Great potential in Germany for Swedish companies – but complex market regulations call for legal advice
Being the world's fourth-largest economic power, Germany is considered as Europe's growth engine. Meanwhile, it is also Sweden's most important trade partner and often plays the role of gateway to the rest of the world for Swedish companies. The economic ties between Sweden and Germany are traditionally strong and have been given a powerful boost recently, partly as a result of the innovation partnership that was initiated between the two countries in 2017. Apart from the new areas of AI and batteries, the partnership covers electric roads, innovation cooperation between small and mid-sized companies, test beds and eHealth.
The partnership aims to strengthen strategic innovation in areas in which both countries are leaders and where they can push for progress within the EU. The partnership also highlights mutual priorities for new European industrial policies characterised by green conversion and digitalisation.
- There is great demand in Germany for solutions in areas in which Swedish companies are leading developments, such as the digitalisation of the public and private industry, 5G, energy, e-commerce solutions aimed at the consumer market and digital payment solutions, where Germany is lagging far behind Sweden, says Dr Nils Gruske, lawyer specialising in new technology and intellectual property at kallan's Berlin office. He was also recently appointed professor for international business law at BSP Business & Law School in Berlin.
- The conversion to a fossil free future and rising demands for green solutions also create many business opportunities for Swedish companies, he continues.
Stable market offering many opportunities
kallan is a commercial law firm with Swedish roots, celebrating its 5th anniversary in November 2021. Until November 2016, the team of lawyers formed the German offices of the leading Scandinavian law firm Mannheimer Swartling. Many of them have been working in Sweden and speak Swedish, and one is also qualified as an Advokat in Sweden. This means that they have a good understanding of both German and Swedish businesses, assisting many Swedish companies in Germany. For example, the firm recently participated as legal experts in AccessGERMANY, a project for Swedish start-ups about to enter the German market initiated by Tillväxtverket, the Swedish Agency for Economic and Regional Growth, together with the Swedish Chamber of Commerce in Germany.
Germany is a politically stable market with a multifaceted industry happy to cooperate with Sweden's innovative entrepreneurs. This applies, not least, to the so called "Mittelstand" sector, i.e. the mid-sized companies that make up the backbone of the German economy. Many exchanges between German and Swedish companies already exist, both when it comes to classical industries including telecom, automotive, and machine construction, and more modern areas, such as digitalisation and energy efficiency. There are many examples of successful cooperation projects. Northvolt's 120 mln SEK order from Volkswagen, which is also the biggest owner of the Swedish battery producer, has recently gained a lot of attention.
Many pitfalls and hard competition
Swedish companies have a good reputation in Germany and certain products can sell more merely based on the fact that the customer sees that it comes from Sweden, a so called "Schwedenbonus". But even if there is a great potential and Germany's business climate in many ways resembles that of Sweden's, there are important differences; competition is fierce and there are many pitfalls, Dr Christina Griebeler, partner and lawyer at kallan's Frankfurt office, points out.
- Many Swedish companies are shocked when they come here and receive a "warm" welcome by way of a so called Abmahnung, i.e. a warning letter accompanied by demands for penalty payments that companies risk getting from competitors and their lawyers. These could be based on alleged misleading marketing, wrong pricing or something seemingly unimportant such as missing contact information. Apart from penalties, the company risks having to pay for the opponent's legal costs, which can make this a very costly experience, Nils Gruske explains.
- There are also cultural differences which are important to understand in order to get a good start on the German market. One example is that Germans pay more attention to clear and detailed accounts of figures and certifications. If you want to sell tech solutions to a German company, it's better to focus on clear diagrams in your presentation than on pretty pictures, says Christina Griebeler.
In other words, in order to avoid costly mistakes, it is wise to consult qualified legal advice from the very beginning – and before you publish a German website, make sure that it has been checked by legal expertise.
- It can be both challenging and time-consuming to succeed in Germany. But once the company has established itself here, it will have built financial muscles that could prove a gateway to the rest of Europe and the world, Christina Griebeler points out.
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