Arbitration in Germany: An Overview
Introduction
Arbitration is a cornerstone of commercial dispute resolution in Germany, offering parties a flexible, confidential, and internationally recognised alternative to litigation. Germany’s arbitration regime is shaped by a robust legal framework, a choice of respected institutions, and a tradition of procedural fairness. This article provides a comprehensive overview of arbitration in Germany, including its legal foundations, key features, procedures, enforcement mechanisms, and the limited scope for appeals and challenges.
Legal Framework
Arbitration in Germany, a civil law jurisdiction, is governed primarily by the German Code of Civil Procedure (Zivilprozessordnung, "ZPO"), specifically sections 1025 to 1066. These provisions regulate the admissibility and conduct of arbitration proceedings and are largely modelled on the UNCITRAL Model Law on International Commercial Arbitration. Notably, German law does not distinguish between domestic and international arbitration, but does differentiate between commercial arbitration, sports arbitration, and investor-state arbitration ("ISDS"), the latter being governed by international treaties such as investment promotion agreements or free trade agreements.
Parties are free to agree on a variety of procedural rules, such as those of the German Institution of Arbitration (Deutsche Institution für Schiedsgerichtsbarkeit, "DIS") or the International Chamber of Commerce ("ICC"). These rules supplement the statutory framework and offer additional flexibility. While most provisions of the ZPO are non-mandatory and apply only in the absence of party agreement, certain procedural guarantees – such as equality of the parties, the right to be heard, and the right to legal representation – cannot be contracted out of.
Key Features of Arbitration in Germany
The leading arbitral institution in Germany is the DIS, which administers both national and international commercial disputes. The DIS offers a range of procedural rules, available in both German and English, and is known for its expertise in complex commercial matters. Other institutions include the German Maritime Arbitration Association, sector-specific bodies such as the Association of Crop Merchants, regional chambers of commerce, and ARIAS Deutschland for insurance arbitration. Many proceedings, even between solely German parties, are conducted under ICC rules, reflecting the international nature of commercial arbitration in Germany. Arbitration is commenced according to the chosen institutional rules or, in their absence, the ZPO.
German arbitral tribunals adopt a cautious approach to document production, reflecting civil law principles. Limited disclosure may be granted for specific, relevant documents; extensive discovery is rare and reserved for exceptional cases. Attorney-client privilege is recognised and enforceable, with explicit exceptions to document production for privileged materials.
Witness evidence is common, with parties often submitting written statements before oral hearings. Where a witness is questioned during the hearing, their oral testimony takes precedence over written evidence. Expert evidence is also significant, with parties able to present their own experts or the tribunal appointing experts as needed. This flexibility allows parties to address complex factual, legal, or technical issues effectively.
The general rule is that claimants must prove the facts supporting their claim. However, German law provides for exceptions, such as shifting the burden to the breaching party in contractual disputes, and recognising prima facie evidence in certain circumstances.
German arbitration law allows tribunals to order provisional measures, including as to security for costs. While there are no explicit statutory rules on security for costs, tribunals and courts have discretion to grant such relief in appropriate cases. This ensures that parties are protected against the risk of non-payment and that the arbitration process remains fair.
Enforcement of Arbitral Award
Germany is a signatory to the New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards, ensuring that enforcement of foreign awards is generally efficient. Under ZPO, an arbitral award has the same effect as a final judgment of a German court. Domestic awards are enforceable once declared so by a state court unless grounds for setting aside, such as non-arbitrability of the subject matter or conflict with German public policy, exist. Competent courts, typically the higher regional courts and the Federal Court of Justice, decide quickly and rarely annul awards. According to the German Federal Ministry of Justice, only a low single-digit percentage of awards are set aside.
Arbitral proceedings in Germany are typically single staged with no right of appeal. Exceptions exist if the parties expressly agree to allow appeals to a state court or another arbitral tribunal. Domestic awards may be set aside by competent courts for limited reasons specified ZPO, but this process is not considered an appeal on the merits. The setting-aside procedure is limited to procedural irregularities or violations of public policy, and the courts do not re-evaluate the merits of the case.
Conclusion
Arbitration in Germany offers parties a reliable, efficient, and internationally recognised forum for resolving commercial disputes. The legal framework, shaped by ZPO and supplemented by institutional rules, provides flexibility while ensuring fundamental procedural guarantees. German arbitral tribunals are known for their expertise, cautious approach to disclosure, and respect for party autonomy; German courts are known for their pro-arbitration stance on enforcement.
