Working Safely and Successfully with German Companies – What Arab Businesses Need to Know

Why Choosing the Right Governing Law Determines Success or Failure

When working with a German partner, selecting the applicable law is one of the most important foundation stones for a stable business relationship.

German courts almost always recognize a contractual choice of law, even if the contracting partner is from the Arab region. Decisions such as those by the Regional Court of Landshut (Ref. 73 O 3793/19) and the Higher Regional Court of Munich (Ref. 20 U 820/20) confirm this.

Your advantage:

You can decide at the time of contracting which law will later apply, German law, English law, or even the law of your own country.

However, many Arab jurisdictions recognize foreign governing law only to a limited extent. This can lead to contradictory decisions in the event of a dispute. That is why it is particularly important for Arab companies to structure the choice-of-law clause carefully and combine it with appropriate dispute-resolution mechanisms.

Why Standard Jurisdiction Clauses Are Often Not Enough

In Germany, contractual agreements on the place of jurisdiction are common. In many Arab countries, however, national courts automatically assume jurisdiction whenever a local party is involved.

The problem:

• A German court may be competent, and an Arab court may be competent at the same time.
• German court judgments are often not enforceable in Arab countries.

For Arab companies, this simply means: a victory before a German court often has no economic value. The claim remains unenforceable.

The better solution:

An international arbitration procedure, for example under ICC, DIAC, or UNCITRAL rules.

Arbitration: The Smartest Legal Safeguard for Arab Companies

Arbitration proceedings offer a unique advantage in international trade: they are recognized worldwide and are often faster and more confidential than state court litigation.

They are particularly attractive for Arab companies because:

• Arbitral awards are enforceable in almost all Arab countries (New York Convention).
• Proceedings can flexibly be conducted in Arabic or English.
• You can choose arbitrators who truly understand your industry.
• Business secrets remain confidential.

In short:

A well-drafted arbitration clause makes contracts with German business partners predictable and enforceable.

German Companies’ Terms & Conditions – Why They Matter for Arab Firms

German companies often work with very detailed General Terms and Conditions (AGB). To many Arab entrepreneurs, these seem overly complex—but legally they carry significant weight.

What you need to watch out for:

• AGB are valid only if properly and fully incorporated into the contract.
• They must be provided in the correct language.
• They must not contain surprising or unreasonable provisions.

Arab companies often discover that German AGB include obligations that are not customary locally. A thorough review is worthwhile, because once validly agreed, they will apply in court.

The Role of Sharia – A Key Factor in Many Sectors

In several Arab countries, Sharia-compliant principles influence parts of economic life. This is particularly relevant in:

• financial transactions
• long-term contracts
• interest and risk-allocation models

German companies are not always familiar with these specifics. Early coordination ensures that the contract aligns with both German and local legal requirements.

Formal Requirements and Evidence: Major Differences Compared to Germany

While contracts in Germany can usually be concluded informally, many Arab jurisdictions require additional measures, such as:

• notarization
• governmental registration
• translation into Arabic
• witness confirmations

Without knowledge of these requirements, you risk the contract not being provable or enforceable in your own country. Arab businesses should therefore ensure mutual clarity on formalities during the negotiation process.

Language Matters – Especially in Case of Disputes

Many contracts are drafted in English. Yet in many Arab countries, Arabic is the only language accepted in court.

This means:

• Translations must be absolutely precise.
• Technical terms should be defined.
• The binding contract language must be stated clearly.

Translation errors often lead to outcomes in dispute situations that differ completely from what the parties originally intended.

Conclusion: Knowing the Differences Gives You a Major Advantage

Arab companies working with German partners can unlock significant economic opportunities when contracts are professionally structured.

The key success factors include:

• clear and effective choice of law
• arbitration rather than uncertain jurisdiction clauses
• professional handling of German AGB
• consideration of local and Sharia-compliant rules
• precise language provisions and proper formal requirements

This turns risk into competitive advantage—and contracts into successful, long-term business relationships.