Introduction of commercial courts and commercial chambers approaching in Germany

The new law authorises the German federal states to set up specialised courts for commercial matters (commercial courts and commercial chambers), where proceedings can be held in English. The aim is to prepare courts for negotiations in international commercial disputes and to strengthen Germany as a centre of justice and reduce the transfer of commercial disputes to private arbitration tribunals and foreign commercial courts.

The recently announced law introduces a shortened appeal process with an initial instance at the commercial courts at the higher regional courts, English as the language of proceedings, mandatory early organisational hearings, better protection of business secrets and a verbatim record, among other new initiatives.

Commercial courts will be set up at the higher regional courts or supreme regional courts, before which commercial disputes under private law can be heard in the first instance.

"With the new law on commercial courts and commercial chambers, the federal government has laid the foundation for a significant modernisation of civil proceedings in large-volume commercial disputes," said Johanna Weißbach, a Munich-based expert in litigation and arbitration at Pinsent Masons. "The federal states are now responsible for fine-tuning the establishment and jurisdiction of the commercial courts and commercial chambers. As soon as the first federal states have made use of the new legal scope, businesses can agree on the jurisdiction of a commercial court or a commercial chamber when drafting contracts."

According to the new law, the parties can agree on the jurisdiction of a commercial court for all civil disputes between businesses with the exception of industrial property rights, copyright and unfair competition law, provided the amount in dispute is at least €500,000. The federal states can set up specialised commercial courts, for example for M&A disputes or antitrust proceedings.

The parties will be able to conduct the proceedings entirely in English. Modern technical equipment, specialised judges and early organisational meetings to plan further proceedings promise to speed up proceedings before the commercial courts. An appeal against the judgement of a commercial court to the Federal Court of Justice will be possible without the need for admissibility, in contrast to what is otherwise provided for in German civil procedure law. It will also be possible to conduct the appeal proceedings in English, provided the competent senate at the Federal Court of Justice agrees.

Decisions of the commercial courts will be translated into German and published, but trade secrets will be protected immediately when the action is brought. Trade secret protection is thus extended to the entire civil proceedings before the commercial courts, and all trade secrets are protected from publication.

As a further significant innovation, the new law provides for the establishment of commercial chambers at the regional courts where commercial disputes can be conducted. The commercial disputes in which the commercial chambers to be set up specialise are to be left to the federal states by regulating the corresponding responsibilities. Both the proceedings and the decision of the commercial chambers will be conducted entirely in English, provided the parties agree to this or the defendant does not object. In addition, video hearings and video evidence recordings will be possible before both the commercial courts and the commercial chambers.

"The overdue offer of English language proceedings improves access to justice for international companies in Germany," said Carlo Schick, also from Pinsent Masons. "With the intended specialisation of the commercial courts and commercial chambers, the mandatory early procedural conference and the expansion of confidentiality options, the legislator is mirroring tried and tested elements from arbitration. Companies that have previously included arbitration agreements in their contracts due to these features now have a similar type of procedure before state courts at their disposal, which will generally be more cost-effective.”

“However, proceedings before the newly created commercial courts and commercial chambers still do not offer the same flexibility in the conduct of proceedings as arbitration. Businesses should therefore carefully analyse the advantages and disadvantages of the new system," he said.