Smaller Is Better: Selecting A German Legal Adviser

Monday, May 2, 2011 - 01:00

Editor: Describe your office, including its staff, types of clients and scope of practice.

Leissner: Our office is relatively new, having been established in October 2007. We have experienced considerable growth since then and now have 20 lawyers practicing in all fields of law.

Much of our work involves real estate funds, which requires expertise in a mixture of real estate law and regulatory law. For example, for an open-ended real estate fund to operate in Germany, it must comply with the German Investment Law that regulates such entities. We provide advice to German real estate companies, real estate funds and their institutional clients and investors on both real estate legal issues and on regulatory matters arising under the Investment Law. We also help foreigners, including U.S. corporations, structure their activities in Germany and Europe in a way that complies with the respective regulatory laws.

At King & Spalding, we have continued to build additional capabilities in our areas of strength, with the goal of providing our clients with deep expertise that allows us to deliver high-quality legal services in an efficient manner. As a result, our clients have entrusted us with complex, high-stakes matters. We hear from clients that our keen interest in productive working relationships also sets us apart. We are a firm that has a unique culture, and we want to grow in a way that will enable us to preserve that culture.

Editor: Do you handle litigation?

Leissner: Yes. We are involved in every area of the law. Although our principal focus is on helping those in the real estate industry with transactional matters and regulatory issues, when a real estate client comes to us, we can handle all its legal needs, including litigation. For example, considerable litigation is taking place in Germany attacking the practices of open-ended real estate funds. We find ourselves defending a number of these cases for investment management companies that are the fund sponsors.

Editor: How has Germany weathered the recent tough economic climate?

Leissner: Let me focus on real estate since this is my field. The real estate industry remained relatively stable even during the severe recession that followed the onset of the economic crisis. We are now seeing a real pick up in business with most real estate investors restarting their investments or sales, but this does not mean that there was no deal activity in Germany during the depths of the recession. Even then there was a constant deal flow, but not at the same level that was achieved prior to the recession.

Starting in the second half of 2010, we began to see a growing number of transactions, and now we are pretty close to the level of three years ago. This is true of the transactions in which our office specializes as well as in the real estate market generally. We see the same thing happening throughout the German economy, which grew at the rate of 3.6 percent during 2010.

Editor: To what do you attribute the success of the German economy? What about the success of the strategies that were implemented to permit German industry to rebound so rapidly, such as Kurzarbeit, whereby skilled workforces were kept intact even though factory orders dropped dramatically?

Leissner: Strategies like Kurzarbeit have been a tradition in German manufacturing. Over the years, German employers have been faced with cyclical ups and downs and have learned that it does not make sense to disband a skilled workforce. This is part of our economic culture and does not have much to do with governmental initiatives. Germany is probably one of very few, if any, countries anywhere that uses Kurzarbeit. German management has learned that if workers become unemployed, it is difficult to build back the labor force when production again picks up.

Editor: I understand that the German economy is based upon a more cooperative relationship between labor and management. Is that true?

Leissner: If I had to choose between "yes" and "no," I would tend to say "yes," but it is not that easy. There are parts of the real estate and other industries where this is true, but there are certain companies where it is completely untrue. Nevertheless, there is not the same sort of everyday battle and collision between management and labor you see in other countries. The deep involvement of labor in the activities and governance of many German companies has certainly contributed to their ability to overcome problems created by the recession and to gear up to serve the new markets that have opened up.

What certainly is true is that when the first signs of trouble in the worldwide economy appeared, management and labor in many companies operating in Germany got together to develop a strategy to successfully weather the recession. Labor agreed to wage and other concessions. Management looked for ways to keep as many workers on the payroll as possible, including using Kurzarbeit .

Editor: Has the recovery of the German real estate industry exceeded that of other EU countries?

Leissner: Germany will be the guest of honor of the leading international real estate trade fair next year. This may reflect the fact that the European and the worldwide real estate industries realize that the recovery of the German real estate industry is ahead of the rest of Europe. For many European and American investors, the German real estate market is the most attractive one and certainly the one to be in.

Editor: Is Germany the best location for the European headquarters of a global company?

Leissner: Germany is one of the most stable nations anywhere. We have a stable legal system, we have a stable political system, we have social security, and we have a political system that tends to be not too far left or too far right. Companies that establish their main European offices in Germany would have the benefits of being in a country where the rule of law prevails with a stable economy and political system.

Germany is in the heart of Europe with close economic and political relationships with all members of the EU. Just look at the map. If your EU headquarters is based in Germany you are in the middle of Europe, and you can use that location in order to serve operations in other countries in Europe and to its north, east and south. Germany is connected to cities throughout Europe by a superior transportation infrastructure, including high-speed passenger rail services that make these other countries readily accessible.

Many EU countries and those on its periphery have benefited from the success of Germany. Many German companies have supply chains that have contributed to the success of local companies in such countries. The goodwill that this generates benefits all companies with headquarters in Germany. All of this makes Germany an ideal place for a global company to locate its EU headquarters.

A further advantage of being in Germany is that the English language is almost more important than the German language. The English language is spoken by everybody in Germany, with the exception of some people not active in the business world. The other great advantage is that you will find that many Germans speak more than just one foreign language, so it is possible that wherever your business takes you in Europe or the nearby countries that there may be someone among your German employees who speaks the local language fluently.

There are some European countries that, unlike Germany, are more focused on their own languages. Of course there are some other countries in Europe that are equally open to foreign languages, but they may not have the other economic and locational advantages that Germany offers.

Editor: What cities should an American company look at in considering a central office in Germany?

Leissner: This is really hard to answer. If access to the financial markets is important, which is true of those involved with real estate funds, the number one location might be Frankfurt. Frankfurt is the financial center of Germany without any doubt. Nobody would even think of other cities in Germany if you're talking about the financial market and those businesses that need to be close to it.

If your company needs to be in the political center of Germany, Berlin is the German capital and houses the German Parliament and most of the important regulatory agencies. If your company is focused on technology, Munich might be an ideal location. If it depends on shipping, Hamburg is a good location.

The cities I mentioned are not the only cities that should be considered; the choice of a business location depends on the special needs of your company.

Editor: We have focused on the attractiveness of Germany as a place for a global corporation to locate its EU headquarters. What are some of the considerations that go into selecting Germany as a location for a distribution center or manufacturing activity?

Leissner: Much of what I have said would also apply to finding a location for production or other business facilities or distribution centers. However, many of the kinds of activities you describe can take place outside major cities with their high local taxes. If you just need some space and a workforce, but want to be in Germany, you don't necessarily have to go to a large city and incur the high local taxes and generally higher costs.

Editor: Let's assume a company needs assistance in determining where to locate in Germany and, once that decision is made, in conducting its activities in a legally proper way. Would your office be able to help such a company?

Leissner: Yes. Our focus on the real estate markets gives us unique insights into the relative advantages of possible locations throughout Germany, and the skills of the lawyers in our office enable us to provide the services required by a company that desires to set up its operations in Germany. We also offer the advantage of being part of a global firm whose skills we can draw on when needed.

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