Litigating in Germany
An opportunity for international commercial disputes?
Many companies currently conduct their international litigation primarily before private arbitration tribunals. However, in some cases it may also be useful to settle a dispute in the public courts. In light of recent developments in the German judicial system to set up special commercial courts, the question is when this applies.
The German legal system itself is already highly regarded internationally and has been among the top-scoring countries in the World Justice Project’s Rule of Law Index for years and also in 2020. However, while London has until now been the uncontested leader as forum for international commercial disputes, there has been at least since Brexit an opportunity for other European locations to become international forums of choice. This could and should also be an opportunity for the German legal system to stand out from international competition.
I. Current situation
1. Digitalisation of courts is an issue affecting forum choice
The introduction of electronic legal filings (‘e-justice’) is the first and essential step towards competitiveness. Especially with many people working from home due to Covid-19, it has become clear once again that digitalisation is also indispensable in the legal system. To date, however, electronic legal filing in the German legal system has not yet happened across the board. When lawyers send their documents via the special electronic lawyer’s mailbox, the incoming mail is often printed out in full by the court. In some cases, this is done only in black and white rather than in colour. In this respect, the Berlin Higher Regional Court recently ruled that this practice is not legally tenable. In its decision it stated that the use of non-original written submissions – in the specific case, black and white printouts instead of colour – was unreasonable for the judges and the parties’ right to be heard was thus not respected (link to the decision). Electronic files are not used exhaustively so far. In particular in international legal filings, however, this is an indispensable element for communication and is often already used in other legal systems and in arbitration. Given the cost and time efficiency of the procedure, e-justice is essential. The theory paper by the Higher Regional Courts Working Party on the Modernisation of Civil Procedure sets out a way forward (German only).
2. English-language courts as pioneers in Germany
The pioneers in international hearings in Germany are currently the courts in the district of Cologne Higher Regional Court and the Regional Courts in Frankfurt am Main and Hamburg:
In the district of Cologne Higher Regional Court, specially designated divisions offer the option, with the agreement of all the parties, of holding the oral hearing in English. Such an English-language oral hearing was held for the first time on an experimental basis at Bonn Regional Court at the end of 2010.
In 2018, English-speaking divisions were finally included in the allocation plan at Frankfurt am Main Regional Court and Hamburg Regional Court. At Frankfurt am Main Regional Court, disputes which have an international dimension and in respect of which the parties agree, at the latest upon expiry of the time limit for replying to the statement of claim, that they wish to hold the oral hearing in English and waive the use of an interpreter, can be assigned to these international commercial divisions.
Hamburg Regional Court has an English-speaking commercial division and, in addition, an English-speaking civil division for all civil proceedings with an international dimension. An application for transfer or referral on the basis of an international dimension must be made in the statement of claim.
However, under the current legislation, a hearing can be conducted in English only in accordance with section 185(2) of the German Courts Constitution Act (GVG). Under section 184 GVG, the language of the court remains German, so written submissions and judgments must be written in German. This leads to a break in linguistic continuity and in turn to a disadvantage compared to private arbitration or other legal systems in which English has long been recognised as a court language. A corresponding draft law providing for English as an additional court language was submitted via the Bundesrat in early 2018 (Bundesrat Publication No. 53/18). This draft law was already tabled in 2010 and 2014 but was eventually dropped without further adoption by the Bundestag. The new draft law has not yet been taken up by the Bundestag either.
3. Planned establishment of two commercial courts in Baden-Württemberg
The opening of a commercial court in Baden-Württemberg from 1 November 2020 is of particular interest for handling complex international disputes. International commercial courts are commercial courts and divisions that specialise in international commercial proceedings. The first such institution was the Dubai International Finance Centre Court (DIFCC). Similar facilities already exist in other locations such as Paris, Amsterdam (NCC) and Singapore (SICC).
The Commercial Court in Baden-Württemberg is to specialise exclusively in conducting complex civil commercial proceedings. An Economic Division will be set up at Mannheim Regional Court and a Division for Commercial Matters with special jurisdiction in Stuttgart. The Stuttgart site is being set up at the Fasanenhof Campus, in close proximity to the airport, which is an advantage for international arrivals. Mannheim Regional Court already enjoys an excellent reputation in patent law and deals with patent disputes of international importance, making this location suitable for the Commercial Court. It should also be possible for the Commercial Courts of Baden-Württemberg to hear the case in English. The appointment of judges with particular experience in commercial law is intended to ensure high-quality court proceedings, even in complex disputes. Through the use of modern means of communication, video links and efficient litigation, including via hearings which may take place over several days, the Baden-Württemberg judiciary and the Commercial Courts are aiming to make the public civil courts attractive again for large-scale commercial disputes with an international dimension.
In North Rhine-Westphalia too, the Higher Regional Courts of Cologne, Düsseldorf and Hamm are now planning to set up Commercial Courts. These are intended to open the way for commercial litigation with very high dispute values to be heard directly at first instance in specialised divisions of the Higher Regional Courts.
It should be noted that, in recent years and with the innovations mentioned above, the German judiciary has opened up the option for international companies to bring their cases before German public courts as well.
However, there is still much room for improvement in order to become truly international and more competitive with regard to private arbitration. Efficient litigation can be guaranteed, and often already is in arbitration, for example by means of special measures such as procedural conferences, reclassification and structuring of the procedural material, use of word-for-word minutes and video transmissions, and flexible meeting venues. The enforceability of a decision in countries outside the EU is also a consideration when deciding which forum is best for litigation. In order to make public courts more competitive, the entry into force and ratification of the Hague Convention on the Recognition and Enforcement of Foreign Judgments in Civil or Commercial Matters would first be necessary. Finally, the public courts still lag behind in terms of technology. Taking into account the existing obligation to keep electronic files from 2026 onwards, an early alignment of the legal system would be desirable. In any case, especially nowadays, there should also be constant openness in the judiciary to automation and the latest developments in the area of legal tech.
In the meantime, however, it is necessary, in particular for companies with international disputes, to consider which forum should be agreed and in which courts (or arbitral tribunals) and locations disputes should be handled.
Noerr is one of the leading law firms in the field of litigation. Its over 130 litigation lawyers across Europe advise and represent clients on all forms of conflict resolution – in public courts, across borders in several jurisdictions, in arbitration and in alternative conflict resolution procedures.
Any questions? Please contact: Manuela Kreuzeder or Inka Yü-Ting von Sanden
Practice group: Litigation, Arbitration & ADR