‘Down Under’—much more than just kangaroos and didgeridoos
There is significant trading and commercial activity between Germany and Australia covering a wide range of industries. In fact, Australia’s most important European trading partner in Europe after the United Kingdom is Germany, which is also currently Australia’s tenth-largest merchandise trading partner worldwide.
Australia may be on the ‘other side of the world’ but it is receiving increasing attention from German business and industry and is an important commercial partner for Germany in the Asia-Pacific region. Notwithstanding the distance and time differences, Australia offers a stable environment within which to do business in terms of the legal, political, financial and commercial conditions. Doing business in Australia is, however, not quite the same as doing business in Germany.
1. What does this mean?
Apart from certain cultural differences, the legal system and regulatory framework in Australia differs greatly to Germany. Australia’s legal system originates from the English common law system, where the role of ‘judgemade’ law and precedents play a crucial role. Although there is today wide-reaching and substantial legislation, the courts continue to not only interpret but to make laws. This means that laws or legal principles are not only to be found in statutes and subordinate legislation, but also in the decisions of state and federal courts.
There are common law concepts that are not recognized in German law. One example is the notion of ‘consideration’, which together with offer and acceptance and intent to create legal relations, is an essential element of a valid contract. Another example is the ‘trust’, a legal institute that was developed centuries ago to allow a party to ‘own’ something because he was holding it for the protection and benefit of another (originally weaker) party. The trustee holds the legal ownership of the trust property and the beneficiary holds the beneficial ownership, giving both parties rights and obligations. The application of this legal instrument has developed over time to play a role in general commercial activity.
Further, Australia is made up of multiple legal jurisdictions with the result that there are both state laws and federal laws applicable to day-to-day business. Although the laws across the various states in Australia are reasonably uniform, some differences do exist. A ‘choice of law’ clause can therefore be of significance to a business’ commercial position.
One question that a German company would obviously ask when wishing to establish a presence in Australia is, ‘How’? There are a number of ways for a foreign company to set up business in Australia, such as: becoming a registered foreign company and establishing a branch office; joining a partnership or joint venture; establishing or even acquiring an Australian subsidiary company; or appointing an agent.
The most commonly selected company type is the limited liability company through shares, which may be private or public. The limited liability proprietary (private) company or ‘Pty Ltd’ is an extremely popular company form, which corresponds to the German GmbH. It is though subject to less stringent establishment requirements than its German ‘equivalent’. There is also the public limited liability company or ‘Limited’, which may be (but must not be) listed on the Australian Stock Exchange. Subject to the minimum requirements for Australian resident directors, it is possible for foreign residents to be directors of such companies.
2. How can we help you?
Our law firm has extensive experience with the Australian legal jurisdiction, including established relationships with legal and accounting/tax firms ‘Down Under’. For Australian and German businesses with interests in the other country, we can help by providing advice, support and representation in relation to, for example:
- Entry into a business relationship and the appropriate governing law;
- Negotiating and draft-ing bilingual contracts;
- Setting-up subsidiaries or branch offices;
- Cross-border dispute resolution (e.g. mediation or arbitration);
- Cross-border litigation through the court system (enforcement or defence of claims).