not covered by §§  3 – 9 StGB beyond the cases expressly provided for.245 Only sect. 30 of the Act on Regulatory Offences246 (Ordnungswidrigkeitengesetz) provides a possibility to impose a fine on legal persons in case a representative of a legal person or such like “has committed a criminal offence or a regulatory offence as a result of which duties incumbent on the legal person or on the association of persons have been violated, or where the legal person or the association of persons has been enriched or was intended to be enriched”. Pursuant to the prevailing opinion this also encloses foreign corporations (and thus also subsidiaries of Ger239 

BGH NStZ 2017, 146, 147. Werle/Jeßberger, in: LK (fn.  92), sect. 9 n.  102. 241  Mey (fn.  236), 118 et seq., 136 et seq. 242  See in this regard and for the following i.a. Ryngaert (fn.  3), 108 et seq.; see for a discussion Sect. 414 Restatement (Third) of the Foreign Relations Law of the United States, esp. Reporters’ Notes 3 and 4. 243  Quote taken from Art.  49 lit.  d) of the Regulation (EU) No 267/2012 of 23 March 2012 concerning restrictive measures against Iran. 244  Niested, in: Krenzler/Herrmann/Niestedt (fn.  87), part 50. n.  36. 245 See i.a. Ambos, in: MünchKomm-StGB (fn.  96), sect. 7 n.  23. 246  Translation available at https://www.gesetze-im-internet.de/englisch_owig/englisch_ owig.html. 240 

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man corporation) as long as German criminal law applies to the criminal offence in question.247 As seen, the active personality principle is also applied in part in the field of foreign trade law.248 However, the provisions refer either to “a German national” (sect. 17 para.  7 and 18 para.  10 AWG) or to “Germans” (sect. 5 para.  5 GWB). Thus, a reference is made to a German natural person and corporations are excluded.249 The question of corporate nationality does not arise. In the field of data protection Art.  3 para.  1 GDPR refers to an establishment in the Union. It is regarded as sufficient if such an establishment is part of a corporate group and only economically promotes the business purpose.250 From this point of view, the GDPR has been applied to subsidiaries of foreign corporate groups. However, this line of argumentation should also be possible for the reversed situation, i.e. a European corporate group with a subsidiary established e.g. under the Law of Delaware and acting in Delaware. As long as the subsidiary promotes the business purpose of the corporate group the GDPR could apply. However, this situation has not been decided yet and thus an amount of uncertainty remains. Finally, it should be noted that in the case of the passive personality principle, subsidiaries with their seat abroad are protected in terms of trade secrets, provided they are “dependent on an enterprise which has its seat within the territorial scope of this statute [StGB] and which forms a corporate group with the latter”, sect. 5 no.  7 StGB.

X. Presumption against extraterritoriality A presumption against an extraterritorial application as it is known in U.S. law251 does not exist in German law. However, restrictions on extraterritorial applicability do arise, as seen, when taking into account the principles of international law.252 Otherwise, extraterritorial applicability in Germany is only established by special connecting factors such as the principle of effect, the marketplace principle or the passive personality principle.253 If such a connecting factor exists, it also implies that a provision can be applied extraterritorially. A presumption against an extraterritorial application would then be contradicto247 See i.a. Rogall, in: Karlsruher-Kommentar OWiG, 5th ed. 2018, sect. 30 n.  88; but comp. Schneider, ZIS 2013, 488, 492. 248  Supra, VII.1. 249 Comp. Stein, in: Rüsken (fn.  87), sect. 5 AWG n.  43. 250  Supra, VII.1. 251 See i.a. Sect. 404, Restatement (Fourth) of the Foreign Relations Law of the United States. 252  Supra, IV.2. 253  Supra, VII.

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ry. In the absence of such a rule, the provisions should only apply domestically. However, it must then be examined to what extent there are special conflict-oflaw rules for the respective area. In the area of private law, various different conflict-of-law rules can be found, although these often do not serve the extraterritorial enforcement of state interests, but rather try to find the closest connection to a certain legal order.254 Exceptions in terms of economic regulation have been dealt with above.255 For criminal law, too, there are generalising provisions with regard to applicability, some of which also explicitly provide for an extraterritorial connection.256 A special situation exists in the field of intellectual property.257 The principle of territoriality and the lex loci protectionis do not provide any information on how to deal with foreign acts that might also have domestic effects, for example via the internet. However, there is a restrictive practice, as illustrated by the Hotel Martime case. Even if this cannot be interpreted as a presumption against extraterritoriality, it serves as an example of the fact that, as a rule, limits to extraterritoriality are also taken into account when applying German law extraterritorially.

XI. Blocking statutes Germany has not enacted any blocking statues. However, on the EU level there is the so-called EU-Blocking Regulation from 1996.258 Originally, it aimed against the far-reaching U.S. secondary sanctions enacted by the 1996 HelmsBurton-Act as well as other acts. In 2018, however, the EU-Blocking Regulation was amended to include the Secondary Sanctions of the United States with regard to Iran in the list of measures to be averted.259 The EU-Blocking Regulation contains a number of different instruments, the central one being the prohibition to comply as stipulated in Art.  5 according to which, no person – including legal persons – shall comply with sanctions specified in the Annex of the Regulation and covering i.a. the aforementioned ones.

254 

Supra, I., 2.c). Supra, II.1. 256  Supra, II.2. 257  Supra, II.1.b). 258  Council Regulation (EC) No 2271/96 of 22 November 1996 protecting against the effects of the extra-territorial application of legislation adopted by a third country, and actions based thereon or resulting therefrom, OJ L 309, 1996, 1 et seq. 259  Delegated Regulation (EU) 2018/1100; for the background see i.a. Niestedt/Göcke, in: Krenzler/Herrmann/Niestedt (fn.  87), VO (EG) 2271/96 Art.  1 n.  1 et seq. with reference to President Trump’s refusal to extend the waiver that has been in place so far. 255 

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This prohibition to comply has recently become the subject of a number of German court decisions.260 In one case, Deutsche Telekom terminated the contract with an Iranian bank because it feared that it would otherwise fall within the scope of U.S. sanctions.261 The Iranian bank argued that this would violate Art.  5 of the Blocking Regulation. In this context, the Hamburg Higher Regional Court submitted a series of questions to the ECJ on the interpretation of the Blocking Regulation.262 First, it was questionable, if Art.  5 para.  1 of the EU-Blocking Regulation only applies “where the acting EU operator […] is issued directly or indirectly with an official or court order on the part of the United States of America” or whether it suffices “for its application that the action of the EU operator is predicated on compliance with secondary sanctions without any such order”.263 Secondly, it was questionable whether or not the Telekom could terminate the contract without “ever having to justify its decision” and thus in accordance with an ordinary termination or whether it had to explain its motives.264 Thirdly, it was questionable whether “ordinary termination in breach of the [EU-Blocking Regulation must] necessarily be regarded as ineffective or [if] the purpose of the [statute can] be satisfied through other penalties, such as a fine”. Finally the court asked, if indeed an ordinary termination was in non-conformity with the blocking regulation pursuant to the interpretation of the CJEU, whether such a general prohibition was compatible with the freedom to conduct a business, which is protected by Art.  16 of the Charter of Fundamental Rights of the EU (CFR), and the principle of proportionality enshrined in Art.  51 CFR, especially against the background that this “expose the EU operator to considerable economic losses on the US market (in this case: 50 % of group turnover)”.265 The advocate general answered all questions in favour of the Iranian Bank and thus to the disadvantage of the Telekom, even though he added that it gives him “no particular pleasure to arrive at this particular result” and asks for the EU legislature to “ponder and consider” parts of the Blocking Regulation. The CJEU essentially agreed with the Advocate General and also decided the questions to the disadvantage of Telekom in a very recent judgement.266 However, it left some room for a proportionality test, which also had to take into account 260  I.a. LG Dortmund, BeckRS 2016, 3046; OLG Köln, BeckRS 2020, 4132; OLG Hamburg EuZW 2020, 390; for an overview see Harings, RdTW 2020, 442, 445 et seq. 261  OLG Hamburg EuZW 2020, 390; English translation of the facts of the case and the preliminary questions can be found in the opinion of the Advocate General Hogan, 12.05.2021, Case C-124/20 Bank Melli Iran, Aktiengesellschaft nach iranischem Recht v Telekom Deutschland GmbH, available at curia.europa.eu. 262  Preliminary references are governed by Art.  267 TFEU. 263  The question can be found at opinion AG (fn.  261), n.  49. 264  Opinion AG (fn.  261), n.  99. 265  See also Harings, RdTW 2020, 442, 448 et seq. 266  CJEU, 21.12.2021, Case C-124/20 Bank Melli Iran, ECLI:EU:C:2021:1035.

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that Telekom had not applied for a derogation form Art.  5 para.  1 of the Regulation, which would have been possible pursuant to Art.  5 para.  2.267

267 

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Localising the Place of Damage in Private International Law1 Wolfgang Wurmnest/Benedikt Wössner

I. Introduction When looking at the rules of jurisdiction and choice of law for tort cases in Germany, two different sets of rules have to be distinguished. First and foremost, German courts apply the European rules on jurisdiction and applicable law. International jurisdiction for tort cases is scrutinized under art. 7(2) Brussels Ibis Regulation 2 and the relevant conflict-of-law rules are enshrined in arts. 4–9, 14 Rome II Regulation.3 If the European rules do not apply, German courts rely on national law, especially on §  32 German Code of Civil Procedure (Zivilprozessordnung, ZPO)4 regarding jurisdiction and arts. 40–42 Introductory Act to the German Civil Code (Einführungsgesetz zum Bürger­ lichen Gesetzbuch, EGBGB5) regarding choice of law. As the German Code of Civil Procedure contains no provisions specifically dealing with international jurisdiction, the general rules on local jurisdiction (örtliche Zuständigkeit) are construed to determine international jurisdiction as well (Doppelfunktionalität der örtlichen Zuständigkeitsvorschriften). In other words: if a court in Germany has local jurisdiction over the matter, the German court is also assumed to have international jurisdiction.6 Regarding choice of law, the national rules mainly regulate violations of privacy and rights relating to personality (including defamation) as these matters are excluded from the Rome II Regulation’s scope (art. 1(2)(g) Rome II Regula-

1 

We warmly thank Martin Fischer for providing a linguistic review of the text. (EU) No 1215/2012 of the European Parliament and of the Council of 12 December 2012 on jurisdiction and the recognition and enforcement of judgments in civil and commercial matters, OJ L 2012, 351/1. 3  Regulation (EC) No 864/2007 of the European Parliament and of the Council of 11 July 2007 on the law applicable to non-contractual obligations (Rome II), OJ L 2007, 199/40. 4  An English translation is available at https://www.gesetze-im-internet.de/englisch_zpo/. 5  An English translation is available at https://www.gesetze-im-internet.de/englisch_bgb eg/. 6 BGH NJW 1965, 1665; Heinrich, in: Musielak/Voit, ZPO, 19th edn. 2022, §   12 ZPO para.  17. 2 Regulation

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tion).7 Regarding jurisdiction, the main limitation of the scope of the Brussels Ibis Regulation is not objective, but subjective in nature. According to art. 4 Brussels Ibis Regulation, the Regulation’s jurisdiction rules apply only in cases where the defendant is domiciled in a Member State of the European Union, 8 unless an exception applies. The latter is for example the case when the parties of a cross-border dispute have agreed on the jurisdiction of a court in an EU Member State (art. 25 Brussels Ibis Regulation). This court has international jurisdiction, irrespective of the defendant’s domicile. This report will focus on the rules on jurisdiction and applicable law in cases of unlawful torts. Other forms of non-contractual obligations are covered only as far as the questionnaire explicitly demands so. Also issues of jurisdiction agreements and choice-of-law clauses are largely carved out because such agreements have no special connection to the place of damage.

II. The rules on jurisdiction and applicable law As German law contains several forms of non-contractual obligations, the following overview shall distinguish between tortious and non-tortious claims and consider (without being exhaustive) how non-tortious claims are dealt with in regard to jurisdiction where no specific rules exist. 1. Jurisdiction a) Tort claims The general concept of both sets of rules regarding jurisdiction is similar. Art.  7(2) Brussels Ibis Regulation confers jurisdiction on the courts of the place where the harmful event occurred or may occur. §  32 ZPO confers jurisdiction on the courts of the place where the tortious act was committed. While at first glance these rules seem to differ in their approach – the European rule referring to the place where the harm occurs, whereas the German rule refers to the place where the act was committed – both rules are read in conformity. The European Court of Justice (ECJ) as well as the Bundesgerichtshof (BGH), i.e., the highest court for civil and commercial matters in Germany, allow a plaintiff to choose whether to sue the defendant in a tort case either at the place where the damage 7  In addition, non-contractual obligations arising out of nuclear damage are excluded from the scope of application (art. 1(2)(f) Rome II Regulation). 8  The application to Danish defendants is based on the Agreement between the European Union and the Kingdom of Denmark on jurisdiction and the recognition and enforcement of judgments in civil and commercial matters of 19.10.2005, OJ L 2005, 299/62 and the notification of Denmark to implement the changes made by the Brussels Ibis Regulation, OJ L 2013, 79/4.

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occurred (Erfolgsort) or at the place of the event giving rise to it, i.e. where the tortious act was committed (Handlungsort).9 This approach is known as the principle of ubiquity (Ubiquitätsprinzip).10 The general aim of both European and German law is to ensure predictable jurisdiction rules and empower courts having a close connection to the case to decide it. The courts at the place where the damaged has occurred or will occur usually have a close connection to such cases which allows this deviation from the general rule (arts. 4, 62, 63 Brussels Ibis Regulation, §  12 ZPO) according to which the claimant has to sue the defendant where he or she is domiciled.11 It is assumed that the courts at the place of damage are in a good position to decide the dispute, especially in terms of gathering and assessing necessary (local) evidence. In the judgment in which the ECJ embraced the principle of ubiquity, the court argued that the proximity to evidence can point both to the place where the damage occurred as well as at the place where the unlawful act was committed, and therefore courts in both states must be competent to hear the case under (what is now) art. 7(2) Brussels Ibis Regulation.12 That all deviations from the principle actor sequitur forum rei must be based on the principles of proximity and sound administration of justice is also expressly stated in recital 16 Brussels Ibis Regulation. The Bundesgerichtshof has argued in a similar manner regarding §  32 ZPO.13 In cases regarding damages or restitution, the European rules additionally confer jurisdiction on any criminal court seized with criminal proceedings in the same matter, if this criminal court is competent to rule on civil liability under its national regime. This is the case in Germany, where §  403 German Code of Criminal Procedure (Strafprozessordnung)14 grants this power to criminal courts (so called Adhäsionsverfahren). The practical relevance of these proceedings is, however, very limited in Germany.15 b) Other forms of non-contractual obligations In Germany, the main examples of non-contractual obligations outside the realm of tort law are negotiorum gestio (Geschäftsführung ohne Auftrag) and 9 ECJ Case 21/76, Bier v. Mines de Potasse d’Alsace, ECLI:EU:C:1976:166 para.   24/25; Case C-360/12, Coty Germany v. First Note Perfumes NV, EU:C:2014:1318, para.  46; BGH NJW 2010, 1752 para.  8. 10  Stadler, in: Musielak/Voit (n. 6), Art.  7 EuGVVO para.  19. 11  Thode, in: Beck’scher Online-Kommentar zur ZPO (hereinafter: BeckOK ZPO), 44th edn. as of 1.3.2022, Art.  7 Brüssel Ia-VO para.  66. 12  ECJ Case 21/76, Bier v. Mines de Potasse d’Alsace, ECLI:EU:C:1976:166 para.  15/19. 13  BGH NJW 1977, 1590. 14 An English translation is available at https://www.gesetze-im-internet.de/englisch_ stpo/. 15  Hess, Europäisches Zivilprozessrecht, 2nd edn. 2021, para.  6 .80; Stadler, in: Musielak/ Voit (n. 6), Art.  7 EuGVVO para.  22.

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unjust enrichment (Bereicherungsrecht). For both sets of rules there are no specific jurisdiction provisions. Therefore, if jurisdiction is to be based on a provision on special jurisdiction under European or German law, the claim must be classified as either contractual or non-contractual. The same holds true for a claim arising from culpa in contrahendo. As a result, the distinction between contractual and non-contractual obligations is of great practical importance when assessing jurisdiction. (1) Culpa in contrahendo When applying the European rules, the characterization of actions as contractual or non-contractual must be based on a European concept to ensure that the Brussels Ibis Regulation is applied in conformity in all EU Member States. The ECJ has held that a contractual claim is based on an obligation freely entered into by one party towards another one,16 whereas claims for damages are of a non-contractual nature if they do not derive from a contractual agreement between the parties. The European characterization can differ from national approaches. One noteworthy example from a German point of view is culpa in contrahendo. Under German procedural law such claims are generally classified as quasi-contractual for the purpose of §  29 ZPO17 and in German substantive law, the obligation arising out of contract negotiations and similar conduct, which is the basis for any claims out of culpa in contrahendo, is codified in the same section of the German Civil Code (Bürgerliches Gesetzbuch, BGB18) as the obligation arising out of a contract, §  311(1) and (2) BGB respectively. Under European law, the ECJ has ruled that claims arising from culpa in con­ trahendo must be classified as non-contractual, at least as far as the parties had not assumed any obligations towards each other.19 This classification is in line with the French concept and applies for example, where claims, that from a German perspective can be classified as culpa in contrahendo, can be classified as tortious because negligent behaviour has led to physical harm before a contract was concluded.20 This classification is in line with the decision to codify the conflict of law rule regarding culpa in contrahendo in the Rome II Regula16  ECJ, Case C-26/91, Handte v. Traitements mécano-chimiques des surfaces, EU:C:1992: 268 para.  15. 17  OLG München, NJOZ 2009, 1210, 1212; Heinrich, in: Musielak/Voit (n. 6), §  29 ZPO para.  4; Hüßtege, in: Thomas/Putzo, ZPO, 43rd edn. 2022, §  29 ZPO para.  4; for a critical view, see Toussaint, in: BeckOK ZPO (n. 11), §  29 ZPO para.  13 pointing to the fact that the Bundesgerichtshof called culpa in contrahendo a gesetzliches Schuldverhältnis, see BGH, NZG 2008, 661, 662 para.  12. 18 An English translation is available at https://www.gesetze-im-internet.de/englisch_ bgb/. 19  ECJ, Case C-334/00, Fonderie Officine Meccaniche Tacconi v. Wagner Sinto Maschi­ nenfabrik, EU:C:2002:499 para.  27. 20  Lorenz, ZEuP 1994, 218, 220.

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tion, not the Rome I Regulation (cf. below). Many cases of culpa in contrahendo in German law would be dealt with by tort rules in other European states, as this concept was inter alia developed to bypass restrictions of German tort law, namely the rather limited liability of a principal for damage wrongfully caused by an agent (auxiliary) under §  831 BGB as well as the fact that pure economic loss can only be recovered when the tortfeasor acted intentionally.21 Building upon the case law of the ECJ, the Bundesgerichtshof indicated that claims arising out of culpa in contrahendo are contractual in nature if the contract is later agreed upon.22 This opinion is in line with that of many legal commentators.23 The Bundesgerichtshof did, however, not have to decide this question as the application of both art. 7(1) and (2) Brussels Ibis Regulation gave jurisdiction to the German courts and the classification was therefore not essential for the determination of jurisdiction. The court’s view appears to be in line with the view of the ECJ. In a case concerning a consumer contract, the ECJ held that art. 17 Brussels Ibis Regulation is applicable if after concluding the contract the consumer sues based on an alleged failure to comply with pre-contractual obligations, a typical example of culpa in contrahendo in German law.24 As this decision was largely based on the argument that the protection of consumers as weaker parties calls for the allocation of all matters having a sufficiently close connection to the contract before one single court,25 it is not definite that the ruling can be transferred to art. 7(2) Brussels Ibis Regulation. In our opinion, however, a similar argument can be made for any contract.26 (2) Negotiorum gestio Regarding negotiorum gestio, the classification as either contractual or non-contractual (or something in between), has been an ongoing topic for decades in Germany.27 At least if the actions taken are in accordance with the assumed will of the principal (the so-called justified negotiorum gestio, gerechtfertigte Geschäftsführung ohne Auftrag) corresponding claims can be regarded as sufficiently close to a contract to warrant at least a quasi-contractual classification.28 21  For more details see Wurmnest, in: Zekoll/Wagner (eds.), Introduction to German Law, 3rd edn. 2019, 199, 214 et seq. 22  BGH NJW 2016, 409, 410 para.  11 referring to ECJ Case C-180/06, Ilsingerc v. Dreschers als Insolvenzverwalter im Konkurs der Schlank & Schick-GmbH, ECLI:EU:C:2009:303 para.  57. 23  Leible, in: Rauscher, Europäisches Zivilprozess- und Kollisionsrecht, vol.   1, 5th edn. 2020, Art.  7 Brüssel Ia-VO para.  30; Stadler, in: Musielak/Voit (n. 6), Art.  7 EuGVVO para.  3a. 24  ECJ Case C-500/18, AU v. Reliantco Investments LTD, ECLI:EU:C:2020:264 paras. 68 et seq. 25  ECJ Case C-500/18, AU v. Reliantco Investments LTD, ECLI:EU:C:2020:264 paras. 61 et seq. 26 Concurring Stadler, in: Musielak/Voit (n. 6), Art.  7 EuGVVO para.  3a. 27  See the overview given by Dutta, IPRax 2011, 134. 28  Dutta, ibid.

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Applying the European regime, however, the Oberlandesgericht Köln, i.e,. the Higher Regional Court of Cologne, refused both the application of art.  7(1) and (2) Brussels Ibis Regulation, respectively.29 As consequence, the plaintiff could only rely on the general jurisdiction at the domicile of the defendant. (3) Unjust enrichment Regarding unjust enrichment, applying the European rules it is widely accepted that claims based on the nullity of a contract are classified as contractual as well.30 This is also the majority view of legal scholars writing on §  29 ZPO.31 In older judgments, the Bundesgerichtshof and the Bayerische Oberste Landes­ gericht, i.e., the Highest Regional Court of Bavaria, have, however, ruled against applying §  29 ZPO.32 If claims arising out of unjust enrichment do not have any connection to a contract, a contractual classification seems far-fetched. At the same time, such claims do not require the claimant to have suffered any actual harm. As a result, applying art. 7(2) Brussels Ibis Regulation is in conflict with the wording of the provision requiring a harmful event.33 Therefore, the ECJ ruled that a claim of unjust enrichment based on invalid enforcement measures falls neither under arts. 7(1) nor 7(2) Brussels Ibis Regulation.34 A similar approach should apply in Germany, but the issue is disputed. The Bayerisches Oberstes Landesgericht has applied §  32 ZPO regarding one sub-type of claim in unjust enrichment, the Eingriffskondiktion (i.e., a claim that does not have a basis in a void contract but rather in the appropriation of another’s assets or right) but rejected jurisdiction for other types of unjust enrichment.35 This ruling has been praised by some legal commentators,36 but others have argued that the application of §  32 ZPO should be limited to strictly tortious claims.37 As a result, it seems likely that some claims fall neither under art. 7(1) Brussels Ibis Regulation/§  29 ZPO nor 29  OLG Köln, IPRax 2011, 174 (on the Brussels I Regulation). Dutta, ibid. offers to apply art. 5 no.  1 and 3 Brussels I Regulation respectively to certain obligations arising out of nego­ tiorum gestio. 30  Thode, in: BeckOK ZPO (no.  11), Art.  7 Brüssel Ia-VO para. 18a.1. (regarding art. 7(1) Brussels Ibis Regulation). 31  Schultzky, in: Zöller, Zivilprozessordnung, 34th edn. 2022, §  29 ZPO para.  6a; Heinrich, in: Musielak/Voit (n.  6), §  29 ZPO para.  7.; for a more differentiated view see Patzina, in: Münchener Kommentar zur ZPO (hereinafter: MüKoZPO), 6th edn. 2020, §  29 ZPO para.  13. 32  BGH, MDR 1962, 399, 400; BayObLG, BeckRS 1994, 11831 para.  14. 33  Hess, EuZPR (n.  15), para.  6 .70. 34  ECJ Case C-242/20, HRVATSKE ŠUME v. BP Europa, ECLI:EU:C:2021:985 paras. 51, 54 et seq. 35  BayObLG, BeckRS 2020, 8038 para.  18. 36  Heinrich, in: Musielak/Voit (n. 6), §  32 ZPO para.  7; Patzina, in: MüKoZPO (n. 30), §  32 ZPO para.  8; Schultzky, in: Zöller (n. 31), §  32 ZPO para.  8. 37  Toussaint, in: BeckOK ZPO (n. 11), §  32 ZPO para.  2.3.

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under art. 7(2) Brussels Ibis Regulation/§  32 ZPO. Again, this will leave the plaintiff with only the general jurisdiction at the defendant’s domicile.38 2. Applicable law The distinction between tortious obligations and other forms of non-contractual obligations is also of relevance regarding choice-of-law. Both the European and the German rules contain different provisions for different forms of non-contractual obligations. a) Tort claims Tort claims are governed by arts. 4–9, 14 Rome II Regulation and arts. 40–42 EGBGB. Whereas the national regime is limited to a general clause (coupled with an escape clause and a rule on choice-of-law), the European regime in addition contains rules for specific torts. In principle, both the European and German private international law rules for torts are based on the principle that the law with the closest connection to the case at hand shall govern it, even though both sets of laws differ with regard to the application of the principle in the area of tort law. (1) Lex damni vs ubiquity principle Whereas art. 4(1) Rome II Regulation calls solely for the application of the lex damni, art. 40(1) EGBGB is – despite much criticism 39 – still based on the principle of ubiquity. German and European law may thus lead to differing results in cases where the act is committed in one state and the damage occurs in another state. A court applying art. 4(1) Rome II Regulation will always apply the lex damni, whereas a court applying art. 40(1) EGBGB will, as a starting point, apply the law of the state where the tortious act was committed. The lex damni will only be applied if the injured party asks the court to do so. This choice benefits the injured party,40 who may choose the lex damni if it is more favourable for him or her in the specific case. Such an option for the injured party is hard to justify if the overarching goal is to designate the law having the closest connection to the case. The European legislature has thus refrained from codifying the principle of ubiquity in art. 4(1) Rome II Regulation for good reason. It is only with regard to environmen38  That was the outcome in ECJ Case C-242/20, HRVATSKE ŠUME v. BP Europa, ECLI: EU:C:2021:985. 39 See von Hein, Das Günstigkeitsprinzip im Internationalen Deliktsrecht, 1999, 89 et seq.; Kadner Graziano, Gemeineuropäisches Internationales Privatrecht, 2002, 228 et seq.; Kropholler, Internationales Privatrecht, 6th edn. 2006, §  53 IV 2. 40  Von Bar/Mankowski, Internationales Privatrecht. Band II: Besonderer Teil, 2nd edn. 2019, §  2 paras. 116 et seq.

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tal damage dealt with under art. 7 Rome II Regulation that the person seeking compensation can choose to base his or her claim on the law of the state in which the event giving rise to the damage occurred. If such a choice is not made, the law designated by art. 4(1) Rome II Regulation is to be applied. This exception was justified by the European legislature with reference to “the principle that preventive action should be taken, the principle of priority for corrective action at source and the principle that the polluter pays” (see Recital 25 Rome II Regulation), i.e., with the argument that potential tortfeasors will usually put more care into avoiding environmental damage if they might be liable under a stricter law. (2) Common habitual residence of tortfeasor and victim However, if both parties have their habitual residence in the same state both art. 4(2) Rome II Regulation and art. 40(2) EGBGB designate the law of this state as the applicable law. The idea behind this rule is one of procedural efficiency. In such cases, the parties are expected to litigate in their common state of habitual residence where now the courts apply their lex fori.41 (3) Escape clause To ensure the necessary flexibility for special cases, both the European and the German rules provide for escape clauses. If there is a manifestly or substantially closer connection with a state other than the state specified by the general rules explained above, art. 4(3) Rome II Regulation and art. 41 EGBGB call for the court seized to apply the law of this other state. The main example of such a closer connection in tort is the existence of a contract between the parties closely connected to the tortious claim (art. 4(3) sentence 2 Rome II Regulation, art. 41(2) no.  1 EGBGB). In such a scenario, the tort claim will be based on the law governing the contract (akzessorische Anknüpfung) so as to avoid dépeçage. (4) Rules for special torts (Rome II Regulation) Unlike the EGBGB, which sets out a Generalklausel for all torts (unless unlawful conduct is governed by special conflict-of-law rules in specialized statutes), the Rome II Regulation contains many special rules for torts. These rules are designed in a manner to protect certain groups of people or a given market. 41 Regarding art. 4 Rome II Regulation Junker, in: Münchener Kommentar zum BGB (hereinafter: MüKoBGB), 8th edn. 2021, Art.  4 Rom II-VO para.  37; von Hein, in: Callies/ Renner, Rome Regulations, 3rd edn. 2020, Art.  4 Rome II Regulation para.  26. Regarding art. 40 EGBGB, Junker argues that the law of the common habitual residence is simply the result of the closest connection principle, as in this case the personal element defines the closest connection. Junker, in: MüKoBGB, Art.  40 EGBGB para.  50.

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The special rule of product liability enshrined in art. 5 Rome II Regulation aims to provide some benefit to the injured party.42 Put simply, the complex rule of art. 5 Rome II Regulation focuses essentially on the states where the product was marketed, thereby prioritizing the habitual residence of the injured party. The rule for environmental damage (art. 7 Rome II Regulation) allows the victim to base his or her claim either on the law of the state in which the event giving rise to the damage occurred or on the lex damni, a mechanism favouring the injured party (supra II.2.a)(1)). In cases of industrial action, art. 9 Rome II Regulation calls – without prejudice to art. 4(2) Rome II Regulation – for the application of the law of the state where the action was or is to be taken in respect of claims based on the liability of a person in the capacity of a worker or an employer or the organisations representing their professional interests. This rule is not only the result of the difficulty of localising damages in cases of industrial action, but it also aims to benefit unions and similar players.43 If the lex damni were to be applied, as foreseen by art. 4(1) Rome II Regulation, these persons or organisations would be required to assess not only possible places of damages but also the legal rules of these places before taking any action.44 Besides these rules protecting specific groups of people, there are also rules which are aimed at the protection of a given market. The conflict-of-law rules for non-contractual obligations arising from violation of competition and antitrust law ensure that the law of the protected market will apply. Accordingly, art. 6(1), (3) Rome II Regulation designate the law of the state where, respectively, competitive relations or the collective interests of consumers are or are likely to be, or where the market is or is likely to be affected for non-contractual obligations arising from cases of unfair competition or acts restricting free competition. Even though the wording “affected” is identical in both rules, they are not interpreted in a completely identical manner. Regarding art. 6(1) Rome II Regulation, the law applicable is that of the state where the other market participant is directly impacted by the actions of the tortfeasor (Marktortprinzip).45 Regarding art. 6(3) Rome II Regulation, the law applicable is that of the state where the market is affected, i.e., where the balance of supply and demand is affected (Auswirkungsprinzip).46 As a result, indirect consequences of an action in another market are irrelevant under art. 6(1) Rome II Regulation.47 42 

Junker, in: MüKoBGB (n. 41), Art.  5 Rom II-VO para.  1. Rec. 27 s. 2 Rome II Regulation. 44  Junker, in: MüKoBGB (n. 41), Art.  9 Rom II-VO para.  2 ; cf. also Wagner, IPRax 2006, 372, 386. 45  Drexl, in: MüKoBGB (n. 41), Art.  6 Rom II-VO para.  145. 46  Wurmnest, in: MüKoBGB (n. 41), Art.  6 Rom II-VO para.  281. 47  Drexl, in: MüKoBGB (n. 41), Art.  6 Rom II-VO para.  146. 43 

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Similarly, the rule for non-contractual obligations flowing from infringements of intellectual property rights has a relation to a specific market, as art. 8(1) Rome II Regulation designates the law of the state for which protection is claimed thereby, taking into account the territoriality of intellectual property rights.48 If the protection is claimed for all EU Member States based on a unitary Community intellectual property right, the law of the place where the infringement was committed is to be applied according to art. 8(2) Rome II Regulation. b) Other forms of non-contractual obligations (1) Negotiorum gestio and unjust enrichment Other than the rules on jurisdiction, both the European and the national German rules on choice of law contain specific provisions for both unjust enrichment and negotiorum gestio in arts. 10 and 11 Rome II Regulation and arts. 38 and 39 EGBGB respectively. These rules follow similar principles. The starting point is the law that governs a closely connected legal relationship between the parties (arts. 10(1), 11(1) Rome II Regulation/arts. 38(1), 41(2) no.  1 EGBGB). If no such relationship exists, the law of the common habitual residence is to be applied (arts. 10(2), 11(2) Rome II Regulation/art. 41(2) no.  2 EGBGB). If the parties have their habitual residence in different states, the law of the place where the unjust enrichment took place or where the act of negotiorum gestio was performed is to be applied (arts. 10(3), 11(3) Rome II Regulation/arts. 38(2), 39(1) EGBGB). In addition, the German rules contain additional provisions for cases of unjust enrichment arising out of the appropriation of another’s assets or rights (Eingriffskondiktion), governed by the law of the state where the infringement took place (art. 38(2) EGBGB) and for cases of negotiorum gestio where one party satisfied debts of the other party, governed by the law governing this debt (art. 39(2) EGBGB). In all cases, it is possible to apply the law of an alternative state if there is a manifestly or substantially closer connection with that state (arts. 10(4), 11(4) Rome II Regulation/art. 41(1) EGBGB. (2) Culpa in contrahendo Regarding culpa in contrahendo, art. 12(1) Rome II Regulation designates the law that would be applicable to the contract if the contract had been concluded. If the applicable law cannot be determined in this way, it is designated by art. 12(2) Rome II Regulation. Art. 12(2) Rome II Regulation mirrors the general rule (art. 4 Rome II Regulation), calling for the application of the lex damni 48  This is in line with the ruling in ECJ C-523/10, Wintersteiger v. Products 4U, EU:C: 2012:220 regarding jurisdiction.

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unless the parties have a common habitual residence (then the lex domicilii com­ munis applies) or another law is more closely connected to the case at hand (then this law applies, even when there is a common habitual residence of the parties). This approach reflects that the nature of culpa in contrahendo is somewhat in the shadow of contractual and non-contractual obligations. It needs to be noted that recital 30 Rome II Regulation excludes some cases from the scope of art. 12(1) Rome II Regulation, namely cases in which a person suffers personal injury in the course of the negotiations for a contract, which are considered cases of culpa in contrahendo under German law.49 In these cases, art. 4 Rome II Regulation is to be applied, showing again that the width of culpa in contrahen­ do and the different classification under German law (supra II.1.b)(1)) have no bearing on the classification under European law.

III. Localising the place where the harmful event occurred 1. Place of damage as an autonomous concept As in every state, in Germany there is a connection between the rules of private law and the conflict-of-law rules as the national law maker usually defines rules for cross-border cases based on legal institutions that are known in the national legal order. In German private international law, the legislature has made recourse to the terminology used in the BGB (unerlaubte Handlung etc.), but that does not mean that classifications in private and private international law follow identical rules. Rather the rules of private international law and international jurisdiction must be construed independently from their counterparts in substantive law as otherwise courts could not deal with legal institutions unknown to the German legal order. Having said that, it must also be stressed that the process of localising the place of damage in cross-border cases is in many cases influenced by the substantive rules of tort law on which the injured party relies (see infra 2.). Turning to European law, it needs to be understood that there is no comprehensive European Civil Code. Therefore, the European rules laid down in the Brussels Ibis Regulation and the Rome II Regulation were partially influenced by the (common) traditions of the legal orders of the member states or compromises between the diverging rules prevailing in the member states. The link between substantive law and the rules for jurisdiction and private international law is thus much weaker than in national law. Additionally, as European law is a distinct body of law, the ECJ has from the outset called for an autonomous interpretation of the European rules. This is also true for the concept of the 49 

Cf. also Junker, in: MüKoBGB (n. 41), Art.  12 Rom II-VO para.  18.

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place of damage in European law.50 Therefore, the construction has to be independent of the applicable substantive law and is based on principles such as proximity to evidence and the like (supra II.1.a)). Still, the European rules are not completely detached from their private law counterparts. When the Rome II Regulation was drafted, the European Commission opted for the lex damni as the general rule for tort claims (art. 4(1) Rome II Regulation) (and not for the place where the tortious act was committed) as there is a trend in (national) substantive tort law towards aiming to prevent infringements instead of punishing infringing behaviour.51 2. Initial damage and indirect consequences a) General rule Under German and European law, strict distinction must be made between the initial damage and indirect consequences. As a general rule, the place of damage is the place where the initial damage occurs, and indirect consequences are irrelevant for the place of damage. This is expressly stated in art. 4(1) and recital 17 Rome II Regulation and holds also true for art. 7(2) Brussels Ibis Regulation52 as well as art. 40 EGBGB and §  32 ZPO.53 b) Defining the place of initial damage The place of initial damage is defined as the place where the legal interest protected by the applicable rule of tort was harmed.54 Regarding German law, this follows from its connection to German substantive law. Under German law, the relevant place for the construction of the Erfolgsort is the place where the protected Recht (right) or Rechtsgut (interest) was directly harmed and this place in some cases needs to be distinguished from the Schadensort, understood as the place where further (consequential) damage occurred.55 Under the general rule of tort law (§  823(1) BGB) liability is based upon a wrongful violation of a Recht or Rechtsgut enumerated in that rule (life, body, health, freedom, property or another right of another person). The damage occurring from this violation is a distinct precondition for a claim for damages. As a result, only the harm to the 50  ECJ Case 21/76, Bier v. Mines de Potasse d’Alsace, ECLI:EU:C:1976:166 para.  8/12; ECJ Case C-189/08, Zuid-Chemie v. Philippo‘s Mineralenfabriek, EU:C:2009:475 para.  17. 51 European Commission, COM(2003), 427 final, 13; von Bar/Mankowski (n. 40), §   2 para.  123. 52  Hess, EuZPR (n.   15), para.   6.74; von Bar/Mankowski, Internationales Privatrecht. Band I: Allgemeine Lehren, 2nd edn. 2003, §  7 para.  54; Gottwald, in: MüKoZPO (n. 31), 6th edn. 2022, Art.  7 Brüssel Ia-VO paras. 57, 61. 53  Toussaint, in: BeckOK ZPO (n. 11), §  32 ZPO para.  13; Junker, in: MüKoBGB (n. 41), Art.  40 EGBGB para.  31. 54  Gottwald, in: MüKoZPO (n. 31), Art.  7 Brüssel Ia-VO para.  57. 55  Kropholler (n. 39), §  53 IV 1.

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protected right or interest is relevant when localising the damage.56 Given that the concept of Rechtsgutverletzung is unknown to most other European tort systems, it is evident that this cannot be the criterion when applying European law. It is, however, generally accepted that there are no significant differences between the place of the Rechtsgutverletzung (art. 40 EGBGB) and the place where the damage occurred (art. 4(1) Rome II Regulation) as the dividing line between direct and indirect damage defined by the ECJ follows similar principles (even though a classification might vary in specific circumstances).57 c) Economic loss As outlined above, the general rule of German tort law, §  823(1) BGB, does not cover pure economic loss but requires harm to a right or legal interest. Therefore, the place where the economic damage was suffered cannot be considered a place of (initial) damage.58 There are, however, other rules such as §  826 BGB, granting damages for pure economic loss. Economic loss is not considered as initial damage if it is the consequence of harm suffered previously. Two examples are given by recital 17 Rome II Regulation: in case of personal injury or damage to property, the relevant place of damage is the place where the personal injury was suffered or the property was damaged. Therefore, the place where the resulting financial loss occurs, e.g., where payment is made to remedy the harm, cannot be classified as place of damage. One textbook example is the victim of a car accident in state A, who some days later has to be hospitalised in state B when the damage to his health resulting from the accident becomes apparent. The costs for his medical treatment are an indirect damage resulting from the car accident, so the courts of state A have jurisdiction under §  32 ZPO/art. 7(2) Brussels Ibis Regulation and would apply the lex fori according to art. 4(1) Rome I Regulation. If, however, the legal rule in question protects the victim against pure economic loss, such economic loss can be classified as the initial damage.59 This includes all cases where there is no prior personal injury, damage to property and the like. 60 In Germany, the crucial question in such cases is whether the victim could assert a claim under substantive law for purely economic loss. If

56  BGH, NJW 1969, 1532, 1533 regarding §  32 ZPO and NJW-RR 2008, 516, 519 para.  21 with an identical distinction regarding art. 5(3) of the Convention of Lugano which corresponds to art. 7(2) Brussels Ibis Regulation. 57  Thorn, in: Grüneberg, Bürgerliches Gesetzbuch: BGB (hereinafter: Grüneberg), 81st edn. 2022, Art.  4 Rom II para.  1. 58  BGH, NJW 1969, 1532, 1533; Kegel/Schurig, Internationales Privatrecht, 9th edn. 2004, 730. 59  Mankowski, EuZW 2016, 585; Heindler, IPRax 2018, 103, 106 et seq. 60  Heindler, ibid. 107.

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this is answered in the affirmative, such damage can be regarded as a relevant initial damage. 61 d) Indirect victims Similarly, the damage suffered by indirect victims cannot be taken into account when deciding on the place of damage.62 A person is an indirect victim of a tortious act if he or she aims to found damages on the basis of the claim of another person and cannot rely on his or her own right for such a claim. In German law, that is the case where family members that depended on the victim can make certain claims against the tortfeasor in case of death. Such claims are based on the liability of the tortfeasor for causing the death and is therefore irrelevant when locating the place of damage.63 The situation is different, however, if a relative of the deceased claims damages based on the shock suffered due to the death of the primary victim. In this situation some scholars argue that the relative is claiming damages based on his or her own claim (typically §  823(1) BGB). 64 Such an interpretation (even though it is very victim friendly) would, however, multiply the places where proceedings can be initiated and undermine the principle of foreseeability and is therefore rejected by other German scholars.65 The ECJ sided with the second view when ruling on art. 4(1) Rome II Regulation. In Lazar,66 a person domiciled in Romania claimed damages from an Italian insurer, arguing that he suffered harm due to the death of his daughter in a car accident in Italy. Under Italian substantive law, such damage qualifies as a damage of the plaintiff as a consequence of an infringement of his personality right. As a result, it could be argued that the damage suffered by the claimant was an initial damage as one of his legal interests was harmed. The ECJ, however, considered the original car accident to be the connecting factor with the direct damage consisting only of the injuries and death suffered by the plaintiff’s daughter. The solution of the court strengthens predictability as otherwise the place of damage would have been the place where the claimant was first in-

61  This distinction is not quite exact from a German perspective. In German law, the relevant criterion is whether economic loss is a factual precondition of the rule of tort law relied upon, Junker, in: MüKoBGB (n. 41), Art.  40 EGBGB para.  31; Rauscher, Internationales Privatrecht: Mit internationalem Verfahrensrecht, 5th edn. 2017, para.  1378. But if it is, the rule also covers purely economic loss. 62  ECJ Case C-220/88, Dumez France and Tracoba v. Hessische Landesbank, ECLI:EU: C:1990:8 para.  22; von Bar/Mankowski (n. 40), §  2 para.  145. 63  Gottwald, in: MüKoZPO (n. 31), Art.   7 Brüssel Ia-VO para.  61; Leible, in: Rauscher (n. 23), Art.  7 Brüssel Ia-VO para.  122. 64  Staudinger/Czaplinski, NJW 2009, 2249, 2252. 65  Junker, in: MüKoBGB (n. 41), Art.  4 Rom II para.  29; Wurmnest, LMK 2016, 376926; for a more critical view see Mankowski, JZ 2016, 310, 311 et seq. 66  ECJ, Case C-350/14, Lazar v. Allianz, ECLI:C:2015:802.

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formed of the death of his daughter, a place that might lack any real connection to either the direct victim, the tortfeasor or his or her actions. 67 Another example illustrating that the distinction between direct and indirect victims is not as straightforward as it might look is the case of Tibor Trans68 in which a freight transport company domiciled in Hungary sued a cartel member incorporated in the Netherlands for damages. The plaintiff alleged that it had acquired trucks at a price distorted by the collusive arrangements in which the defendant had participated. The trucks were acquired via dealers and not directly from the defending cartel member, so the plaintiff was an indirect purchaser to which the unlawful overcharge was allegedly “passed-on” by the direct purchaser. Thus, the question arose whether the indirect purchaser had only suffered a consequential loss and must therefore sue at the place where the direct purchaser had suffered the “initial damage”. The ECJ answered this question in the negative. It distinguished the damage sustained by the direct purchaser and the damage of the indirect purchaser and argued that the latter “is not merely a financial consequence of the damage that could have been suffered by direct purchasers […], which could have consisted of a loss of sales following the price increase”. 69 Instead, the damage of the indirect purchaser stems “essentially from the additional costs incurred because of artificially high prices and, therefore, appears to be the immediate consequence of an infringement pursuant to art. 101 TFEU and thus constitutes direct damage which, in principle, provides a basis for the jurisdiction of the courts of the Member State in which it occurred”.70 This interpretation will facilitate private enforcement of competition (antitrust) law as indirect purchasers will be able to sue at the place where the market prices were distorted and in which the victim claims to have suffered that damage, which is often their home jurisdiction. 3. Latent damage and fictitious localisation Regarding latent damage, there is no distinction from damage already suffered when applying the rules of private international law. Article 2(3)(b) Rome II Regulation explicitly states that damage that is likely to occur is to be considered damage within the meaning of the regulation. Therefore, the place of damage for latent damage is simply the place where damage is likely to be suffered in the future instead of the place where damage was suffered.71

67  Friesen, r+s 2016, 196, 197; von Hein, in: Callies/Renner (n. 41), Art.  4 Rome II Regulation para.  18. 68 ECJ Case C-451/18, Tibor-Trans Fuvarozó és Kereskedelmi v. DAF Trucks, ECLI: EU:C:2019:635. 69  Ibid. para.  31. 70  Ibid. para.  31. 71  Junker, in: MüKoBGB (n. 41), Art.  4 Rom II-VO para.  24; Rauscher (n. 61), para.  1450.

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As far as we can see, there is no purely fictitious localisation of the place of damage by rules of private international law outside of the field of non-contractual liability. Even in the area of non-contractual liability where the ECJ has construed the Erfolgsort for actions against online defamation cases as being the victim’s centre of interest (infra IV.2.a)), it cannot be said that this localisation is a fictitious localisation as at least part of the damage was sustained in this state.

IV. Collective redress 1. The Musterfeststellungsklage There is no proper collective redress instrument under German law, apart from the so called Musterfeststellungsklage (§§  606 ZPO et seq.) which has a very restricted scope.72 Under this instrument, which is widely regarded as an insufficient collective redress mechanism,73 a consumer association can initiate a type of model lawsuit for the benefit of a group of consumers that have registered and paid a registration fee. The association is, however, limited to asking the court to rule on predefined abstract issues (for example whether a product is defective) but cannot claim damages or any other form of redress on behalf of the consumers. The idea behind the Musterfeststellungsklage is that a judgment obtained by the consumer association is treated as binding in follow-on lawsuits brought by individual consumers to obtain redress. As the proceeding brought by the association suspends limitation for registered consumers under German law (§  204(1a) BGB) it also buys time for consumers. The parties of the Musterfest­ stellungsverfahren can in addition negotiate a (court approved) settlement which can bind registered consumers as far as it is not refused (§  611 ZPO). 2. Problems arising in cross-border cases In general, this mechanism is open to foreign consumers as well. If a Musterfest­ stellungsverfahren is initiated, foreign consumers are able to register their claims. As the registration cannot lead to the adjudication of individual claims, the international jurisdiction of the German courts for the claim of a foreign consumer is not considered to be a requirement for registration. As a result, registration is open to consumers who could not bring their claim before the German courts in an individual proceeding.74 As, however, the aforementioned 72  An overview of the new proceedure in English language is given by Kleinschmidt, in: Karner/Steiniger (eds.), European Tort Law 2018, 2019, 221 et seq. 73 See Balke/Liebscher/Steinbrück, ZIP 2018, 1321 et seq.; Stadler, VuR 2018, 83; Wurm­ nest/Gömann, in: Karner/Steiniger (eds.), European Tort Law 2019, 2020, 205, 210 with further references. 74  Horn, ZVglRWiss 118 (2019), 314, 326; Stadler, NJW 2020, 265, 267.

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settlement will concern individual claims of all registered consumers who do not refuse it, the defendant could at this stage require all consumers to prove that their claims can be adjudicated by German courts in order to benefit from the settlement (§  611(2) no.  2 ZPO).75 If no settlement is reached, it is not yet clear if the ruling in the Musterfeststellungsverfahren will be binding on foreign courts if they are asked to rule on the individual claims of registered consumers in the aftermath of the Musterfeststellungsverfahren. On the one hand, this would lead to a situation where a court would give a binding ruling on an issue without having jurisdiction and without the defendant being able to raise the issue of jurisdiction; on the other hand, the reasons for refusal of recognition under art. 45 Brussels Ibis Regulation are limited and do not prima facie allow non-recognition in these circumstances.76 As the Brussels Ibis Regulation is not aimed at mechanisms like the German Musterfeststellungsklage, it is suggested that it is better to construe art. 45(3) sentence 1 Brussels Ibis Regulation in order to limit the binding effect of such rulings.77 Regarding the applicable law, the Musterfeststellungsklage does not lead to a deviation from the general rules. The registration of a foreign consumer is without relevance to the law applicable on his or her individual claim.78 If this law deviates from the law applied by the court in the Musterfeststellungsverfahren, the binding nature will, regardless of the problems outlined above, be limited to any factual issues, as a binding ruling on the application of e.g. German law would not be relevant if another law is applicable regarding the individual claim of a specific consumer.79 In a model lawsuit concerning the diesel emission scandal, many consumers have accepted a settlement negotiated by the Verbraucherzentrale Bundesverband (vzbv) with Volkswagen. In this lawsuit, foreign consumers from Italy and Austria registered for the Musterfeststellungsklage.80 As the defendant, Volkswagen, is based in Germany, the issue of jurisdiction did not come up as the jurisdiction of German courts follows from art. 4 Brussels Ibis Regulation for all claims.81 In a Hinweisbeschluss, the Oberlandesgericht Braunschweig pointed out that the consumer organization apparently wanted the court’s judgment to be based on German law. As there is no special conflict-of-law rule for a Mus­ terfeststellungsklage, the court pointed out that under art. 4 Rome II Regulation a foreign law might rule claims of consumers domiciled abroad. 82 As conse75 

Horn, ZVglRWiss 118 (2019), 314, 327. Horn, ZVglRWiss 118 (2019), 314, 330 et seq. 77  Horn, ZVglRWiss 118 (2019), 314, 336. 78  Horn, ZVglRWiss 118 (2019), 314, 327. 79  Horn, ZVglRWiss 118 (2019), 314, 327; Stadler, in: Musielak/Voit (n. 6), §   606 ZPO para.  14a. 80 Cf. Stadler, NJW 2020, 265, 266. 81 Cf. Horn, ZVglRWiss 118 (2019), 314, 326; Stadler, NJW 2020, 265, 267. 82 OLG Braunschweig, Hinweisbeschluss vom 3 July 2019, sub II, available at https:// 76 

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quence, foreign consumers cannot be certain that a judgment of the German court will be of help in a follow-on action given that their claims might be governed by a foreign law.83

V. Scope of jurisdiction 1. International and local jurisdiction Both the European and the national German rules on tort jurisdiction grant the designated court international and local jurisdiction. Not only are the courts in the state where the harmful event occurred or may occur competent to hear and decide the case (internationale Zuständigkeit), but within this state the courts in whose district the damage can be located have jurisdiction (örtliche Zuständig­ keit). In German law, this principle derives from the fact that the rules on local jurisdiction (§§  12 et seq. ZPO) are also applied to determine the international jurisdiction of German courts in cases not governed by European or international law (supra I). In European law, art. 7(2) Brussels Ibis Regulation does not confer jurisdiction to all courts of a Member State but only the “courts for the place where the harmful event occurred”. 2. Multi-state torts, especially violation of personality rights a) Jurisdiction under EU law When a single act causes damages in several states, this can lead to multiple places of damage under both the European and the national German rules. Regarding art. 7(2) Brussels Ibis Regulation, this was first decided for violations of personality rights by media companies in Shevill.84 In Shevill, a newspaper containing an allegedly defamatory article was published in France but also distributed in other states, including England, where the plaintiff was domiciled. Mrs. Shevill sued the French newspaper in England for damages. The ECJ held that an action for damages against the publisher can be brought either before the courts for the place where the publisher of the defamatory publication is established (art. 4 Brussels Ibis Regulation), “which have jurisdiction to award damages for all the harm caused by the defamation”.85 Or the victim can sue before the courts of each member state “in which the publication was distributed and www.bundesjustizamt.de/DE/Themen/Buergerdienste/Klageregister/Klagen/201802/Ver fahren/Verfahrensstand.html;jsessionid=B10328A3BFDAFC8FBA18AA9752D4E46B.2_ci d500?nn=11994364#doc11743832bodyText6 (3.1 Bekanntmachung des Oberlandesgerichts Braunschweig vom 04.07.2019), last accessed 7.7.2022. 83  Stadler, NJW 2020, 265, 268. 84  ECJ Case C-68/93, Shevill, v. Presse Alliance, ECLI:EU:C:1995:61. 85  Ibid. para.  24.

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where the victim claims to have suffered injury to his reputation, [but those courts] have jurisdiction to rule solely in respect of the harm caused in the state of the court seised”.86 In addition, the publisher can be sued for all of the damage caused at the place of the event giving rise to the damage (Handlungsort), which regularly coincides with the place where the publisher was established as usually the decision to publish the infringing article is taken at the publisher’s seat.87 This differentiated approach to jurisdiction leads to the so-called “mosaic principle” when the victim sues at the Erfolgsort as the power of the courts in these states is confined to the damage occurring in their state. This result splits up the damage into several pieces which the injured party has to add together (like a mosaic) by suing in different states unless the victim sues for all of the damage caused at the domicile of the defendant or at the place of the event giving rise to the damage. The mosaic approach is not limited to cases of defamation but also applies, for example, in cases of the infringement of intellectual property, where the relevant places of damage are the different states that protect an intellectual property right in their respective territories.88 The mosaic principle is, however, not a general principle under art. 7(2) Brussels Ibis Regulation. For example, it has not yet been embraced by the ECJ (at least not expressively) for antitrust damages actions and also with regard to violations of personality rights, the ECJ restricted its reach in eDate advertising.89 Unlike Shevill, the latter case concerned an online defamation. The ECJ argued that the Shevill restriction cannot be applied in online cases as “the placing online of content on a website is to be distinguished from the regional distribution of media such as printed matter in that it is intended, in principle, to ensure the ubiquity of that content. That content may be consulted instantly by an unlimited number of internet users throughout the world, irrespective of any intention on the part of the person who placed it in regard to its consultation beyond that person’s Member State of establishment and outside of that person’s control.”90 Given “the serious nature of the harm which may be suffered by the holder of a personality right who establishes that information injurious to that right is available on a world-wide basis”,91 the connecting criteria for the localisation of harm “must therefore be adapted in such a way that a person who has suffered an infringement of a personality right by means of the internet may bring an action in one forum in respect of all of the damage caused, depending 86 

Ibid. para.  33. Ibid. para.  24. 88  E.g. ECJ Case C-170/12, Pinckney v. KDG Mediatech, ECLI:EU:C:2013:635 para.  47. An overview with further case law is given by Leible, in: Rauscher (n. 23), Art.  7 Brüssel IaVO para.  129. 89  ECJ Joined Cases C-509/09 and C-161/10, eDate Advertising v. X and Martinez v. Société MGN, ECLI:EU:C:2011:685. 90  Ibid. para.  45. 91  Ibid. para.  47. 87 

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on the place in which the damage caused in the European Union by that infringement occurred. Given that the impact which material placed online is liable to have on an individual’s personality rights might best be assessed by the court of the place where the alleged victim has his centre of interests, the attribution of jurisdiction to that court corresponds to the objective of the sound administration of justice.”92 Usually, the centre of interests corresponds with the victim’s habitual residence but it can also lie in another state “in so far as other factors, such as the pursuit of a professional activity, may establish the existence of a particularly close link with [this other state]”.93 As a result, in cases of online defamation, the injured party can sue for all of the damage caused at the domicile of the infringer, the place where the harmful act was committed and his or her centre of interests. Alternatively, the victim could sue in the different states where the website could be accessed but would be limited to the harm suffered in this state under the Shevill rule. This applies also where the injured party is a legal person. In these cases, the centre of interests must not necessarily be the registered office of that legal person.94 The relevance of the centre of interest requires, however, that the plaintiff can be somehow identified in the article by objective and verifiable elements. In Mittelbayerischer Verlag, the plaintiff, an activist for the preservation of the memory of the victims of crimes committed by Nazi Germany against Polish nationals during World War II, having his centre of interests in Poland sued a German newspaper before Polish courts. He claimed a violation of his personality rights, arising from an online article about a Jewish Holocaust survivor. The article on the defendant’s website mentioned that the sister of the holocaust survivor “was murdered in the Polish extermination camp of Treblinka”. The plaintiff argued that the reference to the “Polish extermination camp” infringed his national identity and dignity as the concentration camps were run by the Nazis in occupied Poland and the wording could create the false impression among some readers that Polish nationals were responsible for the extermination camps. As the website was also accessible from other states, including Poland, the plaintiff relied on eDate Advertising to justify the international jurisdiction of the Polish courts. The ECJ, however, underlined that only the existence of a particularly close connection between the dispute and the courts makes it possible to derogate from the general rule of actor sequitur forum rei.95 Such a connection can only be established in cases of alleged violations of personality rights if “objective and verifiable elements [exist] which make it possi92 

Ibid. para.  48. Ibid. para.  49. 94  ECJ Case C-194/16, Bolagsupplysningen and Ilsjan v. Svensk Handel AB, EU:C:2017:766 para.  4 4. According to R. Magnus, RabelsZ 84 (2020), 1, 21, the place of central administration should be the main criterion to achieve conformity with art. 23(1) Rome II Regulation. 95  ECJ Case C-800/19, Mittelbayerischer Verlag v. SM, EU:C:2021:489 paras. 40 et seq. 93 

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ble to identify, directly or indirectly, that person as an individual”.96 As the plaintiff was not identified as an individual, either directly or indirectly in the content placed online on the defendant’s website (the article was not about the plaintiff or his family), and merely claimed that he is part of the group of the Polish people whose personality rights were affected by the reference to “Polish concentration camps”,97 the Court held that “there is no particularly close connection between the courts of the place where the centre of interests of the person relying on those personality rights is situated and the dispute concerned, with the result that that court does not have jurisdiction to hear that dispute under [art. 7(2) Brussels Ibis Regulation]”.98 b) Jurisdiction under German law As already mentioned, (supra I), §  32 ZPO has a slightly different scope from art. 7(2) Brussels Ibis Regulation as it only concerns jurisdiction of the German courts in cases in which the place of damage can be localised in Germany. In addition, the Bundesgerichtshof chose a different approach from the ECJ to localise the place of damage in cases of violations of personality rights. Generally speaking, German courts have (international and local) jurisdiction if a protected legal right (Rechtsgut) has been interfered with in Germany. With regard to violations of personality rights infringed by print publications, the Bundesgerichtshof ruled that such infringement was committed at the place where the press product is deliberately disseminated (Ort der bestim­ mungsgemäßen Verbreitung), so that print products that occasionally reach German territory from outside the publisher’s distribution system are not sufficient to make the foreign publisher susceptible to jurisdiction under §  32 ZPO.99 Regarding online defamations, the Bundesgerichtshof emphasised that a localisation of the damage in each state where a website could be accessed would confer jurisdiction on too many states.100 Other than press publications, where the number of states where a specific magazine is sold is typically somewhat limited and the publisher has some control over this issue, online content can typically be accessed from all over the world. As a result, the Bundesgerichtshof applied a criterion that can be regarded as form of centre of gravity approach (Schwerpunktbetrachtung). The Court assumes international jurisdiction of German courts if the online content has a clear objective connection to Germa96 

Ibid. para.  42. Ibid. para.  4 4. 98  Ibid. para.  45. 99  BGH NJW 1977, 1590 (1591); BGH NJW 2010, 1752, 1753 para.  10. 100  BGH NJW 2010, 1752, 1753 para.  17. The ECJ used a similar argument to substantiate the special role of the centre of interests in Joined Cases C-509/09 and C-161/10, eDate Advertising v. X and Martinez v. Société MGN, ECLI:EU:C:2011:19 paras. 45 et seq. 97 

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ny which can be assumed if the “clash of the conflicting interests” (Ort der In­ teressenskollision), i.e., the plaintiff’s interest in respecting his right of personality on the one hand and the defendant’s interest in reporting certain content on the website on the other hand, can be localised in Germany.101 Generally speaking, there needs to exist a real possibility that the article will be read in Germany by a relevant number of people. This presupposes more than the mere fact that the website in dispute can be accessed from Germany102 without necessarily being directed at German readers.103 In sum, courts must find an objective connection with Germany based on the analysis of the specific circumstances of the case, in particular the content of the website in dispute and the language in which the article was written.104 The U.S. newspaper The New York Times can therefore be sued before German courts for alleged violations of personality rights of plaintiffs domiciled in Germany whose names were mentioned in the newspaper as people domiciled in Germany can register for the newspaper’s online version and more than 14.000 online readers had stated that they are domiciled in Germany when registering.105 In turn, a person domiciled in the U.S. who published an online article in the Russian language and the Cyrillic alphabet about a former classmate in Russia who is now domiciled in Germany and who she had met in Russia at a class reunion in Moscow, could not be sued in Germany. The Bundesgerichtshof argued that the allegedly defamatory online article contained private information about the plaintiff that was – as can be inferred from the language and the content – directed at the other participants of the class reunion, who all – apart from the plaintiff – are domiciled outside Germany.106 c) Multi-state torts: applicable law As the infringement of personality rights is excluded from the scope of the Rome II Regulation, the relevant choice-of-law-rule is art. 40 EGBGB (supra I). The general opinion amongst German scholars is that the mosaic principle also applies regarding the applicable law. If damage is caused in multiple states, each part of the harm is governed by the law of the respective state.107 To grant the injured party the right to choose the law of one of the places of damage is con101 

BGH NJW 2010, 1752, 1753 para.  20. BGH, NJW 2010, 1752, 1754 para.  18; BGH NJW 2011, 2059, 2060 para.  14. 103  BGH, NJW 2010, 1752, 1754 para.  18. 104  BGH NJW 2010, 1752, 1753 para.  20; BGH NJW 2011, 2059, 2060 paras. 12, 15; BGH NJW 2012, 148, 149 para.  12. 105  BGH NJW 2010, 1752, 1753 paras. 22 et seq. 106  NJW 2011, 2059, 2061 para.  15. 107  Von Bar/Mankowski (n. 40), para.  146; von Hein, RabelsZ 73 (2009), 461, 475 et seq.; Junker, in: MüKoBGB (n. 41), Art.  40 EGBGB para.  33 with further references. Cf. also BGH NJW 1996, 1128. 102 

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sidered to go too far, even after considering the protection of victims.108 However, as according to art. 40(1) sentence 2 EGBGB the law of the place of damage is only an option that the injured party may choose with the law of the place where the harmful act was committed being the general rule (supra II.1.a)(1)), the injured party may simply not exercise the option leading to the law of the place where the harmful act was committed being applicable to the damage as a whole.109 The Oberlandesgericht Hamburg has also applied German law as the law of the place of damage to a claim for injunctive relief concerning an alleged violation of personality rights via the internet.110 It has however to be noted that under the so-called e-Commerce Directive111 a publisher of online media seated in one EU Member State cannot be held accountable under a law stricter than that at the publisher’s seat.112 Also under European law, the mosaic principle plays an important role in multi-state torts. The application of the general rule (art. 4 Rome II Regulation) usually leads to the application of the mosaic approach.113 The same can be said for the applicable law in cases of infringements of intellectual property rights (art. 8 Rome II Regulation)114 and for antitrust damages actions remedying damage that occurred in different states (art. 6(3)(a) Rome II Regulation) unless the plaintiff has opted for the lex fori according to art. 6(3)(b) Rome II Regulation.115

VI. Pure economic loss As outlined above, not every pure economic (financial) loss can be regarded as relevant (initial) damage. However, if it is, the question of localisation arises. The localisation of pure economic loss is, in many ways, still an open question. 1. European law: a multitude of cases in search of general principles Even though there is a substantial amount of case law of the ECJ on this point, it is difficult to derive general principles from it that would allow one to 108 

Von Bar/Mankowski (n. 40), para.  146. Junker, in: MüKoBGB (n. 41), Art.  40 EGBGB para.  33. 110  OLG Hamburg, ZUM 2008, 63. 111  Directive 2000/31/EC of the European Parliament and of the Council of 8 June 2000 on certain legal aspects of information society services, in particular electronic commerce, in the Internal Market (“Directive on electronic commerce”), OJ 2003 L 178/1. 112  For more details see Fornasier, in: beck-online.GROSSKOMMENTAR (hereinafter: BeckOGK), 1.6.2022, Art.  40 EGBGB paras. 94 et seq. 113 COM(2003) 427 final, 11; cf. also Rauscher (n. 61), Rn.   1931; Rühl, in: BeckOGK, 01.12.2017, Art.  4 Rom II-VO paras. 71 et seq. with further references. 114  McGuire, in: BeckOGK, 01.12.2016, Art.   8 Rom II-VO para.   143; Spickhoff, in: Beck’scher Online-Kommentar zum BGB (hereinafter: BeckOK BGB), 62nd edn. as of 1.5.2022, Art.  8 Rom II-VO para.  4. 115  Wurmnest, in: MüKoBGB (n. 41), IntWettbR/IntKartellR para.  307. 109 

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clearly localise pure economic loss in future cases. This is because the ECJ has not elaborated a general framework but has instead handed down narrow decisions based on specific facts and it is common sense that newer decisions are not always in line with older decisions.116 Thus, it seems necessary to differentiate different Fallgruppen of pure economic loss.117 a) Financial investments (esp. prospectus liability) Three decisions given by the ECJ concerned cases of financial investments. In Kronhofer,118 a plaintiff domiciled in Austria claimed damages for losses from investments in speculative call options on the London Stock Exchange. The money for the investments was transferred from a German bank account. In Kolassa,119 another Austrian plaintiff had invested in bearer bonds and suffered losses due to a faulty prospectus. In Löber,120 , the Austrian plaintiff suffered damages again due to a faulty prospectus. In all three cases, the ECJ considered the damage to be suffered at the place of the bank account from which the investments had been paid for. Whereas in Kronhofer that led to the jurisdiction of the German courts,121 Kolassa and Löber could sue at home, as they had not set up specific accounts in other states from which the payment for the investments had been made.122 This shows that the relevant bank account is only the account from which money leaves the sphere of the injured party. It is therefore irrelevant if the money was transferred to this account from another account held by the injured party.123 To locate the relevant bank account, it is suggested that following the idea of art. 2 no.  9 iii EIR recast and considering the IBAN of the bank account allows for a proper localisation.124 For accounts without an IBAN it is suggested that reliance be placed on the place of the central administration of the bank or, if the account was opened with a specific branch, the place of this branch.125 116 

Von Bar/Mankowski (n. 40), §  2 para.  150. Lutzi, IPRax 2019, 290, 293. 118  ECJ Case C-168/02, Kronhofer v. Maier, EU:C:2004:364. 119  ECJ Case C-375/13, Kolassa v. Barclays Bank, ECLI:EU:C:2015:37. 120  ECJ Case C-304/17, Löber v Barclays Bank, ECLI:EU:C:2018:701. 121  In a similar scenario, the Oberlandesgericht Nürnberg declined the jurisdiction of the German courts under Art.  5 no.  3 Lugano Convention as investments had been made from an account set up in Switzerland, OLG Nürnberg, BeckRS 2006, 136216. 122  ECJ Case C-375/13, Kolassa v. Barclays Bank, EU:C:2015:37, EU:C:2015:37 para.55; ECJ Case C-304/17, Löber v Barclays Bank, para.  32. The same result was reached in BGH, NZG 2011, 69, 72 et seq. paras 30 et seq. where money was transferred to a foreign account in the name of the injured party, but the account had only been set up to make the bad investments. 123  Von Bar/Mankowski (n. 40), §  2 para.  153. 124  Von Bar/Mankowski (n. 40), §  2 paras. 158 et seq. 125  Von Bar/Mankowski (n. 40), §  2 para.  161. 117 Cf.

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The bank account is, however, not the sole relevant factor as the ECJ considers all the circumstances of the case. Therefore, it is difficult to derive general principles from the cases cited above for application in other cases in which damage is suffered due to financial investments. If, for example, the investor buys a share of a company and that share decreases in value, the question arises whether the share is the relevant connecting factor and not the account from which the payment for the share originated. Some scholars argue therefore that the place where the financial instrument was listed should be the relevant connecting factor to locate the place where the damage manifests itself.126 b) Fraud Also in circumstances involving fraud, the harm will often be suffered because the victim enters into an unfavourable contract.127 As a result, the conclusion of the contract is often considered the relevant connecting factor. It is argued that the conclusion of an unfavourable contract impacts the victim’s assets as he or she gains a claim of a certain value in return for granting a claim of a higher value. As only the initial damage is relevant and all later losses are merely indirect consequences, it is argued that the first impact, i.e., the conclusion of the unfavourable contract, must be the one that counts for the localisation of the damage.128 This view is in line with German criminal law. With regard to the crime of fraud (Betrug), §   263 German Criminal Code (Strafgesetzbuch, 129 StGB ), it is widely accepted that the conclusion of a contract can itself cause damage. Therefore, the so-called Eingehungsbetrug (fraud of commitment) is already completed when the victim agrees to an unfavourable contract.130 The amount of damage is calculated on an economic basis by taking into account the risk of receiving the less valuable performance in return for rendering the own 126 

Thomale, RabelsZ 84 (2020), 841, 847 et seq. with further references. As fraud often results in the conclusion of a contract, the place of damage will only be relevant if the resulting claims are not to be considered contractual. They are contractual if “the legal basis […] can reasonably be regarded as a breach of the rights and obligations set out in the contract which binds the parties in the main proceedings, which would make its taking into account indispensable in deciding the action”, see ECJ Case C-548/12, Brogsitter v Fabrication de Montres Normandes, ECLI:EU:C:2014:148, para.  26. It is argued that this will not influence classic cases of fraud where the victim is deceived before the contract is concluded as otherwise a success of the fraudster would deprive the victim of the jurisdiction of the courts at the place of damage, see Spickhoff, IPRax 2017, 72, 76. The opposite result was reached by the Landgericht Aachen and the Oberlandesgericht Köln, however, see LG Aachen, IPRax 2017, 96 and OLG Köln, IPRax 2017, 97. 128  Bach, NZG 2016, 795, 796; Rieländer, RabelsZ 85 (2021), 579, 601 et seq. arguing that the relevant initial damage is to the Dispositionsfreiheit (the right not to be fraudulently induced into entering unwanted contracts). 129 An English translation is available at https://www.gesetze-im-internet.de/englisch_ stgb/. 130  Fischer, Strafgesetzbuch: StGB, 69th edn. 2022, §  263 StGB para.  176. 127 

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performance.131 The conclusion of the contract was also considered the relevant factor in cases of buyers of faulty diesel-engine cars.132 Alternatively, it can be argued that the damage is caused when payment is made by the victim as it is at this point that he or she suffers a financial loss. Some consider such an outflow of assets to be necessary for the causation of damage133 as this Vermögensabfluss actually reduces the funds available to the injured party.134 In addition, it is argued that in cases of fraud the injured party could, if knowing all the facts, refuse exchange of performances and therefore significantly increases the damage by making payment.135 This would lead to the localisation of the damage via a bank account or, in case of cash payment, at the place where payment was made.136 German civil law distinguishes between the so-called Verpflichtungsgeschäft (a contract of sales or similar agreement, creating obligations on both parties to render the promised performance) and the so-called Erfüllungsgeschäft (a separate contract by which the parties render the performance, e.g. transfer of ownership of the sold goods from seller to buyer). In line with the concept outlined above, one needs to differentiate between these two contracts.137 With the two examples given above, the Verpflichtungsgeschäft would probably be relevant when buying shares, as the specific shares the seller promises to deliver are less valuable than the price paid and therefore the obligation to receive exactly those shares is already less valuable.138 When the buyer receives a diesel-engine car that does not meet all public-law requirements, however, the parties will typically have agreed on a car that meets all such requirements and the seller will only fail to deliver as promised. Therefore, the obligation to receive the car will be as valuable as the price and only the car actually received will be less valuable than both the price and the obligation. On this basis one could argue that the Erfüllungsgeschäft should be the relevant one.139 However, the Bundesgerichts­ hof took the opposite position, arguing that damage arises at the point a party agrees to a contract he or she would not have agreed upon if all the relevant facts

131 

Fischer (n. 130), §  263 StGB para.  176d. Stadler, in: Musielak/Voit (n. 6), Art.  7 EuGVVO para.  19f. The ECJ reached the same result in Case C-343/19, Verein für Konsumenteninformation v Volkswagen, ECLI:EU:C: 2020:534 para.  40, however, not considering the loss as pure economic loss, see paras. 32 et seq. This categorization is questioned by Stadler/Krüger, IPRax 2020, 512, 517. 133  Von Bar/Mankowski (n. 40), §  2 Rn.  162. 134  Von Bar/Mankowski (n. 40), §  2 Rn.  163. 135  Thomale, RabelsZ 84 (2020), 841, 847. 136  Spickhoff, IPRax 2017, 72, 77. 137 Cf. Rieländer, RabelsZ 85 (2021), 579, 591 et seq. This is also necessary if one does not consider the damage to be a purely economic loss as did the ECJ in Case C-343/19, Verein für Konsumenteninformation v. Volkswagen, EU:C:2020:534, supra n.  131. 138  Bach, in: Huber, Rome II Regulation, 2011, Art.  4 Rome II paras. 36 et seq. 139 Cf. Stadler/Krüger, IPRax 2020, 512, 518. 132 

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(e.g. the defects of the whole line of cars) had been known.140 This is in line with the German court practice on substantive law.141 c) Competition law Another example of pure economic loss are damages caused by anticompetitive conduct. In these cases, the applicable law according to art. 6(3) Rome II Regulation is the law of the state where the market is affected (supra II.2.a)(4)). As the Brussels Ibis Regulation does not contain a specific rule for infringements of competition (antitrust) law, jurisdiction has to be determined according to the general rule for torts, art. 7(2) Brussels Ibis Regulation. However, there seems to be a development in the jurisprudence of the ECJ to construe the place of damage under art. 7(2) Brussels Ibis Regulation as the place where the market is affected, in line with art. 6(3) Rom II Regulation. After holding in CDC that the place of damage can be located at the victim’s registered office in a case of a horizontal cartel,142 a decision that blatantly ignored the effects principle as connecting factor, the ECJ held in a case of a selective distribution network that the affected market must be taken into account when applying art. 7(2) Brussels Ibis Regulation. In Samsung, the court held that “the place where the damage occurred is to be regarded as the territory of the Member State which protects the prohibition on resale by means of the action at issue, a territory on which the appellant alleges to have suffered a reduction in its sales”.143 The affected market was also considered the relevant criterium in flyLAL-Lithuanian Airlines.144 Later, the “market affected by the anticompetitive conduct” was specifically mentioned as a relevant factor in cases of indirect purchaser claims against members of a horizontal cartel in Tibor Trans.145 As the cartel in question affected the market of all EEA member states, the ECJ specified that jurisdiction under art. 7(2) Brussels Ibis Regulation is vested in the courts in the place “where the market prices were distorted and in 140  BGH NJW 2020, 1962, 1968 para.  42. This can also be argued using the fact that the fault is with the model of the car and not the individual car received by the buyer. Therefore, it was impossible from the conclusion of the contract that the buyer would receive a car meeting all requirements, cf. Thomale, ZVglRWiss 119 (2020), 59, 65. 141  The conclusion of such a contract can be considered as damage, therefore the annulment of the contract can be claimed as compensation, see BGH NJW 2019, 1739 para.  13; Herres­ thal, in: BeckOGK 01.04.2022, §  311 BGB paras. 233, 238, 240 with further references. 142  ECJ Case C-352/13, Cartel Damage Claims (CDC) Hydrogen Peroxide v Akzo Nobel, ECLI:EU:C:2015:335, paras. 52 et seq. 143  ECJ Case C-618/15, Concurrence v Samsung Electronics France, ECLI:EU:C:2016:976 para.  35; Lutzi, IPRax 2017, 552, 556 adds that this will only be the case if the products in question were sold to customers in that state. 144  ECJ Case C-27/17, flyLAL-Lithunian Airlines v Starptautiskā lidosta “Rīga”, ECLI: EU:C:2018:533, para.  43. 145  ECJ Case C-451/18, Tibor-Trans Fuvarozó és Kereskedelmi v DAF Trucks, ECLI:EU: C:2019:635, para.  34.

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which the victim claims to have suffered that damage”.146 This last element ensures that the injured party was also a participant in the market affected at the place where the lawsuit is brought, and did not, for example, purchase goods at a higher price in one market but is suing in another Member State, arguing that the same cartel affected the market there as well.147 These later decisions are in line with an earlier decision of the Bundesge­richts­ hof making reference to the affected market when deciding on jurisdiction under the European rules and thereby pointing to the resulting concurrence with the applicable law.148 As the ECJ has moved in the same direction, it does not seem that the Bundesgerichtshof needs to adjust its interpretation of art. 7(2) Brussels Ibis Regulation. d) The case of Universal Music: three parties and a settlement A rather atypical case was decided by the ECJ in Universal Music.149 Two parties had agreed on a sales contract for a percentage of the shares of a company including an option to buy the rest of them at a later point in time. Due to a mistake by the law firm representing the buyer, the option price turned out to be higher than actually intended by the parties. They later settled on a price which was still higher than their original intentions. As the buyer claimed damages from the law firm, the ECJ held that the relevant act leading to the economic loss was the conclusion of the settlement agreement between buyer and seller.150 It has to be noted that the case involved three parties. Unlike cases of fraud (supra b)), the agreement causing the damage was not one between the injured party and the liable party but rather between the injured party and a third party. It is only in such cases that a settlement agreement seems to be a possible connecting factor for localising damage. If the injured party and the tortfeasor settled regarding the liability of the tortfeasor it is already unlikely that the injured party would later be able to initiate a lawsuit on the damages. In addition, such a lawsuit would then most likely be based on the settlement agreement and therefore based on contract and not tort. Besides this, it remains unclear how the damage would need to be localised in such a three-party scenario if no settlement had been reached. In Universal Mu­ sic, the price for the shares would then have been decided on by an arbitral tri146 

Ibid. paras. 33, 37. For a more critical interpretation of the ECJ’s case law, see Mäsch, IPRax 2020, 305, 307. 148  BGH, GRUR-RR 2013, 228, 229 para.  16. 149 ECJ Case C-12/15, Universal Music International Holding v Tétreault,Schilling, ECLI:EU:C:2016:449. 150  This is criticised by Huber/Geier-Thieme, IPRax 2018, 155, 157, arguing that the settlement agreement only limited a damage that already existed before such settlement was reached. Doubts are also voiced by Bach, NZG 2016, 794, 795. One could argue, however, that the settlement agreement does not only modify the original damage but the is basis for an independent obligation and therefore constitutes an independent loss. 147 

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bunal. In such a scenario would the award be relevant as it rules on the price in a binding manner and therefore allows to calculate the damage?151 To answer this question in the affirmative would overlook that a tribunal – or a court – does not on its own set the price but merely finds what price the parties had agreed upon. Would one then have to go back to the original agreement after all as this would be the basis for the price that needs to be paid?152 Or, would it be the calling in of the option, as only then will the party definitely be required to pay the price that was agreed upon in advance? In addition, it is not necessary that the parties either settle or go to court if there is no basis for arguing that a certain price was in fact agreed upon even though it is higher than actually intended. This would leave only the conclusion of the original contract or the calling-in of the option as relevant acts. Or one would have to resort, after all, to the payment being made by the party suffering the damage, even though the ECJ expressly denied that the actual payment caused the relevant damage in Universal Music.153 One reason for the deviation from Kolassa and Löber seems to be that neither Mr Kolassa nor Ms Löber could have manipulated the location of the relevant bank account, as they did not know that they would suffer damage when making the payment.154 By contrast the injured party in Universal Music could choose freely which account the amount agreed upon in the settlement would be paid from.155 Therefore, relying on the payment would not have been a feasible factor in this scenario as the injured party could then manipulate the place of damage in his or her favour.156 Beside these difficulties, a contract as connecting factor can lead to entirely random results or might be difficult to locate for example if the parties conclude the contract via (e-)mail.157 Due to the very specific circumstances of the case it is unclear how much guidance can be drawn from it for other cases. e) Conclusion The cases cited underline that the jurisprudence of the ECJ regarding the place of damage in cases of pure economic loss has developed different approaches for different groups of cases. Whereas in some cases the bank account from which 151 

This is answered in the negative by Bach, NZG 2016, 794, 795. This was suggested even with the existence of a settlement agreement by Advocate General Szpunar, Opinion in Case C-12/15, Universal Music International Holding v Tétreault Schilling, ECLI:EU:C:2016:161 para.  33; see also Huber/Geier-Thieme, IPRax 2018, 155, 157. 153 ECJ Case C-12/15, Universal Music International Holding v Tétreault Schilling, ECLI:EU:C:2016:449 para.  40. 154  Müller, NJW 2016, 2169, 2170; Rieländer, RabelsZ 85 (2021), 579, 588 et seq. 155 Cf. Sujecki, EuZW 2018, 1000, 1001 who considers if the fact that in Kolassa and Löber, the injured parties were consumers where in Universal Music it was a multi-national company was relevant for the result reached by the ECJ. 156  R. Magnus, LMK 2016, 381538. 157  Bach, NZG 2016, 794, 795; Lehmann, NJW 2020, 2872. 152 

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the money was paid is of relevance, in other cases it is the affected market or the conclusion of an unfavourable agreement. However, the ECJ does not rely on a single connecting factor but instead takes into account all relevant circumstances in any given case to avoid unjust results. As a result it is very difficult to draw general principles from the case law. 2. German law Regarding German law, pure economic loss is only an issue under §  32 ZPO, not under art. 40 EGBGB as infringements of personality rights, which are the main group of cases still governed by German private international tort law, are, from a German perspective, not examples of pure economic loss. The German case law on §  32 ZPO is also not entirely consistent. In a case of cartel damages, the Bundesgerichtshof decided that the damage suffered was to be localised at the domicile of the injured company.158 The same result was reached by the Oberlandesgericht Frankfurt a. M., explicitly stating that the domicile of an injured person should prevail over the place where his or her bank account was located.159 Other courts, namely the Bayerisches Oberstes Landesgericht160 and the Oberlandesgericht Karlsruhe161, decided in earlier decisions that precedence needs to be given to the location of the bank account and localised the damage at the seat of the bank where the injured parties held their accounts. It seems most likely, however, that the courts will follow the principles set by the ECJ when applying German law. The Bundesgerichtshof made explicit reference to a decision by the ECJ in the decision mentioned above. Similarly, legal commentators refer to cases decided under the European rules regarding the construction of §  32 ZPO.162 As a result, the most likely outcome seems to be that the application of the European and German rules will converge as the ECJ further clarifies the interpretation of the European rules.

158 

BGH, NJW-RR 2019, 238, 239 para.  18. OLG Frankfurt am Main, NJOZ 2007, 4637, 4638. 160  BayObLG, BeckRS 2003, 30313585. 161  OLG Karlsruhe, BeckRS 2006, 9503. 162  E.g. Toussaint, in: BeckOK ZPO (n. 11), §  32 ZPO para.  12.4. 159 

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VII. Tort Jurisdiction and forum actoris 1. A softened general principle: actor sequitur forum rei In general, both the Brussels Ibis Regulation and the German ZPO follow the principle of actor sequitur forum rei (art. 4 Brussels Ibis Regulation and §§  12 et seq. ZPO), aiming to protect the defendant.163 The rule that the plaintiff has to sue the defendant at his or her domicile is, however, softened to protect weaker parties to a contract. The Brussels Ibis Regulation embraces a forum actoris in insurance matters brought by the policyholder, the insured or a beneficiary (art. 10(2)(b) Brussels Ibis Regulation), certain matters regarding consumer contracts brought by the consumer (art. 18(1) Brussels Ibis Regulation) and employment matters brought by the employee if the employee works in his or her home state (art. 21(1)(b) Brussels Ibis regulation). A similar rule can be found in §  29c(1) ZPO for matters regarding off-premises contracts brought by the consumer. As a matter of fact, §  29a(1) ZPO also creates a forum actoris in many cases. Under this rule, courts in whose district the premises are located shall have exclusive jurisdiction over disputes concerning claims arising from tenancy or lease contracts for premises or disputes as to the existence of such contracts, which will coincide with the domicile of the tenant in many cases, e.g. if the premises are rented for habitation or serve as the place of business of the tenant. 2. The creation of a forum actoris in some areas of law Even though the general rule under European and German law is that the plaintiff has to come to the home of the defendant and that the rules on tort jurisdiction must be interpreted strictly because they are deviating from the general rule,164 they are interpreted in order to create a forum actoris in some areas of the law. The driver for this interpretation is often to be found in substantive law and typically the true reason is obscured behind the recourse to the principles of proximity and sound administration of justice.165 Three lines of cases shall demonstrate this.

163  Report of Jenard on the Convention of 27 September 1968 on jurisdiction and the enforcement of judgments in civil and commercial matters, OJ 1979 C 59/1, 18; ECJ, Case C-26/91, Handte v Traitements mécano-chimiques des surfaces (TMCS), ECLI:EU:C:1992:268, para.  14; ECJ, Case C-412/98, Group Josi Reinsurance Company v Universal General Insurance Company (UGIC), ECLI:EU:C:2000:399, para.  35. 164 See ECJ, Case C-25/18, Kerr v Postnov, ECLI:EU:C:2019:376, para.   22; ECJ, Case C-800/19, Mittelbayerischer Verlag v SM, ECLI:EU:C:2021:489, para.  26. 165  Heinze, in: FS für Hans-Jürgen Ahrens, 2018, 521, 526 et seq., 531.

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a) Violation of personality rights The first line of cases concerns the localisation of the Erfolgsort in claims for violations of personality rights. Initially, the European Court of Justice interpreted art. 7(2) Brussels Ibis Regulation rather narrowly to avoid the creation of a forum actoris in Shevill by establishing the so-called mosaic principle regarding place of damage (supra V.2.a)). Shevill is therefore widely regarded as an attempt to limit the possibility that the plaintiff will be able to sue a foreign defendant before the plaintiff’s home courts.166 However, in the later decision of eDate Advertising (supra V.2.a)) the ECJ ruled that the plaintiff could claim the entire loss sustained (worldwide) at the plaintiff’s centre of interest. This will typically coincide with the injured party’s domicile, thereby strengthening the forum actoris.167 This shift was mainly explained with reference to “[t]he difficulties in giving effect, within the context of the internet, to the criterion relating to the occurrence of damage which is derived from Shevill [… which] contrasts, […] with the serious nature of the harm which may be suffered by the holder of a personality right who establishes that information injurious to that right is available on a world-wide basis”.168 Obviously the Court was concerned that defamations via the internet may be of such gravity that it saw the need to strengthen law enforcement by making it easier for victims to enforce their rights in court.169 In the more recent judgment in Mittelbayerischer Verlag (supra V.2.a)) the trend towards creating a forum actoris was, however, restricted as the ECJ ruled that the jurisdiction of the courts at the centre of interest requires the plaintiff to be identifiable by objective and verifiable elements in the online publication. The ECJ argued that only the existence of a particularly close connection between the dispute and the courts makes it possible to derogate from the general rule of actor sequitur forum rei.170 The jurisprudence of the Bundesgerichtshof giving relevance to the place of the collision of interests of tortfeasor and injured party (supra V.2.b)) will often lead to a forum actoris, even though the Bundesgerichtshof expressly stated that the courts at the domicile of the injured party will not always have jurisdiction based on §  32 ZPO.171 This, however, is not to be seen as an attempt to limit fo­ rum actoris as the reason given was a general fear that injured parties could 166  Opinion of Advocate General Cruz Villalón, Joined Cases C-509/09 and C-161/10, eDate Advertising v X and Martinez v. Société MGN, ECLI:EU:C:2011:19 para.  18. 167  Heinze, EuZW 2011, 947; Leible, LMK 2012, 329468. 168  ECJ Joined Cases C-509/09 and C-161/10, eDate Advertising v X and Martinez a v Société MGN, EU:C:2011:685 para 47. 169  Heinze, in: FS für Hans-Jürgen Ahrens, 2018, 521, 525; Roth, IPRax 2013, 215, 221 170  ECJ, Case C-800/19, Mittelbayerischer Verlag v SM, ECLI:EU:C:2021:489 paras. 40 et seq. 171  BGH NJW 2011, 2059, 2060 Rn.  13.

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move their seat around in order to find a favourable forum.172 Therefore, the concern of the Bundesgerichtshof is not to create a forum actoris in general, but rather to avoid the manipulation of that forum after the tort was committed, meaning when the article was published. b) Competition law enforcement Another line of cases concerns the area of private enforcement of competition (antitrust) law. Whereas for many years the enforcement of the (European) competition rules for a large part laid in the hand of the competition authorities, recently private enforcement has picked up. Private enforcement currently mainly concern cases in which the competition rules are used “as a sword”, i.e., in which plaintiffs demand damages and/or an injunction for violations of prohibitions laid down in arts. 101, 102 TFEU. As anticompetitive conduct does not stop at national borders, many cases have an international element and defendants are often domiciled abroad. As plaintiffs are typically more reluctant to sue abroad than at home, private enforcement will certainly be strengthened if plaintiffs can bring actions before their home courts. Against this background, the ECJ held in CDC that in claims for damages resulting from price fixing conspiracies prohibited by art. 101 TFEU (artificially high prices for cartelised goods or services), the place where the damages arose may be located at each victim’s registered office as these courts are in the best position to assess such actions.173 Even though it cannot be denied that some evidence about the caused damage can be found at the plaintiff’s office, it is also true that the bulk of evidence can usually be found at the registered office of the defendant cartel member as in private actions for damages against cartels the parties usually litigate about issues of causation and damages (quantum).174 So the true reason behind the interpretation chosen by the Court is not proximity to evidence. Rather, the ECJ interprets the jurisdiction regime so as to allow for effective enforcement of the European competition rules175 in line with the landmark Courage ruling in which the court held that “actions for damages before the national courts can make a significant contribution to the maintenance of effective competition in the Community” given that the existence of a right to claim damages “discourages agreements or practices, which are fre-

172 

BGH NJW 2011, 2059, 2060 Rn.  14. ECJ Case C-352/13, Cartel Damage Claims (CDC) Hydrogen Peroxide v Akzo Nobel, ECLI:EU:C:2015:335 para.  52. 174 See Heinze, in: FS für Hans-Jürgen Ahrens, 2018, 521, 526 et seq.; Wurmnest, CMLRev 53 (2016), 225, 243. 175  W.-H. Roth, FS für Klaus Hopt zum 80. Geburtstag, 2020, 1071, 1090; Stadler, JZ 2015, 1138 (1140). 173 

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quently covert, which are liable to restrict or distort competition”.176 German courts have recently embraced this interpretation when applying §  32 ZPO.177 Even though the test to locate the damage was slightly changed in later decisions which put more emphasis on the effects principle178 (supra VI.1.c)), this only marginally limited the forum actoris issue as in most cases the plaintiffs are domiciled in the market in which the transaction affected by the anticompetitive conduct occurs. The effects principle is, however, a much sounder basis for jurisdiction than a rule relying on access to evidence as it is widely recognised today that a tortfeasor must be amenable to justice in the state whose market protection rules he or she has violated. The strengthening of private enforcement was also the driver behind the judgment in Wikingerhof,179 in which the ECJ recalibrated the standard to distinguish between contract and tort jurisdiction in a way that reduces the scope of application of art. 7(1) in favour of art. 7(2) Brussels Ibis Regulation. The case concerned a claim of a German hotel against the platform “Booking.com” in Amsterdam/The Netherlands. Both were bound by a contract under which the hotel was listed on the platform’s search engine. The hotel alleged that Booking abused its dominant position on the market inter alia by contractual stipulations that violated German competition law and/or art. 102 TFEU. As it is settled law that tort jurisdiction under art. 7(2) Brussels Ibis Regulation “must be regarded as an independent concept covering all actions which seek to establish the liability of a defendant and which are not related to a ‘contract’ within the meaning of [art. 7(1) Brussels I bis Regulation]”,180 actions can only be classified as tortious if they are not contract-related. In Brogsitter, the ECJ had interpreted the contractual sphere rather broadly and classified claims based on unfair competition law as contractual “where the conduct complained of may be considered a breach of contract”181 which is always the case, when “the contract […] is indispensable to establish the lawful or […] unlawful nature of the conduct complained of”.182 Under the broadly worded Brogsitter ruling many competition law claims against dominant firms would fall under art. 7(1) Brussels Ibis Regulation as such abuses are often implemented by contractual stipulations. As a result, the courts at the dominant firm’s domicile would be competent under art. 176 

ECJ, Case C-453/99, Courage v Crehan, ECLI:EU:C:2001:465 para.  27. BayObLG BeckRS 2019, 7913 para.  19. 178  ECJ Case C-27/17, flyLAL-Lithuanian Airlines v Starptautiskā lidosta “Rīga”, ECLI: EU:C:2018:533 para.  40; Case C-451/18, Tibor-Trans Fuvarozó és Kereskedelmi v DAF Trucks., ECLI:EU:C:2019:635, para.  33. 179  ECJ, Case C-59/19, Wikingerhof v Booking.com, ECLI:EU:C:2020:950. 180  ECJ, Case 189/87, Kalfelis v Bankhaus Schröder, Münchmeyer, Hengst & Co., ECLI: EU:C:1988:459 para.  18. 181  ECJ, Case C-548/12, Brogsitter v Fabrication de Montres Normandes, ECLI:EU:C: 2014:148 para.  24. 182  Ibid. para.  25. 177 

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7(2) Brussels Ibis Regulation if the place of performance of the obligation in question lay there. Also, in Wikingerhof, the Schleswig-Holsteinisches Ober­ landesgericht, had ruled that under the Brogsitter test, the hotel’s claim was contractual and that the courts in Amsterdam had the power to hear and decide the case.183 But upon a referral by the Bundesgerichtshof, the ECJ restricted Brogsitter by pointing out that “the legal issue at the heart of the case in the main proceedings is whether Booking.com committed an abuse of a dominant position […]. [I]n order to determine whether the practices complained of against Booking.com are lawful or unlawful […], it is not indispensable to interpret the contract between the parties to the main proceedings, such interpretation being necessary, at most, in order to establish that those practices actually occur”.184 This broadening of tort jurisdiction in competition actions will help many plaintiffs to sue at home. Given that the general criterion used to locate the proper forum should be the effects test, plaintiffs can sue dominant firms at home, as far as they are domiciled in the state targeted by the dominant firm. c) Pure economic loss Other examples of a strengthening of forum actoris are the decisions in Kolassa and Löber. After holding in Kronhofer, that pure economic loss sustained in capital market transactions is not necessarily suffered at the domicile of the injured party,185 the ECJ ruled in Kolassa and Löber that the place of damage was effectively at such domicile given that the bank account from which the money was transferred could be located at the home of the defendant (supra VI.1.a)). In Kolassa the court explicitly stated that this localisation of the place of damage “strength[ens] the legal protection of persons established in the European Union, by enabling the applicant to identify without difficulty the court in which he may sue and the defendant reasonably to foresee in which court he may be sued”.186 This reasoning is especially noteworthy as in Kolassa the ECJ could have easily used the proximity to pieces of evidence to explain why the damage occurred at the bank account.187 3. Conclusion Summing up, even though the ECJ in general is hostile towards a forum actoris and construes art. 7(2) Brussels Ibis Regulation narrowly, in some areas of law the court has accepted such a forum based on substantive law considerations,

183 

OLG Schleswig, BeckRS 2017, 154336, paras 34 et seq. ECJ Case C-59/19, Wikingerhof v Booking.com, ECLI:EU:C:2020:950 para.  35. 185  ECJ Case C-168/02, Kronhofer v Maier, ECLI:EU:C:2004:364 para.  21. 186  ECJ Case C-375/13, Kolassa v Barclays Bank, ECLI:EU:C:2015:37, para.  56. 187  Heinze, in: FS für Hans-Jürgen Ahrens, 2018, 521, 530. 184 

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especially the effectiveness of law enforcement. German courts have taken on this approach in part.

VIII. Miscellaneous 1. Impossibility of locating the place of damage The place of damage can be localised in the vast majority of cases. There are, however, very few instances in which the connecting factor does not work. One example where the place of damage cannot be taken into account is the collision of two vessels on the High Seas. As this part of the ocean does not belong to the coastal waters of a state (i.e., to its “territory”) the connecting factor does not lead to any applicable law if the accident occurs in the mare liberum. As the exploitation of these waters is also not assigned to a coastal state (unlike to a certain extent the Exclusive Economic Zone or the continental shelve up to a certain line) it can – unlike for collisions in the EEZ or above the continental shelf188 – also not be argued that one state has some powers over these waters which allow it to apply art. 4(1) Rome II Regulation. As a result, the applicable law cannot be determined by virtue of the place of damage. If both ships fly different flags, is also not possible to apply art. 4(2) Rome II Regulation.189 The solution of the Oberlandesgericht Hamburg under German law – to apply the law of the vessel most favourable to the damaged vessel190 – is no longer available under the Rome II Regulation.191 The same problem arises in cases of collisions of planes in areas not assigned to a specific state192 or of satellites in the outer space.193 Several solutions have been proposed to resolve the issue. In all cases the application of the law with the closest connection according to art. 4(3) Rome II Regulation remains possible but the question arises how the closest connection must be defined.194 Some argue that the place of damage should be the flag state of the damaged vessel, plane or satellite as the place of damage is technically on

188  See generally Wurmnest, in: Basedow/Kischel/Sieber (ed.), German Reports to the 18th International Congress of Comparative Law, 2010, 371, 397. 189  Lund, in: Juris PraxisKommentar (hereinafter: JurisPK), vol.  6 , 9th edn. 2020, Art.  4 Rom II-VO para.  56. 190  OLG Hamburg, VersR 1975, 761, 762. 191  Lund, in: JurisPK (n. 189), Art.  4 Rom II-VO para.  56. 192  Lund, in: JurisPK (n. 189), Art.  4 Rom II-VO para.  60; Thorn, in: Grüneberg (n. 57), Art.  4 Rom II para.  24. 193  Frohloff, RabelsZ 84 (2020), 594, 601. Art. II of the Outer Space Treaty especially states that space is not and cannot be subject to the authority of any state. 194  Frohloff, RabelsZ 84 (2020), 594, 606.

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board this vessel, plane or satellite.195 As it seems likely that both vessels, planes or satellites will suffer damage from the collision, this would, however, call for the application of different laws for each injury.196 Therefore, others argue for the application of the lex fori.197 This seems to be the logical default solution if one considers the relevant rule(s) of private international law do not designate any law.198 However, this solution might lead to the application of law not having a strong connection to the case.199 As of now, there is no clear solution to the problem.200 Similar issues arise with regard to the localisation of the place where the damage manifests itself under art. 7(2) Brussels Ibis Regulation. In addition, some legal commentators have argued that the place of damage should not be considered under art. 7(2) Brussels Ibis Regulation in cases of pure economic loss due to the difficulties in localisation.201 It is unlikely, however, that this proposition would in fact simplify matters as the place of damage will in most cases still be relevant under art. 4(1) Rome II Regulation – as under this rule there is no possibility of applying the law of the place where the tortious act was committed.202 As a result, greater differences between the interpretation of the rules of applicable law and of jurisdiction will occur, even though the synchronisation is a general aim of the Rome II Regulation.203 2. Non-pecuniary loss (“dommage moral”) The localisation of a “dommage moral” as a type of non-pecuniary loss is not a particular problem under German and European private international law. If the non-pecuniary damage is caused by the destruction of a thing or by bodily harm, it is the consequence of the impairment of an object or a legal interest so that the place of damage can be located by locating the right or interest that was harmed. A judge faced with a claim for (non-pecuniary) compensation for infringements of personality rights would therefore have to ask if the unlawful act was committed in Germany or if the damage can be located in Germany by recourse to the different connecting factors described above (supra V.2.a) and b)) 195  Thorn, in: Grüneberg (n. 57), Art.  4 Rom II paras. 22, 24; Junker, in: MüKoBGB (n. 41), Art.  4 Rom II-VO para.  101, 115, 142. 196  Basedow, RabelsZ 74 (2010), 118, 136; Frohloff, RabelsZ 84 (2020), 594, 601, 606; Rühl, in: BeckOGK (n. 113), Art.  4 Rom II-VO para.  77. 197  Basedow, RabelsZ 74 (2010), 118, 137; Lund, in: JurisPK (n. 189), Art.  4 Rom II-VO para.  56. 198  Basedow, RabelsZ 74 (2010), 118, 137. 199  von Hoffmann, in: Staudinger, Kommentar zum Bürgerlichen Gesetzbuch, BGB, 2001, Art.  40 EGBGB para.  258; Rühl, in: BeckOGK (n. 113), Art.  4 Rom II-VO para.  77. 200  On possible solutions regarding collisions of satellites in the outer space see Frohloff, RabelsZ 84 (2020), 594, 606 et seq. 201  See the references given by Oberhammer, JBl. 2018, 750, 753 (n. 20). 202  Thomale, ZVglRWiss 119 (2020), 59, 86. 203 Ibid.

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in order to assume jurisdiction. With regard to the applicable private law, the judge would apply art. 40 EGBGB. 3. Cybertorts “Cybertorts” does not have a fixed meaning in German or European law but has many facets and cannot be dealt with here in full. It also needs to be noted that many issues are not settled yet. With regard to violations of personality rights via the internet, the ECJ as well as the Bundesgerichtshof have shown a willingness to take into consideration the special circumstances of the online world (supra V.2.a)). If the damaged right or interest can straightforwardly be localised, e.g., physical damage to property caused via the internet, there seems to be no need to localise any differently from a tort committed in the “analogue world”.204 As far as a “cybertort” was committed “against” data or other digital goods, it is suggested that the best approach is to localise the data and therefore the damage at the place where the data is stored, i.e., the place of the server, 205 as far as this is possible. If the data that was destroyed or harmed was stored in a cloud set up by multiple servers in different locations a proper localisation is difficult. As far as the data storing company was responsible for the damage, it can be sued at its domicile. Concerning the applicable law, different approaches have been suggested to overcome the problem. One solution would be to disregard the place of damage and apply the law of the cloud-storage contract206 or the law of the habitual residence of the injured party, 207 but these issues have not been settled yet. 4. Actions by third parties based on breach of contractual obligations In German law, the line between contract and tort law is somewhat blurred. Even though it is accepted that a contract is a vinculum iuris between the parties that have concluded it, the protection of the contract has been extended to third parties to counterbalance the limited reach of tort law. Courts have developed the concept of a Vertrag mit Schutzwirkung zugunsten Dritter, a contract with protective effects towards third parties. The idea behind that concept is that some non-parties are so closely connected to a contract that the contractual protection of rights and interests should extend to them as well. One example are the children of a tenant. If the landlord negligently causes an injury to the tenant’s children, for example by not repairing the stairway so that the children 204 Cf. Spickhoff, in: BeckOK BGB (n. 114), Art.  4 Rom II-VO para.  35; Rauscher (n. 61), para.  1387 regarding the mosaic principle. 205  Bach, in: Huber (n. 138), Art.  4 Rome II Regulation para.  52. 206  Nordmeier, MMR 2010, 151, 155 et seq. 207  Spickhoff, in: BeckOK BGB (n. 114), Art.  4 Rom II-VO para.  41.

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fall and injure themselves, the landlord’s liability can also be based on a breach of the lease agreement even though the children are not a party to this agreement (just their parents).208 Applying German private international law, such claims by third parties to the contract have been considered to be contractual.209 Some want to extend this solution to the application of the European rules as the parties to the contract know which non-parties will be extended protection under the contract and therefore the obligation is freely entered into.210 If this were the case, the place of damage would be entirely irrelevant when deciding on jurisdiction and applicable law because it is not a factor under art. 7(1) Brussels Ibis Regulation and the Rome I Regulation. As the solution to allow third parties to the contract to rely on a breach of contract to claim damages is a peculiarity of German law in order to fill gaps of German tort law, the majority of scholars argue that such claims should be considered as non-contractual when applying the European rules, in line with the classification of culpa in contrahendo.211 In this case, however, it is only logical to then localise the damage without reference to the contractual obligations, let alone the law applicable to the contract, as it would be inconsistent to classify the claim as non-contractual but give relevance to the contractual basis under German law when localising the damage.212 5. Little temptation for a lex fori approach As a general rule it is fair to say that German courts look for a close connection and do not abuse the localisation of the damage for “lexforist” purposes even though it cannot be denied that also in Germany it might be tempting for courts to apply the lex fori. Scholars have coined the expression Heimwärtsstreben for this general temptation.213 Regarding the place of damage this temptation is, however, not very strong. As outlined above, in many cases the plaintiff can rely on art. 7(2) Brussels Ibis Regulation/§  32 ZPO to sue at the court of their domicile or at least before a court within Germany. As the connecting factors for jurisdiction and applicable law are to a great extent streamlined, a German court having jurisdiction in the international sense will in most cases also be in a position to apply German law, so that there is no incentive to “manipulate” the construction of the rule of private international law in order to reach a specific result. The risk of such a manipulation is of course stronger with regard to ju208 

For more details see Wurmnest (n. 21), 215 et seq. OLG Köln RIW 1993, 1023. 210  Spellenberg, in: MüKoBGB (n. 41), Art.  12 Rom I-VO para.  6 4. 211  von Hein, in: Rauscher, Europäisches Zivilprozess- und Kollisionsrecht, vol.  3, 4th edn. 2016, Art.  1 Rom I-VO para.  10; Martiny, in: MüKoBGB (n. 41), Art.  1 Rom I-VO para.  17, both with further references; Dutta, IPRax 2009, 293, 294 et seq. 212  Dutta, IPRax 2009, 293, 298 et seq. 213 See Kropholler (n. 39), §  7 I. 209 

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risdiction. If a German court wants a case to be decided by German law, it must construe the jurisdiction rules broadly so that the place of damage can be located in Germany. 6. Risk of manipulation The risk of manipulation by one of the parties must certainly be taken into account when deciding on the interpretation of the place of damage. This has been done explicitly by the Bundesgerichtshof regarding the localisation of infringements of personality rights (supra V.2.b)). In addition, it is seen as a relevant criterion for the ECJ’s refusal to rely on the location of the bank account when localising the damage in Universal Music (supra VI.1.d)).

IX. Conclusion In many practical cases it is relatively simple to identify the place of damage for example with regard to traffic accidents (probably the practically most relevant cross-border tort), or more generally with regard to torts leading to damaged property or bodily harm. Therefore, predictability and legal certainty are very high, and cases are all in all decided “correctly”. Having said that, it is also true that with regard to pure economic loss the place of damage is much more difficult to locate. With regard to such claims, tort jurisdiction can be a very dynamic field of law and the case law of the ECJ often takes twists and turns which are hard to predict. In addition, the reasoning of the ECJ has sometimes even been a bit contradictory. This clearly undermines legal certainty and this unwarranted result is strengthened by the court’s policy that any departure from an older line of cases is never openly admitted in the reasoning.214 For example, the ECJ has already rendered quite a number of rulings on the reach of the European rule of tort jurisdiction in antitrust damages cases (supra VI.1.c)) and VII.2.b)) but many basic issues are still not settled. With good reason a German commentator recently noted that in antitrust damages litigation “little is clarified and even less convincingly resolved” (translation by the authors).215 Even though it has to be conceded that claims for antitrust damages are a rather novel development in Europe, the ECJ could have done much more to clarify these issues. Also, with regard to other cases of pure economic loss, it is difficult to extract general principles from the case law of the ECJ (supra VI.1.e)).

214 

Wurmnest, IPRax 2021, 340, 341. Mäsch, IPRax 2020, 305 (308): „[I]m Kartellprozessrecht [ist] trotz CDC Hydrogen Per­ oxide, flyLAL-Lithuanian Airlines und nun Tibor-Trans weniges geklärt und noch weniger überzeugend gelöst“. 215 

Specialized Commercial Courts and Their Role in Cross-Border Litigation Thomas Riehm/Quirin Thomas

I. Introduction “We facilitate English-speaking specialized chambers for international commercial and business disputes.”1 This statement in the coalition agreement of the current “Ampel” coalition government in Germany exemplifies the prominent interest shown by current politics for the topic of this contribution. For over two decades now, the German justice system has been confronted with a decline in the numbers of cases brought before the state courts – a trend that can be observed in other jurisdictions, as well.2 This regards civil matters in general but also commercial matters in particular, where the judiciary seems to be competing with and losing ground to other dispute resolution mechanisms, with potentially negative consequences for the development of German law. This trend is most pronounced in relation to international commercial disputes, where only a very small number of cases reach German courts and jurisdiction clauses in favour of other jurisdictions seem to prevail in contracts involving one German party. Like other countries, Germany hopes that “Brexit” will make the London Commercial Court a less attractive forum for foreign disputes,3 thus creating a vacuum that other “Commercial Courts” can fill – so why not in Germany? In the 2010s, the initiative “Law made in Germany”,4 founded by the associations of the German legal profession, the notarial profession, and the judiciary, as well as the German Chambers of Industry and Commerce, tried to promote German law and German courts around the world, in order to attract interna1  “Wir

ermöglichen englischsprachige Spezialkammern für internationale Handels- und Wirtschaftsstreitigkeiten”: “Mehr Fortschritt wagen” – coalition agreement of the “Ampel” coalition, in office since 2021, https://www.spd.de/fileadmin/Dokumente/Koalitionsvertrag/ Koalitionsvertrag_2021-2025.pdf, 106. 2  For details, see III.1, below. 3  With this estimate, see Melin, Betriebs-Berater 2020, 2702; Grohmann, Internationali­ sierung der Handelsgerichtsbarkeit, 2022, 357–358; Pfeiffer, Zeitschrift für internationales Wirtschaftsrecht 2020, 51, 52; Pika, Zeitschrift für internationales Wirtschaftsrecht 2016, 206, 207–208; Rühl, Europäische Zeitschrift für Wirtschaftsrecht 2016, 761; Rühl, American Journal of International Law Unbound 2021, 11, 12–13; Michael Stürner, Juristenzeitung 2019, 1122. 4 https://www.lawmadeingermany.de/.

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tional disputes. This initiative, which was also supported by the then Federal minister of justice and consumer protection, Heiko Maas, had apparently ceased its activities by the time of writing – the latest brochure dates from 2014, the last entry on the website from 2018, and in 2022, the website has been put in a “development mode“ altogether. Nevertheless, it did spark other efforts to promote German law and the German justice system for the adjudication of international commercial disputes. One part of these efforts is the establishment of “International Commercial Courts” – English-speaking courts within the German judiciary, specialised in international commercial disputes, and intended to be worthy competitors to international arbitration. In 2010,5 2014,6 20187 and 2021,8 the Bundesrat (the second legislative chamber of Germany consisting of representatives of the German Länder (states) on the federal level) had proposed changes in the Code of Civil Procedure (Zivilprozessordnung – ZPO) and the Courts Constitution Act (Gerichtsverfassungsgesetz – GVG) to create a specific legal regime for such International Commercial Courts. However, these initiatives have not yet led to federal legislation.9 Seeing as the coalition agreement of the new government signifies an intention to enable the necessary legislative change and the Bundesrat has just recently re-proposed the 2021 draft with only marginal changes,10 the hopes are now rising that such a special regime for International Commercial Courts (“ICL”) could potentially be created during the current legislative period. Independent of these legislative initiatives, some Länder have already begun to establish specialised bodies of jurisdiction for international commercial disputes within the current legislative framework. Their common feature is the ability to conduct parts of the proceedings in English. In addition to this, they 5  Bundesrat, Entwurf eines Gesetzes zur Einführung von Kammern für internationale Handelssachen (KfiHG), 7.5.2010, https://dserver.bundestag.de/btd/17/021/1702163.pdf. 6  Bundesrat, Entwurf eines Gesetzes zur Einführung von Kammern für internationale Handelssachen (KfiHG), 14.3.2014, https://www.bundesrat.de/SharedDocs/drucksachen/ 2014/0001-0100/93-14(B).pdf?__blob=publicationFile&v=1. 7  Bundesrat, Entwurf eines Gesetzes zur Einführung von Kammern für internationale Handelssachen (KfiHG), 2.3.2018, https://www.bundesrat.de/SharedDocs/drucksachen/ 2018/0001-0100/53-18(B).pdf?__blob=publicationFile&v=1. 8  Bundesrat, Entwurf eines Gesetzes zur Stärkung der Gerichte in Wirtschaftsstreitigkei­ ten, 7.5.2021, https://www.bundesrat.de/SharedDocs/drucksachen/2021/0201-0300/219-21 (B).pdf?__blob=publicationFile&v=1. 9  For a more thorough analysis of these drafts, see Armbrüster, Zeitschrift für Rechtspolitik 2011, 102 (specifically in relation to the language of the proceedings); Bert, “Commercial Courts” in Deutschland: Sind aller guten Dinge vier?, 2021, https://anwaltsblatt.anwalt verein.de/de/zpoblog/commercial-courts-in-deutschland-sind-aller-guten-dinge-vier; Groh­m ann (fn.  3), 301 et seq.; Hoffmann, Kammern für internationale Handelssachen, 2011; Wagner, Rechtsstandort Deutschland im Wettbewerb, 2017, 212–213. 10  Bundesrat, Entwurf eines Gesetzes zur Stärkung der Gerichte in Wirtschaftstreitigkeiten, 11.03.2022, https://www.bundesrat.de/SharedDocs/drucksachen/2022/0001-0100/79-22 (B).pdf?__blob=publicationFile&v=1.

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use the flexibility provided by the ZPO and the GVG to different extents to adapt the procedure to the (perceived) necessities of international commercial disputes. Nonetheless, as long as the federal legal framework remains unchanged, this flexibility is limited. Most crucially, the parties’ submissions and the courts’ decisions must still be written in German and appeals to the Federal Court of Justice (Bundes­gerichtshof – BGH) continue to be in German. The following contribution presents the institutional framework for cross-border litigation in Germany, analyses the statistics of the German justice system, and thoroughly examines the existing ICLs. It concludes with recommendations for the upcoming creation of a specific legal regime.

II. The institutional framework for cross-border litigation in Germany As in almost any country, cross-border litigation in Germany can be done in state courts or in arbitration. As far as arbitration is concerned, Germany has transposed the UNCITRAL Model Law into its ZPO (sect. 1025 et seqq.) nearly verbatim. Furthermore, Germany is a signatory to the New York Convention on the Recognition and Enforcement of International Arbitral Awards. The legal framework for arbitration is therefore largely comparable to the framework in most other countries.11 Apart from the state courts and arbitration institutions, there are no institutionalised alternative means for the resolution of international commercial disputes. While mediation seems to be a rather well-received way to resolve commercial disputes,12 this is mainly done on an ad hoc basis with little statistical data available.13 1. Organization of the German judiciary In the Federal Republic of Germany, the legal framework for the judicature, as far as the organization and the applicable procedural rules are concerned, is governed by federal law, specifically by the GVG and the ZPO. It is therefore uniform throughout the country. However, the organization of the judiciary falls within the competence of the individual Länder, creating differences not only in terms of staffing and equipment, but also in terms of organizational specificities. Therefore, there are different models of specialized chambers for international commercial matters. 11  For the little quantitative importance of arbitration in cross-border dispute resolution see part III, below. 12  In 2010, 44 % of German citizens preferred mediation over judicial proceedings, while only 20 % had the inverse preference, see Roland Rechtsreport 2010, https://www.ifd-allens bach.de/fileadmin/studien/7570_Roland_Rechtsreport_2010.pdf, 45. 13  Wagner, Rechtsstandort (fn.  9), 118–120.

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In general, Regional Courts (Landgerichte – LGs) act as courts of first instance for disputes exceeding 5,000 EUR (sect. 71 (1), 23 No.  1 GVG) and therefore decide the vast majority of commercial disputes.14 These courts are divided into different chambers, comprised of three professional judges. Some of these chambers are specialized in specific subject matters, while others are general civil chambers (Allgemeine Zivilkammern) treating all disputes arising in civil matters which are not attributed to specialized chambers. Under sect. 72a GVG, LGs are obligated to create specialized chambers for the following subject matters: Banking and finance law; construction law; claims arising from medical treatment; insurance law; press law; competition law; succession law; and insolvency related claims. Often, the specialization of any one civil chamber is not exclusive (sect. 72a (3) GVG), so that even the specialized chambers get a share of general civil matters outside their area of specialization. Besides these civil chambers (specialized or not), sect. 93 GVG allows the creation of “Chambers for Commercial Matters” (Kammern für Handelssa­ chen). These chambers, composed of one professional judge and two honorary judges, assume jurisdiction for typical commercial matters (e.g., disputes arising from commercial contracts or corporate disputes), but only if either the claimant or the respondent request the hearing of the case before the Chamber for Commercial Matters. If neither party requests this, the dispute will be heard by a regular civil chamber regardless of the matter. Under the GVG, international commercial disputes are not treated differently from other commercial disputes. Therefore, in principle, the regular Civil Chambers as well as the Chambers for Commercial Matters have subject matter jurisdiction for commercial disputes involving foreign parties and/or the application of foreign law. However, in addition to this, some LGs or Higher Regional Courts (Oberlandesgerichte – OLGs) have – at the initiative of the judicial administration15 – established different models of specialized chambers for international commercial disputes. The models range from regular Civil Chambers where the judges are proficient in legal English and allow the parties to submit evidence (and sometimes also their oral pleadings) in English (LGs of Cologne, Bonn and in the second instance, the OLG of Cologne)16 , to regular (also English-speaking) Civil Chambers specialized in international commercial disputes (Stuttgart17, Mannheim18 , Berlin19 [also offering proceedings in French], Hamburg20), to specialized Chambers for International Commercial 14 

This country report will therefore not cover the local courts (Amtsgerichte). e.g., Lehmann, ‘Law Made in Germany’ – The Export Engine Stutters, in: Kramer/ Sorabji (ed.), International Business Courts. A European and Global Perspective, 2019, 85–87. 16  Established in 2010. 17  Established in 2020. 18  Established in 2020. 19  Established in 2021. 20  Established in 2018. 15 See,

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Matters (“Kammern für Internationale Handelssachen”) who also hear cases in English and are specialized in international commercial law (Stuttgart, Mannheim, Berlin [also offering proceedings in French], Hamburg, Frankfurt/ Main 21). The most widespread model is the regular Civil Chamber which allows oral arguments and evidence in English and specializes in international commercial law. Some Länder use the name “Commercial Court” for these chambers and dedicated specific buildings to them (Baden-Württemberg and its specialized chambers in Stuttgart and Mannheim)22 . Some Länder, such as Baden-Württemberg, have also taken this approach to the second instance, establishing an equally specialized senate at the OLG Stuttgart 23 as well as the OLG Karlsruhe which also allows oral pleadings and evidence in English. In the end, as the following section will show,24 the specialized International Commercial Courts are, apart from the (limited) possibility of conducting parts of the proceedings in English and the specialization on international commercial law, just regular Civil Chambers or regular Chambers for Commercial Matters. 2. The decline of the caseload of German state courts Like in many other jurisdictions, the number of cases before German state courts have massively decreased during the last 20 years – with exception of the years since 2017, as a huge wave of “Diesel” cases has flooded German LGs with tens of thousands of disputes. While the caseload seems to have barely decreased from 369,089 cases in 2010 to 340,527 in 2020,25 the number had been significantly lower in 2017, when the LGs only resolved 308,026 cases, corresponding to a 16.5 % loss since 2010. This decline is even more pronounced for the Chambers for Commercial Matters26:27 From 40,468 disputes resolved by the chambers for commercial matters in Germany in 2010, the number went down to 22,502 in 2020, 28 corresponding to a 44.4 % loss of their caseload during the last decade. In accounting for the “Diesel” effect with respect to the numbers for the general civil 21 

Established in 2018. Melin, Deutsche Richterzeitung 2021, 62. 23  Established in 2020. 24  See III, below. 25  Statistisches Bundesamt, Rechtspflege – Zivilgerichte (2020), 9.8.2021, https://www. destatis.de/DE/Themen/Staat/Justiz-Rechtspflege/Publikationen/Downloads-Gerichte/ zivilgerichte-2100210207004.pdf?__blob=publicationFile, 42–43. 26  See II.1, above. 27  Jacob, Handelsgerichtsbarkeit, 216–227; Podszun/Rohner, Staatliche Gerichte für wirt­ schaftsrechtliche Streitigkeiten stärken, 2017, https://www.jura.hhu.de/fileadmin/redaktion/ Fakultaeten/Juristische_Fakultaet/Podszun/Podszun_Rohner_Paper_Staatliche_Gerichte_ staerken.pdf, 7–9. 28  Statistisches Bundesamt, Rechtspflege 2020 (fn.  24), 42–43. 22 

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chambers, the Chambers for Commercial Matters lost 33.4 % of their caseload between 2010 and 2017, which is twice the loss experienced by the general civil chambers. This might also be linked to the fact that at the level of the LGs, pursuant to sect. 72a GVG, even more specialized chambers for specific subject matters must be established since 2018.29 While these specialized chambers do treat specific commercial matters (in a broader sense), they are not “Chambers for Commercial Matters” within the meaning of sect. 93 GVG. Their caseload therefore does not appear in the respective section of the German statistics; they are essentially “in-house competition” for the Chambers for Commercial Matters.

III. International parties in German courts The German economy is famous for being export oriented: during the last decade, the export quota of the German economy constantly rated between 40 and 50 %,30 the export volume being over one trillion EUR in each year since 2011.31 But quite surprisingly, these numbers are not reflected by the internationality of the disputes decided by German courts.32 Of the approximately 340,500 parties in disputes decided in 2020 by LGs,33 only 2.0 % of the claimants and 1.8 % of the respondents were based in the rest of the EU, with 1.1 %, and 0.8 % respectively based outside the EU, totalling 10,500 non-German claimants (3.1 %) and 8,800 non-German respondents (2.6 %) and less than 20,000 disputes with foreign participation.34 These numbers have only changed slightly during the last ten years.35 This shows a significant lack of attractiveness of German state courts for international commercial disputes.36 29 

See II.1, above. Statistisches Bundesamt, Exportquote für Waren und Dienstleistungen, https://www. destatis.de/DE/Themen/Wirtschaft/Globalisierungsindikatoren/_Grafik/_Interaktiv/vgrexportquote.html. 31  Statistisches Bundesamt, Gesamtentwicklung des deutschen Außenhandels ab 1950, 1.11.2021, https://www.destatis.de/DE/Themen/Wirtschaft/Aussenhandel/Tabellen/gesamt entwicklung-aussenhandel.pdf?__blob=publicationFile, 3. 32 See also Hoffmann, Zeitschrift für Schiedsverfahrensrecht 2010, 96, 100; Lehmann (fn.  14). 33  The numerous international family dsiputes and, in particular, matrimonial disputes are not relevant in these statistics due to the exclusive jurisdiction of the local courts (as family courts) under sect. 23a (1) No. 1 GVG. 34  Statistisches Bundesamt, Rechtspflege 2020 (fn.  24), 60. 35  In 2010, 3.3 % of the claimants and 2.3 % of the respondents were seated outside Germany, see Statistisches Bundesamt, Rechtspflege – Zivilgerichte (2010), 9.9.2011, https://www. statistischebibliothek.de/mir/servlets/MCRFileNodeServlet/DEHeft_derivate_00010099/ 2100210107004.pdf, 53. 36  See also Lehmann (fn.  14), 83–84; Rühl, Building Competence in Commercial Law in the Member States, 2018, https://www.europarl.europa.eu/RegData/etudes/STUD/2018/ 30 

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The reservations against the use of German state courts for the settlement of international commercial disputes can only be explained to a small degree by the parties’ choice of arbitration or mediation.37 While reliable data on the use of commercial arbitration is, for obvious reasons, nearly impossible to obtain, there is no indication that a substantial number of international commercial disputes are drawn away from German state courts by arbitration.38 In 2020, the German Arbitration Institute (Deutsche Institution für Schiedsgerichtsbarkeit – DIS) and the ICC only administered a fraction of the international commercial disputes administered by the state courts: According to a study commissioned by by the German Federal Ministry of Justice in cooperation with the DIS, the total number of arbitral proceedings initiated anually in Germany from 2012 to 2016 fluctuates between 444 and 1,581 – and is more likely 750 than 1,000.39 In addition, at most 86.48 % of the figure relate to national as well as international commercial disputes administered in Germany.40 Concerning internationality, among the 132 arbitration proceedings administrated by the DIS in 2020, 65 (49 %) had at least one non-German party.41 This is a significant increase in the participation of foreign parties in DIS arbitration proceedings from 43 out of 155 arbitrations (27.7 %) in 201042 , while the absolute number of DIS arbitrations has fairly constantly stayed between 120 and 175 during the last decade. While ad hoc arbitrations43 and arbitrations administrated by other institutions44 are not included in these numbers, it seems highly unlikely that the addition of their caseload with at least one German party would substantially change the outcome. It therefore seems safe to say that by absolute numbers of cross-border disputes, arbitration proceedings are not numerically relevant competition for state courts45 – even before the introduction of specialized chambers for international commercial disputes. The same holds true for mediation: A report commissioned by the German Federal Ministry of Justice and 604980/IPOL_STU(2018)604980_EN.pdf, 34; Podszun/Rohner, Betriebs-Berater 2018, 450, 450–451. 37  See also Wagner/Arntz, Commercial Courts in Germany, in: Lei Chen/André Janssen (ed.), Dispute Resolution in China, Europe and World, 2020, 12–13. 38  See also Podszun/Rohner, BB 2018 (fn.  34), 451. 39 See Wolff, “Die Landschaft der Schiedsgerichtsbarkeit im Spiegel gerichtlicher Entscheidungen”, Zeitschrift für Schiedsverfahrensrecht 2022, 72–73. 40 Cf. Wolff, SchiedsVZ 2022, 75. 41  Deutsche Institution für Schiedsgerichtsbarkeit, Unsere Arbeit in Zahlen – Verfahrens­ eingänge 2020, https://www.disarb.org/ueber-uns/unsere-arbeit-in-zahlen. 42  Deutsche Institution für Schiedsgerichtsbarkeit, DIS-Statistik 2010, 2010, https://www. disarb.org/fileadmin//user_upload/Ueber_uns/Statistik/Statistik_2010_DE.pdf, 1. 43  Estimated by Wagner, Rechtsstandort (fn.  9), 116 at 16 % of institutional arbitrations. 44  For the Swiss Chambers’ Arbitration Institution (SCAI) see Wagner, Rechtsstandort (fn.  9), 103. 45 Cf. Wagner, Rechtsstandort (fn.  9), 116; Schubert, Gehen der Justiz in Deutschland die Zivilverfahren aus?, in: Höland/Meller-Hannich (ed.), Nichts zu klagen? Der Rückgang der Klageeingangszahlen in der Justiz. Mögliche Ursachen und Folgen, 2016, 30.

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Consumer Protection in 2017 estimates the total number of mediations in Germany from 2014 to 2016 to be between 7,000 and 9,000 cases per year,46 with only a fraction concerning commercial matters.47 This impression changes only slightly if one looks at high volume disputes: Among the approx. 340,500 cases that the LGs have settled in 2020, only 0.7 % (approx. 2,380 cases) concerned an amount greater than 1 million EUR – German and non-German parties combined.48 During the same period, 79.4 % of the 946 total ICC Arbitrations (all countries combined) were above 1 million USD.49 With regard to the DIS, one can deduce from the available data 50 an average amount in dispute of approx. 17 million EUR in 2020 51 which indicates a majority of all cases to have been above 1 million EUR. But even then, in absolute numbers the state courts still resolved approximately ten times more of these disputes than the arbitral institutions. While the overall numbers still speak very much in favour of the state courts, anecdotal evidence pertaining to disputes of more than 100 million EUR and to certain subject matters shows that in some areas of law, arbitration is nevertheless the prevailing mode of dispute resolution. This seems to be especially the case for post-M&A disputes where arbitration clauses are the rule, so that legal practitioners even complain about a complete lack of published case law on complex M&A contracts.52 The relatively new specialized Chambers for International Commercial Matters installed at some LGs do not play a significant role in these statistics. Their caseload of international disputes, as reported to the author,53 are low single-digit figures per chamber and will be under 20 cases per year for the entire country. It would nevertheless be premature to conclude from these numbers 46  Masser/Engewald/Scharpf/Ziekow, Evaluierung des Mediationsgesetzes, https://www. bmj.de/SharedDocs/Downloads/DE/Service/StudienUntersuchungenFachbuecher/Evalua tionsbericht_Mediationsgesetz.pdf?__blob=publicationFile&v=1, 84. 47  According to Masser/Engewald et al. (fn.  41), 67, only 15 % of the mediators are working in commercial mediation. 48  Statistisches Bundesamt, Rechtspflege 2020 (fn.  24), 56. 49  International Chamber of Commerce, 2020 Statistics, 2020, https://iccwbo.org/publica tion/icc-dispute-resolution-statistics-2020/, 31. 50  Overall amount in dispute: 2.25 billion EUR for 132 disputes, see Deutsche Institution für Schiedsgerichtsbarkeit, Deutsche Institution für Schiedsgerichtsbarkeit (fn.  36). 51  The data of 2015 (15 million EUR average for DIS) and the data from the SCAI (14 million EUR average), see Wagner, Rechtsstandort (fn.  9), 117. 52 See Grohmann (fn.  3), 363; Raeschke-Kessler, Neue Juristische Wochenschrift, Editorial 52/21. 53  LG Frankfurt: one decided case, five pending cases; LG Hamburg: one case decided by amicable settlement, one pending case; LG Stuttgart “Commercial Court”: 165 proceedings filed at the Civil Camber, 100 proceedings filed at the Chamber for Commercial Matters (but none of these are conducted in English, see Melin, DRiZ 2021 (fn.  21), 65). However, these figures do not differentiate between international and non-international cases. As reported to the author, international cases are the exception.

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that the specialized chambers are going to be irrelevant as their creation is still very recent. It will therefore take years before a significant number of cases can reach them, and it is too early to determine if this will be the case.

IV. Main features of ICLs in Germany There is no uniform concept for ICLs in Germany, only a common basic pattern resulting from the design of ICLs as specialised chambers of state courts. The individual ICLs deviate from this basic pattern from state to state with specific features that can roughly be categorized into three types: 1) non-internationally specialized English-speaking Civil Chambers, 2) regular (also English-speaking) Civil Chambers specialized in international commercial disputes, and 3) specialized (also English-speaking) Chambers for international Commercial Matters (Kammern für internationale Handelssachen). 1. Access to the specialized chambers Across all three types, access to the ICL depends on the regulations in the respective Land and may even differ between the individual ICLs within one Land, because there is no statutory regulation. Instead, the ICLs jurisdiction within the limits of the court is determined by judicial self-administration through the court’s schedule of responsibilities (“Geschäftsverteilungsplan”). For the first type of ICL the court’s schedule of responsibilities holds no significance: Both at the LG Cologne and at the LG Bonn (as well as in the second instance at the OLG Cologne), the regulations require the parties to agree to conduct oral proceedings in English, to waive the need for an interpreter, and the legal dispute to show an international connection. This agreement must be declared in the statement of claim and the statement of defence by both parties respectively. It is therefore not possible to bindingly choose the jurisdiction of the English-speaking chambers by means of a choice of forum agreement. For the second type of ICL, on the other hand, access to the ICL becomes somewhat uncertain as the mere intention of the parties to conduct the proceedings in English is not sufficient. In addition, the jurisdiction of the specialized Civil Chambers is limited by the schedule of responsibilities to disputes in certain subject matters, and the “Commercial Courts” of Baden-Württemberg are even partially (LG Stuttgart) or entirely (LG Mannheim) dependent on a minimum amount in dispute. The “Commercial Court” in Stuttgart, for example, restricts its jurisdiction within the LG Stuttgart to selected corporate disputes, M&A disputes, or disputes about mutual commercial transactions initially limited to a minimum amount in dispute54 of 2 million EUR (reduced to 1 million 54 

Critical of a minimum amount in dispute Pfeiffer, IWRZ 2020 (fn.  3), 54.

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as of 2022). The “Commercial Court” in Mannheim (3rd Civil Chamber of the LG Mannheim) even restricts all of the selected disputes to a minimum amount in dispute of 2 million EUR.55 The same applies to the third type of ICL, where it is regularly in the hands of the parties whether the dispute will be heard before the general civil chamber or the Chamber for (International) Commercial Matters.56 As a result, even by means of a choice of forum agreement in favour of the LGs offering ICLs, the jurisdiction of the respective ICL cannot be chosen bindingly. This uncertainty reduces the attractiveness of the ICLs significantly. In addition, the existence of numerous, independent and rather small ICLs gives rise to the question whether they provide for sufficient international visibility. It might be wise to consider whether the establishment of a single independent ICL outside of the existing court system would be more appropriate and attractive to commercial parties.57 2. Composition of the ICLs For complex international commercial disputes, it is often helpful to have them decided by a full bench of three judges instead of a single judge. This is already reflected in most arbitration rules and the UNCITRAL Model Law on Commercial Arbitration, where a tribunal composition of three arbitrators is the standard. And as a study by the German Federal Ministry of Justice in cooperation with the DIS shows, 61.30 % of national and 43.11 % of international commercial arbitral disputes were decided by a three-arbitrator panel – whereas only 27.53 % resp. 38.32 % were decided by a single arbitrator.58 In everyday practice, parties only appoint a single arbitrator in smaller cases, while for the more complex cases, the combined knowledge, skills, and attention of three arbitrators is generally preferred. In principle, cases before LGs chambers (first two types of ICLs) are decided by a full bench comprised of three professional judges (sect. 59 GVG) as are disputes in commercial, banking, finance, and insurance law (sect. 348 (1) 2 ZPO). Therefore, most international commercial disputes brought before the second type of ICL will be decided by a full bench. This is different for the Chambers for Commercial Matters, (where the bench is composed by one pro-

55  Whether the amount will also be reduced to 1 million EUR is not sure yet as the court’s schedule of responsibilities of 2022 has not been published so far. 56  See II.1, above and Melin, BB 2020 (fn.  3), 2703; in depth Schumann, Der Betrieb 2021, 662, 662–663. 57  Curschmann, Zeitschrift für internationales Wirtschaftsrecht 2018, 241, 242; Stürner, JZ 2019 (fn.  3), 1124. 58 Cf. Wolff, SchiedsVZ 2022, 83.

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fessional judge and two honorary judges,59 pursuant to sect. 105 (1) GVG). 60 If the disputes are brought before such chambers, the complex legal questions arising will de facto be decided by the presiding judge as the only professional judge on the bench. 61 a) Statutory prerequisites for appointment To be appointed as a professional judge at an ICL (or at any other state court) it is necessary to meet the elements pursuant to sects. 9, 5–7 of the Judiciary Act (Deutsches Richtergesetz – DRiG). In essence: The appointee needs to be a German citizen pursuant to Art.  116 of the Constitution (Grundgesetz – GG) and to have completed a full legal education in Germany (first and second state exam). Therefore, lawyers qualified in a foreign jurisdiction, or laypersons cannot be appointed. The honorary judges for the third type of ICL must be businessmen, or members of the board of a corporation, or authorised signatories of such entity. Pursuant to sect. 108 GVG, the honorary judges are appointed by the judicial council of the Higher Regional Court for a term of five years at the proposal of the Chambers of Commerce and Industry (Industrie- und Handelskam­ mern – IHK). b) Qualification and selection process Beyond those just stated, there are no further formal prerequisites in order to be appointed as a judge at a German ICL. However, in general only significantly above-average graduates are given the opportunity to pursue a career as a judge. 62 In addition, the judicial administration, in considering what judges to assign to an ICL, will require very good English language skills and in-depth knowledge of corporate and commercial law. Professional experience as a commercial or corporate lawyer is highly desired – as the presiding judge Mr. Melin of LG Stuttgart’s 49th Civil Chamber (which is one of the ICL’s chambers) pointed out and as other ICLs reported to the authors upon request. 63 It is preferable that the judges in specialized international chambers are experienced lawyers who have already seen the “business side” of commercial transactions from the perspective of a solicitor or barrister, in order to have a thorough understanding of the economic rationales behind certain contract clauses, and to be able to communicate on an equal footing with the highly specialized counsel 59  With criticism regarding the usage of honorary judges in Germany and France Rühl, Building Competence (fn.  34), 56. 60  See II. above. 61  See as well Podszun/Rohner, Neue Juristische Wochenschrift 2019, 131, 131. 62  With the estimate that German judges are generally highly qualified, see also Lehmann (fn.  14), 85. 63  Melin, BB 2020 (fn.  3), 2703.

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of the parties. This is reflected, in particular, in the published curricula vitae of the judges at the “Commercial Courts” in Mannheim and Stuttgart: Melin holds a LL.M. degree from a US-American Ivy League university, a PhD in comparative law, and has served as a judge at regional and higher regional courts for many years – focusing on trademark, copyright, antitrust and competition law. Equally remarkably, the presiding judge Schumann of LG Stuttgart’s 31st Chamber of Commerce has practiced as a lawyer in international law firms both in Stuttgart and London. 64 In some Länder, this poses serious problems because the selection process for judges is construed in a way that bans experienced counsel from “switching sides” and changing their career to become a judge. In Bavaria for example, the judiciary recruits its personnel nearly exclusively at the very beginning of their careers. With regard to calling in honorary judges for a case, the LG Stuttgart’s 31st Chamber of Commerce takes into account their professional activities and interests and their industry-related knowledge to find the best matches with the knowledge necessary for the specific case (per the chamber’s internal schedule of responsibilities65). 66 The appointment of professional judges at the (higher) regional courts is a matter for the Länder and therefore differs from Land to Land: For example, in Baden-Württemberg judges are nominated by the ministry, then advised upon by a presidential council and, in the event that the presidential council rejects the nomination, a committee of judges decides on the appointment.67 In Hamburg judges are nominated by a committee of judges and then appointed by the senate. 68 Initiative applications are possible. The reasons for doing so are not directly monetary, because the judges at the ICLs do not earn more than at other regional courts. However, working at an ICL can certainly serve as a career advancement. c) Ensuring and preserving the chamber’s specialization International commercial disputes require the judges to be highly specialized in the specific matters of the dispute, to allow them to deal on an equal footing with the highly specialized lawyers. In this regard, it is not sufficient for the 64 

See https://commercial-court.de/richter. more about the fact that pursuant to Art.  101 GG there is no possibility for the courts to assign specific judges to a specific case, see below IV.2.c). 66  Schumann (fn.  57), 663. 67 See Art.   66 (3) of the Constitution of Baden-Württemberg (Verfassung des Landes Baden-Württemberg – LV) in conjunction with sects. 43, 57 of the Judges and Prosecutors Act of Baden-Württemberg (Landesrichter- und -staatsanwaltsgesetz – LRiStAG). 68  See Art.  63 of the Constitution of the Free and Hanseatic City of Hamburg (Verfassung der Freien und Hansestadt Hamburg – Verf HA) in conjunction with sects. 14 et seqq. of the Judges Act of Hamburg (Hamburgisches Richtergesetz – HmbRiG). 65  For

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judges to be specialized in “commercial matters” generally. If one takes the standard applied by the parties’ counsel when selecting arbitrators for a specific dispute, even a specialization of a candidate in, e.g., M&A transactions or IT contracts is not always enough; parties often require even more specific experience in the field, like the drafting of complex earn-out clauses or agile software development contracts. Even though some chambers may specialize in certain fields it is an organizational challenge for the judiciary to maintain and accumulate the specific knowledge of a chamber in its field over time. For example, this requires the judiciary to keep judges and legal professionals allocated to a specific chamber. This goes contrary to the regular planning of human resources in the German judiciary which often relies on the universal skills of German lawyers. Judges are regularly transferred between different areas of law, in some states even between the public prosecutor’s office (Staatsanwaltschaft) and the civil jurisdiction. It is therefore laudable that at least for the Stuttgart and Mannheim “Commercial Courts”, the bench shall explicitly be composed of the same judges for a long time. The same holds true for the Chambers for International Commercial Matters in Frankfurt, Hamburg, Berlin and elsewhere, where only one professional judge serves, typically over a longer period of time, to allow for sufficient specialization, at least in commercial law in general. Regarding the honorary judges, who are appointed for five years, a repeat appointment is explicitly not excluded, equally allowing for more relevant experience and specialization. d) Transparency and parties’ influence At all ICLs, the incumbent judges can be found in the respective court’s schedule of responsibilities, which is published electronically by all ICLs. 69 However, only the “Commercial Courts” in Mannheim and Stuttgart provide information on the individual judges’ CVs and qualifications.70 At all ICLs (or at any other state court), the parties have no right to choose their judges ad personam. In addition, the court does not have the possibility to assign specific judges to a specific case (neither ex officio nor at the parties’ request).71 Pursuant to the very strict interpretation of the principle of the legally competent judge (“Recht auf den gesetzlichen Richter”, Art.  101 GG) by the German Federal Constitutional Court (Bundesverfassungsgericht – BVerfG) and the Federal Court of Justice, the composition of the chambers must be determined in abstracto for any case brought before the court, leaving no discre-

69  Which is unfortunately not the case for all other German courts, see Labusga/Petit, Neue Juristische Wochenschrift 2022, 300, 300–304. 70  See n.  50. 71  See in-depth also Grohmann (fn.  3), 350–354.

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tion to the court or the parties.72 This is completely different in international arbitration where the parties choose their arbitrators ad personam in a thorough process to find the arbitrators with just the ideal set of skills and competences for the specific case at hand. 3. Procedural rules and special features a) Applicable procedural rules There are no specific procedural rules for international commercial disputes at the ICLs. Instead, the rules of the ZPO apply just like in any other dispute. They leave little room to party autonomy when it comes to procedural rules and therefore provide very little possibility for the parties to adapt the procedure to their needs with tailor-made rules. Moreover, the ZPO is very much oriented towards the amicable resolution of disputes, as pursuant to sect. 278 (1) ZPO the court shall act in the interest of arriving at an amicable resolution in all stages of the proceeding. This gives the judge a relatively active role in the proceedings: In German civil procedure, it is mainly the judge(s) who question(s) the witnesses, and the parties’ counsel may only ask additional questions. Furthermore, it is very common for the judge(s) to make specific proposals for an amicable settlement of the dispute, based on an early evaluation of the dispute. And last but not least, pursuant to sect. 139 (1) 3 ZPO the parties can be obliged to follow a specific structure in their submissions, ordered by the court, in order to simplify the treatment of complex multi-issue disputes (as far as possible). b) Active case management One of the most important factors for the efficient resolution of complex commercial disputes is an active case management by the court. Elements of such case management are a case management conference where the proceedings are planned, a strict and reliable procedural timeable that sets all dates for the parties’ submissions and the hearings in advance, and, where appropriate, thorough directions for the content of the parties’ submissions to focus the arguments on the aspects which are material from the court’s point of view. This allows, finally, for focussed hearings where only the relevant witnesses are heard, and the essential points of disagreement are argued. Active case management, however, requires for the court to prepare and, if necessary, deliberate the case at a very early stage, and to communicate with the parties and their counsel in a cooperative manner. The ZPO does not oppose such an active role in case management, even though it is not customarily used 72  BVerfGE 2, 307, 320; BVerfG NJW 2018, 1155, 1156; Jachmann-Michel, in: Dürig/Herzog/Scholz (ed.), Grundgesetz, August 2018, Art.  101 GG mn. 47–49.

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for common civil procedures.73 Some ICLs however make regular use of a case management conferences74 and other techniques to streamline complex proceedings. c) Use of the English language during the proceedings In principle, proceedings before the ICLs (as in any state court) have to be conducted in German (sect. 184 GVG). Deviating from this, some provisions allow the proceedings to be partially conducted in English without translation.75 It is possible to conduct the hearings in English and to use English documents without translation by waiving the use of interpreters pursuant to sect. 185 (2) GVG and translations of documents pursuant to sect. 142 (3) ZPO.76 However, the parties’ written submissions, the hearings transcript and the award have to be in German.77 With regard to the transcript, however, it is disputed whether pursuant to sect. 185 (1) 2, (2) GVG a witness’s testimony can be included in the transcript in the original language without translation if the witness is questioned in English.78 Relating to the inclusion of third parties,79 finally, it is undisputed that the third party cannot be forced to conduct the proceedings in English – 80 in particular the compelling character of the third party notice (sect. 72 ZPO) suffers thereby. Overall, these limitations make the currently possible concept of English language proceedings seem rather half-baked, and it has always been one of the most important aspects of the diverse attempts at legislation to allow proceedings to be completely conducted in English.81 73  Criticizing this fact, Grohmann (fn.  3), 45–71. With the proposal to define a case management conference for proceedings before the ICLs as legal standard, Pfeiffer, IWRZ 2020 (fn.  3), 53. 74  For the “Commercial Courts” in Mannheim and Stuttgart see https://commercial-court. de/commercial-court; for the LG Frankfurt see Hess/Boerner, Erasmus Law Review 2019, 33, 34–36. 75  With an in-depth analysis Armbrüster, Neue Juristische Wochenschrift 2011, 812. 76  Diekmann, Neue Juristische Wochenschrift 2021, 605, 608. 77  Köhler/Hudetz, Betriebs-Berater 2020, 2179, 2182; Diekmann (fn.  76), 608. 78 Against the need to translate Diekmann (fn.   76), 608; Lehmann (fn.  14), 95; Meier, Zeitschrift für Wirtschafts- und Bankrecht 2018, 1827, 1831; Pabst, in: Münchener Kommentar zur Zivilprozessordnung, 6th ed., 2020 et seq., sect. 185 GVG mn. 18; Rühl, AJIL Unbound 2021 (fn.  3), 13; for the need Armbrüster, ZRP 2011 (fn.  9), 102; Hoppe, Praxis des Internationalen Privat- und Verfahrensrechts 2010, 373, 374; Hau, Fremdsprachengebrauch durch deutsche Zivilgerichte – Vom Schutz legitimer Parteiinteressen zum Wettbewerb der Justizstandorte, in: Michaels/Solomon/Michael (ed.), Liber Amicorum Klaus Schurig. Zum 70. Geburtstag, 2012, 57. 79  See with regard to the inclusion of third parties in detail IV.3.i), below. 80  Armbrüster, ZRP 2011 (fn.  9), 103; Grohmann (fn.  3), 347. 81 See deemphasizing the importance of fully conducted English language proceedings Grohmann (fn.  3), 347–348; Rühl, AJIL Unbound 2021 (fn.  3), 13; in relation to disputes of SME’s also Armbrüster, ZRP 2011 (fn.  9), 104; Hoffmann, Zeitschrift für internationales Wirtschaftsrecht 2018, 58, 62; Podszun/Rohner, NJW 2019 (fn.  61), 135.

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d) Organization of the hearings In complex international commercial disputes, hearings often involve people from different continents – parties’ representatives, counsel, witnesses, experts, who convene for the hearings. The more complex the dispute is, the more people are involved, and the more time will be needed to hear all necessary arguments and facts. This makes it inevitable to extend the hearings over several days.82 Given the enormous effort required for all people involved to travel to the hearings, it is crucial that the hearings be held on consecutive days. In complex International Arbitrations, it is not rare to see two or more whole weeks (Monday through Friday) being reserved for hearings. This requirement poses a challenge for the organization of the court that should not be underestimated. Since the LGs are generally dealing with standard cases requiring only rather short hearings of one or several hours, a typical Civil Chamber has one specific day reserved for hearings per week. One courtroom is therefore allocated to different Civil Chambers on different days of the week. This makes it extremely difficult, if not impossible, to schedule hearings over several consecutive days, which in turn makes the respective chamber unattractive for complex international commercial disputes. It is therefore laudable that some of the specialized Chambers for International Commercial Matters or “Commercial Courts” are organized differently, such as having a dedicated facility solely at their disposal, allowing them to schedule hearings over several consecutive days whenever they deem it necessary. In Baden-Württemberg, for example, the “Commercial Courts” have dedicated buildings with courtrooms at their disposal.83 Of great importance – even more so in recent years – is the availability to conduct hearings remotely, especially in international disputes to avoid travel for foreign participants in cases where their physical presence in the courtroom does not seem necessary. Regrettably, not all German civil courts – and by far not all civil chambers – have the adequate equipment (in particular video conferencing technology) to facilitate this. By contrast, most of the ICLs also have a video conferencing system at their disposal. e) Discovery and document production The concepts of pre-trial discovery and document production are foreign to the German ZPO, which only provides very limited possibilities for one party to access material documents from the opponent.84 While sect. 142 (1) ZPO allows the court to order the presentation of documents, these orders must be limited 82 

See also Wagner/Arntz, 20. See https://commercial-court.de/en/sites. 84  See also Grohmann (fn.  3), 333–336. 83 

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to specific documents listed individually in the order,85 and, above all, are not enforceable. If a party refuses to comply with the order, this can only be taken into account when appreciating the evidence but does not entail any other sanctions. 86 f) Taking of evidence Especially in the context of the taking of evidence, international commercial disputes demand flexible, tailor-made solutions. Even if the ZPO, as already stated, leaves little room to party autonomy, 87 certain agreements on the taking of evidence are possible: For instance, in principle sect. 399 ZPO does not prohibit the parties to agree on waiving the evidence by witnesses who do not appear at the agreed hearing88 – even if the waiver is declared in advance. Also, the parties can waive expert evidence for disputed facts below a certain amount at stake (this is often agreed on in order to save costs).89 Furthermore, as an important feature in international commercial disputes, witnesses (in particular those residing in foreign countries) can be heard virtually (sect. 128a (2) ZPO) – although the decision is at the discretion of the court. The possibility to substitute oral witness examinations by written witness statements (often followed by cross-examination) is, however, disputed: Pursuant to sect. 377 (3) ZPO it is to the court’s discretion to impose written witness statements. It therefore seems inadmissible for the parties to bindingly substitute oral witness examinations by agreement.90 An advantage of ICLs in Germany, especially compared to International Arbitration, is that they can effectively enforce the taking of evidence by exercising coercive powers.91 For example, if a witness does not appear for examination, the court can impose a fine and, in exceptional cases, even order the imprisonment of the witness (sect. 380 (1) 2 ZPO). In contrast, an arbitral tribunal in Germany, as in all countries that have implemented Art.  27 UNCITRAL Model Law on Commercial Arbitration, would have to take the cumbersome way via state court assistance pursuant to sect. 1050 ZPO. Thereafter, the assisting

85  BGH, 14 June 2007 – VII ZR 230/06, NJW-RR 2007, 1393, 1394; von Selle, in: Vorwerk/ Wolf (ed.), Beck’scher Online Kommentar ZPO, 43rd ed., 2022, sect. 142 mn. 10; Stadler, in: Musielak/Voit (ed.), Zivilprozessordnung. Mit Gerichtsverfassungsgesetz, 18th ed., 2021, sect. 142 mn. 4a. 86  Von Selle (fn.  84), sect. 142 mn. 17; Stadler (fn.  84), sect. 142 mn. 7. 87  See above IV.3.a). 88  Diekmann (fn.  76), 607. 89  Diekmann (fn.  76), 608. 90 For the possibility to bindingly agree on written witness statements, see Diekmann (fn.  76), 607; as here, Pfeiffer, IWRZ 2020 (fn.  3), 55. 91 See Melin, BB 2020 (fn.  3), 2704; Köhler/Hudetz (fn.  7 7), 2184.

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state court would even hear the witnesses itself, with the arbitrators only having a right to attend.92 g) Hearing transcript A major disadvantage of a proceeding before state courts in Germany is that routinely, only summarised transcripts, dictated by the judge, are used.93 This carries the risk that a witness statement might be summarized, albeit unconsciously, in an incomplete, biased or even misleading way.94 In this regard, it is of great advantage to use a verbatim transcript and/or recording. This is particularly essential for large international commercial proceedings, in which the court often has to examine numerous witnesses and thus, with only a summarized transcript, there is a high risk that certain elements of the witness’ testimony will fade away until its post-hearing assessment.95 In this respect, the general practice of verbatim transcripts in International Arbitration is a good indicator of how high the need for a verbatim transcript and/or recording is.96 However, at least several ICLs offer a verbatim transcript and/or recording of the hearing pursuant to sect. 160a (4) ZPO.97 h) Participation of foreign counsel Foreign counsel cannot participate formally in proceedings before the ICLs (as before any other state court). According to sect. 4 Federal Lawyers’ Act (Bun­ desrechtsanwaltsordnung – BRAO), the prerequisite is that the lawyer has either undergone a complete German legal education (and thus has the qualification to become a judge, s. above IV.2.a)) or is a European lawyer and admitted to the German bar. However, this does not prevent foreign lawyers from acting in an advisory capacity. As long as they do not need to make formal submissions, it is even sufficient if a German qualified lawyer adopts their statements as their own during the hearing.

92  For this reason, with the proposal to amend sect. 1050 ZPO, Schmidt-Ahrendts/de Jong, Zeitschrift für Schiedsverfahrensrecht 2018, 281, 285–286. 93  Diekmann (fn.  76), 606–607. 94  See also Pfeiffer, IWRZ 2020 (fn.  3), 54; Stürner, Zeitschrift für Schiedsverfahrensrecht 2018, 299, 302. 95  With this in mind also Pfeiffer, IWRZ 2020 (fn.  3), 54; Stürner, SchiedsVZ 2018 (fn.  93), 303. 96 See Stürner, SchiedsVZ 2018 (fn.  93). 97  For the “Commercial Courts” in Mannheim and Stuttgart see https://commercial-court. de/commercial-court. The LG Frankfurt a. M. has declared to offer a verbatim transcript and/ or recording upon request of the author; the LG Hamburg has declared not to.

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i) Inclusion of third parties One of the big advantages of a proceeding at one of the ICLs compared to a proceeding in International Arbitration is the rather uncomplicated possibility to extend the effect of the proceedings to third parties by so-called third party notice (Streitverkündung – sects. 72 et seqq. ZPO) and (side) intervention (Nebenintervention – sects. 66 et seqq. ZPO). Simply put, these mechanisms allow the intervention of a third party in support of one of the parties without the party’s consent (Nebenintervention), as well as the extension of the award’s effects to a third party without his/her consent (under specific circumstances), whereas the complicated joinder procedure in International Arbitration in principle requires the consent of all parties involved98 and is therefore of only limited practical importance. j) Publicity of the proceedings and the awards In Germany, court hearings are in principle public (sect. 169 GVG), as long as no specific interests in confidentiality are at play (sect. 170 et seqq. GVG, sect. 299 (2) ZPO, sect. 16, 19 of the Trade Secrets Protection Act [Gesetz zum Schutz von Geschäftsgeheimnissen – GeschGehG]).99 As this principle is obligatory, the parties cannot waive nor exclude the public from the hearings at their discretion (debated100). This does, however, not regard the case file which is not publicly available. Thus, if the court orders – upon the parties’ consent – a written procedure (sect. 128 (2) ZPO), this effectively also excludes the public from the proceedings. Awards from the ICLs (as from most state courts) are published (in anonymized form) only if the court or one of the parties find that there is a special public interest in doing so, which is rarely the case.101 However, the “Ampel” coalition government plans to assure a full publication of all court decisions in the future – depending on the development of technical means for automatic anonymization.102 When published, so far, the awards are not officially translated into English – and while there are propositions to do so, there are no official plans.103

98  Elsing, in: Salger/Trittmann (ed.), Internationale Schiedsverfahren, 1st ed., 2017, §   9 mn. 12. 99 See. Köhler/Hudetz (fn.  7 7), 2183; Pfeiffer, IWRZ 2020 (fn.  3), 56. 100 See Hoffmann, KfiH (fn.  9), 182–187. 101  Currently, only approx. 1 % of all awards are published, see Hamann, Juristenzeitung 2021, 656, 658. 102 Coalition agreement of the “Ampel” coalition, https://www.spd.de/fileadmin/Doku mente/Koalitionsvertrag/Koalitionsvertrag_2021-2025.pdf, 106. 103  Proposition by Hoffmann, KfiH (fn.  9), 190.

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k) Appeal and other remedies Appeals can be filed against the decisions of ICLs to the same extent as against any other state court’s decision: in principle, there is the right to appeal (on questions of fact and law) to the competent OLG and – in 3rd instance – the right to appeal (on questions of law only) to the BGH. That said, the parties have the possibility to waive their right to appeal ex ante, i.e., before the court has made its decision (sect. 515 ZPO)104 – even limited to the extent that only the appeal on questions of law to the BGH remains open.105 However, according to the prevailing opinion, this waiver can only be declared in the context of a specific dispute, and not already in the dispute resolution clause.106 For the ICLs at the LG Mannheim and LG Stuttgart, specialized senates for appeal have been established at the OLG Karlsruhe107 and OLG Stuttgart108 “Commercial Court of Appeal”109 that can conduct proceedings in English to the (limited) extent stated above (IV.3.c)). However, none of the senates at the BGH are adapted to conduct proceedings in English. l) Interim relief Last but not least, an advantage of conducting proceedings before the ICLs compared to arbitration is the availability of interim relief.110 This is because the ZPO (sect. 916 et seqq.) offers effective, flexible preliminary relief with which a party’s right can be secured even without an oral hearing (sect. 922 (1) ZPO). In principle, it is only required that the applying party can give a good reason to a particular urgent threat to his/her right and that the court deems the existence of the urgent threat as well as the claimed right more likely than not (sect. 920 (2) ZPO). Interim relief can also be granted in the form of injunctions, prohibiting a party from certain behaviours. Interim relief decisions are directly enforceable. By contrast, under German arbitration law the enforcement of arbitral titles of interim relief requires the assistance of the state courts (sect. 1041 (2) ZPO). However, even in case of an arbitration agreement, a court can order interim 104 

Hoffmann, KfiH (fn.  9), 191. BGH, 10 July 1985 – VIII ZR 285/84, NJW 1986, 198. 106  Rimmelspacher, in: Münchener Kommentar zur Zivilprozessordnung, 6th ed., 2020 et seq., sect. 515 mn. 8; contradicting Wagner, Prozeßverträge, 1998, 537–541; open BGH, 10 July 1985 – VIII ZR 285/84, NJW 1986, 198. 107  OLG Karlsruhe, Geschäftsverteilungsplan 2022, https://oberlandesgericht-karlsruhe. justiz-bw.de/pb/site/jum2/get/documents/jum1/JuM/OLG%20Karlsruhe/GVP/GVP%20 2022%20%28Stand%2017.12.2021%29.pdf, 13. 108 OLG Stuttgart, Geschäftsverteilungsplan 2022, https://oberlandesgericht-stuttgart. justiz-bw.de/pb/site/pbs-bw-rebrush-jum/get/documents_E-1681375234/jum1/JuM/ OLG%20Stuttgart/GVP/GVP%202022%20-%20Stand%2001.01.2022.pdf, 28. 109  Melin, BB 2020 (fn.  3), 2703. 110  See as well Köhler/Hudetz (fn.  7 7), 2184. 105 

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relief before or after the arbitral proceeding has been commenced (sect. 1033 ZPO). 4. Applicable substantive law As important as the quality of the courts and the whole judiciary might be, it can be presumed that the most important factor for the choice of a jurisdiction still is the substantive law applied by the courts. While it is of course possible and not unusual for German courts to apply foreign substantive law, the choice of German jurisdiction will mostly go hand in hand with the choice of German substantive law.111 It is a key strength of German state courts that they are proficient not only in German civil procedure, but also in German substantive law. Conversely, if parties refrain from choosing German substantive law for their contract, it is highly unlikely that they would choose German state courts for the resolution of their contractual disputes. Therefore, for German courts to be attractive as a jurisdiction in international commercial contracts, German substantive law (i.e., mainly German contract law) must be sufficiently attractive to the contracting parties as well.112 a) Private international law The German state courts – and thus also the ICLs – apply the Rome Regulations to resolve any conflict of laws. For contractual claims, Art.  3 (1) Rome I-Regulation113 allows the parties to choose the applicable law for their contract among all state laws. The same holds true for claims based on torts or other statutory provisions where a contract is also involved (Art.  14 (1) 1 b) Rome II-Regulation114). Under the Rome Regulations, the parties can only choose the statutory law of a state; they can neither choose non-state law (such as the UNIDROIT Principles on International Commercial Contracts)115 nor empower the court to decide ex aequo et bono. This is different in arbitration where sect. 1051 ZPO (derived from Art.  28 of the UNCITRAL Model Law on International Commercial Arbitration) allows for the parties to choose only a subset of a state’s law116 or non-state law like the UNIDROIT principles,117 and even to opt for a decision ex aequo et bono (sect. 1051 (3) ZPO). Especially the possibility to ex111 

BT-Drs, 17/2163, 7–8. In the same sense, see Grohmann (fn.  3), 107. 113  Regulation (EC) No 593/2008 of the European Parliament and of the Council of 17 June 2008 on the law applicable to contractual obligations (Rome I), OJ L 177/6, 4.7.2008. 114  Regulation (EC) No 864/2007 of the European Parliament and of the Council of 11 July 2007 on the law applicable to non-contractual obligations (Rome II), OJ L 199/40, 31.7.2007. 115  Hoffmann, KfiH (fn.  9), 198–200. 116  BT-Drs. 13/5274, 52; Münch, in: Münchener Kommentar zur Zivilprozessordnung, 6th ed., 2020 et seq., sect. 1051 mn. 15. 117  BT-Drs. 13/5274, 52; Münch (fn.  115), sect. 1051 mn. 68–71; Stürner, JZ 2019 (fn.  3), 1129. 112 

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clude portions of German contract law could be a considerable advantage of arbitration, although the evidence for its use is very sparse and only anecdotal.118 b) Substantive law As regards substantive contract law, the German initiative “Law made in Germany”119 shows German officials’ pride for their contract law system. Indeed, German contract law as codified in the Civil Code (Bürgerliches Gesetzbuch – BGB) and extensively interpreted by a highly competent judiciary and very productive legal scholars is – objectively spoken – a reliable legal source with rather predictable outcomes,120 which is a very important factor in the choice of law. However, these qualities do not seem to attract foreign contracting parties.121 Looking for the reasons for this perceived discrepancy, there are at least two major downsides to German contract law, one of linguistic, and one of substantive nature.122 aa) Accessibility in English One essential element of the attractiveness of a legal system is its accessibility to non-native lawyers. In this regard, codified legal systems like German contract law have, in principle, an advantage over case-law systems like common law because of the structured and comprehensive nature of the official source of law, the BGB. Nevertheless, accessibility predominantly depends on how accessible the legal sources (law, case-law and doctrine) are to non-native speakers. Countries with less widespread official languages (like German) are considerably disadvantaged compared to English-speaking countries, as English has long since established itself as the lingua franca of international commerce. It is therefore crucial that sufficient English translations of the legal sources of non-English-speaking countries are available. In this regard, German contract law ranks rather poorly.123 There is no authoritative translation of the relevant codes (BGB, HGB, ZPO). Instead, the German ministry of Justice has commissioned and published non-authoritative translations of these codes124 along with many 118 Cf.

Pfeiffer, Neue Juristische Wochenschrift 2012, 1169. Hoffmann, IWRZ 2018 (fn.  81); Wagner, Rechtsstandort (fn.  9), 58. 120  Lehmann (fn.  14), 89; however, it is problematic that for some specific areas of law (e.g., post M&A or car manufacturing supply chain disputes), virtually no published case-law exists because of the predominance of (confidential) arbitration in these fields. 121  In a study conducted in 2014, German law made last place in a comparison after English, Swiss, U.S. state and French law, see Cuniberti, Northwestern Journal of International Law & Business 2014, 455–517. 122  In this regard, see also Grohmann (fn.   3), 95–100 and especially Cuniberti (fn.  120), 89–92. 123  See as well Altemeier, Deutscher AnwaltSpiegel 2014, 3, 5. 124  BGB: https://www.gesetze-im-internet.de/englisch_bgb/; HGB (only books 1, 2 and 119 

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other statutes.125 Not only is the linguistic quality of these translations widely criticized;126 the main deficit seems to be that these translations have not been updated since 2013 (BGB and ZPO), and 2017 (HGB) respectively and there is no procedure in place to automatically translate every modification of German statutory law and amend the translations. This leads to the result that all translations currently made available to the public by the German federal ministry of justice are outdated and therefore unreliable and partly incorrect. With regard to the case law of German courts, virtually no effort is made to make it available in English. While the BVerfG provides at least summarized English translations for some of its most important decisions,127 the BGH does not publish any English translations of its decisions.128 The same holds true for lower instance courts. The case-law in German contract law is therefore inaccessible to non-German speakers. Finally, German legal doctrine is also in an overwhelming majority (far above 95 %) published in German.129 This aspect is particularly important because abstract legal doctrine plays a crucial role in the system and reality of German law. The courts rely heavily on doctrinal statements to argue their decisions which makes knowledge of legal doctrine essential for the pleading of cases before courts in German law. The inaccessibility of German legal doctrine to non-German speakers is therefore a major drawback for the choice of German law in international commercial contracts. bb) Fitness for international commercial contracts With regard to the substance of the law, the attractiveness of a specific contract law regime for international commercial contracts is determined by the extent to which the rules – in their application by the competent courts – are perceived 5): https://www.gesetze-im-internet.de/englisch_hgb/englisch_hgb.html and ZPO: https:// www.gesetze-im-internet.de/englisch_zpo/englisch_zpo.html. 125 https://www.gesetze-im-internet.de/Teilliste_translations.html. 126 See, e.g., Winslow, The unofficial English-language rendition of the BGB: §  305, “aushandeln” is not “to negotiate”, 24.2.2019, https://community.beck.de/2019/04/24/the-unoffi cial-english-language-rendition-of-the-bgb-ss-305-aushandeln-is-not-to-negotiate; Peter Winslow, Wörtliche Übersetzungen: schlechte Formulierungen, unnötige Schöpfungen, 8.3.2019, https://community.beck.de/2019/03/08/woertliche-uebersetzungen-schlechte-formu lierungen-unnoetige-schoepfungen. 127  See https://www.bundesverfassungsgericht.de/SiteGlobals/Forms/Suche/EN/Entschei dungensuche_Formular.html?language_=en and also the CODICES database under http:// www.codices.coe.int/NXT/gateway.dll?f=templates&fn=default.htm. 128  Even the BGH’s participation in the “Common portal of case law” of the Network of the presidents of the supreme judicial courts of the EU (https://network-presidents.eu/cpcl) seems defective, as every search on German case law yields an error message. 129  With the laudable exceptions of Markesinis/Unberath/Johnston, The German law of contract, 2nd ed., 2006 and Markesinis/Bell/Janssen, Markesinis’s German law of torts, 5th ed., 2019 and the very recent commentary in English language edited by Dannemann/Schulze (ed.), German Civil Code, 2020.

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to fit “fit” the needs of international commerce. In this regard, German contract law has the reputation of giving (too) much room to “judicial activism”.130 Indeed, German contract law – both as law in the books and as law in action – seems to have been developed with consumers and SMEs in mind. For example, the rules on contract interpretation explicitly order the judge “to ascertain the true intention rather than adhering to the literal meaning of the declaration” (sect. 133 BGB), and to interpret contracts “as required by good faith, taking customary practice into consideration” (sect. 157 BGB). These provisions give the judge a wide margin of discretion to eventually leave aside the wording of a contract in favour of the (perceived) interests of the parties. This approach to contract interpretation, as well as the large power of discretion conferred to the judge by the application of the fundamental principle of good faith which is overarching the whole law of contracts (sect. 242 BGB), make German decisions in contract law cases somewhat unpredictable and sometimes quite surprising for foreign lawyers. An even more important example for this feature of German contract law is its rigid approach to standard business terms which applies not only to B2C transactions, but also to B2B contracts.131 Pursuant to the case law of the BGH, virtually any clause that has been introduced into the contract by one party which has not been altered during the negotiations will be considered as a “standard business term” under section 305 (1) BGB. This leads to an extensive control of the clauses against a standard of reasonableness where the clauses are “ineffective if, contrary to the requirement of good faith, they unreasonably disadvantage the other party to the contract with the user” (sect. 307 (1) 1 BGB). Section 307 (2) No.  1 BGB in principle prohibits contractual deviations from the fundamental principles of German contract law – even if the clauses are common ground in other jurisdictions and might therefore constitute a sound compromise between different legal systems in an international commercial contract. For example, it is virtually impossible to impose strict liability on the seller for the delivery of defective goods in the standard business terms of the buyer132 – even though strict liability for breach of contract is the rule in many legal systems. This strict case law has long since been perceived as an impediment to the promotion of German contract law in international commercial contracts.133 130 

See, in more detail, Lehmann (fn.  14), 89–92. e.g., Wagner, Rechtsstandort (fn.  9), 176–182; Maier-Reimer, Neue Juristische Wochenschrift 2017, 1; Berger, Schiedsgerichtsbarkeit und AGB-Recht, in: Genzow/ Grunewald/Schulte-Nölke (ed.), Zwischen Vertragsfreiheit und Verbraucherschutz. Festschrift für Friedrich Graf von Westphalen zum 70. Geburtstag, 2010; Pfeiffer, NJW 2012 (fn.  117). 132  BGH, 22 October 2015 – VII ZR 58/14, NZBau 2016, 213, 215 et seq,; BGH, 18 October 2017 – VIII ZR 86/16, NJW 2018, 291, 292 et seqq.; Maier-Reimer (fn.  130), 5. 133  Grohmann (fn.  3), 96–98; Lehmann (fn.  14), 89. 131 See,

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Parties from other jurisdictions are surprised by the fact that the terms of their contract would undergo serious scrutiny by German courts, and that there is a considerable risk that German courts would not accept contractual provisions which simply reflect their own legal traditions (such as strict liability for breach of contract). To date, despite the announcement of the former German government to tackle this issue,134 no modification of the BGB135 or the relevant case law is on the horizon – on the contrary, the BGH has recently confirmed and even slightly aggravated its case law on the question.136 Parties wanting to rely on the written terms of the contracts they negotiated must therefore either avoid the application of German contract law – which would at the same time eliminate the reason for choosing the jurisdiction of German state courts. Alternatively, they can opt out of the German state judiciary and choose arbitration instead as their dispute resolution mechanism. Arbitral tribunals are generally considered to be more restrained when interpreting and applying German law, especially with regard to standard business terms,137 where renowned German arbitration practitioners openly advocate for a solution contrary to the BGH’s case law.138 Additionally, the choice of law-agreement in an arbitration clause would even allow choosing German law exclusive of the law on standard business terms and therefore avoiding this problem, which is not possible under the Rome I-Regulation applicable in state courts.139 c) Foreign substantive law Of course, there remains the possibility that parties to international commercial contracts choose foreign law as applicable to their contract, while still choosing German courts as competent. This is possible in theory, albeit not common in 134 “Ein neuer Aufbruch für Europa, Eine neue Dynamik für Deutschland, Ein neuer Zusammenhalt für unser Land” – coalition agreement between the “GroKo” coalition (2017–2021), https://archiv.cdu.de/system/tdf/media/dokumente/koalitionsvertrag_2018.pdf? file=1, 131–132. 135  The coalition agreement of the new “Ampel” coalition does not mention contract law at all, only specialized chambers for international commercial disputes. 136  BGH, 19 March 2019 – XI ZR 9/18, NJW 2019, 2080. 137  Leuschner/Meyer, Zeitschrift für Schiedsverfahrensrecht 2016, 156, 160; Guhling, in: Guhling/Günter (ed.), Gewerberaummiete. BGB, BetrKV, HeizKV, WärmeLV, WEG, InsO, ZVG, BBodSchG, PreisKlG, UStG, KStG, GewStG, EStG, GrEStG, ErbStG ; mit systematischer Darstellung des Prozessrechts einschließlich Formularen ; Kommentar, 2nd ed., 2019, sect. 310 mn. 26. 138  Berger, Die (fehlende) Bindung des Schiedsrichters an die höchstrichterliche Rechtsprechung, in: Ebke/Olzen/Sandrock (ed.), Festschrift für Siegfried H. Elsing zum 65. Geburtstag, 2015; Schütze/Thümmel, Schiedsgericht und Schiedsverfahren, 7th ed., 2021, sect. 12 mn. 15. 139  Ampatzi, Das AGB-Recht in der nationalen und internationalen Schiedsgerichtsbarkeit im unternehmerischen Geschäftsverkehr, 2019, 210; Pfeiffer, NJW 2012 (fn.  117).

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practice. Nevertheless, as soon as a contract does not contain a (valid) choice of law and/or choice of forum clause, it can happen that German courts apply foreign law. In this case, foreign law is in principle treated as law, in that the court will determine and apply it ex officio.140 However, pursuant to sect. 293 ZPO, it is still the parties’ right to argue and to prove the content of foreign law insofar as it is unknown to the court. 5. Duration of the proceedings The average duration of the proceedings in German state courts is rather short: Proceedings in the regional courts (Landgerichte – LGs) of first instance – regardless of their subject matter and of their outcome – take 10.5 months on average, with 73 % of the disputes being resolved in under 12 months.141 The average duration has gone up significantly during the last 10 years from 8.1 months in 2010 (with 81 % under 12 months),142 but is still rather short compared, e.g., to arbitration proceedings. If one includes the second instance (Higher Regional Courts – Oberlandesgerichte [OLGs] – as courts of appeal), the average duration of the proceedings from the statement of claim to the termination of the appeal (by judgment or settlement) is 23.4 months with 69.8 % of the proceedings taking less than 2 years in 2020. This duration has slightly gone down from 24.6 months on average in 2010, where nevertheless 82.9 % of the disputes had been resolved in less than 2 years. These average numbers should however not hide the fact that Germany has already been reprimanded in more than 100 cases between 1959 and 2019 for excessively long proceedings by the ECtHR, which has even described this as a structural deficit of the German judiciary in 2010.143 In individual cases, the duration of the proceedings can therefore be nevertheless very long and attain more than 10 years. The overall increasing duration of the dispute resolution by state courts – in spite of the decreasing number of disputes – seems to indicate that the disputes have become more complex during the last ten years, and that perhaps the state courts – unlike many law firms – have not yet taken full advantage of the possibilities of digital workflows. This has been made especially obvious by the huge wave of “Diesel” cases which has brought many state courts to the very limit of their capacity – and beyond.144 140  Prütting, in: Münchener Kommentar zur Zivilprozessordnung, 6th ed., 2020, §   293 mn. 47. 141  Statistisches Bundesamt, Rechtspflege 2020 (fn.  24), 56. 142  Statistisches Bundesamt, Rechtspflege 2010 (fn.  33), 50. 143  ECtHR, 2.9.2010, 46344/06 – Rumpf v. Germany, NJW 2010, 3355. See also Grohmann (fn.  3), 108. 144  See the urgent letter sent by nine presiding judges of the LG Augsburg to Thomas Eck­ ert, chairman of the influential judges council “Bezirksrichterrat” (cf. https://www.handels blatt.com/politik/deutschland/wirecard-oder-dieselskandal-hohe-belastung-durch-massen verfahren-richterbund-fordert-minister-buschmann-zum-handeln-auf/27889058.html).

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There is no specific data available for the specialised International Commercial Courts. The very small number of cases heard by these chambers until today does not allow any reliable information on the duration of the proceedings to be inferred. Since the procedural rules applied are the same as before ordinary state courts, there are no big differences to be expected. Another important factor of the duration of the proceedings is unchanged for the ICLs: since their decisions may be appealed before the Courts of Appeal, and subsequently before the BGH, the overall duration for all three instances can be long. A significant advantage of international arbitration in this regard is the fact that in general, arbitral awards are not subject to appeal by the parties, and the potential annulment proceedings at the Higher Regional Courts are rather fast (5.7 months average145) and rarely successful.146 6. Fees and cost allocation In Germany, the court fees are based on the amount in dispute, ranging from 483 EUR for an amount of 5,000 EUR to 362,163 EUR for any amount greater than 30 million EUR, with 17,643 EUR for an amount of 1 million EUR, for the first instance. For the second instance, the range is from 644 EUR to 482,884 EUR with 23,524 EUR for an amount of 1 million EUR, and for the third instance from 805 EUR to 604,605 EUR with 29,405 EUR for an amount of 1 million EUR. There are no special fees for ICLs. If anything, the proceedings can be less costly if the pleadings and evidence may be in English because no translation costs arise. But these costs will most likely not be the deciding factor for the choice between state courts and arbitration. These fees are not far from the average fees for an arbitral tribunal under the Rules of the two most important arbitration institutions in Germany, the DIS (Deutsche Institution für Schiedsgerichtsbarkeit e.V.) and the ICC (International Chamber of Commerce). Under the DIS Rules 2018, the fees for the arbitral tribunal range from 3,290 EUR for an amount in dispute of 5,000 EUR to 312,185 EUR for 30 million EUR (but going well beyond that for higher amounts in dispute) with 74,685 EUR for 1 million EUR in dispute,147 which seems to be comparable to the state court fees, given that arbitration replaces at least the first two instances of the state courts. Under the ICC Rules, the average fees for comparable amounts in dispute range from 14,000 USD for 5,000 USD in dispute to 508,867 USD for 30 million USD in dispute with 141,472 USD for 1 million USD in dispute, therefore being considerably higher.148 145 

Wolff, Zeitschrift für Schiedsverfahrensrecht 2021, 328, 336–337. Wolff (fn.  143), 332–334. 147 https://www.disarb.org/werkzeuge-und-tools/gebuehrenrechner. 148 https://iccwbo.org/dispute-resolution-services/arbitration/costs-and-payments/costcalculator/. 146 

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With regard to the lawyers’ fees, the German court system is governed by the “loser pays” rule (sect. 91 ZPO), providing for the losing party of a dispute to pay not only its own legal fees, but also the opposing party’s legal fees as well as the entire court fees.149 On the other hand, the lawyers’ fees to be reimbursed are regulated by the lawyer’s remuneration act (Rechtsanwaltsvergütungsgesetz – RVG), also based on the amount in dispute. While the parties are free to agree to hourly fees with their counsel, in case of success these fees will only be reimbursed within the limits of the RVG, potentially leaving the party with the difference between the hourly and the reimbursed fees. For the above-mentioned amounts in dispute, the lawyers’ fees range from 1,017 EUR to 300,169 EUR per party in first instance, with 15,461 EUR for 1 million. Over all three instances, the regulated lawyers’ fees range from 3,688 EUR to 1,092,598 EUR with 56,263 EUR for 1 million in dispute per party. This is much less than typical hourly fees for qualified and specialized dispute resolution lawyers for a complex commercial dispute before state courts or arbitral tribunals. The practical result thereof is that only a fraction of the hourly fees will be reimbursed, thus significantly devalorizing the “loser pays”-rule. Arbitration is much more flexible in this regard, allowing the parties to negotiate different cost allocation or allowing the tribunal to allocate costs at its discretion. Moreover, if the “loser pays” rule is applied by the tribunal150 – traditionally all “reasonable costs” are reimbursed to the winning party,151 without limitation to the reimbursable costs under the German RVG. This flexibility can be more attractive to parties stemming from a jurisdiction where the “American rule” (each party bears its own costs, regardless of the outcome) applies. 7. Decision-making, delivery and enforcement of judgement At the ICLs (as at any state court in Germany), decisions are made by majority of the votes (sect. 196 (1) GVG). Nevertheless, the decision then taken is uniformly considered to be one of “the court”. Accordingly, there are no published dissenting opinions in Germany. In principle, the judgment is delivered to all parties (sect. 317 (1) 1 ZPO), which can also happen in electronic form, sect. 169 (5) No.  1 ZPO,152 although the electronically delivered document may not be used for enforcement. The 149 See Hess/Hübner, Cost and Fee Allocation in German Civil Procedure, in: Reimann (ed.), Cost and Fee Allocation in Civil Procedure. A Comparative Study, 2012. 150  This was obligatory under Art.  35.2 DIS-Rules 1998 and is still possible under Art.  33.3 DIS-Rules 2018. 151  There are however some arbitral tribunals who apply the same limitations in domestic disputes when applying their discretion as to the determination of reimbursable lawyers’ fees under sect. 33.3 DIS-Rules 2018. 152  Schmieder, in: Ory/Weth (ed.), Juris Praxiskommentar Elektronischer Rechtsverkehr, 26.7.2021, §  317 ZPO mn. 10.

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judgment must, in particular, state the facts and the reasons for the decision (sect. 313 ZPO). Under German and European law, there are no special rules for the enforcement of judgments stemming from German ICLs. For the enforcement of awards in commercial matters within the EU, the general rules of the Brussels I bis-Regulation153 apply. These rules allow for an enforcement of awards stemming from German state courts in every member state of the EU without an additional exequatur procedure, and without révision au fond. Only in very extreme cases, foreign member states can refuse the enforcement on the grounds of their public policy (ordre public), or for very serious infringements of elementary procedural rights and principles, cf. Art.  45 (1) Brussels I bis-Regulation. For the enforcement outside the EU, the Lugano Convention allows for the enforcement of German judgments in non-EU European countries, while the 2005 Choice of Court convention allows for a simplified enforcement of judgments in the UK, Mexico and Singapore. In all other states, enforcement of German judgments depends on multilateral or bilateral conventions (Art.  69, 70 Brussels I bis-Regulation) and can be cumbersome in practice.154 It is one of the main advantages of international commercial arbitration that arbitral awards are relatively easy to enforce in foreign countries. Virtually all relevant economies of the world are members of the New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards (NYC). This convention provides standardized criteria for the recognition and enforcement of arbitral awards which allow only very limited grounds for its refusal (Art. V NYC). It is therefore much easier to enforce an arbitral award in a foreign country than a judgment from a state court – including ICLs.

V. Conclusion We share the common perception that German ICLs under the current legal and institutional framework are simply not working, in that they do not attract any relevant number of international commercial disputes.155 Their current situa153 Regulation (EU) No 1215/2012 of the European Parliament and of the Council of 12 December 2012 on jurisdiction and the recognition and enforcement of judgments in civil and commercial matters, see OJ L 351/1, 20.12.2012. 154  Hoffmann, KfiH (fn.  9), 210–213. 155  Grohmann (fn.  3), 107–108; Hoffmann, IWRZ 2018 (fn.  81), 58; Lehmann (fn.  14), 102– 106; Podszun/Rohner, BB 2018 (fn.  34), 452–454; Rupprecht Podszun/Tristan Rohner, “Initiative der Landesjustizminister für ‘Commercial Courts’”, Zeitschrift für Rechtspolitik 2019, 190, 193; Rühl, AJIL Unbound 2021 (fn.  3), 14–15; Stürner, JZ 2019 (fn.  3), 1124; in doubt regarding the approach taken so far also Bert (fn.  9); Graf von Westphalen, “Commercial Courts – überspannte Erwartungen”, Zeitschrift für Wirtschaftsrecht und Insolvenzpraxis 2020, 2203.

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tion is the result of different failed attempts by the German government: The main legislative issues on the federal level (lack of specific provisions for the use of English as official language in court; the law on standard business terms in B2B contracts) have not (yet) been tackled, leaving the Länder with relatively little creative leeway for the establishment of “true” ICLs which they have used in different and imaginative ways. The numerous (quasi identical) legislative projects to introduce (proper) “Chambers for International Commercial Matters”156 at the regional courts (sect. 93 (2) GVG-E) as well as at the higher regional courts (sect. 119b GVG-E) contain many important elements: the use of the English language throughout the proceedings (sect. 184 (2)-(4) GVG-E), the possibility of a binding choice of forum clause in favour of a Commercial Court (sect. 114b GVG-E, 96 (1) GVG; sect. 119b (2) GVG-E), the option for the parties to in effect waive the first instance by choosing a Commercial Court and therefore limit the dispute from the outset to a maximum of two instances, the option of a verbatim transcript of the hearings (sect. 184 (2) GVG-E, sect. 510 (4) ZPO-E), the possibility to keep some information confidential (sect. 510 (5), (6) ZPO-E) and the unlimited availability of appeal to the BGH (sect. 542 (2) ZPO-E) are certainly helpful steps towards an attractive forum. However, as has been tried to demonstrate in this analysis, they are only a small part of the solution to the problem of the lack of attractiveness of German state courts for international commercial disputes. Some of the other problems can be – and are in some instances – resolved by the judiciary of the Länder through the establishment of specialized Commercial Courts which are organized separately from general LGs with dedicated judges and buildings as well as sufficient technical equipment and auxiliary staff to enable them to treat complex disputes – raising the interesting question why sufficient and up-to-date technical and personnel equipment is not also provided for “normal” civil proceedings. Other essential problems however remain ignored, probably because they touch more fundamental principles of German law. This holds especially true for substantive contract law where the rigid approach to standard business terms constitutes a massive impediment to the choice of German law and subsequently of German state courts, especially in contracts involving parties from different jurisdictions.157 Even if this issue should be resolved one day, it will take a long time for German contract law to gain an international reputation as business friendly. The problem of accessibility of German law and jurisprudence to non-German speakers can only be solved by a continuous effort to provide translations regarding every legislative project, all essential case-law in the relevant areas, and the additional funding of translations of legal doctrine. With 156 

See footnotes 5–8 and 10, above. IV.4.b)bb), above.

157  See

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regard to procedural law, features like document production and pre-trial discovery are missed by lawyers from other jurisdictions, and the exclusion of foreign counsel from the formal aspects of the proceedings158 does not help, either. The most fundamental practical problem however seems to be the principle of federalism and the competence of the Länder for the organization of the judiciary which make it politically extremely difficult to create one central Commercial Court for Germany to allow for a significant number of cases which will in turn enable real professionalization and specialization within the court as well as the creation of a specialized bar. One last aspect which is even enshrined in the constitution is the principle of the legally competent judge – in its strict interpretation by the BVerfG – which also considerably weakens the state courts’ attractiveness to professional parties, compared to arbitration.159 Given the enormous efforts needed to establish a truly attractive forum for international disputes in Germany, one question imposes itself: “Why?” It still seems unclear why attracting international commercial disputes to German state courts is so important. It would need the fees of many thousands of high-volume disputes to recoup the investment in specialized Commercial Courts – the financial aspect160 clearly seems to not be the main objective of the initiatives.161 One argument often made is the intention to avoid the migration of disputes to arbitration in order to preserve published case-law and therefore legal certainty in some specific areas like post M&A disputes.162 While this intention seems clearly laudable, it has no specific nexus to the English language and the international nature of those disputes. It seems therefore more helpful to create specialized chambers centralized across several LGs for these subject matters and concentrate the disputes on them.163 The main objective seems to lie in a hoped-for economic impact for the private sector: the application of German contract law and the competence of German state courts might be advantageous for German exporting companies, especially SMEs who might face difficulties affording qualified legal counsel for international arbitrations. But even this hypothesis seems weak, since qualified (and potentially expensive) legal counsel is equally helpful for state court litigation.164 As long as international arbitration is considered an adequate method of 158 

See IV.3.h), above. See IV.2.d), above. 160  Raised, however, by Grohmann (fn.  3), 13; Stürner, JZ 2019 (fn.  3), 1122. 161  As here Hau (fn.  78), 59. 162 See Grohmann (fn.  3), 360–362 and III, above. 163 See, e.g., the recent establishment of a centralized specific chamber for post M&A disputes at the LG Düsseldorf, as part of the initiative “QualityLaw” of the Land North-RhineWestphalia, https://www.lto.de//recht/justiz/j/justiz-gerichte-quality-law-nrw-konzentra tion-zustaendigkeiten/. 164  As a 2020 survey by the Society of the Federal Republic of Germany for Foreign Trade and Location Marketing (GTAI) shows, over 80 % of those surveyed preferred an arbitration clause in international trade agreements, cf. Germany Trade & Invest, Kurzumfrage zur Ver159 

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resolving international commercial disputes – which it should be –, this should not be a problem. Given that arbitration, by the numbers of the proceedings, is anyways not a serious competition for German state courts, it is difficult to see why there is a need for specialized chambers for international commercial disputes and why German state courts should attempt to mimic its features. Perhaps in the end it boils down to wanting to show that Germany is part of the movement to set up International Commercial Courts and thus has its finger on the pulse of times. It might be, at least to some extent, a question of pride: German lawyers and government officials tend to think that German law and the German judiciary are among the best in the world and should therefore be recognized as such. Practice shows however, that this perception is not shared by many foreign commercial parties, and perhaps not even by domestic ones. If the main reason for the establishment of Commercial Courts therefore is to promote the quality of German law and the German judiciary, then this gives a whole new twist to the subject: why not invest in the substance of German law and the German judiciary to create a better product that can then be promoted on an international level? Tackle the long-standing issues of German contract law regarding B2B contracts, invest in a better equipped and better staffed judiciary and in the digital transformation of its workflows. This would be a much more convincing argument for the choice of German law and German state courts than the existence of specialized Commercial Courts which rather gives the impression of a vain attempt of fancy repackaging of an otherwise unattractive product.

wendung von Schiedsklauseln in internationalen Verträgen, 2020, https://www.gtai.de/re source/blob/261354/c1041149802613ef4e91f45cd83a917a/umfrage-schiedsklauseln-data.pdf, 3. According to a survey conducted by the Queen Mary University of London and White & Case LLP, even 92 % of in-house counsel prefer international arbitration for resolving cross-border disputes, cf. Queen Mary University of London/White & Case LLP, 2018 International Arbitration Survey: The Evolution of International Arbitration, 2018, https://arbitration.qmul.ac.uk/media/arbitration/docs/2018-International-Arbitration-Survey-TheEvolution-of-International-Arbitration-(2).PDF, 6. See in this regard also Loh, The Rise of International Commercial Courts – A Threat to Arbitration?, in: Gebauer/Klötzel/Schütze (ed.), Usus atque scientia. Festschrift für Roderich C. Thümmel zum 65. Geburtstag am 23. Oktober 2020, 2020, 502–504.

Smart Contracts Martin Fries

I. Introduction The idea of mapping contracts digitally and executing them automatically has recently attracted a great deal of attention under the label “smart contracts”. There is a consensus that a smart contract is not some sort of a contract in the legal sense which develops intelligence, but that the core issue of smart contracts is the attempt to noticeably facilitate the execution of contracts by means of digitization and automation. The key prerequisite for this is that the contract must be embedded as completely as possible in the Internet of Things. Thus, smart contracts can be used under three conditions: firstly, the structured recording of the contract data, secondly the establishment of oracles for establishing new facts relevant to the contract, and thirdly the connection of accounts, software or digitally controlled objects to the digital infrastructure of the contract in order to trigger the legal consequences agreed in the contract there. Unlike the actual meaning of the word, the term “smart contracts” therefore does not describe a specific type of contract, but actually the embedding of a contract in the Internet of Things. Meanwhile, the technology used for data storage is of no decisive importance; smart contracts can therefore be administered on a blockchain, but also outside of it. In German jurisprudence, smart contracts have been received with great interest for several years.1 The discussion on legal policy has occasionally brought to light ideas on how the possibilities of automatic contract execution could be consciously used to effectuate regulatory goals; however, these ideas have not yet matured into implementation. Against this background, this contribution addresses the questions prepared for the 2022 World Congress of the International Academy of Comparative Law, which cover the following five areas: How is blockchain technology commonly used for smart contracts regulated in Germany? What contract law issues are raised by smart contracts? How can smart contracts be reconciled with data protection law? What are the implica1  In

January 2022, the legal search engine Juris listed about 300 scientific articles for the search term “smart contracts”.

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tions for international civil law and civil procedure law? And to what extent are smart contracts suitable for simplifying dispute resolution?

II. Regulation of blockchain technology Blockchain technology as a storage format for decentrally administered contracts is not specifically regulated in Germany. However, one should not infer from this observation that the German legislator has no interest in blockchain technology. On the contrary: with its blockchain strategy adopted in the fall of 2019, the (then) German government set itself the goal of “using the opportunities in blockchain technology and of mobilising the areas of potential that it offers for the digital transformation”; Germany wants to become “an attractive base for development of blockchain applications and for investments in scaling them up”2 . Projects under discussion include ensuring transparency of supply and value chains in the clothing and food sectors, establishing a decentrally administered electronic vehicle file, and creating digitally verified certificates of competence and job references.3 While this innovation-friendly approach deserves applause, the thoroughly problematic ecological aspects of the hitherto extraordinarily energy-intensive storage technology deserve significantly increased attention by legal politics. One area of law has already deliberately opened up to blockchain transactions in mid-2021 following a speedy legislative process: With the new Electronic Securities Act (Gesetz zur Einführung von elektronischen Wertpapieren, eWpG), securities can be set up without a paper certificate for the first time. In this way, the law wants to remain compatible with the international securities law market and at the same time set certain minimum standards for market integration and investor protection. In doing so, the new law chooses a technology-agnostic approach, for example, by not specifically speaking of blockchains, but rather, according to Section 4 (11) eWpG, of a “system of record” (“Aufzeichnungssystem”) as a decentralized association in which the rights of control are distributed between the entities operating the respective system according to a predefined pattern. Such a system of record forms the basis for the crypto securities register pursuant to Section 16 eWpG, which in turn represents the alternative to the classic, centrally maintained securities register. It is noteworthy that the law does not fully trust the decentralized administration of securities administered in this way and defines a responsible entity in Section 16 (2) eWpG after all. Notwithstanding this attempt to centralize decentralized responsibil2  Bundesministerium für Wirtschaft und Energie und Bundesministerium der Finanzen, Blockchain Strategy of the Federal Government, 2019, 4. 3  Bundesministerium für Wirtschaft und Energie und Bundesministerium der Finanzen, Blockchain Strategy of the Federal Government, 2019, 10, 11, 18, 19.

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ity, it is now possible under German law to issue bonds and share certificates on a blockchain.4 Against the background of the only slowly developing legal framework for blockchain business models, it is not surprising that the blockchain case law of the German courts has so far been very scarce. The few decisions issued so far have concerned the prerequisites for prospectus liability in the case of an initial coin offering (ICO),5 the identification of the operator of a cryptocurrency, 6 the taxation of capital gains in cryptocurrencies,7 and the forfeiture of criminally obtained bitcoins based on criminal law. 8 If one tries to derive a line of jurisprudence from these few decisions, one can observe a certain trend of not attaching any importance to decentralized storage technology, i.e., of treating legal assets represented on a blockchain no differently than those that are embodied, securitized on paper, or stored in central registers. Supervision of the issuance and administration of blockchain currencies and other crypto tokens in Germany is in the hands of the Federal Financial Supervisory Authority (Bundesanstalt für Finanzdienstleistungsaufsicht, BaFin). The legal bases relevant for BaFin’s decisions can be found in the aforementioned eWpG, but also in the German Banking Act (Kreditwesengesetz, KWG), the German Investment Act (Vermögensanlagengesetz, VermAnlG), and the German Payment Services Supervision Act (Zahlungsdiensteaufsichtsgesetz, ZAG). In recent years, these legal foundations have been supplemented with rules for cryptocurrencies for the sake of clarification; however, this has not resulted in specific blockchain regulation.9

4  Further details provided by Ibrahim E. Sancak, Implications of Germany’s Electronic Securities Act for Supervisory Technology, Journal of International Banking Law and Regulation (JIBLR), forthcoming. 5 LG Berlin, judgment dated May, 27, 2020, ECLI:DE:LGBE:2020:0527.2O322.18.00, https://openjur.de/u/2331892.html. 6 VG Frankfurt, judgment dated November 4, 2021, ECLI:DE:VGFFM:2021:1104. 7K1262.20.F.00, https://openjur.de/u/2382779.html. 7  FG Berlin-Brandenburg, judgment dated June 20, 2019, ECLI:DE:FGBEBB:2019:0620. 13V13100.19.00, https://openjur.de/u/2257934.html; FG Baden-Württemberg, judgment dated June 11, 2021, ECLI:DE:FGBW:2021:0611.5K1996.19.00, https://openjur.de/u/2380126. html. 8  BGH, judgment dated July 27, 2017, ECLI:DE:BGH:2017:270717B1STR412.16.0, https:// openjur.de/u/2110723.html. 9  Detailed description in German language but well worth reading by Oliver Fußwinkel and Christoph Kreiterling, Blockchain-Technologie – Gedanken zur Regulierung, 2018, https://www.bafin.de/SharedDocs/Veroeffentlichungen/DE/BaFinPerspektiven/2018/ bp_18-1_Beitrag_Fusswinkel.html.

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III. Contract law of smart contracts As in many other countries, smart contracts have not been specifically regulated in Germany to date; instead, they are subordinate to general civil law. However, a number of special legal issues arise, in particular concerning the definition, the effectiveness, the content, the interpretation and the handling of breaches of contract. 1. Definition and taxonomy of smart contracts There is no definition of the term smart contract in German law. An important characteristic of smart contracts is described in Section 4 (11) eWpG, which refers to the programming of a decentralized storage system as a “predefined pattern”. A more precise even though more simple definition would describe a smart contract as a contract execution software.10 From this term, it is clear that there must be an algorithmic image of the contract that is supplied with performance data and can initiate transactions in view of this data. In other words: Not every computable contract is a smart contract, but only computable contracts can be smart contracts. If a contract is only partially computable, it can at best be partially executed automatically. This automatic contract execution is particularly attractive not only with regard to the fulfillment of primary contractual obligations, but also with regard to the frequently conflicting fulfillment of secondary contractual obligations. If, for example, a contractually owed service is delayed or does not materialize at all, a contract execution software can bring about the consequences owed under the contract or under statutory law and stored in the algorithm, such as blocking an item or debiting a lump sum for damages. In view of the fact that, contrary to the meaning of the word, a smart contract is not a contract in the legal sense, a literal translation of the term into German as well as the alternative term “smart legal contract” do not appear to make much sense. The English term has been useful for a while as a key word in the jurisprudential debate, but in the medium term more appropriate German equivalents are likely to prevail. 2. Legal validity As far as the legal validity of smart contracts is concerned, it should first be pointed out that the execution software commonly referred to by the term “smart contract” cannot be effective because no legal relationship can be derived 10  Similar definitions are referred to by Savelyev, Contract law 2.0, 20 Inf. & Comm. Technol. L. 2017, 116, 120 et seqq.; Werbach and Cornell, Contracts ex machina, 67 Duke L. Rev. 2017, 313, 330 et seqq.; Raskin, The Law and Legality of Smart Contracts, 1 Geo. L. Tech. Rev. 2017, 305, 306, 309.

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from the mere existence of data or digital content. Therefore, the question should rather be under what conditions the contract depicted in a smart contract acquires legal effect. a) Conclusion of the contract With regard to the conclusion of the contract, there are no differences to the classic contract which does not correspond to an execution software: A contract is concluded by two concurring declarations of intent called offer and acceptance. Usually, no special form is required for these declarations of intent. A contract can therefore be concluded not only orally or in writing, but also electronically. The parties are not restricted to a specific language, they can also conclude the contract in a programming language, as long as the statements by the parties show which rights and obligations (essentialia negotii) the contract shall comprise. The identity of the contracting parties does not necessarily need to be disclosed, as long as it is at least possible to determine from a bird’s eye view who has concluded the contract. In this respect, there are no differences to the conclusion of a contract at a classic vending machine. German law does not provide for autonomous conclusion of a contract by software; instead, the law identifies in each case a natural or legal person who is responsible for the use of the software and to whom the transaction can therefore be attributed. Under German law, the place where the agreement is concluded is of no significance for the effectiveness of the agreement;11 only for supervisory measures12 and for questions of jurisdiction and the applicable substantive law13 is there a state interest in putting a location tag at the conclusion of the agreement. Thus, it is not a particular challenge for German contract law to let the parties first conclude a classical contract and then translate it into an enforcement code. It goes without saying that frictions between the classic contract and the code must be resolved in favor of the contract in these cases, i.e., transactions initiated by the software but not justified by the contract may have to be reversed under the law of enrichment, Section 812 (1) BGB. However, the increased standardization of code components through smart contracts libraries will ensure better expectation management for the parties and make such frictions much less frequent. A different, and slightly more complicated case is the situation where the execution software is already written before the parties conclude the contract. Anyway, in this case the validity of the contract can be established as well, be11  The place where the agreement is concluded is only important for the posting of general terms and conditions according to Section 305 (2) No.  1 BGB. 12  See Section 16 (2) eWpG. 13  See below sub 4.

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cause the parties are free to agree to subject their legal relations to the rules of a particular software. This applies even if they do not know or do not understand the details of this software. According to Sections 133, 157 of the German Civil Code (Bürgerliches Gesetzbuch, BGB), the objective content of the declaration and not the subjective understanding of the parties is decisive for the content of offer and acceptance14 – like it is also possible to sign a paper contract with legal effect without having read it. b) Special Case: Contracts Requiring a Certain Form In individual, more specific cases, statutory form requirements pose an additional barrier to the validity of a contract. For example, consumer loan agreements must be in paper form under Section 492 (1) BGB, and real estate transactions have to be notarized under Section 311b (1) sentence 1 BGB. According to Section 126a BGB, the paper-based written form can be replaced by electronic form; however, a digital text document or a file with computer code is not sufficient for electronic form. Instead, a qualified electronic signature is necessary in accordance with the requirements of the European eIDAS Regulation,15 and the access requirements regulated therein are so high that the electronic signature does not play any role in practice. For smart contracts, this means that they can primarily be used where there are no statutory formal requirements. c) Challenge of Contract Once a contract has been concluded in accordance with the principles described above, the contracting parties will only be able to dissolve it in exceptional cases. In German law, there are no special grounds for contesting automatically executed contracts. Rather, the general rules of Sections 119 et seqq. BGB apply. According to these, a contestation can only be considered if a contracting party did not know what it was declaring or what its declaration meant, or if it made the declaration on the basis of deception or threat.16 In this respect, a challenge of contract could be considered, for example, if one party has foisted the consent to the use of the execution software on the other party, but not if one party blindly hoped that it would later be satisfied with the transactions carried out by the software.

14 See Wais, in: Dannemann/Schulze (eds.), German Civil Code, 2021, §  133 para.  3 et seqq. 15 See

Wais, in: Dannemann/Schulze (eds.), German Civil Code, 2021, §  126a para.  4. Details are provided by Wais, in: Dannemann/Schulze (eds.), German Civil Code, 2021, §  119 para.  2 et seqq., §  123 para.  4 et seqq. 16 

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3. Content of smart contracts A look at the contractual practice of innovative market participants shows in which areas the use of smart contracts can be expected in the foreseeable future. In general, these are highly standardized agreements in mass commerce with links to accounts of the contracting parties and/or to the Internet of Things. The use of contract execution software can be expected both for consumer contracts and in the B2B area. a) B2C Contracts In the consumer sector, there are already considerations to provide passenger transportation contracts with enforcement software or even to force carriers by law to make use of enforcement software and to automatically pay out owed delay charges in accordance with the European passenger rights Regulations No.  261/2004 and 1371/2007.17 Similarly, the legislator could also oblige landlords to execute residential leases partially automatically, e.g. to refund rent if the data-transmitting heating system reports a failure, or to refund the deposit automatically after the lease has been concluded. In addition to these areas of consumer protection, which can only be expected after a legislative obligation, companies can of course also use smart contracts on their own initiative to protect their rights. For example, they could debit contractual penalties to a vehicle hirer if she drives abroad in violation of the contract, systematically exceeds the speed limit, or gets behind the wheel under the influence of alcohol.18 Legally, things get a little trickier when the enforcement software blocks an object that is in the possession of a customer; here there are quite some voices in jurisprudence19 and case law20 that see this as a forbidden act of self-involvement in the sense of Section 858 BGB, which can result in a liability for damages on the part of the software operator in accordance with Section 823 (2) BGB.21 The automation of contract execution is to be expected comparatively early in all areas in which central instances such as trading platforms or comparison platforms can take over contract management and thus also orchestrate contract 17  Fries, Smart consumer contracts: The end of civil procedure?, in: Aggarwal et al. (eds.), Autonomous Systems and the Law, 2019, 13 et seqq. 18  EU Regulation 2019/2144 determines that from July 6, 2022, type-approvals in the European Union will only be granted for vehicles with an interface for connecting with alcohol interlock devices. 19  Riehm, Smart Contracts und verbotene Eigenmacht, in: Fries/Paal (eds.), Smart Contracts, 2019, 85, 90 et seqq.; with a slightly different view Kuschel, AcP 220, 98, 125 et seqq. 20 OLG Düsseldorf, judgment dated October 7, 2021, ECLI:DE:OLGD:2021:1007.20U 116.20.00, https://openjur.de/u/2382975.html, currently pending before the supreme court (BGH) under file no. XII ZR 89/21. 21  Magnus, in: Dannemann/Schulze (eds.), German Civil Code, 2021, §   823 para.  48 et seqq.

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content and execution mechanisms. This is because platform service providers have a vested interest in functioning markets and, through their monopoly position, can often roll out law-enforcement mechanisms at a speed that the ponderous grind of state law enforcement can hardly match. Platform-administered smart contracts will generally not run on a blockchain, but it is conceivable that some platforms will be replaced by decentralized storage mechanisms in the future, and the use of smart contracts would then be almost inevitable. b) B2B Contracts In addition to the use of smart contracts in the area of consumer contracts, there are already many efforts to make them usable for contracts between companies. These include, for example, the automatic triggering of contractually agreed consequences of delayed goods shipments or disruptions in cold chains, as well as price adjustments in the area of commercially used licenses. With regard to the currently growing regulation of supply chains, smart contracts can also sanction transparency deficits or insufficient certification proofs. The software can also be used in power-asymmetric contractual relationships, e.g., between a monopolistic platform and a trader dependent on it. 4. Interpretation of smart contracts The interpretation of smart contracts under German law generally holds no surprises, because it is not (solely) the rules underlying the software that matter, but what the contracting parties have agreed upon. The interpretation of the declarations of intent and thus of the contract takes into account the wording of the agreement, the intent of the parties, but above all the objective recipient horizon of the respective contracting party.22 With regard to smart contracts, the particular challenge is to determine the extent to which the parties referred to the software code in their declarations, what ideas they had about the algorithms, and to what extent they may have relied, in part blindly, on the fact that the software would not make any surprising dispositions. Also of great importance is the question of the authority of the data sources tapped by the enforcement software: If the contracting parties have agreed on a specific data source or an oracle, they are bound to this determination in case of doubt; if, on the other hand, the question of the data feed has remained open, the data fed in can be checked for correctness without restriction. Insofar as the contract or the enforcement code contains open factual features that require an evaluation in the individual case (e.g., an “appropriate” compensation” as a legal consequence of a certain breach of duty), the use of an enforcement software that is overburdened with this evaluation does not change the 22 

See above fn.  14.

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fact that this individual case evaluation must be carried out in accordance with the contractual provisions. If this human evaluation then leads to a deviation from the dispositions of the code, the former naturally takes precedence, i.e. a transaction carried out unlawfully by the execution software must be reversed under the law of enrichment and a transaction omitted by the software in breach of contract can still be carried out manually. Where the contracting parties have seen an already existing execution code, but have overlooked certain details in it, there is the possibility of a supplementary interpretation of the contract in order to close the gaps in the agreement.23 Where the general conditions of the execution of the contract fundamentally change after the conclusion of the contract, an amendment or termination of the contract may be considered pursuant to Section 313 BGB.24 5. Breach of smart contract The handling of breaches of contract is first of all significantly simplified by smart contracts. This is because the enforcement software knows the legal consequences associated with the most common breaches of contract and can trigger them automatically. Difficulties primarily arise when the software incorrectly assumes a breach of contract or when it erroneously sees no breach of contract or cannot trigger a consequence for a certain breach of contract. Dealing with these difficulties is in principle easy for German law, because it clearly distinguishes between contract and algorithm. In the end, only the contract is legally relevant. Wherever the dispositions of the software deviate from the contract, they can be supplemented or reversed under the law of enrichment. In one point, however, Lawrence Lessig’s factual “code is law”25 applies: With regard to the burden of claim and the burden of proof, it makes a difference whether someone defends herself against an unjustified claim for damages or has to recover unjustifiably collected money, because the burden of claims and the burden of proof lie with the claimant in each case.26 In addition, there are the generally known obstacles to legal enforcement in the administration of justice, such as ignorance of the law, legal costs, litigation risks, and conflict aversion. This makes it all the more important to take the greatest possible care in the design of the contract enforcement software and in the selection of data sources. Because supplied data is a representation of legal facts, German law can handle interfaces to hardware, to software and to human input equally well. Legal research on responsibilities for data quality is still in its infancy. 23 

Wais, in: Dannemann/Schulze (eds.), German Civil Code, 2021, §  157 para.  4 et seqq. The idea of Section 313 BGB is similar to the concept of frustration of contract in common law jurisdictions, see Oehm, in: Dannemann/Schulze (eds.), German Civil Code, 2021, §  313 para.  1 et seqq. 25  Lessig, Code and other Laws of Cyberspace, 1999, Chapter 1. 26  Madir, Smart Contracts, in: Madir (ed.), FinTech: Law and Regulation, 2021, 175 et seqq. 24 

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6. Special requirements of consumer protection Smart contracts deserve special attention in the consumer area. This is because standard contracts that are simply structured and therefore easy to code are by far the most common in this area. The rapid growth of e-commerce via trading platforms has given uniform mass contracts another significant boost in recent years. At the same time, the European Union has considerably strengthened and standardized the consumer contract law of its member states since the end of the 20th century. The standardization and coding of consumer contracts is initially attractive to entrepreneurs, who can significantly reduce the costs associated with contract management in this way. At the same time, they know that consumers shy away from any effort associated with enforcing the law and therefore regularly leave it at the de facto allocation of goods carried out by software. Companies often obtain consumers’ consent to the use of software through general terms and conditions. In this respect, the question of the permissibility of the use of smart contracts in this area depends to a considerable extent on the law governing general terms and conditions. The European Union standardized this area of law almost 30 years ago with the Unfair Terms in Consumer Contracts Directive 93/13/EEC. In Germany, the inclusion and effectiveness of general terms and conditions is governed by Sections 305 et seqq. BGB. For general terms and conditions that justify the use of smart consumer contracts, the prohibition of surprising clauses under Section 305c (1) BGB in particular can be a serious challenge.27 However, the ease with which consumer contracts can be codified not only benefits consumers, but can also be an opportunity to make consumer contract law much more effective. The law can force companies to refrain from automatic disconnections in certain cases or force them to make automatic payments to consumers. For example, consumer law might oblige mobility service providers to automatically order compensation payments or require network providers to refund partial amounts of payments made for network downtimes. It is also possible to map cancellation rights in smart contracts; this even applies to contracts managed by use of distributed ledger technology, because the unwinding of contracts under the provisions of EU private law or in Germany under Sections 357 et seqq. BGB only requires a reversal of the goods transactions, but not an elimination of already existing transaction data. It goes without saying that the mapping of contractual and contract law provisions facilitates the administration of justice only to the extent that the original and the mapping match to some extent. If smart contracts pay out compensation too early, the companies concerned may have to make claims for recov27 See Fries, in: Dannemann/Schulze (eds.), German Civil Code, 2021, §   305c para.  2 et seqq.

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ery. If companies block rented items prematurely, they risk lawsuits by consumer associations, which are already occurring in isolated cases28 and will increase significantly in view of the upcoming implementation of the European Directive 2020/1828 on collective actions.29 This ex-post clarification of the legal compliance of smart contracts is admittedly suboptimal from a systemic perspective. It would seem preferable to develop legally compliant standards that can be used by smart contracts libraries on a modular basis. It would also be conceivable to set up an authority to check the algorithm quality of smart contracts, but there are currently no concrete plans to create such a body in Germany.

IV. Data protection Data protection law in Germany is governed not exclusively, but primarily, by the European General Data Protection Regulation (GDPR). According to this regulation, the processing of personal data is only possible under strict conditions. The point in time at which data enables the identification of a person within the meaning of Art.  4 No.  1 GDPR is disputed in detail. In any case, if a natural person is a contractual partner, a reference to a person is obvious. The use of smart contracts then constitutes data processing within the meaning of Art.  4 No.  2 GDPR,30 and this leads to the fact that the conditions and limits of the GDPR for the lawfulness of the data processing must be complied with. In principle, the operator of the software will usually be able to invoke Art.  6 (1) p.  1 lit.  a) and b) GDPR. Here, the lawfulness of the data processing follows de facto the contract law, because an effective consent of the contractual partner to the use of the enforcement software will also be interpreted as consent to the data processing required for this purpose. By contrast, data processing is difficult if the smart contract runs on a distributed ledger, because in this case the right to be forgotten from Art.  17 GDPR can hardly be technically implemented. Similar requirements as for data processing as such must be met under Art.  22 GDPR if smart contracts make an automated decision in an individual case.31 Here, too, necessity for the performance of the contract and the consent of the data subject have a legitimizing effect under Art.  22(2)(a) and (c) GDPR. What is necessary, however, is the interface to a human decision provided for in Article 28 

See above fn.  20. It is particularly noteworthy that the Directive provides that consumers should be able to directly enforce a judgment obtained by a consumer association; see Inchausti, GPR 2021, 61, 73. 30  Pesch, Blockchain, Smart Contracts und Datenschutz, in: Fries/Paal (eds.), Smart Contracts, 2019, 13, 18 et seqq. 31  See below sub 5. 29 

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22 (3) of the GDPR. The person to whom the personal data processed relates must therefore have the possibility to interrupt the automated process of the enforcement software and to be heard by a human case handler.32

V. International jurisdiction and applicable law The clear separation between contract and enforcement software means that smart contracts hardly raise any new legal problems with regard to international jurisdiction. International jurisdiction follows Art.  4 et seqq. of the European Brussels Ia Regulation. According to this, the courts in the state of the defendant have jurisdiction over contractual disputes. An important addition is found in Art.  18 (1) Brussels Ia Regulation, according to which consumers can also bring suit in their country of residence. Prorogation is possible in principle under Art.  25 Brussels Ia Regulation, but for consumers only under the strict conditions of Art.  19 Brussels Ia Regulation. An encoded forum selection clause is possible, but it is only effective if it has become part of the contract according to the general rules33. Similar considerations apply to the handling of smart contracts in conflict of laws. Here, too, only the classical contract executed by software is relevant, and there are no differences to the non-automatically executed contract. According to Art.  4 of the Rome I Regulation, contracts are generally governed by the law of the country in which the party performing the typical contract is located. A choice of law is possible according to Art.  3 of the Rome I Regulation; if it is made by means of an encoded choice of law clause, this must also have become part of the contract according to the general rules34. For consumer contracts, Art.  6 of the Rome I Regulation ensures that the consumer is afforded at least the level of protection of the state in which he has his habitual residence. The determination of international jurisdiction as well as the determination of the applicable law is particularly difficult where the necessary connection to a certain location fails due to a lack of legal facts, for example because the registered office of a company administered via a blockchain and thus organized in a decentralized manner within the meaning of Art.  63 (1) a) Brussels Ia Regulation cannot be determined. German and European legal scholars are currently still discussing how international civil procedure law should deal with these novel legal facts.35 32  In more detail Finck, Smart Contracts as Automated Decision-Making under Article 22 GDPR, international Data Privacy Law, 9/2019, 1–17. 33  See above sub III.2.a). 34  See above sub III.2.a). 35 See, e.g., Simmchen, MMR 2017, 162, 164 et seqq.; Möslein, Blockchain Applications and Company Law, 2020, https://www.ssrn.com/id=3720222; Schwemmer, AcP 221, 555 et seqq.

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VI. Smart dispute resolution A good smart contract can anticipate many conceivable performance disputes and provide for an automatic solution. At the same time, it is obvious that there will never exist a complete contingent smart contract in the economic sense,36 because atypical disputes can always occur, and their occurrence cannot be predicted so that no solution can be discussed in advance. In this case, many smart contracts have interfaces for integrating human decisions into the coded contract execution. It is conceivable, for example, that conflicts could be assigned to digital committees which, with knowledge of the contract but without reference to statutory law, determine an equitable solution by majority vote.37 In German law, the legally effective involvement of such conflict resolution bodies is subject to high preconditions. This applies in particular where consumers are involved in the contract. According to Section 309 No.  14 BGB, consumers cannot even be temporarily forced to participate in such proceedings by means of general terms and conditions. If the decision in dispute is to be binding as an arbitration award, the agreement to use this procedure must be recorded in a document signed by the parties themselves or comply with the electronic form of Section 126a BGB in accordance with Section 1031 (5) sentence 1 and 2 of the German Code of Civil Procedure (Zivilprozessordnung, ZPO). Even if these prerequisites are high, the practice of the arbitration mechanisms now common at many payment service providers shows that many people voluntarily engage in such conflict resolution offers as long as the respective conciliation mechanism has been proven to be speedy and easy to use. Instead of integrating out-of-court dispute resolution mechanisms, a smart contract could of course also open the door to the state courts via a judicial interface. In Germany, however, the judiciary is still busy introducing the pdf format in 2022; an interface to coded contracts therefore seems a long way off. A faster reform tempo can at best be expected in cases where the judiciary itself is burdened with a greatly increased number of cases, as is the case, for example, with the courts in the vicinity of large airports as a result of the recent sharp increase in air passenger rights lawsuits. Here, it would be conceivable in the medium term for the law not only to oblige airlines to pay out compensation automatically, but also to open a digital door for this kind of disputes, through which the contracting parties can start legal action at the push of a button and provide the court with all the data relevant to the dispute.

36  The idea of complete contingent contracts was coined by Shavell, Damage measures for breach of contract, 10 Bell J. Econ. 1980, 466. 37  Details provided by Kaulartz, in: Fries/Paal (eds.), Smart Contracts, 2019, 73 et seqq.

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VII. Conclusion A look at the legal framework for the use of smart contracts in Germany does not reveal any serious gaps, but rather considerable new ideas for innovative legal policy. Particularly with regard to enforcement in consumer law, smart contracts are certainly more of an opportunity than a threat. The most pressing civil law issue concerns the blocking of objects, which can hardly be prevented by the prohibition of self-determination under civil law. As some voices fear vigilante justice here, a legal policy debate in this area seems desirable.

The Law and Bioethics of End-of-Life Decisions Bettina Weisser

I. Introduction The following considerations on end-of-life decisions are written from the perspective of a criminal law scholar and accordingly focus on this field of the law. The legitimacy, validity and repercussions of end-of-life decisions and their execution are nevertheless touched upon by provisions in various fields of the law: Private law regulates to what extent the patient’s explicit wishes or an advanced directive are binding for medical personnel when deciding about the patient’s treatment.1 In this field of the law, rapid development took place since the year 2009, when provisions on the prerequisites and legal effects of living wills were introduced in the Civil Code.2 The new provisions triggered a breakthrough in criminal jurisprudence on withdrawal of treatment in line with the patient’s will at the end of life.3 Administrative law contains provisions on physicians’ professional ethics4 and also on the general requirements for the dissemination of drugs that can be used to end one’s life prematurely.5 Private and administrative law are complemented by criminal law provisions as a last resort only. The state is constitutionally required to protect the citizen’s right to life and to bodily integrity6 and thus criminalizes infringements of these rights in sec. 222 et seqq., 211 et seq. of the Penal Code (hereinafter: “PC”). Yet at the same time, the state must ensure that the dignity of the individual is respected until the very end of her life. Part of human dignity is the individual’s right to self-determination which in turn entails the right to autonomously decide about the end of one’s life. Therefore, 1 

Esp. sec. 630a-630h of the Civil Code on contracts on medical treatment. Section 1901a et seqq. of the Civil Code, see in detail Schneider, in: Münchener Kommentar-StGB, 4. ed. 2021 (hereinafter: “MK-StGB”), Vor §  211, mn. 138 et seqq. 3  BGHSt 55, 191; Hilgendorf, JZ 2014, 545, 545. 4 (Muster-)Berufsordnung für die in Deutschland tätigen Ärztinnen und Ärzte vom 5.5.2021; Grundsätze der Bundesärztekammer zur ärztlichen Sterbebegleitung, Deutsches Ärzteblatt, Jg. 108, Heft 7, 18.2.2011 (both available at: https://www.bundesaerztekammer.de, accessed 22 February 2022). 5  See for an overview of the most important aspects: Eser/Sternberg-Lieben, in: Schönke/ Schröder, StGB, 30. ed. 2019 (hereinafter: “Schönke/Schröder”), Vor §  211, mn. 35b. 6  Article 2 of the German Constitution, see in detail fn.  11. 2 

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the state must respect a mentally sane adult’s decision to take her own life or to renounce life-saving medical treatment. It is at the crossroads of these state obligations to protect human life on the one hand and to protect the autonomy of the individual on the other hand, that in a recent landmark decision,7 the Constitutional Court made it very clear: The state cannot prevent the citizen from carrying out her wish to die by creating a legal framework that precludes her from receiving professional help in doing so. In other words: The state’s obligation to protect life is reigned in by the autonomous decision of the individual about her life. Such a decision is to be respected even if it puts life at risk or ends life prematurely. Unfortunately, the more recent debate on criminal law at the end of life revolved almost exclusively around the question whether and to what extent it should be a criminal offence to assist another person in taking her own life. One of the effects of this debate is that large parts of the whole range of problems concerning end-of-life decisions (including the termination of life-prolonging treatment or active euthanasia) remained in the dark while instead a very small number of questions were given far too much attention. Since the legislator is preparing to (re-)introduce a law on suicide assistance, the one-sidedness of this debate is very likely to continue. In contrast to this, the following outline will first pinpoint the basic principles overarching the protection of human life through criminal law (II.). Then, the legal framework for the most common situation of end-of-life decisions is dealt with: Very often, a choice between undergoing medical treatment with a view to prolonging the remaining lifetime and limiting medical treatment to mere palliative support without prolonging human life presents itself. This constellation is often described as a decision about the termination or withdrawal of treatment (III.), although this description is not entirely correct because in most cases, (palliative) medical care will still be provided even if the treatment does no longer aim at prolonging the patient’s life. In some cases, palliative care (esp. strong pain medication) has life-shortening side-effects (“indirect euthanasia”, IV.). In such case, a line must be drawn between legitimate palliative care and illegitimate active euthanasia (V.). Another field of problematic end-of-life decisions (and their implementation) concerns the distinction between prohibited and legitimate assistance in suicide (VI.), including the medical support for patients who deliberately end their lives by stopping to eat and drink (VII.) and the scope of obligations to save an unconscious person after a suicide attempt (VIII.). Finally, complementing laws on drugs are addressed (IX.). End-of-life situations bring about numerous open questions, and the criminal law needs to be amended to answer them adequately (X.).

7 

BVerfGE 153, 182 (judgement of 26 February 2020).

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II. Basic tenets of Germany’s legal framework on end-of-life decisions: fundamental and human rights Like every criminal law regulation, the criminal law on end-of-life situations has to be in line with the general standard set by the constitution (“Grundge­ setz”, hereinafter “GG”) and the European Convention on Human Rights (hereinafter: “ECHR”). 8 The ECHR is part of the national legal framework, and the GG as well as the criminal law need to be interpreted with reference to the ECHR and to the European Court of Human Rights’ (hereinafter: “ECtHR”) jurisprudence.9 Article 2 (2) GG10 as well as Art.  2 ECHR11 entail the right to life, meaning that the state must not intentionally interfere with the citizens’ lives. At the same time, Art.  2 GG and Art.  2 ECHR constitute an obligation for the state to actively protect the life of its citizens.12 The constitutional right to life however does not comprise a negative component, hence there is no right to die neither under German constitutional law nor under the ECHR.13 Although there is no duty for the citizen to live against her own will, the state is not constitutionally required to provide help for a citizen in carrying out her wish to die.14 But the individual’s right to life includes the right to autonomously end her life if she so wishes. This decision about why, when, and how she wants her life to end is of a most personal, individual and intimate nature – and it is for this reason, that the ECtHR held that the autonomous decision about the end of one’s life is also protected by Art.  8 ECHR15 , the right to privacy.

8  For a discussion of constitutional law limits of criminal law legislation see: SternbergLieben, in: FS für Rudolf Rengier, 2018, 341. 9  Article 59 GG; Jarass/Pieroth, GG, 16. ed. 2020, Art.  1 mn. 29. 10  Article 2 GG: Personal freedoms (1) […] (2) Every person shall have the right to life and physical integrity. Freedom of the person shall be inviolable. These rights may be interfered with only pursuant to a law. 11  Article 2 ECHR: Right to life 1. Everyone’s right to life shall be protected by law. No one shall be deprived of his life intentionally save in the execution of a sentence of a court following his conviction of a crime for which this penalty is provided by law. (According to Protocol 6 to the Convention, the death penalty is abolished in the Member States of the Convention.) 12  ECtHR, Pretty v. The United Kingdom, 29 April 2002, 2346/02, mn. 37 et seq.; ECtHR, Lambert v. France, 5 June 2015, 46043/14, mn. 140. 13  Weigend, in: FS für Urs Kindhäuser, 2019, 841, 846; Weisser, ZStW 2016, 106, 107 et seq. 14  ECtHR, Pretty v. The United Kingdom, 29 April 2002, 2346/02, mn. 39 et seqq. 15  Article 8 ECHR: Right to respect for private and family life 1. Everyone has the right to respect for his private and family life, his home and his correspondence. 2. T here shall be no interference by a public authority with the exercise of this right except such as is in accordance with the law and is necessary in a democratic society in the interests of national security, public safety or the economic well-being of the country, for the

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This notion of self-determination is the overarching principle to be respected by legal interventions in the context of end-of-life situations.16 Likewise, the German law on end-of-life situations is governed by the unconditional respect for a person’s autonomous decisions,17 including the right to a self-determined death that forms part of the right to personality in Art.  2 (1) GG.18 End-of-life decisions reflect how the individual defines “the quality of life and a meaningful existence”19 and they embody very personal inner convictions, experiences and beliefs. For this reason, end-of-life decisions – in the words of the Constitutional Court – “elude any evaluation on the basis of general values, religious dogmas, societal norms for dealing with life and death, or considerations of objective rationality. It is thus not incumbent upon the individual to further explain or justify their decision; rather, their decision must, in principle, be respected by state and society as an act of autonomous self-determination.”20 But since there is no right to die, it is not for the state to ensure that the individual is granted help in carrying out her wish to die. In other words: The citizen can expect the state to actively protect her life and to “passively” tolerate her suicide out of an autonomous wish to die. But the citizen cannot expect the state to provide the legal framework for any structured offer of suicide assisting services.21 On the contrary, the ECtHR holds that under its obligation to protect the citizens’ lives, the state can protect vulnerable persons from hastened endof-life decisions, even if it entails a criminalization of suicide assistance.22 The German criminal law (esp. sec. 216 PC, see infra, III.) reflects the same approach to protect individuals against rash decisions concerning the end of their life. However, in a recent judgement, the Constitutional Court has also defined constitutional limits to an appropriate criminalization of suicide assistance (see infra, VI.). In the end, a free, liberal society is characterized by the respect for autonomous decisions of mentally sane, adult persons23 about the end of their lives – no prevention of disorder or crime, for the protection of health or morals, or for the protection of the rights and freedoms of others. 16  ECtHR, Pretty v. The United Kingdom, 29 April 2002, 2346/02, mn. 61; ECtHR, Haas v. Switzerland, 20 January 2011, 31322/07, mn. 51; ECtHR, Koch v. Germany, 19 July 2012, 497/09, mn. 51. 17  BVerfGE 153, 182, mn. 209. 18  Article 2 GG: Personal freedoms (1) Every person shall have the right to free development of his personality insofar as he does not violate the rights of others or offend against the constitutional order or the moral law. 19 BVerfG, Press Release 12/2020 of 26 February 2020 (available at: https://www.bundesverfassungsgericht.de, accessed 22 February 2022). 20 Ibid. 21  Hilgendorf, JZ 2014, 545, 550; Weisser, ZStW 2016, 106, 108. 22  ECtHR, Pretty v. The United Kingdom, 29 April 2002, 2346/02, mn. 74. 23  ECtHR, Haas v. Switzerland, 20 January 2011, 31322/07, mn. 58.

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matter whether such decision relates to a termination of treatment, to a request for lethal drugs or to assistance in suicide. A shortcoming of the current legal situation however lies in the problem of defining the requirements for a truly autonomous decision. Courts as well as the prevailing view in literature24 hold that any error or coercive factor influencing an end-of-life decision eliminates the decision maker’s autonomy.25 Then, the state’s duty to protect life calls for a criminalization of any conduct executing or failing to hinder the execution of such bad decisions. The following survey will demonstrate how these general guidelines play out in various end-of-life situations.

III. Withdrawal/termination of treatment The Constitutional Court has made it very clear that the decision on how long and in what condition a person wants to live on or prematurely end her life cannot be challenged by any “objective or common-sense” standard.26 The respect for the (mentally sane) individual’s decision, no matter how reasonable or unreasonable it may be, is rooted in the concept of human dignity, Art.  1 GG,27 and the right to personality, Art.  2 (1) GG. They guarantee the individual’s personal autonomy and entail the right to self-determination. This is reflected in the fact that medical treatment is only legal if it is performed with the patient’s consent.28 The same is true for Art.  2 ECHR that also requires the patient’s consent for any legal medical treatment and calls for procedures to interpret the implicit wishes of patients who are no longer able to actively communicate their consent.29 The fully informed patient’s veto to medical treatment must be respected by medical personnel, treatment against the individual’s will is unlawful and amounts to a bodily assault – no matter whether the treatment in fact improved the patient’s physical condition. It would amount to a severe infringe24  BGH NStZ 2012, 319 et seq.; Eser/Sternberg-Lieben, in: Schönke/Schröder, Vor §§  211 et seqq. mn. 36; Hillenkamp, in: FS für Reinhard Merkel, 2020, 1091, 1095, 1098 et seq.; Neu­ mann, in: Nomos Kommentar StGB (hereinafter: „NK-StGB“), 5. ed. 2017, Vor §  211 Rn.  6 4 et seq. 25  Others say that decisions are autonomous as long as the deciding person would be criminally responsible if she violated the rights of others instead of taking a decision about her own life, see Roxin, GA 2013, 313, 319 et seq. Since criminal liability is not in every case hindered by an error or coercive factors, this view leaves more room for autonomous end-of-life decisions. 26  BVerfGE 153, 182, mn. 210. 27  Article 1 (1) GG: Human dignity shall be inviolable. To respect and protect it shall be the duty of all state authority. 28  RGSt 1894, 375, 377 et seq.; BGHSt 11, 111, mn. 9; Engländer, JZ 2011, 513, 514; Hillen­ kamp, in: Anderheiden/Eckart (eds.), Handbuch Sterben und Menschenwürde (1), 2012, 349, 367. 29  ECtHR, Lambert v. France, v. 5 June 2015, 46043/14, mn. 181.

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ment of the individual’s bodily integrity and even human dignity to force medical treatment on her. Human dignity is violated if a human being is treated as if she were a mere object of state interventions.30 This would be the case if a person were subjected to medical treatment against her will. Thus, as a rule, a renunciation of medical treatment by the patient cannot lead to criminal liability for medical personnel respecting the patient’s decision – no matter if this happens for an already death-bound patient or for a patient who could live on for an undefined period of time if life-sustaining treatment were carried on (as for example for a patient in a coma). But the difficult question is how such mere termination of life support can be distinguished from acts of killing. Formerly, German doctrine differentiated rather strictly between actively terminating a person’s treatment, for example by flipping the switch of a respirator, and omitting further treatment of the patient. While the latter was considered as letting nature take its course towards the death of the patient (or: “passive euthanasia”), the former was deemed a criminal offence of active euthanasia. Active euthanasia is criminalized – in sec. 216 PC (killing upon request) if it is performed on the patient’s demand, – in sec. 212 PC (homicide) if it is performed without the patient’s consent, – or even under sec. 211 PC (murder) if it is performed without the patient’s consent and motivated by reprehensible reasons (for example by the wish to inherit the patient’s belongings) or committed in a particularly reprehensible manner (for example perfidiously). Obviously, this distinction between “active” and “passive” euthanasia led to completely different results: While letting a person die is perfectly legal if it is based on the patient’s consent, active euthanasia is a criminal offence and punishable as killing another person irrespective of any consent. The reasoning behind the distinction of active and passive euthanasia was that “letting the patient die” was nothing more than letting nature take its course while active euthanasia was considered as an active interference ending the patient’s life prematurely. Even if the patient had requested this interference, the conduct was not justifiable because of the insurmountable threshold of the criminal law blanket ban on killing another person. But since the arbitrariness of this distinction was obvious – what difference does it make if someone turns a switch as opposed to simply no longer upholding a “feeding” routine? – scholars tried to make the distinction work by inventing the highly artificial constellation of “omission by action” (Unterlassen durch Tun31). This hardly convincing doctrinal construc30 

BVerfGE 27, 1, 6. Neumann/Saliger, in: NK-StGB, Vor §§  211 et seqq. mn. 126; Roxin, in: Roxin/Schroth, Handbuch des Medizinstrafrechts, 4. ed. 2010, 75, 94 et seq.; Schneider, in: MK-StGB, Vor §  211 et seqq. mn. 119. 31 

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tion served solely to avoid the inappropriate consequence of criminal liability for killing if a termination of treatment could not be done without actively turning life-prolonging “machines” off. An additional flaw of the former distinction between active and passive euthanasia was that a mere “termination” of treatment is in fact not a realistic scenario for the situations in question: If life-sustaining treatment is terminated, the patient will in many cases still need medical care. The mere difference then is a change in the purpose of the medical treatment: While before it was aimed at prolonging the patient’s life, the patient will now need enhanced palliative care, comprising pain medication or treatment of a dry mouth or of anxieties. Consequently, the notion of a simple termination of treatment is in many cases not realistic. The turning point for this unsatisfactory legal situation was reached in the year 2009, when new provisions on living wills were introduced in the Civil Code (sec. 1901a Civil Code)32 to ensure adequate respect for the patient’s wishes in the doctor-patient relationship. The provisions allow future patients to deny any unwanted medical treatment for certain physical conditions in advance. Provided that the living will is applicable to a certain subsequent situation, medical personnel is legally bound by the patient’s former dispositions and any treatment overstepping the advanced directive’s boundaries amounts to an illegal violation of the patient’s bodily integrity. In light of this development, the Federal Court of Justice (Bundesgerichtshof, “BGH”) echoed the enhanced respect for the patient’s will in the field of criminal law: The former distinction between actively ending medical treatment (amounting to the criminal offence of active euthanasia) and discontinuing life-sustaining treatment (legal “passive” euthanasia) was abandoned.33 The Court held that the one and only decisive criterion for the legitimacy of a termination of treatment (Behandlungsabbruch) was the patient’s will – be it communicated actively by the patient herself in the decisive situation or be it laid down in a living will created in advance. Consequently, if the patient calls for a termination of treatment or if a living will forbids life-prolonging measures for a certain medical condition, it does no longer matter whether the patient’s orders are followed by (actively) flipping a switch or by simply omitting further acts of medical treatment. Since any treatment against the patient’s will is prohibited and amounts to a criminal offence, withdrawal of treatment in line with the 32  Section 1901a Civil Code: Living will (1) If a person of full age who is able to consent has determined in writing, for the event of his becoming unable to consent, whether he consents to or prohibits specific tests of his state of health, treatment or medical interventions not yet directly immanent at the time of determination (living will), the custodian must examine whether these determinations correspond to the current living and treatment situation. If this is the case, the custodian must see to it that the will of the person under custodianship is done. […] 33  BGHSt 55, 191, mn. 27 et seq.

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patient’s will is legal – regardless of the distinction between active killing or just letting the patient die.34 Today, the line between a legal termination of treatment and a criminal offence of active euthanasia is marked by the so-called “Behandlungszusammen­ hang”: It requires that the terminating conduct takes place within the context of medical treatment. This is for example true if a ventilator is turned off or if life-prolonging medication is withheld. A punishable act outside the treatment context would for example consist of the injection of a lethal drug that does not serve to treat the patient’s condition but to end her life. In short, any interference creating a new cause for the patient’s death is a punishable act of killing pursuant to sec. 216, 212, or even 211 PC. In brief, the judgement defined the following requirements for a lawful termination of treatment: – It is the patient’s wish to terminate life-prolonging treatment35 and   – the patient has communicated her will explicitly at the time of the termination or   – the patient has laid down her will in advance in a living will that corresponds to the situation at hand36 and is now executed by her legally appointed legal guardians or her chosen representatives or   – there is neither an explicit communication nor an advanced directive, but the patient’s implicit will can without remaining doubts be deduced from formerly communicated values, beliefs, or statements.37 – The termination of treatment is executed in a way that forms part of the actual treatment provided, i.e., the termination is within the context of the treatment of the patient’s underlying physical condition.38 The new case law is a considerable improvement of the law on end-of-life situations because the former distinction was based on an artificial differentiation that did not reflect the reality of medical treatment at the end of life and that led to inappropriate results. The downside of the newly invented judicial practice is 34 

BGHSt 55, 191, mn. 30 et seqq. BGHSt 55, 191, mn. 38. 36  A very intricate question in this regard concerns persons suffering from dementia: If the living will contains an individual’s wish not to be provided with life-prolonging treatment needed in case she would suffer from dementia in the future and could no longer decide autonomously, and then the person gets sick, for example with pneumonia, and needs, say, antibiotics – is medical personnel bound to withhold such medication no matter what the demented patient herself communicates? Or should the self-determination by the demented person supersede, notwithstanding the fact that her former directive may have provided otherwise? See for a discussion of such problems Hörnle, JZ 2020, 872; Meyer, Umfang und Grenzen der Bindungswirkung von Patientenverfügungen, 2021, 139 et seqq. 37  BGHSt 35, 246, mn. 7 et seqq.; Eser/Sternberg-Lieben, in: Schönke/Schröder, Vor §  211, mn. 28e et seqq. 38  BGHSt 55, 191, mn. 33. 35 

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that it is not entirely in line with the general principle in criminal law as it is laid down in sec. 216 PC39: In general, killing upon request cannot be justified by the victim’s consent and the offence can be committed by the attending physician’s failure to prevent the victim’s death.40 However, such legal assessment is at the same time in conflict with the general guideline that medical treatment must not be provided against the patient’s wishes. There is no convincing solution to this dilemma under the current state of German law on end-of-life situations because it cannot be denied that in the end, a legal termination of treatment respecting the patient’s wishes does in fact meet the offence description of killing upon request (actively or by omission) as is further explained in the next paragraph on active euthanasia.

IV. Active euthanasia41 as an act of killing When it comes to life, the principle volenti non fit iniuria no longer applies in German criminal law. Section 216 PC entails a strict criminalization of killing another person upon her demand.42 Therefore, in the scenario of a terminally ill person who suffers from intolerable pain and asks another person to end her life, the addressee of the request will still be punished with imprisonment between six months and five years if she does what she is asked to do. German criminal law takes the victim’s request into account only to the extent that such cases of killing upon request carry a milder sentence than murder or manslaughter, and the victim’s request precludes the offence committed from being classified as murder. This means that if the perpetrator is not only motivated by the victim’s request but also by the reward the victim promises (which otherwise would turn the offence into murder out of greed, carrying a life sentence), the conduct does not amount to murder but to the more lenient offence of killing upon request pursuant to sec. 216 PC. In terms of concurrence the offence of killing upon request supersedes other offences of killing and thereby ensures a more lenient punishment. The criminalization of killing upon request is not self-evident because it ignores the explicit will of the person concerned. And because of the principle that nobody has a duty to live the state is not entitled to protect an individual’s 39 

Merkel, ZStW 1995, 545, 553; Weisser, ZStW 2016, 106, 116. BGHSt 55, 191, mn. 37. 41  Usually, the term euthanasia is carefully avoided in today’s debate on end-of-life decisions in Germany. At times, the expression is used as a hallmark of the hideous crimes committed systematically against mentally ill people during Nazi times; see Giesen, JZ 1990, 929, 935; Hörnle, JZ 2020, 872, 876. 42  Section 216 PC: Killing upon request (1) Whoever is induced to kill at the express and earnest request of the person killed incurs a penalty of imprisonment for a term of between six months and five years. 40 

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life against her own will. Due to this boundary, sec. 216 PC cannot be legitimized with a view to the state’s obligation to protect the life of the person concerned (under Art.  2 ECHR and Art.  2 (2) GG). Furthermore, in a secular state, an idea of sanctity of life informed by religious beliefs cannot justify the criminalization of killing upon the victim’s request.43 Nevertheless, sec. 216 PC is explained with a general societal interest in a solid and insurmountable blanket ban on ending another’s life44 – which in the end is nothing other than a secular reformulation of the concept of sanctity of life. But in a liberal society, a person’s life belongs only to herself. Therefore, the individual cannot be used by society to support an overarching principle such as sanctity of life.45 Moreover, the German legal order does in fact accept the active killing of another person in certain situations, as for example in cases of legitimate self-defence or defence of others. Hence it is not even true that the German legal order entails an absolute prohibition of taking another’s life under any circumstances. What is more, there are even certain end-of-life situations that allow for life-shortening measures, such as palliative sedation and a legitimate withdrawal of treatment to spare the patient intolerable psychological or physical pain (see supra, III., and infra, V.). This can hardly be reconciled with a truly insurmountable threshold prohibiting to end the life of another person.46 Against this backdrop, another line of reasoning explains sec. 216 PC with the aim to prevent individuals from rash decisions.47 But this is not even a logical explanation since sec. 216 PC requires the victim’s express and earnest demand to be killed. Naturally, this requirement is only met if the victim’s wish to die was solid and sincere. Alternatively, sec. 216 PC is justified with the argument that it is impossible to prove the solidity of a death wish once the victim has died.48 But it is obvious that to criminalize a certain behaviour because of feared evidentiary difficulties can hardly be legitimate in a liberal state. Apart from this, if this were the rationale behind the criminal offence, the law would have

43  Hilgendorf, JZ 2014, 545 et seqq.; Hörnle, JZ 2020, 872, 877; Neumann, Die Mitwirkung am Suizid als Straftat?, 2015, 201; Neumann, in: FS für Kristian Kühl, 2014, 569, 576; Roxin, GA 2013, 313, 320. 44  Neumann/Saliger, in: NK-StGB, §  216, mn. 3; Rissing-van Saan, in: Leipziger Kommentar StGB (hereinafter: „LK-StGB“), 12. ed. 2018, §  216 mn. 3. 45  Hörnle, JZ 2020, 872, 877; Kaspar, Verhältnismäßigkeit und Grundrechtsschutz im Präventionsstrafrecht, 2014, 474; Pawlik, in: FS für Jürgen Wolter, 2013, 627, 637; Rostalski, JZ 2021, 477, 480 et seqq.; Weigend, in: FS für Urs Kindhäuser, 2019, 841, 844 et seq.; Weisser, ZStW 2016, 106, 128. 46  Duttge, GA 2006, 573, 575; Weigend, in: FS für Urs Kindhäuser, 2019, 841, 845. 47  Engländer, in: FS für Bernd Schünemann, 2014, 583, 586 et seq.; Jakobs, Tötung auf Verlangen, Euthanasie und Strafrechtssystem, 1998, 22; Kindhäuser, in: FS für Hans-Joachim Rudolphi, 2004, 135, 144; Roxin, in: FS für Thomas Fischer, 2018, 509, 511 et seq.; Schneider, in: MK-StGB, §  216 mn. 8. 48  Arzt, ZStW 1971, 1, 36; Roxin, in: FS für Thomas Fischer, 2018, 509, 512.

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to provide for exceptions in cases where there is no room for any doubt on the victim’s request. Furthermore, it is argued that the mere possibility to legally kill another person upon her request could give rise to a concealed pressure on elderly or sick people in need of care to make use of the possibility to spare others the trouble of seeing after them.49 Since a request to be killed by another renders irreversible results once the addressee served the victim’s wishes, safety reasons cannot be rejected altogether. In the end, sec. 216 PC can only be justified with a view to preventing a societal climate that accepts killing upon request as a perfectly legal, almost “ordinary” way to end one’s life once it becomes too burdensome. The provision aims at an indirect protection of life as it seeks to prevent any pressure on sick or elderly people to make use of an “easy way out” of life. For this reason, sec. 216 PC is qualified as a crime of abstract endangerment. Although this reasoning is a bit tenuous,50 it can be seen as in line with the state’s obligation to protect the life of its citizens. And since this obligation even allows for a criminalization of suicide assistance – as the ECtHR has pointed out51 – it is conceivable to argue that such criminalization for killing another person on her request must also be legitimate. But still, none of the attempts to justify the harsh criminalization of killing upon request is without shortcomings, because there is no way around the fact that the provision ignores the concerned person’s sincere wish to die. This criticism can only be countered by pointing to the fact that the individual is still free to take her own life without involving others and burdening someone else with the request to kill – a request that inevitably exposes its addressee to a moral dilemma between the wish to help and the risk to encounter criminal liability for this help. In addition, if the person concerned takes her life with her own hands, there is less reason to doubt that the wish to die was serious and solid.52 The resort to suicide however does not help for persons who are physically unable to end their lives without the help of others – as for example in the prominent ECtHR cases of the tetraplegic Diane Pretty53 or of Vincent Lambert54 who was in a persistent vegetative state. In such cases, a consequent application of sec. 216 PC without any exception results in a complete denial of the individ49 

Weigend, in: FS für Urs Kindhäuser, 2019, 841, 845. Hörnle, JZ 2020, 872, 877. 51  ECtHR, Pretty v. The United Kingdom, 29 April 2002, 2346/02, mn. 76. 52  Gavela, Ärztlich assistierter Suizid und organisierte Sterbehilfe 2013, 16 et seq.; Jakobs, Tötung auf Verlangen, Euthanasie und Strafrechtssystem, 1998, 22; Kaspar, Verhältnismäßigkeit und Grundrechtsschutz im Präventionsstrafrecht, 2014, 469; Kindhäuser, FS für HansJoachim Rudolphi, 2004, 135, 144; Verrel, in: FS für Hans-Ullrich Paeffgen, 2015, 331, 340; Weisser, ZStW 2016, 106, 124. For a critical view on this argument see Hörnle, JZ 2020, 872, 878; Rostalski, JZ 2021, 477, 482. 53  ECtHR, Pretty v. The United Kingdom, 29 April 2002, 2346/02. 54  ECtHR, Lambert v. France, v. 5 June 2015, 46043/14. 50 See

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ual’s right to a self-determined death as it is protected by Art.  2 (1) GG and Art.  8 ECHR. Therefore, it is for the legislator to ensure that the will of such persons is respected. For individuals who cannot end their lives with their own hands, an exception from the blanket ban of killing another in sec. 216 PC is needed.55 What is more, situations of so-called indirect euthanasia are additional fields of end-of-life situations that call for amendments of sec. 216 PC – they will be addressed in the next paragraph.

V. Palliative sedation – indirect euthanasia If palliative care does not have life-shortening side effects, the legal assessment as due medical care is as simple as it is convincing. But as soon as such side-effects cannot be avoided, problems with this solution arise, because then the conduct in question does in fact actively shorten the patient’s remaining lifetime. The problem comes up if palliative sedation ultimately leads to the patient’s death, because painkillers are needed in such high doses that a life-shortening side effect is probable.56 In Germany, this situation is traditionally referred to as “indirect euthanasia” (indirekte Sterbehilfe57). The term is supposed to euphemistically circumvent the fact that where the administration of pain-relieving medication is the direct cause of the patient’s death at a certain point in time, “indirect euthanasia” in fact amounts to an active act of killing (which is a criminal offence under sec. 216, 212 or 211, see supra, III.). Nevertheless, jurisprudence as well as academia agree unanimously that the conduct in question should not be considered a criminal offence.58 The reasoning for this uncontended result however is not entirely clear: Some voices in the scholarly debate argue that indirect euthanasia does not fulfil the actus reus of killing another person, because the patient’s death is in fact not the result of the physician’s act but was caused by the patient’s disease (that made the medication necessary). This reasoning is based on the distinction between causation and objective im55  Hoven, ZIS 2016, 1; Kaspar, Verhältnismäßigkeit und Grundrechtsschutz im Präventionsstrafrecht, 2014, 477; Weisser, ZStW 2016, 106, 116, 122 et seq. 56  It is not entirely clear whether this still happens nowadays – there are medical experts who claim that cases like that are today no longer conceivable, see Borasio, selbst bestimmt sterben, 2014, 54; Moratti/Vezzoni, in: Negri (ed.), Self-Determination, Dignity and End-oflife Care, 2011, 287, 288. Others say that even today, in extreme cases patients’ pain can only be controlled if painkillers are provided in such high doses that life-shortening side-effects can occur, Lüthi, Lebensverkürzung im medizinischen Kontext, 2014, mn. 189; Schwarzen­ egger, in: Hilgendorf et al. (eds.), Handbuch des Strafrechts IV (hereinafter: „HB StrafR“), 2019, ch. 2 mn. 14; Verrel, in: FS für Hans-Ullrich Paeffgen, 2015, 331, 337. 57  Schwarzenegger, HB StrafR, ch. 2 mn. 13 et seqq. 58  BGHSt 42, 301; Berghäuser, ZStW 2016, 741, 752; Eser/Sternberg-Lieben, in: Schönke/ Schröder, Vor §§  211 et seqq., mn. 26; Hilgendorf, JZ 2014, 545, 549; Roxin, GA 2013, 313, 314; Schneider, in: MK-StGB, Vor §  211, mn. 106 et seqq.

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putation in German doctrine. While causation is limited to the explanation of natural, chemical, physical connections between certain factors, objective imputation implies a normative assessment of whose “deed” a harmful outcome is. Objective imputation is evaluated in two steps: First, the perpetrator must have created an unlawful risk that certain legal interests may be violated and second, exactly this risk must have materialized in the harmful outcome.59 In cases of indirect euthanasia, some authors argue that the risk created by the pain medication is not unlawful but perfectly legal if it is necessary to stop the patient’s pain and is based on her informed consent. 60 Hence, although the pain medication may have caused the patient’s death at a certain point in time, it would still not be imputable to the doctor’s conduct, and therefore, the actus reus requirements of killing another person are not met. Others find that there is no way around the fact that an administration of lethal medications satisfies the actus reus of killing61: Although the patient’s illness was the reason for the pain medication, it is still true that the medication caused the patient’s death to occur at a certain point in time – a time that the patient would have outlived had she not received the medication. And since competent medical personnel knows about the side-effects of medication, the mens rea of killing is also established. Based on this reasoning, the still predominant view in Germany considers indirect euthanasia an act of killing that is justified by necessity. 62 According to this view, the patient’s interest in relief from pain outweighs her interest in an otherwise achievable but insignificant prolongation of her life, which, however, can only be purchased at the price of severe pain. Some writers argue that necessity can only justify indirect euthanasia if the patient consents to her premature death. 63 But this requirement is already satisfied if the medication is based upon the patient’s informed consent, because in such cases, sufficient information includes information about the risk of a premature death. And since medical treatment is only lawful if the patient consents to it, this requirement is in fact not a specific requirement for cases of indirect euthanasia, but a general rule. Though the justification by necessity seems convincing at first sight, some weaknesses of this line of reasoning become visible with closer scrutiny: Al59  Walen/Weisser, Causation and Responsibility for Outcomes, in: Ambos et al. (eds.), Core Concepts in Criminal Law and Criminal Justice, 2022, ch. 3. 60  Jähnke, in: LK-StGB, Vor §§   211 et seqq., mn. 16; Knauer/Brose, in: Spickhoff (ed.), Medizinrecht, 3. ed. 2018, §  216 Rn.  23. 61  Müller-Busch, in: Duttge et al. (eds.), Selbstbestimmung am Lebensende, 2006, 124, 127; Rissing-van Saan, ZIS 2011, 544, 545; Weisser, ZStW 2016, 106, 113. 62  BGHSt 42, 301, 305; Eser/Sternberg-Lieben, in: Schönke/Schröder, Vor §§  211 et seqq. Rn.  26; Merkel, ZStW 1995, 545, 570 et seq.; Roxin, GA 2013, 313, 314; Saliger, in: NK-StGB, §  216 Rn.  19; Schneider, in: MK-StGB, Vor §§  211 et seqq. mn. 110 et seq. 63  Merkel, in: FS für Friedrich-Christian Schroeder, 2006, 297, 313 et seqq.; Neumann, in: NK-StGB, Vor §§  211 et seqq. mn. 103; Roxin, GA 2013, 313, 314; Schwarzenegger, in: HB StrafR IV, 2019, ch. 2 mn. 15.

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though the assessment that an effective pain medication must be legal even in cases of an associated shortening of life is doubted nowhere (and it shall not be doubted here either), the justification for this result is not entirely in line with the general doctrine regarding necessity. First, it is usually applied in situations where the perpetrator violates the rights of a third person to save her own or the rights of another (i.e., an interpersonal conflict of interests). Cases of indirect euthanasia are structured differently: Here, the patient’s interest in pain relief is secured while the very same act shortens her own life. Therefore, the situation amounts to a so-called intrapersonal conflict of interests – and some voices in the scholarly debate contend that necessity does not accommodate such situations. 64 And second, justification by necessity is only conceivable if a higher legal interest is saved at the cost of a lower ranking interest. In cases of indirect euthanasia, the patient’s life is sacrificed to buy freedom from pain. But indirect euthanasia does not enable a pain-free continuation of life. Freedom from pain is only secured by the premature ending of the patient’s life – and this certainly devalues the persuasiveness of the necessity justification. Some writers suggest that a weighing of interests in favour of pain medication could be achieved by resorting to human dignity as the protected higher interest. It is consented in Germany, that human dignity is the highest-ranking legal interest – it takes precedence even over the legal interest of life. Therefore, so the scholars argue, necessity justifies the saving of human dignity at the cost of a small amount of lifetime left.65 But this reasoning is not entirely convincing either: In suggesting that pain medication restores the patient’s human dignity, this concept implies that intolerable physical pain impairs human dignity. But this is not true. Dignity is inherent in human beings regardless of their physical or mental condition. Even the most seriously ill person suffering from unbearable pain does not lose her dignity because of the pain she suffers from. Therefore, dignity cannot be used as the higher-ranking legal interest that justifies the shortening of a lifespan as a result of pain medication. Finally, if this argument was convincing, administering life-shortening pain medication would be mandatory whenever a patient’s severe pain cannot be eliminated entirely by lesser doses of painkillers. Otherwise, medical personnel would violate their duty to ensure the best protection of human dignity. In the end, this could even result in a sort of duty to shorten a patient’s life by administering sufficiently strong painkillers to save a state of dignity. This of course cannot be true in a society seeking to protect life and human dignity. 66

64 

Engländer, GA 2010, 15, 25; for indirect euthanasia Weisser, ZStW 2016, 106, 115. BGHSt 42, 301, 305; Hufen, NJW 2001, 849, 850 et seq.; Rosenau, FS für Claus Roxin II, 2011, 578, 584 et seq. 66  For German discussants, such lines of reasoning stir bad associations with the horrific Nazi concept of “euthanasia”, see fn.  41. 65 

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In the end, there is no solution to the conundrum German doctrine is facing in terms of indirect euthanasia under the current legal framework. The only way to create a convincing answer to pressing questions of “indirect” euthanasia is to introduce a new provision into the law on offences of killing another person. The absolute criminal law blanket ban on killing needs to be complemented by provisions that allow for an adequate legal assessment of indirect euthanasia as well as of other problematic cases of active euthanasia as they have been mentioned before (see supra IV.). Such provisions should seek to preserve what the Constitutional Court recently called the individual’s right to a self-determined death. 67

VI. Assistance in suicide The previously mentioned prohibition of killing upon request in sec. 216 PC is based on the normative assessment that individuals who want their life to end, can be required to do this with their own hands and without making others become part of the killing of another person. Additionally, sec. 216 PC is justified with the aim to prevent the individual from giving her life in the hands of another without proper consideration. 68 This implies the notion that if the individual takes her life by her own acts it can be assumed that she was genuinely determined and ready to die that very moment. 69 Another consequence of this line of reasoning however is that it must be possible to take one’s own life in a humane way which will often include the suicidal person’s wish not to die alone. The German legal status used to be in line with this general reasoning: Since the entry into force of the Penal Code in the year 1871, assistance in suicide was not a criminal offence. For more than 140 years, the German legal order used to be a holdout to the majority view amongst the Member States of the ECHR. Most of them criminalize assistance in suicide, the ECtHR found in a comparative analysis in the year 2012.70 In the year 2002, the ECtHR had ruled that a criminalization of suicide assistance was in line with the state’s duty to protect life and that such provision does not constitute a violation of individual liberties under Art.  8 ECHR.71 The Court held that the contracting states have a wide 67 

BVerfGE 153, 182, mn. 201 et seqq. See supra, I.; fn.  8. 69  Gavela, Ärztlich assistierter Suizid und organisierte Sterbehilfe, 2013, 16 et seq.; Jakobs, Tötung auf Verlangen, Euthanasie und Strafrechtssystem, 1998, 22; Kaspar, Verhältnismäßigkeit und Grundrechtsschutz im Präventionsstrafrecht, 2014, 469; Kindhäuser, FS für HansJoachim Rudolphi, 2004, 135, 144; Verrel, in: FS für Hans-Ullrich Paeffgen, 2015, 331, 340; Weisser, ZStW 2016, 106, 124. 70  In 36 of 42 legal systems compared, all forms of assisted suicide were criminalized, see ECtHR, Koch v. Germany, 19 July 2012, 497/09, mn. 26. 71  ECtHR, Pretty v. The United Kingdom, 29 April 2002, 2346/02, mn. 74. In the same 68 

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margin of appreciation with regard to the regulation of assisted suicide as well as the legal regulation of access to lethal medication.72 The traditional general impunity of assistance in suicide in Germany can also be considered within this margin of appreciation, for it had by no means set a trend toward mass assisted suicide. The underlying rationale of this legal situation was quite simple: Since it is not a crime to take one’s own life, the mere assistance in this undertaking cannot be criminal either,73 because accessory participation is generally ruled out if there is no criminal offence. Since this view on the derivative nature of accessory participation74 is widely shared in the conventional states, most of them criminalize assistance in suicide as a standalone offence. When the German legislator finally chose to follow this approach in the year 2015, he reacted to the increased activities of associations offering organized suicide assistance in Germany. These associations’ services were considered a threat to elderly or sick people who should be protected against a societal climate in which they no longer thought of themselves as worthy members of that society but maybe as more of a burden. The fear was that, in such a climate, vulnerable people would be more inclined to accept organized suicide assistance to spare others the care they would otherwise need with increasing age and/or decreasing health.75 For these reasons, the legislator felt that a regulation prohibiting the activities of associations offering suicide assistance on German soil was needed. After a long, sometimes highly emotional debate in parliament, in academia76 and in society, suicide assistance in a “business-like” manner was criminalized in sec. 217 PC (former version). The restrictive “business-like” element of a criminal suicide assistance did not require that payment was involved. The legislator considered assistance offered in a structured, organized framework an “at least abstract threat to the highest-ranking legal interests, namely human life and the autonomy of the individual”.77 This abstract danger, however, was not substantiated by anything: A mere offer does not by itself restrict its addressee in her autonomous decision to (not) make use of the service offered. On the contrary, it is not atypical for a self-determined, autonomously deciding individual to prefer to end her life with professional help rather than vein are the subsequent judgements ECtHR, Haas v. Switzerland, 20 January 2011, 31322/07; ECtHR, Koch v. Germany, 19 July 2012, 497/09; ECtHR, Gross v. Switzerland, 30 September 2014, 67810/10. 72  ECtHR, Pretty v. The United Kingdom, 29 April 2002, 2346/02, mn. 76. 73  BGHSt 32, 367, mn. 13; Coenen, medstra 2020, 84, 84; Roxin, GA 2013, 313, 313. 74  See for the German law on participation in crime Roxin, Strafrecht Allgemeiner Teil II, 2003, §  26 mn. 2 et seqq. 75  A reasoning that is already familiar, since it is used to justify the criminalization of killing upon request in sec. 216 PC, too, see supra, I. 76  The vast majority of German criminal law scholars signed an appeal to the legislature to abandon the proposed provision, available at https://hpd.de/sites/hpd.de/files/field/file/reso lution_zur_sterbehilfe_15_4.pdf (accessed 22 February 2022). 77  BT-Drs. 18/5373, 12.

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the help of family or friends who might not be up for such challenge. Apart from that, it did not make sense that the very fact of a “business-like” conduct should have elevated an otherwise legally permissible act of support to a punishable wrong: Suicide assistance was still deemed legally neutral in case of a one-time activity performed perhaps by a family member or a close friend, whereas the very same conduct turned into a criminal offence if it was rendered in an organized framework by persons with a professional background and with a view to further acts of assistance in comparable situations.78 Perhaps the most serious flaw of the former offence of business-like suicide assistance was that it was not entirely inconceivable that even professional care exercised by physicians was suspected as some shady suicide assistance that fell under the offence description. This was an unwanted side effect of the interpretation of the “business-like” manner. If for example a hospice physician decided to help one of her terminally ill and severely suffering patients to end her life prematurely, this could already amount to a business-like assistance in suicide: While she was prepared in an individual case to help a patient end her life, she could hardly contend that this was a singular, exceptional case that would never again occur. Especially for palliative and hospice physicians this situation would arise repeatedly, and therefore any assistance would inevitably be offered within an organized, professional structure and with the prospect of a repeated performance of such services in the future. That is why such cases would prima facie amount to a business-like assistance in suicide – although the legislator repeatedly pretended that this was not the case.79 Especially in this context of doctor-patient relationships the provision also risked serious chilling effects for suicide prevention. The climate of trust between doctor and patient would be harmed if the physician risked criminal liability in case a patient committed suicide following a confidential consultation. Under such circumstances, it is hardly conceivable that a patient would even dare to disclose her wish to die if counselling services were suspected of assisting in suicide. Thus, not only did the provision obstruct access to professional and suicide-preventive counselling and thereby harbour the danger that the suicidal person would be driven into isolation. Also, education and training of medical personnel in suicide-preventive counselling as well as further research with a view to increasing expertise in the field was hindered by the criminalization of “business-like” suicide assistance. In the end, the provision accepted a considerable risk that isolated and desperate patients would have to rely on the help of medically untrained laypeople or even throw themselves in front of a train right away. This of course is anything but humane, and it also leads to a 78  Duttge, NJW 2016, 120, 122; Schöch, FS für Kristian Kühl, 2014, 585, 599; Weisser, ZStW 2016, 106, 131. 79  BT-Drs. 18/5373, 17 et seq.

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traumatization of those affected by the execution of such lonely suicide decisions. For all these reasons, the legislator would have done well to adhere to the principle that state interference in the citizen’s autonomous personal dispositions of her rights is generally prohibited – which also requires legislative abstinence regarding assistance in a self-determined suicide. This became perfectly clear with the judgement of the Constitutional Court on sec. 217 PC in February 2020. In short, the Court decided that sec. 217 PC was unconstitutional because the provision violated the citizen’s right to self-determination under Art.  2 (1) GG, that includes the right to autonomously decide about the end of one’s own life and to execute this decision without interference by the state.80 Although it is a corollary of the state’s duty to protect life that the legislator has to take care that the individual is in no way pressured into the choice to end her life, the state must not inappropriately reduce the individual’s choice on autonomous end-of-life decisions.81 Moreover, the autonomous decision must not be devalued by the state blocking the way to a humane method of suicide for a person willing to die – especially in light of the fact that killing on demand is not an option in the German legal order either. Since the Constitutional Court declared sec. 217 PC unconstitutional and therefore void, right now the German legal order is back to square one: The legal situation before the enactment of the provision is restored (see supra, at the beginning of this section) and right now, assistance in suicide is not a crime.

VII. Physician assisted suicide in case of patients who voluntarily stop eating and drinking In the wake of the Constitutional Court’s judgement in February 2020, the legal regulation on the professional ethics of physicians was amended and the general prohibition of physician assisted suicide was abolished. This holds true also for palliative care lent to patients who kill themselves by voluntarily stopping to eat and drink. This palliative care does legally not amount to suicide assistance because it is confined to respecting the patient’s will and providing due care if harmful side-effects of the renunciation of nutrition and hydration occur. But an intricate question arises once the patient loses consciousness: Does a duty to rescue arise if she can no longer extricate herself from her decision to fast to die? This question will be answered in the next section on a general duty to rescue suicidal persons after a suicide attempt, because the general underlying question

80  81 

BVerfGE 153, 182, mn. 209. BVerfGE 153, 182, mn. 232 ff, 273 et seqq.

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is identical82 no matter whether the person tried to kill herself by denial of nutrition or in any other way.

VIII. A duty to rescue an unconscious person after a suicide attempt? In older times, German jurisprudence held that suicide (attempts) were immoral and/or illegal.83 Therefore, a general duty to save a suicidal person when encountering her in a state of unconsciousness was established. Persons who were in no way connected to the suicidal person were criminally liable under sec. 323c PC for failing to render assistance. 84 And if the third person was legally obliged to protect the suicidal person (a so-called “guardian” as for example a spouse or a parent would be), the failure to (try to) save the suicidal person would amount to an offence of killing by omission. Today, these principles no longer apply. It is generally agreed that suicide can no longer be considered illegal since there is a constitutional right to end one’s life when and how an adult person wishes, provided that she makes her decision freely and autonomously. Accordingly, it cannot amount to a criminal offence to respect that person’s wish to die by abstaining from any attempt to save her. Since medical treatment is only legitimate if it is administered with the patient’s consent, there is no general duty for medical personnel to rescue a suicidal person against her will. If, however, the suicide attempt was not based on a free decision of a person in her right mind, a failure to rescue the suicidal person amounts to a criminal offence of killing by omission or pursuant to sec. 323c PC. There is contention over the question whether there should be a prima facie conjecture for a duty to rescue a suicidal person because one can never be entirely sure whether an unconscious person in a suicide situation really decided freely to take her own life. Statistics according to which over 90 % of the persons who tried to kill themselves and failed, never try again, are seen as strong evidence for the assumption that most suicide attempts are based on wavering decisions. Nevertheless, if it is generally accepted that the patient’s will must always be decisive for medical treatment, then neither a guardian nor a third par82  Compared to other cases of unconscious suicidal persons, the case of voluntarily stopping to eat and drink might be easier to assess because here the patient’s wish to die can be verified for a considerable period of time. 83  BGHSt GS 6, 147, 153; BGHSt 46, 279, 285. 84  Section 323c PC: Failure to render assistance (1) Whoever does not render assistance in the case of an accident or a common danger or emergency although it is necessary and can reasonably be expected under the circumstances, in particular if it is possible without substantial danger to that person and without breaching other important duties, incurs a penalty of imprisonment for a term not exceeding one year or a fine.

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ty can be legally required to disregard a person’s known will to die and initiate rescue measures under threat of criminal punishment. Otherwise, the suicidal person’s life would be “protected” against her own wishes – which in effect would be nothing other than coercive treatment, which the legal system generally prohibits. A general insinuation that suicidal persons acted upon a decision that was unreasonable and not taken autonomously would disregard the general recognition of every sane adult as capable of self-determination and autonomy. Based on this assumption, a responsible suicidal person makes it clear by her act of suicide that she does not consent to a rescue attempt. Thus, if an unconscious suicidal person is encountered, it is legally permissible to refrain from a rescue attempt in accordance with the will of the person concerned. This is even true for persons legally connected to the suicidal (as for example the attending doctor or a relative): they cannot reasonably be expected to rescue her against her explicit wish.85 In a scenario however, that leaves room for interpretation including the possibility of a not entirely autonomous suicide decision, a duty to rescue an unconscious person arises. In case of remaining doubts, the duty to save lives takes precedence. The Federal Court of Justice has very cautiously confirmed these guidelines in two recent judgements,86 but based the decisions on specific circumstances of the cases at hand without formally distancing itself from its former line of jurisprudence.87 Therefore, it is not entirely clear whether the Court will stick to these rules. Nevertheless, since the decisions were rendered prior to the previously mentioned Constitutional Court’s decision that emphasized the individual’s right to a self-determined death,88 a continuation of the more liberal approach by the Federal Court of Justice in the future seems very likely.

IX. Complementing laws on drugs The call for humane methods of suicide naturally comprises the need for professional assistance and for drugs that allow for a painless way of dying. In Germany, however, the prescription of a lethal anaesthetic has formerly been prevented by regulations in the Narcotics Act (Betäubungsmittelgesetz, hereinafter: “BtMG”). The BtMG aims at protecting public health and therefore allowed for a prescription of narcotics for therapeutic purposes only, 89 which prohibited a 85  For others who are not connected to the suicidal, a general duty to rescue under sec. 323c PC is ruled out due to the fact that a self-determined, autonomous suicide (attempt) does not constitute an “accident” as is required by the provision. 86  BGHSt 64, 121; BGHSt 64, 131. 87  This is criticized by Hillenkamp, JZ 2019, 1056; Rissing-van Saan/Verrel, NStZ 2020, 121. 88  BVerfGE 153, 182. 89  Pursuant to sec. 3 (1), 5 (1) no.  6 BtMG the request for a drug must be denied if the sub-

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prescription for suicidal purposes. Moreover, provisions on professional ethics forbid doctors in most states of Germany to assist in suicide because such help was deemed outside the scope of proper medical treatment. These provisions were further complemented by the criminal law ban on suicide assistance in sec. 217 PC former version. All these rules taken together produced a rather hopeless situation for terminally ill persons who suffered severe pain and sought to end their life. They could not get professional suicide assistance by physicians nor by associations offering suicide services. And the BtMG provisions prevented the authorities from handing out narcotics to suicidal persons on request. Taking into account this bitter situation, the Federal Administrative Court decided in the year 2017 that in cases of extreme distress, the state’s obligation to protect the individual’s right to self-determination under Art.  2 (1) GG allows for an exceptional provision of lethal narcotics to persons who were terminally ill, suffered from intolerable pain, had decided autonomously to commit suicide and did not have any alternative way to take their own life in a humane manner.90 The Court held that in such extreme cases the authorities were not allowed to withhold a prescription of lethal doses of sodium pentobarbital if a patient wished to die because her life had turned unbearable due to intolerable pain and physical restrictions without any view to improvement. In such cases, the Court held, the legal situation would produce a factual “duty” to live on. This would be considered unlawful and therefore the authorities could not disrespect the patient’s wish to die arguing that drugs could only be handed over to patients for therapeutic purposes. Despite this judgement, desperate patients could still not hope for help, because the (former) Secretary of Health instructed the authorities not to follow the Court’s guidelines but to deny suicidal persons lethal narcotics irrespective of their physical condition.91 It is hardly convincing that the Secretary of Health simply ignored not only the judgement of the Federal Administrative Court but also implicitly the separation of powers. However, he argued that he waited for the Constitutional Court’s decision on the complaints pending concerning sec. 217 PC former version. In the end, his plan worked out: With the Constitutional Court’s decision to declare sec. 217 PC unconstitutional (see supra, VI.) and the following abolishment of the professional ethics that prevented doctors from assisting in suicide, the precondition that there is no humane alternative to end unbearable suffering than to receive lethal narcotics, is no longer present.92 stance would not be used to ensure public health. See also BVerwG NJW 2019, 2789, 2790. BVerwGE 158, 142 followed the ECtHR’s decision in the case of ECtHR, Koch v. Germany, 19 July 2012, 497/09. The ECtHR had decided that Germany had disregarded Koch’s right to respect for his private life under Art.  8 ECHR. In light of this judgement, he achieved a retrial in Germany and the Court finally decided at least partly in his favour. 90  BVerwG NJW 2019, 2789, 2790. 91  BT-Drs. 19/4834. 92  See BVerfG NJW 2021, 1086.

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Today, suicidal persons can reasonably be expected to seek help by a physician to get a prescription of the wanted drugs. Therefore, a right to receive lethal doses of sodium pentobarbital directly from the authorities is no longer conceivable.93

X. Unresolved Questions/Law Reform Today, the line between an adequate medical support in life-threatening conditions and futile overtreatment of patients extending their suffering is not easy to draw. Medical personnel must not be left alone with difficult questions in existential conflicts between necessary medical treatment, unwanted overtreatment, and perhaps bad decisions under the impression of desperate physical conditions. Physicians need legal certainty when they ensure that patients’ wishes are respected, no matter if they willingly accept an exhaustive application of medical treatment available or decide not to accept such treatment and instead let nature take its course while receiving palliative care throughout the dying process. It is for the legislature to regulate issues of an adequate handling of end-oflife decisions. Yet so far, the legislature has concentrated on the criminalization of associations offering suicide assistance without noticing that the provisions introduced inadequately restricted the individual’s right to self-determination. Here, the new legal situation after the Constitutional Court’s landmark judgement is a significant improvement because it reopens the path to medical consultation, which in turn increases the chance of professional suicide-prevention by a doctor who knows about her patient’s condition and life circumstances. Support for patients in existential situations is best placed in the hands of doctors who, in view of their medical care for the person willing to die, are also in the best position to judge the autonomous nature of her wish. And what is more, opening this option in the doctor-patient relationship makes the services offered by dubious euthanasia organizations superfluous in many cases. Nevertheless, there is no doubt that the legislator will give the creation of a regulation of assistance in suicide a second try. Although the discussion on endof-life decisions has quieted down over the general election in September 2021 and is now overshadowed by an intense societal debate over the implications of the COVID-crisis, it is only a question of time until politics will return to the topic. Several drafts laws on suicide assistance are on the table already94 and it would not be a surprise if more were to come. The odds are very much in favour of a new attempt to partly criminalize assistance in suicide. It is very likely that the legislator will create a so-called “Schutzkonzept” – a legal concept to ensure 93  BVerfG NJW 2021, 1086; Higher Administrative Court of Münster, BeckRS 2022, 1147, mn. 91 et seqq. 94  See for a first assessment of the drafts Neumann, NJOZ 2021, 385.

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the autonomy of suicide decisions.95 The Constitutional Court has already defined the constitutional limits of such concept: The state has no right to objectively define under what circumstances the individual would legitimately call for her life to end, because the view on the quality of a life that is worth to adhere to is very personal and not for the state to evaluate. Consequently, the right to end one’s life is in no way connected to external factors such as age, illness or the prospect of improvement or decline of one’s physical or mental condition.96 It will be a very difficult task for the legislator to strike the right balance between adequate respect for the individual’s self-determination and sufficient protection of her autonomy when taking end-of-life decisions. In the end, the new regulations are expected to serve partially conflicting purposes: While the state is on the one hand required not to interfere with the individual’s autonomous end-of-life decisions, it is on the other hand expected to get involved to ensure said autonomy. The practical need for new regulations on matters of assistance in suicide however is far less urgent than for reliable legal provisions on end-of-life situations that arise daily: In most cases of terminal illness, treating physicians are faced with the question of whether a change from curative to mere palliative purposes of medical treatment is permissible under criminal law. The legislator is adamantly silent on this issue although there is an urgent need for an explicit legal basis for a termination of life-prolonging treatments considering the patient’s will. The support of a natural dying process by palliative care must not amount to a criminal offence. The same must be true for a medical assistance of persons who actively want to end their lives and call for professional help. There must be a legal way to receive such assistance without putting medical personnel at the risk of criminal liability. Therefore, the legislator should finally create a criminal law regulation that provides exceptions to sec. 216 PC for patients who want their life to end but are physically unable to commit suicide. Furthermore, clear regulations are needed for palliative sedation as well as for any other palliative support for patients who seek to end their lives out of an autonomous, self-determined decision. It is the legislator’s responsibility to ensure that such measures are taken out of the twilight of legal doubts into the light of an assessment as due medical care. Apart from that, it is questionable whether the current legal status requiring an individual who is willing to die to take her life with her own hands is entirely convincing. There can be good reasons for rather relying on medical personnel to perform the necessary acts, particularly the fact that professionals know how to handle lethal drugs or what to do in case of complications. This could be 95 The view that such concept is needed is shared widely in the academic debate, see Berghäuser, ZStW 2016, 741, 779; Hörnle, JZ 2020, 872, 878; Weigend, in: FS für Urs Kindhäu­ ser, 2019, 841, 846. 96  BVerfGE 153, 182, mn. 210.

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taken into account by a more liberal version of sec. 216 PC that leaves room for the execution of self-determined end-of-life decisions by others under certain conditions. The planned concepts to ensure autonomous suicide decisions in case of suicide assistance could be extended to autonomous decisions to request others to end one’s life. A legislature that genuinely cares for adequate end-oflife regulations should be willing to at least enter an honest debate on such questions. But activities in this field of the law are very contentious and therefore not very likely to reward the legislator with positive headlines. On the contrary, it is not an unlikely scenario that a debate on such issues brings about very emotional, subjective, and sometimes even aggressive or polemic statements. One reason for this is that such discussion goes back to deeply rooted values and very often religious beliefs. Another underlying reason is that nobody can discuss end-of-life questions as a completely neutral discussant. Personal experiences with the loss of loved ones as well as the uncertainty about the end of one’s own life are unconsciously brought into the legal debate. This uncertainty is exacerbated by the fact that it is not easy to keep pace with new developments of medical treatment and the possibility of prolonging human life by medical interventions. A fear of harmful and excessive therapies at the end of life is the result of the phenomenon that the line between a natural death, between futile and painful over-treatment for terminally ill people and even between actively hastening death by medical treatment can in some cases become blurred. The scientific community should enter this debate with contributions from all fields of the law supporting liberal regulations that strengthen the individual’s self-determination and ensure that everybody can end their life in a way that is consistent with the way they lived it.

List of Contributors Helmut Philipp Aust (Doctorate Humboldt-Universität zu Berlin 2009; Habilitation Humboldt-Universität zu Berlin 2016) is Professor for public and international law at Freie Universität Berlin and Co-Chair of the ILA Study Group “The Role of Cities in International Law”. Ivo Bach (Doctorate Mainz 2008; Habilitation Mainz 2016) is Professor for Civil Law, Medical Law, European and International Private Law at GeorgAugust-Universität Göttingen. Christoph Benicke (Doctorate Heidelberg 1994; Habilitation Heidelberg 2002) is Professor for Civil Law, Private International Law and Comparative Law at Justus-Liebig-Universität Giessen. Jens-Hinrich Binder (LL.M. London 2001; Doctorate Freiburg 2003; Habilitation Freiburg 2010) is Professor of Law (Chair for Private Law, Company Law, Banking and Securities Law) at Eberhard Karls Universität Tübingen. Martin Ebers (Doctorate Humboldt-Universität zu Berlin 2001; Habilitation Humboldt-Universität zu Berlin 2016) is Associate Professor for IT Law at University of Tartu (Estonia) and President of RAILS (Robotics & AI Law Society). Martin Fries (Doctorate München 2010; LL.M. Stanford 2011, Habilitation München 2016) is Private Lecturer at Ludwig-Maximilians-Universität München. Jens Gerlach (Doctorate Bucerius Law School Hamburg 2018) is post-doctoral Senior Research Fellow at the Chair for Public Law, Science of Public Administration, and Comparative Law (Hermann Pünder) at Bucerius Law School Hamburg. Urs Peter Gruber (Doctorate Mainz 1999; Habilitation Mainz 2002) is Professor for Private Law and Civil Procedure at Johannes Gutenberg-Universität Mainz. Stefan Grundmann (Doctorate in Law München 1985; Doctorate in Philosophy München 1988; LL.M. Berkeley 1990; Habilitation München 1995) is Professor for Private Law and Economic Law at Humboldt-Universität zu Berlin.

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Beate Gsell (Doctorate Tübingen 1997; Habilitation Bonn 2001) is Professor for Civil Law, Civil Procedure, European Private Law and Procedure at LudwigMaximilians-Universität München and Judge at Munich Higher Regional Court (OLG München). Stephan Hobe (Doctorate Kiel 1992; Habilitation Kiel 1996) is Professor of Law (Jean-Monnet Chair for Public International Law, European Law, European and International Economic Law) and Director of the Institute of Air Law, Space Law and Cyber Law at Universität zu Köln. Anna-Bettina Kaiser (LL.M. Cambridge/UK 2001; Doctorate Freiburg 2007; Habilitation Freiburg 2017) is Professor for Public Law and General Jurisprudence at Humboldt-Universität zu Berlin and Co-director of the Integrative Research Institute Law & Society. Stefan Klingbeil (LL.M. Yale 2012; Doctorate Frankfurt am Main 2017) is Research Fellow at the Chair for Private Law, Civil Procedure, Private International Law and Comparative Law (Felix Maultzsch) at Goethe-Universität Frankfurt am Main. Hanno Kube (LL.M. New York 1995; Doctorate Heidelberg 1998; Habilitation Heidelberg 2003) is Professor for Public Law with particular regard to Public Finance and Tax Law at Ruprecht-Karls-Universität Heidelberg and Director of the Institute for Public Finance and Tax Law. Nikolaus Marsch (D.I.A.P. [ENA] 2010; Doctorate Osnabrück 2010; Habilitation Freiburg 2017) is Professor for German and European Public Law and Comparative Law at Universität des Saarlandes. Felix Maultzsch (LL.M. New York University 2003; Doctorate Jena 2005; Habilitation Freiburg 2010) is Professor for Private Law, Civil Procedure, Private International Law and Comparative Law at Goethe-Universität Frankfurt am Main. Ann-Kristin Mayrhofer is Research Fellow at the Chair of Civil Law, Civil Procedure, European Private Law and Procedure (Beate Gsell) at Ludwig-Maximilians-Universität München. Olaf Meyer (Doctorate Münster 2005; M.St. Oxon 2006; Habilitation Bremen 2017) is Professor for Civil Law, in particular Law of Contracts and Contract Design at Frankfurt University of Applied Sciences. Christina Möllnitz (Doctorate Bayreuth 2016; LL.M. Durham 2021) was Postdoc Research Fellow at the Chair for German and European Consumer Law and Comparative Law (Martin Schmidt-Kessel) at Universität Bayreuth.

List of Contributors

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Hermann Pünder (LL.M. Iowa 1993; Doctorate Münster 1995; Habilitation Münster 2002) is Professor for Public Law, Science of Public Administration and Comparative Law at Bucerius Law School Hamburg and Associate Member to the International Academy of Comparative Law. Thomas Riehm (Doctorate München 2006; Habilitation München 2011) is Professor for German and European Private Law, Civil Procedure and Legal Theory at Universität Passau. Martin Schmidt-Kessel (Doctorate Freiburg 2001; Habilitation Freiburg 2003) is full Professor for German and European Consumer Law, Private Law and Comparative Law and Director of the Centre for Consumer Law at Universität Bayreuth. He serves as Secretary General of the German Association of Comparative Law and is Associate Member to the European Law Institute and Associate Member to the International Academy of Comparative Law. Anne Schneider (LL.M. Bristol 2008; Doctorate Münster 2010; Habilitation Bonn 2018) is Professor for German, European and International Criminal Law at Heinrich-Heine-Universität Düsseldorf. Sofía María Fölsch Schroh is Research Fellow at the Chair for German and European Public Law and Comparative Law (Nikolaus Marsch) at Universität des Saarlandes. Sören Segger-Piening (Doctorate Würzburg 2016; LL.M. Würzburg 2017) is Post-doc Research Fellow at the Chair for Civil Law, European Economic Law, Private International Law and Litigation as well as Comparative Law (Oliver Remien) in Würzburg. Quirin Thomas is Research Fellow at the Chair for German and European Private Law, Civil Procedure and Legal Theory (Thomas Riehm) at University of Passau. Brian Valerius (Doctorate Würzburg 2004; Habilitation Würzburg 2009) is Professor for Artificial Intelligence in Criminal Law at Universität Passau. Eva Ellen Wagner (Doctorate Mainz 2010; Habilitation Mainz 2021) is Private Lecturer at Johannes Gutenberg-Universität Mainz. Bettina Weisser (Doctorate Konstanz 1995; Habilitation Köln 2010) is Professor for Foreign and International Criminal Law at Universität zu Köln and Director of the Institute for Comparative Criminal Law. Birgit Weitemeyer (Doctorate Kiel 1994; Habilitation Kiel 2003) is Professor for Tax Law at Bucerius Law School Hamburg and Director of the Institute for Foundation Law and the Law of Non-Profit Organizations. She is founder and

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List of Contributors

board member of the association “Hamburger Forum für Unternehmensteuerrecht”. Benedikt Wössner (Doctorate Augsburg 2021) was Research Fellow at the Chair for Private Law, Commercial Law, Private International and Comparative Law (Wolfgang Wurmnest) at Universität Augsburg. Wolfgang Wurmnest (Doctorate Universität Hamburg 2002; LL.M. Berkeley 2004; Habilitation Universität Hamburg 2009) is Professor for Private Law and Commercial Law including Maritime Law at Universität Hamburg.