Unfortunately it is a common misconception that attorneys are mainly involved in litigation. This leads to potential clients avoiding the involvement of attorneys, to settle matters without litigation. However, this often proves to be a self-fulfilling prophecy, since attorneys are only involved once matters have gone sour. At that stage litigation will actually be unavoidable.

In fact any competent attorney will advise his client in a way that already minimizes the risk of future disputes at the time a contract is entered. When drafting and negotiating a contract the attorney will attempt to reduce the potential risks for his client as far as possible and will advise him about the remaining risks. Should a dispute arise later on, a skillful attorney will try to settle the matter out of court whenever reasonable. In the long run, a client who settles a dispute, especially in a business relation, will usually be satisfied. The outcome of litigation, on the other hand, is in many cases hard to predict.

In advising businesses attorneys provide the same services as do in-house legal departments, either in addition to an existing legal department, which might want to retain special know-how and/or manpower from outside counsel, or in lieu of the legal department, if the client does not have an in-house counsel.

To provide optimal services to their clients attorneys require more and more specialization.

Sometimes very specific formal requirements and the ever-increasing volume of statutes, regulations and precedents, which no general practitioner can adequately be aware of, play an important role in the German legal system. Often only a specialist can insure that no irreparable mistakes are made. This applies even more if different legal systems are involved in a matter. This does not only apply to special competence in a particular legal field or kind of transaction but also to special linguistic, cultural or business knowledge as well as the familiarity with certain industries and markets. Attorneys in Germany are usually specialized in certain legal fields, certain kinds of transactions, certain industries or a combination thereof. It will often prove worthwhile to invest some effort on finding the right attorney to handle a particular matter.

Through the “Rechtsberatungsgesetz”, the Legal Services Statute, the commercial provision of legal services in Germany is strictly limited to German attorneys and, under certain circumstances, EU lawyers and notaries. However, this does not limit anyone in using his own legal expertise in a wide variety of areas, which at least larger companies usually do by maintaining a legal department.

Legal representation by an attorney is generally mandatory in civil court, unless the matter concerns small claims or labor disputes. That means a party has to be represented by an attorney licensed to practice in Germany, even if the party would be competent to represent itself. For certain transactions and in dealing with certain registry matters (for instance a purchase of shares of a liability company [GmbH] or of real estate) the involvement of a notary is mandatory. Depending on the federal state they are located in, notaries can only act exclusively as such or can simultaneously be practicing as attorneys.

The more than 110.000 licensed attorneys in Germany (approximately one attorney for every 750 inhabitants) are mandatorily organized in local bar associations which are joint in the federal bar association. The local bar associations have the disciplinary oversight and attorneys have to observe an extensive code of professional responsibility, whose core provisions still originate from the Code of Professional Responsibilities (Rechtsanwaltordnung) of 1879.

The professional responsibility regulations mainly serve to insure a high professional standard of legal services and to preserve the moral authority of the bar. Central provisions deal with legal malpractice liability, mandatory malpractice insurance, the handling of client funds, billing, confidentiality, limitation with regard to marketing and the general obligation for continued legal education, even though this does not include any specific continued legal education requirements.

Traditionally the fees for legal services in Germany are charged in accordance with the statutory Federal Fee Schedule. Under the Fee Schedule fees are mainly determined based on the amount at issue in the dispute, transaction or other matter. However, the degree of difficulty and the amount of work involved in the matter are of minor importance in determining the fees.

In many cases, but especially representing corporate clients, the statutory fee system has proven to be impractical. Thus, fees in this area are predominantly charged on an hourly basis. When entering a fee agreement it has to be observed, that contingency fees are strictly prohibited. Furthermore, in case of litigation fee agreements must not lead to fees that are lower than the statutory fees. Notaries may not enter into fee agreements. They have to charge their fees according to the statutory Fee Schedule for Notaries. If exceptionally high amounts are at issue, those fees are often considered excessive. Notarizations involving large amounts are therefore often done in Switzerland.