Germany more attractive as a place of arbitration? Federal Ministry of Justice plans reform of the German arbitration law.

On 18 April 2023, the German Federal Ministry of Justice announced its planned reform of the German arbitration law in an effort to strengthen the attractiveness of Germany as place of arbitration [1]. The reform is to build upon the thorough revision of the German arbitration law by the adaption of the UNCITRAL model law [2] 25 years ago with the respective Act of 22 December 1997 [3].

Since the coming into force of the German arbitration law in 1998, a number of developments in the field of national as well as international commercial arbitration, like the revision of the UNCITRAL Model Law of 2006, the legal reforms in neighbouring to Germany countries (eg in France, Austria and Switzerland), the revisions of the arbitration rules of many major arbitral institutions, the advancing digitalization of procedural law, now dictate its further reform. The paper of the German Federal Ministry of Justice shall set the basis for a reform bill that – once adapted – would modify the 10th Book of the German Code of Civil Procedure, which regulates arbitration in Germany.

The German Federal Ministry of Justice identifies the following 12 key points that shall be the basis for drafting a bill to modernize German arbitration law:

1. Arbitration agreements without form requirements in commercial transactions. This would allow formless, oral arbitration agreements in B2B transactions as already implemented in Option II of Article 7 of the UNCITRAL Model Law (2006). The high requirements of validity for B2C agreements shall remain unchanged. 
2. Introduction of provisions for the appointment of arbitrators in multi-party arbitration proceedings.
3. Possibility of judicial review (and annulment) of negative arbitral decisions on jurisdiction. Currently, only positive jurisdictional decisions are subject to such a review.
4. Digitalisation of the arbitration proceedings. It should be possible to hold virtual hearings and also record them.
5. Possibility to have the arbitral award published, subject to the parties’ consent. The aim is to increase transparency in arbitration proceedings and to enable the further development of the law.
6. In enforcement and setting aside proceedings as well as in judicial support proceedings, it shall be possible to submit both the arbitral award itself as well as other documents from the arbitration proceedings in English. This will speed up the proceedings and save the parties the costs of producing laborious translations.
7. German Federal States that introduce Commercial Courts shall be able to declare these special panels of the Higher Regional Courts competent to decide on applications for the enforcement or the setting aside of arbitral awards. It shall be possible to conduct proceedings before the Commercial Courts entirely in English.
8. In order to strengthen the integrity of arbitral proceedings, an additional remedy comparable to an action for restitution pursuant to Section 580 of the German Code of Civil Procedure shall be introduced. This remedy shall apply to final domestic arbitral awards where grounds for retrial of the case in litigation pursuant to Section 580 of the German Code of Civil Procedure are met.
9. Measures of interim relief ordered by an Arbitral Tribunal shall be enforceable in Germany even if the place of arbitration is abroad.
10. In the case of an application for a declaratory judgment on the admissibility or inadmissibility of arbitral proceedings pursuant to Section 1032 para 2 of the German Code of Civil Procedure, it shall also be possible to decide at the same time on the existence or validity of the arbitration agreement. 
11. Where appropriate, the court shall be able, at the request of a party, to refer a matter back to the arbitral tribunal after rejecting an application to declare the award enforceable and setting the same aside. Consequently, the annulment of the arbitral award shall, in case of doubt, result in the reviving the arbitration agreement with respect to the subject matter of the dispute.
12. The power of the presiding judge of a state civil panel to make certain orders without prior hearing of the opposing party shall be limited to urgent cases.

In addition to the above, the German Federal Ministry of Justice wants to examine the following topics, in the course of drafting the bill:

1. It shall be examined whether the German Code of Civil Procedure shall provide for a so-called emergency arbitrator, who can take interim measures before an arbitral tribunal is constituted. A further question is whether interim protection measures ordered in an arbitration with seat abroad should be enforced by the courts in Germany.
2. It shall be examined whether a statutory provision on the admissibility of dissenting opinions should be integrated into the German arbitration law.
3. It shall be examined whether there is a need on the part of the German Federal States to establish joint panels of judges from the Higher Regional Courts in arbitration cases across German Federal States borders.
4. It shall be examined whether the taking of evidence or the performance of other judicial acts, for which the District Courts are currently responsible, shall be transferred to the Higher Regional Courts.

The German arbitration law as reformed with the previous Act of 22 December 1997 has rather stood the test of time, despite the developments in the domestic and international arbitration scenery. Nonetheless, the reform that the German Federal Ministry of Justice currently contemplates shall further modernize the arbitration law to meet the needs of arbitration practitioners for the years to come. This is an intention to be welcomed. However, since the paper published by the German Federal Ministry of Justice only set the basis for the bill that is yet to follow, it remains to be seen how and to what extent the legislator will take the above into account in the road to reform.