1. International Seminar of the Indonesia Notary Association
7-9 September 2017, Bali/Indonesia
The Important Role of the Notary in Assuring Legal Certainty in the Investment Sector in Germany: Theory and Practice.
Dr. Leif Böttcher, Notary
German Federal Chamber of Notaries

2. The German Civil Law Notary
German Notaries are highly qualified legal professionals
They are independent holders of a public office
They are appointed by the state and are subject to government supervision
All of the approximately 7,000 notaries are organized in 21 regional chambers
There are different types of notaries (single-profession notary v. advocate/notary) sharing the same professional code

3. The Federal Chamber of German Civil Law Notaries (Bundesnotarkammer)
The Federal Chamber of German Civil Law Notaries is a statutory public entity. All 21 regional Chambers of Notaries are its members.
single-profession civil law notaries
advocate and notary

4. Content 01 Overview 02 Role of notaries in real estate transactions 03
Role of notaries in commercial law 04
Public registers 05
Authentic instruments Notarial deed

5. 01
eIDAS: e-ID Authentication and Signing
Overview

6. The German system of preventaive justice – an overview
In Germany, notaries play an important role in the investment- sensitive areas of commercial law, real estate transactions and secured credit (but also in the areas of family law, inheritance law and the drafting of powers of attorney)
At the same time, the law relies on public registers (especially the land register and the commercial register) that enjoy – to a different extent – public faith
The notarial deed as an authentic instrument is the link between the notaries and the registers

7. 02
Role of notaries in real estate transactions

8. Role of notaries in real estate transactions (1)
In Germany, notaries play an important part in real estate transactions of all kinds:
Firstly, all real estate transactions need full notarization (“Beurkundung”) to be legally binding, i.e. the notary prepares the draft of the contract of sale, reads the contract aloud to the parties and explains every provision of the contract. Only the notary has the power of notarization.
Secondly, not only the contract of sales, but also the transfer of property needs to be declared before a notary.
Notaries also intervene in the area of secured credit: by law the creation a mortgage with submission under the immediate execution has to be notarized
Finally, any other declaration or document that is submitted to the land register has to be in notarial form, i.e. either notarized or certified by a notary
Hier auch den Grund darstellen, warum nationale Formanforderungen von HR ausgenommen sind.

9. Role of notaries in real estate transactions (2)
The process of a real estate transactions in practice
Once the seller and the buyer agree on a price, they contact the notary and send in the relevant data
Depending on the complexity of the transaction, the notary will either immediately draft the contract and send it to the parties, or he will ask the parties to see him for an initial meeting in order to discuss the legal difficulties
Once the parties have informally agreed to the draft, a meeting for the notarization is set. The parties meet with the notary, he reads the contract to them aloud and explains all relevant provisions
Once the contract is signed, the notary sends all the documents to the land registe

10. Role of notaries in real estate transactions (3)
There, a highly-trained law clerks performs another thorough check (four-eyes principle)
If everything is deemed okay, a priority notice is entered into the land register
At the same time, the notary takes care of all other relevant steps so that it is safe to pay the purchase price for the buyer, e.g.:
the notary will take care of the documents required for the deletion of remaining mortgages in the land register
he will also take care of the communication with the muni- cipal authorities (especially whether these want to exercise their legal preemption right)

11. Role of notaries in real estate transactions (4)
Once all relevant documents have been collected, the notary informs the seller in writing that it is now safe to pay and that the purchase price is now due
After the seller informs the notary that he has received the payment, the notary will ask the land registry to register the buyer as the new owner
If the buyer needs credit in order to purchase the property, the creditor (= the bank) will usually require to forms of security:
Firstly, the bank will require the buyer to create a mortgage on his newly purchased property.
At the same time, the bank will require the buyer to submit himself to immediate execution which requires the establishment of a notarial deed
Usually, both is done in the same deed.

12. 03
Role of notaries in commercial law

13. Role of notaries in commercial law
Setting up a business
All commercial companies: documents for registration have to be certified by a notary
As for capital companies, especially the limited liability company (“GmbH”) and the stock corporation (“AG”), the formation of the company as well as the statutes have to be notarized
“Lifecycle” of a company, e.g.:
All shareholder resolution leading to an amendment to the statutes have to be notarized (e.g. capital increase)
In case of a change of directors, the documentation sent to the commercial register has to be certified by a notary
As for the limited liability company, even the transfer of shares (i.e. the entire share purchase agreement) has to be notarized

14. 04
Public registers

15. Public registers (1)
Why does German law require such a thorough legal control in the areas of real estate and commercial law?
German real estate and commercial law are based on a peculiar registry system. Registration in both the land registry as well as in the commercial register has far-reaching legal effets:
For instance, changes of rights to land do not take effect before being registered in the land registry (§ 873 BGB). Some exceptions apply (e.g. the heir becomes owner of a property even if he is not registered as owner in the land registry).
Until otherwise proven, the correctness of all titles recorded on the register is assumed and a buyer can rely on the correctness of the land Register ("public faith", § 892 BGB).

16. Public registers (2)
The land registry may be accessed only by persons who can prove a legitimate interest  (e.g. forced heir, creditor) and by notaries. Those persons may also apply for an extract from the land registry.
Effect: Cost of due diligence when buying a house: 8 EUR!
As for companies, whereas in other jurisdictions it is often hard to tell if (1.) the company exists and (2.) who are the directors of the company, so that extensive legal research or even a legal opinion is required, in Germany, it is sufficient to check the commercial register that – just like the land registry – protects the good faith of the user.
The commercial register may be accessed by anybody; it is not necessary to prove a legitimate interst.
Effect: Cost of due diligence: 4,50 EUR!

17. Public registers (3) Interdependence notary – register – material law:
If the material law confers positive public faith or public trust to a register, it has to make sure that the information in the register is complete and correct. This Property is protected by German Constitution.
In order to achieve completeness and correctness, the law relies and notaries and the second check by the law clerks.

18. 05
Authentic instruments and under-lying philosophy

19. Authentic instruments and underlying philosophy (1)
Public Registers rely on notarial deeds, i.e. authentic instruments
Authentic instruments are part of the German legal and social infrastructure
The enjoy distinct and material probative value and force.
Drawing up public instruments that incorporate contracts of legal and economic significance.
Verification of identitiy
Explanation of rights and obligations

20. Authentic instruments and underlying philosophy (2)
In practice: Notary as a “one-stop-shop”
The citizen signs the deed.
The notary takes care of everything else.

21. Electronic Signatures – The role of the notary
handwritten signature = qualified electronic signature
notarial seal = attribute „notary“ in the certificate of the signature

22. Electronic Signatures (2) – Structure of an Electronic Application to the Commercial Register
Certified electronic copies of application and other deeds and documents
XML
Essential content of the application as machine-readable data (XML)
Documents and XML data are wrapped into a secure transport layer and submitted as an electronic message to the commercial register

23. Efficient Collaboration (1): The Notary…
collects
required information and documents, mostly also preparing them for the parties
their content (completeness, legal accuracy, legal validity) and gives impartial and independent legal advice where required
evaluates
by digitizing the documents
by certifying the accuracy of the electronic version and
by filtering and structuring information relevant for the entry(XML data)
prepares

24. Efficient Collaboration (2): The Commercial Register…
can rely
on information already verified and documents prepared by highly qualified and trusted legal professionals
re-checks
information and documents for completeness, accuracy, legal validity, (“second set of eyes”)
electronic documents and structured data (XML) into the register in a process of few clicks, usually without having to make any changes to the data.
incorporates

25. Conclusions
The German system of commercial law and its socio-economic benefits are based on transparency and public trust in the content of the commercial register. The principle of public trust is only viable if the information in the register can be relied on as legally and factually accurate, complete and current.
The system of public trust in the commercial register has been maintained in compliance with the demands of modern procedures and EU regulation
Entry into the commercial register is no longer a major bureaucratic process, but a cost- and time-efficient and modern service rendered by notaries and courts

26. The Role of the Federal Chamber of Civil Law Notaries – Providing Qualified Electronic Signatures
Since 2001, the Federal Chamber of German Civil Law Notaries is one of the largest certification authorities (CA) in Germany, issuing signature cards for qualified electronic signatures on the highest quality level under German and European law.
Currently, more than 70,000 cards for notaries, courts and attorneys are in use.

27. Underlying philosophy
“An ounce of protection is worth a pound of cure.”
New Institutional Economics vs. Neo-Classical Economics
Legal certainty as the point of original and objective of notarial practice

28. Thank you for your attention.
Dr. Leif Böttcher, Notary
Bundesnotarkammer
Mohrenstraße 34
D Berlin
Germany
Tel:
Fax: