GERMANY Law and Practice Contributed by: Leif Gösta Gerling, Matthias Krämer, Anna Reuber and Jiabao Gerling-Li, LPA
be governed by and construed in accordance with foreign substantial law. However, even if the JV agree - ment is governed by foreign substantial law, it still has to consider mandatory German (corporate law) provi - sions. For this reason, among others, JV parties often keep German substantial law as the governing law of the JV agreement. By default, and in the absence of deviating agree - ments, disputes in JVs are subject to the jurisdiction of German state courts. As an alternative, JV agreements may also be made subject to arbitration clauses. Germany is a signatory to the Hague Service Con - vention (1965) and the Hague Evidence Convention (1970). Germany does not allow international pre-trial discovery proceedings within German borders. Ger - many is also party to the New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards (1958). Foreign arbitral awards are enforced after the completion of exequatur proceedings. For - eign judgments are recognised on the basis of inter - national agreements. Other than that, German courts grant exequatur to judgments of states in which Ger - man judgments are also recognised (principle of reci - procity) but excluding cases where the foreign court asserted a jurisdiction that is considered excessive under German rules. Germany is also subject to various EU regulations that provide for easements when enforcing judgments from other EU member states, on the service of court documents and regarding the gathering of evidence in other EU member states.
each JV party to have the right to nominate one or more managing directors, thereby ensuring balanced representation. However, it is also possible for each JV party to appoint managing directors in proportion to its respective equity stake. In more complex or highly regulated JVs, the JV parties may appoint independ - ent or neutral managing directors to ensure balanced decision-making and compliance with legal or govern - ance requirements. In stock corporations, the board of directors is appointed by the stock corporation’s supervisory board, which in turn is appointed by the general meet - ing. Unlike the managing directors of a GmbH, the board members of an AG enjoy extensive freedom in their decisions and are not bound by instructions – ie, they are not obliged to follow instructions from the supervisory board and/or the general meeting. Regarding the managers or board members them - selves, there are generally no nationality or residency restrictions, so foreign individuals may serve as man - aging directors or board members. In fact, all manag - ing directors may live abroad; German law imposes no residency requirement. The only conditions are that managing directors must be able to properly fulfil their duties and must not be legally excluded from assum - ing the office of managing director or member of the board of directors. In practice, however, important tax and corporate considerations arise. While the GmbH’s statutory seat must remain in Germany, the place of effective management ( Ort der Geschäftsleitung ) is decisive for tax residence. If all managing directors operate permanently from abroad, the GmbH risks losing its German tax residency, potentially triggering double taxation or immediate taxation of hidden reserves. For this reason, practitioners often recommend appointing at least one managing director with strong ties to Ger - many and ensuring that key management decisions demonstrably take place in Germany. The articles of association and JV agreement can also provide for protective measures such as joint decision-making for certain transactions, veto rights or super-majority requirements to safeguard the inter - ests of minority shareholders. This ensures that man -
7. The JV Board 7.1 Board Structure
In German JVs organised as a GmbH, management is exercised by one or more managing directors rather than a formal board of directors as in an AG, whereas the managing directors are, by default, appointed by the shareholders of the JV in shareholders’ meetings. The articles of association and the JV agreement usually determine the number of managing directors, their appointment and removal rights, their scope of authority and decision-making rules. It is common for
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