New rules allow German limited liability practices

GERMAN law firms can now limit liability claims to partnership-owned assets and the individual property of specific lawyers following the introduction of new legislation last month.

Brought in via the Statute Concerning Partnerships for Members of the Independent Professions, the rules mark the first creation of a new German legal entity since 1900.

The optional rules – similar to those introduced in other jurisdictions – mean lawyers can adopt alternative methods of practice to the civil law partnership which entitles clients to sue for the personal assets of every partner.

It will now be possible to tie liability to the activities of the partner responsible for a case, a rule which some lawyers say will “fill the gap” between limited liability companies and civil law partnerships.

But others claim it is a statute for the future, and predict it is unlikely many firms will opt for the practice at present.

Dr Michael Lappe, London resident partner for Oppenhoff Radler, says: “The limited liability partnership is something which looks very far into the future, seeing potential liability risks similar to the US environment.”

“The problem out there is much greater than it is currently in England or Germany and I think this legislation goes very far into the future, predicting that the situation will be as it is in the US – that may not happen.

“We have had some cases of professional liability, but the idea of limits has not really been an issue in Germany so far.

“There are people who are concerned about this but I think this is something which will not immediately be widely used in Germany.”

Frederick Bartelsmeyer, a partner at Frankfurt-based firm Bryan Cave, says that client expectations will also dictate whether partnerships adopt the new rules.

“In the first instance, for most clients, claims are covered by insurance and the individual partner stands with his complete private assets behind his services,” comments Bartelsmeyer.

“Presuming there is adequate insurance, the clients should be willing to accept this new statute. But the issue will come down to whether clients are satisfied with a limitation on the assets they can pursue.”