German Federal Court rules on judge's duty to know more foreign law

The case decided by the German Federal Court of Justice (Bundesgerichtshof/BGH) concerned a private individual but the decision is relevant for businesses taking action in German courts because courts might decide to include foreign as well as German law in its judgment.

The parties in this case were in dispute over a traffic accident which occurred in Germany and which was caused by someone who was driving a Lithuanian-registered car. The Berlin court of appeal (Kammergericht) ruled that Lithuanian law was applicable and awarded the claim, based on a rough translation of one specific section of the Lithuanian vehicle insurance code, which had been supplied to the court by the person who made the claim.

The Lithuanian driver appealed to the Federal Court of Justice against the ruling, arguing that the Berlin court had failed to properly explore the legal situation under Lithuanian law. The Federal Court of Justice ruled in favour of the Lithuanian driver and sent the case back to the court of appeal, clarifying that by basing its judgment on one translated section of a foreign law code, the court of appeal had neglected its duty to properly explore foreign law.

As the Federal Court of Justice pointed out, it is not appropriate for a court to base its judgment on foreign law without having taken proper steps to establish the legal situation under foreign law.

In such cases it is common practice for a German judge to appoint an expert, such as a professor of international or foreign law at a German university, who then furnishes an expert opinion for the court to take evidence on the specific aspects of foreign law relevant to the case.

Taking evidence on matters of foreign law forms an exception to the general rule of German civil procedure law that there is only evidence on facts but not on matters of law.

In general, the German approach to evidence is that the parties have to provide all of the facts and evidence. The court does not investigate the facts automatically. Subject to certain exceptions, each party bears the burden of proof for the facts supporting its claim or defence and may rely on direct and circumstantial evidence.

The court will consider and assess the submissions and the evidence in its free discretion. Technically, the judge has to be fully convinced that a certain contested fact is true. This standard of proof is somewhat higher than the concept of 'the balance of probabilities' which is used in common law systems and is more like the 'beyond reasonable doubt' standard applied in criminal cases in common law jurisdictions.

With the exception of damage claims based on cartel violations, there are no procedural pre-trial discovery, disclosure or document production obligations between the parties and there are no procedural means to seek disclosure of documents or information from third parties, such as the Norwich Pharmacal order in the .

This means that the parties are not subject to legal or litigation hold obligations with respect to German court proceedings. The parties are generally not required to present facts and submit evidence that is detrimental to their case, either. However, all submissions made and evidence presented must be true.

Information asymmetry which would usually be bridged by disclosure proceedings in common law countries is often, but not always, resolved by easing, shifting to a certain extent or even reversing the burden of proof. For example, in a product liability case the burden of proof to show that its product did not cause harm lies with the manufacturer. If German substantive law applies, it may also influence the allocation of the burden of proof.

The court will only take evidence if - in the court's view - a fact is relevant to the case and material to its outcome and is disputed between the parties. For instance, if the court can dismiss the case based on a legal argument, no evidence will be taken. In most cases, the court will formally order the taking of evidence in a court order setting out the contentious facts and the means of evidence.

The parties do not have to prove or plead the law, but only the facts – except when foreign law has to be applied to the case, as the recent judgment of the Federal Court of Justice has demonstrated.

Further information is available in a manual covering practical issues particularly relevant to foreign parties which you can request from Attila Bangha-Szabo.