Eight advantages of the new Commercial Courts.

Companies with international operations in Germany are familiar with the issue: jurisdiction agreements in favor of German courts in contracts with foreign suppliers, customers and other business partners have their disadvantages. The proceedings drag on for several years through at least two instances, documents have to be translated and interpreters appointed for foreign witnesses. The court proceedings take place in public and one or two business secrets could become public.

Many of these weaknesses will be eliminated by the Legal Venue Strengthening Act, which the Bundestag and Bundesrat passed in October 2024 before the end of the traffic light government and which will therefore come into force as planned on 01 April 1 2025. The law is an amending law, so it does not create a permanent new legal basis, but rather adapts the German Code on Civil Prodecure (“ZPO”) and other ancillary laws.

It should be noted at the outset that the law does not eliminate all the disadvantages of state jurisdiction compared to arbitration proceedings. For example, the strict German law on general terms and conditions, which is applied as mandatory law in state proceedings as opposed to arbitration proceedings, is a well-known obstacle to proceedings in Germany.

The lack of enforceability in many countries around the world is also a disadvantage compared to arbitration proceedings. Nonetheless, the Act to Strengthen the Location of Justice is a good step towards making German jurisdiction attractive for cross-border disputes. The changes include at least the following advantages:

Advantage 1: Voluntariness

The jurisdiction of the Commercial Courts lies in the hands of the parties. They decide by agreement (e.g. in framework agreements) whether their dispute will be heard by the Commercial Court (Section 610 (2) sentence 2 ZPO, new version). This means that the Commercial Courts function differently to the familiar commercial divisions, against whose jurisdiction one party cannot object if the other party requests a referral to the KfH (sections 96 (1) Court Constitution Act or GVG, 98 (1) sentence 1 GVG). The jurisdiction of the Commercial Court is therefore entirely in the hands of the parties to the dispute.

Advantage 2: Shortening of instances

The Commercial Courts are located at the Higher Regional Courts. This shortens the appeal process, as the regional court is usually the court of first instance for commercial law disputes, against whose judgments an appeal to the higher regional court and then an appeal to the Federal Court of Justice is admissible. This is different in the Commercial Courts, where there is only an appeal to the BGH, although this is also admissible without express permission (Section 614 ZPO, new version).

Advantage 3: Expertise and acceleration through specialization

The jurisdiction of the Commercial Courts is limited to disputes between entrepreneurs and those involving individuals, such as post-M&A proceedings (Section 119b (1) GVG as amended). This also includes all “commercial litigation”, i.e. disputes regarding deliveries, minimum purchases, warranties, compensation claims and damages.

This specialization is inevitably associated with the concentration of expertise, especially as jurisdiction is restricted to procedural values of over EUR 500,000.00. The limit on the amount in dispute could also ensure that the number of cases at the Commercial Courts is limited so that the courts are not overburdened. While such forecasts are certainly open to challenge, in conjunction with other aspects of the law, better quality and faster decisions are at least plausibly to be expected.

Advantage 4: More efficient processes

The proceedings are also likely to become more efficient than is currently the case with proceedings before the commercial divisions of the regional courts. In particular, the case management conference, which is already known from arbitration proceedings, should lead to this. Section 612 ZPO (new version) refers to it as an “organizational meeting” and enables the parties to organize the proceedings in a resource-saving and efficient manner.

Advantage 5: English as the language of negotiation

A very important point is the introduction of English-language proceedings through the German Legal Venue Strengthening Act (Section 606 f. ZPO). This should significantly increase the acceptance of a jurisdiction clause in favor of German courts in international trade.

Advantage 6: Word logs

Although the German Code of Civil Procedure (ZPO) currently provides for minutes of proceedings in Section 160 ZPO, this only covers “essential proceedings of the hearing” according to Paragraph 2 of the provision. The extensive hearing is often abbreviated to “The legal and contentious status was discussed”, which is not very useful for the professional follow-up of a hearing. Section 613 ZPO (new version) now provides that the parties can request a complete verbatim record by mutual agreement.

Advantage 7: Confidentiality

Confidentiality is a key argument in favor of arbitration agreements, which is somewhat weakened by Section 273a ZPO (new version) when weighed against agreements in favor of the Commercial Courts. This is because, according to this new provision, the Commercial Courts can classify certain contents of the proceedings as confidential. With regard to the consequences of such a classification, the provision refers to sections 16 to 20 of the Trade Secrets Protection Act, which, among other things, classify violations of this as an administrative offense and provide the Commercial Court with further means of protecting the information.

Advantage 8: Costs

Last but not least, the costs are an advantage, as proceedings before the Commercial Courts are inexpensive compared to arbitration proceedings. The costs for proceedings before the Commercial Courts are based on the general rules, so there are no additional costs for the proceedings. On the contrary: the English-language proceedings can even eliminate translation costs. Proceedings before the Commercial Court cost EUR 17,643.00 (VAT-free) for an amount in dispute of one million euros, whereas DIS proceedings cost EUR 35,785.00 (net).