This country-specific Q&A provides an overview of the legal framework and key issues surrounding international arbitration law in Germany.
This Q&A is part of the global guide to International Arbitration.
For a full list of jurisdictional Q&As visit http://www.inhouselawyer.co.uk/index.php/practice-areas/international-arbitration-4th-edition/
What legislation applies to arbitration in your country? Are there any mandatory laws?
The German arbitration law is enacted as the 10th Book of the German Code of Civil Procedure (Zivilprozessordnung, ZPO), sections 1025 through 1066. The enactment dates back to 1998 and is mostly based on the UNCITRAL Model Law. Germany is a "Model Law Country".
The German arbitration law is based on the principle of territoriality. The regime applies to both domestic and international arbitrations. With few exceptions only, its scope of application is limited to arbitration proceedings seated in Germany, irrespective of the nationality of the parties. The law contains, e.g., also rules on the enforcement of foreign arbitral awards, and they differ slightly from the provisions governing the enforcement of domestic awards.
The basic principle underlying the German arbitration law is party autonomy (section 1042 (2) ZPO). The parties are to a large extent free to determine the arbitral procedure themselves, and they may do so by way of reference to a set of arbitration rules (section 1042 (3) ZPO).
However, the parties are limited by the following mandatory rules:
- Application of the German arbitration law to arbitral proceedings where the seat of arbitration is Germany (section 1025 ZPO);
- The rules on objective arbitrability (section 1030 ZPO);
- Recourse to the state courts for the decision on the validity of the arbitration agreement (section 1032 ZPO);
- The state courts' role in enforcing temporary relief (sections 1033; 1041 (2) and 1041 (3) ZPO) is usually considered mandatory;
- Equal participation and weight of all parties regarding the constitution of the arbitral tribunal (section 1034 ZPO);
- Recourse to the state courts to verify the decision on the challenge of an arbitrator, provided that the arbitral tribunal has rejected the challenge (section 1037 (3) ZPO);
- The tribunal may decide on its own jurisdiction (so-called Kompetenz-Kompetenz, section 1040 (1) ZPO), but the parties cannot rule out the review of that decision by the state courts;
- Respect of the principle of equal treatment of all parties and the parties' right to be heard (section 1042 (1) ZPO);
- Representation by attorneys cannot be excluded per se (1042 (2) ZPO);
- A party's general right to initiate set-aside proceedings (section 1059 ZPO) cannot be waived in advance.
There are more mandatory rules in other sources of German substantive and procedural law, and the arbitration proceedings must at all times respect the German public order in order to ensure the enforceability of the award.
Mandatory rules enacted by – or to establish – the European Union may also limit the general freedom to arbitrate in Germany. For instance, in the famous Achmea case, the German Federal Supreme Court (Bundesgerichtshof) expressly confirmed in its decision of 31 October 2018 (I ZB 2/15) that the related judgment of the European Court of Justice (ECJ) in Case C-284/16 is consistent with German arbitral law. The ECJ had decided that Art. 344 TFEU and Art. 267 TFEU establish a system of judicial review in the European Union in which elementary aspects of EU law must be open for a review that guarantees the coherence and consistence of its interpretation, and that the Member States' practice to conclude bilateral investment treaties (BITs) which contain the respective States' offer to certain investors to resort to arbitration infringes this system. The ECJ had ruled that arbitration clauses in such "intra-EU BITs" are "inapplicable". However, for the avoidance of doubt, arbitration clauses providing for commercial arbitration between "intra-EU arbitrants" have not been declared void or inapplicable in Germany – even though EU law may play a significant role in the dispute – as the possibility of judicial review by the Member States' courts and their right to present certain issues to the ECJ are generally considered sufficient to enforce mandatory EU law.
Is your country a signatory to the New York Convention? Are there any reservations to the general obligations of the Convention?
Germany signed the New York Convention on 10 June 1958. The Convention was ratified on 30 June 1961 and entered into force on 28 September 1961.
Germany withdrew its reciprocity reservation in 1998. Hence, German courts also enforce awards made in the territory of a state that is not party to the New York Convention.
What other arbitration-related treaties and conventions is your country a party to?
Germany is the country which has signed the largest number of bilateral investment treaties (BITs) in the world.
To date, Germany has signed 147 investment treaties (bilateral or trilateral). Some of them have become ineffective, others have not yet entered into force.
A list of investment treaties and their status can be found on the website of the German Federal Ministry for Economic Affairs:
As stated above under 1., the ECJ decided in March 2018 that Investor-State arbitration clauses in BITs between EU Member States are incompatible with EU law and, hence, "inapplicable" (Case C-284/16).
Contrary to that, the ECJ came to the conclusion that the investment protection section of the Comprehensive Economic and Trade Agreement (CETA) between the EU and Canada is compatible with EU law (Case C-1/17, Opinion 1/17 of 30 April 2019). The ECJ inter alia held that arbitral tribunals under the CETA would not have the power to interpret or to apply EU law, but the CETA and public international law. The CETA is currently applied only in part, and its rules on Investor-State Dispute Settlement will only apply once all Member States have ratified it.
In addition, Germany is a party to the following arbitration-related conventions:
- The Geneva Protocol on Arbitration Clauses (1923);
- The Geneva Convention on the Execution of Foreign Arbitral Awards (1927);
- The European Convention on International Commercial Arbitration (1961);
- The Convention on the Settlement of Investment Disputes between States and Nationals of other States (1965);
- The Energy Charter Treaty (1994).
Is the law governing international arbitration in your country based on the UNCITRAL Model Law? Are there significant differences between the two?
The German Arbitration Law is based on the UNCITRAL Model Law on International Commercial Arbitration. However, it is applicable to any kind of arbitration with a German seat, and not only to "commercial disputes" in "international arbitration", for which UNCITRAL had prepared its "Model Law".
The main differences between the German arbitration law and the UNCITRAL Model Law are:
- Formal requirements for the arbitration agreement are more flexible;
- The option to request a ruling from a court on the admissibility of arbitration prior to the constitution of the arbitral tribunal (section 1032 (2) ZPO);
- Greater powers of state courts with regard to the appointment of arbitrators (e.g. if there is a preponderance of one party in the constitution of the tribunal) and with regard to the enforcement of interim relief;
- In case the parties did not agree on the applicable substantive law: obligation for the arbitral tribunal to apply the law of the country to which the subject matter is most closely connected (1051 ZPO); and
- Time limits for the initiation of annulment proceedings.
Germany has not adopted the 2006 amendments of the UNCITRAL Model Law. A task force is currently exploring how to reform the German arbitration law, it also considers the 2006 amendments of the UNCITRAL Model Law.
Are there any impending plans to reform the arbitration laws in your country?
In 2016, the German Federal Ministry of Justice established a task force charged to assess the potential need of modernisation of the German arbitration law. The underlying goal is to strengthen the attractivity of the German seat of arbitration.
What arbitral institutions (if any) exist in your country? When were their rules last amended? Are any amendments being considered?
The most important German arbitration institution is the "Deutsche Institution für Schiedsgerichtsbarkeit e.V." (DIS), which has recently changed its English name from "German Institution of Arbitration" to "German Arbitration Institute". It was established in 1992, but its predecessor organisations date back to the 1920s.
The latest version of the DIS Arbitration Rules entered into force on 1 March 2018 ('DIS 2018 Rules'). It replaced the DIS 1998 Rules.
The DIS 2018 Rules contain significant modifications regarding:
- Acceleration of initiation of proceedings and of constitution of the arbitral tribunal;
- Promotion of use of sole arbitrators;
- Mandatory Case Management Conference requiring the discussion of efficiency measures at an early stage;
- Promotion of early settlements;
- New rules on multi-party-, multi-contract-, and joinder situations;
- Stronger administrative role of the DIS;
- Option to opt-in new set of rules for Expedited Proceedings (Annex 4).
The DIS has also enacted rules and guidelines for:
- UNCITRAL Arbitration Rules - Administered by the DIS
- The Reimbursement of Arbitrators Expenses;
- Expert Determination Proceedings;
- Expertise Proceedings;
- Adjudication Proceedings;
- Sports Arbitration (2008 and 2016);
- Expedited Arbitration Proceedings (relating to the (old) DIS Arbitration Rules 1998);
- Arbitrating Corporate Law Disputes; and
- Conflict Management.
All the DIS-Rules may be found on the website of the institution: http://www.disarb.org/en/16/rules/overview-id0
Other German arbitration institutions include the local representation of the International Chamber of Commerce (ICC) in Germany, the Chinese European Arbitration Centre (CEAC), the German Maritime Arbitration Association (GMAA), and several local Chambers of Industry and Commerce (Industrie- und Handelskammern) that support arbitrations, often by way of referring to the arbitration rules of the DIS.
What are the validity requirements for an arbitration agreement under the laws of your country?
Sections 1029 to 1033 ZPO deal with the arbitration agreement under German law.
Pursuant to section 1029 (2) ZPO, the arbitration agreement may take the form of an independent arbitration agreement or that of an arbitration clause contained in a contract.
The formal requirements are enshrined in section 1031 ZPO. The arbitration agreement shall be contained in a document signed by the parties, or in an exchange of letters, telefaxes, telegrams, or other means of telecommunication which provide for a record of the agreement.
Pursuant to section 1031 (2) ZPO, an arbitration agreement can also take the form of a document transmitted from one party to the other party or by a third party to both parties, provided that no objection to the document was raised in good time and that common usage allows to qualify the terms of the document as contractual content.
Pursuant to section 1031 (3) ZPO, reference to a document which contains an arbitration clause can also constitute an arbitration agreement if the reference is such as to make that clause part of the contract.
The formality requirements differ in case of a contract to which a party is a consumer. Pursuant to section 1031 (5) ZPO, the arbitration agreement to which a consumer is party must be contained in a contract which has been personally signed by the parties.
The notion of a "consumer" is dealt with at section 13 of the German Civil Code (Bürgerliches Gesetzbuch, BGB). It may be interpreted wider than perhaps customary in an international context. However, the qualified written form protecting consumers may be substituted by the electronic form pursuant to section 126a BGB. The arbitration agreement with a consumer must not contain any other agreements than the agreement to arbitrate, but this rule does not apply in case of a notarial recording.
Any non-compliance with the form requirements is cured if the parties do not object against the arbitral tribunal's competence before arguing on the substance in the arbitral proceedings (section 1031 (6) ZPO).
Are arbitration clauses considered separable from the main contract?
Yes. Section 1040 (1) ZPO provides for the separability or independence of the arbitration agreement from the other terms of a contract. The invalidity of the main contract does not automatically affect the validity of the arbitration agreement. The law, however, does not categorically rule out that severe defects causing the nullity of the main contract may also affect the validity of the arbitration agreement.
Is there anything particular to note in your jurisdiction with regard to multi-party or multi-contract arbitration?
The ZPO does not contain any specific provisions on multi-party or multicontract arbitration.
However, there seems to be wide-spread consensus in Germany that the French Cour de cassation's ruling in the Dutco case also reflects the German law position. This applies even more since the enactment of section 1034 (2) ZPO in 1998 according to which the courts may be called to appoint one or more arbitrators if the arbitration agreement gives preponderant rights to one side with regard to the constitution of the arbitral tribunal.
The new DIS 2018 Rules added provisions specifically dealing with multi-contract and multi-party arbitrations (Articles 17 to 20). The DIS Rules are, of course, no source of law, but can be agreed between the parties.
Article 20 of the DIS 2018 Rules specifically deals with three-member arbitral tribunals in multi-party arbitrations and calls for the appointment of one or both "party-appointed" arbitrators by the DIS-Appointing Committee if the multiple parties on one side cannot agree on a joint nomination.
In what instances can third parties or non-signatories be bound by an arbitration agreement?
The arbitration agreement only binds the parties that have expressly agreed to arbitrate, section 1029 ZPO. Third parties can only be bound by the arbitration agreement under certain circumstances, either based on a contractual agreement or in case of legal succession by inheritance or assignment.
As of today, there is no court decision in Germany adopting the "group of companies doctrine". It is accepted in the case law, however, that the fact that a foreign arbitral award has been rendered on the basis of the "group of companies doctrine" is not a reason as such for denying its recognition and enforcement in Germany according to German case law.
How is the law applicable to the substance determined? Is there a specific set of choice of law rules in your country?
Section 1051 ZPO sets forth the rules which substantive law applies to the merits of a dispute:
- The arbitral tribunal shall use the law chosen by the parties;
- Failing any such designation of the parties, the arbitral tribunal shall apply the law of the State to which the subject matter is most closely connected;
- The arbitral tribunal may decide ex aequo et bono or as amiable compositeur only if the parties have expressly authorized it to do so;
In any event, the arbitral tribunal shall decide in accordance with the terms of the contract and shall take into account the usages of the trade applicable to the transaction.
Are any types of dispute considered non-arbitrable? Has there been any evolution in this regard in recent years?
Objective arbitrability is dealt with at section 1030 (1) ZPO. Any claim involving an "economic interest" ("vermögensrechtlicher Anspruch") is arbitrable. The German arbitration law hence differs from the UNCITRAL Model Law which requires a dispute to be "commercial" for its arbitrability.
An arbitration agreement concerning claims not involving an economic interest shall have legal effect to the extent that the parties are entitled to conclude a settlement on the issue of the dispute.
There is a number of matters which are considered non-arbitrable under German law. The following list is not exhaustive:
- Pursuant to section 1030 (2) ZPO, an arbitration agreement relating to disputes on the existence of a lease or residential accommodation within Germany shall be null and void, except for residential accommodations as specified in section 549 (2) Nos. (1) to (3) BGB.
- Divorce, child custody matters, issues of family status, criminal law matters are not arbitrable.
- Employment matters are only arbitrable in accordance with specific provision of the German Labour Court Act.
- Matters typically involving third party interests may be considered non-arbitrable, such as disputes about the existence of a patent or shareholder disputes aiming at erga omnes effect (unless the parties obey the strict rules formulated by the Federal Supreme Court for certain company types (GmbH and KG) in the decisions Schiedsfähigkeit II and Schiedsfähigkeit III in 2009 and 2017, respectively; the DIS has enacted Supplementary Rules for Corporate Law Disputes that aim to comply with the Federal Supreme Court's rulings).
Pursuant to section 1059 (2) no. 2 a) ZPO, an award can be set aside if the court finds that the subject-matter of the dispute is not capable of settlement by arbitration under German law.
In your country, are there any restrictions in the appointment of arbitrators?
German Law does not provide for any specific restrictions regarding the appointment of arbitrators. The parties are free to choose the arbitrators, section 1035 German Code of Civil Procedure (Zivilprozessordnung, "ZPO") as long as they are impartial and independent to prevent them from being challenged under the prerequisites of section 1036 (2) ZPO.
Are there any default requirements as to the selection of a tribunal?
The procedure for the appointment of the tribunal is subject to party autonomy, section 1035 (1) ZPO. However, the ZPO provides for a default procedure if the parties fail to agree on a procedure regarding the composition of the tribunal.
Sole arbitrator: In arbitration proceedings with a sole arbitrator the parties shall agree on such arbitrator. If the parties fail to do so, the competent Higher Regional Court (Oberlandesgericht, "OLG", section 1062 ZPO) will appoint the arbitrator on the application of one of the parties.
Three arbitrators: In arbitration proceedings with three arbitrators each party shall select one arbitrator. The two selected arbitrators select the chairman. If one of the parties fails to select an arbitrator within one month after receiving the adverse party's notice, or if the arbitrators fail to agree on the chairman within one month of their appointment, the arbitrator or the chairman will be appointed by the competent OLG on the application of one of the parties (section 1035 (3) sentences 2 and 3 ZPO).
Can the local courts intervene in the selection of arbitrators? If so, how?
Local courts can intervene in the selection of arbitrators, particularly in the following cases:
Imbalanced arbitration agreement regarding the composition of the tribunal: section 1034 (2) ZPO provides for a court intervention if the arbitration agreement significantly favors one party as regards the composition of the arbitral tribunal, and this places the other party at a disadvantage. In this case the disadvantaged party may request the competent OLG to appoint the arbitrator(s). The court's decision may diverge from the party agreement to ensure balanced influence of both parties on the formation of the tribunal.
Appointment of arbitrators: As already set out in question no. 13, the competent OLG may intervene if (a) the parties fail to agree on the sole arbitrator, if (b) the parties fail to select the arbitrator for a tribunal consisting of three arbitrators, or if (c) the arbitrators selected by the parties fail to appoint the chairman.
Other procedural matters: The court is furthermore entitled to intervene upon a party's application if the parties to the dispute have agreed on a procedure for the appointment, and where one party does not adhere to this procedure, or where the parties to the dispute or the two arbitrators are unable to come to an agreement in accordance with the said procedure, or where a third party does not fulfil the tasks conferred upon it under the procedure (section 1035 (4) ZPO).
Challenge procedure: According to section 1037 (1) ZPO the parties are free to agree on a procedure for challenging an arbitrator. If a challenge under the procedure agreed upon by the parties remains unsuccessful, the challenging party may request the court to decide on the challenge (section 1037 (3) ZPO).
Can the appointment of an arbitrator be challenged? What are the grounds for such challenge? What is the procedure for such challenge?
The appointment of an arbitrator can be challenged. The parties are free to agree on a l challenge procedure (section 1037 ZPO).
Absent such agreement, section 1037 (2) ZPO provides for a default statutory challenge procedure. In this case the challenging party must file a written statement specifying the reasons for the challenge within two weeks after the constitution of the arbitral tribunal or after obtaining knowledge of any reasons which give rise to doubts about the impartiality and independence of the arbitrators.
If this challenge is unsuccessful, the party can, within one month after receiving notice of the arbitral tribunal's decision rejecting the challenge, request from the competent state court to decide on the challenge (section 1037 (3) ZPO). Should the party fail to file such a request with the competent state court, it will be barred from raising objections to the impartiality or independence of the arbitrator during the enforcement proceedings.
The arbitral tribunal, including the challenged arbitrator, may continue with the arbitral proceedings and issue an arbitral award while the challenge request is pending in the court. Should the arbitral award already be valid, and the state court subsequently consider the challenge request as founded, the arbitral award becomes void due to section 1059 (2) no. 1. lit. d. and no. 2. lit. b. ZPO.
What happens in the case of a truncated tribunal? Is the tribunal able to continue with the proceedings?
Should an arbitrator's mandate, for whatever reason, end prematurely, a substitute arbitrator needs to be appointed according to the rules which were applicable to the appointment of the initial arbitrator, section 1039 (1) ZPO.
Are arbitrators immune from liability?
No. Arbitrators can be held liable depending on whether the breach of duties is related to the actual decision of the dispute or to other duties.
Pursuant to the applicable case law it is recognized that the parties of the arbitration proceedings implicitly agree to treat the arbitrator's liability equivalent to the liability of the state court judges laid down in section 839 (2) Civil Code. Thus, arbitrators cannot be held responsible for the incorrectness of the judgment unless the breach of duty represents a criminal offence.
The arbitrator cannot invoke this privilege if the breach relates to other contractual duties, e.g. if the arbitrator terminates his contract without justified reasons at an inappropriate stage of arbitration. In this case the arbitrator must compensate the parties for their damages on the basis of general contractual liability principles.
Is the principle of competence-competence recognised in your country?
Yes - section 1040 (1) sentence 1 ZPO empowers the arbitral tribunal to rule on its own jurisdiction as well as on the existence or validity of the arbitration agreement. Should the arbitral tribunal issue an interim decision on an objection regarding its competence, the party may, however, apply for a court decision within one month after having received the interim decision in writing, section 1040 (3) ZPO. Furthermore, any decision of an arbitral tribunal to decide on its own jurisdiction is of course subject to review in potential enforcement or setting-aside proceedings.
The principle of competence-competence is complemented by section 1040 (1) sentence 2 ZPO which stipulates the principle of separability according to which an arbitration clause shall be treated as a separate agreement. Consequently, the arbitral tribunal may examine the validity of the arbitration clause independent of the other terms of the contract. Apparently, both principles (competence-competence and separability) are interdependent and aim at enabling the parties to obtain at least preliminary assurance about the jurisdiction, even though the state court retains the last word, particularly if one of the arbitral parties intends to contest the tribunal's decision on its jurisdiction.
What is the approach of local courts towards a party commencing litigation in apparent breach of an arbitration agreement?
If litigation proceedings are commenced in breach of the arbitration agreement, the local court will deal with the issue of jurisdiction if respondent invokes the arbitration clause in order to contest the admissibility of the lawsuit, section 1032 (1) ZPO. The defendant must object prior to the hearing on the merits.
How are arbitral proceedings commenced in your country? Are there any key provisions under the arbitration laws relating to limitation periods or time bars of which the parties should be aware?
Unless otherwise agreed by the parties to the dispute, the arbitration proceedings regarding a certain dispute shall commence on the date on which respondent has received the petition to bring the matter before an arbitral tribunal. The petition must designate the parties as well as the subject matter of the litigation, and it must indicate that an arbitration agreement was concluded, section 1044 ZPO.
The commencement of the arbitral proceedings effects the suspension of the limitation period according to German substantive law. Apart from this, the parties should pay attention to the time limits determined by the parties themselves or the arbitral tribunal during the arbitration proceedings (section 1046 (1) ZPO).
Section 1048 ZPO complements this rule by defining the consequences of the default of a party. Accordingly, the arbitral tribunal is entitled to terminate the proceedings if claimant fails to submit its statement of claim in accordance with the applicable time limits (section 1048 (1) ZPO). Likewise, if respondent fails to submit its statement according to the applicable time limitation, the arbitral tribunal shall continue the proceedings and render an award, section 1048 (2) ZPO. Such an award is enforceable under German law if the respondent was given sufficient opportunity to present his counter arguments.
In what circumstances is it possible for a state or state entity to invoke state immunity in connection with the commencement of arbitration proceedings?
States or state entities cannot invoke immunity once they have validly concluded an arbitration agreement. The agreement on referring the dispute to arbitration is considered as waiver of any objection based on the grounds of state immunity. However, whether or not a waiver of immunity has been given will be assessed separately for the arbitration proceedings and the enforcement proceedings.
What happens when a respondent fails to participate in the arbitration? Can the local courts compel participation?
Should a respondent fail to reply to the request for arbitration pursuant to section 1046 (1) ZPO, the arbitral tribunal shall continue the proceedings, without the failure to comply with procedural rules as such being deemed to be an acknowledgment of the assertions made by the plaintiff. The arbitral tribunal may even issue an award on the basis of the evidence before it if the respondent fails to appear at the oral hearing or to produce documentary evidence although he was given sufficient advance notice (section 1048 (3) ZPO).
Local courts can neither compel a respondent nor third parties to participate in the arbitration.
Can local courts order third parties to participate in arbitration proceedings in your country?
Local courts cannot compel third parties to participate in arbitration proceedings under German law.
What interim measures are available? Will local courts issue interim measures pending the constitution of the tribunal?
German law does not provide for specific interim measures pending the constitution of the tribunal. Section 1033 ZPO merely clarifies that the parties, by entering into the arbitration agreement, do not exclude their right to apply to state courts for an interim relief before, during or even after the arbitral proceedings. Parties can therefore request courts to take interim measures in accordance with their competence laid down in section 919 ZPO, such as attachment orders (sections 916-934 ZPO) and interim injunctions (sections 935-945 ZPO).
Courts in Germany will not issue anti-suit injunctions.
In addition to this, the arbitral tribunal can issue interim measures as well (section 1041 ZPO). However, interim measures by the arbitral tribunal cannot be enforced right away which appears to be a a significant disadvantage compared to interim measures rendered by local courts.
Are there particular rules governing evidentiary matters in arbitration? Will the local courts in your jurisdiction play any role in the obtaining of evidence? Can local courts compel witnesses to participate in arbitration proceedings?
German law does not stipulate specific rules governing evidentiary matters in arbitration. The taking of evidence is subject to party autonomy. The parties are free to determine the admissibility and details of taking evidence. Absent any party agreement, the arbitral tribunal has broad discretion to decide on the admissibility, relevance and methods of taking evidence (section 1042 (4) ZPO) without being bound by procedural rules applicable for state courts.
Local courts (Amtsgerichte) may play a role in the obtaining of evidence. Section 1050 ZPO states that the arbitral tribunal or a party with the approval of the arbitral tribunal may request assistance from a local court in taking evidence which the arbitral tribunal is not empowered to carry out. The state court may hereby assess whether the arbitral tribunal itself would have been able to conduct the requested measure. If the state court considers itself competent, it will take the requested measure without any further review whether the measure is necessary for the progress of the arbitral proceedings.
The local court may, however, be entitled to refuse assistance to the arbitral tribunal if the requested measure contravenes German procedural law, e.g. if the arbitral tribunal asks the local court to conduct a US-style discovery of documents.
What ethical codes and other professional standards, if any, apply to counsel and arbitrators conducting proceedings in your country?
German law does not provide for specific ethical codes for arbitrators. German lawyers are rather bound by the ethical standards laid down in the Federal Lawyers' Act (Bundesrechtsanwaltsordnung) as well as the Professional Regulations for Lawyers (Berufsordnung für Rechtsanwälte).
The IBA Rules of Ethics for International Arbitrators are widely accepted in German arbitration proceedings.
In your country, are there any rules with respect to the confidentiality of arbitration proceedings?
German law does not provide any rules with respect to the confidentiality of the arbitration proceedings. If the parties want to keep their proceedings confidential, they need to agree explicitly on the confidentiality of the arbitration proceedings.
The new 2018 DIS Rules contain a provision dealing with the confidentiality of the arbitration (Article 44). Unless the parties agreed otherwise the persons involved in the arbitration proceedings shall not disclose any information concerning the arbitration. Exceptions are provided for the event that disclosures are necessary because of the applicable law or any other legal duties. The DIS can only publish the arbitral award with the prior written consent of all of the parties.
How are the costs of arbitration proceedings estimated and allocated?
Pursuant to section 1057 (1) ZPO, the arbitral tribunal decides how to estimate and allocate the cost of the proceedings. While the parties may provide a separate agreement, a decision by the Arbitral Tribunal is the general rule.
In its decision, the arbitral tribunal takes into account all facts and circumstances of the case as well as the Arbitration's outcome, section 1057 (2) ZPO. Similar to proceedings in German state court, the arbitral tribunal's decision follows the concept of "cost-follow-the-event". Nonetheless, the arbitral tribunal may deviate from such concept where it deems necessary.
The decision of the arbitral tribunal covers the costs of the arbitration, which include in particular institutional fees (of the arbitration institution as well as the arbitrator) and the reasonable lawyers' fees. In terms of "reasonableness" the award of costs is not limited to a statutory fee schedule as in district court proceedings. Instead, the arbitral tribunal may decide in its discretion to what extend costs and fees were necessary, and thus reasonable, for a party's proper conduct of the proceedings.
The arbitral tribunal's decision on costs may be included in the final award or can be issued as a separate award on cost following the conclusion of the arbitration proceedings, section 1057 (2) ZPO.
Can pre- and post-award interest be included on the principal claim and costs incurred?
Interest may be granted and awarded by the arbitral tribunal if and to the extend the respective substantive law provides for entitlement for interests. German law stipulates that interest may be added to a payment claim from the date of commencement of the arbitration (lis pendens). In addition, pre-arbitration interest may be awarded if the party had been in breach of contract or default.
Interest accrues and is thus payable up to the date of payment. No distinction is made between a pre-award period and post-award period.
What legal requirements are there in your country for the recognition and enforcement of an award? Is there a requirement that the award be reasoned, i.e. substantiated and motivated?
Sections 1060 and 1061 ZPO distinguish between the recognition of domestic awards and foreign awards.
Section 1060 ZPO (domestic award) is applicable if the arbitral tribunal that rendered the award is seated in Germany. Even though arbitral awards are considered "equal" to a regular state court decision, the arbitral award nonetheless must be declared enforceable by a German state court in order to take an enforceable effect. In determining the enforceability, the court must – ex officio – determine whether the subject matter of the arbitration is arbitrable and whether the award violates any public policy in Germany. In addition, the court must also review whether reasons for setting aside the award (section 1059 (2) Nr. 1 ZPO) may oppose its enforceability; such reasons may only be reviewed, though, if raised/alleged by a party in a timely manner.
The requirement of proceedings for recognition of an arbitrable award is not necessary only where and if the parties have agreed that the award shall be enforceable and the parties have made such declaration before a German notary public. In such case, notary public only reviews whether the award violates public policy.
Foreign awards on the other hand are recognize and enforced in accordance with the New York Convention, section 1061 ZPO.
What is the estimated timeframe for the recognition and enforcement of an award? May a party bring a motion for the recognition and enforcement of an award on an ex parte basis?
The timeframe for proceedings to recognize and/or enforce an arbitral award can vary significantly depending whether or not disputed issues regarding the enforceability are presented by a party. In that case, the court may even have to take evidence on the respective issues in order to analyse the underlying arbitration proceeding. Hence, the timeframe for recognition of an arbitral award can vary from 3 to 6 months (no relevant disputes the parties) up to 9 to 18 months where significant legal and factual issues are at dispute as to the relevant reasons of section 1059 ZPO.
The proceedings require participation of both parties. Hence, ex parte motions for recognition or enforcement are not foreseen. A Claimant, though, may take separate legal action, e.g. to freeze assets to ensure later collection once and if the arbitral award has been declared enforceable.
Does the arbitration law of your country provide a different standard of review for recognition and enforcement of a foreign award compared with a domestic award?
No, the standards of review regarding the enforceability and recognition of domestic awards and foreign awards are generally the same. Naturally, certain issues of review may be more relevant in respect of foreign awards than of domestic awards. E.g. the issue of compliance with public policy may more often be relevant when recognizing and enforcing a foreign award.
Does the law impose limits on the available remedies? Are some remedies not enforceable by the local courts?
The types and range of remedies that can be awarded by the arbitral tribunal depend on the substantive law of the dispute. Arbitration law does not impose limitations on these available remedies per se.
In addition, the parties of the arbitration may afford further competence to arbitral tribunal and empower the arbitral tribunal to render a decision ex aequo et bono.
Limitations to the available remedies and also limitation to the arbitral tribunal's discretion where it has been afforded ex aequo et bono competence are based in the superseding German public policy. I.e. remedies that violate public policy may be awarded by the arbitral tribunals but are not enforceable. Most notably, the Federal High Court (Bundesgerichtshof) held that punitive damages are considered a violation of such public policy.
Can arbitration awards be appealed or challenged in local courts? What are the grounds and procedure?
Absent different agreements of the parties, the German arbitration law does not provide for an appeal process. The only recourse following an arbitral award is to commence setting-aside proceedings.
Section 1059 ZPO provides for the details of the setting-aside proceedings for a domestic arbitral award, i.e. an award rendered by an arbitral tribunal with its seat in Germany. These proceedings have to be initiated within three months from the date of service of the arbitral award.
The list of grounds to set aside a domestic arbitral award mirrors the grounds for the refusal of recognition or end-enforcement of foreign awards under the New York Conventions. The grounds listed in section 1059 ZPO include in particular:
- The violation of due process (section 1059 (2) no. 1 lit. a) ZPO);
- violation of the parties' arbitration agreement (section 1059 (2) no. 1 lit. b) ZPO), which does not only include the agreement to arbitrate but also agreements of the parties during the arbitration, e.g. with respect to the taking of evidence;
- The arbitral tribunal exceeding its competence (section 1059 (2) no. 1 lit. c.) ZPO); and
- The violation of the policy (section 1059 (2) no. 2 lit. b. ZPO).
Other additional circumstances may not be taken into account by the respective district court. In particular, there is no review of the arbitral award on substance.
In terms of a decision, the district court can either set aside the arbitral award or refer the proceedings back to the arbitral tribunal where such option would be appropriate and requested (section 1059 (4) ZPO). Where possible, the dispute is referred back to the initial arbitral tribunal if the award is set aside, in which case the proceedings will continue before the original arbitral tribunal. Whether such option is available depends also on the circumstances and reasons of the decision to set aside the original award. E.g., if the decision is based on lack of due process or the arbitral tribunal exceeding its competence, continuing before the original arbitral tribunal may not be a reasonable option. In such case the arbitral proceedings must be repeated and started from the very beginning.
In June 2018 the Federal High Court (Bundesgerichtshof) stated that section 1059 (4) ZPO shall not only apply in set-aside proceedings but also in the proceedings for a declaration of enforceability if the application for a declaration of enforceability under the annulment of the award is to be rejected because one of the ground for setting-aside in section 1059 (2) ZPO exists (Bundesgerichtshof, 7. June 2018 – I ZB 70/17). The application requirement of section 1059 (4) ZPO also applies to a corresponding application of this provision in the procedure for enforceability of the award.
The court of appeals (Oberlandesgericht) is the competent court to decide on the setting aside proceedings. Its decision can be appealed to the Federal High Court (Bundesgerichtshof). Such appeal is limited to the reasons listed in section 1062 (1) ZPO, i.e. issues regarding the admissibility of arbitration proceedings, jurisdiction of the arbitral tribunal, as well as the reasons for setting aside the award. Outside these reasons, the decision of the court is binding and cannot be appealed.
Can the parties waive any rights of appeal or challenge to an award by agreement before the dispute arises (such as in the arbitration clause)?
The right to apply for setting aside an arbitral award cannot be excluded by the parties in advance entirely. The Federal High Court (Bundesgerichtshof) held that such waivers are invalid, in particular as far as the waiver would extend to the right to challenge an arbitral award based on the issue on non-arbitrability as well as on violation of public policy grounds.
To what extent might a state or state entity successfully raise a defence of state or sovereign immunity at the enforcement stage?
If and where a state has agreed to arbitration, the defense of state or sovereign immunity can no longer be raised during the arbitration proceedings or the subsequent proceedings about the declaration of enforceability/recognition of an arbitration award.
However, the issue of state or sovereign immunity does come back into play in respect of the enforcement of an arbitral award. While the arbitration award against a state remains enforceable, such arbitration award cannot be enforced and executed into all state assets. Pursuant to a decision of the Federal Constitutional Court (Bundesverfassungsgericht) so-called sovereign and non-sovereign assets have to be distinguished. Sovereign assets, i.e. assets that fulfill a sovereign function are exempted from enforcement to measures. On the other hand, may be enforced and collected from non-sovereign assets.
In what instances can third parties or non-signatories be bound by an award? To what extent might a third party challenge the recognition of an award?
Any party that is adversely affected by the arbitration award is generally entitled to challenge the arbitration award and demand its setting aside. The extend of "adverse effect" may even be limited to the decision on costs. I.e. were the award has certain legal effect extending to the third party (res judicata effect on third party), such party is entitled to apply for a setting aside of the arbitral award.
Have courts in your jurisdiction considered third party funding in connection with arbitration proceedings recently?
Neither the German arbitration provisions nor the DIS Arbitration Rules expressly address or regulate third-party funding. Third-party funding is generally permitted in Germany, both in litigation and arbitration. It has been gaining more relevance over the past few years. The main focus of third-party funding, so far, has been on antitrust litigation matters as well as mass litigation rather than individual claims in arbitration.
Is emergency arbitrator relief available in your country? Is this frequently used?
German arbitration law does not provide any rules for emergency arbitrators. While the DIS Arbitration Rules have been revised in 2018, the rules do not provide for emergency arbitrator relief. The DIS Sport Arbitration Rules, on the other hand provide for interim relief prior to the constitution of the arbitral tribunal, which is due to the very specifics of sport disputes.
While the DIS Arbitration Rules foresee that the arbitration tribunal may issue interim measures, these measures require the constitution of the arbitral tribunal. Outside these measures, the parties generally resort to interim relief before the ordinary courts. However, the parties are free to agree on additional terms or institutional rules that provide emergency arbitrator relief.
Are there arbitral laws or arbitration institutional rules in your country providing for simplified or expedited procedures for claims under a certain value? Are they often used?
German arbitration law does not provide for rules for expedited arbitration proceedings in the event of ad hoc arbitration.
Have measures been taken by arbitral institutions in your country to promote transparency in arbitration?
Pursuant to section 44 DIS Arbitration Rules, conduct of the arbitration, i.e. its subject matter and the parties involved, is confidential and the arbitral award may only be published upon consent of the parties. Neither the DIS Arbitration Rules nor the provisions of the ZPO explicitly provide for the issuance of a dissenting opinion within the arbitral tribunal, though the arbitral tribunal is responsible for the content of its decision. A dissenting opinion therefore may be added by one of the arbitrators.
Is diversity in the choice of arbitrators and counsel (e.g. gender, age, origin) actively promoted in your country? If so, how?
While national and international initiatives for more diversity are gaining support in Germany, neither the DIS Arbitration Rules nor German arbitration law provide for specific rules, provisions dealing with the diversity of either the arbitrators, experts or counsel.
Have there been any recent court decisions in your country considering the setting aside of an award that has been enforced in another jurisdiction or vice versa?
Generally, courts will not enforce foreign awards even if they had been set aside at the seat of arbitration. This practice is in line with Article V (1) (e) of the New York Convention.
An exception, though, applies where the state in which the foreign award was set aside is a member state of the European Convention on International Commercial Arbitration of 1961. The Federal High Court (Bundesgerichtshof) has ruled that this convention excludes the applicability of the above general rule and that a foreign award that had been set aside on the basis of a public policy that is not recognized in Germany will nonetheless be recognized and enforced in Germany.
Generally, a party resisting enforcement of an arbitral award in Germany may request the stay of proceedings pending parallel proceedings to set aside the foreign award in the country of origin of the arbitration award. German courts are not bound to such request but may continue and declare the foreign award enforceable if – in the court's view – the alleged grounds for setting aside the arbitral award hold no merit.
Is corruption an issue that is regularly raised in your jurisdiction? What standard do local courts apply for proving of corruption?
Corruption is not an issue/topic that is raised regularly. If raised by one of the parties, the standard of prove is no different than any other facts that are relevant to the subject matter of the alleged claim or defence.
Have there been any recent court decisions in your country considering the definition and application of “public policy” in the context of enforcing or setting aside an arbitral award?
In October 2018 the Federal High Court (Bundesgerichtshof) came to the conclusion that the misjudgment of the res judicata constitutes a violation of the procedural orde public by the arbitral tribunal (Bundesgerichtshof, 11. October 2018 – I ZB 9/18). Consequently an award which wrongly assesses the res judicata of a previous decision shall be set aside pursuant to section 1059 (2) Nr. 2 lit. b ZPO. However the assumption of a violation of public policy presupposes that the determination of the extent of the res judicata on the basis of the earlier decision is not doubtful and, in particular, does not require any interpretation of the grounds of the decision.
In the same judgement the Federal High Court (Bundesgerichtshof) noted additionally that an award can also be set aside if the res judicata has been overestimated, e.g. because it overestimates the subject matter of the dispute in the previous proceedings. This decision of the Federal High Court (Bundesgerichtshof) seems to be an international novelty.
Have there been any recent court decisions in your country considering the judgment of the Court of Justice of the European Union in Slovak Republic v Achmea BV (Case C-284/16) with respect to intra-European Union bilateral investment treaties or the Energy Charter Treaty? Are there any pending decisions?
The German Federal Court (Bundesgerichtshof) decided in a follow-on matter against Achmea BV that the related judgment of the Court of Justice of the European Union in Case C-284/16 is consistent with German arbitral law. The Court of Justice of the European Union had decided that arbitration clauses in bilateral investment treaties between Member States of the European Union (intra-EU BITs) offering investors to resort to arbitration against the States are "inapplicable" as they infringe the system of judicial review established by the EU. The German Federal Court noted that the lack (or inapplicability) of an arbitration agreement equals the invalidity of an arbitration agreement as referred to in section 1059 (1) Nr. 1 lit. a ZPO and set aside Achmea's Final Award obtained in the PCA Case No. 2008-13 (Bundesgerichtshof, 31 October 2018 – I ZB 2/15).
Have there are been any recent decisions in your country considering the General Court of the European Union’s decision Micula & ors (Joined Cases T-624/15, T-694/15 and T-694.15), ECLI:EU:T:2019:423, dated 18 June 2019? Are there any pending decisions?