Chapter 4
Cultural Differences in Negotiations: An Overview on the US, China
and Germany
4.1 How Germans Negotiate
4.1.1 Preliminary Notes
As with any other nationality, one cannot distinguish “the German negotiator” or the “German negotiation style”. Personal mentality (degree of extroversion, ability to manage conflicts, risk aversion, emotionality), circle of friends, experience abroad, gender, age, hierarchy, level of education, professional expertise, branch, region, migration background, ownership structure of the firm (e.g. mother company abroad, large corporation with anonymous shareholders or family corporation), size and internationality of the company, international negotiation experience, corporate strategy, competitive situation regarding the contract object etc. are all factors which influence the negotiator’s negotiation type. If, for instance, negotiators lack professional competence, these negotiators negotiate cooperatively less often due to their fear of being disadvantaged. Above that, these negotiators also often act and react emotionally. In Germany, regional differences play hardly any role: the people negotiating are almost never from the same region. Besides, other factors are more formative, such as socialisation in the academic and entrepreneurial environment. In addition, the level of negotiation experience and negotiation training or the concrete composition of the negotiation group can have a significant impact on the negotiation type. Hence it is now commonplace for German corporations to establish international negotiation teams. Nonetheless, there are some statements that generally comply with the behaviour of German negotiators.
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4.1.2 Negotiation Training
In Germany, training courses for negotiations exist at law faculties and business schools and in business and engineering degree courses, but they are usually not mandatory and only a fraction of the students take part in such a course. This may be due to the fact that, particularly at universities, practically approached knowledge transfer is viewed with fundamental scepticism. Especially in Germany, the different degree specialisations are strictly separated. Interdisciplinary education (simultaneous or consecutive) is relatively rare, and is furthermore hardly honoured in terms of career perspectives. Since contract negotiations combine scientific knowledge from various sciences (social psychology, classical economic theory, game theory, behavioural economics, communication science, law), each German scientist who deals generally with negotiations moves largely within a foreign field of expertise. This situation is avoided as far as possible. Thus, only a few universities offer more comprehensive courses in contract negotiations. Large companies and occasionally also SMEs offer negotiation training for their employees, depending on a needs assessment conducted by the responsible superior manager. Younger lawyers’ knowledge in negotiation science can, for instance, originate from mediation training or an LL.M. from an US law school. The fact that German negotiators lack specific negotiation training is often not initially apparent, since the constant improvement of the own abilities, due to progressive experience, is one of the characteristically German ideals. Experienced German negotiators thus negotiate on a professional level, even without negotiation training. In these circumstances, the generally structured and rational approach to tasks can compensate for the lack of specific training, even in the case of inexperienced German negotiators. Yet the effects of a lack of training can be observed in the search for win-win solutions, although these rarely occur; or in the context of the relatively small range of possible strategies and tactics. As, for instance, the effects of → behavioural economics are largely unknown, German negotiators often struggle with understanding the importance of background information and utilising this to assume consequences.
4.1.3 Mentalities
Based on the variety of people and environmental influences, ascribing specific mentalities to negotiators from different countries would seem to be hardly imaginable. Firstly, customary descriptions do not relate to the individual negotiator him-/ herself, but rather to the average negotiator. Subsequently, this average is compared to the average determined for other countries. Accordingly, this comparison is based on certain tendencies, which do not necessarily comply with individual characteristics.
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4.1.4 Orientation on Legal Rules: Safe Harbour Principle
Germans are generally perceived to be “law abiding”. Though this may be correct in the sense of a general tendency, it is necessary to take a differentiated point of view. Apart from objective parameters (such as the companies’ size, significance of legal risks or whether the transaction is a one-time-deal), the law’s importance for the negotiation particularly depends on the level of lawyer involvement. Primarily, business negotiations between SMEs and larger, family-owned SMEs should preferably be conducted without the direct involvement of lawyers.
German SMEs do not usually have a specific legal department but rather take legal decisions in consultation with law firms as permanent external consultants.
Many SMEs try to adhere relatively strictly to beneficial or at least safe clauses, drafted previously and determined by decision-makers within the company, who often consult external lawyers. Other SMEs, however, do not engage in drafting a legally effective contractual relationship, because they are confident that legal disputes rarely arise anyway. Instead, they place emphasis on clauses that benefit their own side. In this way, the question of legal effectiveness is upstaged—even though, worldwide, Germany has one of the strictest sets of rules on content control regarding B2B → boilerplates. Occasionally, there are companies that even want to utilise this sharp set of rules on the control of general terms and conditions (boilerplate- control) for their own benefit. As a result, these companies readily agree even with critical points because they entirely trust the intensive support of the legal content control as it orders the ineffectiveness of particularly detrimental clauses (so-called “boilerplate-based negotiation tactic”1). This protective measure could be abolished if the respective clause were negotiated individually. However, this tactic is only realisable where German law applies. Large companies in particular practice intensive consultation with the legal department. Consequently, these companies often present themselves as less flexible and insist on the use of their standard clauses— even in cases where the alternative desired by the opposing party holds no substantial disadvantages. In total, compared to other countries, the significance of law for negotiations is relatively high in Germany. This is due to the fact that Germans strive for a safe, highly predictable situation for the processing of the contract. For this matter, a legally protected situation appears invaluable. This conforms with the fact that Germans attach great importance to the principle of contract compliance (pacta sunt servanda), although it does not imply full compliance of the contracts at all times. In this regard, Germans’ high legal compliance as perceived externally, appear to be exaggerated. Yet, renegotiations after the final conclusion of the contract might not be uncommon but are generally not accepted by the side that is unwillingly faced with the renegotiation. However, this does not apply to situations where a fundamental change of circumstances took place after the conclusion of contract. Regarding negotiated contract clauses, German law is strongly influenced by the search for individually suitable solutions (principle of good faith; fair and
1 See Jung and Krebs (2016), p. 40.
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interest-considered interpretation; sometimes even against the exact wording of the contract; gap-filling in accordance with the parties’ ideas (supplementary contract interpretation)). The application of this principle allows a complete regulation of each individual case to be waived, as well as enabling a more generous hand with formulations, insofar as the content-related elements are sufficiently clear. This leeway, granted for negotiations, often remains unused however; perhaps since this would involve deliberate risk-taking. Thus, this course of action is especially uncommon among lawyers. In summary, when compared to their international counterparts, Germans are often considered to be risk averse—even though in this context, the world-famous “German Angst” is probably not significant. Still, compared to American companies, German companies generally tend to draft less comprehensive agreements.
As long as lawyers take a key role in contract negotiations (either as the negotiating person or in the → back office), it is very common to choose the legally safest way. German lawyers usually follow the safe harbour principle and are not orientated towards pursuing a legal risk management, which evaluates economic risks and chances as well as comprising major risks outside the field of criminal law. Likewise, economically-oriented companies often do not dare to override legal concerns that have been set out in writing, since German liability law is perceived to be very strict. The principle of legality prohibits breaches of law, even if they have been conducted in the interests of the company. Despite the significance of this law for German companies, bringing legal disputes before courts or arbitral tribunals is not a desired option. Settling disputes by means of this procedure is perceived as elaborate, risky and damaging to business. Accordingly, these legal means are understood to be the ultima ratio. Hence in dispute negotiations, legal arguments are only used in order to reach a reasonable agreement—at least by non-lawyers. It is thus very seldom that Germans evaluate the option of an actual legal dispute to be a real → BATNA. Company-intern compliance rules, which have gained ground enormously in recent years, are, in a broader sense, another legal element that influences the German negotiator. These rules aim not only to prevent corruption in the form of expenditure for negotiation partners (presents, invitations, joint dinners) but also comprise regulations for German negotiators, supervising their acceptance of presents and invitations from the other party. Compliance rules are generally very strict, particularly within large companies or in SMEs delivering to large companies. The scope to grant exceptions is very small, frequently necessitating a laborious procedure. In this context, German negotiators might conceivably find themselves in an embarrassing situation if handed presents or invited to dinners when the costs incurred exceed company limits. In these cases, German negotiators face the dilemma of either violating company-intern rules or upsetting the opposing party.