Keywords: real estate, commercial lease agreements, rent, tenant, landlord, construction permit, property, German Construction Act, Land Use Regulation, real estate transfer tax rates,


Higher Regional Court Frankfurt am Main, decision dated March 18, 2013 – 2 U 179/12

By Frank David Endebrock

A pre-formulated clause may be used in a commercial lease agreement, according to which changes to the lease agreement, including that clause, must be made in writing under any circumstances. Such a clause is effective, and any change to the lease agreement made orally by the parties in mutual agreement in violation against that clause is void because of non-compliance with the written form.


The decision deal with the case of a commercial lease to which the lessee had issued an extraordinary termination notice. The lessee invoked that there was an oral side agreement about the ancillary charges which infringes the legally-required written form for leases with an agreed term of more than one year. The parties had increased the amount of monthly prepayments on ancillary charges by mutual oral agreement. This increase agreement was legally binding and effective and therefore did not fulfill the written form according to the lessee's opinion. He did not accept to be required to establish the written form subsequently, since the pre-worded text of that lease agreement was insofar contradictory and since therefore no cooperation obligation had been agreed effectively.

Content and Subject of the Decision

Contrary to the lessee's opinion, the Higher Regional Court (OLG) Frankfurt am Main had considered the oral increase agreement between the parties ineffective (decision reprinted in Zeitschrift für Immobilienrecht [ZfIR] 2013, pg. 584), since it violated the agreement contained in the lease agreement that subsequent changes to the lease agreement could only be effected in writing and that this agreed written form requirement as such could only be modified in a manner satisfying the written form. Such a pre-worded clause was effective, the agreement concerning the ancillary charges was therefore ineffective, and no written-form violation existed. As a result, the OLG therefore confirmed the lease agreement in spite of the termination notice issued by the lessee. The OLG permitted an appeal on grounds of law against the decision, the appeal is pending before the German Federal Court of Justice (BGH) under case number XII ZR 65/13.

The decision deserves some attention because the OLG gives some explanations both concerning the question of the effectiveness of so-called "dual precaution clauses" and of the effectiveness of so-called "written form cure clauses" in connection with a dual precaution clause. The purpose of so-called dual precaution clauses is to agree indispensably between the parties that the content of the lease agreement can only be modified in writing. This is an important issue in the case of lease agreement because of the term of the contractual relationship, which may be very long, and because of the difficulty to reconstruct oral agreements precisely, particularly if the parties or even the employees responsible for the contract change. The legal uncertainty arises from the fact that such clauses are pre-worded in many lease agreements and hence, fall under the definition of General Terms and Conditions. Section 305b of the German Civil Code (BGB) stipulates the so-called "priority of individual agreements" in respect to such General Terms and Condition, i.e. that all agreements between the parties over particular circumstances ("individual agreements") shall take priority over the pre-worded contractual text which is designated for general application. If e.g. subsequently – as in the case of the OLG – the conditions of the incidental cost prepayment are modified, this constitutes a change of the contractual condition and at the same time also of the General Term and Condition that the change should only be effected in writing. According to Section 305b BGB, the amending agreement would also be effective orally, since not only the amount of the incidental costs is changed, but implicitly also the agreement to only conclude such an amendment in writing. Otherwise, the transactional intent of the parties in connection with the subsequent amendment agreement would not be taken into account sufficiently, since they wanted to bring about an effective agreement.

In order to avoid the related uncertainties in respect to the content of the agreement, which due to understandable reasons is to apply only in a sufficiently documented form, the practice has developed a clause structure that subjects even an implicit amendment agreement to the written form requirement (so-called dual precaution clause). The purpose of this is to prevent an amendment agreement from becoming effective which has not been concluded in writing. However, this additional agreement is as such also a General Term and Condition, which could be "overridden" by individual agreement. According to the OLG's assessment of this clause, however, any subsequent deviating agreement regarding the validity of oral amending agreements cannot be effective because of the requirement expressed in that clause that a contract must be fully set forth in writing, which the OLG considers deserving protection. The reason for this view is the particular attention which has to be paid to the written form for long term leases which otherwise may be exposed to the risk of premature termination.

In the present case, the oral agreement about the increase of the incidental costs was therefore unable to break the written form requirement.

To justify the effectiveness of the clause against the background of Section 305b BGB, the OLG merely skims a decision of the BGH dated September 21, 2005 (case number: XII ZR 312/02), in which the 12th Senate of the BGH, which is competent for commercial leasing law, found that in the case of a simple written-form clause, the priority of the individual agreement could not be broken. It does not discuss the opinion upheld in the literature much, according to which clauses, which aim at their "own solidification", were not effective. They were not only in conflict with the principle of the priority of individual agreements referred to above, but were also unreasonably detrimental for the other party, since they created the impression that the agreement concluded in a non-written form was ineffective (accordingly e.g. the Federal Labor Court [BAG] in a decision dated May 20, 2008, case number 9 AZR 382/97).

The OLG furthermore does not address the farther-reaching question about the potential impact of written form cure which was included in the lease agreement in addition to the dual written form clause. According to these clauses, the parties are to conclude contractual contents agreed in a non-written manner subsequently in a manner that fulfills the statutory written form and furthermore waive the statutory termination right pursuant to Section 550 BGB in a case of a violation against this. The OLG argues that a contradiction might exist here, if one considered only written changes to be effective and otherwise made precautions for the case of non-written changes and the ensuing termination risks. However, the OLG does not appear to see a contradiction here, but appreciates the intent of the parties to rule out a possibility for premature termination because of formal defects to the extent possible.

Whether and how a violation of the statutory written form requirement may occur in the case of the written form requirement assumed by the OLG, is not discussed by the OLG. This has already led to criticism of the decision, inter alia, by pointing out that there was indeed a contradiction between the clauses and because of a violation against the transparency requirement applicable to General Terms and Conditions, these were ineffective overall, thus also the written-form remediation clause (cf. Remmy, ZfIR 2013, pg. 588 et seq.).

In fact, however, there should not be any contradiction. The so-called voluntary written-form, i.e. the contractual agreement to agree on something only in writing, has different requirements concerning the written form than the statutory written form. When agreeing on the written form, for example, a fax may also be sufficient (Section 127 paragraph 2 BGB), while this does not suffice for the statutory written form. Therefore, different areas of application exist.

Impact on Day-to-Day Business

The outcome of the appellate proceedings remains to be seen, hoping that the BGH will render a decision. The underlying legal questions require clarification in order to meet risks, e.g. because of the question of a potential inconsistency and thus intransparency of the customary clauses when writing contracts. The subject matter of using pre-formulated clauses can hardly be redressed in practice, since it is unrealistic to negotiate all standard clauses individually. Only through a clarifying decision by the BGH will it be possible to say, whether the combination of the customary sets of clauses can be retained.


BGH, decision dated February 1, 2013 – V ZR 72/11

By Elmar Günther

Already, sellers are obliged to disclose all such circumstances to potential buyers which are capable of frustrating the contractual purpose of the potential buyer and which evidently are of material importance for the other party's decision; at least, if the potential buyer may fairly expect respective information. According to a recent decision of the Federal Court of Justice (BGH), current rent amounts and even amounts of sub-rent will usually form such circumstances. In addition, the obligation assumed by the seller to provide certain documents (or information) bears risk of liability in case the documents are not described in detail but merely in general.

Head Note

If the rent proceeds stated by the seller of a real property at the time of the conclusion of contract reflect the earning capacity of the property incorrectly due to special circumstances, he is required to disclose these circumstances to the purchaser, if they are evidently of importance for the latter's purchasing decision.

The information agreed in a purchase agreement may exceed what the seller would have been required to disclose based on the pre-contractual obligatory relationship.


The purchase price for the sold shopping center had been calculated by multiplying the annual rents. The seller had guaranteed the owed annual rents. Nearly half of the premises were leased to the main tenant under contracts with a 15-year term, which had only a short remaining term. The majority of these areas had been sub-leased by the main tenant for several years. The average generated sub-rent, however, only amounted to slightly more than one quarter of the main rent. In the purchase agreement, the seller had guaranteed the delivery of all documents related to the lease agreements including all supplements, additional agreements, and tenant correspondence. The purchaser – an investment company – had been granted the right, based on a due diligence of the object to be conducted, to demand renegotiations within nine days and to rescind the contract in case these should fail. The purchaser had known about the fact of the long sub-leasing the exposé, just as the significant vacancies in the object. Because of the strongly deviating sub-rents, the purchaser demanded payment of an amount of slightly more than one-fifth of the purchase price.

Content and Subject of the Decision

The appellate court had dismissed the lawsuit by arguing that no duty had existed to provide information about the amount of the sub-rents without having been asked. Therefore, the purchaser was not entitled to claims for damages against the seller based on a violation of such a pre-contractual obligation. The seller had been able to assume that the purchaser was aware of the risk of no longer being able to achieve the current rents in the case of new leasing. Finally, the purchaser had knowledge of the short remaining term of the main lease agreements and of the fact of long-term subleasing by the main tenant. Even though the German Federal Court of Justice (BGH) attested that the appellate court assessed the pre-contractual information duty without legal errors, it nevertheless remitted the matter to the appellate court for a new trial. The reason for this was the question, which had not been addressed by the prior instance, whether the seller had fulfilled his contractually assumed information obligation or not. According to the opinion of the German Federal Court of Justice, the lease agreement documents and tenant correspondence to be delivered to the purchase also included the sublease agreements and the letters in which the seller was informed about the amount of the sub-rents. If these documents had not been submitted in breach of duty, the purchaser would have to show that if he had received the information in accordance with that duty, it would have had to reasonably demand an amendment of the contract. The seller would have to show, whether the purchase had forgone this information or whether the loss had also occurred, if the seller had duly provided the information. The German Federal Court of Justice furthermore states that in the case of breaches of duty, it was out of the question that any contributory fault of the purchaser was to be taken into account. The court leaves the question unanswered, whether the contractual rule for conducting a due diligence constitutes an obligation of the purchase to carry out such an expert review or not. Because any contributory fault is out of the question according to the German Federal Court of Justice, if the purchaser carries out a review is in this case, but if the seller had provided incomplete documents in breach of his duties.

The German Federal Court of Justice upheld its previous case law regarding pre-contractual information obligations. Such an obligation will arise always, if (i) circumstances exist, which are capable of frustrating the contractual purpose of the other party and which are of material importance for the other party's decision, and if (ii) the other party may fairly expect the information in good faith. The German Federal Court of Justice derives from this in respect to the price calculation that the seller will have to inform about the circumstances which are material for the price calculation, if he recognizes that the purchaser issues his offer based on incorrect beliefs. The German Federal Court of Justice furthermore states that the actual rent proceeds at the time when the purchase agreement is concluded regularly constitute such a circumstance. The contractually agreed rents were formed based on market-based factors. According to generally accepted standards, it was therefore possible to draw a conclusion from the currently generated rents to the earning capacity of the real property, since they were considered a safe standard for the benefit derived from the real property. Therefore, the current lease agreements were also regularly referred to in purchase agreements. If it was not possible to draw this conclusion due to special facts, this constituted a circumstance that had to be disclosed. It was regularly to be assumed that this was evident for the seller, if – as in the present case – the purchase price was determined based on the current annual rents. The situation might be different only in exceptional cases, where the willingness of the purchaser to pay the purchase price is obviously not based on the present use of the real property at the time of sale. Such an exceptional situation existed in the present case due to the knowledge of the short remaining term of the main lease agreement, the long-term sublease, and the vacancy rate. Therefore, the seller rightly acted on the assumptions that the purchaser pursued plans of his own in respect to the purchase object and had tied his income expectations to these.

Impact on Day-to-Day Practice

The result regarding the information obligation is not surprising and the remittance is rather based on particularities that are unusual in the area of institutional investors. In particular, a due diligence is rarely conducted after the conclusion of the contract. Accordingly, parties do not regularly agree on special contractual information obligations as was the case here. Nevertheless, the decision is noteworthy in several respects.

The German Federal Court of Justice had previously developed two groups of cases for which it assumed an information obligation on the seller's side in respect to potential misconceptions due to the currently agreed and collected rents. First, where the current rent is higher than the legally permitted rent, and second for the case that the current rent exceeds the rent amount accepted by the cost-bearers as eligible for reimbursement. With this decision, the German Federal Court of Justice established the foundation for a highly questionable third group of cases, the absence of the ability to sustainably generate the current rents. This is questionable already because of the rather crude consideration of the relationships between rent price formation and informative value concerning the earning capacity of the real property. Finally, the German Federal Court of Justice disregards issues that are taken for granted in the real estate business. Because the market-economy aspects of rent price formation include, inter alia, the current situation on the leasing market, the age and furnishings of the object, and the assessment of the location. These aspects obviously change during the time from the conclusion of the lease agreement. It should be possible to expect from a professional investor that he compares the current rents to the rents achievable for the object and accordingly values long or short remaining terms. The next point of criticism that ensues from this is that the rent amount is unilaterally considered as the decisive fact, disregarding the remaining terms. Finally, the German Federal Court of Justice even elevates the conclusion from the current rents to the earning capacity to the level of basic assumption. It is a standard for the real estate business to verify the purchase price calculation by using the annual rents and a corresponding factor in order to determine the yield. Thus, the mere fact of a calculation based on multiplied annual rents should not entail the basic assumption of the buyer being focused on the current rental return.

As a consequence of the decision, the agreement should be clearly worded to avoid a recourse on the court's basic assumptions. On the seller's side, it is feasible to not base the purchase price calculation in the purchase agreement on a multiplication of the annual rents, but to agree on it explicitly as a fixed price, irrespective of changes in the annual rents. But it will always be decisive for purposes of the question of the information obligation, whether the purchaser has made it clear at some stage during negotiations that he effectively calculates the purchase price by multiplying the annual rents. It remains unclear, whether the standard return calculation can be sufficient or whether the calculation must have been specifically reflected in the purchase agreement. It must therefore be recommended to disclose all circumstances for reasons of precaution, from which might result a deviating assessment of the conclusion drawn from the current rents to the earning capacity.

Regrettably, the German Federal Court of Justice left the question unanswered, whether a contractual stipulation regarding a due diligence may require a purchaser to actually carry out such a due diligence or not. As a seller, one will not be able to rely on a duty and as a purchaser, one will have to expect it for reasons of precaution. Irrespective thereof, any contributory fault of the purchaser always remains out of the question in spite of a due diligence, if the seller does not provide information in breach of his duties. In any case, it remains advisable to determine the scope of the information to be provided as precisely as possible. On the purchaser's side, this prevents being faced with a flood of data and information, which will then be attributed as known in its entirety. Conversely, the above decision shows that the seller may also have an interest in identifying the documents to be provided as precisely as possible in order not to be required to deliver all of the information that may be included therein.


BGH, decision dated April 12, 2013 – V ZR 266/11

By Slaven Kovacevic

Head Note

A missing construction permit regularly constitutes a material defect of sold residential real property; the question of whether a permit is required, has to be answered by the civil courts in their own responsibility – without being bound by any administrative notice issued by the building authorities only after the transfer of risks.

Fraudulent intent requires at least contingent intent; this is not equivalent to the case where the existence of facts, which give rise to a defect of the purchased object, should have been evident for the seller.


By notarial deed dated December 9, 2005, the plaintiff acquired a condominium from the defendant, which had been refurbished by the latter, at a price of EUR 90,000. Any liability for material defects was excluded. When the plaintiff intended to sell the condominium to a third party in 2009, it turned out that no construction permit existed for the condominium and the balcony belonging to it. An application for a construction permit filed by the defendant's wife had already been rejected in 2000. The plaintiff therefore asked the defendant in March 2009 to obtain a construction permit, to which the defendant did not agree. He pointed out that the condominium had merely been refurbished and modernized by him without interfering with the statics and that it had already been used as a residence before that. The plaintiff then declared rescission from the purchase agreement, demanded repayment of the purchase price from the defendant, and at the same time offered to issue declarations concerning the re-conveyance.

By administrative notice, which became unappealable, the building authority prohibited the use of the condominium for residential purposes at the end of 2009 entirely. In respect to the balcony, the construction permit was issued subject to conditions, but the defendant withdrew his application for a construction permit insofar during the objection proceedings.

The plaintiff demanded a reversal of the purchase agreement and thus payment of a total of EUR 102,000 concurrently against re-conveyance of the condominium. He claims that the defendant had known of the missing construction permit and had therefore misled the plaintiff with fraudulent intent. The courts of the prior instances have supported the plaintiff's opinion.

Content and Subject of the Decision

The German Federal Court of Justice (BGH) first finds that civil courts have to answer the question, whether a construction change requires a permit under public law, in their own responsibility as a question preceding the defectiveness of the purchase object under civil law. A missing construction permit did without any doubt regularly constitute a material defect, since the building authority could prohibit any use of the real property at least until the permit was issued, irrespective of whether it could have been issued by way of an exception. In the specific case, it was not possible to clarify, however, whether a prior legally-binding decision of the building authority existed, which might grant a grandfathering right to the purchaser. No defect would exist in that case, while an unappealable prohibition of use prior to the transfer of risks would constitute such a defect. The administrative notice issued after the transfer of risk in the present case was not binding upon the courts, however, so that the existence of a defect was to be examined again by the prior instance courts.

The defendant was furthermore not precluded pursuant to Section 444 BGB from invoking the agreed exclusion of liability. At least contingent liability, which the plaintiff had to prove, was required for this; even grossly negligent ignorance of the defendant in respect to the missing construction permit was not sufficient for assuming fraudulent intent.

Contrary to the opinion of the courts of the prior instances, it was insufficient, if the existence of facts that must be disclosed – here the missing construction permit – should have been evident to the defendant, because fraudulent intent would otherwise be uncoupled from any intent whatsoever and would as a result be treated as negligent ignorance. Even a conscious "closing one's mind" could not give rise to fraudulent intent. In any case, at least (positive) knowledge of the relevant facts was necessary, i.e. of the requirement of a construction law permit for the condominium at the time of transfer of risks. Such knowledge could not be replaced by judgmental considerations. At best, an attenuation of the necessary degree of knowledge might be considered regarding the conclusion drawn from the relevant knowledge of facts to the assessment of the legal situation. But such an assessment of the legal situation is not at issue in Section 444 BGB, so that the only decisive question was, whether at least contingent intent regarding the permit requirement had existed on the defendant's side. If this was the case, it was not decisive, whether the defendant also came to the (correct) conclusion regarding a material defect.

It was not established, however, that the defendant did have knowledge of the defect or had at least considered it possible. This is another reason why the BGH remanded the matter to the appellate court. Impact on Day-to-Day Business

Impact on Day-to-Day Business

It still applies: a lawsuit based (primarily) on fraudulent intent cannot be won easily. It is not sufficient to mainly claim that defects were "obvious" so that the opponent "must have known of them". It must be proven at any rate that the opponent had at least "approvingly accepted" a defect. Only what the opponent knew demonstrably is able to give rise to fraudulent intent. Since it will regularly be difficult to provide such evidence, separate guarantees should be agreed explicitly for fundamental matters such as construction permits, which are not included in the general exclusion of liability.


By Anja Giesen

The "Act strengthening the internal development in cities and towns and continuing further development of urban development law" dated June 11, 2013 was announced on June 20, 2013 in the German Federal Gazette (Bundesgesetzblatt (BGBl. 2013 Part 1 No. 29, pg. 1548)). The law contains both changes to the German Construction Act (BauGB) and to the Land Use Regulation (Baunutzungsverordnung (BauNVO)). The changes supplement the first part of an amendment of the BauGB by the "Act promoting climate protection in the development in cities and towns" dated July 22, 2011, which became effective on July 30, 2011 (BGBl. 2011 Part 1 No. 39, pg. 1509). We have briefly summarized those revisions, which we believe to be most important and which may have to be taken into account particularly in connection with new construction projects.

Priority of internal development measures

One of the main purposes of the amendment is to achieve a reduction of the use of new land. Municipal development is therefore meant to be implemented primarily through internal development measures, which is now stipulated expressly in Section 1 paragraph 5 BauGB. During planning, possibilities for internal development are to be determined first, taking into account fallow land, building vacancies, gaps between buildings, and other possibilities for redensification. According to Section 1 paragraph 2 BauGB, it will become more difficult to justify the conversion of areas used as agricultural land or forests.

Dealing with derelict buildings

Run-down buildings that can no longer be used economically and which are not maintained by the respective owner or cannot be properly maintained and repaired by him plainly due to financial reasons (so-called "junk properties") are increasingly a thorn in the side of municipalities. Most junk properties are in built-up areas in terms of Section 34 BauGB. So far, the demolition of such buildings could be demanded only, if a zoning plan existed for that area. This is no longer necessary after the revision of Section 179 BauGB. Furthermore, the owner may now be required to financially bear part of the costs up to the amount of the benefit he receives due to the demolition of the building pursuant to Section 179 paragraph 4 BauGB.

Simplification of the exercise of the statutory preemption right of municipalities

The exercise of a municipal preemption right is simplified insofar as the municipality may now exercise its preemption right directly for the benefit of a third party. According to the revision in Section 27 a paragraph 1 sentence 1 No. 1 BauGB, the precondition is that the third party is able to make use of the property in the manner intended through the exercise of the preemption right within a reasonable period of time and undertakes to do so. The efforts in terms of time and money involved in a dual acquisition first by the municipality, which after exercising a preemption right often resold the property to a third party, is meant to be reduced through this option of direct acquisition by a third party. If the third party should not meet its obligation to use the property as intended, however, the municipality has the right to demand retransfer or a transfer to a different third party according to Section 27a paragraph 3 sentence 2 in connection with Section 102 BauGB.

Revision of the site development contract

There will only be two possibilities for site development from now on. Either a municipality enters into an urban development contract, as the revision of Section 11 BauGB now provides, or it is required, after rejection of the contractual offer, to carry out the site development measure itself pursuant to Section 124 BauGB. A significant innovation here is that the municipality may also enter into a urban development contract for a site development with one of its own municipal companies.

Deviation from the blending-in requirement

In unplanned inner zones (projects within built-up areas pursuant to Section 34 BauGB), the admissibility is generally determined by the existing nature and existing degree of building usage. The rule in Section 34 paragraph 3a BauGB regarding the exception, which permits a deviation from this principle of blending-in, was expanded by the option to change the use of commercially used operations to residential use, while it was being ruled out for those retail businesses, which negatively affect convenient supply for consumers or may have harmful effects on central supply areas within the municipality or in other municipalities.

Controlling the settlement of public entertainment locations

The amendment of the law is meant to better control the settlement of public entertainment locations by having a zoning plan pursuant to Section 9 paragraph 2b BauGB explicitly determine public entertainment locations as permitted or not permitted or permitted in exceptional cases. This provides the municipalities with significantly greater leeway regarding the determinations in a zoning plan. It is meant to prevent negative effects on residential use or other facilities requiring protection such as churches, schools, and daycare centers and specifically counteract negative effects due to a detrimental clustering of public entertainment locations.

Permissibility of child care facilities in purely residential areas

Only residential buildings were permitted without any restriction in purely residential areas pursuant to Section 3 BauNVO. Facilities serving social purposes could be permitted only in exceptional cases. Due to the revision, child care facilities serving residents of an area are generally permitted in addition to residential buildings when zoning an area as a purely residential area in terms of Section 3 BauNVO in a zoning plan. This also applies to already approved zoning plans, in which an area is zoned as a purely residential area.

Greater flexibility in respect to the degree of building development

Another change of the Land Use Regulation concerns the degree of building development. The change of Section 17 BauNVO provides municipalities with greater flexibility when determining this degree, by allowing the upper limits to be exceeded for reasons of urban development, if the excess is compensated by circumstances or measures, which ensure that the general requirements regarding a healthy living and working situation are not affected and detrimental effects on the environment are avoided.

Restrictions of privileges of commercial livestock breeding facilities in outskirt areas

The privileges of commercial livestock breeding facilities in outskirt areas (Section 35 paragraph 1 No. 4 BauGB) were restricted. In the future, only those livestock breeding facilities are considered among the privileged projects, which are not subject to the duty of having a site-related or general preliminary audit or environmental compatibility audit conducted pursuant to the Law on Environmental Compatibility Audits (Gesetz über die Umweltverträglichkeitsprüfung). This is the case only up to a certain size (number of animals depending on the type of animals).

In general, it can be noted that the amendment granted municipalities with greater leeway for decisions and that the general development regarding modern living situations is taken into account. In respect to further changes, reference is made to the publication in the German Federal Gazette.


By Susan Günther

The following table provides an overview of the current status of the real estate transfer tax rates in the individual federal states (October 1, 2013). To the extent that specific information and indications regarding a change of the real estate transfer tax rate exist in a state, this was noted accordingly. Changes since the last issue in spring 2013 are marked in bold.

Originally published October 2, 2013

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