Legal Developments in 2017

Companies and entrepreneurs will once again face a number of new legal developments in 2017. Here is an overview of what lies ahead:

Reformation Day declared a national public holiday in 2017

One man's meat is another man's poison: In 2017, the 500th anniversary of the alleged posting of the 95 Theses of Martin Luther on the door of the All Saints' Church (Schlosskirche) in Wittenberg, Reformation Day, on 31 October 2017, will be celebrated as a public holiday throughout Germany on a one-time basis. It is usually only residents of the States of Brandenburg, Saxony, Saxony-Anhalt, Thüringen and Mecklenburg-Vorpommern who are given this particular day off work; an – one-time – exception will be made in this 5th centenary year.

Minimum wage set to rise to €8.84

As of 1 January 2017, the minimum wage has increased from €8.50 to €8.84 (gross) per hour, and even more in particular sectors of industry, for example in the construction trade, in which it now amounts to €11.30 per hour in the states comprising the former West Germany and €11.05 per hour in the states comprising the former East Germany. The members of the Minimum Wage Commission (Mindestlohnkommission) had unanimously voted in favour of the increase on 28 June 2016, with the German Federal Government then approving their corresponding proposal at the end of October 2016. Every two years, the Commission resolves, in accordance with the German Minimum Wage Act (Mindestlohngesetz), upon whether to raise the amount of the minimum wage – and will do so again in 2018.

The possibility of flexible retirement is here, increasing the appeal of working past the official retirement age

In 2017, new flexible retirement arrangements will provide older employees with more options for flexibly transitioning from their working lives to retirement. It is currently the case that anyone retiring at the age of 63 but continuing to earn more than €450 per month may well find himself or herself subject to severe reductions in his or her pension entitlements. Now, an upper limit of €6,300 applies to the earnings of individuals continuing to work past retirement age – with 40 % of any supplementary income exceeding this threshold being deducted from their pension entitlements.

New provisions governing the due date for dividend payments in the case of stock corporations (Aktiengesellschaften)    

New provisions governing the due date for dividend payments enshrined in the 2016 Amendment of the German Companies Act (Aktiengesetz – AktG) have come into force with effect as of 1 January 2017. Pursuant thereto, dividends will in the future be payable to shareholders on the third business day following the corresponding annual general meeting, although the annual general meeting or the articles of association may stipulate a later due date. Thus, should the company wish, for example on cash flow- or reporting-related grounds, to have the due date for the payment of dividends occur during a particular quarter, provisions should be included in the articles of association to that effect.

New legislation governing construction contracts

New provisions reforming the existing legislation governing construction contracts and amending the regulation of liability for defects pursuant to the law governing the sale of goods are likely to come into force as of mid-2017, and will comprise, among other things, a considerable intensification of the liability provisions also applicable to suppliers: Should any products installed in the context of a construction projects prove to be defective, the supplier in question will be required not only to provide a non-defective replacement therefor, but also to assume the associated dismantling and re-installation costs. It remains to be seen whether it will be possible to contractually exclude such an outcome. Construction principals will also be subject to new obligations: To date, non-action has in individual cases been deemed to constitute non-acceptance of the completed construction work, however in the future this will no longer suffice. Rather, construction principals will be required to identify specific defects constituting grounds for any such non-acceptance within a reasonable deadline.

New developments with regard to the hiring out of temporary workers

As of 1 April 2017, far-reaching amendments in the context of the hiring out of workings will come into force: In the future, it will only be possible to hire out an individual temporary worker for a maximum period of 18 months; however, it will be possible to fill a single position with (various) temporary workers over a period in excess of 18 months. Interruptions of short duration will not have the effect of causing the 18-month period to commence anew. In the future, temporary workers will as a general rule be entitled to receive the same remuneration as permanent employees after a period of no more than nine months. In addition, they will also count towards the threshold values pursuant to the German Works Constitution Act (Betriebsverfassungsgesetz) and in the corporate co-determination context. Existing permits for the hiring out of temporary workers will now only cover contractual arrangements which are explicitly identified as arrangements for the hiring out of temporary workers.

New thresholds for EEG limits applicable to industrial enterprises

Another new 2017 German Renewable Energy Sources Act (Erneubare-Energien-Gesetz – EEG) has now come into force as of 1 January 2017. The core element of the reforming legislation is a systemic move away from guaranteed feed-in tariffs towards a tendering model. At the same time, more companies are set to benefit from the capping of the EEG levy in the future. Companies which attain the minimum consumption threshold of 1 GWh p.a. and are included on the so-called "List 1" of an Annex to the EEG in terms of their business purpose will be able to apply for a capping of the EEG levy where they realise a degree of "electricity cost intensity" of 14 % (as compared to a requirement of 17 % in 2016). Furthermore, the statutory definition of the "reorganisation" of companies pursuant to the EEG will be amended, thereby facilitating the submission of applications in the wake of business transfers by way of asset deals.

Amendment of the law governing medicinal devices

Companies will face extensive changes in the medicinal devices context in 2017, particularly as a result of the new EU Medical Device Regulation (MDR) and the amendment of the German Regulation Governing the Operation of Medical Devices (Medizinprodukte-Betreiberverordnung – MPBetreibV) and the German Regulation Governing Safety Plans for Medical Devices (Medizinprodukte-Sicherheitsplanverordnung – MPSV).

The MDR will come into force in stages over the next three years, probably from the second quarter of 2017 onwards, and will supersede the previously applicable EU Directives on Medical Devices and Active Implantable Medical Devices. The MDR will impose more stringent requirements on manufacturers of Class I reusable surgical instruments and of Class IIb and Class III devices; in particular, the requirements relating to technical documentation, market monitoring and clinical trials for new products are set to become more stringent. In addition, not every Notified Body will in the future be able to accredit all types of products. Manufacturers of medical devices should therefore inform themselves as to the products which the previously relevant Notified Bodies will be able to accredit going forward. The new MPBetreibV is already in force as of 1 January 2017, and stipulates that larger facilities with more than 20 employees will in the future be required to appoint an officer responsible for ensuring the safety of medical devices.

New provisions regulating vehicle exhaust emissions

Two amendments of the legislation regulating exhaust emissions which are of particular relevance for vehicle manufacturers and dealers will take effect as of 2017, with the switch from the currently applicable New European Driving Cycle (NEDC) to the new Worldwide Harmonized Light-Duty Vehicles Test Procedure (WLTP) being implemented as of the third quarter of the year. However, given that both of these test procedures are purely bench test procedures which do not reflect actual vehicle consumption or emissions levels, Real Driving Emissions (RDEs) will also be assessed in the type testing context in the future. Such RDE testing will be introduced in stages, initially in connection with nitrogen oxide emissions by diesel engines and subsequently also with regard to particulate matter in the case of diesel and spark ignition engines. In the interests of softening the impact of these developments, vehicle emissions may exceed the threshold value of 80 milligrams of nitrogen oxide per kilometre by 110 % up to 31 December 2019 and by 50 % thereafter. Operating permits will not be issued for any models failing to meet these requirements.

Certification mark and graphic representation

Two important changes will affect EU trademarks, i.e. trademarks which are subject to protection within the entire European Union, in 2017. On the one hand, a new type of EU trademark will be introduced, namely the so-called "EU certification mark", in response to industry demand for a type of trademark of its own for the seal of quality which has proven to be of great importance in practice. Unlike "normal" trademarks, which serve as an indication of the origin of a particular product, it is intended that the certification mark will function, vis-à-vis consumers, as a guarantee of the particular quality of the goods or services in question. On the other hand, the requirement as to graphic representation in connection with applications for trademark protection will no longer apply, with the result that even marks which are not capable of graphic representation, such as sounds, will be eligible for trademark protection. In contrast, scent and taste marks will remain ineligible for protection, given that no means exist for recording and rendering these in any generally accessible register.

New developments in the law governing actions brought by creditors contesting transactions entered into by a debtor prior to the initiation of insolvency proceedings

A number of developments relating to the bringing by creditors of actions contesting transactions entered into by a debtor prior to the initiation of insolvency proceedings have not yet come into force but are likely to do so over the course of the first half of the year. Thus, it is to be expected, in particular, that the current 10-year limitation period for the bringing of such actions will be reduced in cases involving wilful intent. It remains unclear whether the presumption developed by the courts in favour of the conclusion of a payment (by instalment) arrangement constituting an indication of the existence of knowledge on the part of the one contractual party of the insolvency of the other contractual party is to be adopted. The Draft Bill intended to reverse any such presumption, and states are also keen to uphold this approach. There also appears to have been a lack of consensus as regards the deliberations of the Judicial Committee on whether the possibility of bringing such actions on grounds of wilful intent is to be excluded in the case of cash transactions.