Executive Summary

As the largest market in Europe, Germany is a major destination for foreign direct investment; consequently, a vast FDI stock has accumulated over time. The United States is the leading source of non-EU inward investment to Germany. Germany is consistently ranked as one of the most attractive destinations for FDI, thanks to reliable infrastructure, a highly skilled workforce, a positive social climate, a stable legal environment, and world-class research and development. It is generally open to FDI, however, in February 2017, Germany, France and Italy requested the European Commission to review the possibility of EU member states being given the ability to block foreign investment on the grounds of reciprocity.

In the last ten years, FDI stocks in Germany doubled. While this FDI mainly originated from other European countries, the United States, and Japan, FDI from emerging economies, and in particular China, has grown substantially since 2005, even if from a low level.

The German legal, regulatory and accounting systems can be complex, but are transparent and consistent with international norms. Businesses enjoy considerable freedom within a well regulated environment. Foreign and domestic investors are treated equally when it comes to investment incentives, and the establishment and protection of real and intellectual property. Foreign investors can fully rely on the legal system, which is efficient and sophisticated. At the same time, this system requires investors to pay attention to their legal obligations. First-time investors will need to ensure that they have the necessary legal expertise, either in-house or outside consul, to meet all requirements.

Germany has effective capital markets and relies heavily on its modern banking system. Majority state-owned-enterprises are generally limited to public utilities: municipal water, energy, and national rail transportation. The primary objectives of government policy are to create jobs and foster economic growth. Labor unions play a constructive role in collective bargaining agreements, as well as on companies’ work councils.

Germany continues efforts to fight money laundering and corruption. Medium-sized companies are increasingly aware of the due-diligence approach to responsible business conduct.

Despite the fact that Germany has 129 investment protection agreements in force, the negotiations on the Transatlantic Trade and Investment Partnership (T-TIP), which were initiated in 2013, triggered an intense public debate on certain issues, including investor-State dispute settlement (ISDS) mechanisms.

Table 1

Measure Year Index/Rank Website Address
TI Corruption Perceptions Index 2016 10 of 176 http://www.transparency.org/
World Bank’s Doing Business Report “Ease of Doing Business” 2017 17 of 190 doingbusiness.org/rankings
Global Innovation Index 2016 10 of 128 https://www.globalinnovationindex.org/
U.S. FDI in partner country ($M USD, stock positions) 2015 $108,094 million http://www.bea.gov/
World Bank GNI per capita 2015 $45,940 http://data.worldbank.org/

Policies Towards Foreign Direct Investment

Germany has an open and welcoming attitude towards foreign direct investment (FDI). The 1956 U.S.-FRG Treaty of Friendship, Commerce and Navigation affords U.S. investors national treatment and provides for the free movement of capital between the United States and Germany. As an OECD member, Germany adheres to the OECD National Treatment Instrument and the OECD Codes of Liberalization of Capital Movements and of Invisible Operations. The Federal Ministry for Economic Affairs and Energy (BMWi) may review acquisitions of domestic companies by foreign buyers in individual cases to assess whether these transactions pose a risk to the public order or national security of the Federal Republic of Germany. The Foreign Trade and Payments Act and the Foreign Trade and Payments Ordinance provide the legal basis for this. For many decades, Germany has experienced significant inbound investment. It is widely recognized that foreign investment has been a considerable contributor to Germany’s growth and prosperity. The German government and industry actively encourage foreign investment. U.S. investment has been strong and continues to account for a significant share of foreign investment. The investment-related problems foreign companies face are generally the same as for domestic firms, for example, high marginal income tax rates and labor laws that impede hiring and dismissals.

Limits on Foreign Control and Right to Private Ownership and Establishment

While Germany’s Foreign Economic Law contains a provision permitting restrictions on private direct investment flows in either direction for reasons of foreign policy, foreign exchange, or national security, in practice, restrictions have mainly been imposed in the sectors of air transport, maritime transport, inland waterways, and rail transport only. In 2016, the German government withdrew its approval and announced a re-examination of the acquisition of German semi-conductor producer Aixtron by China’s Fujian Grand Chip Investment Fund based on national security concerns. Before the German government could reissue a decision, Fujian Grand Chip withdrew its offer as the result of a concomitant negative CFIUS ruling. Additionally, Germany limits the foreign provision of employee placement services, such as providing temporary office support, domestic help, or executive search services.

German law affords foreign investors national treatment: under German law, a foreign-owned company registered in the Federal Republic of Germany (FRG) as a GmbH (limited liability company) or an AG (joint stock company) is treated the same as a German-owned company. There are no special nationality requirements for directors or shareholders.

Other Investment Policy Reviews

The World Bank Group’s “Doing Business 2017” and Economist Intelligence Unit both provide additional information on Germany investment climate.

Business Facilitation

Before engaging in commercial activities, companies and business operators have to register in public directories, the two most significant of which are the commercial register (Handelsregister) and the trade office register (Gewerberegister).

Applications for registration at the commercial register, which is publically available under www.handelsregister.de , are electronically filed in publicly certified form through a notary. The commercial register provides information about all relevant relationships between merchants and commercial companies, including names of partners and managing directors, capital stock, liability limitations and insolvency proceedings. Registration costs vary depending on the size of the company.

Germany Trade and Invest (GTAI), the country’s economic development agency, can assist in the registration processes (https://www.gtai.de/GTAI/Navigation/EN/Invest/Investment-guide/Establishing-a-company/business-registration.html ) and advise investors, including micro, small and medium-sized enterprises (MSMEs), on how to obtain incentives.

In the EU, MSMEs are defined as follows:

  • Micro enterprises: less than 10 employees and less than €2 million annual turnover or less than €2 million in balance sheet total.
  • Small enterprises: less than 50 employees and less than €10 million annual turnover or less than €10 million in balance sheet total.
  • Medium-sized enterprises: less than 250 employees and less than €50 million annual turnover or less than €43 million in balance sheet total.

Outward Investment

On application, the Federal Government provides guarantees for investments by German-based companies in developing and emerging economies and former countries in transition in order to insure them against political risks. In order to receive guarantees, the investment must enjoy adequate legal protection in the host country. Commercial risks are not covered.

Germany does not have a bilateral investment treaty (BIT) with the United States. However, a Friendship, Commerce and Navigation (FCN) treaty dating from 1956 contains many BIT provisions: national treatment, most-favored nation, free capital flows and full protection and security.

Germany has bilateral investment treaties in force with 129 countries and territories. Treaties with former sovereign entities (including Czechoslovakia, the Soviet Union, Sudan and Yugoslavia) continue to apply in an additional seven cases. These are indicated with an asterisk (*) and have not been taken into account in regard to the total number of treaties. Treaties are in force with the following states, territories or former entities; for a full list of treaties containing investment provisions that are currently in force, see the UNCTAD Navigator:http://investmentpolicyhub.unctad.org/IIA/CountryBits/78#iiaInnerMenu 

Afghanistan; Albania; Algeria; Angola; Antigua and Barbuda; Argentina; Armenia; Azerbaijan; Bahrain; Bangladesh; Barbados; Belarus; Benin; Bosnia and Herzegovina; Botswana; Burkina Faso; Brunei; Bulgaria; Burundi; Cambodia; Cameroon; Cape Verde; Central African Republic; Chad; Chile; China (People’s Republic); Congo (Republic); Congo (Democratic Republic); Costa Rica; Croatia; Cuba; Czechoslovakia; Czech Republic*; Dominica; Ecuador; Egypt; El Salvador; Estonia; Ethiopia; Gabon; Georgia; Ghana; Greece; Guatemala; Guinea; Guyana; Haiti; Honduras; Hong Kong; Hungary; India; Indonesia; Iran; Ivory Coast; Jamaica; Jordan; Kazakhstan; Kenya; Republic of Korea; Kosovo*; Kuwait; Kyrgyzstan; Laos; Latvia; Lebanon; Lesotho; Liberia; Libya; Lithuania; Macedonia; Madagascar; Malaysia; Mali; Malta; Mauritania; Mauritius; Mexico; Moldova; Mongolia; Montenegro*; Morocco; Mozambique; Namibia; Nepal; Nicaragua; Niger; Nigeria; Oman; Pakistan; Palestinian Territories; Panama; Papua New Guinea; Paraguay; Peru; Philippines; Poland; Portugal; Qatar; Romania; Russia*; Rwanda; Saudi Arabia; Senegal; Serbia*; Sierra Leone; Singapore; Slovak Republic*; Slovenia; Somalia; ; South Sudan*; Soviet Union; Sri Lanka; St. Lucia; St. Vincent and the Grenadines; Sudan; Swaziland; Syria; Tajikistan; Tanzania; Thailand; Togo; Trinidad & Tobago; Tunisia; Turkey; Turkmenistan; Uganda; Ukraine; United Arab Emirates; Uruguay; Uzbekistan; Venezuela; Vietnam; Yemen; Yugoslavia; Zambia; and Zimbabwe.

A BIT with Bolivia was terminated in May 2014 and a BIT with South Africa was terminated in October 2014; there are no current plans to renegotiate these.

Germany has ratified treaties with the following countries and territories that have not yet entered into force:

Country Signed Temporarily Applicable
Brazil 09/21/1995 No
Congo (Republic) 11/22/2010 *
Iraq 12/04/2010 No
Israel 06/24/1976 Yes
Pakistan 12/01/2009 *
Timor-Leste 08/10/2005 No
Panama* 01/25/2011 *
(*) Previous treaties apply

Bilateral Taxation Treaties

Taxation of U.S. firms within Germany is governed by the “Convention for the Avoidance of Double Taxation with Respect to Taxes on Income.” It has been in effect since 1989 and was extended in 1991, to the territory of the former German Democratic Republic. With respect to income taxes, both countries agreed to grant credit for their respective federal income taxes on taxes paid on profits by enterprises located in each other’s territory. A Protocol of 2006 updates the existing tax treaty and includes several changes, including a zero-rate provision for subsidiary-parent dividends, a more restrictive limitation on benefits provision, and a mandatory binding arbitration provision. In 2013, Germany and the United States signed an agreement on legal and administrative cooperation and information exchange.

As of January 2016, Germany has bilateral treaties with respect to taxes on income and assets with a total of 96 countries, including with the United States, and, with respect to inheritance taxes, 6 countries. It has special bilateral treaties with respect to income and assets by shipping and aerospace companies with 9 countries and has treaties relating to the exchange of information and administrative assistance with 28 countries. Germany has initiated and/or is renegotiating new income and wealth tax treaties with 49 countries, special bilateral treaties with respect to income and assets by shipping and aerospace companies with 4 countries, and information exchange and administrative assistance treaties with 9 countries.

Transparency of the Regulatory System

Germany has transparent and effective laws and policies to promote competition, including antitrust laws. The legal, regulatory and accounting systems can be complex but are transparent and consistent with international norms.

Formally, the public consultation by the federal government is regulated by the Joint Rules of Procedure, which specify that ministries must consult early and extensively with a range of stakeholders on all new legislative proposals. In practice, laws and regulations in Germany are routinely published in draft, and public comments are solicited. According to the Joint Procedural Rules, ministries should consult the concerned industries’ associations (rather than single companies), consumer organizations, environmental and other NGOs. Consultation generally takes between two to eight weeks.

The German Institute for Standardization (DIN) is open to foreign members.

International Regulatory Considerations

As member state of the European Union, the Federal Republic of Germany must observe and implement directives and regulations adopted by the EU. EU regulations are binding and must immediately be applied by the Member States. They constitute immediately applicable law. A directive, whilst also being intended for the Member States, merely constitutes a type of framework law that is to be elaborated by the Member States in an individual legislative process. Directives are implemented along normal German legislative procedures.

Member States of the European Union need to implement directives within a given period of time. Should a deadline not be met, the Member State may suffer the initiation of an infringement procedure, which could result in high fines. Germany has a set of rules that prescribe how to break down any payment of fines devolving on the Federal Government and the Länder. Both bear part of the costs depending on their responsibility within legislation and the respective part they played in non-compliance.

The German Länder (federal states) have a say in European affairs through the Bundesrat (upper chamber of parliament). It is incumbent upon the Federal Government to instruct the Bundesrat at an early stage on all plans at EU level that are relevant for the Länder.

The federal government notifies draft technical regulations to the WTO Committee on Technical Barriers to Trade (TBT) through a National Notification Office within the Federal Ministry of Economic Affairs and Energy (BMWi).

Legal System and Judicial Independence

German law is both predictable and reliable. Companies can effectively enforce property and contractual rights under German law. Germany’s well-established enforcement laws and official enforcement services ensure companies/investors to consistently assert their rights. German courts are fully available to foreign investors in the event of an investment dispute.

The judicial system is independent, and the federal government does not interfere in the court system. The legislature sets the systemic and structural parameters, while lawyers and civil law notaries use the law to shape and organize specific situations. Judges are highly competent. International studies and empirical data have attested that Germany offers an efficient court system committed to due process and the rule of law.

In Germany, all important legal issues and matters are governed by comprehensive legislation in the form of statutes, codes and regulations. The most important legislation in the area of business law includes:

  • the Civil Code (Bürgerliches Gesetzbuch, abbreviated as BGB), which contains general rules on the formation, performance and enforcement of contracts and on the basic types of contractual agreements for legal transactions between private entities;
  • the Commercial Code (Handelsgesetzbuch, abbreviated as HGB), which contains special rules concerning transactions among businesses and commercial partnerships;
  • the Private Limited Companies Act (GmbH-Gesetz) and the Public Limited Companies Act (Aktiengesetz), covering the two most common corporate structures in Germany – the ‘GmbH’ and the ‘Aktiengesellschaft’; and
  • the Act on Unfair Competition (Gesetz gegen den unlauteren Wettbewerb, abbreviated as UWG), which prohibits misleading advertising and unfair business practices.

Germany has specialized courts for administrative law, labor law, social law, finance and tax law. The Federal Patent Court hears cases on patents, trademarks, and utility rights which are related to decisions by the German Patent and Trademarks Office. Both the German Patent Office (Deutsches Patentamt) and the European Patent Office are headquartered in Munich.

Laws and Regulations on Foreign Direct Investment

The Federal Ministry for Economic Affairs and Energy (BMWi) may review acquisitions of domestic companies by foreign buyers in individual cases to assess whether these transactions pose a risk to the public order or national security of the Federal Republic of Germany. The Foreign Trade and Payments Act and the Foreign Trade and Payments Ordinance provide the legal basis. However, in practice, restrictions of foreign direct investment are very rare.

Cross-sector investment review procedures apply to any acquisitions of a company by a foreign investor located outside the territory of the EU or the EFTA region whereby investors acquire ownership of at least 25 percent of the voting rights of a company resident in Germany. There is no requirement for investors to obtain approval for or notify any acquisition, but the BMWi may conduct a review within three months from the day of the conclusion of the acquisition agreement. An investor may also request a binding certificate of non-objection from the BMWi in advance of the planned acquisition to obtain legal certainty at an early stage. If the BMWi does not open an in-depth review within one month from the receipt of the request, the certificate shall be deemed as granted.

Special rules apply for the acquisition of companies that operate in sensitive security areas, including defense and IT security. In contrast to the cross-sectoral rules, the sensitive acquisitions must be notified in written form including basic information of the planned acquisition, the buyer, the domestic company that is subject of the acquisition and the respective fields of business. The BMWi may open a formal review procedure within one month after receiving notification, or the acquisition shall be deemed as approved. If a review procedure is opened, the buyer is required to submit further documents. The acquisition may be restricted or prohibited only within one month after the full set of documents has been submitted.

Any decisions resulting from review procedures are subject to judicial review by an administrative court.

The German Economic Development Agency GTAI provides extensive information for investors, including about the legal framework, labor-related issues and incentive programs, on their website: http://www.gtai.de/GTAI/Navigation/EN/Invest/investment-guide.html 

Competition and Anti-Trust Laws

German government ensures competition on a level playing field on the basis of two main legal codes:

The Law against Limiting Competition (reformed in 2013) is the legal basis for the fight against cartels, merger control and monitoring abuse. State and Federal cartel authorities are in charge of enforcing anti-trust law. In exceptional cases the Minister for Economics and Energy can provide a permit under specific conditions; the last case was a merger of two retailers (Kaisers/Tengelmann and Edeka) to which a ministerial permit was granted in March 2016.

The Law against Unfair Competition (amended last in 2015) can be invoked by regional courts.

Expropriation and Compensation

German law provides that private property can be expropriated for public purposes only in a non-discriminatory manner and in accordance with established principles of constitutional and international law. There is due process and transparency of purpose, and investors and lenders to expropriated entities receive prompt, adequate, and effective compensation.

There have not been expropriatory actions in the last five years and none are expected for the near future. Certain long-running expropriation cases date back to the Nazi and communist regimes. During the financial crisis, the parliament adopted a law allowing an emergency expropriation if the bankruptcy of a bank had endangered the entire financial system, but the measure expired without having been used.

Dispute Settlement

ICSID Convention and New York Convention

Germany is a member of both the International Center for the Settlement of Investment Disputes (ICSID) and New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards, meaning local courts must enforce international arbitration awards under certain conditions.

Investor-State Dispute Settlement

Investment disputes involving U.S. or other foreign investors in Germany are extremely rare. According to the UNCTAD database of treaty-based investor dispute settlement cases, Germany has been challenged a handful of times, none of which involved a U.S. investor, A much-publicized ICSID arbitration request filed in 2012 by a European energy company under the Energy Charter Treaty, challenging Germany’s decision to phase out nuclear energy, remains pending.

International Commercial Arbitration and Foreign Courts

Germany has a domestic arbitration body called the German Institution for Dispute Settlement. ”Book 10” of the German Code of Civil Procedure addresses arbitration proceedings. The International Chamber of Commerce has an office in Berlin. In addition, chambers of commerce and industry offer arbitration services.

Bankruptcy Regulations

German insolvency law, as enshrined in the Insolvency Code, supports and promotes restructuring. If a business or the owner of a business becomes insolvent, or a business is over-indebted, insolvency proceedings can be initiated by filing for insolvency; legal persons are obliged to do so. Insolvency is not a crime, but prosecutors must check for certain types of deliberate behavior.

Under a regular insolvency procedure, the insolvent business is generally broken up in order to release as much money as possible through the sale of individual items or rights or parts of the company. Proceeds can then be paid out to the creditors in the insolvency proceedings. The distribution of the monies to the creditors follows the detailed instructions of the Insolvency Code.

Equal treatment of creditors is enshrined in the insolvency code. Some creditors have the right to claim property back. Post-adjudication preferred creditors are served out of the insolvency assets during the insolvency procedure. Ordinary creditors are served on the basis of quotas from the remaining insolvency assets. Secondary creditors, including shareholder loans, are only served if insolvency assets remain after all others have been served. Germany ranks third in the global ranking of “resolving insolvency” in the World Bank’s Doing Business Report, with a recovery rate of 84.4 (cents on the dollar).

Investment Incentives

Federal and state investment incentives, including investment grants, labor-related and R&D incentives; public loans, and public guarantees are available to domestic and foreign investors alike. Different incentives can be combined. In general, foreign and German investors have to meet the same criteria for eligibility.

The Federal Ministry of Economic Affairs and Energy offers investment grants intended to improve business conditions in certain regions in Germany. These grants are approved by the EU Commission. The KfW Banking Group and development banks of the individual Federal States offer attractive interest rates, especially for small and medium-sized enterprises (SMEs).

Labor-related incentives are offered by over 700 local offices of the Federal Employment Agency for programs that focus on recruitment support, and pre-employment training.

R&D incentives are provided by the European Union, the German Government and the German state governments in the form of R&D grants, public loans, and special partnership programs.

Germany Trade & Invest, Germany’s federal economic development agency, provides information on incentives in English: www.gtai.com/incentives-programs 

Foreign Trade Zones/Free Ports/Trade Facilitation

There are currently three free ports in Germany established and operated under EU law: Bremerhaven, Cuxhaven, and Duisburg. The duty-free zones within the ports also permit value-added processing and manufacturing for EU-external markets, albeit with certain requirements. All of them are open to both domestic and foreign entities. In recent years, falling tariffs and the progressive enlargement of the EU have gradually eroded much of the utility and attractiveness of duty-free zones. Kiel and Emden lost free-trade zone status in 2010. Hamburg lost free-trade zone status in 2013, and Deggendorf lost free port status in 2016.

Performance and Data Localization Requirements

In general, there are no requirements for local sourcing, export percentage, or local or national ownership. In some cases, however, there may be performance requirements tied to the incentive, such as creation of jobs or maintaining a certain level of employment for a prescribed length of time.

U.S. companies can generally obtain the visas and work permits required to do business in Germany. Citizens from the United States may apply for work and residential permits from within Germany. Germany Trade & Invest offers detailed information online at www.gtai.com/coming-to-germany .

A number of U.S. states have not yet concluded reciprocal agreements with Germany to mutually recognize driver’s licenses. As a result, licenses from those states are not legal in Germany beyond six months, whereas licenses from states that have signed agreements can be converted to German licenses after six months.

There are no localization requirements for data storage in Germany. However, in recent years German and European cloud providers appear to be trying to market the domestic location of their servers as a competitive advantage.

Real Property

The German Government adheres to a policy of national treatment, which considers property owned by foreigners as fully protected under German law. In Germany, mortgages are given based on recognized and reliable collateral. Secured interests in property, both chattel and real, are recognized and enforced. According to the World Bank’s Doing Business Report it takes an average of 52 days to register property in Germany.

The German Land Register Act dates back to 1897 and was last amended in 2015. The land register mirrors private real property rights and provides information on the legal relationship of the estate. It documents the owner, rights of third persons, liabilities and restrictions and how these rights relate to each other. Any change in property of real estate must be registered in the land registry to make the contract effective. Land titles are now maintained in an electronic database and can be consulted by persons with a legitimate interest.

Intellectual Property Rights

Germany boasts a robust regime to protect intellectual property rights. Legal structures are strong and enforcement is good. Nonetheless, internet piracy and counterfeit goods remain an issue. Germany has been a member of the World Intellectual Property Organization (WIPO) since 1970. The German Central Customs Authority annually publishes statistics on customs seizures of counterfeit and pirated goods. The statistics for 2016 can be found under: http://www.zoll.de/SharedDocs/Downloads/DE/Publikation/Broschuere_Bestandteile/Die-Zollverwaltung/jahresstatistik_2016_gesamt.pdf?__blob=publicationFile&v=4 

Germany is also a party to the major international intellectual property protection agreements: the Bern Convention for the Protection of Literary and Artistic Works, the Paris Convention for the Protection of Industrial Property, the Universal Copyright Convention, the Geneva Phonograms Convention, the Patent Cooperation Treaty, the Brussels Satellite Convention, and the Treaty of Rome on Neighboring Rights. Many of the latest developments in German IP law derived from European legislation with the objective to make applications less burdensome and to allow for European IP protection.

The following types of protection are available:

Copyrights: National treatment is also granted to foreign copyright holders, including remuneration for private recordings. Under the TRIPS agreement, Germany also grants legal protection for U.S. performing artists against the commercial distribution of unauthorized live recordings in Germany. Germany has signed the WIPO Internet treaties and ratified them in 2003. Foreign and German rights holders, however, remain critical of provisions in the German Copyright Act that allow exceptions for private copies of copyrighted works. Most rights holder organizations regard German authorities’ enforcement of intellectual property protections as effective. In 2008, Germany implemented the EU enforcement directive with a national bill, thereby strengthening the privileges of rights holders and allowing for improved enforcement action.

Trademarks: Foreigners may register trademarks subject to exactly the same terms as German nationals at the German Patent and Trade Mark Office. Protection is valid for a period of ten years and can be extended in ten-year periods.

Patents: Foreigners may register patents subject to exactly the same terms as German nationals at the German Patent and Trade Mark Office. Patents are granted for technical inventions which are new, involve an inventive step, and are industrially applicable. However, applicants having neither a domicile nor an establishment in Germany must appoint a patent attorney in Germany as a representative filing the patent application. The documents must be submitted in German or with a translation into German. The duration of a patent is 20 years, beginning on the day following the invention patent application. Patent applicants can request accelerated examination when filing the application provided that the patent application was previously filed at the U.S. patent authority and that at least one claim had been determined to be allowable. There are a number of differences in patent law which a qualified patent attorney can explain to U.S. patent applicants.

U.S. grants of IP rights are valid in the United States only. It is possible to register in EU countries, such as Germany, individually or, for EU-wide trademark and design protection, apply for the Community Trademark and/or Registered Community Design. These provide protection for industrial design or trademark in the entire 28-nation EU mega market of more than 500 million people. Both national trademarks and the CTM can be applied for from the U.S. Patent and Trademark Office as part of an international trademark registration system (http://www.uspto.gov ), or the applicant may apply directly for those trademarks from the European Union Intellectual Property Office (https://euipo.europa.eu/ohimportal/en/home ). U.S. IPR owners should also note that the EU operates on a “first to file” principle and not on the “first-to-invent” principle, used in the United States.

For patents, the situation is slightly different but protection can still be gained via the U.S. Patent Office. Although there is not yet a single EU-wide patent system, the European Patent Office (EPO) does grant individual European patents for the contracting states to the European Patent Convention (EPC), which entered into force in 1977. The 38 contracting states include the entire EU membership and several more European countries. As an alternative to filing patents for European protection with the U.S. Patent Office, the EPO, located in Munich, provides a convenient single point to file a patent in as many of these countries as an applicant would like: https://www.epo.org/index.html .

Trade Secrets: Trade secrets, both technical and commercial, are protected in Germany by the Law Against Unfair Competition. Currently, the EU institutions are discussing a directive to harmonize protection of trade secrets across EU member states.

In addition, German law offers the possibility to register designs and utility models.

For additional information about treaty obligations and points of contact at local IP offices, please see WIPO’s country profiles at http://www.wipo.int/directory/en/ .

Resources for Rights Holders

Contact at Mission
Minister Counselor for Commercial Affairs

Country resources:

For additional information about how to protect intellectual property in Germany, please see Germany Trade & Invest website at http://www.gtai.de/GTAI/Navigation/EN/Invest/Investment-guide/The-legal-framework/patents-licensing-trade-marks.html .

Statistics on the seizure of counterfeit goods are available through the German Customs Authority (Zoll):


Investors can identify IP lawyers in AmCham’s Online Services Directory: https://www.amcham.de/services/overview/member-services/address-services-directory/ (go to “legal references” and select “intellectual property”.)

Businesses can as well join the Anti-counterfeiting Association (APM)

http://www.markenpiraterie-apm.de/index.php?article_id=1&clang=1  or the Association for enforcing copyrights (GVU) http://www.gvu.de .

Capital Markets and Portfolio Investment

As an EU member state with a well-developed financial sector, Germany welcomes foreign portfolio investment and has an effective regulatory system. Germany has a very open economy, routinely ranking among the top countries in the world for exports and inward and outward foreign direct investment. As a member of the Eurozone, Germany does not have sole national authority over international payments, which are a shared task of the Eurosystem, comprised ofthe European Central Bank and the national central banks of the 19 member states that are part of the eurozone, including the German Central Bank (Bundesbank). There are no restrictions on capital movements into or out of Germany, based on European law. However, in February 2017, Germany, France and Italy requested the European Commission to review the possibility of EU member states being given the ability to block foreign investment on the grounds of reciprocity. Global investors see Germany as a safe place to invest, as the real economy continues to outperform other EU countries and German sovereign bonds retain their “safe haven” status.

Listed companies and market participants in Germany must comply with the Securities Trading Act, which bans insider trading and market manipulation. Compliance is monitored by the Federal Financial Supervisory Authority (BaFin) while oversight of stock exchanges is the responsibility of the state governments in Germany (with BaFin taking on any international responsibility). Investment fund management in Germany is regulated by the Capital Investment Code (KAGB), which entered into force on July 22, 2013. The KAGB represents the implementation of additional financial market regulatory reforms, committed to in the aftermath of the global financial crisis. The law went beyond the minimum requirements of the relevant EU directives and represents a comprehensive overhaul of all existing investment-related regulations in Germany with the aim of creating a system of rules to protect investors while also maintaining systemic financial stability.

Money and Banking System

Although corporate financing via capital markets is on the rise, Germany’s financial system remains mostly bank-based. Bank loans are still the predominant form of funding for firms, particularly the small and medium sized enterprises of Germany’s famed Mittelstand. Credit is available at market-determined rates to both domestic and foreign investors, and a variety of credit instruments are available. Legal, regulatory and accounting systems are generally transparent and consistent with international banking norms. Germany has a universal banking system regulated by federal authorities, and there have been no reports of a shortage of credit in the German economy. Since 2010, Germany has banned some forms of speculative trading, most importantly “naked short selling.” In 2013, Germany passed a law requiring banks to separate riskier activities such as proprietary trading into a legally separate, fully capitalized unit that has no guarantee or access to financing from the deposit-taking part of the bank.

Germany supports a worldwide financial transaction tax and is pursuing the introduction of such a tax along with several other Eurozone countries.

Germany has a modern banking sector, but is often considered “over-banked,” as evidenced by ongoing consolidation and low profit margins. The country’s so-called “three-pillar” banking system is made up of private commercial banks, cooperative banks, and the public banks (savings banks, or Sparkassen, and the regional state-owned banks, or Landesbanken). The private bank sector is dominated by Deutsche Bank and Commerzbank, with a balance sheet total of €1.709 billion and €558 billion respectively (2015 figures). Commerzbank received €18 billion in financial assistance from the federal government in 2009, which gave the government a 25% stake in the bank (now reduced to 15.6%). Germany’s regional state-owned banks were among the hardest hit by the global financial crisis and continue to face major challenges to their business models. The federal government is currently in the process of winding down several so-called “bad banks” composed of toxic assets of failed banks WestLB (now Portigon AG) and Hypo Real Estate.

Foreign Exchange and Remittances

Foreign Exchange

As a member of the Eurozone, Germany uses the euro as its currency, along with 18 other European Union countries. The Eurozone has no restrictions on the transfer or conversion of its currency, and the exchange rate is freely determined in the foreign exchange market.

Germany honors independence of the bloc’s central bank (ECB) and does not engage in currency manipulation. In a February 2017 report, the European Commission (EC) concluded Germany’s persistently high current account surplus widened further in 2016 and is projected to remain above 8% of GDP until 2018. While falling prices of oil and other raw materials and the depreciation of the euro explain a substantial part of this increase in 2015-2016, the high level and persistence of the surplus reflects an excess of savings over investment relating to a number of structural, regulatory, and fiscal factors. German policymakers argue the large surplus is the result of market forces rather than active government policies.

Germany is a member of the OECD-based Financial Action Task Force (FATF) and is committed to further strengthening its national system for the prevention, detection and suppression of money laundering and terrorist financing. According to a February 22, 2017 press release from the Federal Finance Ministry, Germany’s Financial Intelligence Unit (FIU) will be restructured and given more staff. So far, the FIU was with the Federal Criminal Police (Bundeskriminalamt –BKA), which falls under the Federal Ministry of the Interior’s remit. It will be transferred to the General Customs Directorate, i.e to the Federal Ministry of Finance. At the same time, their tasks and competencies are redefined taking into account the provisions of the Fourth EU Money Laundering Directive. One focus will be on operational and strategic analysis. The government published draft legislation to implement the Fourth EU Money Laundering Directive, the European Funds Transfers Regulation (Geldtransfer-Verordnung) and the restructuring of the FIU is expected to enter into force on 26 June 2017 (The Act will amend the German Money Laundering Act (Geldwäschegesetz – GwG) and a number of further laws).

There is no difficulty in obtaining foreign exchange.

Remittance Policies

There are no restrictions or delays on investment remittances or the inflow or outflow of profits.

However, according to the Finance Ministry, the issue of remittances will play a key role during the German G20 presidency. Remittances sent by migrants to their home countries are very important for many families in developing countries, including in Africa. In the context of the fight against money laundering and terrorist financing, however, the G20 is working to improve the infrastructure for remittances without compromising the standards for combating money laundering and terrorist financing. The G20’s FATF and an FSB working group will prepare proposals in this respect in cooperation with the Global Partnership for Financial Inclusion. The goal of the German G20 presidency is to provide the FATF with the necessary resources and organize it structurally in such a way that it can continue to effectively perform its tasks, which have continued to grow over the years, in the area of combating money laundering and terrorist financing.

Sovereign Wealth Funds

The German government does not currently have a sovereign wealth fund or an asset management bureau. Following German reunification, the federal government set up a public agency to manage the privatization of assets held by the former East Germany. In 2000, the agency, known as TLG Immobilien, underwent a strategic reorientation from a privatization-focused agency to a profit-focused active portfolio manager of commercial and residential property. In 2012, the federal government sold TLG Immobilien to private investors.

The formal term for state-owned enterprises (SOEs) in Germany translates as “public funds, institutions, or companies,” and refers to entities whose budget and administration are separate from those of the government, but in which the government has more than 50% of the capital shares or voting rights. Appropriations for SOEs are included in public budgets, and SOEs can take two forms, either public or private law entities. Public law entities are recognized as legal personalities whose goal, tasks and organization are established and defined via specific acts of legislation, with the best-known example being the publicly-owned promotional bank KfW (Kreditanstalt für Wiederaufbau). The government can also resort to ownership or participation in an entity governed by private law if the following conditions are met: doing so fulfills an important state interest, there is no better or more economical alternative, the financial responsibility of the federal government is limited, the government has appropriate supervisory influence, yearly reports are published, and such control is approved by the federal Finance Ministry and the ministry responsible for the subject matter.

Government oversight of existing SOEs is decentralized and handled by the ministry with the appropriate technical area of expertise. The primary goal of such involvement is the furtherance of the public interest rather than the generation of profits. The government is required to end its ownership stake in a private entity if tasks change or technological progress provides more effective alternatives, though certain areas, particularly science and culture, remain permanent core government obligations. German SOEs are subject to the same taxes and the same value added tax rebate policies as their private sector competitors. There are no laws or rules that seek to ensure a primary or leading role for SOEs in certain sectors/industries. Private enterprises have the same access to financing as SOEs, including access to state-owned banks such as KfW. Under the law, SOEs are subject to hard budget constraints which are generally enforced.

The Federal Statistics Office maintains a database of SOEs from all three levels of government (federal, state, and municipal) listing a total of 15,707 entities for 2014, or 0.4% of the total 3.6 million companies in Germany. SOEs in 2014 had €534 billion in revenue and €513 billion in expenditures. 42.7% of SOE revenue was generated by water and energy suppliers, 11.6% by health and social services, and 11.3% by transportation-related entities. Measured by number of companies rather than size, 88% of SOEs are owned by municipalities, 10% are owned by Germany’s 16 states, and 2% by the federal government.

The Federal Finance Ministry is required to publish a detailed annual report on public funds, institutions, and companies in which the federal government has direct participation (including a minority share), or an indirect participation greater than 25% and with a nominal capital share worth more than €50,000. The federal government held a direct participation in 108 companies and an indirect participation in 508 companies at the end of 2015, most prominently Deutsche Bahn (100%), Deutsche Telekom (32%), and Deutsche Post (21%), and Federal government ownership is concentrated in the areas of science, infrastructure, administration/increasing efficiency, economic development, defense, development policy, culture, and real estate. As the result of federal financial assistance packages from the federally-controlled Financial Market Stability Fund during the global financial crisis of 2008-9, the federal government still has a partial stake in several private banks, including a 15.6% share in Commerzbank, Germany’s second largest private bank. The 2016 annual report can be found here: http://www.bundesfinanzministerium.de/Content/DE/Standardartikel/Themen/ Bundesvermoegen/Privatisierungs_und_Beteiligungspolitik/Beteiligungspolitik/ Beteiligungsberichte/Beteiligungsbericht-2016.html 

Publicly-owned banks also constitute one of the three pillars of Germany’s banking system (cooperative and commercial banks are the other two). Germany’s savings banks are mainly owned by the municipalities, while the so-called Landesbanken are typically owned by regional savings bank associations and the state governments. There are also many state-owned promotional/development banks which have taken on larger governmental roles in financing infrastructure. This increased role removes expenditures from public budgets, particularly helpful in light of Germany’s balanced budget rules, which go into effect for the states in 2020.

One case of a German partially state-owned enterprise is automotive manufacturer Volkswagen, in which the German state of Lower Saxony owns a 12.7% stake (the fourth largest), but controls 20% of the voting rights. The so-called Volkswagen Law, passed in 1960, limited individual shareholder’s voting rights in Volkswagen to a maximum of 20% despite the actual number of shares owned, so that Lower Saxony could veto any takeover attempts. In 2005, the European Commission successfully sued Germany at the European Court of Justice (ECJ), claiming the law impeded the free flow of capital. The law was subsequently amended to remove the cap on voting rights, but Lower Saxony’s 20% share of voting rights was maintained, preserving its blocking minority against hostile takeovers. In 2013, the ECJ judged that the amended law complied with the required modifications of the earlier ruling.

Deutsche Bahn, the 100%-federally controlled railroad company, has been investigated for potential abuse of a dominant market position by the European Commission (EC) and the Federal Cartel Office. The EC closed the investigation in 2013 after Deutsche Bahn implemented a new, competitive pricing system. The German Cartel Office terminated the proceedings against Deutsche Bahn in May 2016 regarding possible abuse of dominance in the market for the distribution of passenger train tickets after the company agreed to several changes of its pricing systems to prevent disadvantages for its competitors.

Privatization Program

There is no privatization program ongoing. As a matter of principle, Germany treats foreigners equally in privatizations.

In November 2014, the Federal Ministry of Foreign Affairs commenced work to draw up a National Action Plan for Business and Human Rights (NAP). The action plan aims to apply the UN Guiding Principles for Business and Human Rights for the activities of German companies nationally as well as globally in their value and supply chains. The broad public consultations were concluded in December 2015. The German Government adopted the NAP in its Cabinet meeting on December 21, 2016. This NAP builds on the prior 2010 NAP, led by the Ministry of Labor and Social Affairs, approved by the Federal Cabinet, and in concert with the UN Working Group on Business and Human Rights, that aimed at anchoring CSR more firmly in enterprises and public bodies, including small and medium-sized enterprises. The 2010 NAP was based on recommendations of the National CSR Forum, which consists of 44 experts from business, unions, non-governmental organizations and academia and which convenes once or twice a year for plenary consultations.

Germany adheres to the OECD Guidelines for Multinational Enterprises, and established an OECD National Contact Point (NCP) in 2000 which is housed in the Federal Ministry of Economic Affairs and Energy. It is supported by an advisory board composed of several ministries, as well as business organizations, trade unions and NGOs. The working group usually meets once a year to discuss all Guidelines-related issues. The German NCP for the MNE Guidelines can be contacted through the Ministry’s website: https://www.bmwi.de/Redaktion/EN/Textsammlungen/Foreign-Trade/oecd-guidelines.html 

There is general awareness of environmental, social and governance issues among both producers and consumers, and various surveys suggest that consumers increasingly care about the ecological and social impacts of the products they purchase. In order to encourage businesses to factor environmental, social and governance issues into their decision-making, the government provides information online and in hard copy. The government awards several CSR related prizes, promotes CSR at business fairs, produces regular reports and newsletters, and has created a website on CSR in Germany (http://www.csr-in-deutschland.de/EN/Home/home.html  in English). The German government maintains and enforces domestic laws with respect to labor and employment rights, consumer protections and environmental protections. The German government does not waive labor and environmental laws to attract investment.

On the business side, the American Chamber of Commerce in Germany (AmCham Germany) is active in promoting standards of social responsibility within their members’ corporate activities. AmCham Germany issues regular publications on selected member companies’ approaches to CSR. Its CSR Committee serves as a platform to exchange best practices, identify trends and discuss regulatory initiatives. Other business initiatives, platforms and networks on sustainable corporate conduct and CSR exist. In addition, Germany’s four leading business organizations have provided information on a common CSR internet portal: www.csrgermany.de 

Social reporting is voluntary, but publicly listed companies frequently do so by including information on their CSR policies in their annual reports and on their websites.

The following civil society groups work on CSR: 3p Consortium for Sustainable Management, Amnesty International Germany, Bund für Umwelt und Naturschutz Deutschland e. V. (BUND), CorA Corporate Accountability – Netzwerk Unternehmensverantwortung, Forest Stewardship Council (FSC), Germanwatch, Greenpeace Germany, Naturschutzbund Deutschland (NABU), Sneep (Studentisches Netzwerk zu Wirtschafts- und Unternehmensethik), Stiftung Warentest, Südwind – Institut für Ökonomie und Ökumene, TransFair – Verein zur Förderung des Fairen Handels mit der “Dritten Welt” e. V., Transparency International, Verbraucherzentrale Bundesverband e.V., Bundesverband Die Verbraucher Initiative e.V., World Wide Fund for Nature (WWF).

Among industrialized countries, Germany ranks 10th out of 176, according to Transparency International’s 2016 Corruption Perceptions Index. However, the auto industry, the construction sector, and public contracting, in conjunction with questionable political party influence and party donations, represent areas of continued concern. Nevertheless, U.S. firms have not identified corruption as an impediment to investment in Germany. Germany is a signatory of the OECD Anti-Bribery Convention and a participating member of the OECD Working Group on Bribery.

Over the last two decades, Germany has increased penalties for the bribery of German officials, for corrupt practices between companies, and for price-fixing by companies competing for public contracts. It has also strengthened anti-corruption provisions on financial support extended by the official export credit agency and has tightened the rules for public tenders. Government officials are forbidden from accepting gifts linked to their jobs. Most state governments and local authorities have contact points for whistle-blowing and provisions for rotating personnel in areas prone to corruption. There are serious penalties for bribing officials and price fixing by companies competing for public contracts.

According to the Federal Criminal Office, in 2015, 71% of all corruption cases were directed towards the public administration, 16% towards the business sector, 12% to law enforcement and judicial authorities, and 1% to politics.

A prominent corruption case is related to the BER Berlin Airport building site. Proceedings were opened in October 2015 against a manager of the airport operating company; three leading employees of a technical company working on electricity, heating and sanitary equipment are facing trial in the Cottbus regional court for corruption. In October 2016, the Cottbus district court sentenced the manager to 3.5 years in prison and a fine of 150,000 Euro ( USD 160,000) because of corruption.

Parliamentarians are subject to financial disclosure laws that require them to publish earnings from outside employment. Disclosures are available to the public via the Bundestag website (next to the parliamentarians’ biographies) and in the Official Handbook of the Bundestag. Penalties for noncompliance can range from an administrative fine to as much as half of a parliamentarian’s annual salary.

Donations to political parties are permitted. However, if they exceed EUR 50,000, they must be reported to the President of the Bundestag. Donations of EUR 10,000 or more must be included in the party’s annual accountability report to the President of the Bundestag.

State prosecutors generally are responsible for investigating corruption cases, but not all state governments have prosecutors specialized in corruption. Germany has successfully prosecuted hundreds of domestic corruption cases over the years, including large scale cases against major companies. An OECD monitoring report released in 2010 noted that the country’s enforcement efforts have increased steadily and resulted in a significant number of prosecutions and sanctions imposed in foreign bribery-related cases against individuals. However, the report highlighted that sentences for corruption were generally within the lower range of available penalties and that most prison sentences were suspended, raising concerns that punishment was not always fully effective, proportionate, or dissuasive. Transparency International criticized the number of plea bargains and the statutory limitation periods.

Media reports in recent years about bribery investigations against Siemens, Daimler, Deutsche Telekom and Ferrostaal increased awareness of the problem of corruption. As a result, an increasing number of listed companies and multinationals have expanded their compliance departments, tightened internal codes of conduct, established points of conducts, and offered more ethics training to employees.

The Federation of Germany Industry (BDI), the German Chamber of Commerce (DIHK) and the International Chamber of Commerce (ICC) provide guidelines in paper and electronic format on how to prevent corruption in an effort to convince all including small and medium sized companies to catch up. In addition, BDI provides model texts if companies with two different sets of compliance codes want to do business with each other.

UN Anticorruption Convention, OECD Convention on Combatting Bribery

Germany signed the UN Anti-Corruption Convention in 2003. The Bundestag ratified the Convention in November 2014.

Germany adheres to the OECD Anti-Bribery Convention which criminalizes bribery of foreign public officials by German citizens and firms. The necessary tax reform legislation ending the tax write-off for bribes in Germany and abroad became law in 1999. Germany actively enforces the convention and is increasingly dealing better with the risk of transnational corruption.

The country participates in the relevant EU anti-corruption measures and signed two EU conventions against corruption. However, Germany has not ratified the Council of Europe Criminal Law Convention on Corruption and the Civil Law Convention on Corruption.

Resources to Report Corruption

There is no central government anti-corruption agency in Germany.

Contact at “watchdog” organization

Prof. Dr. Edda Muller
Transparency International Germany
Alte Schonhauser Str. 44, 10119 Berlin
+49 30 549 898 0

The Federal Criminal Office publishes an annual report: “Lagebild Korruption” – the latest one covers 2015.

https://www.bka.de/SharedDocs/Downloads/DE/Publikationen/ JahresberichteUndLagebilder/Korruption/ korruptionBundeslagebild2015.html;jsessionid=6498B8909CDD2549EBD2BCF686BD3A95.live0601?nn=28078 

Political acts of violence against either foreign or domestic business enterprises are extremely rare. Isolated cases of violence directed at certain minorities and asylum seekers have not affected U.S. investments or investors.

The German labor force is generally highly skilled, well-educated, and productive. The labor market remained resilient during the economic and financial crisis and was stronger in 2016 than ever before. Employment in Germany has continued to rise for the eleventh consecutive year and reached an all-time high of 43.4 million in 2016, an increase of 425,000 (or 1.0 percent) from 2015—the highest level since German reunification (October 1990).

Simultaneously, unemployment has continued to fall by more than two million since 2005, and reached in 2016 the lowest average annual value in 25 years. In 2016, around 2.7 million people were registered as unemployed, corresponding to an unemployment rate of 6.1 percent, according to official national data from the German Federal Employment Agency. Using internationally comparable data from the European Union, Germany had an average annual unemployment rate of 3.85 percent in 2016, the second lowest rate among all European Union member states (EUROSTAT). Although the unemployment rate gap between federal states in eastern Germany versus western Germany has narrowed considerably in recent years, the average unemployment rate in the eastern states (8.5 percent ) still significantly exceeded that of the western states (5.6 percent) in 2016.

Germany’s national youth unemployment rate was 5.3 percent in 2015. The German vocational training system has gained international interest as a key factor in Germany’s highly skilled workforce and its sustainably low youth unemployment rate. Germany’s so-called “dual vocational training,” a combination of theoretical courses taught at schools and practical application in the workplace, teaches and develops many of the skills employers need. Each year, there are more than 500,000 apprenticeship positions available in more than 340 recognized training professions in all sectors of the economy and public administration. Around 50 percent of students in every age group choose to start an apprenticeship. The government is promoting apprenticeship opportunities, in partnership with industry, through the “National Pact to Promote Training and Young Skilled Workers.”

An element of growing concern for German business is a shrinking labor force due to an aging population, especially with respect to skilled labor. Official forecasts at the behest of the Federal Ministry of Labor and Social Affairs predict that the current working age population will shrink by almost 3 million between 2010 and 2030 resulting in an overall shortage of labor. Labor bottlenecks are already a reality in certain industries, occupations and regions. According to the Federal Employment Agency, doctors, medical and geriatric nurses and mechanical, automotive and electrical engineers as well as IT professionals are in short supply. The government has begun to enhance its efforts to ensure an adequate labor supply by improving programs to integrate women, elderly, young people as well as foreign nationals into the labor market. The government has also facilitated the immigration of qualified workers.

The net migration rate of foreigners (total number of immigrants minus the number of emigrants) rose from a 2008 low of 10,700 to 890,000 in 2015, an increase of almost 50 percent compared to the previous year. In 2016, the number decreased to 280,000 foreigners according to the German Federal Ministry of the Interior. Whereas in recent years the majority of immigrants came from other EU member states choosing Germany due to its positive labor market situation, the majority of arrivals in 2015 and 2016 were refugees/asylum-seekers. An updated 2016 forecast commissioned by the Federal Ministry of Labor and Social Affairs predicts that the immigration of refugees will increase the population by 1.4 to 2.1 million until 2030. The annual economic growth will hence be 0.25 percent higher than without immigration. The number of employed will increase by 1.2 million, but unemployment is also likely to rise without the successful integration of refugees into the labor market.

Labor Relations

The cooperation and partnership of labor unions and employer associations is considered a fundamental principal of the German social market economy and has contributed to the country’s resilience during the economic and financial crisis.

German labor unions are generally constructive in their interaction with employers. As job security for members was long a core objective for German labor unions, they showed restraint in collective bargaining in weak economic times. In the last few years, Germany experienced a considerable rise in the number of labor actions, however, as unions became more insistent that employees should benefit from Germany’s strong economic recovery. According to the Institute of Economic and Social Research (WSI), about 2 million workdays were lost in 2015, the highest amount since 1992, and more than three times as many as in the previous year. The number decreased to 462,000 in 2016. All workers have the right to strike, except for civil servants (including teachers and police) and staff in sensitive or essential positions, such as members of the armed forces.

The constitution, federal legislation, and government regulations contain provisions designed to protect the right of employees to form and join independent unions of their choice. The overwhelming majority of unionized workers are members of one of the eight largest unions – largely grouped by industry or service sector – which are affiliates of the German Trade Union Confederation (Deutscher Gewerkschaftsbund, DGB). Several smaller unions exist outside the DGB. Overall trade union membership has, however, been in decline over the last several years. In 2013, less than 18 percent of the workforce belonged to unions. Since peaking at around 12 million members shortly after German reunification, total DGB union membership has dropped to 6.0 million. In contrast however, IG Metall, the largest German labor union with 2.3 million members, the influential service sector union Ver.di (2.01 million members), educational union GEW and the police labor union GDP all reported membership gains in 2016.

The constitution and enabling legislation protect the right to collective bargaining, and agreements are legally binding to the parties. Collective bargaining agreements in 2014 covered approximately 58 percent of all employees, 60 percent of the labor force in the western part of the country and approximately 47 percent in the East. On average, collective bargaining agreements in Germany were valid for 21.1 months in 2015.

Collective bargaining agreements concluded in 2016 provided nominal pay increases of 2.4 percent in 2016. Collective bargaining resulted in an overall real wage gain of 1.9 percent in 2016 compared to an inflation rate of 0.5 percent. Labor unions have achieved wage increases that were above the inflation rate since 2009.

Labor costs increased by 2.5 percent in 2016. With an average labor cost of €32.70 per hour, Germany remained eighth among the 28 EU-members states (EU average: €25.90) in 2015. Since the introduction of the European common currency, the increases of the unit labor cost in Germany remained significantly below EU average.

In January 2015, Germany’s first statutory country-wide minimum wage of €8.50 ($9.06) per hour entered into force, and which increased to €8.84 ($9.43) per January 1, 2017. The new law exempts young people under the age of 18, the long-term unemployed within their first six months at a new job, and apprentices – irrespective of their age – in the context of a vocational training.

By law, workers can elect a works council in any private company employing at least five people. The rights of the works council include the right to be informed, to be consulted, and to participate in company decisions. Works councils often help labor and management to settle problems before they become disputes and disrupt work. In addition, “co-determination” laws give the workforce in medium-sized or large companies (corporations, limited liability companies, partnerships limited by shares, co-operatives, and mutual insurance companies) significant voting representation on the firms’ supervisory boards. This co-determination in the supervisory board extends to all company activities.

OPIC programs were available for the new states of eastern Germany for several years during the early 1990s following reunification, but were later suspended due to economic and political progress which caused it to ‘graduate out’.

Table 2: Key Macroeconomic Data, U.S. FDI in Host Country/Economy

Host Country Statistical Source USG or International Statistical Source USG or International Source of Data:
BEA; IMF; Eurostat; UNCTAD, Other
Economic Data Year Amount Year Amount
Host Country Gross Domestic Product (GDP) ($M USD) 2016


€3,132,670 million

€2,923,900 million

2015 $3,363,000 million www.destatis.de  (Federal Statistical Office, data only available in €), www.worldbank.org/en/country 
Foreign Direct Investment Host Country Statistical Source USG or International Statistical Source USG or international Source of Data:
BEA; IMF; Eurostat; UNCTAD, Other
U.S. FDI in partner country ($M USD, stock positions) 2014 €52,851 million 2015 $108,094 million http://www.bundesbank.de  (German Central Bank, 2014 data published in April 2016, only available in €)

BEA data available at http://bea.gov/international/direct_investment_

Host country’s FDI in the United States ($M USD, stock positions) 2014 €181,176 million 2015 $255,471 million http://www.bundesbank.de  (German Central Bank, 2014 data published in April 2016, only available in €)

BEA data available at http://bea.gov/international/direct_investment_

Total inbound stock of FDI as % host GDP 2014 1.8% 2015 3.2% N/A

Table 3: Sources and Destination of FDI

Direct Investment from/in Counterpart Economy Data
From Top Five Sources/To Top Five Destinations (US Dollars, Millions)
Inward Direct Investment Outward Direct Investment
Total Inward 786,941 100% Total Outward 1,376,181 100%
Luxembourg 155,677 19.8% United States 254,286 18.5%
Netherlands 151,506 19.3% United Kingdom 159,044 11.6%
United States 78,123 9.9% Luxembourg 135,822 9.9%
United Kingdom 68,035 8.6% Netherlands 119,247 8.7%
Switzerland 52,333 6.7% China, P.R.: Mainland 76,588 5.6%
“0” reflects amounts rounded to +/- USD 500,000.

Table 4: Sources of Portfolio Investment

Portfolio Investment Assets
Top Five Partners (Millions, US Dollars)
Total Equity Securities Total Debt Securities
All Countries 3,081,796 100% All Countries 965,090 100% All Countries 2,116,706 100%
Luxembourg 541,551 17.6% Luxembourg 446,056 46.2% France 305,465 14.4%
France 379,001 12.3% United States 118,930 12.3% United States 232,927 11.0%
United States 351,857 11.4% France 73,536 7.6% Netherlands 215,204 10.2%
Netherlands 246,278 8.0% Ireland 72,579 7.5% Italy 176,543 8.3%
United Kingdom 201,024 6.5% United Kingdom 47,996 5.0% United Kingdom 153,028 7.2%

Minister-Counselor for Commercial Affairs
Clayallee 170, 14191 Berlin, Germany

2017 Investment Climate Statements: Germany
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