Recently, both the German legislator and the German Institution of Arbitration tasked working groups with a reform of the German arbitration law and the DIS Arbitration Rules. The last reforms in 1998 strived for unification with international standards. Now is the time to ask whether Germany should aim at further internationalization, or rather emphasize characteristics of German law that serve the users’ needs: time, costs and predictability.
In 1998, Germany had, with some minor amendments, adopted the UNCITRAL Model Law on International Commercial Arbitration in 1998. The motives behind the reform were twofold. First, the law was not readily accessible, out of tune with international standards and could only be construed correctly by reference to a sizable body of case law. Second, it was felt that the antiqueness and opacity of the law deprived Germany of revenues from international arbitration proceedings. Faced with this situation, the German legislator went for a fresh start and decided to replace the existing law with the 1985 UNCITRAL Model Law on International Commercial Arbitration, subject to some minor changes. It is fair to say that the change was for the better. The law provides clear and accessible rules for both national and international arbitration proceedings in Germany. Foreign parties and arbitrators have a familiar procedural basis for conducting arbitration proceedings in Germany.
The number of arbitrations seated in Germany has increased since 1998 as the following chart of new cases under the auspices of the German Institution of Arbitration (“DIS”) shows:
This increase was most likely not, at least not solely, triggered by the reform of the German arbitration law, but it certainly was a contributing factor. The years since then were characterized by consistency and dependability in German arbitration law. In general, time has confirmed that Germany is an arbitration-friendly country. In particular, German courts continue to be pro arbitration. The number of successful challenges, or successful oppositions in enforcement proceedings, is almost negligible; the duration of such proceedings is comparatively short.
Recently, the Ministry of Justice tasked a working group with reviewing German arbitration law. The motives seem very similar to those current in 1998, i.e. strengthening the user-friendliness of German arbitration law and thereby increasing the potential for revenues from international arbitrations.
Further, in 2016 German Institution of Arbitration (DIS) decided to initiate a reform of its arbitration rules. The present DIS Arbitration Rules were adopted in 1998 and the members and users of DIS feel that it is time for an update to adapt the DIS Arbitration Rules to the present and future needs of German and international users. All members of DIS have been asked to participate in the reform process. This process is still under way.
Although it is yet unclear what the new rules will look like, some have raised concern that they may become too similar to the rules of other international arbitration institutions, namely the ICC Rules.
Given that German arbitration law already is in line with international standards, it may be the right time for the legislator and the DIS to focus on the “unique selling points” of German law rather than on further harmonization and internationalization. The users’ most common complaints remain the costs and the duration of arbitral proceedings. And here, German law has something to offer to users of arbitration. The so-called Relationstechnik applied by German-trained judges limits the taking of evidence to those facts that are (i) disputed and (ii) relevant and material to the case. It requires judges to take an active role in the proceedings, e.g. by way of specific evidence limiting the taking of evidence to facts that are relevant to the case and material to its outcome. All too often, the length of evidentiary hearings in arbitral proceedings is disproportionate to the gain of knowledge such hearings produce. An early intervention of the arbitral tribunal can help to streamline the proceedings.
The same holds true for a second specialty of German civil procedural law, i.e. the judges’ obligation to give early instructions to the parties as to the content and relevance of their submissions (Section 139 (1) German Code of Civil Procedure). Judges are therefore permitted, even required, to point parties to those facts that are relevant in the judges’ view. Rather than having to second-guess what may be going on in the decision makers’ minds, parties obtain direct feedback early on in the process. Parties generally appreciate such early directions, as they help to reduce submissions and evidentiary hearings to those aspects that are finally relevant for the decision, and thereby save time and costs.
In order to foster the objective of strengthening Germany as a venue for arbitral proceedings, it may be useful to promote such “peculiarities” of German law rather than to opt for further international harmonization.