Checklist for Business Relationships in the U.S.: 21 Points for German Companies
From the independence of the U.S. branch to raising employee awareness – limiting liability risks in U.S. business at an early stage
Business in the U.S. offers great opportunities but involves liability risks that German companies do not know in this form from their home law. The following checklist summarises the points that have proved particularly important in advisory practice. It does not replace an examination of the individual case, but helps to ask the right questions.
Basics and structure
Understanding the legal system: The U.S. legal system differs considerably from the German one in procedure and standards of liability. This also applies to employment law: prohibitions of discrimination and harassment (anti-discrimination, sexual harassment) must be observed from the outset.
Independence of the U.S. branch: Clarify which functions of day-to-day business are performed by the U.S. branch and which by the German parent. The more the parent itself controls day-to-day business, the more likely it is that the branch will be treated as a mere instrument of the parent.
Risk of piercing the corporate veil: Even with a Delaware Inc., there is a risk that U.S. courts will set aside the limitation of liability and hold the parent liable under the “alter ego” doctrine.
Attorney-client privilege: Communications with lawyers may be protected by confidentiality (attorney-client privilege). Confidential documents should be marked accordingly; the scope of the protection must be clarified in the individual case.
Holding company and shareholder structure: Consider interposing a holding company or, more generally, the shareholder structure of the U.S. branch, again from the point of view of the “alter ego” doctrine.
Product information, documents and contracts
Operating instructions and hazard warnings: Where U.S. requirements apply, they must be designed with the U.S. recipient’s perspective in mind. Inadequate instructions or warnings may give rise to product liability claims (cf. Restatement (Third) of Torts: Products Liability § 2).
Circulation of liability-relevant documents: Monitor which liability-relevant U.S. documents are in circulation and how their confidentiality is preserved.
Contracts between the branch and the parent: Regulate the relationship in writing, for example by a distribution agreement (Vertragshändlervertrag), a joint marketing and sales agreement or an intercompany transfer agreement.
Alignment of general terms and conditions: The general terms and conditions (AGB) between the end customer and the U.S. branch and between the U.S. branch and the German parent should be aligned with one another.
Choice of law, insurance, translation and service of documents
Jurisdiction, governing law, arbitration, CISG: Regulate jurisdiction, governing law and, where appropriate, arbitration expressly. The UN Convention on Contracts for the International Sale of Goods (CISG) applies between Germany and the U.S. as contracting states to contracts for the sale of goods unless it is excluded (Art. 6 CISG); whether an exclusion is wanted should be decided deliberately.
International insurance cover: Check whether the existing policies cover risks arising from the U.S. business, including proceedings conducted in the U.S.
Specialist, first-class translations: Contracts, instructions and warnings should be prepared by specialist translators so that their meaning is also rendered accurately from the point of view of a U.S. court.
Service of documents and communication with U.S. lawyers: Be careful with the service of U.S. documents having legal effect and with communication with U.S. lawyers (Hague Conventions). Documents served start time limits running; forward them to your legal adviser immediately.
Documentation, compliance and product safety
Development processes and record-keeping: Development processes should be carefully documented. Key points include: no “dumping ground for frustration”, no consecutive numbering, no cost considerations versus safety, the standard is not the maximum.
Business processes and compliance: Document business processes, compliance rules and employee information in writing, including a complaint procedure and a code of business conduct. An effective complaint procedure is also of significance in harassment law (cf. Faragher v. City of Boca Raton, 524 U.S. 775 (1998); Burlington Industries, Inc. v. Ellerth, 524 U.S. 742 (1998)).
Keeping U.S.-relevant records separately: With a view to pre-trial discovery (cf. Fed. R. Civ. P. 26, 34), e-mail communication and document retention, U.S.-relevant records should be kept separately; retention periods should be fixed (ISO 9000).
General terms and conditions tailored to the U.S. market: The general terms and conditions must be tailored to the U.S. market. This applies in particular to retention of title (Eigentumsvorbehalt): a retention of title drafted on the German model does not as a rule have the same effect in the U.S.; security interests in goods are governed there by the Uniform Commercial Code (Article 9).
State of the art: Review the “state of the art” and the world standard continuously, in particular with regard to product liability risks (design and instruction defects). This includes benchmarking, not offering safety at a surcharge, caution with advertising claims and not portraying earlier products negatively.
Product monitoring: Monitor your products on the market, document customer notifications of defects and the measures taken, and take action against imitators. Keep a crisis team (“fire brigade circle”; Feuerwehrkreis) and a disaster plan ready.
Lawyers and employees
Early involvement of lawyers familiar with U.S. law: Where there is “danger in delay”, involve lawyers who know U.S. law at an early stage.
Raising employee awareness: Make employees aware of U.S. legal risks and train them to draft letters with the perspective of U.S. courts in mind.
Conclusion
Anyone who implements the points of the checklist at an early stage reduces the risk of being confronted in the U.S. with unexpected liability and litigation consequences. Please feel free to contact us if you have any questions.
Status: 23 October 2026
NIETZER Rechtsanwälte · Attorneys at Law (USA) · Heilbronn · www.unternehmensrecht.com
This article is for general information only and does not replace legal advice in an individual case.
