German businesses - whether with their subsidiaries, branches or as joint ventures - are present all over the world. This is by no means true only of major German corporations; medium-sized German companies (mittelständische Unternehmen) are at least equally likely to have an international presence, sometimes in one or two locations in selected countries, often in some 25 to 40 locations worldwide. Managing the legal affairs of such multi-jurisdictional set-ups poses significant legal and other challenges, particularly in developing countries and emerging markets such as China, India, Brazil, Vietnam, or Indonesia. Many of these countries have no commercial law tradition to speak of. In others, statutory and case law change much more rapidly than is customary in Western countries. In what follows, we illustrate some of the challenges this may pose by way of examples we have encountered in our practice.


Much of the commercial law jurisprudence in China is either of very recent origin, or only just developing. There is no established case law, the legal writings so familiar in the Western world are lacking, and more often than not, laws are not applied uniformly throughout the country. This means that, if we, as German legal advisors, would like to know how a certain Chinese law provision is to be interpreted, we have to rely on the explanations of our Chinese colleagues. In addition, and to obtain as much legal certainty as possible, we usually also consult the competent official at the appropriate authority for his / her legal understanding of a particular matter. But what is the case in Shanghai may not be the case in Guangzhou - and in Peking most authorities operate according to a system of rotation, which means that officials change from case to case. As a consequence, legal issues may be interpreted differently by different officials.


"Other countries, other customs" also means that what might seem quite obvious to us, may be seen quite differently elsewhere. Brazil offers two cases in point. Although the Brazilian "limitada" is modelled on the German GmbH (i.e. the German private limited liability company), a limitada is required to have at least two shareholders. It is accordingly neither permissible, nor possible, to have a wholly-owned subsidiary in Brazil. Brazilian labour law also has some surprises in store. Thus managing directors of limitadas are not obliged to retire from their position on attaining the age of 65, unless they are paid compensation - which may easily equate to an annual salary. For Brazilian law neither provides for a managing director's employment relationship to automatically terminate at the age of 65, nor does a managing director's 65th birthday justify the termination of the employment relationship.


In India, a welcome liberalisation process commenced in 1991, and continues to the present day. In consequence, legislation is continuously being amended and modernised. This process may, however, also contain unexpected traps. Consider the following example: A German business is operating a joint venture in India with Indian and other joint venture partners. A five-member board is responsible for the management of the joint venture company. The members of the board are resident in India and in various European countries. They accordingly take their decisions by regularly communicating with one another by way of video conferencing facilities. The astonishment of the board may be imagined, when, upon requesting legal advice in relation to certain matters, they were advised that all of their decisions are - and have been - invalid because, although board decisions via video conferencing facilities have been permitted under Indian law since 2011, they are permitted to be so taken only if the articles of association expressly provide accordingly.


To be successful abroad, businesses need excellent products and services. In addition, a careful analysis should be conducted of local conditions - preferably in advance. This should take into account both the applicable law, as well as "unwritten laws", i.e. matters, which have literally never been written down. For, while often great opportunities may await in emerging markets, the potential pitfalls may be equally existent.

Gerhard Manz, Barbara Mayer

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