Arbitration Law: Draft Bill for Modernization

What is the Background of the Law?

Arbitration proceedings are a means of dispute resolution through non-state courts. In principle, the parties or institutions such as the DIS are free to determine the procedure themselves. State law establishes guidelines for this, which are contained in Book 10 of the Code of Civil Procedure and become particularly relevant in annulment, recognition, and enforcement proceedings.

Why is the Law Necessary?

According to the explanatory memorandum to the draft, the aim is to make targeted improvements 25 years after the last reform in order to “adapt this area of law to the needs of today, increase its efficiency, and strengthen Germany’s attractiveness as an arbitration venue.

What are the Most Important Changes?

• Arbitration agreements can be concluded somewhat more easily. Section 1031(1) of the Code of Civil Procedure in the draft version provides that the arbitration agreement must be “concluded or documented in writing or by any other means of communication that allows subsequent access to the information.” Previously, the law did not require strict written form either, but the amendment is somewhat more modern than the previous reference to “letters, fax copies, telegrams, or other forms of message transmission” exchanged between the parties.
• Arbitrators may issue dissenting opinions (Section 1054a of the Code of Civil Procedure in the draft version), and arbitral tribunals may publish arbitral awards in anonymized form with the consent of the parties, which is presumed under certain circumstances (Section 1054b of the Code of Civil Procedure, new version).
• In addition to the application for annulment of arbitral awards (Section 1059 of the Code of Civil Procedure), the draft also contains a new legal remedy, namely the application for restitution (Section 1059a of the Code of Civil Procedure, new version). This applies when the application for annulment is inadmissible, mainly when it is time-barred. The grounds for restitution cover extreme exceptional cases such as forgeries, criminal offenses, or conflicting res judicata. These are exceptional cases.
• The federal states may assign certain proceedings related to arbitration (appointment and challenge of arbitrators, annulment of arbitral awards, declaration of enforceability, etc.) to the Commercial Courts at the Higher Regional Courts (Section 1063a of the Code of Civil Procedure, new version). Arbitration agreements and other documents may also be submitted in English in such proceedings.

What Changes in Practice?

The possibility of assignment to the Commercial Courts by the federal states is welcome. The expertise in commercial disputes and proficiency in English should benefit the participants in such proceedings. The submission of English-language documents also simplifies such court proceedings. Beyond that, the other changes are unlikely to have significant practical implications.

Does Anything Change Regarding the Fundamental Decision “Arbitration Agreement or Jurisdiction Agreement”?

This fundamental decision is unlikely to change in the future either. The advantages and disadvantages of arbitration proceedings compared to state court proceedings have been extensively discussed. We have written several times in this BLOG about the Commercial Courts and Commercial Chambers at Regional Courts and Higher Regional Courts – they are in any case good alternatives to arbitration proceedings.

What Happens Next?

The ministerial draft is, as the name suggests, a draft of a law intended to modernize state arbitration procedural law. The previous coalition government had already started this attempt at the end of 2024 but, unlike the Commercial Courts, was unable to implement it. The current coalition is now taking up this project again and should, barring absolutely unforeseen events, be able to implement it.