On 18 April 2023, the German Ministry of Justice published a key issues paper on a prospective reform of German arbitration law. The proposal is a first step towards a reform bill that would modify chapter 10 of the German Code of Civil Procedure, which governs arbitration. As the key issues paper is a very early step in the legislative process, the substance of the reform can still change significantly.
Background
German arbitration law was last overhauled in 1997, based on the 1985 UNCITRAL Model Law on International Commercial Arbitration but with considerable modifications. According to the key issues paper – which characterises commercial arbitration as “of central importance” – it is now “necessary to adapt this field of law in detail to the needs of today in order to increase its efficiency and to further strengthen Germany's attractiveness as a location for arbitration.”
Reform proposals
The Ministry of Justice’s paper sets out twelve cornerstones for the reform:
- Allowing the conclusion of arbitration agreements without form requirements, in a commercial context.
- Default mechanisms for arbitrator appointments in multi-party arbitration.
- Allowing for interim judicial review of negative jurisdictional decisions (in addition to decisions by which tribunals affirm their jurisdiction).
- Provisions for virtual hearings.
- Creation of a legal basis for the publication of awards if the parties consent.
- Allowing arbitral awards and key documents to be presented to the courts in English in annulment and enforcement proceedings.
- Integrating judicial support and review of arbitration with the establishment of Commercial Courts (which allow for proceedings in English).
- Introduction of an extraordinary remedy against domestic awards that have become final if circumstances that would be grounds for retrial in litigation are met (e.g. if a judgment was obtained by criminal offence in connection with the legal dispute or where documents were falsified).
- Enabling courts to allow enforcement of interim relief obtained from an arbitral tribunal with an international seat.
- Ensuring that courts’ decisions on the (in)admissibility of arbitration under sec. 1032(2) of the German Civil Code also have substantive legal force regarding the existence of a valid arbitration agreement.
- Clarifying that a court may, where appropriate, refer the case back to the arbitral tribunal on a party’s request after an application to declare an award enforceable is rejected (and the award simultaneously is annulled) and that the arbitration agreement is revived where the award is annulled.
- Restricting certain powers granted to state court judges to make ex parte orders (e.g. regarding measures of protection) to urgent cases.
In addition, the key issues paper contains four further proposals which the Ministry wants to subject to an “open-ended examination”:
- Inquiring whether legislative provisions on emergency arbitrators (including measures ordered by emergency arbitrators abroad) should be developed.
- Assessing whether an explicit statutory provision on the admissibility of dissenting opinions should be integrated into German arbitration law.
- Probing whether there is a need to establish joint chambers between Higher Regional Courts of multiple German states for cases related to arbitration.
- Investigating whether responsibility to assist arbitral tribunals in the taking of evidence should be shifted from the local courts (Amtsgericht) to the Higher Regional Courts (Oberlandesgericht).
Path to reform
The reform proposals published by the ministry will spark vigorous debate among German arbitration practitioners, legal scholars and users of arbitration. While some of the proposed changes are likely to be universally welcomed, such as the relaxation of form requirements in line with the 2006 amendments to the UNCITRAL Model Law, allowing a greater use of English in annulment and enforcement proceedings and the clarification regarding the admissibility of dissenting opinions, others will prove more controversial, e.g. the introduction of an extraordinary remedy against domestic arbitration awards. Furthermore, the arbitration community will surely contribute additional aspects worth including in the reform.
The next step in the legislative process will be the preparation of a draft bill, which will firm up the ideas floated in the key issues paper.