GERMANY Law and Practice Contributed by: Michael Josenhans, Anouschka Zagorski and Christina Banz, Freshfields
6. Enforcement 6.1 Enforcement of Collateral by Secured Lenders By law or pursuant to the relevant security agreement, the enforcement of German collateral is only possible if and once the secured claims have become due and payable. In many cases, security agreements contain (additional) conditions, requiring an event of default to have occurred and be continuing and/or the loan to have been accelerated. However, certain pre-enforce- ment securing steps are sometimes permitted without a due and payable claim as long as an event of default is continuing. Enforcement by law generally requires the enforc- ing creditor to obtain an enforcement title in court. This requirement is often either waived (eg, in share pledges) or avoided by immediate submission to fore- closure (eg, in land charge deeds). The further enforcement procedure depends on the type of security, as follows. • A security assignment over claims is enforced by the secured party collecting any claims from the debtors. • A surety or guarantee is enforced by seeking a court title for payment against the debtor. • A share pledge is enforced by way of a public sale (ie, an auction). This is subject to a prior notice period typically limited to five business days. After the secured debt has become enforceable, the pledgor and pledgee may also agree on a private sale – a forced private sale or appropriation is not permitted. • An account pledge is enforced by instructing the account bank to pay any amounts standing to the credit of the account to the pledgee. • Land charges/mortgages are primarily enforced by way of public auction. This process can be expect- ed to take at least 12 months. Where the charged real property generates income, it is also possible to place the property into forced administration and to use the generated income to pay down the secured debt – this is often quicker. In any event, the enforcement of a land charge requires that six months’ prior notice be given to the debtor.
6.2 Foreign Law and Jurisdiction In general, parties may contractually agree on the governing law of their agreements. Under the Rome I Regulation (Regulation (EC) No 593/2008), in general the parties have the right to choose any governing law, even without a specific connection to the case. Similarly, the parties may contractually agree to submit to a foreign jurisdiction. Depending on which foreign jurisdiction is chosen, this submission will be legally binding in accordance with different applicable regula- tions, conventions or laws. A waiver of immunity will generally be upheld by German courts. However, assets that serve a spe- cific public purpose generally benefit from sovereign immunity under German law, according to Section 882a of the German Code of Civil Procedure ( Zivil- prozessordnung – ZPO). 6.3 Foreign Court Judgments Under the Brussels I Regulation recast (Regulation (EU) No 1215/2012), judgments in civil and commer- cial matters delivered within an EU member state are (with very limited reasons for rejection) automatically acknowledged in all EU member states, regardless of whether or not the judgment is final and binding. In addition, the Hague Judgments Convention 2019 provides a framework for the recognition and enforce- ment of judgments in civil and commercial matters between contracting states (which, since 1 July 2025, include the United Kingdom). Unlike the Hague Con- vention on Choice of Court Agreements 2005, the Hague Judgments Convention applies regardless of the existence of exclusive jurisdiction agreements and, subject to certain exceptions (such as fam- ily law, insolvency or arbitration), enables simplified cross-border enforcement. The criteria and grounds for refusal set out in the Hague Judgments Conven- tion are applied by German courts when recognising judgments from other contracting states. When the fundamental criteria for recognition (or rejec- tion) are governed by an international treaty, German courts will apply those criteria.
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