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The Executive School of the University of St.Gallen

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Prof. Winfried Ruigrok

Prof. Winfried Ruigrok

Dean

Dean of the Executive School of Management, Technology and Law and Director of the Research Institute for International Management at the University of St.Gallen (HSG) […]

Uber liability

The German court decision to ban Uber will sustain the current structure of the German taxi market, and this is bad for German customers and innovation.  But Uber should not have been surprised.

Unlike in the Anglo-American (common law) system based on ex ante freedom of citizens and organisations, the German (civil law) system requires lots of (ex ante) negotiation before citizen, corporate or stakeholder rights are “codified”.  Once a compromise has been reached, the German legal system provides (ex post) guidance and protects the interests that have been taken into account.  The German legal system is not primarily about flexibility or change, but about providing clarity and direction to all stakeholders.

Most German people support this principle (even if some may object to how it works out in the case of Uber).  Individualism and risk-appetite are appreciated less in Germany than in the U.S. or the UK.  The German legal system simply reflects the distinct German cultural values.

The case of Uber illustrates the notion of “liability of foreignness”, which refers to the (knowledge, network and experience) disadvantage that foreign firms face as they enter new foreign (host) countries.  Ask Walmart, Disney, or Huawei which all found out the hard way that people, markets and authorities abroad do not function the same way as they do at home.  Now Uber also knows.

Read more: Financial Times Editorial  ” Germany says ‘Nein’ to Uber taxi app”