Good or bad for business? Lawyers across Germany make predictions as Merkel’s 16-year reign ends


German lawyers say it’s too early to know for sure what impact Sunday’s election result in Germany will have on their practices and clients, especially because coalitions need to be formed before the government can act on issues. that will affect the future of Germany.

The federal elections were historic not only because they marked the end of Angela Merkel’s 16-year chancellery, but also because they recorded the lowest vote for center-right Christian Democrats (CDU ) to Merkel’s power in her post-war history, which saw them narrowly lose to Olaf Scholz. Center-left Social Democrats (SPD).

Well below a majority, Scholz’s challenge now is to find partners with whom to form a coalition. The SPD and the CDU having both ruled out joining forces in a “grand coalition”, the best German lawyers believe that it is difficult to determine the economic and political landscape likely to emerge. A future government will likely have to balance the various political goals of two very different factions – the socially-minded Greens and the pro-business and economically liberal Free Democratic Party (FDP) in a potential three-way coalition, they say.

They agree, however, that the election results have placed lawyers at a crossroads, surrounded by several unanswered questions.

Will any coalition clear the way for negotiators? Could ESG lawyers take advantage of a windfall? Will we see an increase in the need for white collar lawyers amid a minefield of trade regulations and sanctions?

Better for business?

Carlos Robles y Zepf, corporate / M & A partner at Mayer Brown in Frankfurt, said that since the FDP is likely to be involved in a coalition, the election outcome could be good news for business.

“Since any new German government will most likely have to involve the FDP as a partner, it will be decisive to what extent the FDP can advance its agenda within that government,” he said. “The more they can grow, the better it is for most M&A companies / markets.”

“When looking at cases similar to Freshfields / cum-ex, this development could also be relevant for law firms. “

Jan Spittka, Data Privacy Partner in the Clyde & Co Düsseldorf office, said that while the regulatory outlook will depend on the appearance of the next governing coalition, if the FDP is part of that coalition, there will at least be no significant increase in regulation.

Spittka predicts the coalition talks will last for some time, much like they did in the last election cycle. But he is hopeful.

“There is something for everyone here, from the abolition of the GDPR (Alternative for Germany / AfD) to the strengthening of the application (Greens, FDP), to sanctions for de-anonymization (SPD), to the extension of the GDPR (Die Linke) “, he said.

… Or harder for businesses?

On the other hand, a failed business sanctions bill could come back under the new government.

“If the CDU / CSU is out, the Corporate Criminal Liability Bill (Verbandssanktionengesetz/Association Sanctions Act) could be taken back, as it was actively torpedoed by the Tories. When looking at the Freshfields / cum-ex-like cases, this development might also be relevant for law firms, ”Spittka said.

Eren Basar, partner of the white-collar criminal law firm Wessing & Partner in Düsseldorf, said he expects a positive side effect of a three-way coalition to be a more detailed debate on reform.

He said that during the last government period many laws were introduced in the Bundestag almost overnight. With the new coalition, he expects there will again be enough time to include more experts in the debate.

The Association Sanctions Act that would establish corporate criminal liability, for example, is unlikely to be passed in its current form this time around. But it all depends on who joins the coalition.

According to a preview by White & Case.

Greater ESG concentration?

Matthias Birkholz, partner at Lindenpartners in Berlin, foresees an increased emphasis on environmental, social and governance regulation if the Greens are part of the coalition.

According to Birkholz, Germany had not previously played an active role in shaping ESG regulation, which was largely initiated by the EU. But the rise of the Greens could change that.

“With the new government most likely involving the Green Party, we expect a more dynamic and open approach when it comes to promoting awareness and implementation of ESGs,” he said. “In this context, the new government is likely to want to actively shape EU regulation. ”

EU directive on sustainable corporate governance is imminent, so lawyers expect to see a greater focus on the issue of sustainable corporate governance in Germany as well, Birkholz said.

“The new government might even be open to including broader societal interests in the duty of care of CEOs, which would have been impossible to imagine under the old, more conservative political configuration.”

Birkholz added that he anticipated more stringent minimum quota rules on gender representation on boards.

Financial repression?

Michael J. Ulmer, M&A Partner at Cleary Gottlieb Steen & Hamilton in Frankfurt, said that even if legal topics were not prevalent in election campaigns, the current political mood could see a tightening of foreign direct investment (FDI) controls.

“Although the German FDI regime has already been tightened several times over the past few years, I wouldn’t be surprised if the political mood pushes this even further,” he said.

“This could probably not be reflected in the written FDI laws – they are already extremely strict – but rather in the guidance to the relevant administration which is currently developing the new processes set out in the strengthened FDI rules. , as well as in the respective approaches. ”

Ulmer added that industrial policy is increasingly becoming a topic, so antitrust processes and approaches could be influenced by political mood.

Renate Prinz, Regulatory Advisor at McDermott Will & Emery in Cologne, agreed that financial matters could be high on the agenda if Scholz, a lawyer who was vice-chancellor under Merkel, became chancellor, since he was finance minister in the previous legislature and had some exposure to critical issues in financial markets.

At the same time, given that the potential government will likely involve both the Greens and the FDP, it will need to balance competing views: promoting diversity, digitization and innovation while simultaneously showing a strong stance on issues. financial abuses, such as anti-money laundering and issues that arose from the Wirecard and cum-ex scandals.

“Scholz would like to show that he is taking action on the financial regulatory side,” she said.

I think that Germany still has some catching up to do, in order to promote a secure but at the same time innovative financial market. To support new ideas and concepts as an innovative site, also in the regulated sector, the supervisory authorities must also play their role, by enabling new developments while monitoring them and regulating them effectively if necessary ”, he said. she declared.

Lawyers said cryptocurrency is another problem the new government could solve because no one knows how to handle the rapid growth and technical developments surrounding it.

Will we see gender quotas?

One issue on which the Greens and the FDP particularly disagree is the recent law on gender quotas, which will force German state-owned companies to Three or more board members to ensure that at least one board member is a woman.

“The Greens really want to show they support and push this forward, because there are criticisms that it doesn’t go far enough, because it only covers a few companies,” Prinz said. “At the same time, we have the liberal FDP be against such a quota from a business point of view – against the rules limiting how one selects a board.

Lawyers have agreed that the impact of the election is not at all straightforward.

“Germany will most likely be governed by a tripartite coalition in the future,” said Thomas Schulz, director of Noerr’s London office. “None of the future ruling parties will be able to push through all of their demands.

“The reality is that these negotiations will take some time, maybe until the end of the year,” he added.

Still, Schulz hopes any changes will be positive.

“Our expectation is that Germany, as the largest economy in Europe, will become even more attractive to our international customers given the new opportunities,” he said.

Anne Bagamery contributed to this report.

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