Monthly Archives: May 2015

Franchise in Germany: Damages Claims By Franchisees

Franchisees can assert claims for damages if they were knowingly forecast unrealistic turnover figures when everything was being explained to them prior to the conclusion of the agreement.
Franchise agreements can today be found in a wide range of different industries. The franchisee runs an independent company and makes use of the franchisors’ trademarks and concept for this purpose. Within this framework, the franchisor generally has a lead over the franchisee in terms of information.

This is due to the fact that the former in most cases has recourse to empirical data from its other franchise partners, which puts it in a position to provide serious figures regarding the expected turnover. While it has not been fully clarified which economic indicators a franchisor needs to make available within the scope of things being explained prior to the conclusion of the agreement, completely unrealistic and exaggerated figures that have no comprehensible basis cannot be used. That was the determination of the Hanseatic Higher Regional Court of Hamburg in its ruling of September 5, 2014 (Az.: 4 U 10/14).

In the instant case, a franchisee of a fashion label raised an action for damages. The turnover figures that it had been forecast were far too high. They were unable to generate this turnover even after two years. It was not even enough to cover the costs associated with the store. For this reason, the franchisee terminated the franchise agreement and sued for reimbursement of the costs incurred. The HRC of Hamburg awarded the plaintiff extensive compensation. At first instance, the Regional Court of Hamburg had also awarded the plaintiff compensation.

The case demonstrates that a franchise agreement is a complex matter both for the franchisor and the franchisee, with respect to which many different factors need to be taken into account. Additionally, a large variety of other legal fields typically come into play as well. Experienced lawyers with a high degree of expertise in the various legal fields concerned can contribute to the drafting of the agreement to ensure that it is legally sound and duly accounts for the interests of all of those involved.

Even if disputes arise concerning existing franchise agreements, it is still important to seek legal advice.

Get Protection and Security for Your Investments in Colombia

A legal framework that guarantees stability to international business is always desirable for any investor or company in any sector of the economy anywhere. Provided that each country has jurisdiction on its own territory, How to promote and protect business abroad? And how to avoid, or at least reduce, the political risk involved in doing business in a different country?

 

With the aim of providing instruments that allow the governments to offer a stable and favorable framework for international business, the countries negotiate and celebrate International Investment Agreements –IIA-. This kind of agreements are international treaties signed by two or more countries with the purpose of establishing a framework of common legal rules that shall be applicable for foreign investments in the geographical area of all signing countries.

There are several types of IIA. First of all, there are the agreements aimed mainly to protect the establishment, operation, management or expansion of foreign investments. These agreements include only one substantial discipline which is investment and are known as Bilateral Investment Treaties –BIT-. Secondly, there are Free Trade Agreements – FTA – that constitutes IIA only when they include an investment chapter aimed to protect the establishment, operation, management or expansion of foreign investments (FTA include several substantial disciplines such as, market access, trade in services, intellectual property, rules of origin, etc.).

Colombia, under the strategy of internationalization of its economy and the promotion of the country as a favorable destiny for international investments and businesses, have negotiated several IIA which include, in general terms, the following rules[1] in order to reduce the political risk in foreign investments:

Non-discrimination: this obligation guarantees that, except in some cases, each country shall not discriminate between the national investors or investors of a third country and the investors of the other country signatory of the IIA. Under this rule, the same treatment granted by a government to national investors or investors of any country, shall be granted in the same conditions, to investors of the other country signatory.

Fair and Equitable Treatment: includes the obligation of a government, of granting to the investments of the other country, a treatment which is not arbitrary but in accordance with the due process of law and the obligation not to deny justice in criminal, civil or administrative proceedings.

Full protection and security: implies the commitment of a government of granting police protection to foreign investments in the same level as granted to national investors.

Prohibition of expropriation without compensation: under this commitment, no expropriation measure may be established unless such measure is taken on a non-discriminatory basis, for a public purpose and in accordance with the due process of law. In any case, any expropriation shall be accompanied by the payment of prompt, adequate and effective compensation.

Free transfer: implies the obligation for each country of allowing investors of the other country to conduct transfers, in a freely usable currency, freely and without undue delay. Transfers include contributions to capital, including the initial contribution, returns and management fees among others.

Investor – State dispute settlement: in the event case of infringement of any of the obligations provided in the IIA, the same agreement establishes a special mechanism for the solutions of differences between the investor and the State. This means that, the investor affected by the infringement by the State, may submit a claim against the host State, before international arbitration courts, pursuing an economic compensation.

Colombia has the following IIA in force[2]:

BIT: with Peru, Switzerland, Spain, China, India, United Kingdom
FTA with investment chapter: México, United States, Chile, North Triangle (Honduras, Salvador Guatemala) and Canada.

It is expected that the following IIA shall enter into force in Colombia during 2015 – 2016:

BIT: Japan, France, Singapore.
FTA with investment chapter: Costa Rica, South Korea and the Pacific Alliance.

It is important to take into account that this kind of IIA provides protection for foreign investments in Colombia as well for Colombian investors abroad considering that such treaties are negotiated on a reciprocity principle.

With these agreements, Colombia certainly improves its investment climate offering a predictable and favorable legal framework for international business which substantially contributes to reduce the political risk involved in any investment established or intended to be established in Colombia by investors from a foreign country.

Disclaimer: The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of any entity or agency of the Colombian government or any other agency associated with it.

Inheritance Asserting Estate Liabilities in Germany

Estate liabilities can be asserted when making an inheritance tax declaration, but only if the debts had already been incurred by the testator by the time of his death.
The debts of the testator are tax-deductible as estate liabilities for the purposes of inheritance tax. To this end, the testator’s statutory, contractual and non-contractual obligations need to have existed prior to his death, even if the consequences do not arise until after the inheritance has accrued. Moreover, the liabilities have to have been incurred by the testator at the time of his death, i.e. liabilities which would ordinarily have had to be met by the testator. This comes from the Finanzgericht Münster’s (Münster Fiscal Court) ruling of April 30, 2015 (Az.: 3 K 900/13 Erb).

The third senate of the FG Münster had to rule on the legal action of an heir who wished to assert oil-related damage as an estate liability. He, in addition to other heirs, had inherited a plot of land with a semi-detached house from his uncle. Prior to his death, the uncle had obtained heating oil which damaged the heating system because it was not the correct grade of oil. Without giving rise to any indication that there had been a malfunction, the oil leaked from the heating installation and reached a height of several centimetres in the room where it was being held. It was not until after the death of the uncle that the damage was detected and fixed. The claimant wanted to assert the costs arising from this based on his pro rata share of the inheritance in his inheritance tax declaration as an estate liability. This was not allowed by the competent tax office and his claim before the FG Münster was also unsuccessful.

The Court stated that while the damage was the result of the uncle purchasing the wrong oil, he was prompted neither by the authorities nor the tenants of the house to fix the damage and thus did not incur any liability during his lifetime in this respect. The Court went on to state that it could not be established whether the damage already existed at the time of the testator’s death. Accordingly, the FG Münster argued that the costs could not be asserted as estate liabilities.

Aside from the matter of estate liabilities, inheritance tax features other aspects where there is room for manoeuvre. Heirs can turn to lawyers and tax advisors who are competent in the field of succession law in order to make optimal use of this.

Can I Be Fired for Missing One Day of Work

Most states and employers operate under an at-will system in which employers can terminate employees for any reason and employees can quit for any reason. However, employers cannot terminate employees for an illegal purpose, which may or may not occur if an employee misses one day of work. The reason for missing work and the terms of employment largely dictate whether an employee can be fired for missing one day of work.

 

Paid Sick Leave

A few areas in the United States require employers to provide paid sick leave to employees. Therefore, in these locations, an employer may not be able to fire an employee for being sick and missing one day of work. However, whether a particular law applies to an employer depends on the duration of employment, the number of employees regularly employed by the employer, the extent of the illness and the reason for missing work.

Likewise, if an employer offers paid sick leave, it must follow its own guidelines related to providing this benefit equally to employees.

Family Medical Leave Act

If the employer has a minimum of 50 employees within a 75-mile radius of the affected employee’s workplace and the employee has worked there for a minimum of one year for a total of 1,250 hours or more in work hours, the employee can take up to 12 weeks of leave for a serious medical condition that either the employee is suffering or an immediate relative is suffering, such as a spouse, parent or child.

To qualify as being a “serious” medical condition, the condition must meet certain legal definitions, such as requiring impatient care, a condition requiring an absence of three or more days from work, a pregnancy-related incapacity, time missed for treatment or incapacity of a chronic condition or incapacity for a permanent or long-term condition.

The employee has the duty to make a request for FMLA leave as soon as he or she knows that leave will be necessary. The employee does not have to take all of the time at one time. He or she can ask for intermittent leave if he or she will not need that much time. If the event that precipitates the need for leave is an emergency, the employee may still be protected. However, he or she should take great care in completing the paperwork related to this leave immediately so that the employer knows that the employee is covered.

Disability

The Americans with Disabilities Act provides protection to employees who miss work due to illness related to a covered disability and who work for employers with 15 or more employees. Under the ADA, a covered employer must provide a reasonable accommodation to an employee as long as doing so would not impose substantial hardship if the employee has a disability that impairs a major life activity, has a history of a disability or is believed to have a physical or mental impairment. Allowing an employee to miss a day of work for a condition that affects his or her disability may be a required accommodation on the part of the employer.

Other Prohibited Conduct

An employer must comply with relevant employment laws, such as not discriminating against employees who have a protected class status. For example, the employer cannot terminate an employee because of his or her race and use the missed day of work as an excuse. Nor can an employer terminate an employee for specific retaliatory purposes, such as reporting the employer for a violation of a state fair employment law.

Protected Activities

Employers may not be permitted to terminate employees if the reason that they missed work is considered a “protected activity” under state or federal law. For example, the employee may have gone to a union meeting, reported for jury duty or voted when he or she missed work. Some states have laws that prohibit an employer from firing an employee who misses work because he or she is under a subpoena to testify in court. There are also laws pertaining to the continued employment of individuals who report for military drills or training that requires them to miss work. Again, the employee is required to notify the employer of such need to miss work.

Several states have laws that protect victims of domestic violence. These states generally prohibit an employer for terminating an employee who misses work due to a medical emergency caused by domestic violence or who pursues protection from the police or court to prevent domestic violence.