Germany

On 1 January 1998 Germany introduced a new Arbitration Act. This act basically incorporates the Model Law on International Commercial Arbitration (1985) of the UN Commission on International Trade Law (the UNCITRAL Model Law) into Book 10 (sections 1025 to 1066) of the German Code of Civil Procedure ("Zivilprozessordnung" or "ZPO"). Unlike the UNCITRAL Model law, sections 1025 to 1066 ZPO apply both to domestic and international arbitration proceedings. 

The arbitration agreement

According to section 1031 ZPO the arbitration agreement needs to be in writing, and should be contained in a separate document if one of the parties is a consumer. The parties can make the arbitration agreement by way of electronic form pursuant to section 126a of the German Civil Code ("Bürgerliches Gesetzbuch" or "BGB"). The arbitration agreement must specify the disputes it will apply to (section 1029 ZPO). The parties can agree on an arbitration agreement to cover disputes arising between them in the future, or after a dispute has arisen.

The arbitrators

  • The arbitral tribunal: The number of arbitrators may be stipulated by the parties. If there is no such stipulation, the arbitration tribunal will consist of three arbitrators (section 1034 ZPO). Within two weeks of the composition of the arbitral tribunal becoming known to the parties, each party may raise written objections to it (section 1037 (2) ZPO) if the parties have not agreed otherwise.The arbitral tribunal will then decide on these objections. If a party's arguments are not accepted, it has recourse to the state court (section 1037 (3) ZPO). The state court has the power to remove an arbitrator if there are reasonable doubts as to his impartiality or independence, or if any additional qualifications as agreed upon by the parties have not been fulfilled (section 1036 ZPO).
  • Powers of the arbitral tribunal: Generally, the arbitral tribunal has the power to decide all procedural matters and may rule on its own jurisdiction and on the existence or validity of the arbitration agreement (section 1040 (1) ZPO). A jurisdictional plea by the defendant may not be made after the defendant has submitted its defence. If the arbitral tribunal considers that it has jurisdiction, it will normally issue a preliminary ruling. In this case, within one month of having received written notice of such a ruling, any party may request that the state court decides the matter. While such a request is pending, the arbitral tribunal may continue the arbitral proceedings and make an award (section 1040 (3) ZPO).

Procedure

  • General rules of procedure: In general, the arbitration proceedings follow the rules agreed upon by the parties. There are, however, some mandatory provisions which cannot be excluded by the parties, e.g. the principle of equality of the parties, the principle that each party has to be heard and the principle that no party can be prevented from being represented by a lawyer (Section 1042 ZPO).
  • Procedural assistance by the state courts: The arbitral tribunal has no power to order compulsory measures. For example, it cannot force witnesses to appear before the arbitral tribunal or order a confirmation by oath. Therefore, the arbitral tribunal can request assistance from the state court in performing judicial acts which it has no power to perform (section 1050 ZPO).
  • Injunctions: The arbitral tribunal may at the request of a party order interim or protective measures where they are not excluded by an agreement of the parties (section 1041 ZPO). The enforcement of such measures can only be permitted by the state court.

Even after an arbitral tribunal has been constituted, each party has the right to apply directly to a state court for interim or protective measures (section 1033 ZPO). These measures can be ordered without a court hearing.

Consolidation

Arbitration proceedings may only be consolidated with the consent of all parties concerned.

The award

  • Applicable law: The arbitral tribunal decides the dispute according to the law agreed upon by the parties (section 1051(1) ZPO). If there is no such agreement, the arbitral tribunal will apply the law of the state which has the closest connection to the matter in dispute. (section 1051(2) ZPO)
  • Rendition of the award: The award must be rendered in writing and signed by the arbitrators (section 1054(1) ZPO). The date of the rendition and the place of the arbitration proceedings have to be stated. The grounds for the award have to be given unless the parties have agreed otherwise.
  • Setting aside the award: The award can be set aside by a state court according to Section 1059 ZPO for the reasons laid down in section 1059 (2) ZPO, for example, if the matter in dispute cannot be the subject of arbitration proceedings under German law or if recognition or enforcement of the award would lead to a result which would contradict German public policy.
  • Enforcement of the award: An arbitral award has the same effect between the parties as a final and binding judgment of a German court (section 1055 ZPO). A domestic award can be enforced as soon it has been declared enforceable by a state court (section 1060). In principle, the state court will not declare the award enforceable, if the award can be set aside according to section 1059 (2) ZPO. Recognition and enforcement of foreign awards is governed by the New York Convention (section 1061 ZPO).
  • Appeal on the merits: Arbitral proceedings are normally single staged without any possibility of an appeal. However, as an exception, the parties may agree a right to appeal on the merits to a state court or to another arbitral tribunal.

Costs

In an ad hoc arbitration procedure, the parties may agree with the arbitrators beforehand on a flat fee. If such an agreement is not made, the arbitrators are entitled to a fee which is customary at the seat of the arbitral tribunal. The "Deutsche Anwaltsverein" and the "Deutsche Richterverein" recommend that the presiding judge of the arbitral tribunal should be entitled to a fee of 150 % of the statutory attorney's fee and a judge of the arbitral tribunal should be entitled to 130 % of the statutory attorney's fee. This means that the arbitrator's fee depends on the amount at stake, but not on the time the arbitrators spend on the case.

Under German procedural rules, the losing party has to bear the costs of the procedure including legal fees. If a party loses a part of its case, it has to bear the costs of the corresponding part of the procedure's costs. Although these rules do not necessarily apply to arbitration proceedings, they will normally be the basis for the arbitral tribunal's decision on the costs of the procedure, unless the parties have agreed otherwise.

The costs of arbitration proceedings under the German Institution of Arbitration (Deutsche Institution für Schiedsgerichtsbarkeit e.V., DIS) or the International Chamber of Commerce (ICC) are stipulated by the rules of these institutions.

Availability of arbitrators

In Germany, a great number of internationally experienced arbitrators are available.  

Further details

For further details, click here to see the relevant section of the ZPO and here for the Arbitration Rules 2018 of the DIS, amended in March 2018.

If you need further information, or advice, on German arbitration law/German arbitrators please contact us.