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© Gerhard Dannemann 2015

Insurance Contract Act (Versicherungsvertragsgesetz, VVG)

“Insurance Contracts Act of 23 November 2007 (Federal Law Gazette I page 2631), as last amended by Article 13a of the Act of 17 July 2009 (Federal Law Gazette I page 1990)”

Translation provided by the Federal Ministry for Justice and Ute Reusch and reproduced with kind permission.


Table of Contents

Part 1 General Part

Chapter 1 Provisions applying to all classes of insurance

Division 1 General provisions

Section 1 Typical obligations
Section 2 Retroactive insurance
Section 3 Insurance policy
Section 4 Insurance policy issued in the name of the holder
Section 5 Deviating insurance policy
Section 6 Advising the policyholder
Section 7 Information provided to the policyholder
Section 8 Policyholder’s right of revocation
Section 9 Legal consequences of revocation
Section 10 Commencement and expiry of insurance
Section 11 Renewal, termination of the contract
Section 12 Period of insurance
Section 13 Change of address and name
Section 14 Due date of cash benefit
Section 15 Suspension of limitation period
Section 16 Insurer’s insolvency
Section 17 Prohibition of assignment of things exempt from seizure
Section 18 Deviating agreements

Division 2 Duty of disclosure, aggravation of risk, other incidental obligations

Section 19 Duty of disclosure
Section 20 Policyholder’s representative
Section 21 Exercising of the insurer’s rights
Section 22 Fraudulent misrepresentation
Section 23 Aggravation of risk
Section 24 Termination of the contract due to aggravation of the risk insured
Section 25 Increase in insurance premium due to aggravation of risk
Section 26 Release from liability due to aggravation of risk
Section 27 Immaterial aggravation of risk
Section 28 Non-observance of an incidental obligation
Section 29 Partial withdrawal, partial termination, partial release from liability
Section 30 Notification of the occurrence of the insured event
Section 31 Policyholder’s duty to disclose information
Section 32 Deviating agreements

Division 3 Premium

Section 33 Due date
Section 34 Payment by a third party
Section 35 Offsetting by the insurer
Section 36 Place of performance
Section 37 Delayed payment of first insurance premium
Section 38 Delayed payment of subsequent premium
Section 39 Termination of the contract before the agreed date
Section 40 Termination on account of increase in premium
Section 41 Reduction of the premium
Section 42 Deviating agreements

Division 4 Insurance for the account of a third party

Section 43 Definitions
Section 44 Rights of the insured person
Section 45 Rights of the policyholder
Section 46 Rights between the policyholder and the insured person
Section 47 Knowledge and conduct of the insured person
Section 48 Insurance for the account of “whom it may concern”

Division 5 Provisional cover

Section 49 Content of the contract
Section 50 Non-formation of the main contract
Section 51 Payment of the premium
Section 52 Termination of the contract

Division 6 Open policy

Section 53 Duty to give notice
Section 54 Breach of the duty to give notice
Section 55 Individual policy
Section 56 Breach of the duty of disclosure
Section 57 Change in risk insured
Section 58 Non-observance of an incidental obligation

Division 7 Insurance intermediaries, insurance advisers

Subdivision 1 Duties to notify and advise

Section 59 Definitions
Section 60 Basis on which insurance intermediary provides advice
Section 61 Insurance intermediary’s duties of advice and documentation
Section 62 Time and form of the information
Section 63 Obligation to pay damages
Section 64 Securing payment to the policyholder’s benefit
Section 65 Jumbo risk
Section 66 Other exceptions
Section 67 Deviating agreements
Section 68 Insurance advisers

Subdivision 2 Power of agency

Section 69 Statutory power of attorney
Section 70 Knowledge of the insurance agent
Section 71 Authorisation to acquire contracts
Section 72 Restriction of the power of agency
Section 73 Employees and intermediaries not working on a commercial basis

Chapter 2 Indemnity insurance

Division 1 General provisions

Section 74 Overinsurance
Section 75 Underinsurance
Section 76 Agreed value
Section 77 Several insurers
Section 78 Liability in the case of multiple insurance
Section 79 Elimination of the multiple insurance
Section 80 Lack of insured interest
Section 81 Causing the insured event
Section 82 Loss avoidance and minimisation
Section 83 Reimbursement of expenses
Section 84 Drawing on an expert
Section 85 Costs of establishing the loss
Section 86 Assignment of claims
Section 87 Deviating agreements

Division 2 Property insurance

Section 88 Insurable value
Section 89 Insurance for an aggregate of things
Section 90 Extended reimbursement of expenses
Section 91 Interest on compensation
Section 92 Termination of the contract after an insured event
Section 93 Replacement clause
Section 94 Effectiveness of payment vis-à-vis mortgage creditors
Section 95 Sale of the insured object
Section 96 Termination of the contract after a sale
Section 97 Disclosure of the sale
Section 98 Protection afforded the buyer
Section 99 Foreclosure, acquisition of the right of use

Part 2 Individual classes of insurance

Chapter 1 Liability insurance

Division 1 General provisions

Section 100 Insurer’s liability
Section 101 Legal protection costs
Section 102 Employer’s liability insurance
Section 103 Causing the insured event
Section 104 Policyholder’s duty of disclosure
Section 105 Acknowledgement by the policyholder
Section 106 Due date for performance
Section 107 Entitlement to a pension
Section 108 Right of recourse provision
Section 109 Several injured parties
Section 110 Policyholder’s insolvency
Section 111 Termination of the contract after an insured event
Section 112 Deviating agreements

Division 2 Compulsory insurance

Section 113 Compulsory insurance
Section 114 Scope of the insurance cover
Section 115 Direct claim
Section 116 Joint and several debtors
Section 117 Liability towards third parties
Section 118 Order of precedence of several claims
Section 119 Third party’s incidental obligations
Section 120 Non-observance of an incidental obligation by the third party
Section 121 Offsetting against third parties
Section 122 Sale of the insured object
Section 123 Recourse in the case of several insured parties
Section 124 Extent of legal force

Chapter 2 Legal expenses insurance

Section 125 Insurer’s liability
Section 126 Claims processing company
Section 127 Freedom of choice of lawyer
Section 128 Procedure for calling in expert opinion
Section 129 Deviating agreements

Chapter 3 Transport insurance

Section 130 Extent of risk accepted
Section 131 Breach of the duty of disclosure
Section 132 Change of risk insured
Section 133 Transportation in breach of contract
Section 134 Unsuitable means of transport
Section 135 Reimbursement of expenses
Section 136 Insurable value
Section 137 Causing an insured event
Section 138 Exclusion of liability for ships
Section 139 Sale of the insured object or goods
Section 140 Sale of the insured ship
Section 141 Release following payment of the sum insured

Chapter 4 Building fire insurance

Section 142 Disclosures to mortgage creditors
Section 143 Continuation of liability towards mortgage creditors
Section 144 Termination of the contract by the policyholder
Section 145 Assignment of the mortgage
Section 146 Duty of the insurer to provide confirmation and disclose information
Section 147 Change of mortgage creditor’s address and name
Section 148 Other charges on real property
Section 149 Owner’s charges on real property

Chapter 5 Life insurance

Section 150 Insured person
Section 151 Medical examination
Section 152 Revocation by the policyholder
Section 153 Surplus sharing
Section 154 Model calculation
Section 155 Annual information
Section 156 Knowledge and conduct of the insured person
Section 157 Declaring incorrect age
Section 158 Change in risk
Section 159 Appointment of beneficiary
Section 160 Interpretation of the appointment of beneficiary
Section 161 Suicide
Section 162 Killing by the beneficiary
Section 163 Change in premium and benefits payable
Section 164 Adjustment of the terms
Section 165 Fully paid-up insurance
Section 166 Termination of the contract by the insurer
Section 167 Conversion to qualify for exemption from attachment
Section 168 Termination of the contract by the policyholder
Section 169 Surrender value
Section 170 Right of subrogation
Section 171 Deviating agreements

Chapter 6 Occupational disability insurance

Section 172 Insurer’s liability
Section 173 Acknowledgement
Section 174 Release from liability
Section 175 Deviating agreements
Section 176 Applicable provisions
Section 177 Similar contracts of insurance

Chapter 7 Accident insurance

Section 178 Insurer’s liability
Section 179 Insured person
Section 180 Invalidity
Section 181 Aggravation of risk
Section 182 Contributory causes
Section 183 Causing the insured event
Section 184 Loss avoidance and minimisation
Section 185 Appointment of beneficiary
Section 186 Insurer’s duty to provide information
Section 187 Acknowledgement
Section 188 Re-assessment of invalidity
Section 189 Drawing on an expert, costs of ascertaining the loss
Section 190 Compulsory insurance
Section 191 Deviating agreements

Chapter 8 Health insurance

Section 192 Typical obligations incumbent on the insurer
Section 193 Insured person; obligatory insurance
Section 194 Applicable provisions
Section 195 Period of insurance
Section 196 Time limit on daily sickness allowance insurance
Section 197 Qualifying periods
Section 198 Supplementary insurance for children
Section 199 Public servants entitled to sickness allowance
Section 200 Prohibition of enrichment
Section 201 Causing an insured event
Section 202 Insurer’s duty to provide information; costs of ascertaining the loss
Section 203 Adjustment of premium and conditions
Section 204 Change of tariff
Section 205 Termination of the contract by the policyholder
Section 206 Termination by the insurer
Section 207 Continuation of the insurance agreement
Section 208 Deviating agreements

Part 3 Concluding provisions

Section 209 Reinsurance, maritime insurance
Section 210 Jumbo risks, open policy
Section 211 Pension funds, small insurance associations, insurances with small contributions
Section 212 Continuation of life insurance after parental leave
Section 213 Acquiring personal health-related data from third parties
Section 214 Conciliation board
Section 215 Place of jurisdiction
Section 216 Derivative right of action with a majority of insurers

 


Part 1

General Part

Chapter 1

Provisions applying to all classes of insurance

Division 1

General provisions

Section 1 Typical obligations

By making a contract of insurance the insurer undertakes to cover a certain risk of the policyholder or a third party by paying a benefit upon occurrence of the agreed insured event. The policyholder is obligated to pay the agreed contribution (insurance premium) to the insurer.

Sections 2 Retroactive insurance

(1) The contract of insurance may provide for the insurance cover to commence prior to the date on which it was concluded (retroactive insurance).

(2) If the insurer knows when submitting his contractual acceptance that the occurrence of the insured event is impossible, he shall not be entitled to an insurance premium. If the policyholder knows when submitting his contractual acceptance that an insured event has already occurred, the insurer shall not be obligated to effect payment.

(3) If the contract is concluded by a representative, in the cases referred to in subsection (2) account shall be taken of both the knowledge of the representative and that of the person he is representing.

(4) Section 37 (2) shall not apply to retroactive insurance.

Section 3 Insurance policy

(1) The insurer shall provide the policyholder with an insurance policy in writing, upon his request as a document.

(2) If the contract is not concluded through one of the insurer’s domestic branch offices, the insurance policy must quote the insurer’s address and that of the branch office through which the contract was made.

(3) If an insurance policy has been lost or destroyed, the policyholder may demand that the insurer issue a new insurance policy. If the insurance policy is subject to invalidation, the insurer shall only be obligated to issue the new insurance policy after the invalidation.

(4) The policyholder may demand at any time that the insurer provide him with copies of the declarations made in relation to the contract of insurance. If the policyholder requires the copies in order to undertake actions against the insurer which are bound by a specified time limit and the insurer had not previously supplied them, the time limit shall be suspended from the time when the insurer receives the request until such time as the policyholder receives the copies.

(5) The costs of issuing a new insurance policy in accordance with subsection (3) and the copies in accordance with subsection (4) shall be borne by the policyholder and must be paid in advance upon request.

Section 4 Insurance policy issued in the name of the holder

(1) Section 808 of the German Civil Code shall apply to an insurance policy issued as a document in the name of the bearer.

(2) If the contract provides for the insurer’s liability only upon the return of an insurance policy issued as a document and if the policyholder declares that he is unable to return the insurance policy, the publicly certified acknowledgement that the obligation has lapsed shall suffice. The first sentence shall not apply if the insurance policy is subject to invalidation.

Section 5 Deviating insurance policy

(1) If the content of the insurance policy deviates from the application made by the policyholder or the agreements made, the deviation shall be deemed to be approved if the preconditions under subsection (2) are met and the policyholder does not object in writing within one month of receipt of the insurance policy.

(2) The insurer shall be obligated to indicate to the policyholder when sending the insurance policy that deviations shall be deemed to have been approved if the policyholder does not object in writing within one month of receipt of the insurance policy. The policyholder’s attention must be drawn to any deviation and to the associated legal consequences by means of conspicuous notes in the insurance policy.

(3) If the insurer has not fulfilled the obligations under subsection (2), the contract shall be deemed to have been concluded as per the content of the policyholder’s application.

(4) An agreement by which the policyholder waives the right to avoid the contract on account of a mistake shall be void.

Section 6 Advising the policyholder

(1) If the difficulty in assessing the insurance being offered or the policyholder himself and his situation gives occasion thereto, the insurer must ask him about his wishes and needs and, also bearing in mind an appropriate relation between the time and effort spent in providing this advice and the insurance premiums to be paid by the policyholder, the insurer shall advise the policyholder and state reasons for each of the pieces of advice in respect of a particular insurance. He shall document this, taking into account the complexity of the contract of insurance being offered.

(2) Before the contract is concluded, the insurer shall provide the policyholder with the advice in writing, clearly and comprehensibly stating reasons. This information may be provided verbally if the policyholder so wishes or if and insofar as the insurer guarantees provisional cover. In such cases the information shall be provided in writing to the policyholder without undue delay as soon as the contract has been made; this shall not apply where a contract is not made and to contracts in respect of provisional cover in the case of compulsory insurances.

(3) The policyholder may waive the right to advice and documentation thereof in accordance with subsections (1) and (2) by a separate written declaration in which the insurer explicitly indicates that such waiving may have an unfavourable effect on his option for asserting a claim for damages against the insurer in accordance with subsection (5).

(4) The obligation under subsection (1), first sentence, shall also apply after the contract has been made for the entire term of the insurance agreement insofar as it is clear that the insurer recognises that the policyholder requires information and advice. The policyholder may in individual cases waive the right to advice by written declaration.

(5) If the insurer breaches an obligation under subsections (1), (2) or (4), he shall be liable to indemnify the policyholder for any loss or damage resulting therefrom. This shall not apply if the insurer is not responsible for the breach of obligation.

(6) Subsections (1) to (5) shall not apply to contracts of insurance covering a jumbo risk within the meaning of section 210 subsection (2) or if the contract is negotiated with the policyholder by an insurance broker or if it is a distance contract within the meaning of section 312b (1) and (2) of the German Civil Code.

Section 7 Information provided to the policyholder

(1) The insurer shall inform the policyholder in writing of his terms of contract, including the general terms and conditions of insurance, as well as the information set out in a statutory ordinance referred to in subsection (2), in good time before the policyholder submits his contractual acceptance. This information shall be provided clearly and comprehensibly in keeping with the means of communication employed. If, upon the request of the policyholder, the contract is concluded by telephone or using another means of communication which does not permit the information to be provided in writing prior to the policyholder’s contractual acceptance, that information must be provided without undue delay after the contract is made; this shall also apply if the policyholder explicitly waives the right to information by a separate written declaration prior to submitting his contractual acceptance.

(2) The Federal Ministry of Justice shall be authorised, with the consent of the Federal Ministry of Finance and in consultation with the Federal Ministry for Food, Agriculture and Consumer Protection, to determine the following by statutory ordinance without the consent of the Bundesrat for the purposes of providing comprehensive information to the policyholder:

  1. which details of the contract, in particular in respect of the insurer, the benefit offered, the general terms and conditions of insurance and the right of revocation shall be provided to the policyholder,
  2. which other information shall be provided to the policyholder in respect of life insurance, in particular regarding the expected benefits, their determination and calculation, regarding a model calculation, and acquisition and distribution costs, insofar as these are set off against insurance premiums, and regarding other costs,
  3. which other information shall be provided in respect of health insurance, in particular regarding the development and form of insurance premiums, and the acquisition and distribution costs,
  4. what information shall be provided to the policyholder if the insurer has contacted him by telephone, and
  5. in what manner this information is to be provided.

When determining the notifications in accordance with the first sentence, the information required in accordance with Council Directive 92/49/EEC of 18 June 1992 on the coordination of laws, regulations and administrative provisions relating to direct insurance other than life insurance and amending Directives 73/239/EEC and 88/357/EEC (OJ EC L 228 p. 1), Directive 2002/65/EC of the European Parliament and of the Council of 23 September 2002 concerning the distance marketing of consumer financial services and amending Council Directive 90/619/EEC and Directives 97/7/EC and 98/27/EC (OJ EC L 271 p. 16), as well as Directive 2002/83/EC of the European Parliament and of the Council of 5 November 2002 concerning life insurance (OJ EC L 345 p. 1), shall be observed.

(3) The statutory ordinance referred to in subsection (2) shall, furthermore, specify what information the insurer must communicate in writing throughout the policy period; this shall in particular apply in the case of changes to information previously supplied, further in respect of health insurance in the event of increases in insurance premiums and regarding the possibility of changing tariffs, as well as in respect of life insurance with surplus sharing regarding the development of the policyholder’s entitlements.

(4) The policyholder may at any time throughout the policy period demand that the insurer send him the terms of contract, including the general terms and conditions of insurance, in the form of a document; the costs of the first dispatch shall be borne by the insurer.

(5) Subsections (1) to (4) shall not apply to insurance contracts covering a jumbo risk within the meaning of section 210 subsection (2). If under such a contract the policyholder is a natural person, the insurer shall inform him in writing prior to the conclusion of the contract of applicable law and the competent supervisory body.

Section 8 Policyholder’s right of revocation

(1) The policyholder may revoke his contractual agreement within 14 days. The policyholder shall declare his revocation to the insurer in writing, but need not state any reason; timely dispatch shall suffice for compliance with the time limit.

(2) The revocation period shall begin at such time as the policyholder receives the following documents in writing:

  1. the insurance policy and the terms of contract, including the general terms and conditions of insurance, as well as the other information in accordance with section 7 (1) and (2), and
  2. a clearly worded instruction regarding the right of revocation and the legal consequences of the revocation which makes clear to the policyholder his rights commensurate with the requirements of the means of communication employed, and the names of the person to whom the revocation is to be declared, with an address at which documents may be served, as well as a note making reference to the commencement of the revocation period and to the rules set out in subsection (1), second sentence.

(repealed)

(3) The right of revocation shall not apply

  1. to contracts of insurance with a term of less than one month,
  2. to contracts of insurance for provisional cover, unless they are distance contracts within the meaning of section 312b (1) and (2) of the German Civil Code,
  3. to contracts of insurance with pension funds based on the provisions set out in a contract of employment, unless they are distance contracts within the meaning of section 312b (1) and (2) of the German Civil Code,
  4. to contracts of insurance covering a jumbo risk within the meaning of section 210 subsection (2).

The right of revocation shall cease to apply if the contract has been wholly fulfilled by both sides at the explicit request of the policyholder before the policyholder has exercised his right of revocation.

(4) Notwithstanding subsection (2), first sentence, the revocation period in e-commerce shall not commence until the obligations set out in section 312e (1), first sentence, of the German Civil Code have also been fulfilled.

(5) The instruction to be given in accordance with subsection (2), first sentence, no. 2. shall be deemed to meet the requirements stipulated therein if the model of the Annex to the present Act is used in text form. The insurer may deviate from the model in terms of format and font size, subject to subsection (2), first sentence, no. 2, and may insert addenda such as the firm name or a mark of the insurer.

Section 9 Legal consequences of revocation

If the policyholder exercises his right of revocation in accordance with section 8 (1), the insurer shall only be obligated to repay that share of the premiums paid for the period after receipt of the revocation if the policyholder has been instructed in accordance with section 8 (2), first sentence, no. 2 about his right of revocation, the legal consequences of revocation and the contribution to be paid, and he has agreed that the insurance cover commences prior to the end of the revocation period; the duty to reimburse shall be fulfilled without undue delay, at the latest 30 days after receipt of the revocation. If no note was provided as required under the first sentence, the insurer shall in addition reimburse the insurance premiums paid for the first year of insurance cover; this shall not apply if the policyholder has claimed benefits on the basis of the insurance policy.

Section 10 Commencement and expiry of insurance

If the length of the insurance cover is determined according to days, weeks, months or a period of several months, the insurance cover shall commence at the start of the day on which the contract is concluded; it shall expire at the end of the last day of the policy period.

Section 11 Renewal, termination of the contract

(1) If, in the case of an insurance agreement for a fixed period, the possibility of renewal is agreed in advance in case the insurance agreement is not terminated prior to the end of the policy period, the renewal shall be void insofar as it refers to a period of more than one year.

(2) Where an insurance agreement is concluded for an unlimited period, both contracting parties may only terminate the agreement to the end of the current period of insurance. They may agree to waive the right of termination for no more than two years.

(3) The period of notice must be the same for both contracting parties; it may not be less than one month and no more than three months.

(4) A policyholder may terminate a contract of insurance concluded for a period of more than three years to the end of the third or each successive year, subject to a notice period of three months.

Section 12 Period of insurance

The period of insurance shall be one year unless the insurance premium is determined for shorter periods.

Section 13 Change of address and name

(1) If the policyholder has not informed the insurer of a change of address, the dispatch of a letter sent recorded delivery to the policyholder’s last known address shall suffice in respect of a declaration of intention to be made to the policyholder. The declaration shall be deemed to have been received three days after the letter was dispatched. The first and second sentences shall apply mutatis mutandis in respect of a change of the policyholder’s name.

(2) If the policyholder has taken out the insurance in his business enterprise, subsection (1), first and second sentences, shall apply mutatis mutandis in the event of his business establishment relocating.

Section 14 Due date of cash benefit

(1) The insurer shall be liable to pay a cash benefit when enquiries necessary to establish the occurrence of the insured event and the extent of the insurer’s liability have been concluded.

(2) If these enquiries have not been concluded one month after notification has been given of the occurrence of the insured event, the policyholder may demand part payment in the amount which the insurer will at least be expected to pay. The time limit shall be suspended for as long as the enquiries cannot be concluded on account of the fault of the policyholder.

(3) An agreement on account of which the insurer is released from the obligation to pay interest on arrears shall be void.

Section 15 Suspension of limitation period

Where a claim arising from a contract of insurance has been registered with the insurer, the period of limitation shall be suspended until such time as the applicant has received the insurer’s decision in writing.

Section 16 Insurer’s insolvency

(1) If insolvency proceedings have been opened against the assets of the insurer, the insurance agreement shall end one month after proceedings are opened; until such time it shall remain effective against the insolvency estate.

(2) The provisions of the Insurance Supervision Act in respect of the effects of the opening of insolvency proceedings shall remain unaffected.

Section 17 Prohibition of assignment of things exempt from seizure

Where the insurance cover relates to things exempt from seizure, a claim arising from the contract of insurance may only be assigned to those of the policyholder’s creditors who have provided him with other things to replace the destroyed or damaged things.

Section 18 Deviating agreements

Agreements deviating from section 3 (1) to (4), section 5 (1) to (3), sections 6 to 9, section 11 (2) to (4), section 14 (2), first sentence, and section 15 to the detriment of the policyholder shall not be permitted.

 

Division 2

Duty of disclosure, aggravation of risk, other incidental obligations

Section 19 Duty of disclosure

(1) The policyholder shall disclose to the insurer before making his contractual acceptance the risk factors known to him which are relevant to the insurer’s decision to conclude the contract with the agreed content and which the insurer has requested in writing. If, after receiving the policyholder’s contractual acceptance and before accepting the contract, the insurer asks such questions as are referred to in the first sentence, the policyholder shall also be under the duty of disclosure as regards these questions.

(2) If the policyholder breaches his duty of disclosure under subsection (1), the insurer may withdraw from the contract.

(3) The insurer’s right to withdraw from the contract shall be ruled out if the policyholder breached his duty of disclosure neither intentionally nor by acting with gross negligence. In such cases the insurer shall have the right to terminate the contract subject to a notice period of one month.

(4) The insurer’s right to withdraw from the contract on account of grossly negligent breach of the duty of disclosure and his right to terminate the contract in accordance with subsection (3), second sentence, shall be ruled out if he would also have concluded the contract in the knowledge of the facts which were not disclosed, albeit with other conditions. The other conditions shall become an integral part of the contract with retroactive effect upon the request of the insurer; in the case of a breach of duty for which the policyholder does not bear responsibility they shall become an integral part of the contract as of the current period of insurance.

(5) The insurer shall only be entitled to the rights under subsections (2) to (4) if he has instructed the policyholder in writing in separate correspondence of the consequences of any breach of the duty of disclosure. These rights shall not exist if the insurer was aware of the disclosed risk factors or the incorrectness of the disclosure.

(6) In the case of subsection (4), second sentence, leading to an increase in the insurance premium of more than 10 per cent on account of an alteration of the contract, or if the insurer refuses to cover the risk for the undisclosed circumstance, the policyholder may terminate the contract without prior notice within one month of receipt of the insurer’s communication. The insurer shall notify the policyholder of this right in the communication.

Section 20 Policyholder’s representative

If the contract is concluded by a person representing the policyholder, both the representative’s knowledge and fraudulent conduct as well as the policyholder’s knowledge and fraudulent conduct shall be taken into account in the application of section 19 (1) to (4) and section 21 (2), second sentence, and subsection (3), second sentence. The policyholder may only invoke the duty of disclosure not having been breached intentionally or with gross negligence if neither the representative nor the policyholder has incurred responsibility for intent or gross negligence.

Section 21 Exercising of the insurer’s rights

(1) The insurer must assert the rights afforded him in accordance with section 19 (2) to (4) in writing within one month. The period shall commence at such time as the insurer learns of the breach of the duty of disclosure on which the right he is asserting is founded. When exercising his rights, the insurer shall disclose the circumstances on which his declaration is based; he may subsequently disclose further circumstances as grounds for his declaration if the time limit in accordance with the first sentence has not yet expired.

(2) In the event of a withdrawal in accordance with section 19 (2) after the occurrence of the insured event, the insurer shall not be obligated to effect payment, unless the breach of the duty of disclosure refers to a circumstance which is neither responsible for the occurrence or for the establishment of the occurrence of the insured event nor for the establishment or the extent of the insurer’s liability. If the policyholder has fraudulently breached the duty of disclosure, the insurer shall not be obligated to effect payment.

(3) The rights of the insurer in accordance with section 19 (2) to (4) shall lapse five years after the contract expires; this shall not apply to insured events which occurred prior to the expiry of this time limit. If the policyholder has breached the duty of disclosure intentionally or by acting fraudulently, this period shall be ten years.

Section 22 Fraudulent misrepresentation

The right of the insurer to avoid the contract on account of fraudulent misrepresentation shall remain unaffected.

Section 23 Aggravation of risk

(1) After submitting his contractual acceptance the policyholder may not aggravate the risk insured or permit its aggravation by a third party without the consent of the insurer.

(2) If the policyholder recognises after the fact that he has aggravated or permitted an aggravation of the risk insured without the consent of the insurer, he must disclose the aggravation of the risk insured to the insurer without undue delay.

(3) If, after the policyholder has submitted his contractual acceptance, an aggravation of the risk insured occurs notwithstanding his intention, he must disclose the aggravation to the insurer without undue delay as soon as he has learned thereof.

Section 24 Termination of the contract due to aggravation of the risk insured

(1) If the policyholder breaches his duty under section 23 (1), the insurer may terminate the contract of insurance without prior notice, unless the insurer has breached the duty neither intentionally nor by acting with gross negligence. If the breach is based on ordinary negligence, the insurer may terminate the contract subject to a notice period of one month.

(2) If an aggravation of the risk insured in accordance with section 23 (2) and (3) occurs, the insurer may terminate the contract subject to a notice period of one month.

(3) The right of termination in accordance with subsections (1) and (2) shall lapse if it is not exercised within one month after the insurer learns of the aggravation of the risk insured or if the state of affairs which existed prior to the aggravation is re-established.

Section 25 Increase in insurance premium due to aggravation of risk

(1) Rather than terminating the contract of insurance the insurer may, from such time as the aggravation of the risk insured occurred, demand an insurance premium commensurate with the aggravation of the risk insured in accordance with his business principles, or may exclude insurance cover for the aggravated risk. Section 24 (3) shall apply mutatis mutandis in respect of the lapse of this right.

(2) If the insurance premium increases by more than 10 per cent in consequence of an aggravation of the risk insured or the insurer excludes insurance cover for the aggravated risk, the policyholder may terminate the contract without prior notice within one month of receipt of the communication from the insurer. The insurer must inform the policyholder of this right in his communication.

Section 26 Release from liability due to aggravation of risk

(1) If the insured event occurs after an aggravation of the risk insured, the insurer shall not be liable if the policyholder intentionally breached his duty under section 23 (1). In the event of a grossly negligent breach, the insurer shall be entitled to reduce his benefits payable commensurate with the severity of the policyholder’s fault; the burden of proof that there was no gross negligence is on the policyholder.

(2) In the cases of aggravation of insured risk in accordance with section 23 (2) and (3), the insurer shall not be obligated to effect payment if the insured event occurs later than one month after the time when the insurer should have received notification, unless the insurer was aware of the aggravation of the risk insured at that point in time. He shall be liable if the breach of the duty of disclosure in accordance with section 23 (2) and (3) was not intentional; in the event of a grossly negligent breach, subsection (1), second sentence, shall apply.

(3) Notwithstanding subsections (1) and (2), first sentence, the insurer shall be obligated to effect payment

  1. if the aggravation of the risk insured was not the cause of the occurrence of the insured event or of the extent of the liability, or
  2. if at the time of the occurrence of the insured event the insurer’s termination period had expired and the contract was not terminated.

Section 27 Immaterial aggravation of risk

Sections 23 to 26 shall not apply if the aggravation of the risk insured is only immaterial or if, based on the circumstances, it can be deemed to have been agreed that the aggravation is also to be covered.

Section 28 Non-observance of an incidental obligation

(1) In the event of the non-observance of an incidental obligation which the policyholder must fulfil vis-à-vis the insurer prior to the occurrence of an insured event, the insurer may terminate the contract without prior notice within one month after learning of the non-observance, unless the non-observance was not intentional or based on gross negligence.

(2) Where the contract provides that the insurer is not obligated to effect payment in the event of the non-observance of an incidental obligation on the part of the policyholder, he shall be released from the liability if the policyholder intentionally breached the obligation. In the case of grossly negligent non-observance of the obligation, the insurer shall be entitled to reduce any benefits payable commensurate with the severity of the policyholder’s fault; the burden of proof that there was no gross negligence shall be on the policyholder.

(3) Notwithstanding subsection (2), the insurer shall be liable insofar as the non-observance of the obligation neither caused the occurrence or the establishment of the insured event nor the establishment or the extent of the insurer’s obligation to effect payment. The first sentence shall not apply if the policyholder fraudulently breached the obligation.

(4) The condition on which the insurer’s entire or partial release from liability in accordance with subsection (2) is based shall, in the event of a violation of an existing duty to provide information or duty of disclosure after the occurrence of an insured event, be the fact that the insurer instructed the policyholder in separate correspondence and in writing of this legal consequence.

(5) An agreement based on which the insurer is entitled to withdraw from the contract in the event of the non-observance of an incidental obligation shall be void.

Section 29 Partial withdrawal, partial termination, partial release from liability

(1) If the conditions according to which the insurer is entitled, in line with the provisions set out in this Division, to withdraw from or to terminate the contract are only met with regard to a part of the objects or persons to which the contract refers, the insurer shall only have the right to withdraw from or to terminate the contract for the remainder if it is to be assumed that the insurer would not have concluded the contract for this part alone with the same conditions.

(2) If the insurer exercises his right to withdraw from or to terminate the contract in respect of a part of the objects or persons, the policyholder shall be entitled to terminate the insurance agreement regarding the remainder. The termination must be declared at the latest at the end of the period of insurance in which the insurer’s withdrawal or termination becomes effective.

(3) If the conditions under which the insurer is partially or wholly released from liability due to a breach of the provisions regarding aggravation of the risk insured are only met regarding a part of the objects or persons to which the insurance refers, subsection (1) shall apply mutatis mutandis to the release from liability.

Section 30 Notification of the occurrence of the insured event

(1) The policyholder shall notify the insurer of the occurrence of the insured event without undue delay after he has learned thereof. If a third party is entitled to the right to the insurer’s benefit, the third party shall also be obligated to notify the insurer.

(2) An insurer may not invoke an agreement according to which the insurer is not obligated to effect payment in the event of the breach of the duty of notification in accordance with subsection (1), first sentence, if he learns about the occurrence of an insured event in good time by other means.

Section 31 Policyholder’s duty to disclose information

(1) After the occurrence of an insured event, the insurer may demand that the policyholder disclose to him all the information necessary to establish the occurrence of the insured event or the extent of the insurer’s liability. The insurer may demand proof to the extent that the policyholder may be reasonably expected to obtain such proof.

(2) If a third party has the right to receive benefits from the insurer, he must also fulfil the obligations under subsection (1).

Section 32 Deviating agreements

Agreements deviating from sections 19 to 28 (4) and section 31 (1), second sentence, to the detriment of the policyholder shall not be permitted. However, agreement may be reached to the effect that any notification to which the policyholder is obligated in accordance with the provisions of this Division must be made in writing.

 

Division 3

Premium

Section 33 Due date

(1) The policyholder must pay a single premium or, where payment of recurrent premiums has been agreed, must pay the first premium without delay 14 days after receipt of the insurance policy.

(2) If the insurer previously collected the premium, the policyholder shall not be obligated to transfer the premium until requested to do so in writing by the insurer.

Section 34 Payment by a third party

(1) The insurer must accept insurance premiums due to him or other payments to which he is entitled from the insured person on the basis of the contract if the insurance is taken for the account of a third party from a beneficiary who has acquired the right to the insurer’s benefits, as well as from a lien creditor even if he could refuse to accept the payment in accordance with the provisions of the German Civil Code.

(2) A right of lien on the insurance claim can also be asserted on the basis of the contributions including all interest payments which the lien creditor has used to pay premiums or other payments to which the insurer is entitled on the basis of the contract.

Section 35 Offsetting by the insurer

The insurer may offset a due insurance premium or any other due claim under the contract against a claim arising on the basis of the insurance even if a third party and not the policyholder is entitled to the claim.

Section 36 Place of performance

(1) The place of performance for payment of the insurance premium shall be the policyholder’s respective place of residence. However, the policyholder must transfer the insurance premium to the insurer at his own risk and at his own cost.

(2) If the policyholder has taken out the insurance in his business enterprise and his business establishment is located elsewhere, the place of performance shall be the place of the business establishment, and not his place of residence.

Section 37 Delayed payment of first insurance premium

(1) If the single premium or the first premium is not paid in good time, the insurer shall be entitled to withdraw from the contract as long as the payment has not been made, unless the policyholder is not responsible for the non-payment.

(2) If the single premium or first premium has not been paid when the insured event occurs, the insurer shall not be obligated to effect payment, unless the policyholder is not responsible for the non-payment. The insurer shall only be released from liability if he had informed the policyholder of the legal consequence of non-payment of the premium in writing in a separate communication or by means of a conspicuous note in the insurance policy.

Section 38 Delayed payment of subsequent premium

(1) If a subsequent premium is not paid in good time, the insurer may set the policyholder a payment deadline of no less than two weeks at his expense and in writing. The setting of the deadline shall only be effective if it details the individual amounts of the premium which are in arrears, the interest and costs, as well as quoting the legal consequences associated in accordance with subsections (2) and (3)with expiry of the time limit; in the case of consolidated contracts, the amounts must be quoted separately.

(2) If the insured event occurs after the deadline expires, and if the policyholder is in arrears as regards the payment of the premium or of the interest or costs, the insurer shall not be obligated to effect payment.

(3) The insurer may, after the deadline expires, terminate the contract without prior notice insofar as the policyholder is in arrears as regards the payment of the due amounts. The termination can be linked to the setting of the payment deadline in such a way that it becomes effective once the deadline expires if the policyholder is in arrears as regards the payment at that point in time; the policyholder must be explicitly informed of this in the termination. The termination shall become void if the policyholder makes the payment within one month after the contract has been terminated or, if it has been linked to the setting of a deadline, within one month after the deadline expires; subsection (2) shall remain unaffected.

Section 39 Termination of the contract before the agreed date

(1) In the event of the termination of the insurance agreement before the end of the period of insurance, the insurer shall be entitled only to that share of the premium for that period of insurance which corresponds to the period in which the insurance cover existed. If the insurance agreement is terminated on account of withdrawal in accordance with section 19 (2) or on account of avoidance by the insurer due to fraudulent misrepresentation, the insurer shall be entitled to the insurance premium up until such time as the declaration of withdrawal or avoidance becomes effective. If the insurer withdraws on the basis of section 37 (1), he may demand an appropriate fee.

(2) If the insurance agreement ends in accordance with section 16, the policyholder may demand the repayment of that share of the premium which corresponds to the period following the termination of the insurance agreement, minus the costs arising for that period.

Section 40 Termination on account of increase in premium

(1) If the insurer increases the premium on the basis of an adjustment clause without the scope of the insurance cover changing in relation thereto, the policyholder may terminate the contract with immediate effect within one month of receipt of the communication from the insurer, at the earliest however at such time as the increase in the insurance premium becomes effective. The insurer must inform the policyholder of his right to terminate the contract in the communication. The policyholder must receive the communication at the latest one month before the increase in the insurance premium becomes effective.

(2) Subsection (1) shall apply mutatis mutandis if the insurer reduces the scope of the insurance cover on the basis of an adjustment clause without reducing the premium accordingly.

Section 41 Reduction of the premium

If a higher premium has been agreed on account of certain risk-aggravating circumstances and these circumstances have ceased to exist or become immaterial after the policyholder has submitted an application or after the contract has been made, the policyholder may demand that the premium be reduced commensurately from such time as the insurer is in receipt of the demand. This shall also apply if the assessment of the higher insurance premium was occasioned by incorrect statements made on the basis of a mistake on the part of the policyholder concerning such a circumstance.

Section 42 Deviating agreements

Agreements deviating from section 33 (2) and sections 37 to 41 to the detriment of the policyholder shall not be permitted.

 

Division 4

Insurance for the account of a third party

Section 43 Definitions

(1) The policyholder may make the contract of insurance in his own name for the account of another with or without naming the insured third party (insurance for the account of a third party).

(2) If the contract of insurance is made for another, it is assumed in cases of doubt, even if the third party is named, that the policyholder is not acting as his agent but in his own name for the account of a third party.

(3) If the circumstances do not indicate that the contract of insurance is to be concluded for another, it is deemed to have been made for the policyholder’s own account.

Section 44 Rights of the insured person

(1) In the case of insurance for the account of a third party, the insured person holds the rights resulting from the contract of insurance. However, only the policyholder may demand that the insurance policy be sent to him.

(2) The insured person may only lay claim to his rights without the agreement of the policyholder and assert these rights in court if he is in possession of the insurance policy.

Section 45 Rights of the policyholder

(1) The policyholder may dispose of the rights to which the insured person is entitled on the basis of the contract of insurance in his own name.

(2) If an insurance policy has been issued, the policyholder shall only be authorised to receive benefits from the insurer and to assign the rights of the insured person without the agreement of the insured person if he is in possession of the insurance policy.

(3) The insurer shall only be liable towards the policyholder if the insured person has given his consent to the insurance.

Section 46 Rights between the policyholder and the insured person

The policyholder shall not be obligated to hand over the insurance policy to the insured person or, in the event of insolvency proceedings having been opened with regard to his assets, to the insolvency estate, until his claims against the insured person have been satisfied with regard to the insured thing. He may satisfy these claims from the claim for compensation against the insurer and, after it has been collected, from the compensation paid before the insured person and the latters creditors.

Section 47 Knowledge and conduct of the insured person

(1) Insofar as the knowledge and conduct of the policyholder are of legal significance, in the case of insurance for the account of a third party account shall also be taken of the knowledge and conduct of the insured person.

(2) Account shall not be taken of the knowledge of the insured person if the contract was made without his knowledge or it was impossible or unreasonable for him to inform the policyholder in good time. The insurer need not accept the objection cited against him that the contract was made without the knowledge of the insured person if the policyholder made the contract without being instructed to do so by the insured person and did not indicate to the insurer at the time the contract was made that he was concluding the contract without having being instructed to do so by the insured person.

Section 48 Insurance for the account of “whom it may concern”

If the insurance is taken out for the account of “whom it may concern” or if the contract provides in another manner that it is to remain unspecified whether an own interest or the interest of another is to be insured, sections 43 to 46 shall apply if it can be concluded from the circumstances that the interest of another is insured.

 

Division 5

Provisional cover

Section 49 Content of the contract

(1) If the essential content of a contract of insurance refers to the insurer granting provisional cover, the contracting parties may agree that the insurer shall only send the policyholder the terms of contract and the information in accordance with section 7 (1) in conjunction with the statutory ordinance referred to in section 7 (2) upon request and at the latest with the insurance policy. The first sentence shall not apply to a distance contract within the meaning of section 312b (1) and (2) of the German Civil Code.

(2) If the general terms and conditions of insurance are not sent to the policyholder when the contract is made, the conditions normally applied by the insurer at that point in time shall become an integral part of the contract for provisional cover, in the absence of such conditions those conditions applied by the insurer to the main contract even without an explicit note to that effect. In cases of doubt regarding which conditions apply to the contract, the conditions applied by the insurer which are the most favourable for the policyholder at the time of the conclusion of the contract shall become an integral part of the contract.

Section 50 Non-formation of the main contract

If, in the event of the non-formation of the main contract, the policyholder is compelled to pay an premium for provisional cover, the insurer shall be entitled to that share of the premium commensurate with the period of the provisional cover which would be payable in the event of the main contract being formed.

Section 51 Payment of the premium

(1) The commencement of the insurance cover may be made dependent on the payment of the premium insofar as the insurer has drawn the policyholder’s attention to this condition in writing in a separate communication or by means of a conspicuous note in the insurance policy.

(2) Agreements deviating from subsection (1) to the detriment of the policyholder shall not be permitted.

Section 52 Termination of the contract

(1) The contract for provisional cover shall expire at the latest at such time as a similar insurance cover begins based on a main contract made by the policyholder or another contract for provisional cover. If the commencement of the insurance cover under the main contract or the other contract for provisional cover is made dependent on the payment of the premium by the policyholder, the contract for provisional cover shall expire in the event of non-payment or delayed payment of the premium notwithstanding the first sentence at the latest at such time as the policyholder is in arrears as regards the payment of the insurance premium, provided that the insurer informed the policyholder of this legal consequence in writing in a separate communication or by means of a conspicuous note in the insurance policy.

(2) Subsection (1) shall not apply if the policyholder concludes the main contract or the other contract for provisional cover with another insurer. The policyholder must inform the previous insurer, without undue delay, of the fact that the contract has been concluded.

(3) If the main contract is not concluded with the insurer with whom the contract for provisional cover is made because the policyholder withdraws his contractual acceptance in accordance with section 8 or submits an objection in accordance with section 5 (1) and (2), the contract for provisional cover shall expire at the latest when the insurer receives the withdrawal or objection.

(4) If the insurance agreement was entered into for an indefinite period, each of the contracting parties may terminate the contract without prior notice. However, the insurer’s termination shall not become effective until two weeks after receipt.

(5) Agreements deviating from subsections (1) to (4) to the detriment of the policyholder shall not be permitted.

 

Division 6

Open policy

Section 53 Duty to give notice

If a contract is made in such a manner that, at the time when the contract is concluded, only the class of insured interest is designated and it is only specified to the insurer in detail once the contract has been concluded (open policy), the policyholder shall be obligated either to give notice without undue delay of the individual insured risks or, if the insurer has waived that right, of the agreed basis on which the insurance premium is to be calculated or, if this has been agreed, to apply for a cover note in each respective case.

Section 54 Breach of the duty to give notice

(1) If the policyholder has failed to give notice of an insured risk or of the agreed basis on which the premium is to be calculated, or to apply for the cover note or has made a mistake in so doing, the insurer shall not be obligated to effect payment. This shall not apply if the policyholder has neither violated the duty to give notice and file an application intentionally or by acting with gross negligence and the notice given or the application submitted or the mistake is corrected without undue delay after he learns of the mistake.

(2) If the policyholder intentionally violates the duty to give notice and file an application, the insurer may terminate the contract without notice. The insurance of individual risks for which the insurance cover has commenced shall continue if no other agreements have been reached which extend beyond the end of the open policy until such time as the agreed term of the insurance of these individual risks ends. The insurer may, further, demand payment of the insurance premium which would have had been payable up until the termination becomes effective if the policyholder had met the duty to give notice.

Section 55 Individual policy

(1) If in the case of an open policy an insurance policy has been issued for an individual risk (individual policy) or a certificate of insurance has been issued, the insurer shall only be liable upon presentation of the document. He is released from obligation by performance to the bearer of the document.

(2) If the document has been lost or destroyed, the insurer shall not be liable until the document has been declared invalid or a security has been paid; no security payment by guarantors shall be permitted. This shall also apply to the insurer’s obligation to issue a replacement certificate.

(3) The content of the individual policy or a certificate of insurance shall be deemed to have been approved by the policyholder notwithstanding section 5 if the policyholder does not revoke it without undue delay after receipt of the certificate. The right of the policyholder to avoid the approval on account of a mistake shall remain unaffected.

Section 56 Breach of the duty of disclosure

(1) Notwithstanding section 19 (2), the insurer shall not be permitted to rescind in the event of a breach of the duty of disclosure; the insurer may terminate the contract within one month after learning of the non-disclosure or incorrect disclosure of the circumstance, and may refuse performance. The insurer shall remain obligated to effect payment if the non-disclosure or incorrect disclosure of the circumstance was not the cause of the occurrence of the insured event or of the extent of the obligation to effect payment.

(2) If the insurer refuses performance, the policyholder may terminate the contract. The right to terminate the contract lapses if it is not exercised within one month of the time when the policyholder receives the insurer’s decision to refuse performance.

Section 57 Change in risk insured

(1) The policyholder shall inform the insurer without delay of any change in the risk insured.

(2) Where the policyholder has not informed the insurer of an aggravation of the risk insured, the insurer shall not be liable if the insured event occurs after the time when the insurer should have received the notification. He shall only be obligated to effect payment

  1. if he knew about the aggravation of the risk insured at such time as he should have been notified thereof,
  2. if the duty of disclosure was breached neither intentionally nor by acting with gross negligence, or
  3. insofar as the aggravation of the risk insured was not the cause of the occurrence of the insured event or the extent of the liability.

(3) Notwithstanding section 24, the insurer shall not be entitled to terminate the contract on account of an aggravation of the risk insured.

Section 58 Non-observance of an incidental obligation

(1) In the case of an open policy, where the policyholder culpably fails to fulfil an incidental obligation to be fulfilled prior to the occurrence of an insured event, the insurer shall not be liable in respect of an insured individual risk to which the breached incidental obligation applies.

(2) In the case of culpable non-observance of an incidental obligation, the insurer may terminate the contract within one month of learning of the non-observance, subject to a notice period of one month.

 

Division 7

Insurance intermediaries, insurance advisers

Subdivision 1

Duties to notify and advise

Section 59 Definitions

(1) ‘Insurance intermediary’ within the meaning of this Act shall be insurance agents and insurance brokers.

(2) ‘Insurance agent’ within the meaning of this Act shall be anyone contracted by an insurer or insurance agent to arrange or conclude contracts of insurance on a commercial basis.

(3) ‘Insurance broker’ within the meaning of this Act shall be anyone who contracts to arrange or conclude contracts of insurance for a client on a commercial basis without having being contracted to do so by an insurer or an insurance agent. An insurance broker shall be deemed to be anyone giving the person wishing to take out insurance the impression that he is providing the services of an insurance broker within the meaning of the first sentence above.

(4) ‘Insurance adviser’ within the meaning of this Act shall be anyone advising third parties on a commercial basis in respect of agreeing, amending or examining contracts of insurance or in respect of making claims arising under contracts of insurance upon the occurrence of an insured event or anyone representing the policyholder out of court vis-à-vis the insurer without receiving an economic benefit from an insurer or without being dependent on him in any other manner.

Section 60 Basis on which insurance intermediary provides advice

(1) The insurance broker shall be obligated to base his advice on a sufficient number of contracts of insurance and insurers available on the market so that he is in a position to make his recommendation, based on professional criteria, regarding which contract of insurance is suited to meeting the needs of the person wishing to take out insurance. This shall not apply if he explicitly informs the person wishing to take out insurance in individual cases prior to contractual acceptance of the limited selection of insurers and contracts.

(2) An insurance broker who informs a person wishing to take out insurance of the limited selection in accordance with subsection (1), second sentence, and an insurance agent must inform the person wishing to take out insurance on which market and information basis they are providing their services, and must state the names of the insurers on the basis of which they are giving advice. The insurance agent must also name the insurer on behalf of whom he is working and whether he is working exclusively for him.

(3) The person wishing to take out insurance may waive the right to the notifications and information in accordance with subsection (2) by separate written declaration.

Section 61 Insurance intermediary’s duties of advice and documentation

(1) If the difficulty of assessing the insurance being offered or the person wishing to take out insurance himself and his situation gives occasion thereto, the insurance intermediary must ask the person wishing to take out insurance about his wishes and needs and, also bearing in mind the relations between the time and effort spent providing the advice and the premium to be paid by the policyholder, must advise the person wishing to take out insurance and state reasons for each piece of advice given in respect of a particular insurance. He must document this in accordance with section 62, taking account of the complexity of the contract of insurance being offered.

(2) The person wishing to take out insurance may waive the right to the advice or documentation in accordance with subsection (1) by separate written declaration in which he is explicitly informed by the insurance intermediary of the fact that a waiver of the right may have a unfavourable effect on the option the person wishing to take out insurance has of asserting a claim for damages against the insurance intermediary in accordance with section 63.

Section 62 Time and form of the information

(1) The policyholder shall be provided, in a clear and comprehensible written form, with the information in accordance with section 60 (2) before submitting his contractual acceptance, and the information in accordance with section 61 (1) before the contract is concluded.

(2) The information in accordance with subsection (1) may be given orally if the person wishing to take out insurance so wishes, or if and insofar as the insurer grants provisional cover. In such cases the information must be provided to the person wishing to take out insurance in writing without undue delay after the contract has been made, at the latest together with the insurance policy; this shall not apply to contracts for provisional cover for compulsory insurances.

Section 63 Obligation to pay damages

The insurance intermediary shall be obligated to compensate for loss incurred by the person wishing to take out insurance on account of a breach of one of the duties under section 60 or section 61. This shall not apply if the insurance intermediary is not responsible for the breach of duty.

Section 64 Securing payment to the policyholder’s benefit

The person wishing to take out insurance must authorise the insurance intermediary in writing by separate declaration to accept benefits from the insurer which the latter must pay to the policyholder on the basis of a contract of insurance.

Section 65 Jumbo risk

Sections 60 to 63 shall not apply to the arranging of contracts of insurance for jumbo risks within the meaning of section 210 subsection (2).

Section 66 Other exceptions

Sections 60 to 64, section 69 (2) and section 214 shall not apply to insurance intermediaries within the meaning of section 34d (9) no. 1 of the Trade Regulation Act.

Section 67 Deviating agreements

Agreements deviating from sections 60 to 66 to the detriment of the policyholder shall not be permitted.

Section 68 Insurance advisers

The provisions set out in section 60 (1), first sentence, section 61 (1) and sections 62 to 65 and section 67 applicable to insurance brokers shall apply mutatis mutandis to insurance advisers. Further duties of the insurance adviser resulting from the contractual relationship shall remain unaffected.

 

Subdivision 2

Power of agency

Section 69 Statutory power of attorney

(1) The insurance agent shall be deemed to have power of attorney in respect of

  1. taking receipt of applications for the purposes of concluding a contract of insurance and its revocation, as well as declarations made prior to the making of a contract and other declarations made by the policyholder,
  2. taking receipt of applications for the renewal of or amendment to a contract of insurance and its revocation, termination, rescission and other declarations relating to the insurance agreement, as well as any information to be provided by the policyholder throughout the policy period, and
  3. passing on to the policyholder any insurance policies or renewal policies drawn up by the insurer.

(2) The insurance agent shall be deemed to have power of attorney to accept payments which the policyholder makes in connection with the arranging or conclusion of a contract of insurance. The policyholder shall only accept a restriction to this power of attorney to his detriment if he was aware of the restriction when making the payment or was not aware of it as a consequence of gross negligence.

(3) The burden of proof regarding the submission or the content of the application or another declaration of intent in accordance with subsection (1) nos. 1, 2 shall be on the policyholder. The burden of proof regarding any breach of the duty of disclosure or a duty on the part of the policyholder shall be on the insurer.

Section 70 Knowledge of the insurance agent

If the knowledge of the insurer is of relevance in accordance with this Act, the knowledge of the insurance agent shall be equivalent to the knowledge of the insurer. This shall not apply to the knowledge of the insurance agent gained when not engaged in his activity as agent and not connected in any manner to the contract of insurance in question.

Section 71 Authorisation to acquire contracts

If the insurance agent is authorised to acquire contracts of insurance, he shall also be authorised to agree amendments or extensions to such contracts and to make declarations of termination and withdrawal.

Section 72 Restriction of the power of agency

Any restriction of the power of agency to which the insurance agent is entitled in accordance with section 69 and section 71 based on the general terms and conditions of insurance shall be void vis-à-vis the policyholder and third parties.

Section 73 Employees and intermediaries not working on a commercial basis

Sections 69 to 72 shall apply mutatis mutandis to an insurer’s employees who are contracted to arrange or conclude contracts of insurance and to persons working independently as agents in the arranging or concluding contracts of insurance but not on a commercial basis.

Chapter 2

Indemnity insurance

Division 1

General provisions

Section 74 Overinsurance

(1) If the sum insured considerably exceeds the value of the insured interest (insurable value), each contracting party may request that the sum insured be reduced with immediate effect in order to eliminate the overinsurance, thereby also reducing the premium proportionally.

(2) If the policyholder concludes the contract with the intention of gaining an illegal pecuniary benefit on account of the overinsurance, the contract shall be void; the insurer shall be entitled to the premium up until such time as he learned of the circumstances establishing nullity.

Section 75 Underinsurance

If the sum insured is considerably less than the insurable value upon the occurrence of the insured event, the insurer shall only be liable in the proportion that the sum insured bears to this value.

Section 76 Agreed value

The insurable value may be determined by agreeing a certain amount (agreed value). The agreed value shall also be deemed to be the value of the insured interest upon occurrence of the insured event, unless it considerably exceeds the actual insurable value at that point in time. If the sum insured is less than the agreed value, the insurer shall only be liable to compensate the loss in the proportion that the insurable value bears to the agreed value, even if the agreed value is considerably overstated.

Section 77 Several insurers

(1) Anyone who insures the same interest against the same risk with several insurers shall be obligated to inform each insurer about the other insurances without undue delay. In his communication he shall name the other insurers and the sum insured.

(2) If the profit lost in respect of the same interest is insured with one insurer but other loss is insured with another insurer, subsection (1) shall apply mutatis mutandis.

Section 78 Liability in the case of multiple insurance

(1) If one interest is insured against the same risk with several insurers and the sums insured exceed the insurable value or for other reasons the sum of damages which would have to be paid by the insurer if the other insurance did not exist exceeds the total loss (multiple insurance), the insurers are liable as joint and several debtors in such a manner that each insurer must pay the sum in accordance with his contract, but the policyholder cannot demand more than the total amount of the loss.

(2) As regards the insurers, they shall be liable to pay in proportion to the amounts for which they are liable in accordance with each respective contract. If foreign law is applicable to one of the insurances, the insurer to whom foreign law applies may only assert a claim for compensation against the other insurer if he himself is liable to pay compensation under the relevant law.

(3) If the policyholder has taken out multiple insurance with the intention of thereby gaining an illegal pecuniary benefit, each contract made with that intention shall be void; the insurer shall be entitled to the insurance premium up until such time as he learned of the circumstances establishing the nullity.

Section 79 Elimination of the multiple insurance

(1) If the policyholder has made the contract on account of which the multiple insurance arose without knowing that the multiple insurance arose thereby, he may demand that the contract made at a later date be rescinded or the sum insured be reduced, also reducing the insurance premium proportionally to that share not covered by the earlier insurance.

(2) Subsection (1) shall also apply if the multiple insurance arose on account of the fact that the insurable value decreased after the conclusion of several contracts of insurance. If in such cases several contracts of insurance were made at the same time or with the consent of the insurers, the policyholder may only demand the proportional reduction of the sums insured and of the premiums.

Section 80 Lack of insured interest

(1) The policyholder shall not be obligated to pay the insurance premium if no insured interest exists when the insurance cover commences; this shall also apply if the interest does not arise in the case of an insurance taken out for a future enterprise or for another future interest. However, the insurer may demand an appropriate fee.

(2) If the insured interest ceases to exist once the insurance cover commences, the insurer shall be entitled to the premium to which he would have been entitled if the insurance had only been applied for up until the time when the insurer learned of the cessation of the interest.

(3) If the policyholder has insured a non-existent interest with the intention of thereby gaining an illegal pecuniary benefit, the contract shall be void; the insurer shall be entitled to the premium paid up until the time when he learns of the circumstances establishing the nullity.

Section 81 Causing the insured event

(1) The insurer shall not be obligated to effect payment if the policyholder intentionally causes the insured event.

(2) If the policyholder causes the insured event by gross negligence, the insurer shall be entitled to reduce the benefits payable commensurate with the severity of the fault of the policyholder.

Section 82 Loss avoidance and minimisation

(1) The policyholder must, upon the occurrence of the insured event, ensure that the loss is avoided or minimised wherever possible.

(2) The policyholder must follow the instructions of the insurer, where reasonable, and obtain instructions, circumstances permitting. If several insurers involved in the contract of insurance issue different instructions, the policyholder must act at his own proper discretion.

(3) In the event of the breach of an incidental obligation under subsections (1) and (2), the insurer shall not be obligated to effect payment if the policyholder intentionally breached the incidental obligation. In the event of a grossly negligent breach, the insurer shall be entitled to reduce the benefits payable commensurate with the severity of the policyholder’s fault; the burden of proof that there was no gross negligence is on the policyholder.

(4) Notwithstanding subsection (3), the insurer shall be liable insofar as the breach of the incidental obligation is the cause neither of the establishment of the occurrence of the insured event, nor of the establishment of the extent of the liability. The first sentence shall not apply if the policyholder has fraudulently breached the obligation.

Section 83 Reimbursement of expenses

(1) The insurer shall reimburse the policyholder’s expenses in accordance with section 82 (1) and (2), even if they remain unsuccessful, to the extent that the policyholder could deem them necessary based on the circumstances. Upon the request of the policyholder the insurer shall advance the amount of the necessary expenses.

(2) If the insurer is entitled to reduce the benefits payable, he may also reduce the amount of the expenses reimbursed in accordance with subsection (1) accordingly.

(3) Expenses incurred by the policyholder on account of his following the insurer’s instructions shall also be reimbursed to the extent that they exceed the sum insured, taken together with the other compensation.

(4) In the case of livestock insurance, the costs of feeding and keeping the livestock, as well as the costs of veterinary examinations and treatment are not classed as expenses to be reimbursed by the insurer in accordance with subsections (1) to (3).

Section 84 Drawing on an expert

(1) If the contract provides for experts to establish the individual prerequisites for the claim arising under the insurance or the amount of the loss, the establishment shall not be binding if it obviously deviates considerably from the facts and circumstances. In such cases the prerequisites shall be established by a judicial decision. This shall also apply if the experts are unable or unwilling to carry out the establishment or delay the establishment.

(2) If the contract provides for the experts to be appointed by the court, that local court shall be responsible for appointing the experts in whose district the loss occurred. The competence can be transferred to another local court by explicit agreement between the contracting parties. The order on account of which the application for the appointment of experts is granted shall not be contestable.

Section 85 Costs of establishing the loss

(1) The insurer shall reimburse the policyholder those costs arising in the establishment and determination of the loss to be compensated to the extent that the expenses were necessary in view of the circumstances. These costs shall also be reimbursed to the extent that they exceed the sum insured, taken together with the other compensation.

(2) The insurer shall not reimburse costs incurred by the policyholder on account of drawing on the services of an expert or counsel, unless the policyholder is contractually obligated to do so or was requested to do so by the insurer.

(3) If the insurer is entitled to reduce the benefits payable, he may also reduce the costs reimbursed accordingly.

Section 86 Assignment of claims

(1) If the policyholder is entitled to claim damages from a third party, this claim shall be assigned to the insurer insofar as the insurer compensates for the loss. The claim may not be assigned to the detriment of the policyholder.

(2) The policyholder shall safeguard his claim for damages or a right serving to safeguard this claim in accordance with the applicable form and time requirements, and shall assist the insurer wherever necessary in asserting them. If the policyholder intentionally breaches this obligation, the insurer shall not be obligated to effect payment insofar as he cannot as a result claim compensation for it from a third party. In the event of a grossly negligent breach of the obligation, the insurer shall be entitled to reduce the benefits payable commensurate with the severity of the policyholder’s fault; the burden of proof that there was no gross negligence is on the policyholder.

(3) If the policyholder claims compensation from a person with whom he is sharing a common household when the loss occurs, assignment in accordance with subsection (1) cannot be asserted, unless that person intentionally caused the loss.

Section 87 Deviating agreements

Agreements deviating from sections 74, 78 (3), sections 80, 82 to 84 (1), first sentence, and section 86 to the detriment of the policyholder shall not be permitted.

Division 2

Property insurance

Section 88 Insurable value

Unless otherwise agreed, the insurable value – where the insurance refers to an item or an aggregate of items – shall be deemed to be the amount which the policyholder must spend upon occurrence of the insured event to replace or to restore the insured property to mint condition, minus the reduced market value resulting from the difference between old and new.

Section 89 Insurance for an aggregate of things

(1) Insurance taken out for an aggregate of items covers each individual item belonging to the aggregate of items.

(2) If the insurance is taken out for an aggregate of items, it covers the items belonging to those persons with whom the policyholder is sharing a common household upon occurrence of the insured event or who are employed by the policyholder at that time and are working at a location covered by the insurance. The insurance shall thus be deemed to have been taken out for the account of a third party.

Section 90 Extended reimbursement of expenses

If the policyholder pays expenses in order to avoid an immediately imminent insured event or to minimise its impacts, section 83 (1), first sentence, subsections (2) and (3) shall apply mutatis mutandis.

Section 91 Interest on compensation

One month after notification is given of the insured event, four per cent interest shall be added to the compensation to be paid by the insurer, unless other higher interest rates can be demanded on other legal grounds. The time limit shall be suspended for as long as the loss or damage cannot be established as a result of the policyholder’s fault.

Section 92 Termination of the contract after an insured event

(1) After the occurrence of the insured event each party may terminate the insurance agreement.

(2) The termination shall only be permissible up until the end of one month after the conclusion of negotiations in respect of the compensation. The insurer shall keep a one month period of notice. The policyholder may not terminate the contract for a later point in time than the end of the current period of insurance.

(3) In the case of hail insurance, the insurer may only terminate the contract to the end of the period of insurance in which the insured event occurred. If the policyholder terminates the contract to an earlier point in time than the end of that period of insurance, the insurer is nevertheless entitled to the premium for the current period of insurance.

Section 93 Replacement clause

If the insurer is obligated under the contract only to pay a share of the compensation in the case of replacement or repair of the insured object, the policyholder may not demand payment of an amount in excess of the insurable value until replacement or repair is guaranteed. The policyholder shall be obligated to repay any compensation to the insurer, minus the insurable value of the object, if the object was not replaced or repaired within an appropriate period as a result of the policyholder’s fault.

Section 94 Effectiveness of payment vis-à-vis mortgage creditors

(1) In the case of section 93, first sentence, a payment made without the guarantee of replacement or repair shall only be effective vis-à-vis a mortgage creditor if the insurer or the policyholder has informed him that the payment is to be made without the guarantee and no less than one month has elapsed since receipt of the communication.

(2) If the amount of compensation is not to be utilised to restore or replace the property in accordance with the terms of the contract, the insurer shall be permitted not to pay with effect vis-à-vis a mortgage creditor until he or the policyholder has notified the mortgagee of that intention and no less than one month has elapsed since receipt of the communication.

(3) The mortgage creditor may object to payment vis-à-vis the insurer for a period of one month only. The communications referred to under subsections (1) and (2) may be omitted if they would necessitate an unreasonable amount of time and effort; in such cases the time limit begins on the due date for payment of the amount of compensation.

(4) If the mortgage creditor has notified the insurer of his mortgage, a payment made without the guarantee of restoration or replacement only becomes effective vis-à-vis the mortgage creditor if the latter has agreed in writing to effect payment.

(5) Subsections (1) to (4) shall apply mutatis mutandis if the property is burdened with a land charge, annuity land charge or other charges on land.

Section 95 Sale of the insured object

(1) If the policyholder sells the insured object, the policyholder shall assign to the buyer the rights and obligations resulting throughout the period of his ownership.

(2) The seller and the buyer shall be liable as joint and several debtors for the premium payable during the current period of insurance at such time as the seller assigns the rights to the buyer.

(3) The insurer must not accept the assignment against him until he has learned thereof.

Section 96 Termination of the contract after a sale

(1) The insurer shall be entitled to terminate the insurance agreement vis-à-vis the buyer of an insured object subject to a notice period of one month. The right to terminate the contract shall lapse if it is not exercised within one month of the insurer learning of the sale.

(2) The buyer shall be entitled to terminate the insurance agreement with immediate effect or to the end of the current period of insurance. The right to terminate the contract shall lapse if it is not exercised within one month of the purchase, in the case of a lack of the buyer’s knowledge of the existence of an insurance within one month after he learns thereof.

(3) In the event that the insurance agreement is terminated in accordance with subsections (1) or (2), the seller shall be obligated to pay the premium; the buyer shall not be liable to pay the premium.

Section 97 Disclosure of the sale

(1) The seller or the buyer must disclose the sale to the insurer without undue delay. Where disclosure has not been made, the insurer shall not be obligated to effect payment if the insured event occurs later than one month after the time when the insurer should have received the disclosure, and the insurer would not have made the contract with the buyer which existed with the seller.

(2) Notwithstanding subsection (1), second sentence, the insurer shall be obligated to effect payment if he knew of the sale at such time as he should have received the disclosure, or if at the time of the occurrence of the insured event the time limit for the insurer to terminate the contract had expired and he did not terminate the contract.

Section 98 Protection afforded the buyer

The insurer may not refer to any provision of the contract of insurance which derogates from sections 95 to 97 to the detriment of the buyer. However, the contract may provide that the termination of the contract by the buyer in accordance with section 96 (2) and the disclosure of the sale must be made in writing.

Section 99 Foreclosure, acquisition of the right of use

Where ownership of an insured object is assigned on the basis of foreclosure or a third party acquires the entitlement to insured produce of the soil on the basis of usufruct, a lease contract or a similar agreement, sections 95 to 98 shall apply mutatis mutandis.

 

Part 2

Individual classes of insurance

Chapter 1

Liability insurance

Division 1

General provisions

Section 100 Insurer’s liability

In the case of liability insurance, the insurer shall be obligated to release the policyholder from any claims asserted by a third party on the basis of the policyholder’s responsibility for a fact arising during the period of insurance, and to avoid unfounded claims.

Section 101 Legal protection costs

(1) The insurance shall also cover the judicial and extra-judicial costs arising from claims asserted by a third party insofar as the circumstances necessitate the expenditure. Further, the insurance covers expenses incurred on the instruction of the insurer by defence counsel in criminal proceedings initiated on the basis of an act which could result in the policyholder becoming liable vis-à-vis a third party. At the policyholder’s request the insurer shall advance the costs.

(2) If a sum insured has been determined, the insurer shall also reimburse the costs of a legal dispute conducted at his instigation and the costs for defence counsel in accordance with subsection (1), second sentence, insofar as they exceed the sum insured plus the insurer’s expenses for indemnifying the policyholder. This shall also apply to interest payments which the policyholder owes the third party as a result of a delay in satisfying the third party occasioned by the insurer.

(3) If the policyholder is released from the obligation of avoiding the execution of a judicial decision by furnishing security or a deposit, the insurer shall effect the payment of the security or deposit. This obligation shall only apply up to the amount of the sum insured; if the insurer is obligated in accordance with subsection (2) over and above that amount, the surplus amount shall be added to the sum insured. The insurer shall be released from the obligation under the first sentence if he acknowledges that the third party’s claim vis-à-vis the policyholder is well-founded.

Section 102 Employer’s liability insurance

(1) If the insurance has been taken out for a business enterprise, it shall cover liability insurance for those persons authorised to represent the enterprise as well as those persons employed by the enterprise. The insurance shall thus be deemed to be taken out for the account of a third party.

(2) Should the business enterprise be sold to a third party or taken over by a third party on account of usufruct, a lease contract or a similar agreement, the policyholder shall assign to the third party the rights and obligations resulting from the insurance agreement throughout the period of his entitlement. Section 95 (2) and (3), as well as section 96 and section 97 shall apply mutatis mutandis.

Section 103 Causing the insured event

The insurer shall not be obligated to effect payment if the policyholder has intentionally and unlawfully caused the loss suffered by the third party.

Section 104 Policyholder’s duty of disclosure

(1) The policyholder shall be obligated to disclose to the insurer within one week those facts which could give rise to his responsibility vis-à-vis a third party. If the third party asserts a claim against the policyholder, the policyholder shall be obligated to disclose that fact to the insurer within one week after the claim is asserted.

(2) Where a claim is asserted against the policyholder in court, legal aid is applied for or a third-party complaint is filed against him in court, he shall be obligated to disclose that fact to the insurer without undue delay. This shall also apply when investigative proceedings have been initiated against the policyholder on account of the occurrence of the loss giving rise to the claim.

(3) Timely dispatch of the notice of disclosure shall suffice for compliance with the time limits under subsections (1) and (2). Section 30 (2) shall apply mutatis mutandis.

Section 105 Acknowledgement by the policyholder

Agreements in accordance with which the insurer shall not be obligated to effect payment if the policyholder satisfies the third party or acknowledges his entitlement without the insurer’s consent shall be void.

Section 106 Due date for performance

The insurer shall be obligated to release the policyholder from the third party’s claim within two weeks, beginning at the time when the third party’s claim is established with binding effect for the insurer by final judgement, acknowledgement or settlement. If the third party has been satisfied by the policyholder with binding effect for the insurer, the insurer shall be obligated to pay the compensation to the policyholder within two weeks after the third party has been satisfied. The insurer shall be obligated to pay any costs to be reimbursed in accordance with section 101 within two weeks after communication of the calculation.

Section 107 Entitlement to a pension

(1) Where the policyholder is obligated to pay the third party a pension, the insurer shall only be liable to pay a pro-rata share of the pension if the sum insured is not equal to the capital value of the pension.

(2) If the policyholder is obligated, by operation of law, to pay the third party a security for the pension he is liable to pay, the insurer’s obligation shall cover the payment of the security. Subsection (1) shall apply mutatis mutandis.

Section 108 Right of recourse provision

(1) The policyholder’s right of recourse against the insurer shall be ineffective vis-à-vis the third party. A legal act of disposal shall be equal to an act of disposal based on execution or attachment execution.

(2) Assignment of the right of recourse to the third party may not be ruled out by the general terms and conditions of insurance.

Section 109 Several injured parties

If the policyholder bears responsibility towards several third parties and their claims are in excess of the sum insured, the insurer shall pay these claims in proportion to their amounts. If the sum insured is thereby exhausted, a third party not taken into consideration during the allocation may not subsequently invoke section 108 (1) if the insurer had not expected and should not have expected that these claims would be asserted.

Section 110 Policyholder’s insolvency

In the event of insolvency proceedings being opened in respect of the assets of the policyholder, the third party may request separate satisfaction from the policyholder’s right of recourse on account of the claim due him against the policyholder.

Section 111 Termination of the contract after an insured event

(1) If, after the occurrence of the insured event, the insurer has acknowledged or wrongly rejected the policyholder’s recourse, each party may terminate the insurance agreement. This shall also apply if the insurer instructs the policyholder to allow a legal dispute in respect of the third party’s claim.

(2) The contract may only be terminated within one month after the acknowledgement or rejection of the right of recourse or after the judgement in the legal dispute with the third party became final. Section 92 (2), second sentence, and subsection (3) shall apply.

Section 112 Deviating agreements

Agreements deviating from section 104 and section 106 to the detriment of the policyholder shall not be permitted.

 

Division 2

Compulsory insurance

Section 113 Compulsory insurance

(1) Liability insurance which a policyholder is obligated by legal provision to take out (compulsory insurance) must be concluded with an insurance company authorised to do business in Germany.

(2) The insurer shall confirm in writing to the policyholder, quoting the sum insured, that he is obligated to take out the compulsory insurance in accordance with a legal provision, to which reference must be made.

(3) The provisions of this Division shall also apply insofar as the contract of insurance grants cover in excess of the prescribed minimum requirements.

Section 114 Scope of the insurance cover

(1) In the case of compulsory insurance, the minimum sum insured shall be 250,000 euros per claim and one million euros for all claims per insurance year, unless otherwise provided by legal provision.

(2) The contract of insurance may specify the content and scope of the compulsory insurance in more detail insofar as this does not endanger the fulfilment of the respective objective of the compulsory insurance and unless explicitly otherwise provided by legal provision. Any excess on the part of the policyholder cannot be cited against the third party, and cannot be asserted against a co-insured person.

Section 115 Direct claim

(1) The third party may also assert his claim for compensation against the insurer

  1. in the case of liability insurance, for the fulfilment of a duty to take out insurance in accordance with the Compulsory Insurance Act, or
  2. where insolvency proceedings have been opened in respect of the assets of the policyholder or an application for such opening has been dismissed on account of a lack of insolvency estate or a provisional insolvency administrator has been appointed, or
  3. if the policyholder’s whereabouts are unknown.

The entitlement to a claim shall exist within the framework of the insurer’s liability under the insurance agreement and, insofar as no liability exists, within the framework of section 117 (1) to (4). The insurer shall pay the compensation in money. The insurer and the policyholder liable to pay compensation shall be liable as joint and several debtors.

(2) The claim under subsection (1) shall be subject to the same limitation period as the claim for compensation against the policyholder liable to pay compensation. The limitation shall commence at the time when the limitation period on the claim for compensation against the policyholder liable to pay compensation commences; however, it shall end at the latest after ten years, beginning when the loss is incurred. Where notice of the third party’s claim has been given to the insurer, limitation shall be suspended up until the time when the claimant receives the insurer’s decision in writing. The suspension, the end of the suspension and the re-commencement of the limitation on the claim against the insurer shall also be effective against the policyholder liable to pay compensation and vice versa.

Section 116 Joint and several debtors

(1) As regards the relationship between the joint and several debtors under section 115 (1), fourth sentence, the insurer shall be solely liable insofar as he is obligated to indemnify the policyholder based on the insurance agreement. If no such obligation exists the policyholder shall be solely liable in respect of the relationship between them. The insurer may request compensation for expenses which it was permissible for him to deem necessary given the circumstances.

(2) The limitation on claims resulting from subsection (1) shall commence at the end of the year in which the third party’s claim is satisfied.

Section 117 Liability towards third parties

(1) If the insurer is wholly or partially released from liability to the policyholder, his liability to the third party shall nevertheless remain.

(2) A circumstance which results in the non-existence or the termination of the insurance agreement shall only be effective in consideration of the third party one month after the insurer has notified the competent agency of this circumstance. This shall also apply if the insurance agreement ends on account of time lapsed. The time limit does not commence before the insurance agreement has ended. A circumstance as described in the first and second sentences may also be cited against the third party if before the point in time at which the loss arose the competent agency had received confirmation of a new insurance taken out based on a relevant law. The above provisions of this Division shall not apply if no competent agency has been appointed to receive the notification in accordance with the first sentence.

(3) In the cases described in subsections (1) and (2), the insurer shall only be liable within the framework of the prescribed minimum sum insured and the risk assumed by him. He shall not be obligated to effect payment insofar as the third party may receive compensation for his loss from another indemnity insurer or from a social insurance agency.

(4) If the insurer’s obligation to effect payment in accordance with subsection (1) or (2) coincides with a liability to pay compensation on the basis of negligent breach of official duty, the liability to pay compensation in accordance with section 839 (1) of the German Civil Code shall not be ruled out in the relationship with the insurer on account of the fact that the preconditions for the insurer’s liability are met. The first sentence shall not apply if the public official is personally liable in accordance with section 839 of the German Civil Code.

(5) Insofar as the insurer satisfies the third party in accordance with subsections (1) to (4) and no case as described in section 116 exists, the third party’s claim against the policyholder shall be assigned to him. The assignment may not be asserted to the detriment of the third party.

(6) Where insolvency proceedings are opened against the assets of the insurer, the insurance agreement shall not end, notwithstanding section 16, until one month after the insolvency administrator has notified the competent agency of this circumstance; up until such time it shall remain effective against the insolvency estate. If no competent agency has been appointed to take receipt of the notification in accordance with the first sentence, the insurance agreement shall end one month after the policyholder has been notified of the opening of insolvency proceedings; the notification must be made in writing.

Section 118 Order of precedence of several claims

(1) If the claims for compensation to be paid on the basis of the same occurrence of loss are in excess of the sum insured, the sum insured shall be paid out to those entitled to compensation according to the following order of precedence, in the event of equal precedence commensurate with their amounts:

  1. claims arising from personal injury insofar as the injured persons cannot receive compensation for their injuries from the injuring party, from another insurer as their liability insurer, a social insurance agency or another third party;
  2. claims arising from other injuries to natural or legal persons under private law insofar as the injured parties cannot receive compensation from the injuring party, another insurer as their liability insurer or a third party;
  3. claims arising from personal injury or other injuries assigned to insurers or other third parties under private law;
  4. claims assigned to social insurance agencies;
  5. all other claims.

(2) If the sum insured is exhausted taking account of subordinate claims, a rightful claimant who should be afforded precedence and who has not been taken into consideration during the allocation may not subsequently invoke subsection (1) if the insurer did not expect and also need not have expected that this claim would be asserted.

Section 119 Third party’s incidental obligations

(1) The third party shall notify the insurer in writing of the loss occurrence from which he wishes to derive a claim against the policyholder or against the insurer in accordance with section 115 (1) within two weeks after he has learned of the loss occurrence; timely dispatch shall suffice for compliance with the time limit.

(2) If the third party asserts the claim against the policyholder in court, he must notify the insurer in writing of that fact without undue delay.

(3) The insurer may demand information from the third party insofar as it is necessary for the establishment of the loss occurrence and of the amount of the loss. The insurer may also request that proof be furnished insofar as the third party can be reasonably expected to obtain such proof.

Section 120 Non-observance of an incidental obligation by the third party

Where the third party culpably breaches the incidental obligation under section 119 (2) or (3), the insurer’s liability in accordance with section 115 and section 117 shall be limited to that amount which he would also have had to pay had the obligation been duly fulfilled, insofar as the third party had previously been informed explicitly and in writing of the consequences of non-observance.

Section 121 Offsetting against third parties

Section 35 shall not apply vis-à-vis third parties.

Section 122 Sale of the insured object

Sections 95 to 98 concerning the sale of insured object shall be applied mutatis mutandis.

Section 123 Recourse in the case of several insured parties

(1) If, in the case of an insurance taken out for the account of a third party, the insurer is not liable to the policyholder, he may only cite this against an insured party authorised to independently assert his rights arising from the contract of insurance if the circumstances on which the exemption from obligation to effect payment are based on the insured person himself or if these circumstances were known to the insurer or not known to the insurer on account of gross negligence.

(2) The extent of the obligation to effect payment under subsection (1) shall be determined in accordance with section 117 (3), first sentence; section 117 (3), second sentence, shall not apply. Section 117 (4) shall apply mutatis mutandis.

(3) Insofar as the insurer pays the claim in accordance with subsection (1), he may have recourse to the policyholder.

(4) Subsections (1) to (3) shall apply mutatis mutandis if the time limit under section 117 (2), first and second sentences, has not yet expired or the insurer has not notified the competent agency that the insurance agreement has ended.

Section 124 Extent of legal force

(1) Where it has been established by final judgement that the third party has no right to claim compensation, the judgement, if issued between the third party and the insurer, shall also be effective to the advantage of the policyholder, if it is issued between the third party and the policyholder, it shall also be effective to the advantage of the insurer.

(2) If the third party’s claim against the insurer has been established by final judgement, acknowledgement or settlement, the policyholder against whom claims have been asserted by the insurer on the basis of section 116 (1), second sentence, must accept this establishment unless the insurer has culpably violated the obligation to avoid unfounded claims for compensation and to minimise or duly establish the loss.

(3) Subsections (1) and (2) shall not apply insofar as the third party may not assert his claim for damages against the insurer in accordance with section 115 (1).

 

Chapter 2

Legal expenses insurance

Section 125 Insurer’s liability

In the case of legal expenses insurance, the insurer shall be liable to the extent necessary to look after the legal interests of the policyholder or of the insured person as per the agreement.

Section 126 Claims processing company

(1) Where risks in the sphere of legal expenses insurance are insured along with other risks, the insurance policy must separately quote the scope of the legal expenses insurance cover and the premium payable therefor. If the insurer hires an independent claims processing company to handle these claims, the name of this company must be quoted on the insurance policy.

(2) If an independent claims processing company is hired to deal with these claims, claims arising under a legal expenses insurance contract may only be asserted against that company. The title shall be effective for and against the legal expenses insurer. Section 727 of the Code of Civil Procedure shall be applied mutatis mutandis.

Section 127 Freedom of choice of lawyer

(1) The policyholder shall be entitled freely to choose a lawyer to represent his interests in court and administrative proceedings from among the circle of lawyers whose fees the insurer will cover in accordance with the contract of insurance. This provision shall also apply if the policyholder is entitled to claim legal expenses for the representation of other legal interests.

(2) A lawyer shall also be anyone authorised to exercise the profession in accordance with the designations set out in the Annex to section 1 of the Act Regulating the Activity of European lawyers in Germany of 9 March 2000 (Federal Law Gazette I, p. 182, p. 1349), as last amended by Article 1 of the Act of 26 October 2003 (Federal Law Gazette I, p. 2074), as amended.

Section 128 Procedure for calling in expert opinion

In the event that the insurer denies his liability because looking after the legal interests does not have sufficient prospects of success or is wanton, the contract of insurance must provide for a procedure to call in expert opinion or another procedure with comparable guarantees of impartiality in which a decision can be taken regarding the differences of opinion between the parties concerning the prospects of success or the wantonness of prosecution. The insurer shall draw the policyholder’s attention to this fact when denying his obligation to effect payment. If the contract of insurance does not provide for any such procedure or the insurer fails to provide this information, the policyholder’s need for legal protection shall be deemed to have been acknowledged in individual cases.

Section 129 Deviating agreements

Agreements deviating from sections 126 to 128 to the detriment of the policyholder shall not be permitted.

 

Chapter 3

Transport insurance

Section 130 Extent of risk accepted

(1) In the case of the insurance of goods against the risks of transportation by land or inland waterways as well as the concomitant storage, the insurer shall bear all the risks to which the goods are exposed throughout the period of cover.

(2) If a ship is insured against the risks of inland waterway transportation, the insurer shall bear all the risks to which the ship is exposed throughout the period of cover. The insurer shall also be liable for that loss incurred by the policyholder as a result of a collision between ships or a collision with fixed or floating objects on account of having to replace loss incurred by a third party.

(3) The insurance against the risks of inland waterway transportation covers contributions to gross average insofar as the average measure serves the avoidance of loss to be compensated by the insurer.

Section 131 Breach of the duty of disclosure

(1) Notwithstanding section 19 (2), in the event of a breach of the duty of disclosure, the insurer’s rescission shall be ruled out; the insurer may terminate the contract and refuse performance within one month from the time when he learns that the circumstance was not disclosed or not disclosed correctly. The insurer shall remain liable insofar as the circumstance which was not disclosed or not disclosed correctly was not the cause of the occurrence of the insured event or of the extent of the liability.

(2) If the insurer refuses performance, the policyholder may terminate the contract. The right to terminate the contract shall lapse if it is not exercised within one month after the time when the policyholder receives the insurer’s decision to refuse performance.

Section 132 Change of risk insured

(1) Notwithstanding section 23, the policyholder may aggravate the risk insured or change it in another manner and permit changes by a third party. He must disclose the change to the insurer without undue delay.

(2) If the policyholder has not provided notification of an aggravation of the risk insured, the insurer shall not be obligated to effect payment if the insured event occurs after such time as the insurer should have received the notification. He shall be obligated to effect payment

  1. if he was aware of the aggravation of the risk insured at the time when he should have received the notification,
  2. if the duty of disclosure was breached neither intentionally nor by acting with gross negligence, or
  3. insofar as the aggravation of the risk insured was not the cause of the occurrence of the insured event or of the extent of the liability.

(3) Notwithstanding section 24, the insurer shall not be entitled to terminate the contract on account of an aggravation of the risk insured.

Section 133 Transportation in breach of contract

(1) If the goods are transported by a means of transport other than that agreed or are reloaded although direct transportation was agreed, the insurer shall not be obligated to effect payment. This provision shall also apply if only a specific means of transport or a specific transport route was agreed.

(2) The insurer shall be obligated to effect payment if, after the commencement of the insurance, the transportation was changed or relinquished without the consent of the policyholder or as the result of an insured event. Section 132 shall apply.

(3) In those cases described under subsection (2), the insurance shall cover the costs of the reloading or the temporary storage as well as the additional costs of the reforwarding.

Section 134 Unsuitable means of transport

(1) If no specific means of transport has been agreed for the forwarding of the goods, the policyholder, insofar as he has any influence thereupon, shall be obligated to use a means of transport which is suited to taking on board and transporting the goods.

(2) If the policyholder breaches this incidental obligation intentionally or by acting with gross negligence, the insurer shall not be liable, unless the breach was not the cause of the occurrence of the insured event or the extent of the liability.

(3) If the policyholder learns of the unsuitability of the means of transport, he must notify the insurer of that fact without undue delay. Section 132 shall apply.

Section 135 Reimbursement of expenses

(1) Expenses incurred by the policyholder in loss avoidance or minimisation, as well as the costs of the ascertainment and establishment of the loss, shall also be reimbursed by the insurer insofar as they do not exceed the sum insured when added to the remaining compensation.

(2) If expenses have been incurred in loss avoidance or minimisation or in the ascertainment and establishment of the loss or to restore or improve the property damaged by the insured event or contributions have been made to gross average, or if the policyholder has become personally liable to pay such contributions, the insurer shall reimburse the loss caused by the subsequent occurrence of the insured event without consideration for the earlier expenses and amounts to be reimbursed by him.

Section 136 Insurable value

(1) The insurable value of the goods shall be deemed to be the common market value and, for lack of that value, the common value of the goods at the place of shipping at the commencement of the insurance, plus insurance costs, costs arising up until the time when the transporter takes receipt of the goods and the final amount of freightage paid.

(2) The value determined in accordance with subsection (1) shall also be deemed to be the insurable value upon occurrence of the insured event.

(3) Where goods are damaged upon arrival at their place of delivery, their value at that place in their damaged state shall be deducted from the value which they would have at that place in an undamaged state. The fraction of the insurable value corresponding to the ratio between the reduction in value and their value in their undamaged state shall be deemed to be the amount of damage.

Section 137 Causing an insured event

(1) The insurer shall not be obligated to effect payment if the policyholder causes the insured event intentionally or by acting with gross negligence.

(2) The policyholder shall not be responsible for the conduct of the ship’s crew when navigating the ship.

Section 138 Exclusion of liability for ships

In the case of insurance of a ship, the insurer shall not be obligated to pay compensation for loss arising on account of the fact that the ship was not in a fit state to sail or not sufficiently equipped or not sufficiently manned when it set sail. This provision shall also apply to loss only arising as a result of the wear and tear onboard a ship in normal use.

Section 139 Sale of the insured object or goods

(1) In the case of the sale of an insured object for which an individual policy or a certificate of insurance has been issued, the buyer shall, notwithstanding section 95, not be liable to pay the premium. The insurer may not refer to his not being obligated to effect payment against the buyer on account of non-payment of the insurance premium or on account of the non-payment of a security, unless the buyer knew the grounds for the non-obligation to effect payment or should have known thereof.

(2) Notwithstanding section 96, the insurer shall not be entitled to terminate the contract on account of the sale of the insured goods.

(3) Notwithstanding section 97, the policyholder shall not be obligated to notify the insurer of the sale.

Section 140 Sale of the insured ship

In the case of the sale of an insured ship, the insurance shall end, notwithstanding section 95, when the ship is transferred to the buyer, in the case of ships en route when the ship is transferred to the buyer at the port of destination.

Section 141 Release following payment of the sum insured

(1) After the occurrence of the insured event, the insurer shall be entitled to release himself from all further liabilities by paying the sum insured. The insurer shall remain liable to reimburse those expenses which arose in loss avoidance or minimisation or to replace or repair the insured object before the policyholder received his declaration of intent to release himself by paying the sum insured.

(2) The right of the insurer to release himself by paying the sum insured shall lapse if the policyholder does not receive the declaration within one week after the time when the insurer learned of the occurrence of the insured event and of its immediate consequences.

 

Chapter 4

Building fire insurance

Section 142 Disclosures to mortgage creditors

(1) In the case of building fire insurance, the insurer must disclose, in writing and without undue delay, to a mortgage creditor who has declared his mortgage in the event that the single or first premium is not paid in good time or the policyholder is given a deadline by when he must pay a subsequent premium. This shall also apply if the insurance agreement is terminated once the deadline expires on account of the non-payment of the subsequent premium.

(2) The insurer shall inform a mortgage creditor who has declared his mortgage in writing of the occurrence of the insured event within one week after he has learned thereof, unless the loss or damage is immaterial.

Section 143 Continuation of liability towards mortgage creditors

(1) In the event of a subsequent premium not being paid in good time, the insurer shall remain obligated to effect payment to a mortgage creditor who has declared his mortgage up until one month after the time when the mortgage creditor was informed of the setting of the deadline for payment or, if this information was not communicated, notification has been given of the termination of the contract.

(2) The termination of the insurance agreement shall not become effective against a mortgage creditor who has declared his mortgage until two months after the time when the insurer informed him of the termination and, insofar as this had not occurred, such time as the contract was terminated or he learned thereof in another manner. The first sentence shall not apply if the insurance agreement is terminated on account of the non-payment of the insurance premium by means of the insurer’s rescission or termination of the contract or the policyholder’s termination of the contract to which the mortgage creditor agreed.

(3) Subsection (2), first sentence, shall apply mutatis mutandis to the effectiveness of an agreement between the insurer and the policyholder on account of which the scope of the insurance cover is reduced or in accordance with which the insurer is only obligated to effect payment in respect of compensation to restore the insured building.

(4) The nullity of the contract of insurance cannot be asserted against a mortgage creditor who has declared his mortgage. However, the insurance agreement against him shall expire two months after the time when he has been informed of the nullity by the insurer or he has learned of the nullity by another means.

Section 144 Termination of the contract by the policyholder

Where a mortgage creditor has declared his mortgage, a termination of the insurance agreement by the policyholder shall, notwithstanding section 92 (1) and section 96 (2), only be effective if the policyholder has provided proof no less than one month before the end of the contract of insurance that at the time when the termination was permissible at the latest there was no mortgage on the property or that the mortgage creditor had agreed to the contract being terminated. The agreement may not be refused without sufficient grounds.

Section 145 Assignment of the mortgage

Insofar as the insurer satisfies the mortgage creditor in accordance with section 143, the mortgage shall be assigned to him. The assignment may not be asserted to the detriment of an equal or subordinate mortgage creditor towards whom the insurer remained liable.

Section 146 Duty of the insurer to provide confirmation and disclose information

The insurer shall be obligated to provide confirmation of declaration to a mortgage creditor who has declared his mortgage and, upon request, to disclose information regarding the existence of insurance cover and regarding the amount of the sum insured.

Section 147 Change of mortgage creditor’s address and name

If the mortgage creditor has not disclosed a change in his address or name to the insurer, section 13 (1) shall apply mutatis mutandis to the insurer’s notifications and communications in accordance with section 142 and section 143.

Section 148 Other charges on real property

If land charges, annuity rent charges and other charges on land have been taken out on the real property, sections 142 to 147 shall apply mutatis mutandis.

Section 149 Owner’s charges on real property

The rights under sections 142 to 148 may not be asserted to the advantage of mortgages, land charges or annuity rent charges to which the policyholder is entitled.

 

Chapter 5

Life insurance

Section 150 Insured person

(1) Life insurance may be taken out for the policyholder or for another person.

(2) Where the life insurance is taken out against the death of another person and the agreed benefit exceeds normal funeral costs, the written agreement of the other person shall be necessary for the contract to be effective; this shall not apply in the case of collective life insurances in company pension schemes. If the other person has no legal capacity to act or only limited capacity to act, or if a custodian has been appointed and the policyholder is entitled to represent that person’s interests, he may not represent the other person when giving his consent thereto.

(3) If one parent takes out the insurance for an under-age child, the child’s consent shall only be required if in accordance with the contract the insurer is to be liable even in the event of the child dying before reaching the age of seven and the benefit agreed for this event exceeds normal funeral costs.

(4) Insofar as the supervisory body has determined a specific maximum amount for normal funeral costs, this amount shall prevail.

Section 151 Medical examination

Agreeing that the insured person shall undergo a medical examination shall not establish the insurer’s right to conduct that examination.

Section 152 Revocation by the policyholder

(1) Notwithstanding section 8 (1), first sentence, the time limit on revocation shall be 30 days.

(2) Notwithstanding section 9, first sentence, the insurer shall also pay the surrender value, plus surplus sharing, in accordance with section 169. In the case of section 9, second sentence, the insurer shall reimburse the surrender value, plus surplus sharing, or, if this is more favourable for the policyholder, the insurance premiums paid for the first year.

(3) Notwithstanding section 33 (1), the single or first premium shall be payable without undue delay 30 days after receipt of the insurance policy.

Section 153 Surplus sharing

(1) The policyholder shall be entitled to a share of the profit and valuation reserves (surplus sharing), unless surplus sharing is ruled out by explicit agreement; surplus sharing may only be wholly ruled out.

(2) The insurer shall apply a causation-based procedure to the surplus sharing; other comparable, suitable principles of distribution may be agreed. The amounts within the meaning of section 268 (8) of the Commercial Code shall not be taken into account.

(3) The insurer shall determine the valuation reserves annually and assign them by calculation according to a causation-oriented procedure. When the contract expires the amount to be determined for that point in time shall be halved and half paid to the policyholder; earlier payment may be agreed. Supervisory regulations regarding capital resources shall remain unaffected.

(4) In the case of pension insurances, the end of the savings accumulation period shall be the relevant time point in accordance with subsection (3), second sentence.

Section 154 Model calculation

(1) If the insurer quotes in figures the amount of the possible benefits over and above the contractually guaranteed payments in connection with the offer or the conclusion of a life insurance, he shall be obligated to provide the policyholder with a model calculation which states the possible maturity benefit based on the actuarial principles for premium calculation with three different rates of interest. This provision shall not apply to risk insurances and contracts which provide for benefits of the type described in section 54b (1) and (2) of the Insurance Supervision Act.

(2) The insurer shall clearly and comprehensibly indicate to the policyholder that the model calculation only represents a model based on fictitious assumptions and that the policyholder cannot derive any contractual claims against the insurer from the model calculation.

Section 155 Annual information

In the case of insurances with surplus sharing, the insurer shall inform the policyholder annually in writing of the development of his claims, including surplus sharing. Further, the insurer, if he has provided figures regarding the possible future progression of the surplus sharing, must indicate to the policyholder how the actual development deviates from the figures quoted initially.

Section 156 Knowledge and conduct of the insured person

Insofar as the knowledge and conduct of the policyholder is of any legal significance under this Act, in the case of insurance taken out for another person, account shall also be taken of that other person’s knowledge and conduct.

Section 157 Declaring incorrect age

Where the insured person’s age has been declared incorrectly, the insurer’s liability shall change in the proportion that the insurance premium commensurate with his actual age bears to the agreed insurance premium. The insurer shall, notwithstanding section 19 (2), only have the right to withdraw from the contract on account of the breach of the duty of disclosure if he would not have concluded the contract had the age been declared correctly.

Section 158 Change in risk

(1) An aggravation of the risk insured shall only be deemed to be such change in the risk factors deemed to constitute an aggravation of the risk insured by explicit agreement; the agreement must be made in writing.

(2) An insurer may no longer assert an aggravation of the risk insured once five years have elapsed since the increase. If the policyholder has intentionally or fraudulently breached his obligation under section 23, this time limit shall be ten years.

(3) Section 41 shall apply with the proviso that a reduction of the premium may only be demanded on account of such a reduction of risk factors deemed to be so by explicit agreement.

Section 159 Appointment of beneficiary

(1) In cases of doubt, the policyholder shall be entitled, without the consent of the insurer, to appoint a third party as beneficiary and to replace the thus appointed third party with the name of another.

(2) A third party beneficiary by revocable designation shall not acquire the right to payment of the insurer’s benefit until the insured event occurs.

(3) A third party beneficiary by irrevocable designation shall acquire the right to payment of the insurer’s benefit at the time when he is designated as beneficiary.

Section 160 Interpretation of the appointment of beneficiary

(1) If several persons are appointed as beneficiaries without determining their shares, they shall be entitled to benefit in equal share. The share not acquired by any one beneficiary shall accrue to the remaining beneficiaries.

(2) If the insurer’s benefit is to be paid to the policyholder’s heirs upon his death, in cases of doubt those appointed as heirs upon his death shall be entitled to benefit in relation to their shares in the inheritance. A waiving of the right to the inheritance shall have no influence on the entitlement.

(3) Where the right to the insurer’s benefit is not acquired by the third party beneficiary, it shall be due to the policyholder.

(4) Where the tax authorities are appointed as heir, they shall not be entitled to benefit within the meaning of subsection (2), first sentence.

Section 161 Suicide

(1) In the case of a whole life insurance, the insurer shall not be obligated to effect payment if the insured person intentionally commits suicide before three years have elapsed since the conclusion of the contract of insurance. This shall not apply if the act was committed while a person was in a state of morbid disturbance of mind precluding their ability to freely determine their intent.

(2) The time limit under subsection (1), first sentence, may be increased by individual agreement.

(3) Where the insurer is not obligated to effect payment, he must pay the surrender value plus surplus sharing in accordance with section 169.

Section 162 Killing by the beneficiary

(1) If the insurance has been taken out against the death of a person other than the policyholder, the insurer shall not be obligated to effect payment if the policyholder intentionally causes the death of the other by an unlawful act.

(2) If a third party has been appointed beneficiary, the appointment shall be deemed not to have occurred if the third party intentionally causes the death of the insured person by an unlawful act.

Section 163 Change in premium and benefits payable

(1) The insurer shall be entitled to re-determine the agreed premium if

  1. the need for benefits has changed not only temporarily and unforeseeably in respect of the bases for calculating the agreed premium,
  2. the re-determined premium is appropriate and necessary in accordance with the amended bases of calculation in order to guarantee the continuous satisfiability of the insurance benefit, and
  3. an independent trustee has examined and confirmed the bases of calculation and the conditions under nos. 1 and 2.

Any re-determination of the premium shall be ruled out insofar as the insurance benefits payable at the time of the first and renewed determination were insufficiently calculated and a prudent and conscientious actuary should have recognised that fact in particular based on the statistical bases of calculation available at that point in time.

(2) The policyholder may request that instead of an increase in the premium in accordance with subsection (1), the insurance benefit be reduced accordingly. In the case of an insurance free of premium (fully paid-up insurance), the insurer shall be entitled to reduce the insurance benefit under the conditions set out in subsection (1).

(3) The re-determination of the insurance premium and the reduction of the insurance benefit shall become effective at the start of the second month after the policyholder has been informed about the re-determination or the reduction and the relevant reasons.

(4) The trustee shall not become involved in accordance with subsection (1), first sentence, no. 3 if the re-determination or the reduction of the insurance benefit requires the authorisation of the supervisory body.

Section 164 Adjustment of the terms

(1) If a provision of the insurer’s general terms and conditions of insurance has been declared void by a decision of one of the highest courts or by a final administrative act, the insurer may replace it with a new rule if this is necessary to continue the contract or if continuing the contract without the new rule would represent undue hardship for either party, even taking into account the interests of the other party. The new rule shall only be effective if it takes appropriate account of the concerns of the policyholder and is in keeping with the objective of the contract.

(2) The new rule in accordance with subsection (1) shall become an integral part of the contract two weeks after the policyholder has been informed of the new rule and of the relevant grounds.

Section 165 Fully paid-up insurance

(1) The policyholder may, at any time from the end of the current period of insurance, demand that the insurance be converted into a fully paid-up insurance, insofar as the agreed minimum insurance cover is achieved. If that is not the case, the insurer must pay the applicable surrender value plus surplus sharing in accordance with section 169.

(2) Fully paid-up insurance benefits shall be calculated in accordance with the accepted actuarial rules using the bases for calculating the insurance premium based on the surrender value in accordance with section 169 (3) to (5) and shall be quoted in the contract for each insurance year.

(3) Fully paid-up insurance benefits shall be calculated for the end of the current period of insurance, taking into account any premium payments in arrears. The policyholder’s claims arising from surplus sharing shall remain unaffected.

Section 166 Termination of the contract by the insurer

(1) If the insurer terminates the contract of insurance, the insurance shall be converted into a fully paid-up insurance upon termination. Section 165 shall apply to the conversion.

(2) In the case of section 38 (2), the insurer shall be liable to that extent to which he would have been liable if the insurance had been converted into a fully paid-up insurance upon occurrence of the insured event.

(3) When setting a deadline for payment in accordance with section 38 (1), the insurer must indicate that the insurance is being converted.

(4) In the case of a life insurance concluded by the employer for the benefit of this employees, the insurer shall inform the insured person in writing of the setting of the payment deadline in accordance with section 38 (1) and of the fact that the insurance is being converted, and he shall grant to them a payment period of no less than two months.

Section 167 Conversion to qualify for exemption from attachment

The life insurance policyholder may at any time demand that the insurance be converted, to the end of the current period of insurance, into an insurance which meets the requirements of section 851c (1) of the Code of Civil Procedure. The costs of the conversion shall be borne by the policyholder.

Section 168 Termination of the contract by the policyholder

(1) Where continuous insurance premiums are payable, the policyholder may terminate the insurance policy at any time to the end of the current period of insurance.

(2) If an insurance covers a risk for which the insurer is certain to be liable, the policyholder’s right to terminate the contract shall also apply if the premium consists of a single payment.

(3) Subsections (1) and (2) shall not apply to a contract of insurance which is to serve as retirement provisions in which the policyholder has reached agreement with the insurer that the policy cannot be cashed in before he reaches the age of retirement; the value of the claims which may not be cashed in at such time may not exceed the amounts set out in section 12 (2) no. 3 of Social Code Book II. The same applies mutatis mutandis insofar as the claims in accordance with section 851c or 851d of the Code of Civil Procedure may not be attached.

Section 169 Surrender value

(1) If an insurance offers insurance cover for a risk for which the insurer is certain to be liable and the insurance agreement is rescinded because the policyholder terminates the contract or because the insurer rescinds or avoids the policy, the insurer shall pay the surrender value.

(2) The surrender value shall only be paid insofar as this value does not exceed the payment made upon occurrence of the insured event when the contract is terminated. The share of the surrender value not paid after that time shall be used for the fully paid-up insurance. In the case of rescission or avoidance of the contract the full surrender value shall be paid.

(3) The surrender value is the insurance’s premium reserve calculated with effect to the end of the current insurance period according to the accepted actuarial rules using the bases of premium calculation, in the case of the termination of the insurance agreement the amount of the premium reserve resulting from a symmetrical allocation of the calculated acquisition and distribution costs for the first five insurance years; the regulations stipulated by the supervisory authorities in respect of maximum zillmerising rates shall remain unaffected. The policyholder is to be informed of the surrender value and the extent to which it is guaranteed before he submits his contractual acceptance; the statutory ordinance referred to in section 7 (2) specifies further particulars. If the insurer’s headquarters are located in another Member State of the European Union or in another state party to the Agreement on the European Economic Area, he may base his calculation of the surrender value on another reference value comparable in that state rather than on the premium reserve.

(4) In the case of fund-based insurances and other insurances which provide for benefits of the type described in section 54b of the Insurance Supervision Act, the surrender value shall be calculated based on the accepted actuarial rules as an end value of the insurance, insofar as the insurer does not guarantee payment of a certain benefit; subsection (3) shall apply in other respects. The principles on which the calculation is based shall be cited in the contract.

(5) The insurer shall only be entitled to deduct the amount calculated in accordance with subsection (3) or (4) if it has been agreed, put in figures and is appropriate. An agreement regarding a deduction for as yet unsettled acquisition and distribution costs shall be void.

(6) The insurer may reduce the amount calculated in accordance with subsection (3) by an appropriate amount insofar as this is necessary to rule out a risk to the policyholder’s concerns, especially a risk to the continuous satisfiability of the obligations arising from the contracts of insurance. The reduction shall be limited to one year in each instance.

(7) In addition to the amount calculated on the basis of subsections (3) to (6), the insurer shall pay the policyholder the surplus sharing already assigned to him, insofar as this has not already been added to the amount calculated in accordance with subsections (3) to (6), as well as the final surplus sharing provided for in accordance with the relevant general terms and conditions of insurance in the event of the termination of the contract; section 153 (3), second sentence, shall remain unaffected.

Section 170 Right of subrogation

(1) If attachment is executed on the insurance claim or compulsory execution has been carried out or insolvency proceedings are opened against the assets of the policyholder, the designated beneficiary may, with the consent of the policyholder, subrogate to the contract of insurance. Where the beneficiary subrogates, he must satisfy the demands of the creditor initiating the proceedings or of the insolvency estate up to the amount of the payment which the policyholder could demand from the insurer in the event of the termination of the contract of insurance.

(2) Where no beneficiary is designated or named, the policyholder’s spouse or life partner or children shall be entitled to the same right.

(3) The subrogation is effected by giving notice thereof to the insurer. The notification may only be made within one month after the time when the person entitled to subrogate learns of the attachment or after the insolvency proceedings have been opened.

Section 171 Deviating agreements

Agreements deviating from section 152 (1), (2) and sections 153 to 155, sections 157, 158, 161 and sections 163 to 170 to the detriment of the policyholder, the insured person or the person entitled to subrogation shall not be permitted. Agreement may be reached to the effect that the policyholder’s request for conversion in accordance with section 165 and his termination of the contract in accordance with section 168 must be made in writing.

 

Chapter 6

Occupational disability insurance

Section 172 Insurer’s liability

(1) In the case of occupational disability insurance, the insurer shall be liable to pay the agreed benefits for any occupational disability arising after the commencement of the insurance.

(2) ‘Occupational disability’ shall refer to anyone who, in consequence of sickness, physical injury or loss of strength over and above what is normal for their age, can probably no longer wholly or partially exercise their most recently exercised profession in the long run to the same extent as when they had no health impairments.

(3) The insurer may agree as a further precondition for his liability that the insured person does not or cannot exercise another profession which he is in a position to take on based on his training and skills and which corresponds to his previous position in life.

Section 173 Acknowledgement

(1) After a claim has been filed, the insurer shall declare in writing when due whether he acknowledges his obligation to effect payment.

(2) The acknowledgement may only be time-barred once. It shall be binding up to the end of the time limit.

Section 174 Release from liability

(1) Where the insurer establishes that the preconditions for his liability are no longer met, he shall only be released from his liability if he has indicated this change to the policyholder in writing.

(2) The insurer shall only be released from liability three months after receipt of the declaration under subsection (1) at the earliest.

Section 175 Deviating agreements

Agreements deviating from section 173 and section 174 to the detriment of the policyholder shall not be permitted.

Section 176 Applicable provisions

Within the territorial scope of this Act, a court may also perform official acts outside its district.

Section 177 Similar contracts of insurance

Sections 150 to 170 shall apply mutatis mutandis to occupational disability insurance insofar as this does not conflict with the specific nature of this insurance.

Chapter 7

Accident insurance

Section 178 Insurer’s liability

(1) In the case of accident insurance, the insurer shall be liable following an accident involving the insured person or an event contractually deemed equivalent to an accident.

(2) An accident shall be deemed to have occurred where the insured person involuntarily suffers a health impairment on account of a sudden event having an external impact on his body. Involuntariness shall be assumed until such time as the opposite is proven.

Section 179 Insured person

(1) The accident insurance may be taken out against the occurrence of an accident involving the policyholder or another person. An insurance against accidents involving another person shall, in cases of doubt, be deemed to have been taken out for the account of a third person.

(2) If the insurance against accidents involving another person is taken out by the policyholder for his own account, the written agreement of the other person shall be required for the contract to become effective. If the other person has no legal capacity to act or only limited legal capacity to act, or a custodian has been appointed to him and the policyholder is entitled to represent the person’s interests, he may not represent the other person when giving his consent thereto.

(3) Insofar as in the case under subsection (2) the knowledge and conduct of the policyholder is of legal significance under this Act, account shall also be taken of the knowledge and conduct of the other person.

Section 180 Invalidity

The insurer shall owe the promised payments to the agreed extent in the case of invalidity if the insured person’s physical or mental capacity is permanently impaired on account of the accident. Such an impairment shall be deemed permanent if it is expected to last for more than three years and no change in the situation is to be expected.

Section 181 Aggravation of risk

(1) An aggravation of the risk insured shall only be deemed to be such change in the circumstances which is to be classed as an aggravation of the risk insured by explicit agreement; the agreement must be made in writing.

(2) If, in the event of an aggravation of risk insured, lower insurance benefits are payable in accordance with the insurer’s applicable tariff if the premium does not change, these shall be deemed to have been agreed one month after the aggravation of the risk insured begins. The insurer may only assert more comprehensive rights if the policyholder fraudulently did not disclose the aggravation of the risk insured.

Section 182 Contributory causes

Where it has been agreed that the right to the agreed payment lapses or is reduced if illness or ailments have contributed to the health impairments or their consequences following an insured event, the insurer shall provide proof that the conditions for the lapse or reduction of the claim exist.

Section 183 Causing the insured event

(1) The insurer shall not be liable if in the case of section 179 (2) the policyholder intentionally caused the insured event through an unlawful act.

(2) If a third party has been designated as a beneficiary, the appointment shall be deemed not to have occurred if the third party intentionally caused the insured event through an unlawful act.

Section 184 Loss avoidance and minimisation

Section 82 and section 83 shall not apply to accident insurance.

Section 185 Appointment of beneficiary

Where it has been agreed that the insurer is to pay out a capital sum, section 159 and section 160 shall apply mutatis mutandis.

Section 186 Insurer’s duty to provide information

If the policyholder gives notice of the occurrence of an insured event, the insurer shall provide him with information in writing regarding the contractual preconditions for a claim and due dates, as well as deadlines which must be adhered to. Should this information not be provided, the insurer may not refer to any failure to meet a deadline.

Section 187 Acknowledgement

(1) After an application for a claim has been filed, the insurer shall declare in writing within one month after submission of the documents necessary for its assessment whether and to what extent he acknowledges his liability. If the application is for payment of an invalidity benefit, the time limit shall be three months.

(2) If the insurer acknowledges the claim or the policyholder and insurer have agreed the reason for and the amount of the claim, the payment shall be due within two weeks. If the liability has been established on the merits only, the insurer shall pay an appropriate advance upon the policyholder’s request.

Section 188 Re-assessment of invalidity

(1) Where the payment of benefits has been agreed in the event of invalidity, each contracting party shall be entitled to have the degree of invalidity re-assessed annually, no more than three years after the accident occurred at the latest. In the case of child accident insurance, the time limit within which a re-assessment may be requested may be extended.

(2) Once the insurer declares that he is liable, the policyholder must be instructed about his right to have the degree of invalidity re-assessed. If such instruction is not given, the insurer may not refer to any delay in the policyholder’s request to have the degree of invalidity re-assessed.

Section 189 Drawing on an expert, costs of ascertaining the loss

Section 84 and section 85 (1) and (3) shall apply mutatis mutandis.

Section 190 Compulsory insurance

If the taking out of accident insurance is compulsory under a legal provision, the insurer shall certify to the policyholder, quoting the sum insured, that an accident insurance exists in accordance with the legal provision, to which reference must be made.

Section 191 Deviating agreements

Agreements deviating from section 178 (2), second sentence, and section 181, as well as sections 186 to 188 to the detriment of the policyholder or the insured person shall not be permitted.

 

Chapter 8

Health insurance

Section 192 Typical obligations incumbent on the insurer

(1) In the case of cost-of-illness insurance, the insurer shall be obligated to reimburse any expenses for medically necessary treatment due to sickness or in consequence of an accident and for other agreed services to the agreed extent, including those expenses associated with pregnancy and childbirth, as well as outpatient medical check-ups for the early diagnosis of diseases in accordance with statutory programmes.

(2) The insurer shall not be liable to pay claims in accordance with subsection (1) insofar as the expenses for treatment or other services are obviously disproportionate to the services performed.

(3) The contracting parties may agree that the content of the cost-of-illness contract of insurance covers additional services directly linked to those referred to in subsection (1), especially

  1. the providing of advice regarding the services referred to in subsection (1), as well as regarding the providers of such services;
  2. the providing of advice regarding the entitlement to remuneration of those providing the services referred to in subsection (1);
  3. the avoidance of unauthorised entitlements to remuneration of those providing the services referred to in subsection (1);
  4. the providing of support to insured persons when asserting claims on account of the incorrect provision of the services referred to in subsection (1) and the consequences resulting therefrom;
  5. the direct settling of accounts for services referred to in subsection (1) with the providers thereof.

(4) In the case of daily hospital allowance insurance, the insurer shall be obligated to pay the agreed daily hospital allowance for medically necessary inpatient treatment.

(5) In the case of daily sickness allowance insurance, the insurer shall be obligated to reimburse the loss of earnings resulting from the illness or accident due to the incapacity to work by paying the agreed daily sickness allowance.

(6) In the case of long-term nursing care insurance, the insurer shall be obligated, in the event of the need for long-term nursing care, to reimburse to the agreed extent the expenses for caring for the insured person (long-term nursing care costs insurance) or to pay the agreed daily allowance (daily long-term nursing allowance insurance). Subsection (2) shall apply mutatis mutandis to long-term nursing care costs insurance. The provisions of Social Code Book XI concerning private long-term nursing care insurance shall remain unaffected.

(7) In the case of cost-of-illness insurance in the basic tariff in accordance with section 12 of the Insurance Supervision Act, the service-provider may also assert his claim to remuneration for services provided against the insurer insofar as the insurer is obligated by the insurance agreement to effect payment. The insurer and the policyholder shall be liable as joint and several debtors as concerns the obligation incumbent on the insurer to effect payment emanating from the insurance agreement.

Section 193 Insured person; obligatory insurance

(1) The health insurance may be taken out for the policyholder or for another person. The insured person shall be that person for whom the insurance is taken out.

(2) Where the knowledge and the conduct of the policyholder are of legal significance under this Act, in the case of insurance for another person, account shall also be taken of the knowledge and conduct of that person.

(3) Each person with a place of residence in Germany shall be obligated to conclude and maintain with an insurance company licensed to operate in Germany for himself and for the persons legally represented by him, insofar as they are not themselves able to conclude contracts, a cost-of-illness insurance which comprises at least a cost refund for outpatient and inpatient treatment and in which the absolute and percentage excesses for outpatient and inpatient treatment which have been agreed for services covered by the respective tariff for each person to be insured are limited to an amount of Euro 5,000 per calendar year; for persons entitled to medical expenses assistance, the possible excesses emerge through the analogous application of the percentage not covered by the rate of medical expenses assistance to the maximum amount of Euro 5,000. The obligation in accordance with the first sentence shall not apply to persons who

  1. are insured or subject to obligatory insurance in statutory health insurance, or
  2. have a right to free treatment, to medical expenses assistance or to comparable rights to the extent of the respective entitlement, or
  3. have a right to benefits in accordance with the Asylum-Seekers Benefits Act, or
  4. are recipients of recurrent benefits in accordance with the Third, Fourth, Sixth, and Seventh Chapters of Social Code Book XII for the duration of the receipt of such benefits and during periods of an interruption of the receipt of benefits of less than one month if the receipt of benefits commenced prior to 1 January 2009.

A cost-of-illness insurance contract agreed prior to 1 April 2007 shall be deemed to meet the requirements of the first sentence.

(4) If conclusion of contract is applied for later than one month after emergence of the obligation in accordance with subsection (3), first sentence, a premium supplement shall be payable. This shall be one months contribution for each further month of non-insurance commenced, from the sixth month of non-insurance one-sixth of a months contribution for each further month of non-insurance commenced. If it is impossible to ascertain the duration of non-insurance, it shall be presumed that the insured party was not insured for at least five years. The premium supplement shall be payable once in addition to the recurrent premium. The policyholder may demand respite from the insurer in respect of the premium supplement if immediate payment would have an unusually serious effect on him and the insurers interests can be satisfied by agreeing an appropriate payment by instalments. Interest shall be applied to the amount to which the respite relates.

(5) The insurer shall be obligated to grant insurance in the basic tariff in accordance with section 12 (1a) of the Insurance Supervision Act

  1. to all persons voluntarily insured in statutory health insurance
    a) within six months after the introduction of the basic tariff,
    b) within six months of commencement of the possibility to change envisioned in Social Code Book V in the context of their voluntary insurance agreement,
  2. to all persons with a place of residence in Germany who are not subject to obligatory insurance in statutory health insurance, do not belong to the group of individuals in accordance with no. 1 or subsection (3), second sentence, nos. 3 and 4, and have not already agreed private cost-of-illness insurance with an insurance company licensed to operate in Germany satisfying the obligation in accordance with subsection (3),
  3. to persons who are entitled to medical expenses assistance or who have comparable entitlements, insofar as they require supplementary insurance protection to meet the obligation in accordance with subsection (3), first sentence,
  4. to all persons with a place of residence in Germany who have agreed private cost-of-illness insurance within the meaning of subsection (3) with an insurance company licensed to operate in Germany and whose contract is concluded subsequent to 31 December 2008.

If the private cost-of-illness insurance contract was concluded prior to 1 January 2009, on change or termination of the contract, the conclusion of a contract in the basic tariff can be demanded with the policyholders own or with another insurance company, old age reserves being carried forward in accordance with section 204 (1) only until 30 June 2009. The application must already be accepted if in case of termination of a contract with another insurer termination in accordance with section 205 (1), first sentence, did not yet take effect. The application may only be rejected if the applicant was already insured by the insurer and the insurer

  1. has contested the contract of insurance because of threat or fraudulent misrepresentation,or
  2. has rescinded the contract of insurance because of an intentional breach of the obligation to provide information prior to conclusion of contract.

(6) If the policyholder is in arrears in respect of an insurance satisfying the obligation in accordance with subsection (3) with payment in the amount of premium shares for two months, the insurer shall issue him with a reminder. If after two weeks after receipt of the reprimand the arrears are still higher than the premium share for one month, the insurer shall determine suspension of the benefits. Suspension shall come into effect three days after receipt of this notification by the insured party. This shall be conditional on the policyholder having been informed of this consequence in the reprimand in accordance with the first sentence. Suspension shall be terminated when all and any arrears and premium shares incurred for the time of suspension have been paid or if the policyholder or the insured person become in need of assistance within the meaning of Social Code Books II or XII; need of assistance shall be certified on request of the entitled person by the competent funding organisation in accordance with Social Code Books II or XII. During the period of suspension, the insurer shall be liable exclusively for expenses necessary to treat acute illness and pain, as well as in case of pregnancy and maternity. The insurer may note information regarding the suspension of the entitlement on an electronic health card in accordance with section 291a (1a) of Social Code Book V. Over and above this, the policyholder shall pay a late payment charge of one percent of the contribution arrears for each month of arrears commenced in place of interest on arrears. If the outstanding contribution shares, late payment charges and collection costs have not been paid in full within one year of commencement of suspension, insurance in the basic tariff shall be continued. The sixth sentence shall remain unaffected.

(7) In case of insurance in the basic tariff in accordance with section 12 of the Insurance Supervision Act, the insurance company may demand additional insurances to be suspended if and for as long as an insured person is dependent on halving the contribution in accordance with section 12 (1c) of the Insurance Supervision Act.

Section 194 Applicable provisions

(1) Insofar as the insurance cover is granted in accordance with the principles of indemnity insurance, sections 74 to 80 and sections 82 to 87 shall apply. Sections 23 to 27 and section 29 shall not apply to health insurance. Section 19 (4) shall not apply to health insurance if the policyholder is not responsible for the breach of the duty of disclosure. Notwithstanding section 21 (3), first sentence, the time limit for asserting the insurer’s rights shall be three years.

(2) If the policyholder or an insured person is entitled to the repayment of remuneration paid without legal basis to the provider of services for which the insurer has paid compensation on the basis of the contract of insurance, section 86 (1) and (2) shall apply mutatis mutandis.

(3) Sections 43 to 48 shall apply to health insurance with the proviso that only the insured person may demand payment of the insurance benefit if the policyholder has designated him in writing to the insurer as the beneficiary of the insurance benefit; such designation may be revocable or irrevocable. Where this condition is not met, only the policyholder may demand payment of the insurance benefit. The insurance policy need not be presented.

Section 195 Period of insurance

(1) Health insurance which may wholly or partially substitute for health and long-term nursing care insurance cover provided for in the statutory social insurance system (substitutive health insurance) shall be for an indefinite period, unless subsections (2) and (3) and sections 196 to 199 provide otherwise. Where the non-substitutive health insurance cover is provided in the manner of life insurance, the first sentence shall apply mutatis mutandis.

(2) In the case of vocational training, overseas, travel and residual debt health insurance, a period of contract may be agreed.

(3) In the case of health insurance for a person with a temporary residence permit for Germany, agreement may be reached to the effect that the insurance will expire after five years at the latest. If a shorter term has been agreed, a similar new contract may only be concluded with a maximum term that does not exceed five years when added to the term of the expired contract; this shall also apply if the new contract is concluded with another insurer.

Section 196 Time limit on daily sickness allowance insurance

(1) In the case of daily sickness allowance insurance, it may be agreed that the insurance expires when the insured person reaches the age of 65. The policyholder may in such cases demand that the insurer accept an application to take out a new daily sickness allowance to commence after he reaches the age of 65 and to expire when he reaches the age of 70 at the latest. The insurer shall notify the policyholder of this right in writing six months at the earliest before the insurance expires, enclosing the text of this provision. If the application is made before two months have elapsed after the policyholder reaches the age of 65, the insurer shall grant the insurance cover without risk assessment or qualifying periods insofar as the insurance cover is not higher or more comprehensive than under the previous tariff.

(2) If the insurer has not informed the policyholder that the insurance will expire in accordance with subsection (1), third sentence, and the application is made before the policyholder reaches the age of 66, subsection (1), fourth sentence, shall apply mutatis mutandis, whereby the insurance shall commence when the insurer receives the application. If the insured event has already occurred before the insurer receives the application, the insurer shall not be obligated to effect payment.

(3) Subsection (1), second and fourth sentences, shall apply mutatis mutandis if immediately after an insurance is taken out in accordance with subsection (1), fourth sentence, or subsection (2), first sentence, an application for a new daily sickness allowance insurance is made which expires when the policyholder reaches the age of 75 at the latest.

(4) The contracting parties may agree a later birthday than that set out in the subsections above.

Section 197 Qualifying periods

(1) If qualifying periods are agreed, these may not exceed three months as general qualifying periods in respect of cost of illness, daily hospital allowance insurance and daily sickness allowance insurance and eight months as special qualifying periods in respect of childbirth, psychotherapy, dental treatment, dental prostheses and orthodontics. In the case of long-term nursing care insurance, the qualifying period may not exceed three years.

(2) As regards persons leaving the statutory health insurance system or who have left another contract relating to cost-of-illness insurance, account shall be taken of their uninterrupted period of insurance when calculating the qualifying period, insofar as the application for the insurance is made two months at the latest after the end of the previous insurance to commence immediately thereafter. This shall also apply to persons leaving the public sector with an entitlement to the health care allowance for public servants.

Section 198 Supplementary insurance for children

(1) If at least one parent has health insurance cover on the day on which their child is born, the insurer shall be obligated to insure this persons new-born from the completion of the birth without a risk premiums and qualifying periods if the application for the insurance is made retroactively two months at the latest after the day on which the child was born. This obligation shall only exist insofar as the insurance cover applied for in respect of the new-born is not higher and not more comprehensive than that of the insured parent.

(2) Adoption shall be equivalent to the birth of a child insofar as the child is still under age at the time of the adoption. Where a greater risk exists, the agreement of a risk premium shall be permissible up to once the amount of the premium.

(3) A minimum period of insurance for the parent may be agreed as the precondition for the insurance cover for the new-born or the adopted child. This must not exceed three months.

(4) Subsections (1) to (3) shall not apply to overseas and travel health insurance insofar as other private or statutory health insurance cover is available in Germany or overseas for the new-born or for the adopted child.

Section 199 Public servants entitled to sickness allowance

(1) In the case of cost-of-illness insurance of an insured person entitled to a sickness allowance in accordance with the principles of the public service, the contracting parties may agree that the insurance will expire to the extent of the increase of the allowance assessment rate when the insured person retires.

(2) If, in the case of an insured person entitled to a sickness allowance in accordance with the principles of the public service, the allowance assessment rate changes or the entitlement to a sickness allowance lapses, the policyholder shall be entitled to demand that the insurer adjust the insurance cover within the framework of the existing cost of illness insurance tariffs so as to balance out the amended allowance assessment rate or the discontinued entitlement to allowance. If the application is made within six months after the change, the insurer shall grant the amended insurance cover without a risk assessment or qualifying periods.

(3) Subsection (2) shall not apply to granting insurance at the basic tariff.

Section 200 Prohibition of enrichment

If the insured person has the right to assert a claim against several parties obligated to effect payment on account of the same insured event, the total compensation may not exceed the total expenses.

Section 201 Causing an insured event

The insurer shall not be obligated to effect payment if the policyholder or the insured person intentionally causes his own illness or his own accident.

Section 202 Insurer’s duty to provide information; costs of ascertaining the loss

The insurer shall be obligated, at the request of the policyholder or of the insured person, to give a physician or lawyer designated by him any information about and the right to inspect expert opinions or statements which he has obtained in examining his liability in respect of the need for a medical treatment. The right to information may only be asserted by the person affected in each instance or by his legal representative. If the policyholder has obtained the expert opinion or the statement at the insurer’s instigation, the insurer shall reimburse the costs arising.

Section 203 Adjustment of premium and conditions

(1) In the case of a health insurance where the premium is calculated in the manner of a life insurance, the insurer may only demand payment of a premium calculated in accordance with the technical bases of calculation under section 12, section 12a and section 12e in conjunction with section 12c of the Insurance Supervision Act. Other than with contracts in the basic tariff in accordance with section 12 of the Insurance Supervision Act, the insurer may agree an appropriate risk premium or release from obligation to effect payment, taking account of an aggravation of the risk insured. A risk assessment shall only be permissible in the basic tariff insofar as it is necessary for purposes of equalisation in accordance with section 12g of the Insurance Supervision Act or for subsequent tariff changes.

(2) If, in the case of health insurance, the insurer’s statutory right of termination is ruled out by law or contract, the insurer shall be entitled, in the event of a not only temporary change to one of the bases of calculation necessary for calculating the premium, to also re-determine the premium in accordance with the adjusted bases of calculation for existing insurance agreements insofar as an independent trustee has reviewed the technical bases of calculation and has agreed to the adjustment of the insurance premium. The amount of an excess may also be adjusted and an agreed risk premium amended accordingly insofar as this has been agreed. The relevant bases of calculation within the meaning of the first and second sentences shall be the insurance benefits and the probabilities of death. As regards the adjustment of insurance premiums, additional premiums and excesses, as well as their review and approval by the trustee, section 12b (1) to (2a) of the Insurance Supervision Act in conjunction with a statutory ordinance enacted on the basis of section 12c of the Insurance Supervision Act shall apply.

(3) If, in the case of health insurance, the insurer’s statutory right of termination is ruled out by law or contract within the meaning of subsection (1), first sentence, the insurer shall be entitled to adjust the general terms and conditions of insurance and the conditions of the tariff to the new conditions in the case of a non-temporary change in the conditions in the health system if the changes appear necessary to sufficiently safeguard the policyholders’ concerns and an independent trustee has reviewed the conditions on which the change is based and has confirmed their appropriateness.

(4) If a provision in the insurer’s general terms and conditions of insurance has been declared void by a decision of one of the highest courts or by a final administrative act, section 164 shall apply.

(5) The re-assessment of the premium and the changes in accordance with subsections (2), (3) shall become effective from the start of the second month after the policyholder has been informed of the re-assessment or the changes and of the relevant grounds.

Section 204 Change of tariff

(1) In the case of an existing insurance agreement, the policyholder may demand that the insurer

  1. accept applications to change to other tariffs with equivalent insurance cover, taking into account the rights acquired under the contract and old age reserves; insofar as the benefits payable according to the tariff to which the policyholder wishes to change are higher or more comprehensive than those in the previous tariff, the insurer may demand to be released from obligation to effect payment for the additional benefit or may demand an appropriate risk premium and, thus, a qualifying period; the policyholder may avoid the agreement of a risk premium and a qualifying period by agreeing release from obligation to effect payment in respect of the additional benefits; in case of a change from the basic tariff into another tariff, the insurer may also demand the risk premium which was calculated on conclusion of contract; the change to the basic tariff of the insurer allowing for the rights acquired from the contract and of the old age reserve shall only be possible if
    a) the existing cost-of-illness insurance was concluded subsequent to 1 January 2009, or
    b) the policyholder has reached the age of 55 or has not yet reached the age of 55, but meets the prerequisites for a claim to a pension from the statutory pensions insurance and has applied for this pension or draws a pension in accordance with civil service law or comparable regulations, or is in need of assistance in accordance with Social Code Books II or XII, or
    c) the existing cost-of-illness insurance was concluded subsequent to 1 January 2009 and the change into the basic tariff was applied for prior to 1 July 2009;
  2. in case of termination of the contract and simultaneous conclusion of a new contract which can completely or partly replace the health insurance protection provided for in the statutory social insurance system, with another health insurer
    a) assign the calculated old age reserve of the part of the insurance the benefits of which correspond to the basic tariff to the new insurer insofar as the terminated cost-of-illness insurance was concluded subsequent to 1 January 2009;
    b) in case of conclusion of a contract in the basic tariff assign the old age reserve calculated of the part of the insurance the benefits of which correspond to the basic tariff to the new insurer insofar as the terminated cost-of-illness insurance was concluded prior to 1 January 2009 and termination took place prior to 1 July 2009.

Insofar as the benefits according to the tariff from which the policyholder wishes to change are higher or more comprehensive than those in the basic tariff, the policyholder may require the previous insurer to agree an additional tariff in which the old age reserve extending beyond the basic tariff is to be accounted for. It shall not be possible to waive the entitlements in accordance with the first and second sentences.

(2) In the case of termination of the contract on private compulsory long-term care insurance and simultaneous conclusion of a new contract with another insurer, the policyholder may require the previous insurer to transfer the old age reserve as calculated for him to the new insurer. It shall not possible to waive this entitlement.

(3) Subsection (1) shall not apply to time-limited insurance agreements.

(4) Insofar as the health insurance is calculated in the form of a life insurance, the policyholders and the insured person shall have the right to continue a terminated insurance contract in the form of a coverage-retention policy.

Section 205 Termination of the contract by the policyholder

(1) Unless a minimum period of insurance has been agreed for the cost-of-illness and daily hospital allowance insurance, the policyholder may terminate a health insurance agreement which has been concluded for a period of more than one year to the end of the first year or each subsequent year, subject to a notice period of three months. The termination may be limited to individual insured persons or tariffs.

(2) If an insured person is obligated by operation of law to take out health or long-term nursing care insurance, the policyholder may terminate a cost-of-illness, daily sickness allowance insurance and long-term nursing care insurance as well as the prospective entitlement insurance which exists for these insurances retroactively within three months of the day on which the obligation to take out the insurance arose. The termination of the contract shall be void if the policyholder does not provide proof to the insurer within two months of the obligation to take out insurance after the insurer has asked him to do so in writing, unless the policyholder is not responsible for missing this deadline. If the policyholder avails himself of the right to terminate the contract, the insurer shall only be entitled to the premium up until that point in time. Subsequently, the policyholder may terminate the insurance agreement to the end of that month in which he provides proof of his obligation to take out the insurance. The statutory right to family insurance or the non-temporary right to a health care allowance for public servants resulting from a public service contract or similar employment status shall be equivalent to the obligation to take out insurance.

(3) If the contract of insurance provides that when the policyholder reaches a certain age or when other preconditions referred to therein are met the premium for another age or another age group applies or the premium is calculated taking old age reserves into account, the policyholder may terminate the insurance agreement with regard to the affected insured person within two months after the change with effect from the time it became effective if the premium increases as a result.

(4) If the insurer increases the insurance premium or reduces a benefit on account of an adjustment clause, the policyholder may terminate the insurance policy with regard to the affected insured person within one month after receipt of the communication of the change with effect from such time as the increase in the premium or the reduction of the benefits is to take effect.

(5) If the insurer has reserved the right to limit the termination of a contract to individual insured persons or tariffs and he avails himself of this possibility, the policyholder may demand that the remaining share of the insurance be rescinded within two weeks after receipt of the termination to such time as the termination takes effect. The first sentence shall apply mutatis mutandis if the insurer declares the avoidance or rescission of the policy possible only for individual insured persons or tariffs. In such cases the policyholder may demand that the contract be rescinded to the end of the month in which he receives the insurer’s declaration.

(6) Notwithstanding subsections (1) to (5), the policyholder may only terminate an insurance which complies with an obligation under section 193 (3), first sentence, if he concludes a new contract with another insurer for the insured person which complies with this obligation. Termination shall not become effective until the policy holder proves that the insured person is insured by a new insurer without interruption.

Section 206 Termination by the insurer

(1) Any termination of a cost-of-illness insurance which complies with an obligation under section 193 (3), first sentence, shall be ruled out by the insurer. Over and above this, the insurer may not give statutory notice of termination on cost-of-illness, daily sickness allowance insurance and long-term nursing care insurance if the insurance can completely or partly replace the health insurance protection or long-term nursing care insurance provided for in the statutory social insurance system. It shall also be ruled out for daily hospital allowance insurance taken out alongside a full cost of illness insurance. Notwithstanding the second sentence, the insurer may terminate a daily sickness allowance insurance for which there is no statutory right to an allowance towards contributions from an employer to the end of each insured year in the first three years, subject to a notice period of three months.

(2) If, in the case of daily hospital allowance insurance or partial cost-of-illness insurance, the preconditions under subsection (1) are not met, the insurer may only terminate the insurance agreement to the end of the insurance year within the first three insurance years. The notice of termination shall be three months.

(3) Where a cost-of-illness insurance or a long-term nursing care insurance is effectively terminated by the insurer on account of delayed payment by the policyholder, the insured persons shall be entitled to declare that the insurance agreement will continue, and name the future policyholder; the premium shall be payable from such time as the insurance agreement continues. The insurer shall inform the insured persons in writing about the termination and the right under the first sentence. This right shall lapse two months after the time when the insured person learns of this right.

(4) The statutory notice of termination of a group contract of insurance which covers the risk of illness by the insurer shall be permissible if the insured persons can continue the health insurance taking into account the rights acquired under the contract and the old age reserve, insofar as it has been set aside, at the terms and conditions of the individual insurance. Subsection (3), second and third sentences, shall apply mutatis mutandis.

Section 207 Continuation of the insurance agreement

(1) If the insurance agreement ends upon the death of the policyholder, the insured persons shall be entitled to declare the continuation of the insurance agreement by appointing the future policyholder within two months following the death of the policyholder.

(2) If the policyholder terminates the insurance agreement overall or for individual insured persons, subsection (1) shall apply mutatis mutandis. The termination shall only be effective if the insured person has learned of the declaration of termination. If the terminated contract is a group contract of insurance and no new policyholder is designated, the insured persons shall be entitled to continue the insurance agreement taking account of the rights acquired under the contract and the old age reserves, insofar as they have been set aside, at the same terms and conditions as the individual contract. The right under the third sentence shall lapse two months after the time when the insured persons learn of this right.

(3) If an insured person moves his habitual place of residence to another Member State of the European Union or to another state party to the Agreement on the European Economic Area, the insurance agreement shall continue, with the proviso that the insurer shall only remain liable up to the maximum benefits which he would have to have paid were his place of residence still in Germany.

Section 208 Deviating agreements

Agreements deviating from sections 194 to 199 and sections 201 to 207 to the detriment of the policyholder or the insured person shall not be permitted. As regards the termination of the contract by the policyholder in accordance with section 205, the contracting parties may agree that this must be made in writing.

 

Part 3

Concluding provisions

Section 209 Reinsurance, maritime insurance

The provisions of this Act shall not apply to reinsurance and insurance against risks in shipping (maritime insurance).

Section 210 Jumbo risks, open policy

(1) The restrictions on the freedom of contract under this Act shall not apply to jumbo risks or to open policies.

(2) Jumbo risks within the meaning of this provision shall be:

1. risks of the transport and liability insurance indicated at Nos. 4 to 7, 10 (b) as well as Nos. 11 and 12 of the Annex to the Insurance Supervision Act, Part A,
2. risks of the credit and suretyship insurance indicated at Nos. 14 and 15 of the Annex to the Insurance Supervision Act, Part A, where the policyholders exercise a commercial, mining or freelance activity if the risks are relevant thereto, or
3. risks of the property, liability and other indemnity insurance indicated at Nos. 3, 8, 9, 10, 13 and 16 of the Annex to the Insurance Supervision Act, Part A, where the policy holders exceed at least two of the following characteristics:
a) Euro 6,200,000 balance sheet total,
b) Euro 12,800,000 net turnover,
c) an average of 250 employees per fiscal year.

If the policyholder belongs to a group of companies which must prepare a consolidated financial statement in accordance with section 290 of the Commercial Code, in accordance with section 11 of the Disclosure Act of 15 August 1969 (Federal Law Gazette I page 1189) in the respectively valid version or in accordance with the requirements of the law of another Member State of the European Community or of another Contracting Party to the Agreement on the European Economic Area which concurs with the Seventh Council Directive 83/349/EEC of 13 June 1983 based on Article 54 (g) of the Treaty on consolidated accounts (OJ L 193 of 18 July 1983, page 1) in the respectively valid version, the figures contained in the consolidated financial statement shall be material to the establishment of the size of the enterprise.

Section 211 Pension funds, small insurance associations, insurances with small contributions

(1) Insofar as other provisions have been agreed in the general terms and conditions of insurance with the consent of the supervisory authority, sections 37, 38, 165, 166, 168 and 169 shall not apply to

  1. insurances with pension funds within the meaning of section 118b (3) and (4) of the Insurance Supervision Act,
  2. insurances taken out with an association recognised as a small association within the meaning of the Insurance Supervision Act,
  3. life insurances with small contributions, and
  4. accident insurances with small contributions.

(2) Further, the following shall not apply to pension funds referred to in subsection (1):

  1. sections 6 to 9, 11, 150 (2) to (4) and section 152 (1) and (2); with regard to distance contracts within the meaning of section 312b (1) and (2) of the German Civil Code this shall not apply to sections 7 to 9 and section 152 (1) and (2);
  2. section 153, insofar as other provisions have been agreed in the general terms and conditions of insurance with the consent of the supervisory authority; section 153 (3), first sentence, shall not apply to funds paying funeral benefits.

(3) Where other provisions have been agreed for insurances with small contributions within the meaning of subsection (1) nos. 3, 4, their effectiveness cannot be challenged by invoking the fact that they are not insurances with small contributions.

Section 212 Continuation of life insurance after parental leave

If an employment relationship continues during parental leave without payment in accordance with section 1a (4) of the Company Pensions Act and a life insurance policy taken out by the employer for the benefit of the employee is converted into a fully paid-up insurance on account of the non-payment of insurance premiums due during parental leave, the employee may demand within three months of the end of parental leave that the insurance be continued at the terms and conditions agreed before the conversion.

Section 213 Acquiring personal health-related data from third parties

(1) The insurer may only acquire personal health-related data from doctors, hospitals and other health institutions, care homes and nursing staff, other insurers of persons and statutory health insurers as well as social insurances for occupational accidents and public authorities; this shall only be permissible insofar as the knowledge of the data is necessary to assess the risk to be insured or the liability, and the affected person has given his consent.

(2) The consent required in accordance with subsection (1) may be given prior to the submission of the contractual acceptance. The affected person shall be informed prior to the data referred to in subsection (1) being acquired; he may object to the data being acquired.

(3) The affected person may demand at any time that the data only be acquired if his consent has been given in each individual case.

(4) The affected person shall be notified of these rights and shall be notified of the right to object in accordance with subsection (2) when being instructed.

Section 214 Conciliation board

(1) The Federal Ministry of Justice may, in consultation with the Federal Ministry of Finance, the Federal Ministry of Economics and Technology and the Federal Ministry of Food, Agriculture and Consumer Protection, authorise private-law institutions to act as conciliation boards for the extra-judicial settlement of disputes

  1. in the case of contracts of insurance with consumers within the meaning of section 13 of the German Civil Code,
  2. between insurance intermediaries or insurance advisers and policyholders in connection with the mediation of contracts of insurance.

This authorisation shall be announced in the Federal Gazette or in the E-Federal Gazette. Those concerned may apply to these conciliation boards; the right to appeal to the courts shall remain unaffected.

(2) Private-law institutions may be authorised to act as a conciliation board if it is independent in respect of providing its answers and suggestions or making decisions and is not bound by any instructions and can fulfil its tasks from an organisational and professional point of view.

(3) The authorised arbitration boards shall be obligated to respond to each complaint regarding an insurer or insurance intermediary, an intermediary in accordance with section 66 and insurance adviser.

(4) The authorised arbitration boards may levy a fee from the insurance intermediary, intermediary in accordance with section 66 or insurance adviser. In the case of obviously improper complaints, a fee may also be levied from the policyholder. The amount of the fee must be proportionate to the recognised conciliation board’s expenses.

(5) Insofar as no private-law institution has been authorised to act as a conciliation board, the Federal Ministry of Justice, in consultation with the Federal Ministry of Finance, the Federal Ministry of Economics and Technology and the Federal Ministry of Food, Agriculture and Consumer Protection, may assign the tasks of the arbitration board to one of the higher federal authorities or to a federal institute by statutory ordinance without the consent of the Bundesrat, and may regulate its procedures and the levying of fees and expenses.

Section 215 Place of jurisdiction

(1) In respect of actions brought on the basis of the contract of insurance or the mediation of a contract of insurance, that local court in whose district the policyholder has his place of residence at the time of the filing of the action shall also have jurisdiction, failing that, his habitual place of residence. In respect of actions brought against the policyholder, only this court shall have jurisdiction.

(2) Section 33 (2) of the Code of Civil Procedure shall not apply to cross-actions brought by the other party.

(3) An agreement deviating from subsection (1) shall be permitted in the event that the policyholder moves his domicile or habitual place of residence outside of the scope of this Act after signing the contract or his domicile or habitual place of residence is unknown at such time as the action is filed.

Section 216 Derivative right of action with a majority of insurers

If an insurance contract with the individual insurers associated together with Lloyds has not been concluded via a branch office in the area of application of this Act, and if there is a domestic venue, claims arising therefrom may be asserted against the authorised signatory of the syndicate named in the insurance policy first, or against an insurer designated by the latter; a title acquired thereby shall apply for and against all insurers which are party to the insurance contract.

Copyright Law (Urheberrechtsgesetz, UrhG)

In the version published on 9 September 1965, as last amended on 8 May 1998

Translation provided by the International Bureau of WIPO and reproduced with kind permission.


Table of Contents

Part I Copyright

Section I General

Article 1

Section II Works

Article 2 Protected Works
Article 3 Adaptations
Article 4 Collections and database Works
Article 5 Official Works
Article 6 Published Works and Released Works

Section III Authors

Article 7 Author
Article 8 Joint Authors
Article 9 Authors of Compound Works
Article 10 Presumption of Authorship

Section IV Scope of Copyright

1. General

Article 11

2. Moral Rights of Authors

Article 12 Right of Publication
Article 13 Recognition of Authorship
Article 14 Distortion of the Work

3. Exploitation Rights

Article 15 General
Article 16 Right of Reproduction
Article 17 Distribution Right
Article 18 Right of Exhibition
Article 19 Right of Recitation, Performance, and Presentation
Article 20 Right of Broadcasting
Article 20a European Broadcasts Transmitted by Satellite
Article 20b Cable Retransmission
Article 21 Right of Communication by Video or Audio Recordings
Article 22 Right of Communication of Broadcasts
Article 23 Adaptations and Transformations
Article 24 Free Use

4. Other Rights of Authors

Article 25 Access to Works
Article 26 Resale Royalty Right
Article 27 Remuneration for Rental and Lending

Section V Dealings with Rights in Copyright

1. Succession to Copyright

Article 28 Inheritance of Copyright
Article 29 Transfer of Copyright
Article 30 Successor in Title of Author

2. Exploitation Rights

Article 31 Granting of Exploitation Rights
Article 32 Limitation of Exploitation Rights
Article 33 Continuing Effect of Non-exclusive Exploitation Rights
Article 34 Transfer of Exploitation Rights
Article 35 Grant of Non-exclusive Exploitation Rights
Article 36 Author’s Participation
Article 37 Agreements to Grant Exploitation Rights
Article 38 Contributions to Collections
Article 39 Alteration of Work
Article 40 Agreements as to Future Works
Article 41 Right of Revocation for Non-exercise
Article 42 Right of Revocation for Changed Conviction
Article 43 Authors in Employment or Service
Article 44 Sale of the Original of a Work

Section VI Limitations on Copyright

Article 45 Administration of Justice and Public Safety
Article 46 Collections for Religious, School or Instructional Use
Article 47 School Broadcasts
Article 48 Public Speeches
Article 49 Newspaper Articles and Broadcast Commentaries
Article 50 Visual and Sound Reporting
Article 51 Quotations
Article 52 Public Communication
Article 53 Reproduction for Private and Other Personal Uses
Article 54 Obligation to Pay Remuneration for Reproduction by Means of Video and Audio Recording
Article 54a Obligation to Pay Remuneration for Reproduction by Means of Photocopying
Article 54b Inapplicability of the Dealer’s Obligation to Pay Remuneration
Article 54c Inapplicability of the Obligation to Pay Remuneration on Export
Article 54d Amount of Remuneration
Article 54e Obligation to Refer in Invoices to Copyright Remuneration
Article 54f Obligation to Report
Article 54g Obligation to Provide Information
Article 54h Collecting Societies, Handling of Reports
Article 55 Reproduction by Broadcasting Organizations
Article 55a Use of a Database Work
Article 56 Reproduction and Public Communication by Commercial Enterprises
Article 57 Incidental Works
Article 58 Catalog Illustrations
Article 59 Works in Public Places
Article 60 Portraits
Article 61 Compulsory License for the Production of Audio Recordings
Article 62 Prohibition of Alteration
Article 63 Acknowledgment of Source

Section VII Duration of Copyright

Article 64 General
Article 65 Joint Authors, cinematographic works
Article 66 Anonymous and Pseudonymous Works
Article 67 Serial Works
Article 68 (Repealed)
Article 69 Calculation of Time Limits

Section VIII Special Provisions on Computer Programs

Article 69a Object of Protection
Article 69b Authors in Employment or Service
Article 69c Restricted Acts
Article 69d Exceptions to the Restricted Acts
Article 69e Decompilation
Article 69f Infringement of Rights
Article 69g Application of Other Legal Provisions; Law of Contract

Part II Neighboring Rights

Section I Protection of Certain Editions

Article 70 Scientific Editions
Article 71 Posthumous Works

Section II Protection of Photographs

Article 72

Section III Protection of Performers

Article 73 Performers
Article 74 Transmission by Screen or Loudspeaker
Article 75 Recording, Reproduction and Distribution
Article 76 Broadcasting
Article 77 Public Communication
Article 78 Assignment
Article 79 Performers in Employment or Service
Article 80 Choral, Orchestral and Stage Performances
Article 81 Protection of Organizers
Article 82 Duration of Rights
Article 83 Protection Against Distortion
Article 84 Limitation of Rights

Section IV Protection of Producers of Audio Recordings

Article 85 Right of Reproduction and Distribution
Article 86 Right of Participation

Section V Protection of Broadcasting Organizations

Article 87

Section VI Protection of the Maker of a Database

Article 87a Definitions
Article 87b Rights of the Maker of the Database
Article 87c Limitations on the rights of the Maker of a Database
Article 87d Term of Protection
Article 87e Contracts Dealing with the Use of a Database

Part III Special Provisions on Films

Section I Cinematographic Works

Article 88 The Right of Cinematographic Adaptation
Article 89 Rights in Cinematographic Works
Article 90 Limitation of Rights
Article 91 Rights in Photographs
Article 92 Performers
Article 93 Protection Against Distortion
Article 94 Protection of Producers of Films

Section II Moving Pictures

Article 95

Part IV Common Provisions on Copyright and Neighboring Rights

Section I Prohibition of Exploitation

Article 96

Section II Infringements

1. Civil Law Provisions; Remedies

Article 97 Actions for Injunction and Damages
Article 98 Claim to Destruction or Surrender of Copies
Article 99 Claim to Destruction or Surrender of Devices
Article 100 Liability of the Owner of an Enterprise
Article 101 Exceptions
Article 101a Claim to Information in Respect of Third Parties
Article 102 Prescription
Article 103 Publication of Judgment
Article 104 Legal Recourse
Article 105 Courts for Copyright Litigation

2. Criminal Law Provisions

Article 106 Unauthorized Exploitation of Copyrighted Works
Article 107 Unlawful Affixing of Designation of Author
Article 108 Infringement of Neighboring Rights
Article 108a Unlawful Exploitation on a Commercial Basis
Article 109 Criminal Prosecution
Article 110 Confiscation
Article 111 Publication of the Judgment

3. Measures by the Customs Authorities

Article 111a

Section III Enforcement

1. General

Article 112

2. Enforcement of Claims for Money Against Authors

Article 113 Copyright
Article 114 Originals of Works

3. Enforcement of Claims for Money Against Successors in Title of Authors

Article 115 Copyright
Article 116 Originals of Works
Article 117 Executor

4. Enforcement of Claims for Money Against Authors of Scientific Editions and Against Photographers

Article 118

5. Enforcement of Claims for Money on Certain Devices

Article 119

Part V Scope of Application

Transitional and Final Provisions
Section I Scope of the Law

1. Copyright

Article 120 German Nationals and nationals of another Member State of the EU or of another Contracting State of the Convention Concerning the EEA
Article 121 Foreign Nationals
Article 122 Stateless Persons
Article 123 Foreign Refugees

2. Neighboring Rights

Article 124 Scientific Editions and Photographs
Article 125 Protection of Performers
Article 126 Protection of Producers of Audio Recordings
Article 127 Protection of Broadcasting Organizations
Section 127a Protection of the Maker of a Data Base
Article 128 Protection of Film Producers

Section II Transitional Provisions

Article 129 Works
Article 130 Translations
Article 131 Works of Language Set to Music
Article 132 Contracts
Article 133 (Repealed)
Article 134 Authors
Article 135 Owners of Neighboring Rights
Article 135a Calculation of the Term of Protection
Article 136 Reproduction and Distribution
Article 137 Transfer of Rights
Article 137a Photographic Works
Article 137b Certain Editions
Article 137c Performers
Article 137d Computer Programs
Article 137e Transitional provision in implementation of Directive 92/100/EEC
Article 137f Transitional provision in implementation of Directive 93/98/EEC
Article 137g Transitional regulation in implementing Directive 96/9/EC
Article 137h Implementation of Directive 93/83/EEC

Section III Final Provisions

Article 138 Register of Authors
Article 139-141 Amending and Repealing Provisions (irrelevant)
Article 142 Application in Land Berlin (irrelevant)
Article 143 Entry Into Force

Annex (to Article 54d(1) of the Copyright Law)
Rates of Remuneration


Part I Copyright

Section I General

Article 1

Authors of literary, scientific and artistic works shall enjoy protection for their works in accordance with this Law.

Section II Works

Article 2 Protected Works

(1) Protected literary, scientific and artistic works shall include, in particular:

1. works of language, such as writings, speeches and computer programs;

2. musical works;

3. works of pantomime, including choreographic works;

4. works of fine art, including works of architecture and of applied art and plans for such works;

5. photographic works, including works produced by processes similiar to cinematography;

6. illustrations of a scientific or technical nature, such as drawings, plans, maps, sketches, tables and three-dimensional representations.

(2) Personal intellectual creations alone shall constitute works within the meaning of this Law.

Article 3 Adaptations

Translations and other adaptations of a work which constitute personal intellectual creations of the adapter shall enjoy protection as independent works without prejudice to copyright in the work that has been adapted. Insignificant adaptations of a non-protected musical work shall not enjoy protection as independent works.

Article 4 Collections and Database Works

(1) Collections of works, data or other independent elements which, by reason of the selection or arrangement of the elements, constitute a personal intellectual creation (collections) shall enjoy protection as independent works without prejudice to a copyright or neighbouring right existing in the elements included in the collection.

(2) Within the meaning of this Act a database work is a collection arranged in a systematic or methodical way, the elements of which are individually accessible either by electronic or by other means. A computer program (§ 69 a) used to create the database work or to render its elements accessible does not constitute a component of the data base work.

Article 5: Official Works

(1) Laws, ordinances, official decrees and notices as also decisions and official grounds of decisions shall not enjoy copyright protection.

(2) The same shall apply to other official works published in the official interest for public information, with the condition that the provisions of Article 62(1) to (3) and Article 63(1) and (2) concerning prohibited alterations and acknowledgment of sources shall apply mutatis mutandis.

Article 6 Published Works and Released Works

(1) A work shall be deemed published if, with the consent of the copyright owner, it has been made accessible to the public.

(2) A work shall be deemed released if, with the consent of the copyright owner, copies of the work have been produced in sufficient quantity and have been publicly offered for sale or put into circulation. A work of fine art shall also be deemed to have been released if, with the consent of the copyright owner, the original or a copy of the work is made permanently accessible to the public.

Section III Authors

Article 7 Author

The person who creates the work shall be deemed the author.

Article 8 Joint Authors

(1) If several persons have created a work jointly, and their respective contributions cannot be separately exploited, they shall be deemed the joint authors of the work.

(2) The right of publication and of exploitation of the work shall belong jointly to the joint authors; alterations to the work shall be permissible only with the consent of the joint authors. However, a joint author may not unreasonably refuse his consent to the publication, exploitation or alteration of the work. Each joint author shall be entitled to assert claims arising from infringements of the joint copyright; however, he may demand payment only on behalf of all joint authors.

(3) The proceeds resulting from the utilization of the work shall accrue to the joint authors in proportion to the extent of their respective contributions to the work unless otherwise agreed between them.

(4) A joint author may renounce his share of the exploitation rights (Article 15). The other joint authors shall be notified of renunciation. Notification shall imply that the share accrues to the other joint authors.

Article 9 Authors of Compound Works

If several authors have combined their works for exploitation in common, each of them may require from the others their consent to the publication, exploitation or alteration of the compound works, if such consent may be reasonably demanded of them.

Article 10 Presumption of Authorship

(1) In the absence of proof to the contrary, the person designated in the customary manner as the author on copies of a work which has been published or on the original of a work of fine art shall be deemed the author of the work; the same shall apply to a designation which is known as the author’s pseudonym or the artist’s mark.

(2) Where the author is not designated as provided in paragraph (1), it shall be presumed that the person designated as the editor on the copies of the work is entitled to assert the author’s rights. Where no editor is designated, it shall be presumed that the publisher is entitled.

Section IV Scope of Copyright

1. General

Article 11

Copyright shall protect the author with respect to his intellectual and personal relationship with his work, and also with respect to utilization of his work.

2. Moral Rights of Authors

Article 12 Right of Publication

(1) The author shall have the right to decide whether and how his work is to be published.

(2) The author shall have the exclusive right to publicly communicate or describe the content of his work for as long as neither the work nor its essence nor a description of the work has been published with his consent.

Article 13 Recognition of Authorship

The author shall have the right of recognition of his authorship of the work. He may decide whether the work is to bear an author’s designation and what designation is to be used.

Article 14 Distortion of the Work

The author shall have the right to prohibit any distortion or any other mutilation of his work which would jeopardize his legitimate intellectual or personal interests in the work.

3. Exploitation Rights

Article 15 General

(1) The author shall have the exclusive right to exploit his work in material form; his right shall comprise in particular:

1. the right of reproduction (Article 16);

2. the right of distribution (Article 17);

3. the right of exhibition (Article 18).

(2) The author shall further have the exclusive right to communicate his work to the public in non-material form (right of communication to the public); his right shall comprise in particular:

1. the right of recitation, performance and presentation (Article 19);

2. the right of broadcasting (Article 20);

3. the right of communication by means of video or audio recordings (Article 21);

4. the right of communication of broadcasts (Article 22).

(3) The communication of a work shall be deemed public if it is intended for a plurality of persons, unless such persons form a clearly defined group and are connected by personal relationship with each other or with the organizer.

Article 16 Right of Reproduction

(1) The right of reproduction is the right to make copies of the work by whatever method and in whatever quantity.

(2) Reproduction of a work shall also be constituted by the fixation of the work on devices which permit the repeated communication of sequences of images or sounds (video or audio recording mediums) whether by recording a communication of the work on a video or audio medium or by transferring the work from one medium to another.

Article 17 Distribution Right

(1) The distribution right is the right to offer to the public or to put into circulation the original work or copies thereof.

(2) If the original work or copies thereof have been put into circulation in the territory of the European Union or of another Contracting State of the Convention Concerning the European Economic Area through sale thereof with the consent of the holder of the distribution right, their further distribution shall be permissible with the exeption of rental.

(3) In the meaning of the provisions of this Law, rental shall be the temporary making available for use for the purposes of directly or indirectly making profits. However, making available the following original works or copies thereof shall not be deemed to constitute rental

1. edifices and works of applied art, or

2. in the context of a work or service relationship for the exclusive purpose of being used in fulfilling obligations arising out of the work or service relationship.

Article 18 Right of Exhibition

The right of exhibition is the right to place on public view the original or copies of an unpublished work of fine art or of an unpublished photographic work.

Article 19 Right of Recitation, Performance, and Presentation

(1) The right of recitation is the right of live delivery to the public of a work of language.

(2) The right of performance is the right of live performance to the public of a musical work or of public performance of a work on the stage.

(3) The right of recitation and performance encompasses the right to make recitations and performances perceivable to the public by screen, loudspeaker or similar technical device, in a place other than that in which the live rendering takes place.

(4) The right of presentation is the right to make a work of fine art, a photographic work, a cinematographic work, or illustrations of a scientific or technical character perceivable to the public by means of technical devices. The right of presentation does not include the right to make the broadcast of such works perceivable to the public (Article 22).

Article 20 Right of Broadcasting

The right of broadcasting is the right to make a work accessible to the public by broadcasting, such as radio or television transmission, or by wire or by other similar technical devices.

Article 20a European Broadcasts Transmitted by Satellite

(1) If a satellite broadcast is transmitted in the territory of a Member State of the European Union or of a Contracting State of the Convention Concerning the European Economic Area, it shall be deemed to have been transmitted solely in Convention that Member State or Contracting State.

(2) If a satellite broadcast is transmitted in the territory of a state which is neither a Member State of the European Union nor a Contracting State of the Convention Concerning the European Economic Area and in which the level of protection provided for under Chapter II of Council Directive 93/83/EEC of 27 September on the coordination of certain rules concerning copyright and rights relating to copyright applicable to satellite broadcasting and cable retransmission (OJEC No. L 248 page 15) is not guaranteed in the law on satellite broadcasting, it shall be deemed to have been transmitted in the Member State or Contracting State in which the uplink station is situated from which the program-carrying signals are transmitted to the satellite, or in which the broadcasting organization is established if the condition under item 1 does not subsist.

The right of broadcasting shall be exercisable in the case under item

1. against the operator of the uplink station, and in the case under item

2. against the broadcasting organization.

(3) A satellite broadcast within the meaning of paragraph (1) and (2) means the introduction, under the control and responsibility of the broadcasting organization of program-carrying signals intended for reception by the public into an uninterrupted chain of communication leading to the satellite and down towards the earth.

Article 20b Cable Retransmission

(1) The right to retransmit a transmitted work in the framework of simultaneous, unaltered and unabridged retransmission of a program by a cable or microwave system (cable retransmission) may be exercised by a collecting society only. This shall not apply to rights that a broadcasting organization exercises in respect of its transmissions.

(2) If the author has granted the right of cable retransmission to a broadcasting organization or to the producer of an audio recording or a film, the broadcasting organization shall nevertheless pay reasonable remuneration for the cable retransmission. The claim to remuneration may not be waived. It may only be assigned in advance to a collecting society and shall only be exercisable by a collecting society. This provision shall not run counter to collective agreements or works agreements of broadcasting organizations if the author is thereby granted reasonable remuneration for each cable retransmission.

Article 21 Right of Communication by Video or Audio Recordings

The right of communication by audio or video recordings is the right to make recitations or performances of a work perceivable to the public by means of video or audio recordings. Article 19(3) shall apply mutatis mutandis.

Article 22 Right of Communication of Broadcasts

The right of communication of broadcasts is the right to make broadcasts of a work perceivable to the public by means of screen, loudspeaker or similar technical device. Article 19(3) shall apply mutatis mutandis.

Article 23 Adaptations and Transformations

Adaptations or other transformations of a work may be published or exploited only with the consent of the author of the adapted or transformed work. In the case of cinematographic adaptations of a work, of the execution of plans and sketches for a work of fine art, or of copies of an architectural work , the author’s consent shall be required for the making of such adaptation or transformation.

Article 24 Free Use

(1) An independent work created by free use of the work of another person may be published and exploited without the consent of the author of the used work.

(2) Paragraph (1) shall not apply to the use of a musical work where a melody has been recognizably borrowed from the work and used as a basis for a new work.

4. Other Rights of Authors

Article 25 Access to Works

(1) The author may require the owner of the original or of a copy of his work to afford him access to the original or the copy, provided it is necessary for making reproductions or adaptations of the work and is not opposed by any legitimate interest of the owner.

(2) The owner shall not be required to surrender the original or the copy to the author.

Article 26 Resale Royalty Right

(1) If the original of a work of fine art is resold and if an art dealer or an auctioneer is involved as purchaser, vendor or agent, the vendor shall pay to the author a share amounting to five percent of the selling price. There shall be no such obligation if the selling price is less than 100 German marks.

(2) The author may not waive his right to his share in advance. The expectancy may not be enforced; any disposition of the expectancy shall be without legal effect.

(3) The author may require an art dealer or auctioneer to provide information on the originals of the author’s works that have been resold through the intermediary of the art dealer or auctioneer during the last calendar year having elapsed prior to the request for information.

(4) Where necessary to assert his claim against the vendor, the author may require the art dealer or auctioneer to provide information on the name and address of the vendor and the amount of the selling price. The art dealer or auctioneer may refuse information on the name and address of the vendor if he pays the share due to the author.

(5) The claims under paragraphs (3) and (4) may only be asserted through a collecting society.

(6) Where there exists reasonable doubt as to the accuracy or completeness of the information provided in accordance with paragraphs (3) or (4), the collecting society may demand that access to the account books or to other documents be granted, at the choice of the party obliged to provide the information, either to the collecting society or to a chartered accountant or sworn auditor designated by that party, to the extent that this is necessary to ascertain the accuracy or completeness of the information. Where the information is found to be inaccurate or incomplete, the party obliged to provide the information shall pay the cost of the examination.

(7) The claims of the author shall expire after 10 years.

(8) The foregoing provisions shall not apply to architectural works and works of applied art.

Article 27 Remuneration for Rental and Lending

(1) If the author has granted to the producer of an audio recording or a film the rental right (Article 17) with regard to a video or audio recording, the hirer shall nevertheless pay an equitable remuneration to the author for the rental. The claim to remuneration cannot be waived. It may only be assigned in advance to a collecting society.

(2) For the lending of originals or copies of a work in respect of which further distribution is permitted under Article 17(2), an equitable remuneration shall be paid to the author if the originals or copies are lent through an institution accessible to the public (library, collection of video or audio recordings or of other originals or copies). Lending in the meaning of the first sentence shall be temporary making available for use, not for the purposes of directly or indirectly making profits; Article 17(3), second sentence, shall apply mutatis mutandis.

(3) The claims to remuneration under paragraphs (1) and (2) may only be asserted through a collecting society.

Section V Dealings with Rights in Copyright

1. Succession to Copyright

Article 28 Inheritance of Copyright

(1) Copyright may be transferred by inheritance.

(2) The author may transfer the exercise of copyright to an executor by testamentary disposition. Article 2210 of the Civil Code shall not apply.

Article 29 Transfer of Copyright

Copyright may be transferred in execution of a testamentary disposition or to coheirs as part of the partition of an estate. Copyright shall not otherwise be transferable.

Article 30 Successor in Title of Author

In the absence of any stipulation to the contrary, the successor in title of the author shall have the rights afforded the author by this Law.

2. Exploitation Rights

Article 31 Granting of Exploitation Rights

(1) The author may grant a right to another to use the work in a particular manner or in any manner (exploitation right). An exploitation right may be granted as a non-exclusive right or as an exclusive right.

(2) A non-exclusive exploitation right shall entitle the right holder to use the work, concurrently with the author or any other entitled persons, in the manner permitted to him.

(3) An exclusive exploitation right shall entitle the right holder to use the work, to the exclusion of all other persons, including the author, in the manner permitted to him, and to grant non-exclusive exploitation rights. Article 35 remains unaffected.

(4) The grant of an exploitation right for as yet unknown types of use and any obligations in that respect shall have no legal effect.

(5) If the types of use to which the exploitation right extends have not been specifically designated when the right was granted, the scope of the exploitation right shall be determined in accordance with the purpose envisaged in making the grant.

Article 32 Limitation of Exploitation Rights

An exploitation right may be limited in respect of place, time or purpose.

Article 33 Continuing Effect of Non-exclusive Exploitation Rights

A non-exclusive exploitation right which the author has granted prior to granting an exclusive exploitation right shall remain effective with respect to the holder of the exclusive exploitation right in the absence of any contrary agreement between the author and the holder of the non-exclusive exploitation right.

Article 34 Transfer of Exploitation Rights

(1) An exploitation right may be transferred only with the author’s consent. The author may not unreasonably refuse his consent.

(2) If exploitation rights in the individual works contained in a collection are transferred together with the exploitation right in the collection (Article 4), the consent of the author of the collection shall be sufficient.

(3) An exploitation right may be transferred without the author’s consent if the transfer is comprised in the sale of the whole of an enterprise or the sale of parts of an enterprise.

(4) The holder of an exploitation right and the author may agree on different terms.

(5) If the transfer of an exploitation right is permissible by agreement or by law without the author’s consent, the transferee shall have joint liability for the discharge of the transferor’s obligations under his agreement with the author.

Article 35 Grant of Non-exclusive Exploitation Rights

(1) The holder of an exclusive exploitation right may grant non-exclusive rights only with the author’s consent. No consent shall be required if the exclusive exploitation right was granted exclusively for the administration of the author’s interests.

(2) The provisions of Article 34(1), second sentence, (2) and (4) shall apply mutatis mutandis.

Article 36 Author’s Participation

(1) If an author has granted an exploitation right to another party on conditions which cause the agreed consideration to be grossly disproportionate to the income from the use of the work, having regard to the whole of the relationship between the author and the other party, the latter shall be required, at the demand of the author, to assent to a change in the agreement such as will secure for the author an equitable share of the income having regard to the circumstances.

(2) Such claim shall be barred two years from the time the author obtains knowledge of the circumstances which give rise to the claim or after 10 years irrespective of such knowledge.

(3) The claim may not be waived in advance. Expectancy may not be enforced; any disposition of the expectancy shall be without legal effect.

Article 37 Agreements to Grant Exploitation Rights

(1) If an author grants to another an exploitation right in his work, he shall be deemed in case of doubt to have retained his right to authorize the publication or exploitation of any adaptation of the work.

(2) If an author grants to another the right to reproduce his work, he shall be deemed, in doubt, to have retained his right to record his work on video or audio mediums.

(3) If an author grants to another the right to communicate his work to the public, the latter shall not be deemed, in doubt, to be entitled to make the communication perceivable to the public by screen, loudspeaker or other similar technical device other than at the event for which it is intended.

Article 38 Contributions to Collections

(1) If an author consents to inclusion of his work in a collection which appears periodically, the publisher or editor shall be deemed in case of doubt to have acquired an exclusive right of reproduction and distribution. However, the author may otherwise reproduce and distribute the work on expiry of one year from the date of release, unless otherwise agreed.

(2) The second sentence of paragraph (1) shall also apply to a contribution to a collection which does not appear periodically, if making the contribution available does not entitle the author to remuneration.

(3) If a contribution is made available to a newspaper, the publisher or editor shall be deemed to have acquired a non-exclusive exploitation right, unless otherwise agreed. If the author grants an exclusive exploitation right, he shall be entitled, immediately after the appearance of the contribution, to otherwise reproduce and distribute his work, unless otherwise agreed.

Article 39 Alteration of Work

(1) The holder of an exploitation right may not alter the work, its title or the designation of author (Article 10(1)), unless otherwise agreed.

(2) Alterations to the work and its title which the author cannot reasonably refuse shall be permissible.

Article 40 Agreements as to Future Works

(1) Agreements by which an author undertakes to grant exploitation rights in future works which are in no way specified or only referred to by type shall be in writing. They may be terminated by either party after a period of five years from conclusion of the agreement. Six months notice of termination shall be given, if no shorter period has been agreed.

(2) The right of termination may not be waived in advance. Other contractual or statutory rights of termination shall remain unaffected.

(3) If exploitation rights in future works have been granted in execution of the agreement, that provision shall cease to have effect in respect of works which have not yet been supplied at such time.

Article 41 Right of Revocation for Non-exercise

(1) If the holder of an exclusive exploitation right does not exercise such right or exercises it insufficiently, and if thereby serious injury is caused to the author’s legitimate interests, the latter may revoke the exploitation right. This shall not apply if non-exercise or insufficient exercise is mainly due to circumstances which the author can reasonably be expected to remedy.

(2) The right of revocation may not be exercised before the expiration of two years from the grant or transfer of the exploitation right or, if the work is supplied at a later date, from the date of delivery. In the case of a contribution to a newspaper, the period shall be three months, for a contribution to a periodical appearing at monthly intervals or less, it shall be six months, and for contributions to other periodicals, one year.

(3) The right of revocation may be exercised only after the author has afforded the holder of the exploitation right, upon notifying him of the proposed revocation, an additional period of time adequate to sufficiently exercise the right. The author shall not be required to afford an additional period of time if it is impossible for the holder of the right to exercise it or if he refuses to exercise it or if the affording of an additional period of time would jeopardize predominant interests of the author.

(4) The right of revocation may not be waived in advance. Its exercise may not be precluded in advance for more than five years.

(5) The exploitation right shall terminate when the revocation takes effect.

(6) The author shall indemnify the person affected by the revocation if and to the extent required by equity.

(7) The rights and claims of the parties under other statutory provisions shall remain unaffected.

Article 42 Right of Revocation for Changed Conviction

(1) An author may revoke an exploitation right if the work no longer reflects his conviction and he therefore can no longer be expected to agree to the exploitation of the work. The author’s successor in title (Article 30) may exercise such right of revocation only if he proves that prior to his death the author would have been entitled to revoke and was prevented from so doing or that he has done so by testamentary disposition.

(2) The right of revocation may not be waived in advance. Its exercise may not be precluded.

(3) The author must equitably indemnify the holder of the exploitation right. The indemnification must cover at least the costs which he had incurred before he was notified of revocation; however, costs attributable to uses already completed shall not be taken into account. Revocation shall not become effective until the author has reimbursed such costs or provided security therefor. The holder of the right shall communicate the amount of his costs to the author within three months after notification of revocation; if he fails to do so, the revocation shall become effective already on expiration of this period.

(4) Should the author wish to resume exploitation of the work after revocation, he shall be required to offer to the previous holder of the exploitation right the same type of right on reasonable conditions.

(5) The provisions of Article 41(5) and (7) shall apply mutatis mutandis.

Article 43 Authors in Employment or Service

The provisions of this subsection shall also apply if the author has created the work in execution of his duties under a contract of employment or service provided nothing to the contrary transpires from the terms or nature of the contract of employment or service.

Article 44 Sale of the Original of a Work

(1) If the author sells the original of a work, he shall not be deemed in case of doubt to have thereby granted an exploitation right to the acquirer.

(2) The owner of the original of a work of fine art or of a photographic work shall be entitled to exhibit the work in public, even if it has not yet been published, unless expressly excluded by the author when selling the original.

Section VI Limitations on Copyright

Article 45 Administration of Justice and Public Safety

(1) It shall be permissible to make or cause to be made copies of a work for use in proeeedings before a court, an arbitration tribunal or a public authority.

(2) Courts, arbitration tribunals and public authorities may, for the purposes of administration of justice and public safety, reproduce portraits or cause portraits to be reproduced.

(3) The distribution, public exhibition and public communication of such works shall be permissible under the same conditions as for their reproduction.

Article 46 Collections for Religious, School or Instructional Use

(1) Reproduction and distribution shall be permissible where limited parts of works, of works of language and of musical works, individual works of fine art or individual photographs are incorporated after their publication in a collection which assembles the works of a considerable number of authors and is intended, by its nature, exclusively for religious, school or instructional use. The purpose for which the collection is to be used shall be clearly stated on the title page or some other appropriate place.

(2) Paragraph (1) shall apply to musical works incorporated in a collection intended for musical instruction only if the collection is intended for musical instruction in schools that are not schools of music.

(3) Reproduction may begin only if the intention to exercise the rights afforded by paragraph (1) has been communicated by registered letter to the author or, if his permanent or temporary residence is unknown, to the holder of an exclusive exploitation right, and two weeks have elapsed since dispatch of the letter. If the permanent or temporary address of the holder of the exclusive right is also unknown, the communication can be made by publication in the Official Bulletin (Bundesanzeiger).

(4) The author shall be paid equitable remuneration for the reproduction and distribution.

(5) An author may prohibit reproduction and distribution if the work no longer reflects his conviction and he can therefore no longer be expected to agree to the exploitation of his work and he has for that reason revoked any existing exploitation right (Article 42). The provisions of Article 136(1) and (2) shall be applicable mutatis mutandis.

Article 47 School Broadcasts

(1) Schools and institutions for the training and further training of teachers may make individual copies of works which are included in a school broadcast by recording the works on a video or audio medium. The same shall apply to youth welfare homes and to the official provincial pictorial materials services or comparable publicly owned institutions.

(2) The video or audio recordings may be used only for instructional purposes. They must be destroyed not later than the end of the school year following the transmission of the school broadcast, unless equitable remuneration has been paid to the author.

Article 48 Public Speeches

(1) It shall be permissible

1. to reproduce and distribute in newspapers, periodicals or other information journals which mainly record current events, speeches on issues of the day made at public meetings or in broadcasting and to communicate such speeches to the public;

2. to reproduce, distribute and communicate to the public speeches made at public proceedings in State, local government or religious bodies.

(2) It shall not be permissible, however, to reproduce and distribute the speeches referred to in paragraph (1), item 2, in the form of a collection containing predominantly speeches by the same author.

Article 49 Newspaper Articles and Broadcast Commentaries

(1) It shall be permissible to reproduce and distribute individual broadcast commentaries and individual articles from newspapers and other information journals devoted solely to issues of the day in other newspapers or journals of like kind and to communicate such commentaries and articles to the public, if they concern political, economic or religious issues of the day and do not contain a statement reserving rights. The author shall be paid equitable remuneration for reproduction, distribution and public communication, unless short extracts from a number of commentaries or articles are reproduced, distributed or publicly communicated in the form of an overview. Claims may be asserted by a collecting society only.

(2) It shall be permissible, without limitation, to reproduce, distribute and publicly communicate miscellaneous information relating to facts or news of the day which have been publicly disseminated by the press or by broadcasting; this provision shall not affect any protection afforded by other provisions of law.

Article 50 Visual and Sound Reporting

For the purposes of visual and sound reporting on events of the day by broadcast or film and in newspapers or periodicals mainly devoted to current events, works which become perceivable in the course of the events which are being reported on may be reproduced, distributed and publicly communicated to the extent justified by the purpose of the report.

Article 51 Quotations

Reproduction, distribution and communication to the public shall be permitted, to the extent justified by the purpose, where

1. individual works are included after their publication in an independent scientific work to illustrate its contents;

2. passages from a work are quoted after its publication in an independent work of language;

3. individual passages from a published musical work are quoted in an independent musical work.

Article 52 Public Communication

(1) The public communication of a published work shall be permissible if the communication serves no gainful purpose on the part of the organizer, spectators are admitted free of charge and, in the case of recitation or performance of the work, none of the performers (Article 73) receive special remuneration. An equitable remuneration shall be paid for the communication. The obligation to pay remuneration shall not apply in respect of events organized by the Youth Welfare Service, the Social Welfare Service, the Old Persons Welfare Service, the Prisoners Welfare Service and for school events, on condition that in accordance with their social or educational purpose they are only accessible for a specifi-cally limited circle of persons. This shall not apply if the event serves the gainful purpose of a third party; in such case, the third party shall be required to pay the remu-neration.

(2) The public communication of a published work shall be permissible at a religious service or a celebration of the churches or religious communities. However, the organizer shall pay the author an equitable remuneration.

(3) Public stage performances and broadcasts of a work and public presentations of cinematographic works shall in all cases be permissible only with the consent of the copyright owner.

Article 53 Reproduction for Private and Other Personal Uses

(1) It shall be permissible to make single copies of a work for private use. A person authorized to make such copies may also cause such copies to be made by another person; however, this shall apply to the transfer of works to video or audio recording mediums and to the reproduction of works of fine art only if no payment is received therefor.

(2) It shall be permissible to make or to cause to be made single copies of a work

1. for personal scientific use, if and to the extent that such reproduction is necessary for the purpose,

2. to be included in personal files, if and to the extent that reproduction for this purpose is necessary and if a personal copy of the work is used as the model for reproduction,

3. for personal information concerning current events, in the case of a broadcast work,

4. for other personal uses,

(a) in the case of small parts of published works or individual contributions that have been published in newspapers or periodicals,

(b) in the case of a work that has been out of print for at least two years.

(3) It shall be permissible to make or to cause to be made copies of small parts of a printed work or of individual contributions published in newspapers or periodicals for personal use,

1. in teaching, in non-commercial institutions of education and further education or in institutions of vocational education in a quantity required for one school class or

2. for State examinations and examinations in schools, universities, non-commercial institutions of education and further education and in vocational education in the required quantity,

if and to the extent that such reproduction is necessary for this purpose.

(4) Reproduction

(a) of graphic recordings of musical works,

(b) of a book or a periodical in the case of essentially complete copies,

shall only be permissible, where not carried out by manual copying, with the consent of the copyright owner or in accordance with paragraph (2), item 2, or for personal use in the case of a work that has been out of print for at least two years.

(6) Copies may neither be disseminated nor used for public communication. It shall be permissible, however, to lend out lawfully made copies of newspapers and works that are out of print or such copies in which small damaged or lost parts have been replaced with reproduced copies.

(7) The recording of public lectures, representations or performances of works on video or audio recording mediums, the realization of plans and sketches for works of fine art, and the reproduction of works of architecture shall only be permissible with the consent of the copyright owner.

Article 54 Obligation to Pay Remuneration for Reproduction by Means of Video and Audio Recording

(1) Where the nature of a work makes it probable that it will be reproduced by the recording of broadcasts on video or audio recording mediums or by transfer from one recording medium to another in accordance with Article 53(1) or (2), the author of the work shall be entitled to payment of equitable remuneration from the manufacturers

1. of appliances and

2. of video or audio recording mediums

that are obviously intended for the making of such reproductions, in respect of the possibility of making such reproductions that is created by the sale of the appliances and of the video or audio recording mediums. In addition to the manufacturer, any person who commercially imports or reimports such appliances or such video or audio recording mediums into the territory to which this Law applies or who deals therein shall be jointly liable. A dealer shall not be liable if he procures in one half calendar year video or audio recording mediums with less than 6,000 hours of playing time and less than 100 appliances.

(2) The importer shall be the person who introduces the appliances or the video or audio recording mediums, or causes them to be introduced, into the territory to which this Law applies. Where the importing is based on a contract with a person foreign to that territory, the importer shall be that contractual party alone who is domiciled in the territory to which this Law applies, in so far as he is commercially active. Any person who acts simply as forwarding agent, carrier or the like in the introduction of the goods shall not be considered the importer. A person who introduces goods from third countries, or causes them to be introduced, into a free zone or a free warehouse in accordance with Article 166 of Council Regulation (EEC) No. 2913/92 of October 12, 1992 establishing the Community Customs Code (OJ No. L 302, page 1) shall only be deemed the importer if the items are used in that territory or if they are released for free circulation for customs purposes.

Article 54a Obligation to Pay Remuneration for Reproduction by Means of Photocopying

(1) Where the nature of a work is such that it may be expected to be reproduced in accordance with Article 53(1) to (3) by the photocopying of a copy or by some other process having similar effect, the author of the work shall be entitled to payment of equitable remuneration from the manufacturer of appliances intended for the making of such reproductions, in respect of the possibility created by the sale or other placing on the market of the appliances. In addition to the manufacturer, any person who commercially imports or reimports such appliances into the territory to which this Law applies or who deals therein shall be jointly liable. A dealer shall not be liable if he procures less than 20 appliances in one half calendar year.

(2) Where appliances of such type are operated in schools, universities or vocational training institutions or other educational and further education institutions (educational institutions), research institutions, public libraries or in institutions which have available appliances for the making of photocopies on payment, the author shall also be entitled to payment of equitable remuneration from the operator of the appliance.

(3) Article 54(2) shall apply mutatis mutandis.

Article 54b Inapplicability of the Dealer’s Obligation to Pay Remuneration

The dealer’s obligation to pay remuneration (Article 54(1) and Article 54a(1)) shall not apply,

1. where a person required to pay the remuneration, from whom the dealer obtains the appliances or the video or audio recording mediums, is bound by an inclusive contract concerning the remuneration or

2. if the dealer notifies the receiving office designated in accordance with Article 54h(3) in writing of the nature and quantity of the appliances and video or audio recording mediums received and of his source of supply by January 10 and July 10 for each preceding half calendar year.

Article 54c Inapplicability of the Obligation to Pay Remuneration on Export

The claim under Article 54(1) and Article 54a(1) shall not apply where it is probable under the circumstances that the appliances or the video or audio recording mediums will not be used to make reproductions within the territory to which this Law applies.

Article 54d Amount of Remuneration

(1) The amounts set out in the Annex shall be deemed equitable remuneration in accordance with Article 54(1) and Article 54a(1) and (2) where not otherwise agreed.

(2) The amount of the total remuneration to be paid by the operator under Article 54a(2) shall depend on the type and extent of utilization of the appliance that is to be expected in view of the circumstances, particularly the location and the habitual use.

Article 54e Obligation to Refer in Invoices to Copyright Remuneration

(1) Invoices for the sale or other placing on the market of appliances under Article 54a(1) shall make reference to the copyright remuneration due for the appliance.

(2) Invoices for the sale or other placing on the market of appliances or video or audio recording mediums referred to in Article 54(1), in which turnover tax in accordance with the first sentence of Article 14(1) of the Law on Turnover Tax is to be shown separately shall include a note stating whether the copyright remuneration due in respect of the appliance or the video or audio recording medium has been paid.

Article 54f Obligation to Report

(1) Any person who commercially imports or reimports appliances or video or audio recording mediums that are obviously intended for the making of reproductions by means of video and audio recording into the territory to which this Law applies shall have the obligation in respect of the author to report in writing the nature and quantity of the items imported to the receiving office designated in accordance with Article 54h(3) monthly by the tenth day after the expiry of each calendar month.

(3) Paragraph (1) shall apply mutatis mutandis to appliances intended for making reproductions by photocopying a copy or by any procedure having a similar effect.

(3) Where the person required to report does not satisfy the obligation to report or only does so incompletely or otherwise incorrectly, twice the rate of remuneration may be required.

Article 54g Obligation to Provide Information

(1) The author may require information from those persons required to pay remuneration under Article 54(1) or Article 54a(1) as to the nature and quantity of appliances and video or audio recording mediums sold or otherwise put into circulation on the territory to which this Law applies. The dealer’s obligation to provide information shall also extend to naming his sources of supply, it shall also subsist in the cases under the third sentence of Article 54(1), the third sentence of Article 54a(1) and of Article 54b, item 1. Article 26(6) shall apply mutatis mutandis.

(2) The author may require information necessary to assess the remuneration from the operator of an appliance in an institution within the meaning of the first sentence of Article 54a(2).

(3) Where the person required to give information fails to satisfy the obligation or only satisfies it incompletely or otherwise incorrectly, twice the rate of remuneration may be required.

Article 54h Collecting Societies, Handling of Reports

(1) Claims under Articles 54, 54a, 54f(3) and 54g may only be asserted through a collecting society.

(2) Each copyright owner shall be entitled to an equitable share in the remuneration paid under Articles 54 and 54a.

(3) The collecting societies shall designate a joint receiving office in each case for the claims to remuneration under Article 54(1) and those under Article 54a(1) to the Patent Office. The Patent Office shall publish them in the Federal Gazette.

(4) The Patent Office may publish models for the reports in accordance with Article 54b, item 2, and 54f in the Federal Gazette. The use of such models shall be compulsory.

(5) The collecting societies and the receiving office may only use the information received in accordance with Article 54b, item 2, 54f and 54g for the purpose of asserting claims under paragraph (1).

Article 55 Reproduction by Broadcasting Organizations

(1) A broadcasting organization entitled to broadcast a work shall have the right to record the work by means of its own facilities on video or audio recording mediums in order to use them once only for broadcasting over each of its transmitters or relay stations. Such video or audio recordings must be destroyed not later than one month after the first broadcast of the work.

(2) Video or audio recordings of an exceptional documentary nature need not be destroyed if they are placed in an official archive. The author shall be notified without delay of their deposit in such archive.

Article 55a Use of a Database Work

Adaptation or other transformation and the reproduction of a database work by the owner of a copy of the data base work, having been put into circulation with the consent of the creator by way of sale, by a person in other ways entitled to use the copy of the database work or by anyone to whom a database work has been made accessible on the basis of a contract with the creator or with a third party who has the former’s consent, shall be permissible if and to the extent that the adaptation or other transformation or copying is necessary for access to the elements of the database work and for its usual use. If, on the basis of a contract described in sentence 1, only a part of the data base work is made accessible, it shall only be permissible to adapt or otherwise transform and to reproduce this portion. Any contractual provisions to the contrary shall be null and void.

Article 56 Reproduction and Public Communication by Commercial Enterprises

(1) Commercial enterprises which sell video or audio recordings or appliances for making or communicating such recordings, or appliances for the reception of broadcasts, or which repair them, may record works on video or audio mediums and may publicly communicate video or audio recordings or make broadcast works perceivable to the public where necessary to demonstrate such appliances and devices to customers or to repair such appliances.

(2) Video or audio recordings made pursuant to paragraph (1 ) must be destroyed immediately.

Article 57 Incidental Works

It shall be permissible to reproduce, distribute and publicly communicate works if they may be regarded as insignificant and incidental with regard to the actual subject of the reproduction, distribution or public communication.

Article 58 Catalog Illustrations

It shall be permissible to reproduce and distribute works of fine art which are exhibited in public or intended for public exhibition or auction in catalogs which are issued by the organizer for the purpose of the exhibition or auction.

Article 59 Works in Public Places

(1) It shall be permissible to reproduce, by painting, drawing, photography or cinematography, works which are permanently located on public ways, streets or places and to distribute and publicly communicate such copies. For works of architecture, this provision shall be applicable only to the external appearance.

(2) Reproductions may not be carried out on a work of architecture.

Article 60 Portraits

(1) The commissioner of a portrait or his successor in title may reproduce it or cause it to be reproduced by photography. If the portrait is a photographic work, reproduction other than by photography shall also be permissible. The copies may be distributed without payment.

(2) The same rights shall be enjoyed by the person portrayed or, after his death, by his next of kin in the case of a portrait created on commission.

(3) Next of kin in the sense of paragraph (2) shall mean the spouse and children or, if there is neither spouse nor child, the parents.

Article 61 Compulsory License for the Production of Audio Recordings

(1) If a producer of audio recordings has been granted an exploitation right in a musical work entitling him to record the work on an audio medium and to reproduce and distribute that recording for commercial purposes, the author shall be required to grant an exploitation right with the same content on reasonable conditions to any other producer of audio recordings whose main establishment or whose domicile is located on the territory to which this Law applies; this provision shall not apply if the exploitation right referred to is lawfully administered by a collecting society or if the work no longer reflects the author’s conviction and he therefore can no longer be expected to agree to the exploitation of his work and he has for that reason revoked any existing exploitation right. The author shall not be required to authorize the use of the work in the production of a cinematographic work.

(2) The provisions of paragraph (1) shall be applicable with respect to a producer of audio recordings who has neither his main establishment nor his domicile on the territory to which this Law applies, only if, as evidenced by a notification by the Federal Minister for Justice in the Bundesgesetzblatt a corresponding right is granted by the State in which his main establishment or domicile is located to producers of audio recordings whose main establishments or whose domiciles are on the territory to which this Law applies.

(3) An exploitation right granted under the foregoing provisions shall have effect only on the territory to which this Law applies and for export to States in which the work does not enjoy protection against recording on audio mediums.

(4) If the author has granted the exclusive exploitation right to another person entitling him to record the work for commercial purposes on audio recording mediums and to reproduce and distribute those recordings, the foregoing provisions shall be applicable except that the holder of the exclusive exploitation right shall be required to grant the exploitation right referred to in paragraph (1).

(5) The foregoing provisions shall be applicable mutatis mutandis to a work of language employed as the text of a musical work, if the author of the work of language has granted to a producer of audio recordings a right to record the work in conjunction with the musical work and to reproduce and distribute such recordings.

(6) Actions claiming the grant of exploitation rights shall be heard in those cases where neither the author nor, in the case referred to in paragraph (4), the holder of the exclusive right has a legal domicile in the territory to which this Law applies, by the courts located in the district in which the Patent Office has its headquarters. Interim injunctions may be issued, even if the conditions set out in Articles 935 and 940 of the Code of Civil Procedure are not fulfilled.

(7) The foregoing provisions shall not apply if the exploitation right referred to in paragraph (1) has been granted solely for the purpose of producing a film.

Article 62 Prohibition of Alteration

(1) Where the use of a work is permissible under the provisions of this Section, no alteration may be made to the work. Article 39 shall be applicable mutatis mutandis.

(2) Where the purpose of the use may demand, it shall be permissible to make translations and such alterations to the work as amount merely to extracts or to transpositions into another key or pitch.

(3) With respect to works of fine art and photographic works, conversion to a different scale and other alterations of the work shall be permissible to the extent required by the method of reproduction.

(4) In the case of collections for religious, school and instructional use (Article 46), such alterations of works of language shall be permissible as are necessary for religious, school and instructional use, in addition to the alterations permitted under paragraphs (1) to (3). However, such alterations shall require the consent of the author or, after his death, of his successor in title (Article 30) if the latter is a next of kin of the author (Article 60(3)) or has acquired copyright by testamentary disposition of the author. Consent shall be deemed to have been granted if the author or his successor in title does not object within one month of notification of the proposed alteration and if the notification of the alteration has drawn attention to this legal consequence.

Article 63 Acknowledgment of Source

(1) If a work or part of a work is reproduced pursuant to Article 45(1), Articles 46 to 48, 50, 51, 58, 59 and 61, the source must in all cases be clearly acknowledged. In reproducing complete works of language or complete musical works, the publishing house which published the work must be stated in addition to the author, as also any abridgments or other alterations to the work. There shall be no obligation to acknowledge sources if no source is given either on the copy of the work used or with the reproduction of the work used and if no source is otherwise known to the person entitled to reproduce.

(2) Where the provisions of this Section permit the public communication of a work, the source must be clearly acknowledged if and where trade practice so requires.

(3) If an article from a newspaper or other information journal is reproduced in another newspaper or other such information journal, or is broadcast, under Article 49(1), the newspaper or other information journal from which the article was extracted shall also be acknowledged in addition to the author designated in the source; if a further newspaper or other information journal is mentioned there as the source, such other newspaper or other information journal shall be acknowledged. If a broadcast commentary is reproduced in a newspaper or other information journal, or in a broadcast, under Article 49(1), the broadcasting organization which transmitted the commentary shall in all cases be acknowledged in addition to the author.

Section VII Duration of Copyright

Article 64 General

Copyright shall expire 70 years after the author’s death.

Article 65 Joint Authors, cinematographic works

(1) If copyright is owned by several joint authors (Article 8), it shall expire 70 years after the death of the last surviving author.

(2) In the case of cinematographic works and works which are produced in a similar way to cinematographic works, copyright shall expire 70 years after the death of the longest-living of the following persons: the principal director, the author of the screenplay, the author of the dialogues, the composer of the music composed for the cinematographic work in question.

Article 66 Anonymous and Pseudonymous Works

(1) In the case of anonymous and pseudonymous works, copyright shall expire 70 years after publication. However, it shall expire as soon as 70 years after creation of the work if the work was not published within that time limit.

(2) If the author discloses his identity within the time limit specified in paragraph (1), first sentence, or if the pseudonym assumed by the author leaves no doubt as to his identity, the duration of copyright protection shall be calculated in accordance with Articles 64 and 65. The same shall apply if within the time limit specified in paragraph (1), first sentence, the true name of the author is submitted for entry in the Register of Authors (Article 138).

(3) The author, or after his death his legal successor (Article 30) or the executor (Article 28 (2)), shall be entitled to perform the actions under paragraph (2).

Article 67 Serial Works

In the case of works published in parts which are not self-contained (instalments), the term of protection of each instalment in the cases referred to in Article 66(1), first sentence, shall be calculated separately from the time of its publication.

Article 68

(Repealed)

Article 69 Calculation of Time Limits

The time limits specified in this Section shall begin with the end of the calendar year in which the event which determines the beginning of the time limit has occurred.

Section VIII Special Provisions on Computer Programs

Article 69a Object of Protection

(1) For the purposes of this Law, computer programs shall mean programs in any form, including their design material.

(2) The protection afforded shall apply to the expression in any form of a computer program. Ideas and principles which underlie any element of a computer program, including those which underlie its interfaces, shall not be protected.

(3) Computer programs shall be protected if they constitute original works in the sense that they are the result of their author’s own intellectual creation. No other criteria, particularly of a qualitative or aesthetic nature, shall be applied to determine their eligibility for protection.

(4) The provisions on works of language shall apply to computer programs where not otherwise provided in this Section.

Article 69b Authors in Employment or Service

(1) Where a computer program is created by an employee in the execution of his duties or following the instructions given by his employer, the employer exclusively shall be entitled to exercise all the economic rights in the program, unless otherwise agreed.

(2) Paragraph (1) shall apply mutatis mutandis to service relationships.

Article 69c Restricted Acts

The right holder shall have the exclusive right to do or to authorize:

1. the permanent or temporary reproduction of a computer program by any means and in any form, in part or in whole. Insofar as loading, displaying, running, transmission or storage of the computer program necessitate such reproduction, such acts shall be subject to authorization by the right holder;

2. the translation, adaptation, arrangement or any other alteration of a computer program and the reproduction of the results thereof. The rights of the person who alters the program shall remain unaffected;

3. any form of distribution of the original of a computer program or of copies thereof, including rental. Where a copy of a computer program is put into circulation by way of sale on the territory of the European Communities or of another Contracting State of the Convention Concerning the European Economic Area with the consent of the right holder, the distribution right in respect of that copy shall be exhausted, with the exception of the rental right.

Article 69d Exceptions to the Restricted Acts

(1) In the absence of specific contractual provisions, the acts referred to in items 1 and 2 of Article 69c shall not require authorization by the right holder where they are necessary for the use of the computer program by any person entitled to use a copy of the program in accordance with its intended purpose, including for error correction.

(2) The making of a back-up copy by a person having a right to use the computer program may not be prevented by contract insofar as it is necessary to ensure future use.

(3) The person having a right to use a copy of a program shall be entitled, without the authorization of the right holder, to observe, study or test the functioning of the program in order to determine the ideas and principles which underlie any element of the program if he does so while performing any of the acts of loading, displaying, running, transmitting or storing the program which he is entitled to do.

Article 69e Decompilation

(1) The authorization of the right holder shall not be required where reproduction of the code and translation of its form within the meaning of items 1 and 2 of Article 69c are indispensable to obtain the information necessary to achieve the interoperability of an independently created computer program with other programs, provided that the following conditions are met:

1. these acts are performed by the licensee or by another person having a right to use a copy of a program, or on their behalf by a person authorized to do so;

2. the information necessary to achieve interoperability has not previously been readily available to the persons referred to in item 1;

3. these acts are confined to the parts of the original program which are necessary to achieve interoperability.

(2) Information obtained by means of acts under paragraph (1) may not

1. be used for goals other than to achieve the interop-erability of the independently created computer program,

2. be given to others, except when necessary for the interoperability of the independently created computer program,

3. be used for the development, production or marketing of a computer program substantially similar in its expression, or for any other act which infringes copyright.

(3) Paragraphs (1) and (2) shall be interpreted in such a way that their application neither impairs the normal exploitation of the work nor unreasonably prejudices the right holder’s legitimate interests.

Article 69f Infringement of Rights

(1) The right holder may require from their owners or proprietors that all unlawfully manufactured or distributed copies or all copies intended for unlawful distribution be destroyed. Article 98(2) and (3) shall apply mutatis mutandis.

(2) Paragraph (1) shall apply mutatis mutandis to any means of which the sole intended purpose is to facilitate the unauthorized removal or circumvention of any technical device which may have been applied to protect a computer program.

Article 69g Application of Other Legal Provisions; Law of Contract

(1) The provisions of this Section shall not prejudice the application of other statutory provisions to computer programs, particularly those concerning the protection of inventions, topographies of semiconductor products, trademarks and unfair competition, including the protection of business and works secrets as also agreements under the law of obligations.

(2) Any contractual provisions contrary to Article 69d(2) and (3) and Article 69e shall be null and void.

Part II Neighboring Rights

Section I Protection of Certain Editions

Article 70 Scientific Editions

(1) Editions which consist of non-copyrighted works or texts shall enjoy, mutatis mutandis, the protection afforded by the provisions of Part I if they represent the result of scientific analysis and differ in a significant manner from previously known editions of the works or texts.

(2) The right shall be enjoyed by the author of the edition.

(3) The right shall expire 25 years after publication of the edition; however, it shall expire 25 years after its production if the edition is not published within that time limit. The time limit shall be calculated in accordance with Article 69.

Article 71 Posthumous Works

(1) Any person who causes a work which has not previously been published to be legally published for the first time or performs it in public for the first time after the expiry of the copyright shall have the exclusive right to exploit it. The same shall apply to works which have not been previously published and which were never protected in the territory to which this Law applies, but whose authors have been dead for more than 70 years. Articles 5, 15 to 24, 26, 27 and 45 to 63 shall apply mutatis mutandis.

(2) The right shall be transferable.

(3) The right shall expire 25 years after the publication of the work or, if its first public communication took place earlier, after the latter.

Section II Protection of Photographs

Article 72

(1) Photographs and products manufactured in a similar way to photographs shall be protected, mutatis mutandis, by the provisions of Part I applicable to photographic works.

(2) The right afforded by paragraph (1) shall belong to the photographer.

(3) The right afforded by paragraph (1) shall expire 50 years after publication of the photograph, or if its first permitted public communication took place earlier, after the latter, but 50 years after its manufacture where the photograph has not been published or legally communicated in public within such period. The period shall be calculated in accordance with Article 69.

Section III Protection of Performers

Article 73 Performers

For the purposes of this Law, performer means a person who recites or performs a work or participates artistically in the recitation or performance of a work.

Article 74 Transmission by Screen or Loudspeaker

Public communication of performance by screen, loudspeaker or similar technical device in a place other than that in which it takes place shall require the consent of the performer.

Article 75 Recording, Reproduction and Distribution

(1) Fixation of performance on a video or audio recording medium shall require the consent of the performer.

(2) The performer shall have the exclusive right to reproduce and distribute the video or audio recording medium.

(3) Article 27 shall apply mutatis mutandis to remuneration rights of the performer for rental and lending of video or audio recording mediums.

Article 76 Broadcasting

(1) Broadcasting of a performance shall require the consent of the performer.

(2) A performance which has been lawfully fixed on video or audio recording mediums may be broadcast without the consent of the performer if the recordings have been published; however, equitable remuneration shall be paid to the performer.

Article 77 Public Communication

If a performance is publicly communicated by means of video or audio recordings or made perceivable to the public by means of a broadcast, the performer shall be paid equitable remuneration.

Article 78 Assignment

A performer may assign to third parties the rights afforded by Articles 74 to 77. Article 75(3) in conjunction with Article 27(1), second and third sentences, shall remain unaffected.

Article 79 Performers in Employment or Service

If a performer has given a performance in execution of his duties under a contract of employment or of service, the extent and conditions under which his employer may use it or authorize others to use it shall be determined, if not otherwise agreed, by reference to the nature of the contract of employment or service.

Article 80 Choral, Orchestral and Stage Performances

(1) In the case of choral, orchestral and stage performances, the consent of the elected representatives of the participating groups of performers, such as choir, orchestra, ballet and stage companies, in addition to the consent of the soloists, conductor and producer, shall suffice for the purposes of Articles 74, 75(1) and (2) and Article 76(1). If a group has no such representative, the consent of the performers belonging to that group shall be replaced by the consent of the leader of the group.

(2) In the case of choral, orchestral and stage performances, the rights afforded by Articles 74 to 77, with the exception of the right of consent, shall be asserted for groups of performers exclusively by their representatives or, if no representatives have been elected, by the leader of the group. Exercise of the right may be transferred to a collecting society.

Article 81 Protection of Organizers

If a performance is organized by an enterprise, the consent of the owner of the enterprise shall be required for the purposes of Articles 74, 75 (1) and (2) and Article 76(1), in addition to the consent of the performer.

Article 82 Duration of Rights

Where a performance has been recorded on a video or audio medium, the rights of the performer shall expire 50 years and those of the organizer 25 years after the publication of the video or audio recording, or if its first legal use for public communication took place earlier, after the latter; however, the rights of the performer shall expire 50 years, and those of the organizer 25 years, after the performance if the video or audio recording has not been published or legally used for public communication within that period of time. The period of time shall be calculated in accordance with Article 69.

Article 83 Protection Against Distortion

(1) A performer shall have the right to prohibit any distortion or other alteration of his performance of such nature as to jeopardize his standing or reputation as a performer.

(2) If a work is performed by several performers together, each performer shall take the others into due account when exercising the right.

(3) The right shall expire with the death of the performer; however, it shall expire 50 years after the performance if the performer has died prior to expiry of that period; the period shall be calculated in accordance with Article 69. After the death of the performer, the right shall belong to his next of kin (Article 60(3)).

Article 84 Limitation of Rights

The provisions of Section VI of Part I, with the exception of Article 61, shall apply mutatis mutandis to the rights afforded the performer and the organizer by this Section.

Section IV Protection of Producers of Audio Recordings

Article 85 Right of Reproduction and Distribution

(1) The producer of an audio recording shall have the exclusive right to reproduce and distribute the recording. If the audio recording has been produced by an enterprise, the owner of the enterprise shall be deemed the producer. The right shall not subsist by reason of the reproduction of an audio recording.

(2) The right shall expire 50 years after publication of the audio recording, or if its first legal use for public communication took place earlier, after the latter; however, it shall expire 50 years after production if the audio recording has not been published or legally used for public communication during that period. The period shall be calculated in accordance with Article 69.

(3) Article 27(2) and (3) as well as the provisions of Section VI of Part I, with the exception of Article 61, shall apply mutatis mutandis.

Article 86 Right of Participation

If a published audio recording on which a performance has been fixed is used for public communication, the producer of the audio recording may claim from the performer an equitable participation in the remuneration which the performer receives pursuant to Article 76(2) and Article 77.

Section V Protection of Broadcasting Organizations

Article 87

(1) A broadcasting organization shall have the exclusive right

1. to rebroadcast its broadcasts,

2. to record its broadcasts on a video or audio recording medium, to make photographs of its broadcasts and to reproduce and distribute such recordings or photographs, with the exception of the rental right,

3. to make its broadcast perceivable to the public in places only accessible to the public on payment of an entrance fee.

(2) The right shall expire 50 years after the first broadcast. The period shall be calculated in accordance with Article 69.

(3) The provisions of Section VI of Part I, with the exception of Article 47(2), second sentence, Article 54(1) and Article 61, shall apply mutatis mutandis.

Section VI Protection of the Maker of a Database

Article 87a Definitions

(1) A database within the meaning of this Act is a collection of works, data or other independent elements arranged in a systematic or methodical way the elements of which are individually accessible either by electronic or by other means, and the obtaining, verification or presentation of which requires a qualitatively or quantitatively substantial investment. A database the contents of which has been changed in a way that is qualitatively or quantitatively substantial is deemed a new database provided that the change entails a qualitatively or quantitatively substantial investment.

(2) The maker of a database within the meaning of this Act is the one who has made the investment defined in subsection 1.

Article 87b Rights of the Maker of the Database

(1) The maker of the database has the exclusive right to reproduce, to distribute and to communicate to the public the whole data base or a qualitatively or quantitatively substantial part thereof. The repeated or systematical reproduction, distribution or communication to the public of qualitatively and quantitatively insubstantial parts of the database shall be deemed as equivalent to the reproduction, distribution or communication of a qualitatively or quantitatively substantial part of the database provided that these acts run counter to a normal exploitation of the database or unreasonably prejudice the legitimate interests of the maker of the database.

(2) Article 17 (2) and Article 27 (2) and (3) shall apply accordingly.

Article 87c Limitations on the rights of the Maker of a Database

(1) The reproduction of a qualitatively or quantitatively substantial part of a database shall be permissible:

1. for private use; this shall not apply to a database the elements of which are individually accessible by electronic means;

2. for the purposes of personal scientific use, if and to the extent that the copying for this purpose is necessary and the scientific use does not serve commercial purposes;

3. for personal use in teaching, in non-commercial institutions of education and further education and in vocational training in a quantity required for one school class.

In the cases outlined in items 2 and 3, the source must be clearly acknowledged.

(2) The reproduction, distribution and communication to the public of a qualitatively or quantitatively substantial part of a database shall be permissible for use in proceedings before a court, an arbitration tribunal or a public authority as well as for purposes of public security.

Article 87d Term of Protection

The rights of the maker of a database shall expire fifteen years after the publication of the database, and fifteen years after the making of the database if it has not been published within that period of time. The period of time shall be calculated in accordance with Article 69.

Article 87e Contracts Dealing with the Use of a Database

A contractual agreement according to which the owner of a copy of the database, having been put into circulation with the consent of the maker of the database by way of sale, or the person in other ways entitled to use the copy of the database or anyone to whom a database has been made accessible on the basis of a contract with the maker of the database or with a third party who has the former’s consent, obligates himself vis-à-vis the maker of the database to refrain from reproducing, distributing or communicating to the public qualitatively and quantitatively insubstantial parts of the database, shall be invalid to the extent that these acts run counter to the normal exploitation of the database nor unreasonably prejudice the legitimate interests of the maker of the database.

Part III Special Provisions on Films

Section I Cinematographic Works

Article 88 The Right of Cinematographic Adaptation

(1) If an author permits another person to make a cinematographic adaptation of his work, he shall be deemed, in doubt, to have granted the following exploitation rights:

1. the right to use the work in its original form or as an adaptation or transformation for the purpose of producing a cinematographic work;

2. the right to reproduce and distribute the cinematographic work;

3. the right to publicly present the cinematographic work if it is a work intended for presentation;

4. the right to broadcast the cinematographic work if it is a work intended for broadcasting;

5. the right to exploit translations and other cinematographic adaptations or transformations of the cinematographic work to the same extent as the work itself.

(2) In doubt, the rights referred to in paragraph (1) shall not be deemed to include the right to remake the cinematographic work. In doubt, the author shall be deemed to have the right, after the expiration of 10 years from the conclusion of the contract, to utilize his work otherwise for cinematographic purposes.

(3) The foregoing provisions shall apply mutatis mutandis to the rights referred to in Articles 70 and 71.

Article 89 Rights in Cinematographic Works

(1) Any person who undertakes to participate in the production of a film shall be deemed, in doubt, to have granted, should he acquire a copyright in the cinematographic work, to the producer of the film an exclusive right to utilize the cinematographic work as also translations and other adaptations or transformations of the cinematographic work in any known manner.

(2) If the author of the cinematographic work has in advance granted to another person the exploitation right referred to in paragraph (1), he shall nevertheless remain entitled to grant that right to the film producer, with or without limitation.

(3) Authors’ rights in works used to produce the cinematographic work, such as novels, screenplay and film music, shall remain unaffected.

Article 90 Limitation of Rights

The provisions concerning the need for the author’s consent to the transfer of exploitation rights (Article 34) and to the grant of non-exclusive rights (Article 35) and the provisions on the right of revocation for non-exercise (Article 41) or for changed conviction (Article 42) shall not apply to the rights referred to in Article 88(1), items 2 to 5, and Article 89(1). The author of the cinematographic work (Article 89) shall have no claims by virtue of Article 36.

Article 91 Rights in Photographs

The producer of a cinematographic work shall be deemed to have acquired the right of cinematographic exploitation in photographs which are taken in connection with the production of such cinematographic work. The photographer shall have no rights in this respect.

Article 92 Performers

(1) If a performer concludes a contract with the film producer on his participation in the production of a cinematographic work, in cases of doubt concerning exploitation of the cinematographic work such contract shall constitute assignment of the rights pursuant to Article 75(1) and (2) and Article 76(1).

(2) If the performer has assigned in advance a right mentioned in paragraph (1) to a third party, he shall nevertheless retain the entitlement to assign this right in respect of exploitation of the cinematographic work to the film producer.

Article 93 Protection Against Distortion

The authors of a cinematographic work and of works used in its production, and the holders of neighboring rights who participate in the production of the cinematographic work or whose contributions are used in its production may prohibit in accordance with Articles 14 and 83 only gross distortions or other gross mutilations of their works or of their contributions, with respect to the production and exploitation of the cinematographic work. Each author or right holder shall take the others and the film producer into due account when exercising the right.

Article 94 Protection of Producers of Films

(1) The producer of a film shall have the exclusive right to reproduce, distribute and use for public presentation or broadcasting the video recording or video and audio recording on which the cinematographic work is fixed. The film producer shall further have the right to prohibit any distortion or abridgment of the video recording or video and audio recording which may jeopardize his legitimate interests.

(2) The right shall be transferable.

(3) The right shall expire 50 years after the publication of the video recording or video and audio recording or, if its first legal use for public communication took place earlier, after the latter; however, it shall expire 50 years after production if the video recording or video and audio recording has not been published or legally used for public communication during such period.

(4) Article 27 (2) and (3), as well as the provisions of Section VI of Part I, with the exception of Article 61, shall apply mutatis mutandis.

Section II Moving Pictures

Article 95

Articles 88, 90, 91, 93 and 94 shall apply mutatis mutandis to sequences of images and to sequences of images and sounds which are not protected as cinematographic works.

Part IV Common Provisions on Copyright and Neighboring Rights

Section I Prohibition of Exploitation

Article 96

(1) Unlawfully made copies may be neither distributed nor used for public communication.

(2) Unlawfully made broadcasts may not be fixed on video or audio recording mediums or publicly communicated.

Section II Infringements

1. Civil Law Provisions; Remedies

Article 97 Actions for Injunction and Damages

(1) As against any person who infringes a copyright or any other right protected by this Law, the injured party may bring an action for injunctive relief requiring the wrongdoer to cease and desist if there is a danger of repetition of the acts of infringement, as well as an action for damages if the infringement was intentional or the result of negligence. In place of damages, the injured party may require surrender of the profits derived by the infringer from the acts of infringement together with detailed accounting reflecting such profits.

(2) Authors, including of scientific editions (Article 70), photographers (Article 72) and performers (Article 73) may, if the infringement was intentional or the result of negligence, recover, as justice may require, a monetary indemnity for the injury caused to them even if no pecuniary loss has occurred.

(3) Rights arising from other statutory provisions shall not be affected.

Article 98 Claim to Destruction or Surrender of Copies

(1) The injured party may require destruction of all copies unlawfully manufactured, unlawfully distributed or intended for unlawful distribution that are in the possession of the infringer or are his property.

(2) In place of the measures provided for in paragraph (1), the injured party may require that the copies that are the property of the infringer be surrendered to him in return for equitable remuneration that may not exceed the cost of manufacture.

(3) Where the measures under paragraphs (1) and (2) are disproportionate, in the individual case, for the infringer or the owner and if the infringing nature of the copies can be removed in some other way, the injured party shall have a claim only to the measures necessary for such purpose.

Article 99 Claim to Destruction or Surrender of Devices

The provisions of Article 98 shall apply mutatis mutandis to devices that are the property of the infringer and that are used or intended exclusively or almost exclusively for the unlawful manufacture of copies.

Article 100 Liability of the Owner of an Enterprise

If a right protected under this Law has been infringed in an enterprise by an employee or agent of such enterprise, the injured party may also assert the rights provided in Articles 97 to 99, with the exception of the right to damages, against the owner of such enterprise. Further claims which may arise from other statutory provisions shall not be affected.

Article 101 Exceptions

(1) If, in the event of infringement of a right protected under this Law, the claims of the injured party for injunctive relief (Article 97), for destruction or surrender of the copies (Article 98) or the devices (Article 99) are asserted against a person whose acts of infringement were neither intentional nor negligent, such person may indemnify in money the injured party if execution of the claims would produce for him a serious and disproportionate injury and if the injured party may reasonably be required to accept redress in cash. The compensation shall represent the amount that would have constituted equitable remuneration had the right been granted by contract. Payment of such compensation shall constitute the injured party’s consent to a utilization within the customary limits.

(2) The measures set out in Articles 98 and 99 shall not apply to:

1. works of architecture;

2. separable parts of copies and devices whose manufacture or distribution is not unlawful.

Article 101a Claim to Information in Respect of Third Parties

(1) Any person who infringes copyright or any other right protected by this Law in the course of business through the manufacture or distribution of copies may be required by the injured party to give information as to the origin and distribution channels of such copies, without delay, except where disproportionate in the individual case.

(2) The person required to give information under paragraph (1) shall give particulars of the name and address of the manufacturer, the supplier and other prior owners of the copies, of the trade customer or of the principal, as also in respect of the quantity of copies that have been manufactured, dispatched, received or ordered.

(3) In those cases where infringement is obvious, the obligation to provide information may be imposed by an injunction in compliance with the Code of Civil Procedure.

(4) Such information may only be used in criminal pcoceedings or in proceedings under the Law on Minor Offenses against the person required to give information, or against a dependent person under Article 52(1) of the Code of Criminal Procedure, in respect of an act committed before the information was given, with the consent of the person required to give the information.

(5) Further claims to information shall remain unaffected.

Article 102 Prescription

Claims arising from infringement of copyright or of any other right protected by this Law shall become invalid by prescription three years after the time at which the entitled person gains knowledge of the infringement and of the identity of the infringer or 30 years after the infringement, irrespective of such knowledge. Article 852(2) of the Civil Code shall apply mutatis mutandis. Where the infringer has made gains at the cost of the entitled person by reason of the infringement, he shall remain obliged, even after the claim has expired, to surrender such gain in accordance with the provisions on the surrender of unjustified gain.

Article 103 Publication of Judgment

(1) If an action has been brought under this Law, the judgment may authorize the successful party to publish the judgment at the cost of the unsuccessful party, if the successful party can offer a legitimate reason to do so. Unless the court rules otherwise, the judgment may not be published until it becomes final.

(2) The nature and extent of the publication shall be determined in the judgment. The authority to publish the judgment shall expire if it is not published within six months after it becomes final.

(3) The party given authority to publish may request that the unsuccessful party be required to defray in advance the cost of publication. This request shall be ruled upon by a competent court of first instance without oral proceedings. Prior to ruling upon the matter, the unsuccessful party shall be heard.

Article 104 Legal Recourse

For all litigation concerning the exercise of rights arising from the legal relationships regulated by this Law (copyright litigation), ordinary legal recourse shall be accorded. For copyright litigation arising out of employment or service relationships that concern solely claims to the payment of an agreed compensation, recourse to labor courts and to administrative tribunals shall remain unaffected.

Article 105 Courts for Copyright Litigation

(1) The Provincial Governments shall be empowered to assign by statutory order copyright litigation for which the Provincial Courts are competent in the first instance or on appeal to one of such Provincial Courts for the jurisdictions of a number of Provincial Courts where it is in the interests of the administration of justice.

(2) The Provincial Governments shall further be empowered to assign by statutory order copyright litigation that is of the competence of the Local Courts to one of such Local Courts for the jurisdictions of a number of Local Courts where it is in the interests of the administration of justice.

(3) The Provincial Governments may transfer the powers under paragraphs (1) and (2) to the Provincial Judicial Administrations.

(4) Parties may also be represented before a Provincial Court to which copyright litigation for the jurisdictions of a number of Provincial Courts has been assigned in accordance with paragraph (1) by lawyers admitted to the Provincial Court which would otherwise be competent. The same shall apply to representatives before the Provincial High Court acting as appeal court.

(5) The additional expense incurred by a party in being represented under paragraph (4) by a lawyer not admitted to the court hearing the case shall not be refunded.

2. Criminal Law Provisions

Article 106 Unauthorized Exploitation of Copyrighted Works

(1) Any person who, other than in a manner allowed by law and without the right holder’s consent, reproduces, distributes or publicly communicates a work or an adaptation or transformation of a work shall be liable to imprisonment for up to three years or a fine.

(2) The attempt to commit such an offense shall be punishable.

Article 107 Unlawful Affixing of Designation of Author

(1) Any person who:

1. without the author’s consent, affixes a designation of author (Article 10(1)) to the original of a work of fine art or distributes an original bearing such designation,

2. affixes a designation of author (Article 10(1)) on a copy, adaptation or transformation of a work of fine art in such manner as to give to the copy, adaptation or transformation the appearance of an original or distributes a copy, adaptation or transformation bearing such designation,

shall be liable to imprisonment for up to three years or a fine if the offense does not carry a more severe penalty under other provisions.

(2) The attempt to commit such an offense shall be punishable.

Article 108 Infringement of Neighboring Rights

(1) Any person who, other than in a manner allowed by law and without the right holder’s consent:

1. reproduces, distributes or publicly communicates a scientific edition (Article 70) or an adaptation or transformation of such edition;

2. exploits a posthumous work or an adaptation or transformation of such work contrary to Article 71;

3. reproduces, distributes or publicly communicates a photograph (Article 72) or an adaptation or transformation of a photograph;

4. exploits a performance contrary to Articles 74, 75(1) or (2) or Article 76(1);

5. exploits an audio recording contrary to Article 85;

6. exploits a broadcast contrary to Article 87;

7. exploits a video or video and audio recording contrary to Article 94 or Article 95 in conjunction with Article 94;

shall be liable to imprisonment for up to three years or a fine.

(2) The attempt to commit such an offense shall be punishable.

Article 108a Unlawful Exploitation on a Commercial Basis

(1) Where the person committing the acts referred to in Articles 106 to 108 does so on a commercial basis, the penalty shall be imprisonment for up to five years or a fine.

(2) The attempt to commit such an offense shall be punishable.

Article 109 Criminal Prosecution

Offenses under Articles 106 to 108 shall only be prosecuted on complaint unless the prosecuting authorities deem that ex officio prosecution is justified in view of the particular public interest.

Article 110 Confiscation

Objects implicated in an offense under Articles 106, 107(1), item 2, 108 and 108a may be confiscated. Article 74a of the Penal Code shall apply. Where the claims referred to in Articles 98 and 99 are upheld in proceedings under the provisions of the Code of Criminal Procedure with regard to the compensation of the injured party (Articles 403 to 406c), the provisions on confiscation shall not be applied.

Article 111 Publication of the Judgment

If in cases covered by Articles 106 to 108a a penalty has been pronounced, the court shall, at the request of the injured party and if the latter can show a justified interest, order publication of the judgment. The nature of the publication shall be laid down in the judgment.

3. Measures by the Customs Authorities

Article 111a

(1) Where the manufacture or distribution of copies infringes copyright or any other right protected by this Law those copies, shall be subject, at the request of the holder of the rights and against his security, to seizure by the customs authorities, on import or export, in those cases where the infringement is obvious. This provision shall apply in trade with other Member States of the European Economic Community and with other Contracting States of the Convention Concerning the European Economic Area only insofar as controls are carried out by the customs authorities.

(2) Where the customs authorities order a seizure, they shall advise the person entitled to dispose and also the petitioner thereof without delay. The origin, quantity and place of storage of the copies, together with the name and address of the person entitled to dispose, shall be communicated to the petitioner; the secrecy of correspondence and of mail (Article 10 of the Basic Law) shall be restricted to that extent. The petitioner shall be given the opportunity to inspect the copies where such inspection does not constitute a breach of commercial or trade secrecy.

(3) Where no opposition to the seizure is made, at the latest within two weeks of service of the notification under the first sentence of paragraph (2), the customs authorities shall order confiscation of the seized copies.

(4) If the person entitled to dispose opposes seizure, the customs authorities shall inform the petitioner thereof without delay. The petitioner shall be required to declare to the customs authorities without delay, whether he maintains the request under paragraph (1) in respect of the seized copies.

1. If the petitioner withdraws his request, the customs authorities shall lift the seizure without delay.

2. If the petitioner maintains his request and submits an executable court decision ordering the impounding of the seized copies or limitation of the right to dispose, the customs authorities shall take the necessary measures.

Where neither of the cases referred to in items 1 and 2 are applicable, the customs authorities shall lift the seizure on the expiry of two weeks after service of the notification to the petitioner under the first sentence; where the petitioner can show that a court decision according to item 2 has been requested, but has not yet been received, the seizure shall be maintained for a further two weeks at the most.

(5) Where the seizure proves to have been unjustified from the beginning and if the petitioner has maintained the request under paragraph (1) in respect of the seized copies or has not made a declaration without delay (second sentence of paragraph (4)), he shall be required to compensate the damages that seizure has occasioned to the person entitled to dispose.

(6) The petition under paragraph (1) is to be submitted to the Regional Finance Office and shall be effective for two years unless a shorter period of validity has been requested; it may be repeated. The cost of official acts related to the request shall be charged to the petitioner in accordance with Article 178 of the Fiscal Code.

(7) Seizure and confiscation may be opposed by the legal remedies allowed by the fixed penalty procedure under the Law on Minor Offenses in respect of seizure and confiscation. The petitioner shall be heard in the review proceedings. An immediate appeal shall lie from the decision of the Local Court; it shall be heard by the Provincial High Court.

Section III Enforcement

1. General

Article 112

Enforcement affecting a right protected by this Law shall be subject to the general rules of law in the absence of anything to the contrary in Articles 113 to 119.

2. Enforcement of Claims for Money Against Authors

Article 113 Copyright

A claim for money against an author may only be enforced on a copyright with his consent and only insofar as he is able to grant exploitation rights (Article 31). The consent may not be given through a legal representative.

Article 114 Originals of Works

(1) A claim for money against an author may only be enforced on originals of his works owned by him with his consent. The consent may not be given through a legal representative.

(2) Consent shall not be required:

1. where enforcement on the original of a work is necessary for enforcement on an exploitation right in the work;

2. for enforcement on the original of a work of architecture;

3. for enforcement on the original of another work of fine art, if the work has been published.

In the cases referred to in items 2 and 3, the original of the work may be distributed without the author’s consent.

3. Enforcement of Claims for Money Against Successors in Title of Authors

Article 115 Copyright

A claim for money against the successor in title of an author (Article 30) may only be enforced on a copyright with his consent, and only insofar as he is able to grant exploitation rights (Article 31). Consent shall not be required if the work has been published.

Article 116 Originals of Works

(1) A claim for money against the successor in title of an author (Article 30) may only be enforced on originals of works of the author owned by the successor in title with his consent.

(2) Consent shall not be required:

1. in the cases referred to in Article 114(2), first sentence;

2. for enforcement on the original of a work if the work has been published.

Article 114(2), second sentence, shall apply mutatis mutandis.

Article 117 Executor

If copyright is to be exercised in accordance with Article 28(2) by an executor, it shall be for the executor to give the consent required in Articles 115 and 116.

4. Enforcement of Claims for Money Against Authors of Scientific Editions and Against Photographers

Article 118

Articles 113 to 117 shall apply mutatis mutandis:

1. to enforcement of claims for money against an author of a scientific edition (Article 70) and against his successor in title;

2. to enforcement of claims for money against a photographer (Article 72) and against his successor in title.

5. Enforcement of Claims for Money on Certain Devices

Article 119

(1) Devices intended exclusively for reproduction or broadcasting, such as moulds, plates, engraving stones, blocks, stencils and negatives, shall be subject to enforcement of claims for money only if the creditor is entitled to exploit the work using such devices.

(2) The same shall apply to devices intended exclusively for presenting a cinematographic work, such as reels of film and the like.

(3) Paragraphs (1) and (2) shall apply mutatis mutandis to editions protected under Articles 70 and 71, to photographs protected under Article 72 and to video and audio recordings protected under Article 75(2) and Articles 85, 87, 94 and 95, .

Part V Scope of Application

Transitional and Final Provisions

Section I Scope of the Law

1. Copyright

Article 120 German Nationals and nationals of another Member State of the EU or of another Contracting State of the Convention Concerning the EEA

(1) German nationals shall enjoy copyright protection with respect to all of their works, whether or not they have been published and regardless of the place of publication. In the case of a work created by joint authors (Article 8), it shall be sufficient if one of the joint authors is a German national.

(2) The following shall be deemed equal to German nationals:

1. Germans in the meaning of Article 116 (1) of the Basic Law who do not possess German nationality, and

2. nationals of another Member State of the European Union or of another Contracting State of the Convention Concerning the European Economic Area.

Article 121 Foreign Nationals

(1) Foreign nationals shall enjoy copyright protection with respect to their works published in the territory to which this Law applies, unless the work or a translation of the work has been published outside that territory more than 30 days prior to its publication within that territory. Subject to the same limitation, foreign nationals shall enjoy protection with respect to their works published in the territory to which this Law applies in translation only.

(2) Works of fine art which are an integral part of real property located in the territory to which this Law applies shall be assimilated to works published in that territory for the purposes of paragraph (1).

(3) The protection afforded under paragraph (1) may be limited by a statutory order of the Federal Minister for Justice for a foreign national who does not belong to a member State of the Berne Convention for the Protection of Literary and Artistic Works and, at the time of publication of the work, had his domicile neither in the territory to which this Law applies nor in one of the member States of the Berne Union, and if the State of which he is a national does not afford adequate protection to the works of German nationals.

(4) Foreign nationals shall further enjoy copyright protection as provided by international treaty. In the absence of such treaty, such works shall be protected by copyright if, according to an announcement by the Federal Minister for Justice in the Bundesgesetzblatt, German nationals enjoy in the State of which the author is a national equivalent protection for their works.

(5) Resale royalty right (Article 26) shall be available to foreign nationals only if the State of which they are nationals grants, according to an announcement by the Federal Minister for Justice in the Bundesgesetzblatt, German nationals an equivalent right.

(6) Foreign nationals shall enjoy protection under Articles 12 to 14 with respect to all of their works, even if the conditions contained in paragraphs (1) to (5) are not fulfilled.

Article 122 Stateless Persons

(1) Stateless persons who are habitually resident in the territory to which this Law applies shall enjoy with respect to their works the same copyright protection as German nationals.

(2) Stateless persons who are not habitually resident in the territory to which this Law applies shall enjoy with respect to their works the same copyright protection as the nationals of the foreign State in which they are habitually resident.

Article 123 Foreign Refugees

The provisions of Article 122 shall apply mutatis mutandis to foreigners who are refugees within the meaning of treaties or other statutory provisions. This shall not preclude protection under Article 121.

2. Neighboring Rights

Article 124 Scientific Editions and Photographs

Articles 120 to 123 shall apply mutatis mutandis for the protection of scientific editions (Article 70) and the protection of photographs (Article 72).

Article 125 Protection of Performers

(1) The protection afforded by Articles 73 to 84 shall be enjoyed by German nationals with respect to all their performances, irrespective of where they take place. Article 120(2) shall apply.

(2) Foreign nationals shall enjoy protection with respect to all of their performances that take place in the territory to which this Law applies unless otherwise stipulated in paragraphs (3) and (4).

(3) If performances by foreign nationals are lawfully fixed on video or audio recordings, and if such recordings have been published, foreign nationals shall enjoy, with respect to such video or audio recordings, protection under Article 75 (2), Article 76(2) and Article 77 if they have been published in the territory to which this Law applies unless such recordings have been published outside the territory to which this Law applies more than 30 days before their publication within that territory.

(4) If performances of foreign nationals have been lawfully broadcast, the foreign nationals shall enjoy protection against the recording of the broadcast on a video or audio medium (Article 75(1)), protection against the rebroadcasting of the broadcast (Article 76(1)) and the protection under Article 77 if the broadcast was transmitted from the territory to which this Law applies.

(5) Foreign nationals shall further enjoy protection as provided by international treaty. Article 121(4), second sentence, and Articles 122 and 123 shall apply mutatis mutandis.

(6) Protection under Articles 74, 75(1) and Article 83 shall be enjoyed by foreign nationals with respect to all of their performances, even if the conditions contained in paragraphs (2) to (5) are not fulfilled. The same shall apply to the protection under Article 76(1) where a direct broadcast of the performance is concerned.

(7) If protection is afforded under paragraphs (2) to (4) or (6), it shall expire at the latest on expiry of the term of protection in the state of which the performer is a national, without exceeding the term of protection under Article 82.

Article 126 Protection of Producers of Audio Recordings

(1) The protection afforded by Articles 85 and 86 shall be enjoyed by German nationals or German enterprises which have their headquarters in the territory to which this Law applies with respect to all of their audio recordings, irrespective of whether and where they have been published. Article 120(2) shall apply. Enterprises which have their headquarters in another Member State of the European Union or in another Contracting State of the Convention Concerning the European Economic Area shall be deemed equal to enterprises which have their headquarters in the territory to which this Law applies.

(2) Foreign nationals or foreign enterprises which do not have their headquarters in the territory to which this Law applies shall enjoy protection for their audio recordings published in that territory unless the recording was published outside the territory to which this Law applies more than 30 days before it was published in that territory. Protection shall however expire at the latest on expiry of the term of protection in the state whose nationality the producer of the audio recording possesses or in which the enterprise has its headquarters, without exceeding the term of protection under Article 85(2).

(3) Foreign nationals or foreign enterprises which do not have their headquarters in the territory to which this Law applies shall further enjoy protection as provided by international treaty. Article 121(4), second sentence, and Articles 122 and 123 shall apply mutatis mutandis.

Article 127 Protection of Broadcasting Organizations

(1) Broadcasting organizations which have their headquarters in the territory to which this Law applies shall enjoy the protection afforded by Article 87 with respect to all of their broadcasts, irrespective of where they are broadcast. Article 126(1), third sentence, shall apply.

(2) Broadcasting organizations which do not have their headquarters in the territory to which this Law applies shall enjoy protection for all of their broadcasts which are broadcast from that territory. Protection shall expire at the latest on expiry of the term of protection in the state in which the broadcasting organization has its headquarters, without exceeding the term of protection under Article 87(2).

(3) Broadcasting organizations which do not have their headquarters in the territory to which this Law applies shall further enjoy protection as provided by international treaty. Article 121(4), second sentence, shall apply mutatis mutandis.

Article 127a Protection of the Maker of a Data Base

(1) The protection granted by Article 87b shall be available to German citizens and to legal entities with a registered office located in the territory in which this Act applies. Article 120 (2) shall apply.

(2) Legal entities without a registered office in the territory in which this Act applies but which have been established according to German law or according to the law of one of the states listed in Article 120 (2) item 2 shall enjoy the protection afforded by Article 87b if:

1. their central administration or principal place of business is geographically located in one of the states listed in Article 120 (2) item 2; or

2. their registered office, as defined by the articles of association, is located in one of these states and their activities have a de facto connection with the German economy or to the economy of one of these states.

(3) In the remaining cases, foreign citizens and legal entities shall enjoy the protection granted by the provisions of international agreements and the protection of agreements entered into between the European Community and third party states; these agreements are published by the Federal Ministry of Justice in the Bundesgesetzblatt [Federal Law Gazette].

Article 128 Protection of Film Producers

(1) German nationals or German enterprises which have their headquarters in the territory to which this Law applies shall enjoy the protection afforded by Articles 94 and 95 with respect to their video or video and audio recordings, irrespective of whether and where they have been published. Article 120(2) and Article 126(1), third sentence, shall apply.

(2) The provisions of Article 126(2) and (3) shall apply mutatis mutandis to foreign nationals or foreign enterprises which do not have their headquarters in the territory to which this Law applies.

Section II Transitional Provisions

Article 129 Works

(1) The provisions of this Law shall also apply to works created prior to its entry into force, unless such works were not at that time protected by copyright or unless some provision to the contrary is contained in this Law. This shall also apply mutatis mutandis to neighboring rights.

(2) The duration of copyright for works which have been published after the expiration of 50 years from the author’s death, but prior to the entry into force of this Law shall be determined in accordance with previously existing legal provisions.

Article 130 Translations

The rights of an author of a translation which was lawfully published prior to January 1, 1902, without the consent of the author of the work translated shall remain unaffected.

Article 131 Works of Language Set to Music

Works of language set to music which could be reproduced, distributed and publicly communicated without the consent of the author under Article 20 of the Law on Copyright in Works of Literature and Music of June 19, 1901 (Reichsgesetzblatt p. 227) in the version of the Law of May 22, 1910, giving effect to the revised Berne Convention for the Protection of Literary and Artistic Works (Reichsgesetzblatt p. 793), may continue in the future to be reproduced, distributed and publicly communicated to the same extent, if the musical version of the work was published prior to the entry into force of this Law.

Article 132 Contracts

(1) The provisions of this Law, with the exception of Articles 42, 43 and 79, shall not apply to contracts concluded prior to the entry into force of this Law. Articles 40 and 41 shall apply to such contracts, except that the periods mentioned in Article 40(1), second sentence, and Article 41(2) shall begin not earlier than the entry into force of this Law.

(2) Dispositions taken prior to the entry into force of this Law shall remain effective.

Article 133 (Repealed)

Article 134 Authors

Any person who, at the time of entry into force of this Law, is considered an author under the earlier provisions, but not under the provisions of this Law, shall continue to be deemed an author except for the purposes of Article 135. Where a legal person is considered the author of a work under the earlier provisions, those previous provisions shall be applicable in calculating the duration of copyright.

Article 135 Owners of Neighboring Rights

Any person who, at the time of entry into force of this Law is considered the author of a photograph or of the recording of a work on devices for audible mechanical reproduction, under the earlier provisions, shall be the owner of the corresponding neighboring rights afforded by this Law.

Article 135a Calculation of the Term of Protection

Where the term of protection is shortened by the application of this Law to a right which came into being prior to the entry into force of this Law, and where the event which under this Law determines the beginning of the term of protection occurred prior to the entry into force of this Law, such term shall be calculated as from the entry into force of this Law. However, protection shall lapse not later than on expiration of the duration of protection under the earlier provisions.

Article 136 Reproduction and Distribution

(1) Where reproduction is permissible under the earlier provisions, but prohibited under this Law, any making of copies of such reproduction commenced prior to the entry into force of this Law may be completed.

(2) Any copies made pursuant to paragraph (1) or prior to the entry into force of this Law may be distributed.

(3) If equitable remuneration is to be paid under this Law to the right holder for a reproduction which would have been free under the earlier provisions, the copies referred to in paragraph (2) may be distributed without payment of remuneration.

Article 137 Transfer of Rights

(1) If copyright has been transferred prior to the entry into force of this Law, the transferee shall enjoy the corresponding exploitation rights (Article 31). However, transfer shall not be deemed in doubt to extend to rights first established by this Law.

(2) If copyright has been transferred in whole or in part to another person prior to the entry into force of this Law, the transfer shall also extend in doubt to the period of time by which the duration of copyright was extended under Articles 64 to 66. The same shall apply if, prior to the entry into force of this Law, another person has been authorized to exercise one of the rights afforded to the author.

(3) In the cases referred to in paragraph (2), the transferee or the person receiving authorization shall pay to the transferor or the person giving authorization an equitable remuneration if it is to be assumed that the latter would have obtained higher remuneration for the transfer or authorization if the extended term of protection had already been stipulated at that time.

(4) The claim to remuneration shall fall away if, as soon as it is asserted the transferee places the right at the disposal of the alien or for the time following expiry of the hitherto stipulated duration of protection or the person receiving authorization waives such authorization for that period of time. If the acquirer has further alienated the copyright prior to the entry into force of this Law, the remuneration shall not be payable if it would constitute an undue burden on the acquirer in view of the circumstances of the further alienation.

(5) Paragraph (1) shall apply to neighboring rights, mutatis mutandis.

Article 137a Photographic Works

(1) The provisions of this Law as regards the term of copyright shall also apply to those photographic works whose term of protection under prior law has not yet expired on July 1, 1985.

(2) Where a right of exploitation in a photographic work has been assigned or transferred to another person; such assignment or transfer shall not extend, in case of doubt, to the period of time by which the term of copyright in photographic works has been extended.

Article 137b Certain Editions

(1) The provisions of this Law concerning the term of protection under Articles 70 and 71 shall also be applied to scientific editions and posthumous editions where their term of protection under prior law has not yet expired on July 1, 1990.

(2) Where any right of exploitation in a scientific edition or a posthumous edition has been assigned or transferred to another person prior to July 1, 1990, the assignment or transfer shall also extend, in case of doubt, for the period of time by which the term of the neighboring right has been extended.

(3) The provisions of Article 137(3) and (4) shall apply mutatis mutandis.

Article 137c Performers

(1) The provisions of this Law concerning the term of protection under Article 82 shall also be applied to performances recorded on video or audio mediums prior to July 1, 1990, if on January 1, 1991, 50 years have not yet elapsed since publication of the recording. If the video or audio recording has not been published within that period of time, the period is to be calculated as from the performance. Protection under this Law shall in no event exceed 50 years after publication of the video or audio recording or, if the recording has not been published, 50 years after the performance.

(2) Where a right of exploitation in the performance has been assigned or transferred to another person prior to July 1, 1990, the assignment or transfer shall also extend, in case of doubt, to the period of time by which the term of protection has been extended.

(3) The provisions of Article 137(3) and (4) shall apply mutatis mutandis.

Article 137d Computer Programs

(1) The provisions of Section VIII of Part I shall also apply to computer programs created prior to June 24, 1993. However, the exclusive rental right (Article 69c, item 3) shall not extend to copies of a program acquired by others prior to January 1, 1993, for the purpose of rental.

(2) Article 69g(2) shall also apply to contracts concluded prior to June 24, 1993.

Article 137e Transitional provision in implementation of Directive 92/100/EEC

(1) The provisions of this Law entering into force on June 30, 1995 shall also apply to previously created works, performances, audio recordings, broadcasts and films, unless they are no longer protected at this time.

(2) If an original or copy of a work or a video or audio recording was acquired prior to June 30, 1995 or made available to a third party for the purposes of rental, the consent of the holder of the rental right (Articles 17, 75 (2) and Articles 85 and 94) shall be deemed to have been given with regard to rental after this time. The hirer shall pay in each case an equitable remuneration to these rightholders; Article 27 (1), second and third sentences, in respect of the rights of authors and performers and Article 27 (3) shall apply mutatis mutandis. Article 137d shall remain unaffected.

(3) If a video or audio recording which prior to June 30, 1995 was acquired or made available to a third party for the purposes of rental was rented between July 1, 1994 and June 30, 1995, this rental shall be subject to a remuneration right, whereby paragraph (2), second sentence, shall apply mutatis mutandis.

(4) If an author has granted an exclusive distribution right prior to June 30, 1995, the grant shall also apply to the rental right. If a performer has participated prior to this date in the production of a cinematographic work, or consented to the use of his performance for the production of a cinematographic work, his exclusive rights shall be deemed to have been assigned to the film producer. If prior to this date he has consented to the fixation of his performance on a audio recording and to reproduction, consent shall also be deemed to constitute assignment of the distribution right, including rental.

Article 137f Transitional provision in implementation of Directive 93/98/EEC

(1) If by application of this Law in the version applicable from July 1, 1995 the duration of a previously accrued right were to be reduced, protection shall expire on expiry of the term of protection pursuant to the provisions applicable prior to June 30, 1995. Furthermore, the provisions of this Law regarding the term of protection in the version applicable from July 1, 1995 shall also apply to works and related rights with regard to which protection did not yet expire on July 1, 1995.

(2) The provisions contained in the version of the Law applicable from July 1, 1995 shall also apply to works with respect to which protection pursuant to this Law expired prior to July 1, 1995, but which at this time still exists pursuant to the law of another Member State of the European Union or of another Contracting State of the Convention Concerning the European Economic Area. The first sentence shall apply mutatis mutandis to the related rights of the publisher of posthumous works (Article 71), of the performers (Article 73), of producers of audio recordings (Article 85), of broadcasting organizations (Article 87) and of producers of films (Articles 94 and 95).

(3) If protection of a work is resumed under paragraph (2) in the territory to which this Law applies, the author shall be entitled to the resumed rights. Exploitation commenced prior to July 1, 1995 may however be continued in the framework provided for. An equitable remuneration shall be paid for exploitation from July 1, 1995. The first to third sentences shall apply mutatis mutandis to related rights.

(4) If prior to July 1, 1995 an exploitation right concerning the subject-matter of a neighbouring right remains protected under this Law has been granted or assigned to another, in cases of doubt the grant or assignment shall also cover the period by which the term of protection has been extended. In the case of the first sentence, equitable remuneration shall be afforded.

Article 137g Transitional provision in implementing Directive 96/9/EC

(1) Article 23 second sentence, Article 53 (5), Article 55a and Article 63 (1) second sentence shall also apply to database works created prior to 1 January 1998.

(2) The provisions contained in Section VI of Part II shall also apply to databases created between 1 January 1983 and 31 December 1997. The term of protection in such cases shall commence on 1 January 1998.

(3) Article 55a and Article 87e shall not apply to contracts concluded before 1 January 1998.

Article 137h Implementation of Directive 93/83/EEC

(1) The provision in article 20a shall apply only from January 1, 2000 to agreements that were concluded before June 1, 1998 if they expire after the former date.

(2) If a contract concerning co-production of a video or audio recording, concluded between two or more co-producers before June 1, 1998, of whom at least one is a national of a Member State of the European Union or of a Contracting State of the Convention Concerning the European Economic Area, makes provision for division of the broadcasting according to broadcast by satellite or other kinds of broadcast, and if the broadcast by satellite of the co-production by one producer would prejudice exploitation of the exclusive rights of another producer in a given territory or language, the broadcast by satellite shall be permissible only with the consent of the holder of these exclusive rights.

(3) The provision in Article 20b(2) shall be applied only if the contract granting the right of cable retransmission was concluded after June 1, 1998.

Section III Final Provisions

Article 138 Register of Authors

(1) The Register of Authors for the entries set out in Article 66(2), second sentence, shall be kept at the Patent Office. The Patent Office shall effect the entries without verifying the applicant’s entitlement or the accuracy of the information submitted for entry.

(2) If entry is refused, the applicant may petition for a decision by the courts. The petition shall be heard by the Provincial High Court having jurisdiction for the district in which the Patent Office has its heardquarters and which shall give a reasoned decision. The petition shall be made in writing to the Provincial High Court. The decision of the Provincial High Court shall be final. In other respects, judicial procedure shall be governed by the provisions of the Law on Matters of Voluntary Jurisdiction. The court costs shall be governed by the Regulations on Costs; the fees shall be determined by Article 131 of the Regulations on Costs.

(3) The entries shall be published in the Bundesanzeiger. The cost of publication shall be paid in advance by the applicant.

(4) Any person may inspect the Register of Authors. Extracts from the Register shall be issued on request; when required, they shall be certified.

(5) The Federal Minister for Justice shall be empowered to issue statutory orders

1. regulating the form of the application and the maintenance of the Register of Authors;

2. ordering the imposition of charges (fees and expenses) to cover administrative costs relating to the entry, the issuing of a certificate of entry and the issuing of other extracts or their certification, and regulating matters concerning the party liable for costs, the time at which charges are due, the obligation of payment in advance, exemption from charges, limitation, the procedure for the fixing of charges, and legal remedies against the fixing of charges. The fee for an entry shall not exceed 30 German marks.

(6) Entries made with the Leipzig City Council under Article 56 of the Law on Copyright in Works of Literature and Music of June 19, 1901, shall remain effective.

Article 139-141 Amending and Repealing Provisions

(irrelevant)

Article 142 Application in Land Berlin

(irrelevant)

Article 143 Entry Into Force

(1) Articles 64 to 67, 69, 105(1) to (3) and 138(5) shall enter into force on the day following promulgation of this Law.

(2) All other provisions of this Law shall enter into force on January 1, 1966.


Annex (to Article 54d(1) of the Copyright Law)
Rates of Remuneration

I. Remuneration under Article 54(1):

The remuneration due to all owners of rights shall be

1. for each audio recording appliance 2.50 DM
2. for each video recording appliance with or without audio recording 18.00 DM
3. in respect of audio recording mediums, for each hour of playing time in normal utilization 0.12 DM
4. in respect of video recording mediums, for each hour of playing time in normal utilization 0.17 DM
5. for each audio and video recording appliance for whose operation separate mediums are not required (items 3 and 4) twice the remuneration rates under items 1 and 2

II. Remuneration under Article 54a(1) and (2):

1. Remuneration due to all owners of rights under Article 54a(1) shall be, for each reproduction appliance with a capacity of

from 2 to 12 copies a minute 75 DM
from 13 to 35 copies a minute 100 DM
from 36 to 70 copies a minute 150 DM
more than 70 copies a minute 600 DM
2. Remuneration due to all owners of rights under Article 54a(2) shall be, for each DIN A4 page of photocopying

(a) for photocopies made exclusively from books approved by a provincial authority as school books and intended for school use 0.05 DM
(b) for all other photocopies 0.02 DM
3. For reproduction appliances with which polychrome photo-copies can be made and for polychrome photocopies, the rate of remuneration shall be double.
4. These rates of remuneration shall be applied mutatis mutandis to other reproduction processes having a comparable effect.

Securities Trading Act (Gesetz über den Wertpapierhandel/ Wertpapierhandelsgesetz – WpHG)

As promulgated on 9 September 1998 (Federal Law Gazette I p. 2708), as last amended by Article 2 of the Law Implementing the EC Deposit Guarantee Directive and Investor Compensation Directive of 16 July 1998 (Federal Law Gazette I p. 1842)


Table of Contents

Part 1 Scope and definitions

Section 1 Scope
Section 2 Definitions
Section 2a Exceptions

Part 2 Federal Securities Supervisory Office

Section 3 Organisation
Section 4 Functions
Section 5 Securities Council
Section 6 Cooperation with domestic supervisory authorities
Section 7 Cooperation with competent authorities in other countries
Section 8 Obligation to observe secrecy
Section 9 Reporting requirements
Section 10 Means of enforcement
Section 11 Allocation of costs and costs

Part 3 Insider surveillance

Section 12 Insider securities
Section 13 Insiders
Section 14 Prohibition of insider dealing
Section 15 Publication and disclosure of price-sensitive information
Section 16 Regular monitoring
Section 16a Monitoring of the transactions effected by the persons employed in the Federal Supervisory Office
Section 17 Processing and use of personal data
Section 18 Criminal proceedings in respect of insider offences
Section 19 International cooperation
Section 20 Exceptions

Part 4 Notification and disclosure requirements in the event of changes in the percentage of voting rights in listed companies

Section 21 Notification requirements applicable to the notifying party
Section 22 Additional counting of voting rights
Section 23 Discounting voting rights
Section 24 Notification by group member undertakings
Section 25 Disclosure obligations of the listed company
Section 26 Disclosure obligations of companies domiciled abroad
Section 27 Proof of notified holdings
Section 28 Loss of rights
Section 29 Powers of the Federal Supervisory Office
Section 30 Cooperation with competent authorities in other countries

Part 5 Rules of conduct for investment services enterprises; limitation of the right of action in respect of claims for compensation

Section 31 General rules of conduct
Section 32 Special rules of conduct
Section 33 Organisational requirements
Section 34 Requirements to keep and retain records
Section 34a Separate asset management
Section 35 Monitoring of the reporting requirements and the rules of conduct
Section 36 Examination of reporting requirements and rules of conduct
Section 36a Enterprises domiciled in another Member State of the European Union or in another Contracting State to the Agreement on the European Economic Area
Section 36b Advertising by investment services enterprises
Section 36c Cooperation with competent authorities in other countries
Section 37 Exceptions
Section 37a Limitation of the right of action in respect of claims for compensation

Part 6 Provisions on offences and fines

Section 38 Provisions on offences
Section 39 Provisions on fines
Section 40 Competent administrative authority
Section 40a Information in criminal cases

Part 7 Transitional provisions

Section 41 Initial notification and disclosure requirement
Section 42 Transitional provision concerning the obligation to reimburse costs pursuant to Section 11
Section 43 Transitional provision concerning the limitation of the right of action in respect of claims for compensation pursuant to section 37a


Part 1 Scope and definitions

Section 1 Scope

This Act shall apply to providing investment services and non-core investment services, to trading in securities, money-market instruments and derivatives on and off stock exchanges and to changes in the percentage of voting rights held by shareholders of listed companies.

Section 2 Definitions

(1) Securities within the meaning of this Act, whether or not represented by an instrument, are

1. shares, certificates representing shares, bonds, participation certificates, warrants and

2. other securities which are comparable to shares or bonds,

if they can be traded on a market.

Securities are also units which are issued by a German investment company or a foreign investment company.

(1a) Money-market instruments within the meaning of this Act are receivables which do not come under the provisions of paragraph (1) above and are usually traded in the money market.

(2) Derivatives within the meaning of this Act are

1. forward transactions in the form of firm transactions or options transactions whose price directly or indirectly depends on

a) the exchange or market price of securities,

b) the exchange or market price of money-market instruments,

c) interest rates or other returns, or

d) the exchange or market price of goods or precious metals,

2. forward exchange transactions (Devisentermingeschäfte) which are effected on an organised market (foreign exchange futures transactions/Devisenfuturegeschäfte), foreign exchange option transactions (Devisenoptionsgeschäfte), currency swap transactions (Währungsswapgeschäfte), foreign exchange swap option transactions (Devisenswapoptionsgeschäfte), or foreign exchange futures option transactions (Devisenfutureoptionsgeschäfte).

(3) Investment services within the meaning of this Act are

1. the purchase and sale of securities, money-market instruments or derivatives in one’s own name for the account of a third party,

2. the purchase and sale of securities, money-market instruments or derivatives by way of own trading on behalf of a third party,

3. the purchase and sale of securities, money-market instruments or derivatives in the name and for the account of a third party,

4. the arrangement of or information on transactions on the purchase and sale of securities, money-market instruments or derivatives,

5. the underwriting (firm commitment) of securities, money-market instruments or derivatives or the granting of similar guarantees,

6. the management of individual assets invested in securities, money-market instruments or derivatives on behalf of third parties with scope for decision.

(3a) Non-core investment services within the meaning of this Act are

1. the safekeeping and management of securities on behalf of third parties, provided the German Safe Custody Act does not apply,

2. the granting of credits or loans to others for the purpose of carrying out investment services by the enterprise that grants or has granted the credit or loan,

3. the giving of advice with respect to investments in securities, money-market instruments or derivatives,

4. the activities referred to in paragraph (3) numbers 1. to 4. in so far as they are concerned with foreign exchange transactions or forward exchange transactions that do not come under the provisions of paragraph 2 number 2. and are related to investment services.

(4) Investment services enterprises within the meaning of this Act are credit institutions, financial services institutions and enterprises operating under Section 53 paragraph (1) sentence 1 of the German Banking Act which provide investment services alone or in connection with non-core investment services on a commercial basis or to an extent that requires their provision on a commercial basis.

(5) An organised market within the meaning of this Act is a market which is regulated and supervised by state-approved bodies, is held on a regular basis and is directly or indirectly accessible to the public.

Section 2a Exceptions

(1) The following shall not be regarded as investment services enterprises:

1. enterprises which provide investment services solely for their parent enterprise or their subsidiaries or affiliated enterprises within the meaning of Section 1 paragraphs (6) and (7) of the German Banking Act,

2. enterprises which provide investment services that only involve the administration of employee-participation schemes of their own enterprises or enterprises associated with them,

3. enterprises which provide only investment services within the meaning of both numbers 1. and 2. above,

4. insurance undertakings under public or private law,

5. the public debt management of the Federation, one of its special funds, a Land, another Member State of the European Union or another Contracting State to the Agreement on the European Economic Area, the Deutsche Bundesbank or the central banks of the other Member States or Contracting States,

6. Members of independent professions who provide investment services only occasionally in the course of their professional activities and who are members of a professional organisation in the form of a corporate body under public law the professional rules and regulations of which do not exclude the provision of investment services,

7. enterprises which provide investment services that only consist in transmitting orders to purchase or to sell units of investment companies or foreign investment units which may be distributed under the Foreign Investment Act to

(a) credit institutions or financial services institutions,

(b) enterprises operating under Section 53 paragraph (1) sentence 1 or paragraph (7) of the German Banking Act,

(c) enterprises which by virtue of a regulation pursuant to Section 53 c of the German Banking Act are subjected to or exempted from the provisions of that Act,

(d) foreign investment companies,

provided they are not authorised to acquire ownership or obtain possession of money, units or shares of customers when providing such investment services,

8. enterprises which provide investment services solely on an organised market where only derivatives are traded on behalf of other members of such market and whose liabilities are covered by a system ensuring the settlement of the transactions effected on such market,

9. enterprises whose main business consists in effecting transactions in commodities with enterprises of the same kind or with the producers or professional users of such commodities and which provide investment services only to such counterparties and only in so far as this is necessary for their main business.

(2) If an enterprise provides investment services within the meaning of Section 2 paragraph (3) numbers 3. and 4. solely for the account and under the liability of a credit institution or financial services institution or of an enterprise operating under Section 53b paragraph (1) sentence 1 and paragraph (7) of the German Banking Act, or under the joint and several liability of such institutions or enterprises without providing any other investment services, it shall not be regarded as an investment services enterprise. Its business activities are attributed to the institutions or enterprises for the account and under the liability of which it provides its services.

Part 2 Federal Securities Supervisory Office

Section 3 Organisation

(1) The Federal Securities Supervisory Office (Federal Supervisory Office) is hereby established as an independent superior federal authority within the ambit of the Federal Ministry of Finance.

(2) The President of the Federal Supervisory Office shall be nominated by the Federal Government and appointed by the Federal President. In making its nomination the Federal Government shall consult the Länder ministries with responsibility for stock exchange matters.

Section 4 Functions

(1) The Federal Supervisory Office shall exercise supervision over securities trading in accordance with the provisions of this Act. The Federal Supervisory Office, as part of the functions assigned to it, shall counteract undesirable developments in securities trading which may adversely affect the orderly conduct of securities trading or provision of investment services or non-core investment services or which may result in serious disadvantages for the securities market. The Federal Supervisory Office may issue orders designed and necessary to eliminate or to prevent such undesirable developments.

(2) The Federal Supervisory Office shall perform the functions and exercise the powers assigned to it under this Act solely in the public interest.

Section 5 Securities Council

(1) A Securities Council comprising representatives of the Länder is hereby established within the Federal Supervisory Office. Membership shall not be held in a personal capacity. Each Land shall appoint one representative. Representatives of the Federal Ministries of Finance, Justice and Economics, the Deutsche Bundesbank and the Federal Banking Supervisory Office shall be entitled to attend meetings of the Securities Council. The Securities Council may consult experts, particularly from the stock exchanges, from among market participants, from business and from the academic world. The Securities Council shall draw up its own standing orders.

(2) The Securities Council shall assist with supervision. It shall advise the Federal Supervisory Office, in particular

1. on issuing regulations and establishing guidelines for the supervisory activity of the Federal Supervisory Office;

2. on the effects of supervisory issues on stock exchange and market structures and on competition in securities trading;

3. on the demarcation of responsibilities between the Federal Supervisory Office and the stock exchange supervisory authorities.

The Securities Council may submit proposals to the Federal Supervisory Office concerning the general development of supervisory practice. The Federal Supervisory Office shall report to the Securities Council at least once a year on its supervisory activities, on the development of supervisory practice and on international cooperation.

(3) The Securities Council shall be convened at least once a year by the President of the Federal Supervisory Office. It shall also be convened at the request of one third of its members. Any member shall be entitled to put forward proposals for consultation.

Section 6 Cooperation with domestic supervisory authorities

(1) The Federal Supervisory Office may enlist the services of other persons and institutions for the performance of its functions.

(2) The stock exchange supervisory authorities shall act on behalf of the Federal Supervisory Office in implementing urgent measures for monitoring the ban on insider dealing pursuant to Section 14 on the stock exchanges subject to their supervision. The details shall be regulated in an administrative agreement between the Federation and the Länder conducting stock exchange supervision.

(3) The Federal Banking Supervisory Office, the Federal Insurance Supervisory Office, the Deutsche Bundesbank, in so far as it makes any observations and findings, including personal data, in the course of its activities pursuant to the German Banking Act, the stock exchange supervisory authorities and the Federal Supervisory Office shall communicate to each other any observations and findings which may be of significance for the performance of their functions.

(4) The Deutsche Bundesbank shall inform the Federal Supervisory Office on request of any data communicated to it under Section 14 paragraph (1) of the German Banking Act in so far as this is necessary for the prosecution of prohibited insider dealing.

(5) For the performance of its functions the Federal Supervisory Office may, in an automated procedure, retrieve data stored with the Deutsche Bundesbank or the Federal Banking Supervisory Office pursuant to Sections 2 (b) and 14 paragraph (3) in connection with Section 19 paragraph (2), Section 24 paragraph (1) numbers 1. to 3., 6., 8. and 11. and paragraph (3), Section 32 paragraph (1) sentences 1 and 2 number 2. and 6. a) and b) of the German Banking Act. If data is retrieved from the Deutsche Bundesbank by the Federal Supervisory Office, the Deutsche Bundesbank shall, for the purpose of data protection control, record in every tenth case the time, the information that makes it possible to establish the data records retrieved as well as the person who is responsible for the retrieval. The recorded data may only be used for the purpose of data protection control, data security or for ensuring the proper functioning of the data processing equipment. The records shall be deleted at the end of the calendar year following the year in which they have been stored. If data is retrieved from the Federal Banking Supervisory Office sentences 2 and 4 above shall apply accordingly.

Section 7 Cooperation with competent authorities in other countries

(1) The Federal Supervisory Office shall handle cooperation with the competent authorities responsible for supervising stock exchanges or other securities or derivatives markets and for trading in securities, money-market instruments, derivatives or foreign exchange in other countries. This shall be without prejudice to the provisions of the Stock Exchange Act and the Prospectus Act relating to cooperation between stock exchange listing boards and similar bodies in other countries.

(2) Within the framework of cooperation with the authorities referred to in the first sentence of paragraph (1) above, the Federal Supervisory Office may communicate facts required for the supervision of stock exchanges or other securities or derivatives markets, of trading in securities, money-market instruments, derivatives or foreign exchange, of credit institutions, financial services institutions, investment companies, financial undertakings or insurance undertakings or for administrative or court proceedings connected with such supervision. In communicating facts, the Federal Supervisory Office shall specify the purpose for which such facts may be used. It shall be indicated to the recipient that the facts communicated, including personal data, may be processed or used only for the purpose for which they were communicated. No personal data shall be communicated if there is reason to assume that such communication is in contravention of the intent of a German statute. Moreover, no communication shall be made if it would be detrimental to interests of the person concerned which warrant protection, especially if the recipient country failed to guarantee an adequate standard of data protection.

(3) If facts are communicated to the Federal Supervisory Office by an authority in another country, such facts may be disclosed or used only in compliance with the purpose specified by that authority. The Federal Supervisory Office may communicate such facts to the stock exchange supervisory authorities and the market supervision units of the stock exchanges in compliance with the purpose specified.

(4) The above shall be without prejudice to provisions on international assistance in criminal matters.

Section 8 Obligation to observe secrecy

(1) Persons employed in the Federal Supervisory Office and persons commissioned in accordance with Section 6 paragraph (1) may not without authority disclose or use facts which have come to their knowledge in the course of their activities and which should be kept secret in the interests of a party subject to this Act or a third party, especially business and trade secrets and personal data, even if such persons have left such employment or their activities have ended. This shall also apply to other persons who learn of the facts referred to in the first sentence of this paragraph from official reports. It shall not constitute unauthorised disclosure or use within the meaning of the first sentence of this paragraph, in particular, if facts are communicated to

1. criminal prosecution authorities or courts responsible for cases involving criminal and administrative fines,

2. bodies entrusted by law or by order of public authorities with the supervision of stock exchanges, other securities or derivatives markets and for trading in securities, money-market instruments, derivatives or foreign exchange, of credit institutions, financial services institutions, investment companies, financial undertakings or insurance undertakings and persons commissioned by such bodies,

in so far as such bodies require the information for the performance of their functions. The secrecy requirements specified in the first sentence of this paragraph shall apply accordingly to persons employed by such bodies. If the body is located in another country, the facts may be communicated only if that body and the persons commissioned by it are subject to secrecy requirements comparable to those specified in the first sentence of this paragraph.

(2) The provisions of Sections 93, 97, 105 paragraph (1), 111 paragraph (5) in conjunction with Section 105 paragraph (1) and Section 116 paragraph (1) of the German Fiscal Code shall not apply to the persons referred to in the first or second sentence of paragraph (1) above in so far as they are acting to implement this Act. This shall not apply if the fiscal authorities require the information for implementing tax evasion proceedings and the taxation proceedings associated therewith, in the prosecution of which there is a pressing public interest. The foregoing sentence shall not apply if the facts in question were communicated to persons referred to in the first or second sentence of paragraph (1) above by a body in another country within the meaning of paragraph (1) sentence 3 number 2. above or by persons commissioned by that body.

Section 9 Reporting requirements

(1) Credit institutions, financial services institutions authorised to conduct trading for own account, enterprises domiciled in a state which is neither a member of the European Union nor a Contracting State to the Agreement on the European Economic Area operating under Section 53 paragraph (1) sentence 1 of the German Banking Act, and enterprises domiciled in Germany and admitted to trading on a German stock exchange shall be required to report to the Federal Supervisory Office not later than the next working day (other than a Saturday) after the conclusion of the transaction any transaction in securities or derivatives which are admitted to trading on an organised market in a Member State of the European Union or in another of the Contracting States to the Agreement on the European Economic Area or are traded on the free market (Freiverkehr) of a German stock exchange, if the transaction is concluded in connection with a securities service or for own account. The requirement pursuant to the first sentence of this paragraph shall also apply to the purchase or sale of rights to subscribe securities, in so far as these securities are to be traded on an organised market, and to transactions in shares and warrants in respect of which an application for admission to trading on an organised market or for admission to trading on the free market (Freiverkehr) has been made or publicly announced. The requirement pursuant to the first two sentences of this paragraph shall also apply to domestic entities which operate a system ensuring the settlement of transactions effected on an organised market in respect of their transactions. The requirements pursuant to the first two sentences of this paragraph shall also apply to undertakings domiciled abroad and authorised to trade on a German stock exchange in respect of transactions concluded by them on a German stock exchange or on the free market (Freiverkehr) in connection with a securities service or for own account.

(1a) Exempt from the requirement pursuant to paragraph 1 above are [German] building societies (Bausparkassen) within the meaning of Section 1 paragraph (1) of the Law on German Building Societies (Gesetz über Bausparkassen) and undertakings within the meaning of Section 2 paragraphs (1), (4) and (5) of the German Banking Act, if they are not admitted to trading on a German stock exchange, as well as housing cooperatives with a savings facility (Wohnungsgenossenschaften mit Spareinrichtung). The requirement pursuant to paragraph (1) above shall also not apply to transactions in units of German investment companies or foreign investment companies in respect of which a repurchase commitment of the companies exists, and to transactions in derivatives within the meaning of section 2 paragraph (2) number 1. b) and d).

(2) The report must be made on data media or by means of remote electronic data transmission. It must include the following information on each transaction:

1. Description of the security or derivative and securities identification number;

2. date and time of the transaction or the relevant price determination;

3. price, number and face value of the securities or derivatives;

4. the institutions and enterprises within the meaning of paragraph (1) above which were involved in the transaction;

5. the stock exchange or the stock exchange’s electronic trading system, if the transaction is concluded on a stock exchange;

6. a marker to identify the transaction.

Transactions for own account shall be identified separately.

(3) The Federal Ministry of Finance may, by ordinance not requiring the consent of the Bundesrat,

1. issue more detailed regulations on the content, nature, scope and form of the report and on permitted data media and means of transmission;

2. prescribe additional information in so far as this is needed for the performance of the supervisory functions of the Federal Supervisory Office;

3. permit reports by those subject to these requirements to be made, at their expense, by the stock exchange or by a suitable third party, and set out the relevant details;

4. in the case of transactions relating to bonds or certain types of derivatives permit the information specified in paragraph (2) above to be reported in summary form;

5. exempt institutions and enterprises within the meaning of paragraph (1) above from the reporting requirement pursuant to paragraph (1) above in the case of transactions concluded on an organised market in another Member State of the European Union or in another of the Contracting States to the Agreement on the European Economic Area, provided that there are equivalent reporting requirements in that State;

6. in the case of savings banks or credit cooperatives conducting transactions through a central giro institution, a cooperative central bank or a central credit institution permit the report required pursuant to paragraph (1) above to be made by such central giro institution, cooperative central bank or central credit institution, provided and to the extent that this does not detract from the intended purpose of the information requirement.

(4) The Federal Ministry of Finance may by ordinance delegate the authority pursuant to paragraph (3) above to the Federal Supervisory Office.

Section 10 Means of enforcement

The Federal Supervisory Office may ensure compliance with the orders which it issues within its legal powers by means of enforcement in accordance with the Law on the Enforcement of Administrative Decisions. It may also apply means of enforcement to public corporations. In derogation of Section 11 of the Law on the Enforcement of Administrative Decisions, the administrative fine may be imposed in an amount up to DM 100,000.

Section 11 Allocation of Costs and Costs1

(1) The costs of the Federal Supervisory Office shall be reimbursed to the Federation

1. in the amount of 68 per cent by credit institutions and enterprises operating under Section 53 paragraph (1) sentence 1 of the German Banking Act, provided that such credit institutions or enterprises are authorised to provide in Germany investment services within the meaning of Section 2 paragraph (3) numbers 1., 2., or 5. above;

2. in the amount of 4 per cent by official exchange brokers and other enterprises admitted to trading on a German stock exchange and which do not come under the provisions of number 1. above;

3. in the amount of 9 per cent by financial services institutions and enterprises operating under Section 53 paragraph (1) sentence 1 of the German Banking Act, provided that such financial services institutions or enterprises are authorised to provide in Germany investment services within the meaning of Section 2 paragraph (3) numbers 3., 4., or 6. above and do not come under the provisions of number 1. or 2. above;

4. in the amount of 9 per cent by issuers domiciled in Germany whose securities are admitted to trading on a German stock exchange or traded on the free market (Freiverkehr) with their consent.

In the case of numbers 1. and 2. of the first sentence above, the costs shall be allocated in proportion to the volume of transactions reported under Section 9 paragraph (1) above; here the number of transactions is relevant, whereas in case of bonds only a third of the transactions shall be taken into account. In the case of number 3. of the first sentence above, the costs shall be allocated in proportion to the result from ordinary business operations or, if proof is provided, in proportion to the gross proceeds from investment services or own account transactions. In the case of number 4. of the first sentence above, the costs shall be allocated to the issuers in proportion to the stock exchange turnover of their securities admitted to stock exchange trading or traded on the free market (Freiverkehr).

(2) The parties subject to the first sentence of paragraph (1) above and the German stock exchanges shall be obliged to furnish the Federal Supervisory Office on request with information on the volume of transactions, the result from ordinary business operations or the gross proceeds and the stock exchange turnover. The claims for reimbursement of costs shall be enforced by the Federal Supervisory Office in accordance with the provisions of the Law on the Enforcement of Administrative Decisions.

(3) Details of the imposition of cost allocations pursuant to paragraph (1) above and of their enforcement shall be set out by the Federal Ministry of Finance in ordinances not requiring the consent of the Bundesrat; the Federal Ministry of Finance may stipulate minimum amounts in such ordinances. The Federal Ministry of Finance may by ordinance delegate this authority to the Federal Supervisory Office.

(4) The costs incurred by the Federation from the audit pursuant to Section 35 paragraph (1) and Section 36 paragraph (4) shall be reimbursed separately by the enterprises concerned and shall be paid in advance if so requested by the Federal Supervisory Office.

Part 3 Insider surveillance

Section 12 Insider securities

(1) Insider securities are securities which are

1. admitted to official trading on a German stock exchange or traded on the free market (Freiverkehr), or

2. admitted to trading on an organised market in another Member State of the European Union or in another of the Contracting States to the Agreement on the European Economic Area.

Securities shall be deemed to be admitted to trading on an organised market or to be traded on the free market (Freiverkehr) if the application for such admission or such trading has been made or publicly announced.

(2) The following shall also be regarded as insider securities:

1. rights to subscribe for, acquire or dispose of securities;

2. rights to the payment of a differential amount calculated on changes in the value of securities;

3. forward contracts on a share or fixed-interest security index or forward interest-rate contracts (financial futures) and rights to subscribe for, acquire or dispose of financial futures in so far as such financial futures are concerned with securities or relate to an index which includes securities;

4. other forward contracts entailing a commitment to acquire or dispose of securities;

if the rights or forward contracts are admitted to trading on an organised market or are traded on the unofficial market in a Member State of the European Union or in another of the Contracting States to the Agreement on the European Economic Area and the securities referred to in numbers 1. to 4. above are admitted to trading on an organised market or are traded on the unofficial market in a Contracting State to the Agreement on the European Economic Area. The rights or forward contracts shall be deemed to be admitted to trading on an organised market or to be traded on the free market (Freiverkehr) if the application for such admission or such trading has been made or publicly announced.

Section 13 Insiders

(1) An insider is any person who

1. by virtue of his membership of the management or supervisory body of the issuer, or as a personally liable partner in the issuer or in an undertaking associated with the issuer,

2. by virtue of his holding in the capital of the issuer or of an undertaking associated with the issuer, or

3. by virtue of his profession, employment or duties in accordance with the regulations

possesses information which has not been made public relating to one or more issuers of insider securities, or to insider securities, which, if it were made public, would be likely to have a significant effect on the price of the insider security (inside information).

(2) An analysis based entirely on publicly-known information shall not be regarded as inside information, even if it may have a significant effect on the price of insider securities.

Section 14 Prohibition of insider dealing

(1) Insiders shall be prohibited from

1. taking advantage of their knowledge of inside information to acquire or dispose of insider securities for their own account or for the account or on behalf of a third party;

2. disclosing or making available inside information to a third party without authority to do so;

3. recommending a third party, on the basis of their knowledge of inside information, to acquire or dispose of insider securities.

(2) A third party who has knowledge of inside information shall be prohibited from taking advantage of that knowledge to acquire or dispose of insider securities for his own account or for the account or on behalf of others.

Section 15 Publication and disclosure of price-sensitive information

(1) An issuer of securities admitted to trading on a German stock exchange must immediately publish any information which comes within his sphere of activity and which is not publicly known if such information is likely because of the effect on the assets or financial position or the general trading position of the issuer to exert significant influence on the stock exchange price of the admitted securities or, in the case of listed bonds, might impair the issuer’s ability to meet his liabilities. The Federal Supervisory Office may on application by the issuer exempt the issuer from the publication requirement if publication of the information is likely to damage the legitimate interests of the issuer.

(2) Before publishing the information referred to in paragraph (1) above, the issuer shall notify

1. the management of the stock exchanges on which the securities are admitted to trading,

2. the management of the stock exchanges on which only derivatives within the meaning of Section 2 paragraph (2) are traded, in so far as the securities are the subject of such derivatives, and

3. the Federal Supervisory Office

of such information. The stock exchange management may use the information of which it has been notified before publication only for the purpose of deciding whether to suspend or to cancel the determination of stock exchange prices. The Federal Supervisory Office may permit issuers domiciled abroad to effect the notification pursuant to the first sentence of this paragraph together with the publication, provided this does not adversely affect the decision of the management on whether to suspend or cancel the determination of stock exchange prices.

(3) Publication pursuant to the first sentence of paragraph (1) above shall be effected in the German language

1. in at least one supra-regional official stock exchange gazette, or

2. by way of an electronic system for the dissemination of information which is broadly accessible to credit institutions, enterprises operating under Section 53 paragraph (1) sentence 1 of the German Banking Act, other enterprises domiciled in Germany which are admitted to trading on a German stock exchange and insurance undertakings.

The Federal Supervisory Office may permit issuers domiciled abroad to effect the publication in another language provided that sufficient information of the public does not seem to be endangered thereby. Publication in any other form may not be effected before publication pursuant to the first sentence of this paragraph. In the case of extensive information the Federal Supervisory Office may permit the publication of a summary in accordance with the first sentence of this paragraph if the complete information is available free of charge from the issuer’s paying agents and if this is indicated in the announcement.

(4) The issuer shall immediately forward the publication pursuant to the first sentence of paragraph (3) above to the management of the stock exchanges covered by paragraph (2) sentence 1 numbers 1. and 2. above and to the Federal Supervisory Office, provided the Federal Supervisory Office has not permitted pursuant to paragraph (2) sentence 3 above to make the notification under paragraph (2) sentence 1 above together with the publication.

(5) The Federal Supervisory Office may require the issuer to submit information and documents in so far as this is necessary to monitor compliance with the requirements set out in paragraphs (1) to (4) above. During normal business hours, employees of the Federal Supervisory Office and persons commissioned by it shall be permitted to enter the property and business premises of the issuer in so far as this is necessary for the fulfilment of the functions of the Federal Supervisory Office. Section 16 paragraphs (6) and (7) shall apply accordingly.

(6) If the issuer fails to comply with the requirements pursuant to paragraphs (1), (2) or (3) above it shall not be liable to compensate any third party for damage resulting from such non-compliance. Claims for compensation having other legal bases shall not be affected.

Section 16 Regular monitoring

(1) The Federal Supervisory Office shall monitor trading in insider securities on and off stock exchanges in order to prevent contraventions of the prohibitions specified in Section 14.

(2) If the Federal Supervisory Office has evidence indicating contravention of a prohibition specified in Section 14 it may require the investment services enterprises and enterprises domiciled in Germany and admitted to trading on a German stock exchange to furnish information on transactions in insider securities which they have concluded or arranged for their own account or for the account of others. The first sentence above shall apply accordingly to requests for information addressed to enterprises domiciled abroad and admitted to trading on a German stock exchange in respect of transaction concluded by them on a German stock exchange or on the free market (Freiverkehr). If so required by the Federal Supervisory Office, the party obliged to furnish information must identify the principal and the persons benefiting or incurring a liability from the transactions and indicate changes in the stock of insider securities, in so far as the transactions concern insider securities for which the evidence exists or whose price depends on such insider securities. If, on the basis of sentence 3 above, there is further evidence indicating contravention of a prohibition pursuant to Section 14, the Federal Supervisory Office may require the party obliged to furnish information to do so in respect of changes in the stock of insider securities of the principals, in so far as these changes occurred within the six months preceding the execution of the transaction in respect of which there is evidence indicating contravention of a prohibition pursuant to Section 14. Before executing orders relating to insider securities within the meaning of Section 12, enterprises referred to in the first sentence above are required to establish and record in the case of natural persons the name, the date of birth and the address and in the case of undertakings the firm and address of the principals and the persons or undertakings benefiting or incurring a liability form the transactions.

(3) As part of the requirement to furnish information in accordance with paragraph (2) above, the Federal Supervisory Office may require the submission of documents by the persons obliged to furnish information. During normal business hours, employees of the Federal Supervisory Office and persons commissioned by it shall be permitted to enter the property and business premises of the enterprises referred to in the first sentence of paragraph (2) above, in so far as this is necessary for the fulfilment of the functions of the Federal Supervisory Office. Outside normal business hours or if the business premises are located in residential property, entry shall be allowed without permission only to prevent substantial danger to public safety and order and in such case must be consented to. The inviolability of the home (Article 13 of the Basic Law) shall be restricted accordingly.

(4) If the Federal Supervisory Office has evidence indicating contravention of a prohibition specified in Section 14 it may require the issuers of insider securities and undertakings associated with the issuer which are domiciled in Germany or whose securities are admitted to trading on a German stock exchange and persons having knowledge of inside information to furnish details of and submit documents relating to inside information and of other persons who have knowledge of such information.

(5) Persons whose identity has been communicated pursuant to the third sentence of paragraph (2) above may be required by the Federal Supervisory Office to furnish information on such transactions.

(6) A person obliged to furnish information may refuse to do so in respect of any questions the answers to which would place himself or one of his relatives as designated in Section 383 paragraph (1) numbers 1 to 3 of the Code of Civil Procedure at risk of criminal prosecution or proceedings under the Law on Administrative Offences. Such person shall be informed of his right to refuse to furnish information.

(7) Objections to and actions to set aside measures in accordance with paragraphs (2) to (5) above shall have no suspensory effect.

(8) Enterprises referred to in the first sentence of paragraph (2) above may not inform the principals or the persons or undertakings benefiting or incurring a liability from the transactions of a request for information made by the Federal Supervisory Office pursuant to the first sentence of paragraph (2) above or of investigative proceedings instituted in consequence thereof.

(9) The records taken pursuant to the fourth sentence of paragraph (2) shall be retained for a period of at least six years. As regards the records to be retained, the provisions of Section 257 paragraphs (3) and (5) of the German Commercial Code shall apply accordingly.

Section 16a Monitoring of the transactions effected by the persons employed in the Federal Supervisory Office

(1) The Federal Supervisory Office must have adequate control procedures which are capable of countering any contravention of the prohibitions as set out in Section 14 by persons employed in the Federal Supervisory Office.

(2) The superior or the person commissioned by him may require the persons employed in the Federal Supervisory Office to furnish information and submit documents relating to transactions in insider securities which they have concluded for their own account or for the account or on behalf of a third party. The provisions of Section 16 paragraph (6) shall apply. Employees who in carrying out their official duties possess or may possess inside information in accordance with the regulations shall be obliged to immediately notify the superior or the person commissioned by him in writing of any transactions in insider securities which they have concluded for their own account or for the account or on behalf of a third party. The superior or the person commissioned by him shall name the employees designated in sentence 3 above.

Section 17 Processing and use of personal data

(1) The Federal Supervisory Office may store, alter and use personal data communicated to it pursuant to Section 16 paragraph (2) sentence 3 or Section 16a paragraph (2) sentence 1 or 3 only for the purpose of verifying whether a contravention of a prohibition pursuant to Section 14 has been committed and for the purpose of international cooperation in accordance with Section 19.

(2) Personal data which are no longer required for verification purposes or for complying with a request for information from a competent authority in another country in accordance with paragraph (1) above shall be deleted immediately.

Section 18 Criminal proceedings in respect of insider offences

The Federal Supervisory Office must report facts giving reason to suspect a criminal offence pursuant to Section 38 to the competent public prosecutor’s office. It may communicate to the public prosecutor’s office the personal data of persons suspected of the offence or persons who may be required to act as witnesses.

Section 19 International cooperation

(1) The Federal Supervisory Office shall communicate to the competent authorities of other Member States of the European Union or other Contracting States to the Agreement on the European Economic Area any information needed to monitor the prohibitions on insider dealing. It shall make use of the powers specified in Section 16 paragraphs (2) to (5) in so far as this is necessary to comply with requests for information from the competent authorities referred to in the first sentence of this paragraph.

(2) When information is communicated, the competent authorities within the meaning of the first sentence of paragraph (1) above shall be advised that, without prejudice to their obligations in judicial proceedings under criminal law concerned with contraventions of prohibitions of insider dealing, they may use the information received solely to monitor the prohibition of insider dealing or in the context of administrative or judicial proceedings relating thereto. The use of such information for other supervision purposes pursuant to the first sentence of Section 7 paragraph (2) or for related criminal prosecution matters or its forwarding to competent authorities of other countries for the purposes designated in the first sentence of this paragraph shall require the consent of the Federal Supervisory Office.

(3) The Federal Supervisory Office may refuse to communicate information

1. if communicating the information might adversely affect the sovereignty, security or public policy of the Federal Republic of Germany, or

2. if judicial proceedings have already been initiated in respect of the same facts or against the persons in question or if a final judgement has been passed.

(4) The Federal Supervisory Office, without prejudice to its obligations in judicial proceedings under criminal law concerned with contraventions of prohibitions of insider dealing, may use information received from the competent authorities within the meaning of the first sentence of paragraph (1) above solely to monitor the prohibition of insider dealing or in the context of administrative or judicial proceedings relating thereto. The use of such information for other supervision purposes pursuant to the first sentence of Section 7 paragraph (2) or for related criminal prosecution matters or its forwarding to competent authorities of other countries for the purposes designated in the first sentence of this paragraph shall require the consent of the authorities communicating the information.

(5) The Federal Supervisory Office may cooperate with the competent authorities of countries other than those referred to in the first sentence of paragraph (1) above to monitor the prohibitions of insider dealing pursuant to Section 14 and the respective prohibitions of other countries and may communicate information to those authorities in accordance with Section 7 paragraph (2). The second sentence of paragraph (1) above shall be applied accordingly.

Section 20 Exceptions

The provisions of this Part shall not apply to transactions carried out in pursuit of monetary, exchange rate or public debt management policies by the Federation, one of its special funds, a Land, the Deutsche Bundesbank, a foreign State or its central bank or other body commissioned to conduct such transactions or with any person acting for their account.

Part 4 Notification and disclosure requirements in the event of changes in the percentage of voting rights in listed companies

Section 21 Notification requirements applicable to the notifying party

(1) Any person (the notifying party) whose shareholding in a listed company reaches, exceeds or falls short of 5 per cent, 10 per cent, 25 per cent, 50 per cent or 75 per cent of the voting rights by purchase, sale or by any other means shall immediately, and at the latest within seven calendar days, notify the company and the Federal Supervisory Office in writing of having reached, exceeded or fallen short of the above-mentioned thresholds and of the size of his percentage of the voting rights, by indicating his address and the day on which he has reached, exceeded or fallen short of the respective threshold. The notification period shall begin at the time when the notifying party learns or in consideration of the circumstances must have learnt that his percentage of the voting rights has reached, exceeded or fallen short of the above-mentioned thresholds.

(1a) Any person who, at the time when the shares of a company domiciled in Germany are admitted for the first time to trading on a stock exchange in a Member State of the European Union or in another of the Contracting States to the Agreement on the European Economic Area, holds 5 per cent or more of the voting rights in such company, shall notify the company and the Federal Supervisory Office pursuant to the first sentence of paragraph (1) above.

(2) Listed companies within the meaning of this Part are companies domiciled in Germany whose shares are admitted to trading on a stock exchange in a Member State of the European Union or in another Contracting State to the Agreement on the European Economic Area.

Section 22 Additional counting of voting rights

(1) For the notification requirements under Section 21 paragraphs (1) and (1a) there shall be deemed equivalent to the voting rights of the notifying party those voting rights arising from shares in the listed company

1. which belong to a third party and are held by that party for the account of the notifying party or an undertaking controlled by him;

2. which belong to an undertaking controlled by the notifying party;

3. which belong to a third party with whom the notifying party or an undertaking controlled by him has concluded an agreement committing both parties to pursue in the long term common objectives in respect of the management of the listed company by exercising their voting rights in concert;

4. which the notifying party has assigned as security to a third party, unless such third party is authorised to exercise the voting rights arising from those shares and states his intention of so doing;

5. in which a usufruct is created in favour of the notifying party;

6. in respect of which the notifying party or an undertaking controlled by him may demand a transfer of title;

7. which are entrusted to the notifying party for safekeeping in so far as he may exercise the voting rights arising therefrom at his own discretion in the absence of special instructions from the shareholder.

(2) The voting rights to be counted additionally shall be indicated separately in the notifications pursuant to Section 21 paragraphs (1) and (1a) for each of the numbers in paragraph (1) above.

(3) A controlled undertaking is an undertaking in which the notifying party directly or indirectly

1. holds a majority of the voting rights of the shareholders or partners;

2. by virtue of being a shareholder or partner is entitled to appoint or dismiss a majority of the members of the administrative, management or supervisory bodies, or

3. by virtue of being a shareholder or partner alone holds a majority of the voting rights on the basis of an agreement with other shareholders or partners of that undertaking.

Section 23 Discounting voting rights

(1) The Federal Supervisory Office may, on receipt of an application in writing to do so, permit the notifying party to discount voting rights arising from shares in the listed company when calculating the percentage of voting rights if the applicant

1. is an undertaking providing investment services which is authorised to trade on a stock exchange in a Member State of the European Union or in another Contracting State to the Agreement on the European Economic Area;

2. holds or intends to hold the shares in question in its trading portfolio, and

3. can show that the intention in purchasing the shares is not to exercise influence over the management of the company.

(2) On receipt of an application in writing from an undertaking domiciled in a Member State of the European Union or in another Contracting State to the Agreement on the European Economic Area which fails to meet the requirements of paragraph (1) number 1. above, the Federal Supervisory Office may permit voting rights arising from shares in the listed company to be discounted for the notifying threshold of 5 per cent if the applicant

1. holds or intends to hold the shares in question in order to realise short-term gain from existing or expected differences between the purchase and the sale price, and

2. can show that the intention in purchasing the shares is not to exercise influence over the management of the company.

(3) When auditing the annual financial statements of an undertaking which has been granted an exemption pursuant to paragraph (1) or (2) above, the auditor shall be obliged to note in a separate certificate whether the undertaking has complied with the provisions of paragraph (1) number 2. or paragraph (2) number 1 above and to submit this certificate together with the annual financial statements to the statutory representatives of the undertaking. The undertaking shall be obliged to submit the auditor’s certificate without delay to the Federal Supervisory Office. If the obligations pursuant to the first or second sentence of this paragraph are not complied with, the Federal Supervisory Office may, in addition to the possibility of revocation under the provisions of the Law on Administrative Procedures, revoke an exemption granted pursuant to paragraph (1) or (2) above. If the exemption is cancelled or revoked, the undertaking may make renewed application for exemption at the earliest three years after such cancellation or revocation has taken effect.

(4) Voting rights which are discounted on the basis of an exemption in accordance with paragraph (1) or (2) above may not be exercised if, were they to be taken into account, a notification requirement pursuant to Section 21 paragraph (1) or (1a) would exist.

Section 24 Notification by group member undertakings

If the notifying party belongs to a group for which consolidated accounts must be drawn up in accordance with Sections 290 and 340i of the German Commercial Code, the notification requirements specified in Section 21 paragraphs (1) and (1a) may be met by the parent undertaking or, if the parent undertaking is itself a subsidiary, by its parent undertaking.

Section 25 Disclosure obligations of the listed company

(1) The listed company must publish a notification made in accordance with Section 21 paragraphs (1) and (1a) immediately, at the latest within nine calendar days of its receipt, in the German language in at least one supra-regional official stock exchange gazette. The notifying party shall be identified in the announcement by name or business name and state in which the registered office is situated or registered office. In respect of companies which purchase or sell their own shares sentences 1 and 2 shall apply accordingly provided that, in derogation of sentence 1, a statement is published the content of which shall be determined by Section 21 and the publication is made not later than nine calendar days after the thresholds designated in Section 21 paragraph (1) sentence 1 have been reached, exceeded or fallen short of.

(2) If the shares of the listed company are admitted to official trading on a stock exchange in another Member State of the European Union or another Contracting State to the Agreement on the European Economic Area, the company must also publish the announcement pursuant to the first and second sentences of paragraph (1) above immediately, at the latest nine calendar days after receipt of the notification, in an official stock exchange gazette in that State or, where the law in that State provides for the public to be notified in another form, in that other form. The announcement must be worded in a language authorised in that State for use in such announcements.

(3) The listed company shall immediately forward to the Federal Supervisory Office documentary evidence of the announcement pursuant to paragraphs (1) and (2) above. The Federal Supervisory Office shall inform the stock exchanges referred to in paragraph (2) above of the announcement.

(4) The Federal Supervisory Office may, in response to a written request, release the listed company from the disclosure requirements under paragraphs (1) and (2) above if, after considering the circumstances, it takes the view that disclosure would be contrary to the public interest or would cause the company considerable damage, unless in the latter case non-disclosure may result in the public being misled about facts and circumstances which are essential for assessing the securities in question.

Section 26 Disclosure obligations of companies domiciled abroad

(1) If the percentage of voting rights held by a shareholder of a company domiciled abroad whose shares are admitted to trading on a German stock exchange reaches, exceeds or falls short of the thresholds referred to in the first sentence of Section 21 paragraph (1), the company shall be obliged, unless the requirements of paragraph (3) below are met, to publish this fact, together with the size of the shareholder’s percentage of voting rights, without delay and at the latest within nine calendar days in a supra-regional official stock exchange gazette. The period shall begin at the time when the company learns that the shareholder’s percentage of voting rights has reached, exceeded or fallen short of the thresholds referred to in the first sentence of Section 21 paragraph (1).

(2) Section 25 paragraph (1) sentence 2, paragraphs (3) and (4) shall apply accordingly to the announcements pursuant to paragraph (1) above.

(3) Companies domiciled in a Member State of the European Union or in another Contracting State to the Agreement on the European Economic Area whose shares are admitted to official trading on both a stock exchange in the State of domicile and a German stock exchange must publish announcements prescribed by the law of the State of domicile on the basis of Article 10 of Council Directive 88/627/EEC of 12 December 1988 on the information to be published when a major holding in a listed company is acquired or disposed of (OJ EC No L 348, p. 62) in Germany in the German language in a supra-regional official stock exchange gazette.

Section 27 Proof of notified holdings

Any person having made a notification pursuant to Section 21 paragraph (1) or (1a) must prove the existence of the notified holding if requested to do so by the Federal Supervisory Office or the listed company.

Section 28 Loss of rights

Voting rights arising from shares which are held by or counted for a notifying party pursuant to Section 22 paragraph (1) number 1. or 2. may not be exercised in the period during which the notification requirements pursuant to Section 21 paragraph (1) or (1a) are not met. This shall not apply to claims under Section 58 paragraph (4) and Section 271 of the German Companies Act provided the notification was not been deliberately omitted and has been made afterwards.

Section 29 Powers of the Federal Supervisory Office

(1) The Federal Supervisory Office may require the listed company and its shareholders and former shareholders as well as investment services enterprises to furnish information and submit documents, in so far as this is necessary for monitoring compliance with the requirements set out in this Part. The powers conferred pursuant to the foregoing sentence shall also apply in respect of persons and undertakings whose voting rights are to be counted additionally in accordance with Section 22 paragraph (1). The provisions of Section 16 paragraph (6) shall apply.

(2) The Federal Supervisory Office may establish guidelines which it shall use, in normal cases, to judge whether the conditions for a notification procedure or an exemption from the notification requirements pursuant to Section 21 paragraph (1) have been met. The guidelines shall be published in the Federal Official Gazette.

(3) The Federal Supervisory Office may make the notifications pursuant to Section 25 paragraphs (1) and (2) at the expense of the listed company if that company fails to comply with the disclosure requirement or complies with it incorrectly, incompletely or not in the prescribed form.

Section 30 Cooperation with competent authorities in other countries

(1) The Federal Supervisory Office shall cooperate with the competent authorities of the other Member States of the European Union, the other Contracting States to the Agreement on the European Economic Area and also, in the cases specified in numbers 1. to 4. below, the corresponding authorities of other States in order to ensure, in particular, that

1. notifying parties who are resident, domiciled or ordinarily resident in one of those States duly comply with the notification requirements;

2. listed companies duly comply with the disclosure requirement pursuant to Section 25 paragraph (2);

3. parties who are required by the regulations of another Member State of the European Union or another Contracting State to the Agreement on the European Economic Area to make notifications in that State and who are resident, domiciled or ordinarily resident in Germany duly comply with the notification requirements;

4. companies domiciled abroad whose shares are admitted to official trading on a German stock exchange duly comply with the disclosure requirements in Germany.

(2) The Federal Supervisory Office may communicate facts including personal data to the competent authorities of the other Member States or Contracting States, in so far as this is necessary for monitoring compliance with the notification and disclosure requirements. When information is communicated, the competent authorities shall be advised that, without prejudice to their obligations in judicial proceedings under criminal law concerned with contraventions of notification or disclosure requirements, they may use the facts including personal data received solely to monitor compliance with these requirements or in the context of administrative or judicial proceedings relating thereto.

(3) In the case of paragraph (1) number 3. above, the Federal Supervisory Office shall have the powers conferred under Section 29 paragraph (1).

Part 5 Rules of conduct for investment services enterprises; limitation of the right of action in respect of claims for compensation

Section 31 General rules of conduct

(1) Investment services enterprises shall be required

1. to provide investment services and non-core investment services with the requisite degree of expertise, care and conscientiousness in the interests of their customers;

2. to endeavour to avoid conflicts of interest and to ensure that in the event of unavoidable conflicts of interest customers’ orders are executed with due regard to customers’ interests.

(2) They shall further be required

1. to demand from their customers particulars of their experience or knowledge of transactions intended to be the subject of investment services or non-core investment services, of the aims they pursue with those transactions and of their financial situation;

2. to furnish their customers with all pertinent information,

in so far as this is necessary to protect their customers’ interests and with regard to the type and scope of the intended transactions. The customers are not obliged to furnish information if so requested pursuant to sentence 1 number 1 above.

(3) Paragraphs (1) and (2) above shall also apply to enterprises domiciled abroad which provide investment services or non-core investment services for customers having their habitual place of residence or registered office in Germany, provided that the investment services or non-core investment services and related ancillary services are not provided exclusively abroad.

Section 32 Special rules of conduct

(1) Investment services enterprises or related enterprises may not

1. advise customers of the investment services enterprise to purchase or sell securities, money-market instruments or derivatives if and to the extent that such advice is not in conformity with the customers’ interests;

2. advise customers of the investment services enterprise to purchase or sell securities, money-market instruments or derivatives in order to cause prices to move in a specific direction for the purpose of transactions for own account of the investment services enterprise or a related enterprise;

3. in cognisance of an order of a customer of the investment services enterprise to purchase or sell securities, money-market instruments or derivatives, conclude transactions for own account which could place that customer at a disadvantage.

(2) The proprietors of an investment services enterprise carried on in the form of a sole proprietorship, in the case of other investment services enterprises the persons empowered by law or by the articles of partnership to conduct the business of and to represent the enterprise, and the employees of an investment services enterprise who are entrusted with concluding transactions in securities, money-market instruments or derivatives, conducting securities analysis or giving investment advice, may not

1. advise customers of the investment services enterprise to purchase or sell securities, money-market instruments or derivatives under the conditions of paragraph (1) number 1. above or in order to cause the prices of securities, money-market instruments or derivatives to move in a specific direction for the purpose of transactions for own account or on behalf of third parties;

2. in cognisance of an order of a customer of the investment services enterprise to purchase or sell securities, money-market instruments or derivatives, conclude transactions for own account or on behalf of a third party which could place that customer at a disadvantage.

(3) Subject to the conditions set out in Section 31 paragraph (3), paragraphs (1) and (2) above shall also apply to enterprises domiciled abroad.

Section 33 Organisational requirements

(1) Investment services enterprises

1. shall be obliged to maintain and use effectively the resources and procedures required for the proper conduct of the investment service and non-core investment service;

2. must be organised in such a way that in providing the investment service and non-core investment service conflicts of interest between the investment services enterprise and its customers or between different customers of the investment services enterprise are kept to the unavoidable minimum;

3. must have adequate internal control procedures which are capable of countering any infringement of the requirements set out in this Act.

(2) Areas which are important for the provision of investment services or non-core investment services may only be outsourced to another undertaking if this does neither adversely affect the proper conduct of such services, nor the fulfilment of the duties pursuant to paragraph (1) above, nor the respective examination rights and control powers of the Federal Supervisory Office. In particular, the investment services enterprise is required to secure for itself by way of contract the necessary discretionary powers and to include the outsourced areas in its internal control mechanisms.

Section 34 Requirements to keep and retain records

(1) In carrying out investment services investment services enterprises shall be obliged to keep a record of

1. the order and pertinent instructions of the customer as well as the execution of the order, and

2. the name of the employee who accepted the customer’s order and the time at which the order was given and executed,

3. the commissions and fees the customer is charged for the order,

4. the instructions of the customer as well as the placement of the order with another investment services enterprise, in so far as asset management within the meaning of Section 2 paragraph (3) number 6. is concerned,

5. the placement of an order for own account with another investment services enterprise, in so far as the transaction is not subject to the reporting requirement pursuant to Section 9 above; orders for own account shall be indicated separately.

(2) The Federal Ministry of Finance may, by ordinance not requiring the consent of the Bundesrat and after consulting the Deutsche Bundesbank, require investment services enterprises to keep additional records in so far as such records are necessary for the monitoring by the Federal Supervisory Office of compliance with the requirements imposed on investment services enterprises. The Federal Ministry of Finance may by ordinance delegate this authority to the Federal Supervisory Office.

(3) The records specified in paragraphs (1) and (2) above shall be retained for a minimum period of six years. Section 257 paragraphs (3) and (5) of the German Commercial Code shall apply accordingly to the retention of the records.

Section 34a Separate asset management

(1) Investment services enterprises which are no deposit-taking credit institutions within the meaning of the first sentence of Section 1 paragraph (3d) of the German Banking Act shall immediately hold in safe custody client money which they accept in connection with an investment service or non-core investment service and which they use in their own name and for the account of their customers, keeping it separately from the money of the enterprise and from other clients’ money in a trustee account with a credit institution authorised to conduct deposit-taking business in Germany or a suitable credit institution domiciled abroad and authorised to conduct deposit-taking business. Before taking the money in safe custody the investment services enterprise shall disclose to the credit institution that the money is deposited for the account of a third party. It shall immediately inform the customer of the account in which the client money is deposited and of whether the credit institution with which the client money is held belongs to an institution designed to protect the claims of depositors and investors as well as of the extent to which the client money is protected by such institution.

(2) Investment services enterprises which are not authorised to conduct deposit-taking business within the meaning of Section 1 paragraph (1) sentence 2 number 5 of the German Banking Act shall immediately pass on for safe custody securities which it accepts in connection with an investment service or non-core investment service to a credit institution authorised to conduct deposit-taking business in Germany or to a credit institution domiciled abroad which is authorised to conduct deposit-taking business and with which the customer is granted a legal status equivalent to that under the German Safe Custody Act. The third sentence of paragraph (1) shall apply accordingly.

(3) The Federal Ministry of Finance may, by ordinance not requiring the consent of the Bundesrat, issue more detailed provisions on the extent of the obligations pursuant to paragraphs (1) and (2) above in order to protect the customers’ money or securities entrusted to an investment services enterprise. The Federal Ministry of Finance may by ordinance delegate this authority to the Federal Supervisory Office.

Section 35 Monitoring of the reporting requirements and the rules of conduct

(1) The Federal Supervisory Office may require the investment services enterprises, the related enterprises and the persons designated in Section 32 paragraph (2) before number 1 above to furnish information and submit documents and also conduct examinations without immediate cause, in order to monitor compliance with the requirements set out in this Part. The provisions of Section 16 paragraph (6) shall apply. During normal business hours, employees of the Federal Supervisory Office and the persons commissioned by it shall be permitted to enter the property and business premises of the investment services enterprises and related enterprises in so far as this is necessary for the fulfilment of the functions of the Federal Supervisory Office set out in this Part.

(2) The Federal Supervisory Office may also require enterprises domiciled abroad which provide investment services for customers having their habitual place of residence or registered office in Germany, provided that the investment services and related non-core investment services are not provided exclusively abroad, to furnish information and submit documents, in order to monitor compliance with the requirements set out in this Part.

(3) The Federal Supervisory Office may also require any credit institutions, financial services institutions and enterprises operating under Section 53 paragraph (1) sentence 1 of the German Banking Act which can be assumed to provide investment services to furnish information on business matters, in particular on the nature and scope of their business, and to submit documents, in order to monitor compliance with the requirements set out in this Part. The first and third sentences of paragraph (1) above shall apply accordingly.

(4) The powers pursuant to paragraph (1) above shall also be conferred to the Federal Supervisory Office for the purpose of monitoring the reporting requirements pursuant to Section 9 above in respect of the enterprises designated in the first, third and fourth sentences of Section 9 paragraph (1) above. The provisions of Section 16 paragraph (6) shall apply.

(5) Objections to and actions to set aside measures in accordance with paragraphs (1), (3) and (4) above shall have no suspensory effect.

(6) The Federal Supervisory Office may establish guidelines which it shall use, in normal cases, to judge whether the requirements pursuant to Sections 31 to 33 have been met. The Deutsche Bundesbank, the Federal Banking Supervisory Office and the central associations of the economic sectors concerned shall be consulted before the guidelines are issued. Guidelines relating to Section 33 shall be issued in consultation with the Federal Banking Supervisory Office. The guidelines shall be published in the Federal Official Gazette.

Section 36 Examination of reporting requirements and rules of conduct

(1) Without prejudice to Section 35 above, compliance with the reporting requirements pursuant to Section 9 above and with the requirements set out in this Part shall be examined once a year by a suitable auditor. The investment services enterprise shall appoint the auditor not later than by the end of the business year to which the examination relates. In the case of credit institutions which are members of a cooperative auditing association (genossenschaftlicher Prüfungsverband) or which are audited by the auditing body (Prüfungsstelle) of a savings banks and giro association (Sparkassen- und Giroverband), the examination shall be carried out by the competent auditing association or auditing body, in so far as this is provided for by the law of the respective Land in the latter case. Suitable auditors are also German certified accountants (Wirtschaftsprüfer), German sworn auditors (vereidigte Buchprüfer) as well as German accounting and auditing firms (Wirtschaftsprüfungs- und Buchprüfungsgesellschaften) which have sufficient knowledge in respect of the subject matter to be examined. After conclusion of the examination, the auditor shall immediately file an examination report with the Federal Supervisory Office, the Federal Banking Supervisory Office and the Deutsche Bundesbank. In so far as the examinations are conducted by cooperative auditing associations or auditing bodies of savings banks and giro associations, the auditing associations or auditing bodies shall be required to file the examination report only upon request of the Federal Supervisory Office, the Federal Banking Supervisory Office or the Deutsche Bundesbank.

(2) Before appointing an auditor, the investment services enterprise shall notify the Federal Supervisory Office of the auditor. The Federal Supervisory Office may require to appoint another auditor within a month after having received the notification if this is deemed necessary to achieve the purpose of the examination; objections to and actions to set aside this measure shall have no suspensory effect. The Federal Supervisory Office shall inform the Federal Banking Supervisory Office of its decision. Sentences 1 to 3 above shall not apply to credit institutions which are members of a cooperative auditing association or are audited by an auditing body of a savings banks or giro association.

(3) The Federal Supervisory Office may make provisions in respect of the investment services enterprise relating to the content of the examination which the auditor is required to observe. In particular, it may determine main points of emphasis of the examination. The auditor shall immediately inform the Federal Supervisory Office of any serious contraventions of the reporting requirements pursuant to Section 9 above or of the requirements set out in this Part. The Federal Supervisory Office may participate in the examinations. To this purpose, the Federal Supervisory Office shall be notified in time of the start of the examination.

(4) In individual cases, the Federal Supervisory Office may conduct the examination pursuant to paragraph (1) above itself or through a person commissioned by it instead of the auditor. The investment services enterprise shall be notified thereof in time.

(5) The Federal Ministry of Finance may, by ordinance not requiring the consent of the Bundesrat, issue more detailed provisions on the nature, scope and timing of the examination pursuant to paragraph (1) above, in so far as this is necessary for the performance of the functions of the Federal Supervisory Office, and especially to counteract undesirable developments in securities, money-market instruments and derivatives business, to ensure compliance with the notification requirements pursuant to Section 9 and with the requirements set out in this Part and to obtain consistent records for this purpose. The Federal Ministry of Finance may by ordinance delegate this authority to the Federal Supervisory Office.

Section 36a Enterprises domiciled in another Member State of the European Union or in another of the Contracting States to the Agreement on the European Economic Area

(1) Enterprises domiciled in another Member State of the European Union or in another of the Contracting States to the Agreement on the European Economic Area, which provides investment services alone or in connection with non-core investment services and which intends to establish a branch in Germany or to provide investment services and non-core investment services to customers having their habitual place of residence or registered office in Germany, shall be notified by the Federal Supervisory Office within the period specified in Section 53b paragraph (2) sentence 1 of the German Banking Act of the reporting requirements pursuant to Section 9 above and of the obligations set out in this Part.

(2) If the Federal Supervisory Office finds that an enterprise within the meaning of paragraph (1) above which has a branch in Germany or which provides investment services or non-core investment services to customers designated in paragraph (1) above fails to comply with the reporting requirements pursuant to Section 9 or with the obligations set out in this Part, it shall require the enterprise to comply with its obligations within a period of time to be specified by the Federal Supervisory Office. If the company fails to comply with the request, the Federal Supervisory Office shall inform the competent authorities of the home Member State. The Federal Supervisory Office shall inform the Federal Banking Supervisory Office if the home Member State fails to take any measures or if the measures prove to be insufficient.

Section 36b Advertising by investment services enterprises

(1) In order to avoid irregularities in respect of the advertising of investment services and non-core investment services, the Federal Supervisory Office may prohibit certain types of advertising.

(2) Before general measures pursuant to paragraph (1) above are taken, the head associations of the industry concerned shall be heard.

Section 36c Cooperation with competent authorities in other countries

(1) The Federal Supervisory Office shall communicate to the competent authorities of the other Member States of the European Union or the other Contracting States to the Agreement on the European Economic Area any information which these authorities require for the supervision of compliance with the rules of conduct according to the provisions in force in such other Member State or Contracting State. It shall make use of the powers specified in Section 35 paragraph (1) above, in so far as this is necessary to comply with requests for information from the competent authorities referred to in the first sentence of this paragraph.

(2) When information is communicated, the competent authorities within the meaning of the first sentence of paragraph (1) above shall be advised that, without prejudice to their obligations in judicial proceedings under criminal law concerned with contraventions of rules of conduct, they may use the information received solely to monitor compliance with the rules of conduct or in the context of administrative or judicial proceedings relating thereto.

(3) The Federal Supervisory Office, without prejudice to its obligations in judicial proceedings under criminal law concerned with contraventions of rules of conduct, may use information received from the competent authorities within the meaning of the first sentence of paragraph (1) above solely to monitor compliance with the rules of conduct or in the context of administrative or judicial proceedings relating thereto. The use of such information for other supervision purposes pursuant to the first sentence of Section 7 paragraph (2) or for related criminal prosecution matters or its forwarding to competent authorities of other countries for the purposes designated in the first sentence of this paragraph shall require the consent of the authority communicating the information.

(4) The Federal Supervisory Office may cooperate with the competent authorities of countries other than those referred to in the first sentence of paragraph (1) above to monitor compliance with the rules of conduct pursuant to Sections 31 and 32 and the respective rules of conduct of other countries and may communicate information to those authorities in accordance with Section 7 paragraph (2). The second sentence of paragraph (1) above shall be applied accordingly.

Section 37 Exceptions

(1) The provisions of Sections 31, 32 and 34 shall not apply to transactions concluded on a stock exchange between two investment services enterprises and resulting in stock exchange prices. Investment services enterprises which conclude on a stock exchange a transaction acting as commission agents shall to that extent be subject to the requirements pursuant to Section 34.

(2) The provisions of Section 33 shall not apply to an investment services enterprise which concludes solely the transactions referred to in the first sentence of paragraph (1).

(3) Section 33 paragraph (1) numbers 2. and 3. and paragraph (2) as well as Sections 34 and 34a shall not apply to branches of enterprises within the meaning of Section 53b paragraph (1) sentence 1 of the German Banking Act.

Section 37a Limitation of the right of action in respect of claims for compensation

The claim for compensation of a customer against an investment services enterprise for having failed to comply with the requirement to furnish information and for having given false advice in connection with an investment service or non-core investment service is subject to a period of limitation of three years as of the time when the claim arose.

Part 6 Provisions on offences and fines

Section 38

Provisions on offences

(1) Any person who

1. acquires or disposes of an insider security in contravention of a prohibition pursuant to Section 14 paragraph (1) number 1. or Section 14 paragraph (2);

2. discloses or makes available inside information in contravention of a prohibition pursuant to Section 14 paragraph (1) number 2., or

3. recommends the acquisition or disposal of an insider security in contravention of a prohibition pursuant to Section 14 paragraph (1) number 3.

shall be liable to imprisonment for a term not exceeding five years or to a fine.

(2) In the cases referred to in paragraph (1) above a foreign prohibition shall also be deemed a prohibition.

Section 39 Provisions on fines

(1) An administrative offence is committed by any person who wilfully or carelessly

1. in contravention of

a) Section 9 paragraph (1) sentences 1, 2 and 3, individually in conjunction with paragraph (2) and in conjunction with an ordinance pursuant to paragraph (3);

b) Section 15 paragraph (2), sentence 1;

c) Section 21 paragraph (1) sentence 1 or paragraph (1a), individually also in conjunction with Section 22 paragraph (1) or (2);

fails to make a report or notification, fails to do so within the prescribed period or makes such report or notification incorrectly, incompletely or not in the prescribed form;

2. in contravention of

a) Section 15 paragraph (1) sentence 1, in conjunction with paragraph (3) sentence 1, or

b) Section 25 paragraph (1) sentence 1, in conjunction with sentences 2 and 3, Section 25 paragraph (2) sentence 1 in conjunction with sentence 2 or Section 26 paragraph (1) sentence 1;

fails to make a notification, fails to do so within the prescribed period or makes such notification incorrectly, incompletely or not in the prescribed form;

3. effects publication in contravention of Section 15 paragraph (3) sentence 2;

4. (repealed)

5. fails to forward a publication or documentary evidence or fails to do so within the prescribed period in contravention of Section 15 paragraph (4) or Section 25 paragraph (3) sentence 1, also in conjunction with Section 26 paragraph (2);

6. fails to keep a record or keeps such record incorrectly or incompletely or fails to do so within the prescribed period in contravention of Section 16 paragraph (2) sentence 5 or Section 34 paragraph (1), also in conjunction with an ordinance pursuant to Section 34 paragraph 2 sentence 1;

7. informs the principals or the persons or undertakings benefiting or incurring a liability from the transactions in contravention of Section 16 paragraph (8);

8. fails to retain a record or fails to do so for a minimum period of six years in contravention of Section 34 paragraph (3) sentence 1;

9. fails to comply with a provision on separate asset management under Section 34a paragraph (1) or (2), individually also in conjunction with an ordinance pursuant to paragraph (3) sentence 1, or

10. fails to appoint an auditor or fails to do so within the prescribed period in contravention of Section 36 paragraph (1) sentence 2.

(2) An administrative offence is committed by any person who wilfully or negligently

1. fails to comply with an enforceable requirement pursuant to Section 15 paragraph (5) sentence 1, Section 16 paragraphs (2), (3) sentence 1, (4) or (5), Section 29 paragraph (1), also in conjunction with Section 30 paragraph (3) or Section 35 paragraph (1) sentence 1, also in conjunction with paragraph (4) sentence 1;

2. fails to permit entry in contravention of Section 15 paragraph (5) sentence 2, Section 16 paragraph (3) sentence 2, or Section 35 paragraph (1) sentence 3, or fails to consent to such entry in contravention of Section 16 paragraph (3) sentence 3, or

3. fails to comply with an enforceable requirement pursuant Section 36 paragraph (1).

(3) The administrative offence is punishable by a fine not exceeding three million Deutsche Mark in the cases referred to in paragraph 1 number 2. a) and number 3. above, by a fine not exceeding five hundred thousand Deutsche Mark in the cases referred to in paragraph (1) numbers 1. b) and c) above, by a fine not exceeding two hundred thousand Deutsche Mark in the cases referred to in paragraph (1) number 9. and paragraph (2) number 3. above, and by a fine not exceeding one hundred thousand Deutsche Mark in all other cases.

Section 40 Competent administrative authority

The administrative authority within the meaning of Section 36 paragraph (1) number 1 of the Law on Administrative Offences shall be the Federal Securities Supervisory Office.

Section 40a Information in criminal cases

(1) When taking public legal action the court, the prosecuting or the enforcement authority shall forward to the Federal Supervisory Office in the case of criminal proceedings instituted against the owners or managers of investment services enterprises or their legal representatives or personally liable partners because of criminal offences to the disadvantage of customers in respect of or in connection with operating the investment services enterprise, furthermore in criminal proceedings concerned with criminal offences pursuant to Section 38 above,

1. the indictment or a motion replacing it,

2. the application for an order imposing punishment and

3. the decision concluding the proceedings, including the statement of reasons;

if an appeal has been filed against the decision, such decision shall be forwarded indicating the appeal which has been filed. In the case of proceedings in respect of criminal offences that have been committed negligently the communications set out in numbers 1 and 2 above shall only be made if in the view of the authority making the communication immediate decisions or other measures of the Federal Supervisory Office are deemed necessary.

If in criminal proceedings other facts indicating irregularities in the business operations of an investment services enterprise become known and if in the view of the authority making the communication the knowledge thereof makes it necessary for the Federal Supervisory Office to take measures pursuant to this Act, the court, the prosecuting or the enforcement authority shall also communicate such facts, if it is not obvious to the authority making the communication that interests of the persons concerned which warrant protection prevail. In this case it must be taken into consideration to which extent the information to be communicated is secure.

Part 7 Transitional provisions

Section 41 Initial notification and disclosure requirement

(1) Enterprises within the meaning of Section 9 paragraph (1) sentence 1 which exist on 1 August 1997 and have not been subject to the notification requirement pursuant to Section 9 paragraph (1) above before this date, shall make notifications pursuant to this provision for the first time on 1 February 1998.

(2) Any person who, taking account of Section 22 paragraph (1), holds on 1 January 1995 five per cent or more of the voting rights of a listed company must notify the company and the Federal Supervisory Office in writing, stating his address, of the size of his percentage of the voting capital at the latest on the day of the company’s first general meeting held after 1 April 1995, in so far as a notification pursuant to Section 21 paragraph (1) has not already been made on that date.

(3) The company must publish any notifications pursuant to paragraph (2) above within one month after receipt pursuant to Section 25 paragraph (1) sentence 1 and paragraph (2) and must immediately send the Federal Supervisory Office documentary evidence of such publication.

(4) The provisions of Sections 23, 24, 25 paragraph (1) sentence 3, paragraph (3) sentence 2, paragraph (4) and Sections 27 to 30 shall apply accordingly to the obligations pursuant to paragraphs (2) and (3) above.

(5) An administrative offence is committed by any person who wilfully or carelessly

1. fails to make a notification, fails to do so within the prescribed period or makes such notification incorrectly, incompletely or not in the prescribed form in contravention of paragraph (2) above, or

2. fails to effect publication, fails to do so within the prescribed period, or effects such publication incorrectly, incompletely or not in the prescribed form, fails to forward documentary evidence or fails to do so within the prescribed period in contravention of paragraph (3) in conjunction with Section 25 paragraph (1) sentence 1 or paragraph (2) above.

(6) The administrative offence is punishable by a fine not exceeding five hundred thousand Deutsche Mark in the cases referred to in paragraph (5) number 1. above and by a fine not exceeding one hundred thousand Deutsche Mark in the cases referred to in paragraph (5) number 2. above.

Section 42 Transitional provision for the obligation to reimburse costs pursuant to Section 11

The parties obliged to reimburse the costs to the Federal Supervisory Office pursuant to Section 11 paragraph (1) sentence 1 of the Act of 26 July 1994 (Federal Law Gazette Part I p. 1749) may also prove the volume of the transactions in securities and derivatives for the time up until the end of 1996 and for the year 1997 on the basis of the number of transactions notified pursuant to Section 9 in 1996 and 1997 respectively.

Section 43 Transitional provision for the limitation of the right of action in respect of claims for compensation pursuant to section 37a

Section 37a shall not apply to claims for compensation against investment services enterprises for having failed to comply with the requirement to furnish information and for having given false advice in connection with an investment service or non-core investment service which came into existence before 1 April 1998.


Footnote

Section 11 WpHG in the old version of 26 July 1994 (Federal Law Gazette I p. 1749) reads as follows:

“(1) The costs of the Federal Supervisory Office shall be reimbursed to the Federation

1. in the amount of 75 per cent by credit institutions domiciled in Germany, branches of enterprises within the meaning of Section 53 paragraph (1) sentence 1 and Section 53 b paragraph (1) sentence 1 of the German Banking Act, or by enterprises which by virtue of a regulation pursuant to Section 53 c of the German Banking Act are subjected to or exempted from the provisions of that Act, provided that such credit institutions or branches are authorised to conduct securities business in Germany;

2. in the amount of 5 per cent by official exchange brokers, unofficial brokers and other enterprises admitted to stock exchange trading which do not come under the provisions of sub-paragraph 1. above;

3. in the amount of 10 per cent by issuers domiciled in Germany whose securities are admitted to trading on a German stock exchange or traded on the free market (Freiverkehr) with their consent.

In the case of sub-paragraphs 1. and 2. above, the costs shall be allocated in proportion to the volume of transactions in securities and derivatives. In the case of sub-paragraph 3. above, the costs shall be allocated to the issuers in proportion to the stock exchange turnover of their securities admitted to stock exchange trading or traded on the free market (Freiverkehr).

(2) The parties subject to the first sentence of paragraph (1) above and the German stock exchanges shall be obliged to furnish the Federal Supervisory Office on request with information on the volume of transactions and the stock exchange turnover. The claims for reimbursement of costs shall be enforced by the Federal Supervisory Office in accordance with the provisions of the Law on the Enforcement of Administrative Decisions.

(3) Details of the imposition of cost allocations pursuant to paragraph (1) above and of their enforcement shall be set out by the Federal Ministry of Finance in ordinances not requiring the consent of the Bundesrat; the Federal Ministry of Finance may stipulate minimum amounts in such ordinances. The Federal Ministry of Finance may by ordinance delegate this authority to the Federal Supervisory Office.

(4) The costs incurred by the Federation from the audit pursuant to Section 36 paragraph (1) shall be reimbursed separately by the enterprises concerned and shall be paid in advance if so requested by the Federal Supervisory Office.”

Ordinance on the Prospectus for Securities Offered for Sale (Prospectus Ordinance) (Verkaufsprospekt-Verordnung, VerkProspVO)

Long title: Verordnung über Wertpapier-Verkaufsprospekte Verkaufsprospekt-Verordnung

As announced on 9 September 1998 (Federal Law Gazette I p. 2853), as last amended by Article 26 of the Third Financial Market Promotion Act (Gesetz zur weiteren Fortentwicklung des Finanzplatzes Deutschland – Drittes Finanzmarktförderungsgesetz) of 24 March 1998 (Federal Law Gazette I p. 529)


Table of Contents

Section 1 Scope
Section 2 General principles
Section 3 Information about the persons or companies assuming the responsibility for the content of the prospectus
Section 4 Information about the securities
Section 5 Information about the issuer
Section 6 Information about the capital of the issuer
Section 7 Information about the business activity of the issuer
Section 8 Information about the assets and liabilities, the financial position and the profits and losses of the issuer
Section 9 Information about the audit of the annual accounts of the issuer
Section 10 Information about the management and supervisory bodies of the issuer
Section 11 Information about the recent development and the prospects of the issuer
Section 12 Securities to which an exchange or subscription right is attached; options
Section 13 Guaranteed securities
Section 14 Reduced prospectus requirements


Section 1 Scope

This Ordinance shall apply to sales prospectuses (prospectuses) for securities in respect of which admission to Official Quotation or to the Regulated Market on a German exchange has not been sought.

Section 2 General principles

(1) The Prospectus shall provide information about the de facto and the legal circumstances necessary for the assessment of the securities offered and shall be correct and complete. It shall contain at least the information required under this Ordinance. It must be written in the German language and in a form which facilitates its understanding and analysis. The Federal Securities Supervisory Office may permit prospectuses of issuers domiciled abroad to be completely or partly written in another language if such language is not uncommonly used in Germany in the field of cross-border securities trading.

(2) The prospectus shall be dated upon its being drawn up and be signed by the offeror.

(3) If statutory information can be directly obtained from the annual accounts enclosed in the prospectus pursuant to section 8 paragraphs (1) and (2), such information does not need to be repeated in the prospectus.

Section 3 Information about the persons or companies assuming the responsibility for the content of the prospectus

The prospectus shall state the names and positions of the persons or companies, or in the case of legal persons or companies their names and registered offices, who assume the responsibility for its content; it shall contain a statement made by such persons or companies to the effect that to their knowledge the information is correct and no material circumstances have been omitted.

Section 4 Information about the securities

The prospectus shall contain the following information about the securities:

1. the nature, number and aggregate face value of the securities offered or a statement to the effect that no aggregate face value has been determined, as well as the rights attaching to the securities;

2. the taxes levied at source on the income from securities in the state in which the issuer has his registered office or in which his securities are offered; if the offeror undertakes to pay these taxes this shall be indicated;

3. the way in which the securities may be transferred and, if necessary, possible restrictions on their free transferability;

4. the organised markets on which the securities are to be traded;

5. the paying agents and depositories;

6. the details concerning payment of the subscription or selling price;

7. the procedure for the exercise of subscription rights, their transferability and the treatment of subscription rights which are not exercised;

8. the agents accepting subscriptions of the public, the period scheduled for the subscription or the sale of the securities and the possibilities to close or shorten subscriptions prematurely;

9. the individual partial amounts if the offer is made in several states simultaneously in certain partial amounts;

10. the features of the printed securities as well as the particulars and periods relating to their delivery;

11. the persons or companies underwriting or having underwritten or having guaranteed to place the securities for the issuer or the offeror; if such underwriting or guarantee does not cover the offer as a whole, it shall be indicated what part of the offer is not included;

12. the selling price of the securities or, if it is not yet know, the details and the time schedule for its determination.

Section 5 Information about the issuer

The prospectus shall contain the following information about the issuer:

1. the name and the registered office;

2. the date of incorporation and, if the issuer is incorporated for a limited period, the duration;

3. the law to which the issuer is subject and the legal form; if the issuer is a partnership limited by shares (Kommanditgesellschaft auf Aktien) additional information concerning the structure of the personally liable partner as well as the regulations under the articles of association or the partnership agreement which differ from the legal provision shall be included;

4. the purpose of the undertaking as laid down in the articles of association or the partnership agreement;

5. the Registration Court where the issuer is domiciled and the number under which the issuer has been entered in the register;

6. if the issuer belongs to a group, a short description of the group and the position of the issuer within the group.

Section 6 Information about the capital of the issuer

(1) The prospectus shall contain the following information about the capital of the issuer:

1. the amount of the capital, the number and classes of the shares into which the capital is divided stating their main characteristics and the amount of the unpaid capital;

2. the nominal value of the securities outstanding which grant their holders an exchange or subscription right attaching to shares, stating the conditions and the procedure for the exchange or subscription.

(2) In the event of an offer of shares the following additional information are required:

1. the nominal amount of the authorised or contingent capital and the duration of the authorisation for the capital increase, the group of persons possessing an exchange or subscription right as well as the conditions and the procedure for the issue of the new shares;

2. the number and main characteristics of the shares not representing capital;

3. to the extent known to the offeror, the shareholders who, directly or indirectly, are in a position to exercise a determining influence on the issuer.

Section 7 Information about the business activity of the issuer

(1) The prospectus shall contain the following information about the business activity of the issuer:

1. the most significant activities;

2. information about the issuer’s dependence on patents, licences, contracts or new production methods if they are of material importance for the business activity or the profits and losses of the issuer;

3. court or arbitration proceedings which may have a significant impact on the financial position of the issuer;

4. information about the most important current investments, except the financial assets.

(2) If the activity of the issuer has been influenced by exceptional events, this shall be indicated.

Section 8 Information about the assets and liabilities, the financial position and the profits and losses of the issuer

(1) The prospectus shall contain the following regarding the assets and liabilities, the financial position and the profits and losses of the issuer:

1. the most recently disclosed annual accounts, the record date of which must not be earlier than eighteen months before the drawing up of the prospectus;

2. interim accounts published in the meantime.

(2) If the issuer is only required to draw up consolidated accounts, these consolidated accounts shall be included in the prospectus; if he is also obliged to draw up individual accounts both types of annual accounts shall be included. It is sufficient to only include the annual accounts of the one kind if the annual accounts of the other kind do not contain any additional material information.

(3) Any material change which occur after the record date of the most recently disclosed annual accounts or of the interim accounts shall be described in the prospectus.

Section 9 Information about the audit of the annual accounts of the issuer

The prospectus shall contain the names, the addresses and the professional titles of the auditors who have audited the annual accounts of the issuer according to the legal provisions. It shall also contain the auditors’ certificate including any additional statements; if there have been any reservations about the annual accounts or if the certificate has been refused, the full text of the reservations or the refusal as well as the statement of the reasons shall be provided.

Section 10 Information about the management and supervisory bodies of the issuer

(1) The prospectus shall contain the names and addresses of the members of the management and supervisory bodies as well as their position with the issuer.

(2) In respect of an offer of shares, the total compensation (salaries, profit-sharing bonuses, expense allowances, insurance payments, commissions and any kind of fringe benefits) granted to the members of the management and supervisory bodies for the last financial year concluded shall also be indicated separately for each body.

Section 11 Information about the recent development and the prospects of the issuer

The prospectus shall contain a general description of the development of business of the issuer after conclusion of the financial year to which the most recently disclosed annual accounts relate as well as information concerning the prospects of the issuer for at least the current financial year.

Section 12 Securities to which an exchange or subscription right is attached; options

(1) In respect of an offer of securities other than shares granting their holders an exchange or subscription right for securities, the prospectus shall contain the following additional information:

1. the nature of the securities offered for exchange or subscription and the rights attaching thereto;

2. the conditions and the procedure for the exchange or subscription as well as the cases in which the conditions for the procedure may be changed.

(2) Where the issuer is not at the same time the issuer of the securities offered for exchange or subscription, the information required under sections 5 to 11 above shall also be provided in respect of the issuer of the securities offered for exchange or subscription. This information can be omitted if the securities are admitted to Official Quotation on a German exchange. Where the offeror is not at the same time the issuer of the securities offered for exchange or subscription, this information can be omitted if the offeror is not regularly in possession of the information.

(3) In respect of an offer of securities to which a payment right is attached that is determined by the value of another security or right or any other reference figure, the prospectus shall include additional information on how this amount is determined.

Section 13 Guaranteed securities

In respect of an offer of securities other than shares for the interest payment or redemption of which a legal person or company has assumed a guarantee, the information required under sections 5 to 11 above shall also be provided regarding the person or company having assumed such guarantee.

Section 14 Reduced prospectus requirements

(1) In respect of an offer of shares which are allocated to the shareholders of the issuer due to their subscription rights, the information stipulated in sections 7 to 10 can be omitted if the shareholders have been sufficiently informed otherwise.

(2) If the issuer was established less than eighteen months ago and has not yet disclosed any annual accounts, the prospectus shall, in derogation of the requirements pursuant to sections 8, 9, 10 paragraph (2) and section 11, contain the following information:

1. the opening balance sheet;

2. interim accounts whose record date shall not be earlier than two months ago;

3. the expected assets and liabilities, financial position and earnings situation for at least the current and the next financial year;

4. target figures of the issuer (investments, production, turnover, profit and losses) for at least the next three financial years.

(3) If a full prospectus, listing particulars (section 36 paragraph (3) no. 2 Exchange Act) or a business report (section 73 paragraph (1) no. 2 Exchange Act) signed by the same offeror were published in Germany within less than the last twelve months, the prospectus shall only contain the changes that have occurred since the publication of the full prospectus or business report which are likely to be relevant for the assessment of the issuer or the securities offered. The prospectus shall only be published together with the full prospectus or the business reports or with a reference to where it is available for inspection.

(4) Certain information in prospectus can be omitted if

1. such information is only of minor significance and is not likely to have an influence on the assessment of the assets and liabilities, financial position and profit and losses as well as the prospects of the issuer; or

2. the dissemination of such information would cause the issuer considerable damage, provided abstention from the publication does not mislead the public as to the facts and circumstances which are material for the assessment of the securities.

Ordinance on the Reporting Requirements Relating to Trades in Securities and Derivatives (Wertpapierhandel-Meldeverordnung, WpHMV)

Long title: Verordnung über die Meldepflichten beim Handel mit Wertpapieren und Derivaten

As promulgated on 21 December 1995, as last amended by the Ordinance Amending the Ordinance on the Reporting Requirements Relating to Trades in Securities and Derivatives of 17 March 1998 (Federal Law Gazette I p. 519)


Table of Contents

Part 1 Scope

§ 1 Scope

Part 2 Form and Content of the Report

§ 2 Reporting Form
§ 3 Designation of the Security or Derivative and Security Identification Number
§ 4 Date and Time
§ 5 Price, Number, Face Value of the Securities or Derivatives
§ 6 Identification of the Reporting Parties
§ 7 Details of Exchange Transactions
§ 8 Labels for Identifying the Transaction
§ 9 Identification of Own Account Transactions
§ 10 Additional Information
§ 11 Imperfect Reports

Part 3 Transmission of the Reports

§ 12 Technical Format of Transmission
§ 13 Approved Data Carriers and Ways of Transmission
§ 14 Reporting by Way of a Third Party
§ 15 Reporting by Way of a Central Institution

Part 4 Aggregated Reports, Exemptions

§ 16 Aggregated Reports
§ 17 Exemptions from the Reporting Requirements

Part 5 Final Provisions

§ 18 Initial Reporting and Notification Requirement
§ 19 Effective Date


Part 1 Scope

§ 1 Scope

This Ordinance shall apply to the reports to be filed with the Federal Securities Supervisory Office (Federal Supervisory Office) pursuant to Section 9 of the Securities Trading Act.

Part 2 Form and Content of the Report

§ 2 Reporting Form

(1) Any enterprise subject to the reporting requirements under Section 9 subsection (1) of the Securities Trading Act (reporting party) shall be required to make its reports according to the annexed reporting form and field description1 ). Fields not needed due to the type and structure of the reportable transaction shall remain empty.

(2) Each notifiable transaction of a reporting party shall be transmitted in a single report. The reporting parties shall use serial numbers for all the reports filed on a particular day.

(3) Any date or time must be given in the same form. A date requires an eight-digit sequence stating century, year, month and day, time requires a six-digit sequence stating hours, minutes and seconds.

§ 3 Designation of the Security or Derivative and Security Identification Number

(1) The security or derivative must be sufficiently identified, especially by stating its type, designation and serial number (Field No. 35). With respect to securities the type has to be stated (Field No. 30), derivatives must be classified according to Call, Put or Future (Field No. 39).

(2) The international identification number of the traded security or derivative is to be stated (Field No. 31). If such international identification number does not exist or is not accessible to the reporting party, the German identification number of the security must be stated; if no German identification number exists, any other national identification number must be stated (Field No. 33). In case of a national identification number its country of origin must be stated (Field No. 32). If a German serial securities identification number exists the respective main security identification number must also be stated (Field No. 34).

(3) If derivatives do not have a securities identification number, the identification number of the underlying instrument must be stated (Field No. 41). The type of the identification number of the underlying instrument must be indicated (Field No. 40).

§ 4 Date and Time

(1) The date of the transaction or of the relevant price determination must be stated (Field No. 13).

(2) The time of the transaction or of the relevant price determination must be stated in the sequence of hours, minutes and seconds (Field No. 14); if seconds can not be stated they must be given as „00″.

(3) The date or the time of transactions concluded abroad must be converted into domestic time (Central European Time or Central European Summer Time).

§ 5 Price, Number, Face Value of the Securities or Derivatives

(1) The volume of the executed order or transaction must be stated (Field No. 25) with reference to the respective units (e.g. number, contracts) (Field No. 24). The number contained in a specific contract must be stated in form of a price multiplier (Field No. 42).

(2) With respect to securities, the price of the reported transaction (Field No. 27) must be stated indicating the unit in which it has been noted (Field No. 36) and the dealing currency (Field No. 26).

(3) With respect to options, the price of the reported transaction (Field No. 27) must be stated with reference to the dealing currency (Field No. 26), the strike price of the option (Field No. 45), the quotation type of the strike price (Field No. 46) and the currency of the strike price (Field No. 44).

§ 6 Identification of the Reporting Parties

(1) The reporting parties must notify the Federal Supervisory Office of their names and addresses as well as, if possible, the numbers provided by the German securities settlements organisation, the German bank code number, the member-ID code of an electronic stock exchange trading system (EBHS) and the identification number of Deutsche Börse Clearing AG (DBC). Any change in these data must be reported to the Office without delay.

(2) The reporting party will receive an eight-digit identification number from the Office after filing of the report in accordance with the first sentence of subsection (1) above.

(3) For the purpose of identification the reporting party must give in the report its identification number pursuant to subsection (2) above or any of the other numbers provided for in the field description according to the sequence prescribed (Field No.2). The type of identification must be designated (Field No. 1).

(4) For the purpose of identifying the credit institutions, financial services institutions authorised to conduct proprietary trading, branches and other enterprises as defined in Section 9 subsection (1) first sentence of the Securities Trading Act which participate in the transaction as customer, counterparty, broker or intermediary, subsection (3) above shall apply accordingly (Field No. 3 to 12).

§ 7 Details of Exchange Transactions

It must be stated whether the transaction was executed on or off a stock exchange (Field No. 21). If the transaction was executed on an exchange, the relevant stock exchange, trading system (Field No. 23) and country in which the transaction was effected (Field No. 22) must also be stated as well as the reference number of the settlement system of the exchange (Field No. 16) as provided for in the field description.

§ 8 Labels for Identifying the Transaction

For the purpose of identifying the transaction the following information must be given:

1. a reporting number for every transaction internally allocated by the reporting party (Field No. 15);

2. whether it is a purchase or a sale from the point of view of the customer (Field No. 17);

3. in case of brokered or exchange-traded transactions a broker-specific identification mark for the type of the respective transaction (Abruf-Gruppe-Makler) (Field No. 60), the information whether the contracting party has been named (Field No. 59) as well as the reference number of the settlement note and, if this reference number has changed, its original reference number (Field No. 58);

4. in the field labelled „type of transaction” (Field No. 18) whether it was a gross transaction or a net settlement, an aggregate report pursuant to Section 16 or an underlying discretionary order;

5. the number of the issuer (Field No. 28) and the original number of the issuer (Field No. 29);

6. the interest rate of the traded security (Field No. 37);

7. the date of maturity of the security, in the case of derivatives the date of maturity of the underlying instrument (Field No. 38);

8. the date for which the money settlement has been agreed (Field No. 51) if a particular currency accounts for a price other than the market price;

9. in the case of derivatives the date of maturity (Field No. 47) and, if given, the number of the respective version (Field No. 43).

§ 9 Identification of Own Account Transactions

Transactions affecting the own portfolio must be identified as such (Field No. 19). It must also be stated whether the transaction is carried out on behalf of a customer or on own account (Field No. 20).

§ 10 Additional Information

(1) In addition to the information to be provided according to Section 9 subsection (2) sentences (2) and (3) of the Securities Trading Act the report must contain the following information:

1. the serial number of the report pursuant to Section 2 subsection (2) (Field No. 54);

2. the date when the report was prepared (Field No. 53);

3. the name of the reporting party (Field No. 55);

4. the computer data processing centre directly ahead of that of the Federal Supervisory Office (Field No. 52).

Reporting party as defined in sentence (1) no. 3 shall be the party which has prepared the report.

(2) If a party other than the reporting party files a report with the Federal Supervisory Office, the following information must be added:

1. the date and time when the report was received by that other party (Field No. 56 and 57);

2. in the case of changes in the report the date of the last change (Field No. 61).

§ 11 Imperfect Reports

If the reporting party detects a mistake in the report already filed it must without delay file the report as cancelled according to the details of the transaction to be cancelled, indicating the date of cancellation (Field No. 48). A subsequent new report of the transaction must be identified as such (Field No. 50); in this case the internal reporting number must differ from the transaction and cancellation reported immediately before. Sentence (2) above shall also apply to subsequent reports of a transaction.

Part 3 Transmission of the Reports

§ 12 Technical Format of Transmission

(1) The reports must be transmitted by way of a carrier file written in the ASCII code.

(2) The carrier file must carry a name consisting of a maximum of eight characters. A file may contain several reports. The file must begin with an introductory phrase and end with a concluding phrase. The introductory phrase consists of the following elements: the name of the carrier file; the date of the preparation of the carrier file; time of the preparation of the carrier file. The concluding phrase consists of the following elements: the date of the preparation of the carrier file; the time of the preparation of the carrier file; the number of records transmitted including the introductory and concluding phrase.

(3) The individual fields of the records must be separated by a semi-colon (ASCII code 59). Each record begins and ends without a semi-colon. The individual records must be separated by a line spacing (ASCII code 13 and 10). The concluding phrase ends without a line spacing. The end of a file may not consist of an empty record.

§ 13 Approved Data Carriers and Ways of Transmission

(1) The carrier file may be transmitted by way of a fixed line or via mailbox. If technical difficulties prevent the use of these ways of transmission in individual cases, 1.44 MB 3.5 inch diskettes (HD) in DOS format (version 3.3 or above) may also be used as data carriers.

(2) The installation of a fixed line for the transmission of data or a mailbox procedure for the purpose of transmitting the reports of the reporting party or a third party to the Federal Supervisory Office is subject to the approval of the Federal Supervisory Office, and the costs must be borne by the reporting party or the third party. The Federal Supervisory Office may refuse to permit the installation of such a fixed line or mailbox if such ways of transmission would imply inappropriate costs for the Federal Supervisory Office.

§ 14 Reporting by Way of a Third Party

(1) The reporting party may have its reports filed at its own cost by an appropriate third party. A third party is deemed appropriate if it guarantees protection of the data and compliance with the reporting period as defined in Section 9 subsection (1) sentence (1) of the Securities Trading Act.

(2) If the reporting party calls in a third party it will have fulfilled the reporting requirements only when the third party has filed the report with the Federal Supervisory Office on the reporting form fully and correctly filled in within the period of time defined in Section 9 subsection (1) sentence (1) of the Securities Trading Act.

§ 15 Reporting by Way of a Central Institution

If savings banks and credit cooperatives subject to the reporting requirements have recourse to a central savings bank or a cooperative central bank or the central credit institution when trading in securities or derivatives, the report may be filed by the respective head organisation. Reporting party of such a report must be the respective savings bank or credit cooperative.

Part 4 Aggregated Reports, Exemptions

§ 16 Aggregated Reports

Fixed price transactions of a particular day with fixed-income or floating-rate bonds of foreign issuers that are repayable at par and can be executed at the same price may be aggregated and transmitted in a single report for each security; in this case, the time need not be indicated. The same applies for subscription rights which a reporting party sells for its customers on the last trading day before the subscription rights expire if these transactions are executed at the same price.

§ 17 Exemptions from the Reporting Requirements

(1) Transactions in derivatives which are not even indirectly connected to a security are exempted from the reporting requirements.

(2) Transactions which are concluded on an organised market in another Member State of the European Communities or another Contracting State to the Agreement on the European Economic Area are not subject to the reporting requirement if in this state similar reporting requirements exist.

Part 5 Final Provisions

§ 18 Initial Reporting and Notification Requirement

(1) The reports must be first filed for all transactions effected after 31 December 1995.

(2) First notifications according to Section 6 subsection (1) sentence (1) must be filed by
31 December 1995 at the latest.

§ 19 Effective Date

This Ordinance will take effect on the day following its announcement.


Footnote

1. The annex is distributed in a separate volume with the issue of the Federal Law Gazette Part I and is not enclosed herewith.

Ordinance on the Examination of Investment Services Enterprises pursuant to Section 36 of the Securities Trading Act (Wertpapierdienstleistungs-Prüfungsverordnung, WpDPV)

Long title: Verordnung über die Prüfung der Wertpapierdienstleistungsunternehmen nach § 36 des Wertpapierhandelsgesetzes

As promulgated on 6 January 1999 Federal Law Gazette I p. 4


Table of Contents

Section 1 Scope
Section 2 Timing of and period to be covered by the examination
Section 3 Nature and scope of the examination
Section 4 General requirements for the examination report
Section 5 Specific requirements for the examination report
Section 6 Effective date

Annex Questionnaire pursuant to Section 4 paragraph (6) WpDPV


Under Section 36 paragraph (5) of the Securities Trading Act as announced on 9 September 1998 (Federal Law Gazette I p. 2708) in conjunction with Section 1 of the Ordinance on the Delegation of Powers to Issue Ordinances to the Federal Securities Supervisory Office of 3 March 1998 (Federal Law Gazette I p. 406), the Federal Securities Supervisory Office issues the following Ordinance:

Section 1 Scope

This Ordinance shall apply to the examination of compliance by investment services enterprises with the reporting requirements pursuant to Section 9 of the Securities Trading Act (reporting requirements) and the duties regulated in Part 5 of the Securities Trading Act (rules of conduct).

Section 2 Timing of and period to be covered by the examination

(1) The auditor shall set the time for the start of the examination, provided the Federal Supervisory Office does not set another time for the start of the examination within one week after receipt of the notification pursuant to Section 36 paragraph (3) sentence 5 of the Securities Trading Act. The auditor shall inform the Federal Supervisory Office in case the investment services enterprise to be examined repeatedly requests to postpone the examination.

(2) In exercising due discretion, the auditor shall set the date of the examination. The period to be covered by the first examination shall be the period between the commencement of operations as an investment services enterprise and the date of the first examination. The period to be covered by all subsequent examinations shall be the period between the date of the previous examination and the date of the following examination.

Section 3 Nature and scope of the examination

(1) The examination shall include compliance with the reporting requirements and the rules of conduct regarding all parts of investment services and non-core investment services. In accordance with the provisions made by the Federal Supervisory Office relating to the content of the examination pursuant to Section 36 paragraph (3) sentences 1 and 2 of the Securities Trading Act, the auditor may, in exercising due discretion, determine main points of emphasis of the examination, provided thorough examination of all parts of the services within an appropriate period of time is ensured. Parts of the services in respect of which there is evidence indicating changes in relation to the previous examination or indicating shortcomings, or in respect of which shortcomings were revealed in the previous examination, shall always be thoroughly examined.

(2) In exercising due discretion, the auditor may confine himself to system checks by means of functional tests and to spot checks in individual cases, unless it is necessary in particular cases to conduct a complete examination. If there is evidence indicating shortcomings regarding compliance with the reporting requirements or the rules of conduct, the examination shall be carried on until the auditor believes that such shortcomings occur only occasionally or are irrelevant. If there are doubts about whether or not shortcomings occur occasionally or are irrelevant, the Federal Supervisory Office shall be informed immediately.

(3) Where investment services enterprises have branches executing material parts of investment services or non-core investment services, these branches shall also be examined. In exercising due discretion, the auditor shall decide to which extent the branches must be examined on site. He may refrain from examining individual branches, especially if the parts executed by them are insignificant and if the investment services enterprise proves that all branches are subject to regular internal controls and that these controls have not revealed any substantial shortcomings. The Federal Supervisory Office may however request that such branches be included in the following examination. As regards parts of the business which are outsourced to other enterprises and which are material for the provision of investment services or non-core investment services, sentences 1 to 4 shall apply accordingly. The Federal Supervisory Office shall be informed of an examination of a foreign branch not later than two weeks before the start of the examination.

(4) The auditor shall inform the Federal Supervisory Office without delay if an investment services enterprise refuses to be examined or if it impedes the conduct of the examination.

(5) The auditor shall be authorised to record the examination in writing or by means of data media and to take documents necessary for making the report. Business documents of the investment services enterprise under examination may only be taken by the auditor with the consent of the enterprise. Upon his request, he must be given copies of the documents necessary for making the report. The records shall be retained for six years.

Section 4 General requirements for the examination report

(1) The examination report shall contain information as to whether the investment services enterprise has observed the reporting requirements and the rules of conduct. Shortcomings shall be described in detail in the examination report.

(2) If in individual cases the Federal Supervisory Office has made provisions relating to the content of the examination or has determined main points of emphasis of the examination , the examination report shall contain a detailed description of the respective action taken during the examination and the findings.

(3) As a rule, it shall not be permitted to make references to the contents of previous examination reports. In order to avoid extensive repetition, such references shall be permitted if the auditor encloses in the examination report the respective extracts of the previous examination reports or of the annual financial statements.

(4) The examination report shall contain a description of how the shortcomings discovered during the previous examination have been remedied or what remedial action has been introduced. If the shortcomings resulted from organisational deficits it shall be explained what organisational measures have been taken by the investment services enterprise to avoid such shortcomings in future.

(5) There shall be a final remark containing a summary assessment of whether the investment services enterprise has complied with the reporting requirements and the rules of conduct. Shortcomings shall be listed by indicating where they are referred to in the report. The auditor shall sign the examination report, stating the place and the date of the examination.

(6) The results of the examination shall be recorded in a questionnaire (enclosure). The questionnaire shall be completely answered and attached to the examination report.

(7) The auditor shall explain the examination report on request of the Federal Supervisory Office.

Section 5 Specific requirements for the examination report

(1) The following details shall be included in the examination report:

1. the nature and scope of the investment services and non-core investment services rendered in the period to be covered by the examination;

2. the measures taken in respect of the selection and training of employees in connection with compliance with the reporting requirements and the rules of conduct;

3. the structure and operational organisation of the investment services enterprise; business areas requiring a particular organisation shall be described separately;

4. the way in which parts that are material for the provision of investment services or non-core investment services are outsourced as well as how compliance with the requirements pursuant to Section 33 paragraph (2) of the Securities Trading Act is ensured;

5. compliance with the requirements under Section 34a of the Securities Trading Act;

6. the way in which customer complaints are handled and the steps taken in this respect concerning staff and organisation;

7. compliance with the requirement to keep and retain records pursuant to Section 34 paragraph (1) of the Securities Trading Act, indicating the number of spot checks and, if necessary, the nature of the shortcomings;

8. compliance with the rules of conduct for employees as regards staff transactions.

(2) If the details set forth in the first paragraph above did not give cause for complaint in the previous examination and if no changes have been revealed during the current examination, a detailed description shall not be required. If, during at least three subsequent years, some areas have not been described in detail, the Federal Supervisory Office may require their detailed description in the following examination even if no changes have occurred in these areas.

Section 6 Effective date

This Ordinance will take effect on the day following its announcement.

Frankfurt am Main, 6 January 1999

The President of the Federal Securities Supervisory Office

Wittich


Annex
Questionnaire pursuant to Section 4 paragraph (6) WpDPV

No Securities Trading Act (WpHG) Subject of the examination If the answer is “yes”, tick here If there are shortcomings that have not been remedied in the meantime, also tick here1

General rules of conduct

1 sec. 31 para. (1) no. 1 Are there any shortcomings in respect of accepting and executing customer orders (especially as regards immediate transmission of customer orders)?
2 sec. 31 para. (1) no. 1 Is there evidence (e.g. customer complaints) indicating that customers were not able to place orders because the enterprise could not be reached?
3 sec. 31 para. (2) no. 1 Are there any shortcomings in respect of seeking information from customers?
4 sec. 31 para. (2) no. 2 Are there any shortcomings in respect of providing customers with proper investor- and investment-related information (especially about product risks and commissions)?
5 sec. 31 para. (2) no. 2 Is there evidence indicating that commission agreements have not been mentioned?

Special rules of conduct

6 sec. 32 para. (1) no. 3 Is there evidence indicating own-account transactions made in cognisance of customer orders, which may lead to disadvantages for the customer (so-called front running)?
7 sec. 32 para. (1) no. 1 Is there evidence indicating disproportionately high fees or frequent movements in the accounts or securities accounts of customers which are not justified by the interest of the customer (so-called churning)?

Organisational duties

8 sec. 33 para. (1) no. 1 Are there any shortcomings in respect of the required training and qualification?
9 sec. 33 para. (1) Is there a lack of appropriate organisational arrangements as regards replacement for temporarily absent members of staff?
10 sec. 33 para. (1) Is there a lack of appropriate organisational arrangements to ensure the proper conduct of staff transactions?
11 sec. 33 para. (1) Are there any shortcomings in practice as regards compliance with the rules of conduct for employees concerning staff transactions?
12 sec. 33 para. (1) no. 3 Is there a lack of efficient internal control mechanisms to counteract breaches of the WpHG, e.g. an independent compliance department for possible conflicts of interest?
13 sec. 33 para. (1) no. 3 Are there any shortcomings in respect of the continuous monitoring of the organisational duties?
14 sec. 33 para. (2) In the case of outsourcing, is there any breach of the statutory duties under Section 33 para. (2) WpHG (ensuring the proper conduct of the services and compliance with the requirements pursuant to Section 33 para. (1) WpHG as well as the respective examination and control rights of the Federal Supervisory Office in cases where material business areas are outsourced)?

Requirements to keep and retain records

15 sec. 34 para. (1) Does the rate of the shortcomings discovered in the spot check pertaining to the record keeping requirements exceed 15 per cent?
16 sec. 34 para. (3) Are there any shortcomings in respect of compliance with the duty to retain records?

Separate asset management2

17 sec. 34 a para. (1) and (2) Is there any breach of the requirement under Section 34 a WpHG to hold client money and/or securities separately?

Reporting requirements3

18 sec. 9 Is there a lack of appropriate arrangements made by the enterprise to ensure compliance with the transaction reporting requirements pursuant to Section 9 WpHG?
19 sec. 9 Are there any shortcomings in practice as regards the completeness and correctness of the reports made pursuant to Section 9 WpHG?

Abusive advertisement

20 sec. 36 b Is there evidence indicating solicitation of private customers by means of unsolicited telephone calls (so-called “cold calling”)

Main points of the examination

21 Has the examination revealed any shortcomings regarding the main points of emphasis of the examination determined by the Federal Supervisory Office?

Footnotes:

1. The same applies if serious remedial action was taken during the examination so that quick remedy can be expected

2 Only to be answered in cases where enterprises are subject to the obligations under Section 34a WpHG.

3 Only to be answered in cases where enterprises are subject to the reporting requirements.

Ordinance on the Fees Levied for the Deposit of Prospectuses (Verkaufsprospektgebührenverordnung, VerkProspGebV)

Long title: Verordnung über Gebühren für die Hinterlegung von Verkaufsprospekten

As promulgated on 7 May 1999 (Federal Law Gazette I p. 874)


Table of Contents

Section 1 Scope
Section 2 Amount of the Fees
Section 3 Obligation to Pay a Fee
Section 4 Initial Levying of Fees pursuant to this Ordinance
Section 5 Entry into effect


In accordance with section 16 (2) of the Prospectus Act, as announced on 9 September 1998 (Federal Law Gazette I p. 2701) in connection with the second part of the Act on Administrative Costs of 23 June 1970 (Federal Law Gazette I p. 821) and section 1 of the Ordinance on the Delegation of Powers to Issue Ordinances under the Prospectus Act to the Bundesaufsichtsamt für den Wertpapierhandel of 25 June 1998 (Federal Law Gazette I p. 1652), the Bundesaufsichtsamt für den Wertpapierhandel issues the following Ordinance:

Section 1 Scope

Pursuant to this Ordinance the Bundesaufsichtsamt für den Wertpapierhandel (Bundesaufsichtsamt) shall levy a fee for the deposit of prospectuses. The deposit of a prospectus shall entail its registration, the confirmation of its receipt, an examination as to whether it contains the required statutory information, and its placement in the archives.

Section 2 Amount of the Fees

(1) The fee levied for the deposit of a complete prospectus shall amount to 400 Deutsche Mark in respect of each issue.

(2) The basic fee levied for the deposit of an incomplete prospectus within the meaning of section 10 Prospectus Act shall amount to 300 Deutsche Mark. For the deposit of a supplement the Bundesaufsichtsamt shall levy an additional fee in respect of each issue. Such additional fee shall amount to 100 Deutsche Mark.

(3) The fee levied for the deposit of a supplement which is intended to be published as additional information within the meaning of section 11 Prospectus Act shall amount to 100 Deutsche Mark.

(4) If the Bundesaufsichtsamt is notified of the intention to refrain from the publication of the prospectus

1. before the examination as to the completeness of the prospectus has been concluded, no fees shall be levied;

2. after the examination as to the completeness of the prospectus has been concluded, the relevant fee shall be reduced by a quarter;

3. after the prospectus has been placed in the archives, the full amount of the fee shall be levied.

Section 3 Obligation to Pay a Fee

The obligation to pay a fee shall arise upon receipt of the documents to be deposited.

Section 4 Initial Levying of Fees pursuant to this Ordinance

(1) The Bundesaufsichtsamt shall levy fees pursuant to this Ordinance for the first time for the deposit of complete prospectuses, incomplete prospectuses, supplements relating to incomplete prospectuses and supplements which are intended to be published as additional information received by the Bundesaufsichtsamt after 31 March 1999.

(2) For the deposit of prospectuses which the Bundesaufsichtsamt received before 1 April 1999 it shall levy fees in accordance with section 16 (2) Prospectus Act as announced on 17 July 1996 (Federal Law Gazette I p. 1047).

Section 5 Entry into effect

This Ordinance shall take effect as of 1 April 1999.

Ordinance on the Allocation of the Costs Incurred by the Federal Securities Supervisory Office during the Years of 1994 to 1997 (Verordnung über die Umlegung der Kosten des Bundesaufsichtsamtes für den Wertpapierhandel der Jahre 1994 bis 1997 )

As promulgated on 21 November 1997 (Federal Law Gazette Part I p. 2746).


Table of Contents

Section 1 Scope
Section 2 Costs
Section 3 Amount of the cost allocated
Section 4 Amount of reimbursement
Section 5 Period during which the obligation to pay reimbursement exists
Section 6 Payments on account
Section 7 Way of reimbursement
Section 8 Parties obliged to pay reimbursement pursuant to Section 11 paragraph (1) sentence 1 sub-paragraphs 1. and 2. of the Securities Trading Act
Section 9 Parties obliged to pay reimbursement pursuant to Section 11 paragraph (1) sentence 1 sub-paragraph 3. of the Securities Trading Act
Section 10 Effective date


Pursuant to Section 11 paragraph (3) of the Securities Trading Act of 26 July 1994 (Federal Law Gazette Part I p. 1749) in connection with Section 1 of the Ordinance on the Delegation of Powers to Issue Ordinances to the Federal Securities Supervisory Office of 16 March 1995 (Federal Law Gazette Part I p. 390) and taking account of Article 2 sub-paragraph 27. of the law of 22 October 1997 (Federal Law Gazette Part I p. 2518), the Federal Securities Supervisory Office issues the following Ordinance:

Section 1 Scope

The costs incurred by the Federal Securities Supervisory Office (Federal Supervisory Office) in the period from 1 August 1994 until 31 December 1997 shall be allocated in accordance with Sections 2 to 9 to the parties obliged to pay reimbursement pursuant to Section 11 paragraph (1) sentence 1 of the Securities Trading Act as amended on 26 July 1994.

Section 2 Costs

The costs consist of the actual budget expenditure of the financial year plus a thirty per cent pension-related supplement of the salaries of established civil servants employed in the Federal Supervisory Office. These costs form the basis of the allocation insofar as they are not covered by fees, special reimbursements or other income. Such income does not include administrative fines and coercive penalty payments.

Section 3 Amount of the cost allocated

The amount of the costs allocated shall consist of the percentage of the costs which a group of parties obliged to pay reimbursement as set forth in Section 11 paragraph (1) sentence 1 of the Securities Trading Act is required to pay. Amounts of reimbursement (Section 4 sentence 1) that could not be collected and deficits from the allocation of the previous year shall be added to the respective amount of the cost allocated, amounts reimbursed later and surpluses from the allocation of the previous year shall be deducted.

Section 4 Amount of reimbursement

The Federal Supervisory Office shall fix for each party obliged to pay reimbursement the proportion it is required to pay of the amount of the costs allocated (amount of reimbursement); it shall amount to at least DM 30. The party obliged to pay reimbursement is required to make the payment within the period of time notified by the Federal Supervisory Office.

Section 5 Period during which the obligation to pay reimbursement exists

(1) The obligation to pay reimbursement exists for the year in which the party obliged to pay reimbursement in accordance with Section 11 paragraph (1) sentence 1 sub-paragraph 1. of the Securities Trading Act was allowed to conduct securities business in Germany, the party obliged to pay reimbursement in accordance with Section 11 paragraph (1) sentence 1 sub-paragraph 2. of the Securities Trading Act was admitted to participate in trading on the exchange, or securities of the party obliged to pay reimbursement in accordance with Section 11 paragraph (1) sentence 1 sub-paragraph 3. of the Securities Trading Act were admitted to trading on a German exchange or were included in the free market (Freiverkehr) with the consent of that party (year of reimbursement).

(2) The first year of reimbursement shall be the year 1994. The obligation to pay reimbursement shall apply for that year if the preconditions under paragraph (1) above existed during the period from 1 August 1994 until 31 December 1994.

(3) The obligation to pay reimbursement shall also apply if the preconditions under paragraph (1) above did not exist throughout the year, in case of paragraph (2) above did not exist during the whole period of time.

Section 6 Payments on account

On the amounts to be reimbursed for the current year payments on account must be made in the amount of 50 per cent of the amounts reimbursed in the previous year.

Section 7 Way of reimbursement

Amounts of reimbursement and payments on account not paid within the specified time shall be recovered by the Federal Supervisory Office under the Law on the Enforcement of Administrative Decisions. Law enforcement authority is the principal customs office which is responsible for the registered office or branch of the judgment debtor.

Section 8 Parties obliged to pay reimbursement pursuant to Section 11 paragraph (1) sentence 1 sub-paragraphs 1. and 2. of the Securities Trading Act

(1) The amount of reimbursement shall be allocated to the parties obliged to pay reimbursement pursuant to Section 11 paragraph (1) sentence 1 sub-paragraphs 1. and 2. of the Securities Trading Act according to the relation of the volume of the transactions in securities and derivatives effected by an individual party obliged to pay reimbursement to the total volume of the transactions in securities and derivatives effected by all parties obliged to pay reimbursement within a group.

(2) The parties obliged to pay reimbursement may provide evidence of the volume of their transactions in securities and derivatives

1. concluded in the period from 1 August 1994 until 31 December 1994 as well as in 1995 and 1996 until 31 December 1997,

2. concluded in 1997 until 31 March 1998.

Details of the way evidence is provided in accordance with sentence 1 shall be determined by the Federal Supervisory Office. If such evidence is not provided within the specified period, the Federal Supervisory Office shall fix the amounts of reimbursement for the period pursuant to sentence 1 sub-paragraph 1. and for the period pursuant to sentence 1 sub-paragraph 2. in accordance with the transactions reported under Section 9 of the Securities Trading Act in 1996 and 1997 respectively.

(3) Relevant for the volume of the transactions within the meaning of paragraphs 1 and 2 shall be the number of transactions concluded in the year of reimbursement. Transactions which have been cancelled shall not be taken into account.

Section 9 Parties obliged to pay reimbursement pursuant to Section 11 paragraph (1) sentence 1 sub-paragraph 3. of the Securities Trading Act

(1) The amount of reimbursement shall be allocated to the parties obliged to pay reimbursement pursuant to Section 11 paragraph (1) sentence 1 sub-paragraph 3. of the Securities Trading Act according to the relation of the stock exchange turnover pursuant to Section 11 paragraph (1) sentence 3 of the Securities Trading Act of a party obliged to pay reimbursement to the total stock exchange turnover of all parties obliged to pay reimbursement within this group.

(2) Relevant shall be the stock exchange turnover during the year of reimbursement.

Section 10 Effective date

This Ordinance will take effect on the day following its announcement.

Ordinance on the Allocation of the Costs of the Federal Securities Supervisory Office (Umlage-Verordnung-Wertpapierhandel)

Long title: Verordnung über die Umlegung der Kosten des Bundesaufsichtsamtes für den Wertpapierhandel

As promulgated on 22 February 1999 (Federal Law Gazette Part I p. 179).


Table of Contents

Section 1 Scope
Section 2 Costs
Section 3 Amount of the costs allocated
Section 4 Period for which reimbursement must be paid
Section 5 Amount of reimbursement
Section 6 Special features for calculating the amount of reimbursement
Section 7 Time for payment
Section 8 Way of reimbursement
Section 9 Transitional provision for parties obliged to pay reimbursement pursuant to section 11 para. (1) sentence 1 no. 3 of the Securities Trading Act
Section 10 Effective Date


In accordance with section 11 para. (3) of the Securities Trading Act (Wertpapierhandelsgesetz) as announced on 9 September 1998 (Federal Law Gazette Part I p. 2708) in connection with section 1 of the Ordinance on the Delegation of Powers to Issue Ordinances to the Federal Securities Supervisory Office of 3 March 1998 (Federal Law Gazette Part I p. 406), the Federal Securities Supervisory Office issues the following Ordinance:

Section 1 Scope

This Ordinance regulates the allocation of the costs of the Federal Securities Supervisory Office (Federal Supervisory Office) to the parties obliged to pay reimbursement pursuant to section 11 para. (1) sentence 1 of the Securities Trading Act.

Section 2 Costs

The costs of the Federal Supervisory Office consist of the actual budget expenditure of the financial year plus a thirty per cent pension-related supplement of the salaries of established civil servants employed in the Federal Supervisory Office. These costs form the basis for the allocation in so far as they are not covered by fees, special reimbursements or other income. Such income does not include administrative fines or coercive penalty payments.

Section 3 Amount of the costs allocated

The amount of the costs allocated is equal to the percentage of the costs which a group of parties obliged to pay reimbursement as set forth in section 11 para. (1) sentence 1 of the Securities Trading Act is required to pay. Deficits from the allocation of the previous year are to be added to the respective amount of the costs allocated, surpluses from the allocation of the previous year are to be deducted.

Section 4 Period for which reimbursement must be paid

Reimbursement must be paid for the year (year of reimbursement) in which

1. the party obliged to pay reimbursement pursuant to section 11 para. (1) sentence 1 no. 1 of the Securities Trading Act was authorised to render investment services within the meaning of section 2 para. (3) no. 1, 2 or 5 of the Securities Trading Act in Germany,

2. the party obliged to pay reimbursement pursuant to section 11 para. (1) sentence 1 no. 2 of the Securities Trading Act was admitted to participate in trading on a German exchange,

3. the party obliged to pay reimbursement pursuant to section 11 para. (1) sentence 1 no. 3 of the Securities Trading Act was authorised to render investment services within the meaning of section 2 para. (3) no. 3, 4 or 6 of the Securities Trading Act in Germany, or

4. securities of the party obliged to pay reimbursement pursuant to section 11 para. (1) sentence 1 no. 4 of the Securities Trading Act were admitted to trading on a German exchange or were included in free market trading (Freiverkehr) with the consent of that party.

The obligation to pay reimbursement also applies in cases where the preconditions of sentence 1 above did not exist during the whole of the year.

Section 5 Amount of reimbursement

The Federal Supervisory Office will fix for each party obliged to pay reimbursement the proportion of the amount of the costs allocated (amount of reimbursement) which it must pay. The minimum amount to be paid is DM 50.

Section 6 Special features for calculating the amount of reimbursement

(1) Relevant for the calculation of the amount of reimbursement of the parties obliged to pay reimbursement pursuant to section 11 para. (1) sentence 1 nos. 1 and 2 of the Securities Trading Act is the number of transactions concluded in the year of reimbursement; transactions that were cancelled are not taken into account.

(2) Relevant for the calculation of the amount of reimbursement of the parties obliged to pay reimbursement pursuant to section 11 para. (1) sentence 1 no. 3 of the Securities Trading Act is the result from ordinary business operations or the evidence supplied in respect of the gross proceeds obtained from investment services or own account transactions in the business year which ends in the year preceding the year of reimbursement. Evidence of the gross proceeds must be supplied to the Federal Supervisory Office in writing not later than 31 March of the year following the year of reimbursement and its correctness must be certified by the auditor of the annual accounts. If no such evidence is supplied within the prescribed period of time the result from ordinary business operations will be relevant. If the first business year as party obliged to pay reimbursement starts in the year of reimbursement, the Federal Supervisory Office levies an amount of reimbursement which is equal to the minimum amount according to the second sentence of section 5 above. If the business year is not identical with the calendar year, the Federal Supervisory Office levies an amount of reimbursement which is equal to the minimum amount according to the second sentence of section 5 above also for the year of reimbursement in which the second business year as party obliged to pay reimbursement starts.

(3) Relevant for the calculation of the amount of reimbursement of the parties obliged to pay reimbursement pursuant to section 11 para. (1) sentence 1 no. 4 of the Securities Trading Act is the stock exchange turnover in the year of reimbursement.

Section 7 Time for payment

The party obliged to pay reimbursement must make the respective payment within the period of time which was notified to it by the Federal Supervisory Office.

Section 8 Way of reimbursement

Amounts of reimbursement not paid within the specified time are recovered by the Federal Supervisory Office under the Law on the Enforcement of Administrative Decisions. Law enforcement authority is the principal customs office which is responsible for the registered office or branch of the judgement debtor.

Section 9 Transitional provision for parties obliged to pay reimbursement pursuant to section 11 para. (1) sentence 1 no. 3 of the Securities Trading Act

Not obliged to pay reimbursement in connection with the allocation of the costs incurred in the financial year 1998 are financial services institutions which waived their licence pursuant to section 64e para. (2) sentence 2 of the Banking Act in the course of the year 1998 or whose licence pursuant to section 64e para. (2) sentence 2 of the Banking Act was revoked by the Federal Banking Supervisory Office (Bundesaufsichtsamt für das Kreditwesen) in the course of the year 1998.

Section 10 Effective Date

This Ordinance will take effect on the day following its announcement.

Directive of the Securities Supervisory Board of 26 May 1997 under §§ 31, 32 Securities Trading Act – Excerpts

§ 1 Scope of application

This Directive illustrates the duties arising under §§ 31 and 32 ‘WpHG’. It applies to the securities services provided by the following securities services companies:

(a) credit institutions whose seat is within the country,

(b) branches of companies in the meaning of § 53 section 1 sentence 1 and § 53b section 1 sentence 1 of Banking Act in the version of 30 June 1993 (BGBl. I S.1082), amended through the Act of 28 September 1994 (BGBl. I S.1082), amended through the Act of 28 October 1994 (BGBl. I S.3210),

(c) branches of companies which are given an equal status or are exempted according to a
statutory instrument based on § 53c of the Banking Act.

This Directive also applies to companies having their seat in a foreign state and which offer securities services towards customers whose ordinary residence or whose business management is within the country, unless primary securities services including related and supplementary services are exclusively rendered within a foreign country.

Securities services in the meaning of this Directive are the transactions on a commission basis, dealings for one’s own account for the benefit of others (Fixed Price Dealings), and procurement dealings, insofar as they relate to securities and derivatives in the sense of § 2 section 1 or 2 ‘WpHG’. Additionally, transactions where securities services companies pass their customers’ orders on to other securities services companies are also covered, provided that the rendered services are not restricted to the mere forwarding of the orders.

According to § 37 section 1 ‘WpHG’ this Directive does not bind

(a) companies which carry out securities services exclusively for their parent firm or their subsidiaries in the sense of § 1 section 6 and 7 of the Banking Act or for other subsidiaries of of their parent firm;

(b) the Federal Debt Administration, one of its Special Funds, the Debt Administration of one of the Federal States, a member state of the European Communities or a signatories to the Treaty on the European Economic Area, the German Federal Bank as well aas the central banks of theother member states or signatories.

This Directive does not apply to dealings which are done between two securities services companies in the stock market (see § 37 section 2 ‘WpHG’).

§ 2 General information to be given before the rendering of the securities services

2.1. Information on the firm

On demand, the securities services firm has to provide the customer with information on the nature and scope of the offered securities services, especially on range of services available.

2.2. Information on costs and collateral securities (‘margins’)

Before the supply of the services, the securities services firm has to enable its customer to obtain information on the calculation, extent and type of the costs, and to realize, where necessary, the need for collateral securities (‘margins’), or the existence of other liabilities such as costs for statements of account or deposit account, and, explain them on demand. Particular attention must also be drawn to minimum fees.

If the securities services firm arranges with brokers or other involved companies the partial reimbursement of third party costs which are billed to the customer as incurred expenses (‘kick-back-agreements’), the securities services firm has to inform the customer about the obligation under the commission arrangement to pay back these sums. Insofar as this information has not already been given when the business relationship was established, it must be provided before the supply of the securities services at the latest. The customer is also to be told, in an appropriate maner, about changes in the way prices are calculated.

2.3. Verification

The securities services firm has to comply with the duties to inform as they are laid down in this section in such a way that its compliance can be verified trhough an inspection under § 35 section 1 or § 36 section 1 ‘WpHG’.

§ 3 Collection of customer details and provision of adequate information

At latest before the placing of the order, the securities services firm must, insofar as necessary, provide its customer with all appropriate information on the type of the envisaged dealings (‘disclosure’), i.e. it must explain to the customer especially the nature and risks of single forms investment.

Insofar as the securities services firm only executes orders (‘execution-only’), either through a separate distribution channel or generally, in an individual case or commonly, meaning that the firm’s disclosure is not followed by a recommendation taking into account its customer’s personal situation, the customer must be informed about this fact explicitly at latest before the customer’s order is executed. In these cases, the rules as set out in third part of this Directive apply subject to the provisions of 3.6.

3.1 Collection of information from the customer

The securities services firm is obliged, insofar as necessary, to ask its customer about his investment objectives, his knowledge of and experience in specific forms of investment and about his financial situation. In this context, it must be pointed out to the customer that the giving of this kind of information, which is on a voluntary basis, is in the customer’s own interest. The scope of the gathered information should be brought into line with the customer’s interests as well as to the type and extent of his envisaged dealings. No collection of information is necessary insofar as the securities services firm has already sufficent knowledge of the customer’s affairs. If, with a view to the provisons of this Directive, individual information on specific forms of investmens is not required and it is only collected within the ordinary course of the business relationship for the purpose of streamlining business procedures, the customer must be informed about this beforehand. It must be safeguarded that the given information is exclusively used for the purpose of disclosure and advice to the customer unless the customer consents to any other use.

The disclosure undertaken by the securities services firm are founded on the customer’s statements. Therefore, the customer’s attention is to be drawn to the fact that he should inform the securities services firm about any substantial change in his affairs that form the basis for his statements. As soon as a change in the situation underlying the customer’s statements is noticeable, the securities services firm must approach and ask the customer again. With regard to derivatives and options, statements by customers are, insofar as necessary, to be obtained again within a period of three years.

The securities services firm must, insofar as necessary, ask the customer with regard to the following points:

(a) Investment objectives
The securities services firm is to question the customer about his investment objectives. The customer is especially to be asked about his interest in long term or short term forms of investment (e.g. for the purpose of his old age provision or eduction), single or recurrent returns (profits) and about the extent of his willingness to take risks.

(b) Knowledge or experience
The securities services firm must also ask the customer of which forms of investments (e.g. debenture bonds, shares, investment certificates, derivatives) he has knowledge and in which of them he has already invested money in the past (extent, frequency and time).

(c) Financial affairs
The securities services firm must also ask the customer with reference to his financial affairs insofar as this is necessary with regard to his envisaged dealings, his investment objectives as well as his knowledge and experience. Insofar as the customer gives information on deposit accounts or derivatives dealings with other credit institutions, this information must also be taken into account by the firm.

With regard to the scope of these questions, the securities services firm is to consider whether the envisaged dealings are to be paid for by the customers’s own means or through loans and what kind of risks concerning loss, additional payments or other risks exist with regard to these transactions. Customers who use their own existing funds to invest in securities of issuers having a particularly high credit standing such as the bonds or special funds of the Federal Republic of Germany or the Republic’s Federal States or equivalent bonds of member states of the European Economic Area, which are members of the Organization for Economic Cooperation and Development (OECD) need not make any statements as to their financial situation.

3.2. Extent of the information 2

At latest before the acceptance of the customer’s order, the customer is, insofar as necessary and with regard to his statements, to be informed about the nature and risks of the forms of investment as well as other relevant facts, for example about the possibility of putting a limit on an order, especially in markets of low liquidity and a minimum number of orders. This can be done through standardized brochures.

The customer must be told that he has the right to give instructions concerning the execution of his order, especially with regard to at which stock exchange the transaction is to be completed.

On demand, and insofar as known to the securities services firm, the firm must inform the customer at which stock exchange or in which markets the order is to be executed and which mediators, traders, market makers, depositary banks or clearing organizations are involved in the transaction. If there are specific risks concerning the involved parties or with regard to particular markets, especially with a view to insolvency or transactions, this must be disclosed to the customer by the securities services firm. This particularly applies to cross border securities services.

The information must be correct, complete and unequivocal as well as structured and is to be presented in an appropriate manner. With regard to the content and form of the information, the securities services firm shall take into account the customer’s knowledge of and experience in the relevant form of investment. The information is to be repeated if this appears to be necessary, for example, if the customer does only show a limited trading activity.

If the customer’s statements are used to place the customer into a specific risk category and he is told about this, then this categorization is to be considered when his orders are being executed by the securities services firm. Additionally, the customer must be told about the criteria which are used for the categorization.

If, on consultation, the customer wishes to have one specific order executed which does not fall into his risk category, the order can be carried out if it is ensured that the customer has received the necessary information before the execution of his order.

3.2.1. Information concerning debenture bonds

Information concerning the risks of debenture bonds should especially include information on the revenue, the credit rating, and, if necessary, the country risk, the price and interest rate risk, the insolvency risk, the currency risk as well as the termination and drawing rights risk.

3.2.2. Information concerning shares

Information regarding to shares should especially include information on the revenue (dividend), the price risk, the credit rating, the insolvency risk, the trade cycle risks as well as the currency risk.

Information on risks with regard to shares which are not traded at a national or foreign stock exchange (e.g. US-American ‘Penny Stocks’) should contain information on the market (especially on the market liquitity) and the specific risk of loss of this form of investment as well as on the origin of the price statements, on the difference between bid and book price (‘spread’) and on the fees charged by the securities services companies involved in the execution of the order.

3.2.3. Information concerning investment certificates

Information on risks of investment certificates should include information on the composition of the funds, the investment strategy, the utilization of the revenue, the issuing price (issuing top up fee etc.), the price risk and the assessment procedures.

3.2.4. Information on derivatives and options warrants

Information on the risks of derivatives must especially contain information on the intrinsic value, the economic context and function of the products (particularly the importance of duration of premium, the type of execution, the leverage effect, the liquidity, the volatility of the markets and, if necessary, the standstill risk), the revenue, the price risk, the currency risk and the credit risk.

If the customer is requested to bring a collateral security (‘margin’) for his envisaged transactions, he, on demand, must be informed in writing about the methods of how the collateral security is being calculated. In this respect, it must be disclosed to him which involved party demands the collateral security and in what form this security can be given (e.g. money, securities) and whether the securities services firm asks for more securities than the stock exchange itself. Additionally, the customer must be told, if necessary, about his obligation to produce further means of collateral securities (‘additional payments’) where necessary. Furthermore, attention should be drawn to the possibility of the passing on of collateral securities to the material stock exchange or clearing organization. The securities services firm must also inform the customer in which circumstances he has the right to even up or liquidate a position. In this context, the customer is also especially to be told at which intervals the requirements for collateral securities are revised by the securities services firm and what time limit the customer is granted to fulfill his obligation to present additional payments or to liquidate his position.

Moreover, the securities services firm has to notify the customer in which forms the given collateral securities are usually administered and whether the customer is, provided that the market situation allows it, entitled to reduce a surplus of collateral securities.

3.3 Agency

If a customer is represented by an agent, the agent’s knowledge of and experience in the form of investment in question is relevant in respect of the obligation to collect information and also with regard to the obligation to give appropriate information.

3.4 Procedure in cases where customers do not give information

The securities services firm must undertake serious efforts to obtain the relevant information from the customer. Where a customer excercises his right to refrain from giving information, this must be documented by the securities services firm. However, the possibility of not giving any information must not be part of a questionnaire used by the firm. In case a customer does not provide the requested information to the firm, the customer’s specific order can be executed if it is ensured that the customer has been offered to to get information on the nature and risks of the forms of investments before his order is being accepted.

3.5 Procedure where the customers are unattainable

Where the customer is unattainable for the purpose of the provision of information to him and where the immediate execution of the order is obviously within his interests, it is sufficient if the relevant pieces of information are given to him without undue delay after the execution of his order.

3.6 Provisions for securities services companies which only execute their customers’ orders (‘execution-only’)

If a securities services firm only executes orders (‘execution-only’), possibly through a separate distribution channel, individually or typically, it must inform its customer about this fact at latest before the acceptance of an order by him. The information that is to be given to the customer must be brought in line with his knowledge of and experience in his envisaged forms of investment. Insofar as the firm provides the customer with information which exceeds the type of information regulated in this section, such as market reports, charts or analysis, it must make it clear to its customer that this information does not amount to the supply of investment advice but is only meant to facilitate the customer’s own investment decision. At latest before the acceptance of the order, the securities services firm typically has only to ask its customer about his knowledge and experience. Statements by the customer concerning his investment objectives and financial affairs are only then required insofar as the securities services firm grants the customer a loan for the execution of his envisaged dealings or requests him to present collateral securities. In other respects, the rules of section 3 apply.

4.3 Execution in the customer’s best interest

Orders must be executed in the customer’s best interest. In this respect, those interests of the customer which are noticable to the securities services firm are material. Orders, which are obviously not in the interest of the customer, must only then be carried out by the securities services firm if it explains to the customer the risks of these orders before their execution. Insofar as there are no specific directions given by the customer, the securities services firm has, with the standard of care usually exercised in the ordinary course of business, to undertake to obtain with a view to the costs the most favourable price on the most favourable market as it is defined by the provisions of § 10 Stock Exchange Act. If necessary, the securities services firm must also inquire about the liquidity of the markets (e.g. so-called ‘emerging markets’).

In case the securities services firm uses a third party for the execution of the order, it must exercise due care when selecting this third party in order to ensure the best excecution of the order.

The splitting up of one single order into several partial orders is only then allowed if this is economically feasible as well as in the customer’s interest considering the thereby created extra costs. However, this does not apply where the customer explicitly requests the splitting up of the order.

With regard to orders which are passed on via an order routing systems of the respective stock exchange, it must be ensured that there are no delays caused by the forwarding of these orders. If delays cannot be avoided, other ways of communication (e.g. telephone or telefax) are to be used.

Where the securities services firm agrees with the customer on a fixed price for a single transaction (dealing for one’s own account or, as the case maybe, fixed price dealings), it must inform the customer about the fact that this agreement leads to the conclusion of a contract of sale. The price with regard to fixed price dealings is to calculated by periodical reference to the market price.

5. Not permitted dealings

5.1 Not permitted recommendations

The securities services firm is not permitted to recommend to the customer a transaction of which it assumes or should reasonably assume that is disadvantageous to the customer’s interests. Especially it must not recommend to the customer transactions which are not in line with his interests.

The customer’s interest is especially impaired if the recommendations result in a unreasonably high number of transactions in his current or deposit account leading to costs which are unreasonably high in proportion to the capital employed and the profit gained.

The securities services firm is also not permitted to recommend to the customer transactions in order to influence the price with a view to dealings in the firm’s own account or in the account of one of the firm’s associated companies in the sense of § 15 Company Act. Especially misleading influence on the forming of the customer’s opinion or deceit of the customer (e.g. through fictitious transactions or arranged dealings) are not allowed.

5.2 Not permitted transactions on the firm’s own behalf which are detrimental to the customer

The securities services firm is not allowed to undertake transactions on its own behalf on the basis of the knowledge of or expectation of a customer’s order and which can result in disadvantages to the customer (prohibition of front, parallel or counter running).

It is especially not permitted to acquire securities or derivatives with regard to a future recommendation in order to sell them with a profit after the recommendation. The same applies to sales. Where the publication of written recommendations for customers or research results of the securities services firm or one of its associated companies are impending, no tradings in the affected securities or derivatives on one’s own behalf are to be carried out before the customers have had reasonable time to react. Such a reasonable time to react can usually be assumed if, at the time of the written recommendation to the customer, the information has been made known to the interested public (so-called ‘Bereichsöffentlichkeit’) by publication of the information through an electronic information processing system that is recognized by the stock exchanges and commonly used by credit institutions, listed companies and insurance companies. There are exceptions to this rule in the following situations:

  • there is obviously no substantial impact on the price or rate to be expected;
  • the transactions are carried out as part of a ‘market maker’ activity;
  • the transaction is made in order to execute a customer’s order and where the securities services firm neither acts as an adviser nor as a portfolio manager;
  • the transaction is made in order to lay in a stock with a view to be able to accept orders after a publication and, thus, there is no influence on the price that is detrimental to the customer;
  • the publication includes a reference to possible transactions on the firm’s own behalf.

The provisons of the number 5.1 and 5.2 do not apply insofar as the securities services firm has implemented sufficient organizational messures to ensure that such conflicts of interest are avoided.
Footnotes

  1. Full name in German: Richtlinie des Bundesaufsichtsamtes für den Wertpapierhandel gemäß § 35 Abs. 2 des Gesetzes über den Wertpapierhandel (WpHG) zur Konkretisierung der §§ 31 und 32 WpHG für das Kommissions-, Festpreis- und Vermittlungsgeschäft der Kreditinstitute’.
  2. The German term used in the Directive is ‘Aufklärung’ which could also be translated as ‘disclosure’. However, the phrase ‘disclosure’ appears to have a slightly different meaning in English in the context of financial services in the UK. In the UK., the word ‘disclosure’ usually seems to characterize a situation where one party is obliged to disclose facts that are (more or less) exclusively known to him or her to another party. In contrast to this, in the German Directive, the term ‘Aufklärung’ is meant to describe the duties of a securities services firm to explain to a (not very experienced) customer facts that are of common knowledge to professionals in the area of financial services.