Germany: What happened in 2021 and significant events in 2022
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Germany taking the lead in GAFA “gatekeeper” proceedings: The Federal Cartel Office (FCO) has opened proceedings against all big tech companies to assess whether they have a paramount significance for competition across markets. If so, the FCO will investigate whether they have abused their position under Section 19a of the German Competition Act. The outcome is still pending but the FCO’s decision may impact the EU Digital Markets Act.
Expansion of EU Merger Control Jurisdiction: The EC has expanded its jurisdiction based on new guidance on its referral mechanism under Art. 22 of the European Merger Control Regulation (EUMR). It can now explicitly review non-reportable deals after an upwards referral from a Member State none of which would otherwise have jurisdiction over the deal. The guidance is not limited to specific sectors, but clearly targets healthcare and tech companies.
Reform of the Money Laundering Law: A reform “to strengthen the fight against money laundering by means of criminal law” came into force in March
Covered Bond Act: The Covered Bonds Directive primarily standardising the requirements for covered bonds has been implemented in Germany by amending the German Covered Bond Act accordingly.
Benchmark Regulation: The Benchmark Regulation was subject to amendments, giving the EC the power to set up statutory replacement rates for tough legacy contracts. The EC has already made use of this new power by issuing implementing regulations in relation to a statutory replacement rate for EONIA and CHF LIBOR. It remains to be seen if the EC will make use of this power for other rates.
Judgment on deemed consent and standard business terms: In a judgment by the German Federal Court of Justice on 27 April 2021, the German court held certain clauses deeming the customer's consent in the event of an amendment to the Bank's standard business terms to be invalid.
Act to strengthen financial market integrity: As a response to the Wirecard scandal, the new law tightens several requirements in the field of corporate governance and accounting. Larger companies must now have an audit committee and stricter requirements regarding annual audits. Further to this, the German regulator takes on a stronger role in supervising and enforcing compliance matters.
Reform of the Partnership Law: A far-reaching modernisation of the law on partnerships was passed in June that will, for example, establish a new register for non-commercial partnerships (GbR), enhance cross-border mobility of partnerships and introduce modernised rules on decision-making. The new rules come into force on 1 January 2024.
Covid-19 - Remote working, occupational health and safety and employees’ vaccination: In 2021, German employment law has been heavily influenced by COVID-19. During lockdown, employees were obliged to work from home where possible. Employers have been obliged to constantly adapt their health and safety concepts to the state of the pandemic and to provide for social distancing and masks. Further, employers have been able to access and use employee data on their vaccination status.
Facilitation of the bundling of claims: The Federal Court of Justice upheld a mass claims collection model that bundled the claims of several parties into one action by way of assignment to a legal services provider (Inkassozession). In parallel, the German legislator also addressed certain aspects of this business practice.
Revision of Works Constitution Act: The German Works Constitution Act (BetrVG) now offers more protection for employees who organise the implementation of a works council and applies the simplified works council elections to more operations. Further, it now includes a co-determination right to mobile working and provides for the employer to be the controller within the meaning of the data protection regulations for data processing by the works council.
New energies: The Government increased the tender amounts for the promotion of electricity from renewable energies to meet its ambition of reaching a share of electricity generated from renewable sources of 65% by 2030. New rules for hydrogen-only grids and exempted electricity used to produce green hydrogen from the renewable energy surcharge, were introduced. The Fast Charging Act introduces tenders to establish fast charging points nationwide.
Climate change litigation: The Federal Constitutional Court ruled that the provisions of the Climate Change Act are incompatible with fundamental rights. Subsequently, in addition to numerous copycat lawsuits to enforce stricter regulations at the level of the federal states, NGOs have also taken companies to German courts.
Supply Chain Due Diligence: With the German Supply Chain Due Diligence Act, the German legislator has set binding requirements that in-scope companies will have to fulfil as of January 2023.
MiFID II quick-fixes: Amendments to MiFID II were adopted in February and aim to remove unnecessary burdens to participants in the financial markets sector and also introduce measures that mitigate the economic turmoil caused by the Covid-19 pandemic.
Outsourcing- amendments to Minimum Requirements for Risk Management: EBA’s guidelines on NPL management, outsourcing arrangements and on ICT and security risk management were transposed to national administrative practice by amendments to MaRisk. In parallel, the Supervisory Requirements for IT in Financial Institutions (BAIT) were updated.
New regime for Crowdfunding Service Provider: Since 10 November 2021, the EU Crowdfunding Service Providers Regulation (ECSPR) is directly applicable in all Member States as a unified EU standard for lending and equity-based crowdfunding.
Reform of the Patent Act: Germany passed changes to the Patent Act in June 2021, especially with regard to the claim for an injunction.
Fund Location Act: The Fund Location Act transposes the European Directive/2019/1160 on cross-border distribution of collective investment undertakings into national law and aims to strengthen Germany as a fund location and reduce bureaucracy hurdles. The Act brings several changes to the German Investment Code (KAGB) and introduces, amongst others, an Investment Development Fund. Furthermore, it sets out new rules for the cross-border marketing of undertakings for collective investment.
New Restructuring Law: A new restructuring law came into effect in January. Financially distressed companies now have access to pre-insolvency restructuring that offers preventive tools for a potential out-of-court process. Amongst others, it permits companies to reorganise their relations with creditors through majority decisions and to overrule dissenting creditors under certain conditions through cross-class-cram downs.
Transparency Register and Financial Information Act: The Act expanded the obligation for companies to file information on their ultimate beneficial owners (UBO) with the transparency register from previously 0.4 to 2.3 million companies (as estimated by the Government). In particular, listed companies and group companies are affected.
Act to Modernise the Corporate Income Tax Law: The core of this Act is the option model for partnerships enabling them to be taxed like a corporation upon application. The partnership itself will thus become the subject of taxation.
Anti-Tax Avoidance Directive (ATAD) Implementation Act: The ATAD has finally been implemented into national law. The Act modifies existing regulations on disentanglement, entanglement and exit taxation, and tightens the regulations against hybrid mismatch arrangements.
Real Estate Transfer Tax (RETT) Reform Act: With this long-awaited reform, real estate transfer tax rules on share deal transactions have significantly tightened as from 1 July 2021.
Tax Haven Prevention Act: With this Act, amongst others, EU Council conclusions on the so-called EU blacklist were newly introduced to national law. The Act encourages jurisdictions to comply with recognised standards in the areas of transparency in tax matters and unfair tax competition and to implement the BEPS minimum standards.
Withholding Tax Relief Modernisation Act: The Act provides, amongst others, for significant changes to regulations on the withholding tax relief procedure and contains relevant legal adjustments to prevent associated abuse.
New EU Medical Device Regulation: The new Regulation increases the obligations for manufacturers, importers and distributors and requires a re-certification under the new rules. In particular, some software may now be subject to a higher risk classification which means a listed body may need to be involved in the certification process.