Arbitration Reform – A Perspective from Germany

German arbitration law was last substantially updated in 1997 and has remained unchanged since then. In 2024, the German Federal Ministry of Justice submitted a draft bill for further reform of the German arbitration rules.

The draft bill was intended to implement the UNCITRAL (United Nations Commission On International Trade Law) Model Law on International Commercial Arbitration (1985) and to introduce digitalisation in procedural law. In addition, the German legislator wanted to react to arbitration reforms in other European countries and thus maintain and improve the attractiveness of Germany as a venue for arbitration. Unfortunately, due to the early parliamentary elections in February 2025, it's unlikely that the draft bill will become law in the near future. However, political and academic commentary suggests that there is generally a cross-party consensus on the proposed reform amendments. The proposed amendments are, therefore, likely to be the basis of any arbitral reform in Germany going forward. This article takes a brief look at the proposals.

Key Topics of the Draft Bill

The draft bill proposes amendments to the existing law to modernise German arbitration law. The key proposals are:

• Public courts may rule on the existence and validity of the arbitration agreement in the event of an application regarding the admissibility or inadmissibility of arbitration proceedings;
• The introduction of detailed provisions for the constitution of multi-party arbitral tribunals;
• Public courts may overturn a decision of lack of competence of arbitral tribunal;
• Oral hearings can be conducted by video conference;
• Arbitral awards may be issued as an electronic document;
• The possibility of annulment of awards by filing a request for retrial; and
• Easier enforcement of interim relief even if the seat of the arbitral tribunal is abroad.

Notably, the draft bill proposes that concurring or dissenting opinions of individual arbitrators should be admissible. While such concurring or dissenting opinions are common in international arbitration, the higher regional court of Frankfurt am Main stated in an obiter dictum in 2020 that such concurring or dissenting opinions are inadmissible. It was envisaged that an explicit provision on admissibility would provide clarification in these scenarios and reduce the risk of arbitration awards being unenforceable.

While the draft bill has received broad support in principle, some of the proposed amendments have been the subject of controversial discussion. The following points are of note.

1. Conclusion of Arbitration Agreements Without Formal Requirements

The bill proposes that arbitration agreements can be concluded without formal requirements. This has been widely debated. Proponents argue that this change will simplify the process of concluding arbitration agreements and make arbitration more accessible to businesses. By removing the need for a written and signed agreement, parties would be able to enter into arbitration agreements through various means, such as electronic communications or oral agreements, which would simplify the process of entering into an arbitration agreement. However, some critics have raised concerns about the potential for disputes over the existence and terms of arbitration agreements. Without a written record, parties may have difficulty proving the existence of an arbitration agreement, which could lead to increased litigation over the existence of an arbitration agreement itself.

Consumers would still have to comply with certain formal requirements for arbitration agreements. While this would help to protect consumers, it could lead to difficulties if the consumer status of one of the parties is not recognised and the arbitration agreement is invalid due to non-compliance with the formal requirements.

2. Publication of Arbitral Awards

Under the current law, arbitral awards are normally confidential unless the parties agree otherwise. The draft bill introduces a default rule allowing the (anonymised) publication of arbitral awards if the parties do not expressly object within a certain period of time. This reform aims to increase the transparency of arbitral proceedings and to develop the rules of arbitration. The publication of arbitral awards would allow parties to gain insight into the reasoning and legal principles applied by arbitral tribunals, thereby contributing to the development of arbitration. Given the potential for sensitive information to be disclosed in published awards, there are some concerns that it could be possible to infer the specific case from the circumstances, even if published in anonymised form. Also, the requirement for parties to actively object to prevent publication may be overlooked, which could lead to unintended disclosure.

3. English as the Language for Proceedings

The draft bill envisages the creation of 'commercial courts' at the higher regional courts, which would be senates specialised in commercial and business transactions. It is proposed that English would be admissible as the language of the proceedings at these commercial courts. In addition, documents already submitted in English in arbitration proceedings should be able to be introduced into the proceedings independently of the court. This proposal was widely supported as it is expected to enhance the international attractiveness of Germany as an arbitration venue and attract more international parties. It also facilitates communication and understanding in cases involving parties from different jurisdictions, where English often serves as the lingua franca. The main criticism of this proposal is the possibility of a change in the language of proceedings at the Federal Court of Justice. The reason for this is that the use of English as language for the proceedings would have to be sought there by a separate motion and the court would then be able to decide at its own discretion. The possibility of having to have all documents translated in the last instance was criticised as not being adequate to strengthen the attractiveness of Germany as a venue for arbitration for foreign parties.

Conclusion

The draft bill was debated in the German parliament at first reading and, apart from the points of discussion mentioned above, there was cross-party agreement on the bill in principle. The experts consulted on the subject also expressed general agreement with the draft. However, due to the early parliamentary elections, the draft bill is unlikely to become law, as legislative initiatives have to be reintroduced when the new Parliament convenes. Nevertheless, the draft bill and the accompanying parliamentary and academic discussion have shown that the existing legal framework for arbitration in Germany functions well in principle and would only require selective amendments to bring it up to date. Given the broad support for the draft bill, it seems possible that such a reform could be implemented in the next legislative term.

ABOUT THE AUTHOR

Christoph Stöger is an associate in Clyde & Co’s Munich office. He focusses on litigation and dispute resolution for commercial and insurance law matters, particularly in financial lines and product liability. His practice also includes insurance regulatory and corporate insurance matters.

This article was originally published on Daily Jus on Friday 14th March, with thanks to Jus Mundi & Jus Connect.