Under the according legal provisions, non-EU plaintiffs must deposit a security for the expected litigation costs either in cash or as a bank bond. The non-EU plaintiff is only exempt from such security deposit if there are special agreements between Germany and the plaintiff’s home country or if the plaintiff has real estate in Germany. The purpose of such security is to protect the defendant from a situation where the non-EU plaintiff disappears after a dismissal of the action and the defendant is left with the costs of the litigation despite having been successful in defending against the claim. This is why the court will usually proceed with the litigation only after the non-EU plaintiff has paid the security. If the plaintiff does not pay, the defendant can request that the action be declared withdrawn.
The obligation to provide a security for legal costs has already existed a long time for plaintiffs from well-known countries, such as Australia, China, Taiwan, South Korea, India, Canada, USA, UAE (sometimes with certain exceptions, which would be too much of a detail here). However, following Brexit, the obligation to provide a security now also includes companies based in Great Britain and Northern Ireland, as existing agreements between Germany and the United Kingdom are not relevant for an exemption from such security for various reasons.
In view of the decisions of the Federal Court of Justice (BGH) and the Federal Patent Court (BPatG) issued in the meantime, this also applies to ongoing court proceedings that were already pending before the completion of Brexit on 1 January 2021. According to the cases already decided, it does not matter how far the pending proceedings have progressed through the instances. In a decision of 1 March 2021 (docket no. X ZR 54/19), the Federal Court of Justice (BGH) ruled that security for legal costs can also be demanded retroactively for a legal dispute that is already at the appeal stage. However, it should be noted that for such pending actions, there is actually a transitional provision in Art. 67(2)(a) of the EU-UK Withdrawal Agreement. According to this provision, the previous rules continue to apply to court proceedings instituted before 1 January 2021. This is likely to include the exemption from security for legal costs.
Anyhow, for all new lawsuits filed by a British company before a German civil court after 1 January 2021, it must be assumed that the plaintiff will be required to provide security for legal costs.
