Arbitration law reform: Germany’s arbitration law becomes more digital and international

The Federal Ministry of Justice and Consumer Protection has recently resumed work on the reform of arbitration law and published a draft bill to amend the 10^th Book of the German Code of Civil Procedure (Zivilprozessordnung ‒ ZPO). This represents the first comprehensive revision of German arbitration law since 1998. Previous reform efforts in recent years had come to nothing and, most recently in 2024, fell victim to the premature end of the parliamentary term. The new draft reflects the expert discussions held in 2024 and addresses some key points of criticism. The aim of the reform is to enhance Germany’s appeal as a venue for international arbitration and to modernise proceedings.

These are the main reforms and new features and their practical implications:

Form of the arbitration agreement

By international standards, German arbitration law imposes fairly stringent requirements on the form of arbitration agreements. These requirements are now set to be eased slightly, though not fundamentally changed.

Under the amended section 1031(1) of the Code of Civil Procedure, an arbitration agreement must be entered into or documented in writing or by any other means of communication that allows the information to be retrieved at a later date. The outdated reference to telegrams in the current wording of section 1031(1) of the Code will be replaced by a technologically neutral wording. The new provision follows option 1 as provided in Article 7 of the 2006 UNCITRAL Model Law on International Commercial Arbitration (UNCITRAL Model Law).

This rule differs significantly from the 2024 draft. The latter (in line with the legal position up to 1997) proposed abolishing all formal requirements for commercial transactions. The current draft, however, requires that every arbitration agreement be at least documented for evidentiary purposes.

While a return to complete freedom of form might appear pragmatic and unbureaucratic, it would also entail considerable legal uncertainty. For one thing, it could lead to avoidable disputes over the existence and content of arbitration agreements. Between complete freedom of form on the one hand and the current rigid formal requirements on the other, the newly proposed documentation requirement offers a reasonable compromise.

The rigid formal requirements for arbitration agreements involving consumers remain unaddressed. This would have been desirable, especially where individuals are parties to corporate agreements. However, it was unrealistic because the definition of a “consumer” is anchored in the German Civil Code (Bürgerliches Gesetzbuch ‒ BGB) and changing that would have gone beyond the scope of reform of the Code of Civil Procedure.

Video hearings

Since the pandemic at the latest, virtual arbitration hearings and case management conferences have become routine. The draft legislation takes this development into account. The new section 1047(2) of the Code of Civil Procedure explicitly authorises arbitral tribunals to conduct oral hearings via audio and video link, unless the parties have agreed otherwise. When exercising their discretion, arbitral tribunals should take various factors into account, including procedural efficiency, data protection and, most importantly, the procedural rights of the parties. Unless the parties have agreed otherwise, the arbitral tribunal is even authorised to conduct a video hearing against the objection of one of the parties, provided that the affected party’s right to be heard is respected.

Electronic arbitration awards

The amended section 1054(1) of the Code of Civil Procedure is to allow arbitral awards to be issued bearing a qualified electronic signature instead of handwritten “wet ink” signatures, provided that no party objects. This change is generally to be welcomed: it promises to save time and money and can be particularly advantageous in urgent proceedings. In practice, circulating the award for handwritten signatures is often a laborious process.

However, the practical benefit of this rule in an international context remains questionable. In the absence of uniform international standards for qualified electronic signatures, the enforcement of such electronic arbitral awards abroad is likely to encounter difficulties. This concern is at least mitigated (unlike in the 2024 draft) by granting the parties the option to subsequently request a “traditional” written version of the award, especially one bearing handwritten signatures (section 1054(5) of the Code).

Dissenting opinions

The newly introduced section 1054a of the Code of Civil Procedure expressly permits an arbitrator to issue a dissenting opinion, unless the parties agree otherwise. This reflects international arbitration practice, above all in the field of investment arbitration.

In German law, however, this clarification is necessary at least for reasons of legal certainty. In light of an obiter dictum of Frankfurt Higher Regional Court (Oberlandesgericht) from 2020 (decision of 16 January 2020 – 26 Sch 14/18), the admissibility of dissenting opinions had recently been a matter of controversy, leaving it unclear how such an opinion might affect the enforceability of a majority arbitral award. The new provision removes any concerns regarding a potential violation of the procedural ordre public.

Publication

A frequent criticism of arbitration is that, due to the lack of published awards, it is unable to contribute to legal certainty or the development of the law. This concern is addressed in the draft legislation.

The new section 1054b of the Code of Civil Procedure permits the publication of anonymised or pseudonymised arbitral awards and dissenting opinions, provided the parties consent to such publication. Under the suggested opt‑out model, a party is deemed to have given consent if it does not object to publication, and, compared with the 2024 draft, the period for lodging an objection has been extended to three months.

Given the high importance attached to confidentiality in arbitration, it can be expected that parties will frequently make use of their right to object. The practical impact of the new provision is therefore likely to remain limited. Nonetheless, even a relatively small body of published awards could make a lasting contribution to the development of the law, enhance the visibility of German arbitration law, and respond to the widely voiced call for greater transparency in arbitration.

In the interests of greater transparency, it is also envisaged that arbitration-related decisions by the Commercial Courts, for example decisions concerning the appointment or challenge of arbitrators or the setting aside or enforcement of arbitral awards, must be published (section 1063a(3) of the Code of Civil Procedure).

Recognition and enforcement of foreign interim measures

Proposed amendments to sections 1025(2) and 1041 of the Code of Civil Procedure clarify that interim measures issued by foreign arbitral tribunals may be enforced by German courts, subject to statutorily defined grounds for refusal. Courts will no longer enjoy a discretion in this regard, thereby aligning German law with Articles 17 H and 17 I of the 2006 UNCITRAL Model Law.

This reform facilitates the securing of assets or the taking of evidence in Germany in support of foreign arbitral proceedings. The assistance of German courts can in future be integrated more predictably into cross‑border strategies for obtaining interim relief, primarily where assets are located in Germany.

Arbitration-related court proceedings in English

An amendment to section 1062(5) of the Code of Civil Procedure is intended to enable the federal states to delegate jurisdiction over arbitration-related decisions to the respective Commercial Courts in future. Under the current section 1062 of the Code, jurisdiction for matters concerning the appointment or challenge of arbitrators, declaring arbitral proceedings admissible, and the enforceability or the setting-aside of arbitral awards generally lies with the higher regional courts at the seat of arbitration. The newly inserted section 1063a of the Code will allow commercial courts to conduct arbitration‑related proceedings entirely in English, provided the relevant state law permits this and the parties’ consent.

Proceedings for the appeal on points of law before the Federal Court of Justice may also be conducted in English under section 1065(3) of the Code of Civil Procedure, where the Federal Court of Justice grants a corresponding application. Even in German-language proceedings, it will now generally be possible to submit documents in English (section 1063b of the Code of Civil Procedure).

This innovation addresses a long‑standing challenge for both international and German parties: court proceedings following an arbitral award previously had to be conducted in German, even where the arbitration itself was conducted in English. This often required extensive and therefore costly translations. If consistently implemented by the state courts, there will in future be a seamless English‑language pathway from the arbitral tribunal through to the Federal Court of Justice. This would be a key step towards enhancing Germany’s international competitiveness as an arbitration hub.

Setting aside arbitral awards rejecting jurisdiction

Under the current law, only positive jurisdictional decisions by arbitral tribunals may be set aside by the courts. The newly introduced section 1040(4) of the Code now addresses the reverse situation: a procedural award in which the arbitral tribunal wrongly declines jurisdiction may likewise be set aside, a possibility previously discussed mainly in legal literature. From a regulatory perspective, this introduces an additional ground for setting aside an award. Substantively, however, it strengthens arbitration, as proceedings that would otherwise have gone before the state courts can instead continue before an arbitral tribunal.

Applications for restitution

Section 1059a of the Code of Civil Procedure introduces an additional remedy in the form of an application for restitution. This allows a party to seek the setting aside of an arbitral award even after expiry of the time limit provided for in section 1059(3) of the Code. This extraordinary remedy is available only in exceptional circumstances, for example where documents have been forged, criminal offences are involved, or documents are discovered late through no fault of a party.

The fundamental finality of arbitral awards under German law therefore remains unaffected. The threshold for invoking an application for restitution is deliberately high and successful applications can be expected to remain rare. Finality is further protected by excluding circumstances already known earlier (section 1059a(3) of the Code) and by an absolute time limit of five years laid down in section 1059a(4) of the Code.

Overall assessment

The new draft bill places particular emphasis on digitalisation, international user‑friendliness and a moderately increased level of transparency. These measures are intended to make Germany a more attractive venue for arbitration in the international arena. The actual impact of the reform on the internationalisation of arbitration‑related court proceedings will depend largely on how it is implemented by the state courts. At the same time, the proposed amendments continue to leave parties considerable flexibility in shaping their proceedings. It will therefore be particularly important for practitioners to make conscious use of procedural design options, for example with regard to video hearings, dissenting opinions and English‑language proceedings. Further practical consequences of the reform lie in the improved possibilities for conducting proceedings in a digital format and for making strategic use of German courts in support of arbitration.

The reform, however, does not introduce any fundamental innovations. In international comparison, the two‑tier system culminating in an appeal on points of law to the Federal Court of Justice is a significant obstacle in terms of time and cost, and it weighs heavily on Germany’s attractiveness as an arbitration venue. It would also be desirable to concentrate first‑instance jurisdiction in a small number of higher regional courts. Even with the expanded possibility of conducting proceedings in English, Germany is essentially only catching up with other jurisdictions and is not setting any new impulses.