Germany to become more attractive for international arbitration proceedings

In 2024, the German government passed a draft law to modernise the current arbitration law.  One significant change to the current arbitration law is the move to enable form-free arbitration agreements in the B2B sector. In addition, the government's draft provides that the arbitral award may be issued in electronic form, and arbitrators may set out their dissenting opinion on the arbitral award or its reasoning, unless the parties agree otherwise. It shall also become easier to publish arbitration awards and dissenting opinion in future, as the consent of both parties is deemed to have been given if no objection to publication is raised within three months of the arbitral tribunal's request.

The draft bill still has to go through various stages of the legislative process. It is now clear that the draft bill will not be passed by parliament before the snap election on 23 February. It will therefore be up to the new German government to decide whether and how the modernisation will be implemented.

Read more of our report on international arbitration in 2025

• International arbitration: regional, sectoral and industry developments reinforce dispute resolution status
• UAE: recent arbitration reforms while legacy DIFC-LCIA clause debate continues
• Saudi Arabia firmly on the map as key arbitration and dispute resolution hub
• New digital services and legal developments boost international arbitration usage in Qatar
• Egypt a ‘central hub’ for arbitration in the MENA region
• Investment disputes continue to drive international arbitration developments in Africa
• Southern African states form harmonised arbitration framework
• UK arbitration developments continue to enhance position as key dispute resolution jurisdiction
• French arbitration law evolves ahead of 2025 reforms
• Germany to become more attractive for international arbitration proceedings
• Singapore continues to rise as an international dispute resolution hub
• Continued improvements in international arbitration driven by new HKIAC rules and case law
• India continues work to modernise arbitration landscape
• Significant developments in Japan’s arbitration landscape
• South Korea strengthens international arbitration framework
• China continues to improve arbitration process efficiency and effectiveness
• Australian court rulings strengthen pro-arbitration stance and expand scope of arbitration
• Construction projects and contracts must consider sanctions risks
• New types of M&A disputes will drive up international arbitration cases
• Growing demand for expertise in cryptocurrency related arbitration in 2025
• Major changes crystallising in investor-state dispute settlement
• What the future holds for mediation in investor-state dispute settlement

The increased usage of arbitration in Germany is reflected in the latest statistics released by the International Chamber of Commerce (ICC). The ICC report found that in 2023, the top countries selected as place of arbitration were France with 99 cases in 2023, the UK with 85, Switzerland with 79 cases, the US with 66, Brazil with 34 and Germany with 33 cases. More interestingly, German is the second most frequent nationality of parties in arbitration proceedings after the US.

Arbitration agreements in sanctions-related disputes

In September 2024, the Berlin Higher Regional Court issued a landmark decision on a case between a German subsidiary of a European industrial company and a Russian party affected by EU sanctions. The court upheld the validity of an arbitration agreement under section 1032(2) of the German Code of Civil Procedure. The court used this provision to bind a sanctioned Russian entity to an arbitration agreement, which it had breached by initiating proceedings in Russian state courts. The ruling opens up new avenues for businesses in similar situations.

The business contract between the two parties was governed by Swiss law and contained an arbitration agreement with the seat in Zurich and under the Swiss Arbitration Rules. However, the Russian company initiated proceedings before a commercial state court in Moscow, thus breaching the agreement. The Russian party relied on a provision in Russian law that states that

sanctioned Russians entities who allegedly face "obstacles to access justice" before foreign arbitral tribunals are not bound by arbitration agreements and can pursue their claims before the Russian commercial state courts.

On this basis, the Russian party had obtained a judgement from a Russian court. In its decision, the Berlin court upheld the parties' agreement and found that arbitration is the “sole, proper forum” for the dispute between the parties. Furthermore, it confirmed that arbitration agreements are enforceable and exclude recourse to state courts, including Russian courts. It found that EU and Swiss sanctions allow sanctioned parties access to legal services required to participate effectively in arbitration proceedings.

This decision also sheds light on how German courts deal with the practical challenges of serving court documents on Russian parties. Notably, the court ruled that Russian parties could be served by public notice. It dispensed the Hague Service Convention, stating that this route is no longer legally effective where Russian parties are concerned as the Russian authorities currently routinely refuse to effectuate service of documents under the Hague Service Convention to Russian parties in sanctions-related disputes.

At the same time, it is rather difficult to obtain a corresponding anti-suit injunction in Germany. In June 2024, the Düsseldorf Higher Regional Court rejected an application by a German party against a Russian party for an anti-suit injunction with regard to proceedings brought in Russia in breach of an arbitration agreement. The Higher Regional Court considered the competence of German courts to be limited to tortious claims, such as the allegation of intentional immoral damage pursuant to Section 826 of the German Civil Code, which it ultimately rejected. This was because the Russian contracting party had obtained a prohibition on conducting proceedings before a commercial court in Russia in accordance with Russian law, thereby lawfully – from the vantage point of Russian law – exploiting the current legal situation in Russia in its favour.

The Higher Regional Court also emphasised that German courts should not issue anti-anti-suit injunctions if these could even only indirectly violate the principle of territoriality and the state sovereignty of the foreign state. The Higher Regional Court argued that it is not the task of the German state to protect the citizen who is engaged in international legal relations from liability in a foreign legal system. Although the decision of the Düsseldorf Higher Regional Court is also be viewed critically, nevertheless it demonstrates the general reluctance of German courts to issue anti-suit injunction at all – in particular to protect arbitration proceedings – and emphasises that the German courts are by no means the first port of call for these kind of anti-suit injunctions.

Supplementary rules on third-party notices

In March 2024, the German Arbitration Institute (Deutsche Institution für Schiedsgerichtsbarkeit e.V./DIS) issued supplementary rules for third-party notices to align the procedures in state court proceedings and in arbitration proceedings.

The supplementary rules are in effect in German and English to facilitate agreements in international context. The consequences of the rules come into effect even if the subsequent proceedings follow different arbitration rules or take place before state courts.

Before, parties involved in arbitration proceedings in Germany were not able to notify a third party of the dispute and bind that party to its outcome, as permitted by the German Code of Civil Procedure for proceedings before the German state courts. This applied equally to arbitration proceedings conducted by the DIS and to proceedings conducted by other leading arbitral institutions.

Under the new supplementary rules (9-page / 171KB PDF), a third party – for example, a supplier – may now be notified of the proceedings and be bound by the outcome of the arbitration between party A and party B for the purpose of subsequent proceedings between the notifying party and the third party. Importantly, the third party does not have to join the proceedings for the binding effect to occur. In addition, the binding effect of the award does not depend on whether the subsequent proceedings between the notifying party and the third party is an arbitration or litigation in state courts.

The DIS is the first arbitral institution to offer supplementary rules, with aims of bridging the gap between the traditional approach to arbitration as a bilateral dispute resolution mechanism, and the growing need for more efficient proceedings for disputes involving multiple potentially affected stakeholders.

The new rules are designed to be a coherent framework that works neatly within the ordinary DIS arbitration rules, which the parties may adopt instead of costly tailor-made solutions. They provide a framework for the notification of third parties, the submission of statements, and the participation of third parties in the proceedings. By allowing for participation of third parties, the new rules aim to improve the effectiveness and efficiency of arbitration proceedings, and to avoid contradicting decisions.

If the third party joins the arbitration proceedings, the DIS-rules on third-party notices ensure that the third party is involved in the constitution of the arbitral tribunal and has the opportunity to make its own factual and legal submissions. In addition, these supplementary rules ensure that the party which did not issue the third-party notice does not have to bear the costs of the third party and the fees for the third-party notice.

Co-written by Anna Vollmer of Pinsent Masons.