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German and American Law: Key Distinctions

A Current Perspective on German & American Law: Differences, Distinctions and History

German and American Law: How Differences Affect You.

The History of German Law

German law developed over centuries and under the influence of several sources. Early Germanic law held court until medieval times. This body encompassed Latin law codes that were written in the early Middle Ages dating back to between the fifth and ninth centuries. The Latin law codes were influenced by Roman law, canon law, and tribal customs. At that time, people were tried by the laws specific to their races, i.e., Roman, Frank, Visigoth, Bavarian, etc. Romans had separate codes governing their cases, the most well-known being the Lex Romana Visigothorum. Before it was codified in writing, early Germanic law was kept by memory by designated people functioning in natural judicial capacities. This meant that it was an unwritten code influenced by the person who held the system and was tasked with meting out justice. German law was finally codified in writing in Latin. In the 13th century, it was codified in the vernacular language called the Sachsenspiegel. Roman law became a strong influence on German law again during the Renaissance (14th to 17th century). Legal scholars later incorporated components of formalized Roman law, and the resulting blend became known as common law (Gemeines Recht) across the German-speaking world. Common law held effect into the 19th century. In the 19th and early 20th centuries, some shifts took place in common law as different historical events occurred.

Prussia introduced the Allgemeines Landrecht fur die preussischen Staaten (General National Law for the Prussian States) which encompassed laws that covered the whole range of legal divisions. This new codification had great influence over later legal structures. After the 1830s, during which the French Revolution occurred, German legal traditions incorporated ideas and codifications from French law. In 1871, when the Deutsches Reich was formed, the German legal system underwent a significant overhaul and emerged with a standardization that crossed all fields, from criminal law to procedural law and everything in between. It took 20 years to craft and refine, and the Burgerliches Gesetzbuch (Book of Civil Law) was the result. Some components of these laws still play an important role in German legislation today. After World War II, the two German states—East Germany and West Germany—embraced different legal systems. East Germany’s system was centered around laws that had its roots in communist and socialist ideology. West Germany built its system on existing laws. When the two states merged, West German law dominated the combined traditions. European law came into effect with the establishment of the European Union. This law seeks to unify states in the European Union and ensure that their overarching laws are in harmony with one another. Laws within the states (i.e., Germany) are still particular to each state.

German Corporate Law

German corporate law, or German company law, is the legal realm under which German companies and businesses operate.
Two primary company forms exist in Germany: partnerships and corporate bodies. The public company in Germany is the Aktiengesellschaft, or the AG. The private company with limited liability is the Gesellschaft mit beschränkter Haftung, or GmbH.

There are several legal classifications of partnerships. These are the limited partnership (the Kommanditgesellschaft, or KG), the professional partnership (Part G); the general trading partnership (Offene Handelgesellschaftk, or OHG); and the non-trading partnership (the Gesellschaft bürgerlichen Rechts, or GbR). Whereas corporate bodies are considered legal entities, partnerships are only partial legal entities. As such, all legal rights and duties apply to corporate bodies but partnerships are not subject to them to the same extent. Because a partnership necessarily involves more than one shareholder, there cannot be a sole shareholder in its legal structure. A corporate body, on the other hand, can have just one shareholder.

The public company is governed by a board of directors, a supervisory board, and shareholder meetings. The owners are shareholders.
Shareholders have specific rights, including:

  • The right to vote (one share, one vote)
  • The right to call a meeting with 20% of the votes
  • The right to change the constitution with a three-quarters majority
  • The right to vote or veto substantial property transactions
  • The right to use profits from account
  • The right to raise or reduce capital

Directors of public companies in Germany bear the duty of loyalty and the duty to exercise competent judgment. Supervisory boards are the only authority that can remove an executive director (company members cannot). Owners of private companies with limited liability (GmbH) are not personally responsible for company debts. In the eyes of the law, the company is a legal person responsible for its debt.  Private companies with limited liability go through a formation process to reach full legal status. The first step is becoming a founding association. The second step is becoming a founded company. The third and final step is becoming a fully registered GmbH. At this point, the GmbH attains full legal status. Partnerships can be limited partnerships or general partnerships, and general partnerships are either trading or non-trading (OHG or GbR). There is a difference between the two in debt liability. OHG partners are liable for partnership debt; KG partners (limited partners, not general partners) have their liability determined and fixed at their partnership contribution. Partnerships are not legal entities. However, they can acquire rights and title to real estate. They also can sue or be sued and can incur liabilities.

History of American Law

It is generally agreed that American law, both at federal and state levels, arose out of the English common law system. Common law can be broadly described as a system that is based on precedent; where treatment of cases is consistent because judges look to past similar (or common) cases and make judgments that are consistent with the decisions made in those past cases. The idea is that consistent principles applied to similar facts yield similar outcomes. In unique instances in which no historical case exists that created a precedential decision, judges create law by making judgments that create a precedent.

All future similar cases then follow the example set, and judges are bound to that precedent. English law has been a common law system since 1189 when the Normans invaded and occupied England. Components of Norman law, which developed in the 10th century after the Vikings settled in Normandy (and which survives today in the legal systems of Jersey and Guernsey, off the coast of France), became assimilated into the English law system. Early English common law developed as justices and judges took existing writs (written orders issued by monarchs) and adapted them—with the inclusion of precedent and common sense—into a consistent core or body of law.

English law followed everywhere the British went into their Empire, including the United States. It gave rise to American law and provided the foundation for many traditions and policies. The US Constitution outlawed some practices, such as bills of attainder (acts that declare a person guilty and punishable without a trial) and general search warrants. But other methods, such as the principle of stare decisis (obligation to honor precedent set in earlier decisions), were adopted almost in their entirety. English law was formally adopted or integrated into American law in some ways.

One way was through the enacting of “reception status,” basically stating that English common law (especially judge-made law) was the law of the state. All states except Louisiana have enacted reception status. Some states set a cutoff date for the response condition, such as the date the colony was founded. A second way was through the formal reenactment of some British statutes that were in effect during the American Revolution time. Two examples are the Statute of Frauds and the Statute of 13 Elizabeth. These statutes and others are often cited in current American cases.

Despite its undeniable roots in English common law and the existence of reception statutes, American law has made its way and created its traditions. In the 19th century, American courts developed their rulings, principles, and precedents. In the period of a hundred years between 1810 and 1910, the number of legal reports filed went from 18 to over 8000. As American law developed fully, it leaned less and less on English tradition. Today classic British cases are occasionally cited, but current English cases are rarely mentioned.

American Corporate Law
American corporate law is entirely different from German corporate law, beginning with forms of business. Three business forms exist in the United States: corporations, partnerships, and sole proprietorships. A sole proprietorship is the purest form of a business in the U.S. One individual can start it, and when it comes to taxes, that individual does not have to pay corporate taxes. He or she only reports profits on their tax returns. The owner of a sole proprietorship is personally liable for lawsuits filed against the business.

For this reason, sole proprietors will often upgrade to an LLC structure. An LLC is a Limited Liability Corporation or Company with the primary advantage being the protection of personal assets. If an LLC becomes the target of a lawsuit, the company’s assets are liable, not the personal assets of the owner(s). An LLC can have multiple owners and is governed by operating agreements.C corporations, and S corporations are different from LLCs.C corps are subject to double taxation, meaning that both the company and individual shareholders must pay taxes. In an S corp, shareholders pay all taxes.C corps can have an unlimited number of shareholders. S corps are limited to 100 shareholders, all of whom must be U.S. citizens or residents. Both C and S corp owners and shareholders are not personally liable for company debts or lawsuits. Partnerships are another business form common in the U.S. These are structured as either general partnerships or as limited liability partnerships. In general partnerships, owners are liable for lawsuits against the business and business debt. In limited liability companies, owners are not responsible for lawsuits or business debt.

Differences Between American Law and German Law

The use of juries is one of the biggest differences between American and German law.
In the US, defendants have a right to trial by jury. In Germany, a judge or a panel of judges decide cases. Sometimes judges are assisted by lay judges called Schöffen. Their votes carry the same weight as the official judge’s vote. Juries in the United States only serve for the course of a single trial. Lay judges in Germany serve for several trials with the same judge. Judges in the US bow to the jury’s decision (although in some cases they can overturn a jury’s decision). In Germany, the judge and the Schöffen consult together and are privy to all case materials and information for their decision.

In the U.S., criminal trials often result in a defendant giving testimony that will help in the conviction of other criminals. In return, the defendant gets a lighter sentence. In Germany, there are rarely any such deals made. There is resistance to lessening punishment in exchange for information. In Germany, once a prosecutor attains the position, he or she is in that position for life. In the U.S., prosecuting attorney positions are fluid and non-permanent. When a new president takes office, typically federal U.S. attorneys are replaced by attorneys who belong to the ruling party. American courts and German courts view confessions differently. In Germany, confessions are considered pieces of evidence, and while they may result in a reduced sentence for the defendant, the case still has to be tried. In the U.S., confessions are discouraged; if a defendant pleads guilty, there is no trial, and the case proceeds to the sentencing phase. German criminal code is streamlined and relatively uncomplicated. There is no common law underlay since the federal government establishes a criminal and civil code. U.S. criminal code is contained in multiple volumes at the national level with additional code at the local and state levels. Common law, with its roots dating back to the 11th century as described above, is a weighty presence in American law.

The punishment handed out by U.S. courts is generally harsher than punishment handed out in Germany. However, Germany does have the Sicherheitsverwahrung, a provision in which a judge can decide that, even after serving their sentence, a criminal is still a danger to society, and he or she can be held indefinitely. Anonymous crime reporting programs are common in the U.S. These reward anonymous crime tipsters for calling in information that leads to convictions. This type of program is frowned upon in Germany, where it is generally viewed that such programs encourage false accusations and also hearken back to the days of the Third Reich when people were called on to spy on each other. Lie-detector tests are used as a matter of course in the U.S. to check suspect statements. (However, results are only admissible in court under certain circumstances.) German courts consider lie detector tests to be unreliable and inadmissible as evidence. Bail is practiced in the U.S. and not practiced in Germany. In the U.S., a person arrested for a crime either goes to jail or pays money (bail) to stay out. Germans consider this a practice that caters to the rich and is entirely unfair. Defendants only await trial in jail if they are deemed dangerous or a flight risk.

The acceptability of undercover operations differs between the U.S. and Germany. German police tend to run undercover operations only in weighty cases of organized crime. U.S. police routinely run undercover operations to bust prostitution rings or rout out drug dealers and the like. U.S. police can pose as criminals to get information that leads to convictions. German police may not pretend and deceive to acquire evidence. Class action lawsuits are permissible in the U.S. under civil law. These are filed by groups of people with similar complaints, usually alleging fraud or negligent action or the like. Lawyers typically work on contingency and get a percentage of the final settlement (often lucrative). Class action lawsuits do not exist in Germany and lawyers may not work on contingency for a portion of the agreement.In general, U.S. courts award much higher damages than German courts do. U.S. corporations and certain professionals, such as those in the healthcare field, thus have to go to significant lengths to protect themselves from lawsuits.

Partial list of German law schools

  • Augsburg: Augsburg Universität – Law School
  • Bayreuth: Bayreuth Universität – Fachbereich Rechtswissenschaft
  • Berlin: Humboldt-Universität zu Berlin – juristischen Fakultät
  • Bonn: Rheinische Friedrich-Wilhelms Universität
  • Cologne: Universität zu Köln – Rechtswissenschaftliche Fakultät
  • Dusseldorf: Heinrich-Heine-Universität – Faculty of Law
  • Frankfurt: Johann-Wolfgang-Goethe Universität – Fachbereich Rechtswissenschaft
  • Hamburg: Bucerius Law School
  • Hannover: Gottfried Wilhelm Leibniz Universität – Faculty of Law
  • Mannheim: Universität Mannheim – Fakultät für Rechtswissenschaft und Volkswirtschaftslehre
  • Munich: Munich Intellectual Property Law Center
  • Saarbrücken: Universität des Saarlandes – Faculty of Law and Economics
  • Trier: Trier Universität – Rechtswissenschaft
  • Würzburg: Julium Maximilian University of Würzburg – Juristische Fakultät

Partial list of American law schools:

  • Southern California Institute of Law·
  • University of California, Berkeley School of Law·
  • Yale Law School·
  • Georgetown University Law Center·
  • Notre Dame Law School·
  • Harvard Law School·
  • Rutgers School of Law·
  • Cornell Law School·
  • Duke University School of Law·
  • Vanderbilt University School of Law·
  • George Mason University School of Law·
  • Case Western Reserve University School of Law

German Law Firms

  • Holger Siegwart is an example of a German international law firm. A boutique law firm, it practices law in several specialized areas: German law, cross-border representation, and cross-border litigation.Holger Siegwart founded the firm. He practiced law in Germany for many years before establishing his international firm. He now handles cross-border representation and litigation. Other examples of German international law firms include:
  • Freshfields Bruckhaus Deringer·
  • Hengeler Mueller·
  • Haarmann Hemmelrath·
  • Gleiss Lutz·
  • CMS Hasche Sigle·
  • Nörr Stiefenhofer Lutz·
  • Wessing·
  • Beiten Burkhardt
  • Urban Thier & Federer Rectsanwaelte

Urban Thier & Federer Rechtsanwaelte (“UTFR”) is based in Munich and Aachen, Germany, and operates as an international law firm in cooperation with Urban Thier & Federer, P.A. (“UTFPA”), a professional association based in the United States and with offices throughout the United States.
Given its structure and affiliations, including with other law firms in the United Kingdom and throughout Europe, UTFR is able to competently and efficiently serve the needs of individuals and business entities in a wide range of legal matters. This is in sharp contrast to some of the other larger global law firms which, due to their structures and size, are unable to provide cost-effective and efficient legal services.

American Law Firms

  • Greenberg Traurig is the third largest law firm in the United States and also an example of an international law firm. It was founded in 1967 by Larry J Hoffman, Mel Greenberg, and Robert Traurig. Currently, the firm operates 37 offices around the world, including in Latin America, Europe, the UK, the Middle East and Asia. Its largest office is in New York City. 1600 attorneys work for Greenberg Traurig in the United States alone. An additional 1800 attorneys are employed by the firm worldwide. Today the firm operates in Britain as Greenberg Traurig Maher LLP and in Warsaw, Poland, as Greenberg Traurig Grzesiak sp.k.  Other examples of U.S.  international law firms include:
  • Baker & McKenzie·
  • DLA Piper·
  • White & Case·
  • Shearman & Sterling·
  • Cleary Gottlieb Steen & Hamilton·
  • Mayer Brown·
  • Latham & Watkins·
  • Weil, Gotshal & Manges·
  • Jones Day·
  • Skadden, Arps, Slate, Meagher & Flom·
  • Dechert·
  • Sullivan & Cromwell·
  • McDermott Will & Emery·
  • Coudert Brothers·
  • Sidley Austin
  • Urban Thier & Federer, P.A.

Urban Thier & Federer, P.A. (“UTFPA”) is a United States-based professional association with offices throughout the United States. UTFPA operates as an international law firm in cooperation with Urban Thier & Federer Rechtsanwaelte, based in Munich and Aachen.

Given UTFPA’s structure and affiliations, including its membership in and affiliation with the Galexy International Association of Lawyers, UTFPA is able to competently and efficiently serve the needs of individuals and business entities in a wide range of legal matters throughout the United States and Europe. This is in sharp contrast to most of the larger United States-based global law firms which, due to their structures and size, are unable to provide cost-effective and efficient legal services.

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