GERMANY Law and Practice Contributed by: Michael Josenhans, Lucas Lengersdorf and Beatrice Zobel, Freshfields
agent. This agent will hold any transaction security on trust for the secured finance parties while parallel debt structures are often used to grant an individual/ parallel claim to the security agent, enabling it to hold transaction security for any and all obligations under the finance documents. 6. Enforcement 6.1 Enforcement of Collateral by Non-Bank Secured Lenders By law, or pursuant to the relevant security agree - ment, 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- enforcement 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 guarantor. • A share pledge is generally enforced by way of a formalised public sale (ie, an auction). This is sub - ject 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. If the shares subject to the pledge are publicly traded, the shares may be sold in a sale by private agreement ( freihändiger Verkauf ) on the basis of their exchange price.
• 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. Typically, creditors try to find consensual solutions to avoid enforcement actions. The most commonly threatened form of enforcement is a share enforce - ment of the SPE (despite the formalistic share enforce - ment procedure). 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), the parties generally 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.
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