Category Archives: Politics Law Society

Politics Law Society

Technical function not enough for trademark protection

Technical function not enough for trademark protection

Technical function not enough for trademark protection

According to trademark law, it is not possible to register marks as trademarks if they consist exclusively of a shape that is necessary to obtain a technical result.

Coffee capsules can be purchased in every supermarket, but not all coffee capsules are created equally. Only one provider was allowed to supply certain capsules made from aluminium. This patent protection has since been rescinded by the Bundespatentamt, Germany“s Federal Patent Office (Az.: 25 W (pat) 112/14). The protection under trademark law was rescinded to the extent that it covered coffee, coffee extracts, coffee-based preparations, coffee substitutes and synthetic coffee extracts. The Bundespatentamt justified this decision by stating that there were grounds for refusal pursuant to sec 3 para. 2 no. 2 of the MarkenG, Germany“s Trademark Act, in relation to these goods. It went on to say that the essential characteristics of this trademark served a technical function that was supposed to render its use in a coffee capsule machine advantageous.

We at the commercial law firm GRP Rainer Rechtsanwälte note that a mark can only be registered as a trademark if it possesses the distinctive character necessary to distinguish it from products and services of other providers. Three-dimensional marks, on the other hand, cannot be registered as a trademark if the shape is determined by the type of good itself or is necessary to obtain a specific technical result. The Bundespatentamt recognized this ground for refusal in the case of the coffee capsules.

As a rule, businesses need to be mindful that grounds for refusal can preclude registration of a trademark. There is said to be an absolute ground for refusal if there is a lack of distinctive character vis-à-vis the goods and services of other providers. This means that a mark must be suitably capable of distinguishing itself from other offerings such that consumers are able to attribute the goods or services to a specific business.

In addition, it is possible for there to be other grounds for refusal. For instance, the mark has to be capable of being displayed in a graphical format. Purely descriptive designations are equally impermissible, as there is a public interest against their exclusive use.

It is also important to ensure that existing trademark rights will not be infringed by registering a new trademark. Lawyers who are experienced in the field of trademark law can assess whether registering a trademark is possible and assert or fend off claims arising from trademark violations.

https://www.grprainer.com/en/legal-advice/intellectual-property-law-and-trademark-law/trademark-law.html

GRP Rainer LLP www.grprainer.com/en/ is an international firm of lawyers and tax advisors who are specialists in commercial law. The firm counsels commercial and industrial companies and corporations, as well as associations, small- and mid-sized businesses, self-employed freelancers and private individuals worldwide from offices Cologne, Berlin, Bonn, Dusseldorf, Frankfurt, Hamburg, Munich, Stuttgart and London UK.

Contact
GRP Rainer LLP
Michael Rainer
Augustinerstraße 10
50667 Cologne
Phone: +49 221-27 22 75-0
Fax: +49 221-27 22 75-24
E-Mail: info@grprainer.com
Url: http://www.grprainer.com/en

Politics Law Society

GRP Rainer Rechtsanwälte – Experience in directors“ liability cases

GRP Rainer Rechtsanwälte – Experience in directors“ liability cases

GRP Rainer Rechtsanwälte - Experience in directors" liability cases

Managing directors of a GmbH, a type of German private limited company, may be liable in the event of insolvency. A common bone of contention is the matter of payments made by the managing director after the onset of insolvency.

We at the commercial law firm GRP Rainer Rechtsanwälte note that a GmbH managing director“s risk of being faced with personal liability can materialize even in cases involving simple negligence. Liability on the part of the managing director can come into question, for instance, if he or she made payments after the onset of insolvency. The contentious issues here are whether the payments were allowed to have been made or whether they have diminished the insolvency estate. GRP Rainer has experience dealing with cases involving directors“ liability.

In its ruling of July 4, 2017, the Bundesgerichtshof (BGH), Germany“s Federal Supreme Court, took a position on which payments a managing director is still allowed to make after the onset of insolvency and when he or she is obligated to compensate for these payments (Az.: II ZR 319/15). According to the Court, the executive body“s obligation to pay compensation ceases to apply if the reduction in the insolvency estate caused by the payment is offset by a contribution that is directly linked to this. The contribution must be suited for use by the creditors. The BGH noted that performing work or supplying a service is generally not suitable for this purpose.

In the instant case, the insolvency administrator had brought an action against a „director“ of a company limited by shares pursuant to English law that was operating in Germany. The provisions under sec. 64 of the GmbHG, Germany“s limited liability companies act, apply to this company. The „director“ had initiated payments to public utility and telecommunications companies as well as paid wages between September 14 and December 9 of 2009. According to the insolvency administrator, the company had been insolvent since no later than September 9, 2009, resulting in the former demanding repayment of these costs.

The action was successful. After the onset of the insolvency, the managing director is supposed to preserve the remainder of the insolvency estate. The BGH held that should he or she nevertheless make payments that diminish the insolvency estate then they are liable to pay compensation. It is not the case in this context that any accrual to the estate should be viewed as an offsetting contribution to the diminished estate; there needs to be a direct economic link, it being noted that the rules on cash transactions pursuant to sec. 142 of the InsO, Germany“s Insolvency Act, do not apply here. Performing work or supplying services is generally not suitable for the purpose of offsetting the reduction in the estate.

Lawyers who are experienced in the field of company law can offer managing directors and other executive bodies advice.

https://www.grprainer.com/en/legal-advice/company-law/managing-director.html

GRP Rainer LLP www.grprainer.com/en/ is an international firm of lawyers and tax advisors who are specialists in commercial law. The firm counsels commercial and industrial companies and corporations, as well as associations, small- and mid-sized businesses, self-employed freelancers and private individuals worldwide from offices Cologne, Berlin, Bonn, Dusseldorf, Frankfurt, Hamburg, Munich, Stuttgart and London UK.

Contact
GRP Rainer LLP
Michael Rainer
Augustinerstraße 10
50667 Cologne
Phone: +49 221-27 22 75-0
Fax: +49 221-27 22 75-24
E-Mail: info@grprainer.com
Url: http://www.grprainer.com/en

Politics Law Society

GRP Rainer Rechtsanwälte – Valuating the compulsory portion

GRP Rainer Rechtsanwälte – Valuating the compulsory portion

GRP Rainer Rechtsanwälte - Valuating the compulsory portion

Spouses and children are entitled to the compulsory portion of an estate even if the testator fails to account for them in his or her will. That being said, the compulsory portion has to be claimed.

In the absence of a will or contract of inheritance, the rules of intestate succession apply. These may not be consistent with the testator“s wishes for various reasons. With the help of a testamentary disposition, the testator can personally determine how his or her estate will be distributed and also designate heirs who would not have been entitled to inherit pursuant to the rules of intestate succession. Notwithstanding this, the testator“s spouse or close relatives, e.g. his or her own children, are still entitled to the statutory compulsory portion under such circumstances.

Those entitled to the compulsory portion include the testator“s spouse, civil partner, children and potentially his or her parents as well. Completely disinheriting someone entitled to the compulsory portion is only possible under strict conditions.

However, valuating the compulsory portion can prove challenging. While it is true that the compulsory portion amounts to half of the statutory share in the estate, calculating this can be problematic because it is necessary to establish the value of the estate. We at the commercial law firm GRP Rainer Rechtsanwälte note that this issue frequently gives rise to disputes between those entitled to inherit according to the will and those entitled to the compulsory portion. Determining the value of the testator“s cash assets is unproblematic, whereas this is more difficult in the case of real estate and other assets, whose value it may only be possible to ascertain through an expert assessment.

In order to valuate the compulsory portion, the value of the estate needs to be ascertained. The persons entitled to the compulsory portion therefore have a right to information relating to the value of the estate vis-à-vis the heirs as well as the right to an estate inventory. On the other hand, the heirs are also entitled to demand information from those entitled to the compulsory portion concerning whether they received any gifts or contributions from the testator during the latter“s lifetime that count towards the inheritance.

Even if there is a valid will or contract of inheritance, it is still possible for disputes to emerge among the heirs when calculating the compulsory portion. Lawyers who are experienced in the field of succession law can offer advice and ensure that the testator“s testamentary dispositions are implemented in a manner that is complaint with the relevant legal provisions.

https://www.grprainer.com/en/legal-advice/private-clients/law-of-succession.html

GRP Rainer LLP www.grprainer.com/en/ is an international firm of lawyers and tax advisors who are specialists in commercial law. The firm counsels commercial and industrial companies and corporations, as well as associations, small- and mid-sized businesses, self-employed freelancers and private individuals worldwide from offices Cologne, Berlin, Bonn, Dusseldorf, Frankfurt, Hamburg, Munich, Stuttgart and London UK.

Contact
GRP Rainer LLP
Michael Rainer
Augustinerstraße 10
50667 Cologne
Phone: +49 221-27 22 75-0
Fax: +49 221-27 22 75-24
E-Mail: info@grprainer.com
Url: http://www.grprainer.com/en

Politics Law Society

GRP Rainer Rechtsanwälte – Assessment of a Berliner Testament

GRP Rainer Rechtsanwälte – Assessment of a Berliner Testament

GRP Rainer Rechtsanwälte - Assessment of a Berliner Testament

Spouses frequently draft a Berliner Testament, literally a „Berlin will“, by mutually appointed each other as sole heirs. Before doing so, it ought to be examined whether a Berliner Testament is the most appropriate form.

There are a number of advantages to a Berliner Testament for spouses. They mutually appoint each other as sole heirs and generally their children as final heirs. Should one of the spouses pass away, the remaining partner is afforded financial security by virtue of their status as sole heir. This is because the children are not entitled to inherit until both parents have died. This can be particularly helpful, e.g. if property becomes part of the estate.

That being said, a Berliner Testament also has its pitfalls. It has a strong binding effect. We at the commercial law firm GRP Rainer Rechtsanwälte note that the dispositions can no longer be unilaterally altered if no provisions have been agreed to that effect. For this reason, it should first be assessed whether a Berliner Testament is the most suitable arrangement for the testamentary dispositions.

When a Berliner Testament is being drawn up, there is often a failure to consider the possibility of a dramatic change to living conditions, for example the marriage falling apart, one of the partners starting a new relationship or falling out with the children. The joint testamentary provisions are nonetheless binding. This means that a spouse“s new significant other could end up empty-handed or the children definitely remain final heirs, regardless of the extent to which the relationship may have broken down in the meantime. The provisions cannot be amended unilaterally, not even after one of the spouses has died. To circumvent this strong binding effect, it is possible to incorporate clauses that ease the effect somewhat. Spouses should therefore carefully consider whether they wish to grant the surviving spouse a certain amount of freedom to amend the will again.

Tax allowances are another thing that should always be taken into account when considering inheritance tax. If a spouse becomes the sole heir, the tax allowance may be exceeded and the taxman might come knocking. If, on the other hand, the estate is distributed among several heirs, the individual tax allowances can be used more effectively.

Those who wish to prepare a Berliner Testament should therefore properly inform themselves about the legal consequences. Lawyers who are experienced in the field of succession law can offer advice.

https://www.grprainer.com/en/legal-advice/private-clients/law-of-succession/last-will-and-testament.html

GRP Rainer LLP www.grprainer.com/en/ is an international firm of lawyers and tax advisors who are specialists in commercial law. The firm counsels commercial and industrial companies and corporations, as well as associations, small- and mid-sized businesses, self-employed freelancers and private individuals worldwide from offices Cologne, Berlin, Bonn, Dusseldorf, Frankfurt, Hamburg, Munich, Stuttgart and London UK.

Contact
GRP Rainer LLP
Michael Rainer
Augustinerstraße 10
50667 Cologne
Phone: +49 221-27 22 75-0
Fax: +49 221-27 22 75-24
E-Mail: info@grprainer.com
Url: http://www.grprainer.com/en

Politics Law Society

EGC – Stringent requirements for colour combinations as trademarks

EGC – Stringent requirements for colour combinations as trademarks

EGC - Stringent requirements for colour combinations as trademarks

Combinations of two or more colours need to be precisely defined for them to be capable of being registered as a colour trademark. That was the verdict of the General Court of the European Union (EGC) (Az.: T 101/15).

A producer of energy drinks was dealt a blow before the EGC. The former cannot have its colour combination made up of the colours blue and silver registered as a colour trademark and protected. Although it is possible as a matter of principle for colour combinations to be registered as a trademark, we at the commercial law firm GRP Rainer Rechtsanwälte note that the combination of colours has to be precisely drafted and sufficiently distinguish itself from other products. Yet the EU Court held that this adequate definition had not been met in the case in question, ruling in its judgment of November 30, 2017 that colour mark was not distinct enough.

The beverage producer“s blue / silver colour combination had already been registered as a European Union trademark. A competing company raised an action against this, and the European Union Intellectual Property Office (EUIPO) ruled in its favour. The latter concluded that the specifications were far too vaguely formulated. The ratio of the two colours was specified as being approximately 50:50, and it was noted that the colours were side by side. The EGC also concluded that this was not enough, stating that this left room for several combinations that could give rise to a completely different overall impression. The relevant specifications were said to be insufficiently precise for registration as a trademark.

While it is certainly possible for two or more colours to be capable of being registered as a trademark, for this to happen they need to be linked with each other in a particular ratio and a particular form so that consumers are able to identify a particular combination as a trademark. That was not the case here.

Trademarks are of great value to businesses, but before a symbol or sign is registered as a trademark it ought to be assessed whether it meets the necessary requirements and, for instance, distinguishes itself sufficiently from the products and services of other businesses.

Lawyers who are experienced in the field of intellectual property law can advise businesses on all matters pertaining to trademark law.

https://www.grprainer.com/en/legal-advice/intellectual-property-law-and-trademark-law/trademark-law.html

GRP Rainer LLP www.grprainer.com/en/ is an international firm of lawyers and tax advisors who are specialists in commercial law. The firm counsels commercial and industrial companies and corporations, as well as associations, small- and mid-sized businesses, self-employed freelancers and private individuals worldwide from offices Cologne, Berlin, Bonn, Dusseldorf, Frankfurt, Hamburg, Munich, Stuttgart and London UK.

Contact
GRP Rainer LLP
Michael Rainer
Augustinerstraße 10
50667 Cologne
Phone: +49 221-27 22 75-0
Fax: +49 221-27 22 75-24
E-Mail: info@grprainer.com
Url: http://www.grprainer.com/en

Politics Law Society

General Data Protection Regulation (GDPR) must be implemented by May 25, 2018

General Data Protection Regulation (GDPR) must be implemented by May 25, 2018

General Data Protection Regulation (GDPR) must be implemented by May 25, 2018

Businesses need to keep May 25, 2018 in mind. This is the day when the EU General Data Protection Regulation, GDPR for short, officially comes into force.

Following a two-year transitional period, the GDPR will come into full force and effect on May 25, 2018, thereby replacing an EU directive dating back to 1995. The GDPR is meant to create a uniform standard for data protection within Europe and provide consumers with greater protection in the digital age. The GDPR shall have precedence over national law. Notwithstanding this, we at the commercial law firm GRP Rainer Rechtsanwälte note that the European Regulation leaves many details open and provides for a certain amount of leeway for national rules and regulations.

In principle, the GDRP applies to all businesses within the EU that gather, record and process personal data. It concerns not only customer or client data, but also data pertaining to company employees. Businesses will now be subject to extensive information and documentation obligations. The more sensitive the data collected is, the stricter the data protection rules are.

For businesses, the implementation of the GDPR means more stringent requirements relating to data protection compliance, especially considering that violations of the Regulation can be severely punished. Fines of up to 20 million euros or up to 4 per cent of worldwide annual turnover can be imposed. Moreover, violations of the GDPR may also be penalized as violations of competition law.

Businesses need to communicate what personal data is being gathered and for what purpose. Personal data refers to information such as name and address, contact details, birthday, IP addresses etc. In short, all data that is likely to allow a person to be identified. This data cannot be collected without consent and has to be processed for a specific purpose or purposes in a transparent and comprehensible manner. Additionally, those concerned have the „right to be forgotten“, i.e. the data must be deleted once the purpose has been achieved. To ensure that data is protected, appropriate technical precautions need to be taken.

The GDPR entails complex changes to data protection law which businesses and employers need to be prepared for. Should violations of the GDPR occur, one should also anticipate formal warnings. To prevent this from happening, it is necessary to obtain expert legal advice or even appoint an external data protection officer.

https://www.grprainer.com/en/legal-advice/it-law-and-media-law/data-protection.html

GRP Rainer LLP www.grprainer.com/en/ is an international firm of lawyers and tax advisors who are specialists in commercial law. The firm counsels commercial and industrial companies and corporations, as well as associations, small- and mid-sized businesses, self-employed freelancers and private individuals worldwide from offices Cologne, Berlin, Bonn, Dusseldorf, Frankfurt, Hamburg, Munich, Stuttgart and London UK.

Contact
GRP Rainer LLP
Michael Rainer
Augustinerstraße 10
50667 Cologne
Phone: +49 221-27 22 75-0
Fax: +49 221-27 22 75-24
E-Mail: info@grprainer.com
Url: http://www.grprainer.com/en

Politics Law Society

CJEU on protected designations of origin

CJEU on protected designations of origin

CJEU on protected designations of origin

As in the case of brands, geographical designations of origin can be protected as well. It is therefore also possible for advertising featuring references to origin to be misleading to consumers and thus impermissible.

Brands and geographical designations of origin are of great value to businesses. They give rise to certain associations among consumers, e.g. in relation to the quality of a product. We at the commercial law firm GRP Rainer Rechtsanwälte note that for this reason the protection of brands and designations of origin is all the more important.

Having said that, a ruling of the Court of Justice of the European Union (CJEU) from December 20, 2017 demonstrates that the protection afforded to designations of origin can have its limits (Az.: C-393/16). The case before the CJEU concerned a legal dispute between a discount supermarket and an association of champagne producers. The discount supermarket offered ice cream under the name „Champagner Sorbet“ (champagne sorbet). The association brought a legal action against this, arguing that it constituted a violation of the protected designation of origin (PDO) „champagne“.

The case ended up before the Bundesgerichtshof (BGH), Germany“s Federal Supreme Court, which in turn requested that the CJEU interpret EU legislation pertaining to the protection of registered designations of origin.

The CJEU held that a protected designation of origin has been exploited improperly if the intention behind using the designation is to unduly benefit from its reputation. According to the Court, the designation „Champagner Sorbet“ was able to benefit from the prestige of the protected designation of origin „champagne“ because consumers associate the latter with a certain class of goods and price range. Notwithstanding this, use of the designation was said not to be illegal if an essential quality of the product is its predominantly champagne flavour, a matter which the CJEU concluded was for the BGH to address.

However, unlawful use might have occurred in the case of a sorbet that, despite the impression given by references in its design or outer packaging, does not include a champagne flavour as one of its essential qualities. References of this kind could be deemed incorrect and misleading. The Court ruled that the protection afforded to registered designations of origin extends beyond the origin of the product in question to incorrect or misleading references pertaining to its nature or essential qualities.

Violations of trademark law or copyright law can be met with severe penalties. Lawyers who are experienced in the field of intellectual property law can advise businesses on enforcing or fending off claims.

https://www.grprainer.com/en/legal-advice/intellectual-property-law-and-trademark-law/trademark-law.html

GRP Rainer LLP www.grprainer.com/en/ is an international firm of lawyers and tax advisors who are specialists in commercial law. The firm counsels commercial and industrial companies and corporations, as well as associations, small- and mid-sized businesses, self-employed freelancers and private individuals worldwide from offices Cologne, Berlin, Bonn, Dusseldorf, Frankfurt, Hamburg, Munich, Stuttgart and London UK.

Contact
GRP Rainer LLP
Michael Rainer
Augustinerstraße 10
50667 Cologne
Phone: +49 221-27 22 75-0
Fax: +49 221-27 22 75-24
E-Mail: info@grprainer.com
Url: http://www.grprainer.com/en

Politics Law Society

Antitrust law – DFB simplifies ticket allocation for 2018 World Cup

Antitrust law – DFB simplifies ticket allocation for 2018 World Cup

Antitrust law - DFB simplifies ticket allocation for 2018 World Cup

The way in which it has allocated tickets has led the DFB, Germany“s Football Association, to be suspected of abusing its dominant market position. The Bundeskartellamt, Germany“s Federal Cartel Office, has since suspended its investigations into the matter.

A lot of fans of the German national football team would like to watch the team“s games live in the stadium, but getting hold of the relevant tickets for the 2018 World Cup or the away matches during the qualification phase has proven extremely difficult because the DFB linked the allocation of the tickets to membership of the German national football team“s fan club. The annual fee for the membership was 40 euros.

A large number of complaints were made against this way of allocating tickets, and the Bundeskartellamt initiated administrative procedures against the DFB on suspicion of misuse of a dominant market position. The Bundeskartellamt has confirmed that the proceedings have since been suspended. Prior to this, the DFB had committed to easing the conditions for applying for tickets to the 2018 World Cup in Russia.

Following consultation with the Bundeskartellamt, it is now possible for fans to obtain significantly cheaper and temporary tournament membership for ten euros and apply for tickets. The background to the DFB“s decision to link ticket allocation to membership of the fan club was to thereby ensure greater safety in the stadia. This argument influenced the cartel watchdog“s decision.

We at the commercial law firm GRP Rainer Rechtsanwälte note that abusing a dominant market position can give rise severe penalties, as antitrust law is supposed to ensure there is diverse competition in the interests of consumer protection. Violations of antitrust law or competition law may therefore entail appropriate sanctions, which can in turn lead to costly and time-consuming legal disputes.

To avoid legal disputes arising from possible violations of competition law or antitrust law, lawyers who are experienced in the field of antitrust law ought to be consulted early on. They can assess whether there are concerns from the perspective of antitrust law and overcome potential problems. If specific accusations and claims have already been made due to alleged violations, experienced lawyers can assume responsibility for fending these off. Of course, the same is also true in the reverse case, i.e. if there is an intention to assert claims for violations of antitrust law.

https://www.grprainer.com/en/legal-advice/antitrust-law.html

GRP Rainer LLP www.grprainer.com/en/ is an international firm of lawyers and tax advisors who are specialists in commercial law. The firm counsels commercial and industrial companies and corporations, as well as associations, small- and mid-sized businesses, self-employed freelancers and private individuals worldwide from offices Cologne, Berlin, Bonn, Dusseldorf, Frankfurt, Hamburg, Munich, Stuttgart and London UK.

Contact
GRP Rainer LLP
Michael Rainer
Augustinerstraße 10
50667 Cologne
Phone: +49 221-27 22 75-0
Fax: +49 221-27 22 75-24
E-Mail: info@grprainer.com
Url: http://www.grprainer.com/en

Politics Law Society

BGH – Bank must explain risk if interest rate dependent on exchange rate

BGH – Bank must explain risk if interest rate dependent on exchange rate

BGH - Bank must explain risk if interest rate dependent on exchange rate

If the interest rate on a loan is based on the development of exchange rates, the bank has a duty to inform with respect to the foreign exchange risk. That was the verdict of the Bundesgerichtshof (BGH), Germany“s Federal Supreme Court, in a recent ruling (XI ZR 152/17).

The appreciation of the Swiss franc against the euro has caused problems for a number of borrowers. Notwithstanding this, the relevant bank must explain the exchange rate risk present. We at the law firm GRP Rainer Rechtsanwälte note that according to a judgment of the Bundesgerichtshof from December 19, 2017, this duty to inform also applies if the interest rate on a loan is based on the exchange rate.

The instant case concerned a loan in the amount of approximately 3 million euros that had been taken out by a municipality in North Rhine-Westphalia. The interest rate for the first 20 years was supposed to be 3.99 per cent p.a. assuming an exchange rate from euros to Swiss francs equal to or greater than 1.43. In the event of the euro falling below this threshold, the interest rate would then be 3.99 per cent plus half of the change in the exchange rate from 1.43. During the consultation, the bank pointed out that the Swiss National Bank, Switzerland“s central bank, would adopt a zero interest rate policy in the event of the Swiss franc appreciating and that their threshold for intervention was 1 euro to 1.45 Swiss francs. Additionally, there was a table showing the respective interest rate for exchange rates ranging from 1.39 to 1.65. From a rate of 1.42 to 1.39, the interest rate increased incrementally from 4.34 to 5.43.

In the end, the franc appreciated so strongly that the municipality was supposed to pay an interest rate of 18.99 per cent p.a. It therefore considered the loan agreement to be unjust and void. Moreover, it claimed that the foreign exchange risk had not been properly explained. Despite the municipality“s claim being unsuccessful before the first two courts of instance, the BGH reached a different conclusion.

Although the loan agreement was not found to be unjust, the bank had failed to fulfil its duty to inform. While the dependent relationship between the interest rate and the exchange rate was said to be apparent from examining the agreement, the bank had not explained with sufficient clarity the risks associated with an obligation to make interest payments based on an exchange rate, but instead downplayed these. The court of appeal must now rule on the case anew.

When it comes to problems concerning loan agreements, lawyers who are experienced in the field of banking law can serve as competent advisors.

https://www.grprainer.com/en/legal-advice/banking-law.html

GRP Rainer LLP www.grprainer.com/en/ is an international firm of lawyers and tax advisors who are specialists in commercial law. The firm counsels commercial and industrial companies and corporations, as well as associations, small- and mid-sized businesses, self-employed freelancers and private individuals worldwide from offices Cologne, Berlin, Bonn, Dusseldorf, Frankfurt, Hamburg, Munich, Stuttgart and London UK.

Contact
GRP Rainer LLP
Michael Rainer
Augustinerstraße 10
50667 Cologne
Phone: +49 221-27 22 75-0
Fax: +49 221-27 22 75-24
E-Mail: info@grprainer.com
Url: http://www.grprainer.com/en

Politics Law Society

BGH – Bank must explain risk if interest rate dependent on exchange rate

BGH – Bank must explain risk if interest rate dependent on exchange rate

BGH - Bank must explain risk if interest rate dependent on exchange rate

If the interest rate on a loan is based on the development of exchange rates, the bank has a duty to inform with respect to the foreign exchange risk. That was the verdict of the Bundesgerichtshof (BGH), Germany“s Federal Supreme Court, in a recent ruling (XI ZR 152/17).

The appreciation of the Swiss franc against the euro has caused problems for a number of borrowers. Notwithstanding this, the relevant bank must explain the exchange rate risk present. We at the law firm GRP Rainer Rechtsanwälte note that according to a judgment of the Bundesgerichtshof from December 19, 2017, this duty to inform also applies if the interest rate on a loan is based on the exchange rate.

The instant case concerned a loan in the amount of approximately 3 million euros that had been taken out by a municipality in North Rhine-Westphalia. The interest rate for the first 20 years was supposed to be 3.99 per cent p.a. assuming an exchange rate from euros to Swiss francs equal to or greater than 1.43. In the event of the euro falling below this threshold, the interest rate would then be 3.99 per cent plus half of the change in the exchange rate from 1.43. During the consultation, the bank pointed out that the Swiss National Bank, Switzerland“s central bank, would adopt a zero interest rate policy in the event of the Swiss franc appreciating and that their threshold for intervention was 1 euro to 1.45 Swiss francs. Additionally, there was a table showing the respective interest rate for exchange rates ranging from 1.39 to 1.65. From a rate of 1.42 to 1.39, the interest rate increased incrementally from 4.34 to 5.43.

In the end, the franc appreciated so strongly that the municipality was supposed to pay an interest rate of 18.99 per cent p.a. It therefore considered the loan agreement to be unjust and void. Moreover, it claimed that the foreign exchange risk had not been properly explained. Despite the municipality“s claim being unsuccessful before the first two courts of instance, the BGH reached a different conclusion.

Although the loan agreement was not found to be unjust, the bank had failed to fulfil its duty to inform. While the dependent relationship between the interest rate and the exchange rate was said to be apparent from examining the agreement, the bank had not explained with sufficient clarity the risks associated with an obligation to make interest payments based on an exchange rate, but instead downplayed these. The court of appeal must now rule on the case anew.

When it comes to problems concerning loan agreements, lawyers who are experienced in the field of banking law can serve as competent advisors.

https://www.grprainer.com/en/legal-advice/banking-law.html

GRP Rainer LLP www.grprainer.com/en/ is an international firm of lawyers and tax advisors who are specialists in commercial law. The firm counsels commercial and industrial companies and corporations, as well as associations, small- and mid-sized businesses, self-employed freelancers and private individuals worldwide from offices Cologne, Berlin, Bonn, Dusseldorf, Frankfurt, Hamburg, Munich, Stuttgart and London UK.

Contact
GRP Rainer LLP
Michael Rainer
Augustinerstraße 10
50667 Cologne
Phone: +49 221-27 22 75-0
Fax: +49 221-27 22 75-24
E-Mail: info@grprainer.com
Url: http://www.grprainer.com/en