When engaging in international business, investors must comprehensively consider the political and legal factors existing in their preferred investment countries. These factors take a central stage since they directly affect the nature of investment and its performance in the state of preference.
Political factors come in the form of unanticipated imposition of laws, regulations, and controls by governments that were neither known initially nor anticipated during the initial planning processes (Feist, 1999 p. 28). Germany extends enticing political considerations to any international investment decision since the political landscape is stable and well structured.
The capitalist ideological orientation is not capable of negatively affecting either global or local investments. Earlier on, some ideological forces such as communism and religious fundamentalism used by individuals in positions of power especially in East Germany to confiscate property owned by international investors.
However, this ideological orientation has been overtaken by events and requirements of modern society. Presently, Germany allows a capitalist system that favors international investors since it gives freedom to private enterprise and ensures that government engagement is limited to functions and roles that the private sector cannot handle.
The political orientation of Germany guarantees minimal interference in business and investment decisions. Indeed, measures have been put in place by the relevant authorities to reduce or do away with burdensome regulations and political interventions in the operations of business enterprises – both local and foreign.
The rules that a foreign enterprise must make provisions or set specific quotas for local labor force have been done away with to stimulate more international investment. Laws requiring international companies to have a specific composition of local ownership have also been greatly relaxed. What’s more, the political class relaxed restrictions and laws on profit disclosures and remittances in addition to other investment regulations.
Indeed, the government does not engage in any activity that can be perceived to hinder operational efficiency of foreign investments. Such activities may include mandatory unionization of employees and offering unjustified support to local competitors at the expense of international counterparts. In Germany, political power is changed in a smooth and orderly manner (Feist, 1999 p. 28).
Germany has a favorable, transparent and secure legal framework. In many European countries, the courts are rarely asked to offer their interpretations as is the case in the US. The solidified and stable rule of law allows international investors to have faith and trust in Germany’s government that it shall protect their interests while operating in the country.
Indeed, Germany is a signatory of several bilateral and multilateral trade and economic treaties and regulations that ensures the rights and interests of international investors are observed at all times. For instance, the country is a signatory to the EU Competition Policy aimed at checking various business vices such as price fixing and business monopolies.
This is the equivalent of antitrust laws in the US. In this perspective, the fact that Germany is influenced by some US laws that inarguably affect international business operations cannot be denied.
The country has also ratified major UN conventions dealing with intellectual property rights, arbitration regulations, and the Contracts for International Sales of Goods (CISG). This, therefore, means that the international investor is comprehensively protected not only by the country’s legal frameworks but also by international statutory regulations and practice (Lynch, 2003 p. 319).
Germany is a member of the European Patent Organization (EPO) and the World Intellectual Property Organization (WIPO). It is bound by the Madrid Agreement of 1891 which safeguards trademarks from misuse by industry competitors. International investors trying their luck in Germany are also protected from copyright infringements since the country is a signatory to both Berne Convention of 1886 and Universal Copyright Convention of 1954.
When it comes to taxation issues, Germany has entered into tax treaties and conventions with many other countries, simplifying the tax requirements of potential international investors. These treaties bind various governments to share crucial information about corporate and individual taxpayers.
Although Germany is known for its considerably high tax burden, investors get a reprieve through the tax write-off schemes and tax cuts. Indeed, the tax burden has considerably plummeted in the last few years.
The country has also ratified product liability regulations that hold company owners to account if their products cause death, injury or harm to users (Lynch, 2003 p. 321). All in all, the trend reveals that Germany would offer an exciting investment destination for real estate business.
Feist, W.R. (1999). Managing a global enterprise: A concise guide to international operations. Greenwood Publishing Group. ISBN: 9781567201628
Lynch, K.L. (2003). The forces of economic globalization: Challenges to the regime of international commercial arbitration. Klower Law International. ISBN: 9789041119940