Germany opens doors to global legal practices

The German legal system stands on the brink of a significant overhaul, proposing groundbreaking reforms to create a more inclusive environment for international law firms. The Federal Ministry of Justice has unveiled a comprehensive proposal aimed at dismantling long-standing barriers that have historically disadvantaged non-European legal practitioners.

Presented on October 25, the 139-page document signals a bold move towards regulatory simplification. Justice Minister Marco Buschmann emphasized the government’s commitment to modernization, stating, “We will abolish unnecessary rules and reduce unnecessary bureaucracy. We will also create greater comprehensibility and clearer structures. In the end, [legal] professionals will benefit from this—and so will our rule of law.”

The proposed reforms target multiple aspects of legal practice, with particularly significant implications for international law firms. Previously constrained by complex regulatory requirements, foreign legal practices—especially those from the United Kingdom and United States—will now find themselves on more equal footing with their European counterparts.

Key changes include simplified registration processes for international limited liability partnerships (LLPs) and expanded opportunities for establishing holding companies. In a notable shift, lawyers transitioning to in-house roles will encounter reduced administrative hurdles, such as the elimination of mandatory contract certification.

Legal experts have welcomed these developments. Dirk Uwer, a partner at Hengeler Mueller specializing in professional law, described the reforms as a crucial step towards modernization. “The important reforms of the German professional law that entered into force on August 1, 2022 left a few inconsistencies. These are now rectified step by step, and this is more than welcome on the way to a modern regulatory framework for the profession,” Uwer explained.

One particularly significant modification addresses previous restrictions under Section 206 of the Federal Code for Lawyers (BRAO). The old regulations required all partners in international LLPs to be licensed in World Trade Organization (WTO) member countries—a requirement that effectively blocked many international firms from entering the German market.

For instance, previously, a law firm with a partner licensed in a non-WTO country like Lebanon would have been automatically disqualified from recognition by German bar associations. This geographical and regulatory constraint has now been removed, opening new pathways for international legal practices.

The reforms also tackle complex issues surrounding law firm ownership and structure. Previously, German regulations only permitted “natural persons” to hold shares, essentially preventing foreign holding companies from participating in the legal market. Now, non-German and non-EU law firms can establish holding structures for entities operating within the German legal landscape.

“Non-German/non-EU domiciled law firms are now allowed to have holding structures for those legal entities that operate in the German legal market. They are now put on equal footing, and rightly so.”, Uwer said.

While some modifications have already been implemented, the comprehensive proposal represents a significant stride towards a more globally integrated legal ecosystem. As the consultation process continues, legal professionals worldwide are watching closely, anticipating the potential ripple effects of Germany’s bold regulatory transformation.

michela.cannovale@lcpublishinggroup.com

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