This opportunity does not, however, guarantee a good result.

A mediator manages the process, facilitates communication and helps the parties explore possible solutions. A mediator does not represent either party or advise whether a proposal should be accepted or rejected. These decisions remain with the parties. Mediation advocacy provides the legal, commercial and strategic support required to make these decisions on an informed basis.

We recently concluded two successful mediations, which were strikingly different in nature. One process unfolded over several months before reaching a resolution. The other was completed in just over two weeks. Yet both shared a common thread: While our role as counsel and the respective mediation styles differed, the same disciplined approach to preparation and case management proved decisive in achieving the best possible outcome for our clients.

1. What is mediation advocacy?

Mediation advocacy describes our role in preparing a client for commercial mediation, guiding the negotiations and turning any agreement reached into clear legal terms. It differs both from the role of the mediator and from conventional advocacy before a court or arbitral tribunal.

In litigation and arbitration, the lawyer’s principal task is to persuade a decision-maker of the client’s legal position. In mediation, there is no decision-maker to be persuaded. We instead help the client understand its position, evaluate settlement and non-settlement scenarios, define objectives and limits, develop possible solutions, negotiate effectively and translate any agreement into clear legal terms.

This requires a combination of legal analysis, commercial understanding, strategic judgment, negotiation experience and restraint.

2. Establishing the decision framework

Before entering into negotiations, the client needs a clear framework for evaluating possible outcomes. This includes identifying the desired result, the interests that must be protected, acceptable areas of compromise and any non-negotiable limits.

An important part of this exercise is assessing the client’s best and worst realistic alternatives to a negotiated agreement, commonly referred to as BATNA and WATNA. Relevant considerations include the prospects of success and evidential risks, the likely costs and duration of proceedings, enforcement or insolvency risks, the impact on management and internal resources, commercial and reputational consequences, and the future of the parties’ business relationship. 

This analysis provides a benchmark against which proposals can be measured. It helps prevent the client from accepting terms that are worse than its realistic alternatives or rejecting terms that would leave it in a better overall position.

BATNA and WATNA do not produce a mechanical settlement figure. Legal and institutional constraints, such as mandatory law, directors’ duties, compliance requirements, equal-treatment considerations or the precedent created by a settlement, may exclude options that otherwise appear commercially attractive. Our task as counsel is to make the true decision space visible:

Which alternatives are realistically available? Which settlement options improve on them? Which limits must be respected?

3. Moving from positions to interests

Commercial disputes are usually expressed through opposing positions. 

One party demands payment. The other denies liability.
One party insists on performance. The other seeks to terminate the contract.

A position describes a particular result. An interest explains why that result matters.

A demand for immediate payment may reflect a need for liquidity, security or planning certainty. A refusal to pay may be driven less by the amount than by concerns about precedent, reputation or similar claims from other parties.

Once the underlying interests are understood, additional solutions may become possible. Depending on the circumstances, these might include structured payments, security, adjustments to future business, revised performance obligations or a package combining financial and operational terms.

Focusing on interests does not mean abandoning legal rights. It allows the parties to identify solutions that may be more practical, valuable or predictable than the outcome of litigation. A mediation counsel helps identify the interests on both sides and translating them into workable settlement options.

4. Preparing and shaping the mediation

Mediation requires structured preparation. For corporate clients, this begins with the internal decision-making process. We would identify who needs to participate, who has authority to settle, who must be consulted and whether approval from management bodies, shareholders, insurers, lenders or other stakeholders may be required. The criteria for evaluating any settlement should be clarified in advance, not for the first time when an offer is already on the table.

Preparation also includes shaping the process. We as counsel may assist in selecting a mediator with suitable legal, commercial or sector experience and determining which participants can provide relevant information, assess the commercial consequences of the dispute or support the relationship between the parties.

The presentation of the case also requires consideration. Where appropriate, a mediation statement can help the mediator understand the dispute and its central legal, technical and commercial issues. We would consider whether an opening statement would assist the process and how our client’s position can be presented persuasively without unnecessarily entrenching positions.

A clear information and confidentiality strategy is equally important. The parties should understand the applicable confidentiality framework, including what may be disclosed in joint or private sessions and how information exchanged during the mediation may subsequently be used. Together with the client we would determine what should be shared, when it should be disclosed and what should remain confidential.

Preparation does not eliminate flexibility. It provides a framework within which the client can respond to new information and unexpected developments without making consequential decisions primarily under pressure or fatigue.

5. Advocacy in the room

Effective representation during the mediation requires assertiveness, judgment and restraint. A mediation is not an oral hearing. Repeating every legal argument may entrench positions without improving the client’s negotiating position. At the same time, remaining silent when the client is acting on a serious misunderstanding or moving beyond an agreed limit would not constitute effective representation.

We would explain the significance of new information (if required), test the assumptions underlying an offer, compare a proposal with the client’s alternatives, request time for private advice, structure concessions carefully, develop packages combining financial and non-financial terms, or protect the client against undue pressure.

Parties may also use ambitious opening positions, deadlines, assertions of limited authority or threats to leave. Such techniques are not necessarily improper, but they must be recognised and assessed. We as counsel may test whether an asserted constraint is genuine, resist pressure for an immediate response, make concessions conditional or reciprocal and return the discussion to objective criteria.

There will also be moments when the client is the most effective person to speak, particularly when explaining the commercial impact of the dispute or addressing a damaged business relationship. The relevant question is whether a particular intervention by us as counsel or the client advances informed decision-making and supports the negotiation.

6. Navigating obstacles and impasse

Even where the parties’ interests are understood, agreement is not automatic. Distrust, perceived unfairness, internal expectations or differing assessments of litigation risk may prevent progress.

Depending on the circumstances, progress may require clarifying disputed assumptions, separating individual issues, introducing objective criteria, developing conditional or package proposals or obtaining further information or internal approvals. A temporary adjournment may allow the parties to reconsider their assessments or continue negotiations once a particular uncertainty has been resolved.

A complete settlement is not the only useful outcome. Mediation may also result in agreement on individual issues, clarification of disputed facts, an exchange of information, a reduction in the matters requiring adjudication or an agreed process for continuing negotiations.

Effective advocacy is, therefore, not measured solely by whether a settlement is reached. If the available terms do not improve on the client’s realistic alternatives or fail to protect essential legal and commercial interests, declining them may be the right result. We would help our client to distinguish between an impasse that may still be overcome and a proposed agreement that should not be accepted.

7. Turning an agreement into a workable settlement

Agreement on headline terms is not the end of the process. Legal precision is essential to ensure that the settlement resolves the dispute instead of creating new uncertainty.

We as counsel would then consider whether the agreement is intended to be immediately binding, whether approvals or other conditions remain outstanding, which claims, contracts and related matters are covered, how and when each obligation must be performed, whether security or enforcement mechanisms are required, what happens in the event of delay or non-performance, how pending litigation or arbitration will be dealt with, how costs, confidentiality and external communications will be handled, and how disputes concerning implementation will be resolved.

Good mediation advocacy turns the negotiated solution into an agreement that is legally effective, practically workable and, where appropriate, enforceable.

Effective mediation advocacy helps clients make informed decisions, negotiate with clarity and convert any agreement reached into a workable legal solution. It does not guarantee settlement, but it ensures that each possible outcome is assessed and pursued on a sound legal, commercial and strategic basis.

Dr Ralf Hafner
Dr Tobias Pörnbacher

According to the 2025 International Arbitration Survey conducted by Queen Mary University of London in partnership with White & Case, the ICC Arbitration Rules emerged as the preferred set of arbitral rules across nearly every region (with only the exception of Asia-Pacific, where the ICC ranks third after HKIAC and SIAC), underlining both their global reach and their flexibility.

The revision also follows a period of continued growth for ICC Arbitration. In 2025, 881 new cases were filed under the ICC Arbitration Rules, placing the year among the three busiest years in the institution's history. At year end, a record 1,869 cases remained pending. In December 2025, the ICC Court reached another milestone by registering its 30,000th arbitration under the ICC Rules.

The scale of ICC Arbitration is further illustrated by the value of disputes administered by the institution. According to the 2024 ICC Dispute Resolution Statistics, the total value of pending cases reached US$354 billion, representing the highest aggregate caseload value ever recorded by the ICC.

Against this background, the 2026 revision was not intended to fundamentally reshape ICC Arbitration. Instead, the 2026 Rules continue the ICC's longstanding approach of refining existing mechanisms, expanding procedural options and adapting to evolving commercial realities.

1. Expanded Expedited Procedure and More Effective Emergency Arbitration

The 2026 Rules further strengthen the ICC's commitment to efficient dispute resolution by refining two mechanisms that have become increasingly important in practice: the Expedited Procedure Provisions ("EPP") and Emergency Arbitration.

1.1 Expanded Scope of Expedited Procedure

The overall structure of the EPP, now governed by Article 32 and Appendix V, remains unchanged. Proceedings continue to benefit from a sole arbitrator by default, shortened procedural timetables and lower costs than ordinary ICC arbitrations.

The principal amendment is the increase of the monetary threshold for automatic application from US$3 million to US$4 million for arbitration agreements concluded on or after 1 June 2026.

The revised threshold reflects both the growing value of international commercial disputes, and the confidence users have developed in expedited proceedings since their introduction in 2017. By the end of 2025, the ICC had administered more than 1,000 expedited cases, and more than 40% of cases filed in 2025 involved amounts below US$4 million.

Party autonomy remains fully preserved: parties may opt out of the EPP even where the threshold is met or agree to apply it to substantially larger disputes.

1.2 More Flexible Emergency Arbitration

The 2026 Rules also introduce targeted amendments to the Emergency Arbitration provisions contained in Article 31 and Appendix IV.

Most notably, emergency applications may now be brought not only against signatories and their successors, but also against parties for whom the President of the ICC Court is satisfied that an arbitration agreement may exist. The amendment reflects the increasingly complex structures of modern commercial transactions and seeks to ensure that access to urgent relief is not unnecessarily restricted.

Another significant innovation is the express recognition of preliminary orders. Emergency arbitrators are now expressly authorised to issue orders aimed at preventing a party from frustrating the purpose of an emergency application.

Where necessary, such orders may be granted without prior notice to the opposing party, for example where advance notice could result in asset dissipation or the destruction of evidence. At the same time, the Rules preserve due process by ensuring that affected parties are subsequently given an opportunity to present their case and by empowering the emergency arbitrator to modify or revoke the order.

These amendments align the ICC Rules more closely with other leading arbitration frameworks and enhance the effectiveness of urgent interim relief.

2. Enhanced Arbitrator Disclosure and Transparency

The independence and impartiality of arbitrators remain among the cornerstones of ICC Arbitration. Accordingly, the 2026 Rules devote particular attention to the disclosure framework contained in Article 12.

The substantive disclosure standard itself remains unchanged. Prospective arbitrators continue to be required to disclose circumstances that may call into question their independence or give rise to reasonable doubts as to their impartiality.

However, the Rules now incorporate several principles that had previously been reflected mainly in the ICC Note to Parties and Arbitral Tribunals (a guide on how to implement the arbitration rules in practice). Article 12(2) expressly provides that any doubts regarding whether a circumstance should be disclosed must be resolved in favour of disclosure, while Article 12(4) clarifies that disclosure alone does not establish a lack of independence or impartiality.

Another important innovation is Article 12(5), which requires each party to provide the Secretariat at the outset of the proceedings with a list of persons and entities that prospective arbitrators should consider for conflict purposes, together with the reasons for their inclusion.

The 2026 Rules also strengthen the position of tribunal secretaries. Tribunal secretaries are now subject to the same requirements of independence, impartiality and confidentiality as arbitrators and must sign a statement of acceptance, availability, impartiality and independence before their appointment. This development acknowledges the increasingly important role tribunal secretaries play in modern arbitral proceedings.

3. Express Recognition of Early Determination

Another important development under the 2026 Rules is the express introduction of Early Determination in Article 30.

Although not new, early determination had previously existed primarily through arbitral practice and the ICC Note to Parties and Arbitral Tribunals, which since 2017 has guided tribunals in disposing of manifestly unmeritorious claims or jurisdictional objections.

In response to feedback from users and the wider business community, the ICC has now incorporated this mechanism directly into the Rules, thereby removing any remaining uncertainty regarding a tribunal's authority to employ it.

Under Article 30, any party may request the early determination of one or more claims or defences on the grounds that they are manifestly without merit or manifestly outside the tribunal's jurisdiction. The tribunal retains broad discretion both as to whether the application should proceed and how the procedure should be organised.

Applications are expected to be made promptly, as those brought only after extensive submissions or document production are less likely to achieve their intended purpose.

Early determination is likely to be most effective where issues can be decided as a matter of law and without extensive evidentiary analysis. Its codification brings the ICC Rules into line with a broader trend among leading arbitral institutions, including SIAC, HKIAC and the SCC.

At the same time, the requirement that claims be "manifestly" without merit suggests that Early Determination will remain an exceptional tool rather than a substitute for full merits proceedings.

4. Greater Procedural Flexibility and the End of Mandatory Terms of Reference

One of the most notable procedural changes introduced by the 2026 Rules concerns the traditional Terms of Reference.

For decades, the Terms of Reference represented one of the defining features of ICC Arbitration, serving to confirm consent to arbitrate, record procedural agreements and identify the scope of the dispute. Over time, however, these functions became less significant as international arbitration evolved.

Under previous versions of the Rules, tribunals were required to prepare the Terms of Reference within 30 days after receiving the file. In practice, extensions were frequently granted, and many users increasingly regarded the process as adding costs and procedural complexity without materially narrowing the issues at such an early stage.

The Terms of Reference have been abolished as an instrument altogether, which does not, however, preclude the tribunal and the parties to the arbitration from agreeing on such.

The amendment builds on the ICC's experience with expedited proceedings introduced in 2017. In more than 1,000 expedited cases administered to date, only a small number of tribunals considered Terms of Reference necessary.

The reform places greater emphasis on early case management. The initial Case Management Conference under Article 24 now becomes the central procedural milestone in the arbitration. Following that conference, no party may introduce new claims without the tribunal's authorisation.

Another consequence concerns the timing of awards. Article 34 now allows the President of the ICC Court to determine and extend time limits by reference to the procedural timetable established in the case.

5. Introduction of Highly Expedited Arbitration

Perhaps the most visible innovation of the 2026 Rules is the introduction of the Highly Expedited Arbitration Provisions ("HEAP"), first referred to in Article 33 and further set out in Appendix VI.

Building on Emergency Arbitration (2012) and the Expedited Procedure Provisions (2017), HEAP provides an additional opt-in option for parties seeking a swift and cost-efficient resolution.

Unlike the Expedited Procedure Provisions, HEAP does not apply automatically and is not linked to any monetary threshold. Instead, it is available on an opt-in basis, irrespective of the amount in dispute.

The suitability of HEAP depends not on the value of the dispute, but rather on its complexity and on the parties' interest in obtaining a rapid resolution. The procedure is intended primarily for disputes involving straightforward factual issues or limited procedural complexity and is therefore not available for joinder or consolidation scenarios.

Proceedings are conducted by a sole arbitrator and are accelerated from the outset. Parties are required to frontload their case by submitting the Statement of Claim together with the Request for Arbitration and the Statement of Defence together with the Answer. The sole arbitrator enjoys broad discretion to limit further submissions, witness evidence and document production and may decide the dispute without a hearing.

Most notably, the award is expected within three months from the initial Case Management Conference, including the ICC Court's scrutiny process.

Another innovative feature is the possibility for parties to agree to an award without reasons. While this may further enhance efficiency, parties should carefully consider potential enforcement risks in jurisdictions that require reasoned awards.

HEAP represents one of the few genuinely new mechanisms introduced by the 2026 Rules. HEAP reinforces one of the central themes of the revision: enabling parties to tailor the arbitral process to the needs of their dispute.

6. Further Noteworthy Amendments 

In addition to the headline changes, the 2026 Rules contain several smaller amendments that further modernise the ICC framework and align it with contemporary arbitral practice.

Electronic communications are now the default under Article 3. Requests for Arbitration, Answers and Requests for Joinder are to be submitted electronically, reflecting long-standing practice and the increasing use of ICC Case Connect.

Consistently with the abolition of mandatory Terms of Reference, Article 34 now links award deadlines to the procedural timetable rather than the signing of Terms of Reference, without affecting the specific timelines under the EPP and HEAP.

The Rules also address confidentiality more expressly. For the first time, arbitrators are subject to an explicit confidentiality obligation under Article 12(8), while parties retain the freedom to tailor confidentiality arrangements to the needs of their particular dispute.

Another amendment reflecting contemporary practice concerns virtual tribunal deliberations. Article 19(3) expressly provides that arbitral tribunals may deliberate in person, virtually or in any other appropriate manner. Following the widespread adoption of remote working practices after the COVID-19 pandemic, the amendment formalises what has already become common practice in international arbitration.

Finally, Article 14 expands the factors that may be considered when appointing arbitrators. In addition to traditional criteria such as nationality, residence and availability, the ICC Court may now expressly consider the qualifications and expertise required by the dispute, including expertise in investment protection law where appropriate. Article 14 also provides greater flexibility by allowing direct appointments in suitable cases.

7. Conclusion

The 2026 ICC Arbitration Rules illustrate the ICC's long-standing approach of measured and pragmatic reform in response to developments in international commerce and arbitral practice.

At the same time, the Rules demonstrate the ICC's willingness to innovate where appropriate. The introduction of Highly Expedited Arbitration, the express recognition of Early Determination and the move away from mandatory Terms of Reference show that the institution continues to adapt its framework to evolving user expectations and the increasing demand for efficiency and proportionality.

In that sense, the 2026 revision reflects one of the ICC's greatest strengths: maintaining continuity while ensuring that the Rules evolve alongside international arbitration itself - with a record caseload and more than 30,000 cases administered to date as testament to their enduring relevance.

Dr Ralf Hafner
Oliver Korte
Dr Tobias Pörnbacher

The draft largely corresponds to the January 2026 ministerial draft, with only a limited number of amendments having been introduced.

Rather than revisiting the principal reforms discussed in our earlier articles, this update highlights a few further developments of practical importance.

1. No Judicial Revocation of Interim Measures

The January draft provided that German courts could not only declare interim measures ordered by arbitral tribunals enforceable but also revoke such measures. The government draft abandons the latter approach. Under Sec. 1041 (2) ZPO-Draft, courts are now limited to granting leave for enforcement, while the power to terminate or amend interim measures remains with the arbitral tribunal itself. This amendment further strengthens the autonomy of arbitral proceedings.

2. Simplified Requirements for Electronic Awards

Sec. 1054 ZPO-Draft has been amended with regard to electronic signatures. Whereas the previous draft required qualified electronic signatures, the government draft now places advanced electronic signatures on an equal footing with qualified electronic signatures. This adjustment reflects commercial practice and avoids unnecessarily high technical requirements that could have impeded the practical use of electronic awards.

3. Narrower Scope of the Retrial Mechanism

The newly introduced retrial mechanism in Sec. 1059a ZPO-Draft has also been revised. Once invoked by a party, the relevant grounds are considered by the court ex officio , and the subsequent discovery of documents no longer constitutes an independent ground for reopening proceedings. The amendment further limits the exceptional character of the remedy and reinforces the principle of finality of arbitral awards.

4. English Language Proceedings Beyond Commercial Courts

Another noteworthy clarification concerns Sec. 1063a (2) ZPO-Draft. Arbitration-related court proceedings may now be conducted in English even where the matter has not been assigned to a Commercial Court. This extension further promotes Germany's attractiveness as a place for international arbitration and recognises the practical importance of English as the working language of many arbitral proceedings.

5. Conclusion

The government draft confirms the overall direction of the reform and leaves the substance of the January 2026 proposal largely untouched. The amendments introduced by the Federal Government are limited in number, but they demonstrate a continued effort to balance digitalisation, procedural efficiency and party autonomy while preserving the finality and integrity of arbitral proceedings.

With the reform now proceeding through the legislative process, no fundamental changes appear to be expected. The latest amendments therefore provide a strong indication of the shape that the modernised German arbitration framework is likely to take. Together with the broader reform package discussed in our previous articles, they further support Germany's ambition to strengthen its position as a competitive place for international arbitration.

Dr Tobias Pörnbacher
Dr Ralf Hafner
Oliver Korte

This article shows that the enforcement of arbitral awards from China often offers much better chances of success than the enforcement of Chinese judgments in Germany. This provides an opportunity to take a closer look at the relevant legal framework as well as the current German recognition and enforcement practice with a particular focus on the special features that are relevant for arbitral awards from China.

1. Necessity: recognition and enforcement

The recognition and enforcement of foreign judgments is necessary to ensure uniform legal relationships in international legal transactions. Recognition means that a foreign judgment is legally accepted in Germany and has the same legal effects as a domestic judgment. Without recognition, identical legal issues could be assessed differently across jurisdiction. Enforcement goes beyond that. It enables a recognized judgment to actually be put into effect in Germany, e.g. by attachment, penalty payment or other state measures. Together, recognition and enforcement ensure legal certainty prevent claims from remaining ineffective.

1.1 Recognition and Enforcement of Chinese Judgments

1.1.1 Jurisdiction 

First of all, the fundamental question arises as to how proceedings against a company domiciled in Germany may be brought before a Chinese court in the first place. The decisive factor for questions of jurisdiction is not the location of the company, but concrete points of connection to the factual dispute. In practice, jurisdiction is often based on a jurisdiction agreement in which the parties explicitly designate a Chinese court. In addition, a “proper” connection to China (including the place of signing of a contract, the place of performance of a contract, the location of the subject matter, the location of the property to be preserve and the location of the representative office; Article 276, the Chinese Civil Procedure Law) can justify the jurisdiction of Chinese courts. The appearance of a company without objection, i.e. a defence on the merits without a prior objection to jurisdiction, can also establish such jurisdiction under Chinese procedural law.

In addition, the Chinese courts will usually consider themselves to have jurisdiction over cases having a Chinese element. Even if there is an agreed jurisdiction clause between the parties agreeing on the jurisdiction of a foreign court, and the foreign party has initiated the court proceeding accordingly, once the Chinese party has initiated the court proceeding in a Chinese court, this Chinese court will consider itself having jurisdiction, unless the foreign party can prove that: 1) the majority of the facts took place outside of China and it is obviously inconvenient for all parties to participate in court proceeding in China, 2) the dispute is not subject to the exclusive jurisdiction of the Chinese courts , 3) no sovereign rights, national security or public interests is involved, and 4) it is more convenient for the dispute to be trialed in a foreign court (Articles 282, the Chinese Civil Procedure Law). This would render parallel litigation in practice and eventually double the cost for resolving disputes.

1.1.2 Recognition and enforcement procedures

However, the recognition and enforcement of Chinese court decisions in Germany is associated with considerable hurdles under German law. Since there is no bilateral treaty between Germany and China, recognition is based on Section 328 of the Code of Civil Procedure. In particular, problems with proper service, possible violations of German public policy and reciprocity, which has not yet been ensured, often lead to refusal in practice. Reciprocity means that the country of origin, in turn, recognizes and enforces foreign judgments. However, it has not yet been reliably proven that Chinese courts recognize German judgments to a sufficient extent, which continues to impede German recognition practice. 

Under Article 299 of the Chinese Civil Procedural Law, the recognition and enforcement of a foreign court judgment is based on either 1) existence of a treaty, or 2) the principal of reciprocity. Due to the lack of bilateral treaty between Germany and China, this is eventually a chicken-egg question - if the Chinese court judgements are not recognized and enforced in Germany, the Chinese courts have no sufficient reason to recognize and enforce German court judgment in China.

In addition, the key focuses of the Chinese courts in reviewing an application for recognition and enforcement of a foreign judgment are sovereign right, national security and public interests. The Chinese courts are rather conservative in these aspects and tend to extensively apply sovereign, national security or public interests defense in recognizing and enforcing foreign court judgments. This is also the reason why, till today, the Chinese courts have only recognized German court judgments on family law (divorce) – in these cases, it is highly unlikely for sovereign right, national security or public interests to be involved, and the focus is the personal relationship between the individuals.

For the enforcement of a Chinese judgment in Germany, a declaration of enforceability is also required in accordance with Sections 722 and 723 of the Code of Civil Procedure. In these proceedings, the competent regional court examines whether the judgement has already become final and binding in the state of origin, whether the content of the decision has been formulated with sufficient clarity and whether enforcement would in principle be possible there. It is precisely at these stages that the same structural difficulties regularly arise in practice as in the recognition procedure: uncertainties regarding res judicata, deficiencies in the service of the title or ambiguities in the form of the decision often lead to the court refusing to declare enforceability. In particular, concerns relating to the right to be heard in the case of public service, the strict application of German public policy standards and the continuing lack of reciprocity weigh heavily here. The probability of success of the enforcement of Chinese judgments in Germany is therefore to be assessed as low overall.

1.2 Recognition and Enforcement of Chinese Arbitral Awards 

1.2.1 Jurisdiction

Arbitration proceedings in China usually arise because jurisdiction is established by the will of the parties. In arbitration proceedings, the jurisdiction of Chinese arbitration institutions such as the China International Economic and Trade Arbitration Commission (CIETAC) is based solely on a previously agreed arbitration clause with a specific designation of an administering institution. A non-party may also be bound by an arbitration agreement through legal succession. Such agreements are usually concluded at the contract formation stage and are binding on the parties regardless of the jurisdiction in the country in which they are domiciled. If the contracting parties (e.g. a German and a Chinese company) agree on such a clause, they thereby undertake to settle disputes not before state courts, but before the selected arbitral tribunal in China. In this way, arbitration proceedings can also occur in China, even if one of the companies involved has its operational focus or its branches outside China.

1.2.2 Procedure

In contrast to the enforcement of Chinese court judgments, which regularly fails in Germany due to strict legal requirements and actual hurdles, the recognition and enforcement of Chinese arbitral awards is significantly less complicated. This is primarily due to the 1958 New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards (NYC), to which both Germany and China are parties. With 173 contracting states, this NYC is one of the world's most important instruments for international dispute resolution and greatly facilitates the enforcement of foreign arbitral awards. Article III of the NYC, for example, obliges the contracting states to recognize and enforce foreign arbitral awards in principle. Only in narrowly defined cases of Article V can enforcement be refused. In Germany, these provisions apply directly via Section 1061 I 1 of the Code of Civil Procedure, so that the courts' review is based exclusively on the standards of the NYC. 

In an international context, arbitral awards can only be refused recognition or enforcement for a few reasons that must be interpreted narrowly. The grounds for refusal are conclusively regulated in Article V of the NYC and relate in particular to serious procedural violations such as a violation of the right to be heard, a violation of the arbitration mandate or fundamental violations of German public policy. However, such a violation of public policy is only assumed by the case law if the application of foreign law leads to a result that is in intolerable contradiction to the fundamental principles of the German legal system. On the other hand, a mere incorrect application of the law is not sufficient. For example, wrong decisions are to be accepted, since a review of the content of the arbitral award is prohibited (so-called révision au fond). 

The hurdle for refusing recognition or enforcement is therefore high overall, so that in practice arbitral awards are usually declared enforceable in Germany without major difficulties. 

2. General Peculiarities of Arbitration Proceedings Compared to State Proceedings 

In a direct comparison of arbitration proceedings with state court proceedings, a number of special features must be taken into account, which are particularly significant in international commercial transactions. A key difference lies in the far-reaching autonomy of the parties to the arbitration proceedings: the parties can shape the proceedings themselves in essential parts, for example by determining the applicable procedural rules, the procedure or the language of the proceedings, while state courts are bound by mandatory national procedural law.

In addition, there is the possibility of filling the arbitral tribunal, at least in part, through one's own selection decisions. Each party regularly appoints an arbitrator, which promotes a balanced and neutral decision-making body.

Another difference is that state proceedings typically go through several instances (in China, two instances), whereas arbitration proceedings are generally designed in a single-tier procedures. The delays often associated with multi-instance proceedings are therefore largely eliminated. The arbitral award is final and binding and can only be challenged in narrowly limited exceptional cases, which enables a rapid establishment of legal peace and avoids lengthy appeal or revision proceedings.

3. Conclusion 

In summary, especially in relation to China, the choice of arbitration proceedings, insofar as an agreement on this is possible, often proves to be the more promising way to dispute resolution. Chinese court judgments have so far been rarely recognized in Germany, as questions of proper service, the right to be heard and reciprocity in particular continue to create uncertainty. Arbitral awards, on the other hand, benefit from clear international standards and much easier enforceability worldwide. The UN Convention enables enforcement that often cannot be achieved in state decisions in this constellation. For companies, this means a generally faster, more flexible and neutral procedure, which offers additional legal certainty through extensive party autonomy, the composition of the arbitral tribunal and the one-stage nature. This creates an instrument that can be used to efficiently resolve cross-border conflicts.

This is precisely why it is highly advisable to seek legal advice at an early stage and to have existing contracts reviewed in order to include an effective arbitration clause if necessary. It is often precisely this contractual decision that determines whether claims can actually be successfully enforced in practice.

Moritz Kopp
Chiara-Lucia Peterhammer
Katharina Reichert

This article was written in collaboration with experts from the Hui Ye Law Firm:
Cheng Chen
Rachel Tao

When it comes to distributing products to Indian customers on the ground, German manufacturers - as always - face the choice: make or buy. While the FTA substantially enhances India’s appeal as a strategic manufacturing base - by lowering trade barriers and deepening opportunities for supply‑chain integration, thereby offering European manufacturers commercially compelling pathway to leverage the “Make in India” ecosystem - alternate lighter entry models like distributorship arrangements provide a prudent initial step. It enables manufacturers to commercially assess the Indian consumer market, understand demand dynamics, and calibrate their long‑term investment strategy before committing to on‑ground manufacturing operations. 

European manufacturers can handle distribution themselves, from their home country, to access the Indian market, build distribution networks, and assess commercial viability without the immediate complexity of setting up a full-fledged local entity. They can also establish subsidiaries, branch or liaison offices in India. While establishing a subsidiary, branch or liaison office offers greater operational control and closer supervision over market activities, it typically involves regulatory approvals, compliance with foreign investment and corporate governance requirements, and the need to build local management and operational infrastructure. 

For distributorship, European manufacturers can appoint local companies as distribution intermediaries who know the market. In this context, it is possible for the European manufacturer to agree with its contractual partner in India either that its own (e.g. German) law applies or that Indian law applies. If the contract so provides, the contractual relationships are in principle subject to the same legal rules that would apply if the products were distributed in Germany. Or better still: Section 92c of the German Commercial Code (HGB) grants manufacturers who appoint commercial agents or distributors outside the European Economic Area greater contractual freedom than usual. In such cases, it is possible to deviate from all mandatory provisions of Sections 84 et seq. HGB - at least in the case of individually negotiated contracts. For example, the statutory minimum notice periods do not necessarily apply, and the goodwill indemnity under Section 89b HGB may be excluded or modified. 

Alternatively, the parties may decide that Indian distribution law shall apply. In that case, however, European manufacturers are well advised to seek advice from Indian lawyers regarding local regulatory environment.

While the parties may designate either German or Indian law as the governing law for their distribution arrangement, they retain full autonomy to structure, negotiate, and document a sophisticated cross‑border commercial relationship for commercial flexibility. However, in the Indian context – where no dedicated statute regulates distribution relationships – the practical commercial landscape necessitates the incorporation of appropriate contractual and regulatory safeguards. These safeguards must ensure a durable and compliant business presence in India, operating within the framework of the Indian Contract Act, 1872, and aligned with the on‑ground regulatory realities of the Indian market.

India’s exchange control regime is generally business‑friendly, allowing cross‑border payments such as distributorship fees, commissions, and royalties through established regulatory channels. However, the agreement must still be drafted with care so that its commercial structure and incentive mechanisms do not raise concerns under any Indian law. A clear, balanced, and well‑structured arrangement will support the parties’ commercial objectives while remaining comfortably within India’s regulatory boundaries.

India does not curtail commercial freedom in distribution arrangements; rather, it channels that freedom through a structured compliance framework. For any end‑product to lawfully enter and circulate within the Indian market, European manufacturers must comply with certain mandatory obligations such as certification standards, quality‑control approvals, labelling rules, and sector‑specific registrations. These requirements do not restrict the parties’ commercial choices; they simply ensure that products meet India’s consumer‑protection and regulatory expectations. For European manufacturers, careful structuring at the outset will ensure that commercial flexibility is harmonized with India’s mandatory regulatory environment. Success in India therefore demands both commercial foresight and regulatory discipline.

It is also important to agree that any disputes shall be decided by an arbitral tribunal. By contrast, agreeing on German jurisdiction would have the disadvantage that enforcement of a German court judgment - while theoretically possible - would require a very time-consuming recognition procedure in India, which would, among other things, necessitate bringing a new action. Enforcement of a foreign arbitral award in India is easier, as India (like, for example, Germany) is a party to the 1958 New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards. Under this Convention, all signatory states have undertaken to enforce foreign arbitral awards within their territory without a renewed, full review of the merits.

India is an attractive enforcement jurisdiction owing to its distinctly pro‑enforcement stance toward foreign arbitral awards. Indian courts refrain from revisiting the merits or reopening factual findings, and the limited grounds for refusal are narrowly interpreted, with the burden placed squarely on the party resisting enforcement. Once enforceability is established, the award is treated as a decree of an Indian court to be executed against the opposite party in India without a fresh trial. For European manufacturers engaging Indian counterparties, this means that a well-drafted arbitration clause is a powerful risk management tool supported by an arbitration/enforcement‑friendly regime.

Oliver Korte
Sonil Singhania (Singhania & Partners LLP )
Jivesh Chandrayan (Singhania & Partners LLP)

Reform of the German Arbitration Law

On 27 January 2026, the German Federal Ministry of Justice presented a revised draft bill to modernize Germany's arbitration framework. While the 2026 version introduces two material modifications compared to the 2024 draft – notably with respect to Sections 55 and 1031 of the German Code of Civil Procedure (ZPO) (Modernisation of German Arbitration Law: Key Changes in the January 2026 Draft | ADVANT Beiten) – it retains the broader reform agenda already set out in 2024.
The overall objective of the reform remains unchanged: to strengthen Germany's position as a competitive place for arbitration, to further harmonize domestic arbitration law with prevailing international standards, and to enhance procedural efficiency in practice. To that end, the draft continues to provide for a number of structural adjustments, including the facilitation of digital proceedings, expressly permitting electronic awards and video hearings, and clearer rules on the publication of arbitral awards (subject to party consent). It also establishes a narrowly tailored retrial mechanism beyond the ordinary set-aside period and clarifies key issues such as multi-party arbitrator appointments, enforcement of foreign interim measures, judicial review of jurisdictional decisions, and the admissibility of dissenting opinions. Collectively, these measures reflect the legislator's intention to modernize German arbitration law in light of international developments and technological process. 

Within this broader framework, the 2026 draft introduces targeted refinements. The revised version of Sec. 55 ZPO now permits reliance on the principle of lex fori and habitual residence of the party concerned, rather than requiring recourse to foreign nationality‑based capacity rules. This approach aligns procedural capacity with modern principles of private international law. 
A further improvement concerns the revised wording of Sec. 1031, Subsection 1 ZPO. Under the draft, arbitration agreements shall be concluded or documented in writing or by any other means of communication that allows the information to be stored. This amendment brings German Law more closely into line with international legal standards while preserving the flexibility required in contemporary commercial practice. 
Taken together, the reform – both in its unchanged core elements and its 2026 refinements – signals a clear policy direction: Germany aims not merely to update its arbitration law, but to position itself proactively within an increasingly competitive global arbitration landscape.

Court of Arbitration for Nazi-Looted Cultural Property: First Cases Underway

The newly established Court of Arbitration for Nazi-Looted Cultural Property began its work in December 2025. It serves as an alternative dispute resolution mechanism for addressing disagreements regarding the restitution of cultural property confiscated as a result of Nazi persecution. Claimants can trigger arbitration unilaterally if public institutions in Germany refuse to return items, utilizing a "standing offer" system. It handles cases of cultural property lost between 30 January 1933 and 8 May 1945 due to persecution on racial, political, religious, or ideological grounds. The court is administered by the German Lost Art Foundation (Deutsches Zentrum Kulturgutverluste) in Magdeburg, with the arbitration office located in Berlin. The panel consists of 36 arbitrators. Its framework was negotiated with the Jewish Claims Conference and the Central Council of Jews in Germany. This institution represents a major shift in Germany's approach to restitution, aimed at providing legal certainty for both claimants and public holders of art. Something which is obviously well appreciated, given that as of February 18, 2026, already two cases have been brought before this institution.

Germany's Commercial Courts

The recent introduction of Commercial Courts in Germany, as part of the broader reform efforts surrounding German arbitration law, cannot be viewed in isolation from developments in arbitration. For decades, arbitration has been the preferred mechanism for resolving complex cross-border commercial or M&A disputes, largely due to its flexibility, international enforceability, specialized decision-makers, and the possibility of conducting proceedings in English. These advantages have increasingly shaped the expectations of multinational companies regarding dispute resolution.
Against this backdrop, the establishment of Commercial Courts represents a deliberate legislative response. By incorporating features traditionally associated with arbitration – such as English-language proceedings, procedural flexibility, specialized senates, and virtual hearings – the German legislator has sought to enhance the competitiveness of its state court system. In doing so, Germany positions its Commercial Courts not as a replacement for arbitration, but as a complementary and, in some cases, competitive alternative within the broader dispute resolution landscape.
Proceedings before Commercial Courts may be conducted in English at the level of certain Higher Regional Courts – a notable innovation within the German judicial system. 
The courts operate through specialized senates, with subject-matter expertise varying by federal state. For instance, two senates at the Hanseatic Higher Regional Court hear commercial disputes with an amount in dispute of EUR 500,000.00 or more, covering areas such as corporate law, post-M&A, banking and insurance law, transport, and shipping. Proceedings may be conducted virtually and offer enhanced confidentiality as well as verbatim transcripts – features traditionally associated with arbitration.
It is therefore unsurprising that the new Commercial Courts have been well received and are widely regarded as a success. Initial experiences suggest that both the Commercial Court and the Commercial Chambers established at certain Regional Courts, such as the Regional Court of Frankfurt am Main, are committed to conducting proceedings efficiently and resolving disputes significantly faster than is typically the case before state courts. 

AI-bitration

The rapid advancement of artificial intelligence has also reached the field of arbitration, bringing significant new developments. AI is increasingly influencing arbitral proceedings by offering transformative tools that promise greater efficiency and enhanced analytical capabilities. While it remains widely accepted that decision-making must rest with human arbitrators, AI's expanding capacity for analysis, interpretation, and drafting raises complex legal, ethical, and practical questions. 
A central issue for arbitral tribunals is whether, and to what extent, arbitration rules permit the use of AI – particularly given that neither international treaties nor most national arbitration laws expressly regulate its deployment. In the absence of legal provisions, parties and tribunals frequently look to institutional guidance. However, such guidance remains in an early stage of development. Examples include the 2024 Guidelines of the Silicon Valley Arbitration & Mediation Center, the SCC's 2024 Guide, and the CIArb's 2025 Guideline. Most recently the American Arbitration Association published its AI Arbitrator focusing on documents-only construction disputes. However, a real arbitrator remains involved and decisive in this procedure.
These initiatives seek to promote the responsible and effective use of AI in arbitration. Yet the existing guidelines remain deliberately broad and preliminary, while technological innovation continues to evolve at remarkable speed. Looking ahead to 2026, the growing relevance of AI in dispute resolution is likely to prompt further institutional guidelines and frameworks. As practical experience accumulates, existing guidelines will be tested, adjusted, and developed further to ensure that arbitral proceedings remain both technologically advanced and firmly anchored in fundamental principles of due process and fairness.

New Arbitration Laws and Rules

Across Asia, 2026, marks a year of significant regulatory reforms. China has introduced comprehensive amendments to its Arbitration Law, effective 1 March 2026. The reform constitutes a strategic step toward modernizing the domestic arbitration framework and further aligning the regime for foreign-related arbitration with international practice. Notable innovations include the nationwide introduction of ad-hoc arbitration, improvements to the recognition and enforcement of foreign arbitral awards, and the incorporation of additional internationally recognized key concepts, including a clearer statutory recognition of the separability of arbitration agreements and enhanced tribunal authority to rule on its own jurisdiction (Kompetenz-Kompetenz) – widely regarded as meaningful progress.
Pursuing a comparable objective of strengthening procedural governance and aligning its framework with internationally recognized best practices, the Asian International Arbitration Centre (AIAC) has introduced the AIAC Suite of Rules 2026. Effective from 1 January 2026, the suite comprises six new or revised sets of rules and guidelines. Key changes include an expanded scope of application, a clarification of party obligations, adjustments to procedural requirements, mandatory disclosure of third-party funding, and revisions concerning arbitrator conduct and tribunal powers.
In Korea, the 2026 version of the KCAB Rules has entered into force. Among the most notable developments are the establishment of the KCAB International Arbitration Court, the introduction of differentiated procedural tracks designed to enhance efficiency, the expansion of virtual proceedings, and the formal recognition of remote hearings.
From a European perspective, the ongoing reform of French arbitration law also merits close attention. The reform, expected to be finalized by autumn 2026, envisaged the codification of a unified and modern Arbitration Code aimed at harmonizing the legal framework and further consolidating France's position as a leading place of arbitration.

Dr. Ralf Hafner
Oliver Korte
Dr. Tobias Pörnbacher

Unfortunately, the other party feels the same way. The other party also does not know the German sales law of BGB and HGB and would thus prefer to agree on its own sales law. It is a deadlock; neither party is willing to budge. 

It was precisely this finding that was the starting point for the creation of the UN Convention on Contracts for the International Sale of Goods (= United Nations Convention on Contracts for the International Sale of Goods, CISG). A supranational law was to be created to serve as a bridge to break the deadlock. And it actually fulfills this task quite well: It is modern, well structured, quite readable even for non-lawyers (with a few drawbacks), somewhat similar to our sales law and thus overall comprehensible – and fair. It does not want to favour any party. That is why the UN Convention on Contracts for the International Sale of Goods is not fundamentally particularly buyer-friendly or seller-friendly. However, there are some features that anyone wishing to make an informed decision about whether to accept or even propose the UN Sales Convention in contract negotiations should familiarise themselves with. The following aspects appear to be particularly important:

Finally, an important practical note because this often goes wrong - anyone who wants to deselect the UN Convention on Contracts for the International Sale of Goods must not only write: "German law applies". This is because the UN Convention on Contracts for the International Sale of Goods is part of German law. A clean formulation would be: "German law applies, excluding the UN Convention on Contracts for the International Sale of Goods". However, whether this is a good solution must be examined on a case-by-case basis. Important criteria for and against can be found above.

Oliver Korte

Ruling

Article 25 (1) of Regulation (EU) No 1215/2012 of the European Parliament and of the Council of 12 December 2012 on jurisdiction and the recognition and enforcement of judgments in civil and commercial matters must be interpreted as meaning that a third party, as the assignee of a claim for damages arising from the non-performance of a contract containing a jurisdiction clause, may rely on that clause vis-à-vis the original contracting party, as the assigned debtor of that claim, under the same conditions as those under which the other original party to the contract could have relied on that clause against that debtor, for the purposes of an action for recovery of that claim and without the consent of that debtor, in a situation where, in accordance with the national law applicable to that contract, as interpreted by the national case-law, an assignment of a claim entails a transfer, to the assignee’s assets, not only of the right of claim, but also of the rights attached to that claim, including the right to rely on the application of an agreement conferring jurisdiction set out in that contract, unless the original parties to the contract have expressly agreed that that clause cannot be relied on against them in the event of assignment, to a third party, of a claim arising from that contract.

CJEU, decision of v. 23 October 2025 – C-682/23 – Prorogation de compétence

Facts

E.B. and E. PL., two companies incorporated under Polish law, entered into two contracts on 24 March and 24 July 2017. The first concerned the preparation of a plot of land for the construction of a new wood products factory in Poland. The second governed the performance of construction work for that factory. On 4 March 2017 E. PL. concluded a subcontracting agreement with E. S.A., a company incorporated under Romanian law. On 10 July 2017, the latter in turn concluded a subcontracting agreement with K.P., a company incorporated under Polish law ("Subcontracting Agreement"). The Subcontracting Agreement contains a jurisdiction
clause stating that "any disputes shall be settled by the court having jurisdiction over the registered office of the contracting party" ("Jurisdiction Clause"), without defining the term "contracting party" in more detail. All the agreements are governed by Polish law.

By an assignment of claim agreement dated 16 December 2021, concluded with the participation of E. PL., E. S.A. assigned a claim for damages to E.B. ("Claim"). This Claim was said to result from K.P.'s failure to fulfil its obligations under the subcontractor agreement.

On 21 December 2021, E.B. brought an action against K.P. before the Tribunalul Specializat Cluj (Romania) for payment of the Claim including default interest. To justify jurisdiction, E.B. invoked the jurisdiction clause in the Subcontracting Agreement. It assumed that the local (Romanian) court had jurisdiction due to the
registered office of E. S.A.

According to K.P., Art. 7 No. 2 of the Brussels Ia Regulation is applicable to tortious claims. As the damage occurred in Poland, the Polish courts should have jurisdiction. In K.P.’s view, E.B. could not invoke the jurisdiction clause as a third party for contractual claims.

In its judgment of 19 December 2022, the Tribunalul Specializat Cluj dismissed the action due to an assumed lack of jurisdiction. E.B. lodged an appeal against this judgment with the Curtea de Apel Cluj on 11 April 2023. E.B. is of the opinion that the assignee's consent to a jurisdiction clause, regardless of when it was given, would be sufficient to establish its validity vis-à-vis the debtor. The latter would already have consented to it when the contract was concluded. Renewed consent would therefore not be necessary. In such a case, the national court designated by the jurisdiction clause would no longer have to examine whether the assignee had assumed the rights and obligations of the assignor.

K.P. counters that a jurisdiction clause would have effect only between the original contracting parties. Due to its personal contractual nature, it could not be invoked against third parties. Furthermore, Art. 25 of the Brussels Ia Regulation would have to be interpreted narrowly. Therefore, the existence of a jurisdiction agreement would always have to be determined between the parties to the proceedings themselves. The referring court points out that, in the present case, E.B., as the assignee of the claim for damages, is relying on the jurisdiction clause and is thus exercising a right linked to the Subcontracting Agreement which it wishes to assert against K.P. as the debtor of the assigned claim. On the other hand, however, as the assignee of only this individual claim, E.B. would not have assumed all of E. S.A.'s rights and obligations under the contract.

Furthermore, under Polish law, on which E.B. relies, the assignment of a claim would not only lead to the transfer of the claim to the assignee's assets, but also to the transfer of the rights associated with it, including the right to invoke the application of a jurisdiction agreement contained in the contract. However, the assignment of the claim would not mean that the obligations which the assignor has entered into vis-àvis the debtor of the assigned claim would be transferred to the assignee.

In those circumstances, the Curtea de Apel Cluj (Court of Appeal, Cluj) decided to stay the proceedings and to refer the following questions to the European Court of Justice for a preliminary ruling:

(1) Can Article 25 of [the Brussels Ia Regulation] be interpreted as conferring on the assignee of a claim arising from a contract [for the performance of works] the right to enforce the jurisdiction clause in that contract against the original party to the contract, if the assignment contract has, in accordance with the national law applicable to the substance of the dispute, transferred the claim and its ancillary rights, but not the obligations arising from the contract?

(2) In a case such as the one described above, is the opposition of the party that agreed to the jurisdiction clause, against whom the action is brought, relevant for the purpose of determining which court has jurisdiction? In addition, is a new consensus required from that party, prior to or concomitant with bringing a legal action, in order for the third-party assignee to be entitled to rely on the jurisdiction clause?

Grounds

30 [The first sentence of Article 25 (1) of the Brussels Ia Regulation] does not specify whether a jurisdiction clause may be assigned, beyond the circle of the parties to a contract, to a third party, who is a party to a subsequent contract and successor, in whole or in part, to the rights and to the obligations of one of the parties to the initial contract (judgment of 25 April 2024, Maersk and Mapfre España, C-345/22 to C-347/22, EU:C:2024:349, paragraph 47 and the case-law cited) nor whether such a third party may rely on such a clause against one of those original parties. (…)

38 [The] objectives [of the Brussels Ia Regulation] could be jeopardised if the enforceability of a jurisdiction clause in the relationship between one of the original parties to the contract in which that clause appears and a third party to that contract depended on whether it is one of those original parties or that third party who first relies on it by bringing an action before the designated court, which would be the case if that third party could not rely on that clause vis-à-vis those original parties under the same conditions as those under which those original parties could, in accordance with the case-law referred to in paragraph 34 of the present judgment, rely on that clause against that third party.

39 It follows that, in a situation in which an original party to the contract containing a jurisdiction clause has not consented to that clause being relied on against it by a third party to that contract, that third party may nevertheless rely on that clause against that original party if that third party has succeeded to all the rights and obligations of the other original party to that contract. (…)

46 A dispute concerning the recovery of a claim for damages, on the basis of the liability of one of the original parties to the contract containing a jurisdiction clause, on account of an improper performance of that contract, does indeed arise from the legal relationship in connection with which that clause was agreed, with the result that that original party cannot be surprised to be sued before the court designated by that clause for the purposes of that recovery, even if that claim for compensation has been assigned to a third party to the contract. (…)

48 Consequently, it must be held that, in the event of assignment of a claim arising from a contract containing a jurisdiction clause, the assigned debtor, who is the original contractual partner of the assignor, must remain, in principle, bound by that clause.

49 The fact remains that, first, that original contractual partner must also not be placed in a less favourable situation as a result of that assignment of claim. In other words, that clause must be interpreted as preventing any situation in which that contractual partner could be sued before courts other than those before which the other original party to the contract could have brought proceedings under that clause. (…)

54 [Absent] of (…) an express agreement, in the event of assignment of a claim arising from a contract containing a jurisdiction clause, the assigned debtor, who is the original contractual partner of the assignor, must remain bound by that clause and cannot unilaterally oppose its application where the assignee of that claim brings proceedings, before the court designated under that clause, aimed at recovering that debt.

55 In the present case, E. S.A. and K.P., as the original parties to the subcontract in question, agreed, by means of the jurisdiction clause at issue, that the ‘court within whose jurisdiction the contracting party has its registered office’ would have jurisdiction to hear disputes arising from that contract, including as regards the claim for damages in question, arising from that contract. First, it is apparent from the order for reference that E.B., as the assignee of that claim, brought proceedings before the same court as that before which E. S.A could have brought proceedings under that clause if E. S.A. had not assigned that claim to E.B., with the result that K.P. does not appear to be placed in a less favourable situation as a result of that assignment. Second, it is not apparent from the file before the Court that those original parties agreed that, in the event of an assignment of a claim arising from the subcontract in question, that clause could not be relied on against them by the assignee. Therefore, subject to verification by the referring court, it appears that, in the context of the dispute in the main proceedings, E.B. is entitled to rely on that clause against K.P. in order to obtain recovery of the claim for damages in question.

56 In the light of all of the foregoing considerations, the answer to the questions referred is that Article 25 (1) of the Brussels Ia Regulation must be interpreted as meaning that a third party, as the assignee of a claim for damages arising from the non-performance of a contract containing a jurisdiction clause, may rely on that clause vis-à-vis the original contracting party, as the assigned debtor of that claim, under the same conditions as those under which the other original party to the contract could have relied on that clause against that debtor, for the purposes of an action for recovery of that claim and without the consent of that debtor, in a situation where, in accordance with the national law applicable to that contract, as interpreted by the national caselaw, an assignment of a claim entails a transfer, to the assignee’s assets, not only of the right of claim, but also of the rights attached to that claim, including the right to rely on the application of an agreement conferring jurisdiction set out in that contract, unless the original parties to the contract have expressly agreed that that clause cannot be relied on against them in the event of assignment, to a third party, of a claim arising from that contract.

Comments

1. The Sixth Chamber of the ECJ has decided that the assignee of a claim (in this case a claim for damages) has the right under Article 25 (1) of the Brussels Ia Regulation to invoke the jurisdiction clause agreed to in the original contract against the debtor. This also applies if the debtor has not again explicitly agreed to the clause. The decision ultimately strengthens legal certainty by increasing the predictability of the jurisdiction clause and is therefore welcomed.

2. The present decision further extends the rights of the assignee. In earlier cases (ECJ, judgment of 27 February 2025, Società Italiana Lastre, C-537/23, EU:C:2025:120, paragraph 34 and the case law cited therein = IWRZ 2025, 145 Anm. Fervers), the ECJ already emphasized that agreements on jurisdiction must be interpreted narrowly due to the exceptional nature of Article 25 of the Brussels Ia Regulation. Until now, the ECJ had merely decided that a jurisdiction agreement remains effective if a third party has expressly assumed all rights and obligations (see, ECJ, judgments of 21 May 2015, CDC Hydrogen Peroxide, C-352/13, EU:C:2015:335, BeckEuRS 2015, 477022, paragraph 65, and of 18 November 2020, Delay-Fix, C-519/19, EU:C:2020:933, BeckEuRS 2019, 665356, paragraph 47 and the case law cited therein).

3. However, the ECJ's decision could mean more work for courts. National courts must now carefully examine whether the assignee has acquired all rights in the present case and how the assignment has been contractually structured. This can only be done on a case-by-case basis.

4. The decision strengthens the rights of the assignee. In practice, when assigning a claim, it should be clearly specified in the contract which rights (not only in relation to jurisdiction clauses) are attached to the claim, particularly in the interests of the debtor as the original contracting party.

5. It might also be conceivable to transfer the reasoning behind the decision to the assignment in connection with arbitration clauses. According to Article 1 (2) (d) of the Brussels Ia Regulation, arbitration clauses do not fall within the scope of the Regulation. However, in its reasoning, the ECJ refers to the legal nature and the assertion of ancillary contractual rights by the assignee. Since arbitration clauses are generally considered to be ancillary contractual rights, it is not unreasonable to transfer the principles of the decision. Accordingly, the assignee can also invoke an arbitration clause in accordance with the principles laid down in the decision.

6. While, according to the prevailing view in German jurisprudence and legal scholarship, an arbitration clause is transferred to the assignee (see FCJ, judgment of 2 October 1997 – III ZR 2/96, NJW 1998, 371; Wolf/Eslami, in BeckOK, 58 ed. 9/2022, Sec. 1031 m.n. 10), it would benefit a unified legal understanding within the European Union if the ECJ, irrespective of the application of the Brussels Ia Regulation, would also apply these general principles to arbitration clauses as well.

Oliver Korte
Dr Tobias Pörnbacher

_{The article originally appeared in IWRZ 2026, p. 47 ff.}

Germany's current arbitration framework in Book 10 of the ZPO dates back to 1997 and was based on the UNCITRAL Model Law in its 1985 version. After more than 25 years, the legal landscape has shifted significantly, for example regarding digitalisation. This evolution prompts the Federal Government to adapt the law to modern needs, improve procedural efficiency and enhance Germany's attractiveness as an arbitration venue. The reform process has been shaped by developments including the 2006 revision of the UNCITRAL Model Law, reforms in other jurisdictions, updated institutional rules and the ongoing digitalisation of procedural law.

The reform introduces several central innovations. These include the establishment of specialized Commercial Courts with English-language proceedings for arbitration matters under Sec. 1062 (5), 1063a, and 1065 (3) ZPO-Draft, along with procedural facilitation through English-language submissions pursuant to Sec. 1063a and 1063b ZPO-Draft. The draft embraces digital practice by permitting electronic arbitral awards and video hearings under Sec. 1054 (2), (5), 1064 (1), 1047 (2), and (3) ZPO-Draft. Additionally, it introduces the publication of anonymised awards subject to party consent or non-objection under Sec. 1054b ZPO-Draft and creates a narrowly framed retrial mechanism that operates even after set-aside deadlines have expired under Sec. 1059a ZPO-Draft.

The legislation also provides clarifications addressing multi-party appointment of arbitrators under Sec. 1035 (4) ZPO-Draft, enforcement of foreign interim measures under Sec. 1025 (2) and 1041 (2) ZPO-Draft, judicial review of both positive and negative jurisdictional decisions under Sec. 1040 ZPO-Draft, and the admissibility of concurring or dissenting opinions under Sec. 1054a ZPO-Draft.

In substance, the reform remains deliberately modest. Compared with the June 2024 draft (Draft bill on the modernization of the German arbitration law of the Federal Government of Germany | ADVANT Beiten), the version of 27 January 2026 differs in only two aspects: Sec. 1031 ZPO and Sec. 55 ZPO. These two amendments form the core of the following analysis.

Tightening of the Form Requirement for an Arbitration Agreement, Sec. 1031 (1) ZPO-Draft

The original Sec. 1031 ZPO-Draft limited formal requirements for arbitration agreements to consumer contracts only, proceeding on the assumption that parties in commercial transactions do not require the protective function of form. The abolition of formal requirements was intended to reflect modern commercial realities, particularly complex supply chains and framework agreements where the parties involved and their respective obligations may evolve over time, making the inclusion of a formal arbitration clause at an early stage impractical.

This approach attracted substantial criticism during the consultation process and parliamentary hearing. Practitioners emphasised that complete freedom of form entails significant risks and legal uncertainty. Without clear formal requirements, evidentiary problems would likely arise, and disputes over (i) whether an arbitration agreement has been concluded and (ii) its precise content would become more frequent, particularly in complex contractual structures. Cultural and linguistic differences in international transactions were highlighted as further factors increasing the risk of misunderstandings.

A further concern related to the enforceability of arbitral awards under the 1958 New York Convention, which requires arbitration agreements to be signed by the parties or contained in written communications such as letters or telegrams. Critics warned that arbitral awards based on purely oral or implied arbitration agreements could face serious obstacles in international enforcement proceedings. Additionally, the draft's reliance on the distinction between consumers and entrepreneurs was regarded as impractical, as the definition of "consumer" is difficult to apply in practice and particularly opaque for foreign parties.

Reflecting this criticism, the revised Sec. 1031(1) ZPO-Draft abandons complete freedom of form. It now requires that arbitration agreements are concluded or at least documented in writing or by any other means of communication that allows the information to be stored and reproduced at a later stage. This approach seeks to preserve flexibility for modern commercial practice while restoring the evidentiary and legal certainty functions traditionally served by formal requirements. Although it remains unclear which means of communication are sufficient to fulfil the form requirement, this amendment of Sec. 1031(1) ZPO represents a welcome improvement over the previous draft.

The new legal capacity regarding foreign countries, Sec. 55 ZPO-Draft

The current version of Sec. 55 ZPO governs the procedural capacity of foreign parties and remains based on nationality. It provides that a foreign party who lacks legal capacity under the law of its home state is nevertheless deemed capable of conducting legal proceedings if it possesses such capacity under the law of the court seized. In contrast, the new Sec. 55 ZPO-Draft abandons the nationality-based approach and links procedural capacity to habitual residence. A party who does not already have the capacity to conduct proceedings in its own name pursuant to Sec. 51 and 52 ZPO is deemed capable if it has party capacity under the procedural law of the state of its habitual residence.

This amendment was necessary following the reform of Article 7(2) EGBGB, which no longer determines legal capacity by reference to nationality but instead by habitual residence. Since under Sec. 51 and 52 ZPO a party's legal capacity is decisive for its capacity to be a party to proceedings, the continued reliance of Sec. 55 ZPO on citizenship created a systematic inconsistency. While substantive legal capacity was already residence-based, procedural capacity for foreigners still depended on nationality.

The new Sec. 55 ZPO-Draft resolves this conflict by harmonising the connecting factors and aligning procedural capacity with modern private international law. It simplifies judicial practice by allowing German courts to rely on lex fori procedural concepts and habitual residence rather than having to determine and apply foreign nationality-based capacity rules. This synchronisation enhances legal certainty, particularly in cross-border disputes and international arbitration-related court proceedings.

Summary

Overall, the modernisation of German arbitration law remains evolutionary rather than revolutionary. While the reform introduces a range of procedural improvements aimed at efficiency, digitalisation and international accessibility, the comparison between the June 2024 and January 2026 drafts shows that only two adjustments were ultimately required. The recalibration of Sec. 1031 ZPO restores legal certainty through a flexible documentation requirement, while the new Sec. 55 ZPO harmonizes procedural capacity with contemporary conflict-of-laws principles. Together, these targeted changes demonstrate the legislator's willingness to modernize German arbitration law without sacrificing predictability or enforceability.

Dr Ralf Hafner
Dr Tobias Pörnbacher, LL.M.

Information on shell companies in tax havens

Offshore service providers enable their customers to set up foreign companies, known as shell companies, in low-tax areas (tax havens). The intermediary role of the companies and, in some cases, straw men serves to hide money from the German tax authorities. This arrangement is often used to evade taxes or to conceal assets obtained through criminal activities.

The LBF NRW has more than one terabyte of data on foreign companies around the world and the beneficial owners behind them. This also includes taxpayers in Germany. Once the data has been processed, it will also be made available to authorities in other federal states and foreign partners.

Criminal prosecution and searches

It is to be expected that numerous taxpayers named in the data will be subject to both tax and criminal investigations; searches are also likely, as in similar cases in the past. Tax evasion has not been a trivial offense for years and can lead to heavy fines or prison sentences. According to the German Federal Supreme Court, tax evasion involving an amount of more than EUR 1 million should generally result in a prison sentence without parole. In most cases, hopes of the statute of limitations expiring are unfounded. Tax evasion in particularly serious cases does not expire before 15 years have elapsed. The courts consider cases involving amounts of EUR 50,000 or more to be particularly serious.

Voluntary disclosure exempting from punishment possible

As long as the tax authorities have not yet discovered a case, i.e., have not yet evaluated the data, it is still possible in individual cases to submit a voluntary self-disclosure that exempts from punishment. 

The decisive factor is now to disclose the facts in full to the authorities in a voluntary self-disclosure or, if not all documents are available, to first disclose the taxable income to the authorities by means of an estimate.

Whether voluntary self-disclosure exempts the taxpayer from punishment depends on whether the authorities discovered the offense first or whether the taxpayer preempted the discovery by making voluntary disclosure. Even if the offense has already been discovered, cooperative and complete voluntary disclosure and payment of the evaded taxes will in any case result in a more lenient punishment. 

Action is the order of the day

Our team of criminal defense attorneys, specialists in criminal tax law, and tax advisors will support you — even at short notice — in making your decision and represent you before the tax and law enforcement authorities.

Dr. Jochen Pörtge
Martin Seevers
Volker Küpper

ProMach is a leading international platform in the field of packaging and processing technologies.

DFT is an established provider of innovative solutions in the field of sterilization, pasteurization and other thermal processes for the food and beverage industry. With the acquisition of DFT, ProMach is continuing its growth strategy in Europe.

The international cooperation within the ADVANT alliance played a central role in this transaction: our Italian alliance partner ADVANT Nctm has been advising ProMach in Italy for many years.

ADVANT Beiten entered into the mandate in close coordination with the US law firm Thompson Hine, which regularly advises ProMach on legal matters in the United States.

Advisors to ProMach:
ADVANT Beiten: Prof Dr Hans-Josef Vogel (Dusseldorf), Roy Naor (Frankfurt, both Corporate/M&A, lead partners), Dr Andreas Imping, Anna Kubitz (both Labour Law), Mathias Zimmer-Goertz, Christian Döpke (both IP/IT), Sarah Peters, Simon Litterst (both Corporate/M&A, all Dusseldorf), Christopher Harten (Dispute Resolution, Hamburg), Marcus Mische, Markus Linnartz (both Tax), Thomas Herten (Real Estate, all Dusseldorf), Katrin Lüdtke (Public Sector, Munich).

Public Relations
Frauke Reuther
Manager Kommunikation
ADVANT Beiten
+49 (69) 75 60 95 - 570
frauke.reuther@advant-beiten.com

Executive Summary (German)

Die Verletzung von Schieds- und Gerichtsstandsvereinbarungen ist für europäische Unternehmen mit Russlandbezug ein zentrales Risiko. Nach Artikel 248.1 der russischen Zivilprozessordnung können russische Gerichte internationale Zuständigkeiten ignorieren und sich selbst für zuständig erklären. Dies betrifft insbesondere Streitigkeiten mit europäischen Unternehmen, wenn russische Parteien von Sanktionen betroffen sind. Die Gerichte weisen Einreden mangelnder Zuständigkeit in der Regel zurück und setzen Verfahren in der Sache fort. Damit entsteht für europäische Unternehmen ein erhebliches Risiko, vor russischen Gerichten verklagt zu werden – unabhängig von vertraglichen Zuständigkeitsregelungen.

Die Europäische Union hat darauf reagiert und mit Artikel 11 a der Verordnung Nr. 833/2014 eine Möglichkeit geschaffen, vor Gerichten in EU-Mitgliedstaaten Schadensersatz gegen Parteien zu fordern, die Verfahren unter Verletzung solcher Vereinbarungen in Russland einleiten. Für Unternehmen ohne laufende Geschäftsbeziehungen zu Russland kann es sinnvoll sein, diese Ansprüche in der Europäischen Union oder vor vereinbarten Schiedsgerichten geltend zu machen. Unternehmen mit fortgesetztem Russlandgeschäft müssen dagegen mit Beschlagnahmungen oder Gegenklagen in Russland rechnen, insbesondere auch in Bezug auf russische Tochtergesellschaften innerhalb derselben Unternehmensgruppe.

Auch die Anerkennung und Vollstreckung europäischer Urteile oder Schiedssprüche gegen russische Parteien außerhalb der Europäischen Union bleibt herausfordernd. Umgekehrt besteht das Risiko, dass russische Urteile in Drittstaaten anerkannt werden, mit potenziell nachteiligen Folgen für europäische Unternehmen. Artikel 11 a der Verordnung Nr. 833/2014 kann Verluste zwar teilweise kompensieren, ersetzt aber keine vorausschauende Strategie. Dabei sind auch die komplexen Wechselwirkungen von Anti-Suit- und Anti-Anti-Suit-Injunctions zu berücksichtigen, die in verschiedenen Jurisdiktionen unterschiedlich gehandhabt werden.

Vor diesem Hintergrund ist die internationale Rechtslage für europäische Unternehmen deutlich komplexer geworden. Wer grenzüberschreitend tätig ist, muss rechtzeitig Maßnahmen ergreifen, um Zuständigkeitsvereinbarungen zu schützen und Risiken aus parallelen Verfahren zu minimieren. Ob eine Verletzung solcher Vereinbarungen hingenommen oder aktiv bekämpft wird, hängt von den jeweiligen Geschäftsinteressen und Vermögensrisiken ab. In jedem Fall sollten Unternehmen ihre Positionen in Russland, der Europäischen Union und in allen relevanten Drittstaaten sichern.

I. Introduction

Before Russian state courts there is currently a stable trend to apply Article 248.1 of the Russian Code of Commercial Procedure (hereinafter the “Russian Code”) to override choice of court and arbitration agreements. If a Russian party files contractual claims against a European counterparty, a Russian state court will declare itself competent to hear the dispute. Russian state courts routinely reject objections by European parties arguing that the claim should be dismissed without a hearing on the merits, due to the existence of an arbitration agreement designating an institution located outside Russia (such as the ICC, SCC, LCIA, SIAC, or others). Instead, courts proceed to hear the case on the merits, relying on Article 248.1 of the Russian Code.

This article analyses the risks and legal remedies available to protect the rights and interests of European parties involved in judicial proceedings before the Russian state courts.[1] European parties conducting – or having previously conducted – business in Russia bear a risk that Article 248 of the Russian Code will be applied, thereby overriding valid choice of court or arbitration agreements. This risk has already materialized and should not be underestimated (see No. II below).

If the European party already initiated proceedings elsewhere, there is a high probability that Russian courts will issue anti-suit or anti-arbitration injunctions. Whether a European party complies with such injunctions or seeks anti-anti-suit or anti-anti-arbitration injunctions in response is of crucial importance, particularly in relation to the imposition of fines. These injunctions place European parties in a legally precarious position, especially when confronted with conflicting obligations arising under international contracts and EU law. The decision to comply with or contest such Russian measures – potentially through counter-injunctions in EU member states or other jurisdictions – can have serious legal and financial repercussions, including enforcement challenges across borders (see No. III below).

While Regulation (EU) No. 833/2014, in particular Article 11 a, and domestic legal remedies, such as Section 280 (1) of the German Civil Code, may offer opportunities for European parties to recover damages resulting from these proceedings, their practical effectiveness remains uncertain (see No. IV below).

Much will depend on the willingness of European courts to grant relief and on the enforceability of such decisions in cross-border contexts. With all these challenges it is, furthermore, important to consider the enforceability and recognition of European decisions in Russia and vice versa (see No. V below).

In light of these developments, European parties must adopt a proactive and strategic approach to dispute resolution when dealing with Russian counterparties. This includes a careful assessment of legal risks, enforcement prospects and the coordination of parallel proceedings in multiple jurisdictions. Whether the remedies granted by EU law will be effective in mitigating risks and damages arising from these complex situations remains to be seen.

II. Overriding of Arbitration and Choice of Court Agreements by Russian State Courts

1. Exclusive competence of Russian state courts: risks for European parties

Russian state courts utilize Article 248.1 of the Russian Code to establish their exclusive competence. Article 248.1 of the Russian Code was introduced in June 2020. A translation of Article 248.1 of the Russian Code reads as follows:

“1. Unless otherwise established by an international treaty of the Russian Federation or by agreement of the parties, according to which the consideration of disputes with their participation is assigned to the competence of foreign courts, international commercial arbitrations located outside the territory of the Russian Federation, the exclusive competence of arbitration courts in the Russian Federation includes cases:

1. in disputes with the participation of persons in respect of which restrictive measures are applied by a foreign state, state association and (or) union and (or) state (interstate) institution of a foreign state or state association and (or) union;
2. on disputes of one Russian or foreign person with another Russian or foreign person, if the basis for such disputes is restrictive measures introduced by a foreign state, state association and (or) union and (or) state (interstate) institution of a foreign state or state association and (or) union in relation to citizens of the Russian Federation and Russian legal entities.”

The article establishes the presumption that Russian state courts have exclusive jurisdiction to hear any commercial disputes between Russian and foreign legal entities if a foreign state has imposed sanctions on the Russian party. This article permits a sanctioned Russian party to file proprietary and non-proprietary contractual and non-contractual claims against a European counterparty before Russian state courts.

Prior to 2022, it was fairly rare for Russian state courts to employ Article 248.1 of the Russian Code – it would be used primarily in cases where a foreign state had imposed personal sanctions against a Russian party.

However, the practice of applying Article 248.1 of the Russian Code became more common after 2022. Now the Russian state courts proceed on the assumption that Article 248.1 of the Russian Code applies not only in cases of personal sanctions against the Russian party, but in any other case where the Russian party has been affected by sanctions (for example, if the goods that are the subject of the dispute are covered by sanctions).[2]

Russian state courts apply Article 248.1 of the Russian Code when the contract has an arbitration agreement specifying an arbitration institution located outside Russia. It is also used in cases where the contract has a choice of court agreement which establishes that a foreign state court from a jurisdiction unfriendly to Russia shall be competent to hear disputes arising from the contract (for example, the state courts of England, Latvia, etc.). Over the past three years, there have been only a limited number of cases where a European party managed to prove the validity and enforceability of an arbitration agreement, resulting in termination of the proceedings in the Russian state court.

Thus, there is an enormous risk for European parties that Russian state courts may disregard an arbitration or choice of court agreement and hear the dispute on its merits, holding that the dispute falls under the exclusive competence of the Russian state court. In this instance, a European party, if it has assets in the Russian Federation or third countries which recognise the decisions of Russian state courts (for more details, see No. V below), must assess the risks if it were to participate in or to disregard the judicial proceedings before the Russian state court.

Only in some instances have European parties been successful even though the Russian state court disregarded the arbitration agreement and moved to the consideration of the dispute on its merits. European parties managed to refute the claims of the Russian party in total or to reduce the size of the claims to the minimum possible amount. However, these were the exception rather than the rule.

2. Exclusive competence of Russian state courts: risks for Russian subsidiaries that are part of the same group as a European party

The exclusive competence of Russian state courts bears a risk for Russian subsidiaries that are part of the same group of companies as the European contracting partner of the Russian party. Let us presume that a European party is unable to perform its contractual obligations to a Russian counterparty due to sanctions and has subsidiaries or sister companies in Russia (hereinafter “Russian Subsidiaries”). In such cases, the Russian claimant, understanding that the Russian state court decisions will probably be unenforceable in the European Union (hereinafter the “EU”), not only files claims against the European party (the contracting party), but also names the Russian Companies as co-respondents.

The Russian claimant demands that the Russian Companies be held jointly and severally liable for the defaulted obligations of the European party, asserting that all the co-respondents are part of a single corporate group and have a single decision-making centre, even in instances where the Russian Companies were not involved in the contractual relations between the claimant and the foreign party. For a Russian claimant, attaching the Russian assets of a foreign group is faster and simpler than litigating in foreign courts and/or arbitration institutions and trying to identify group assets in foreign jurisdictions.

This approach of the Russian state courts facilitates that Russian claimants see their claims satisfied with the Russian assets of the foreign group, without requiring recognition and enforcement in a third jurisdiction.

In 2023 and 2024 Russian state courts issued such rulings in various cases, affirming the legitimacy of the claims of Russian claimants,[3] even though previously Russian jurisprudence rejected joint and several liability in similar cases.

a) Important ruling of the Russian Supreme Court

In 2025 the Russian Supreme Court heard a landmark case between a Russian bank and Citibank Group.[4] Due to sanctions, the American-based Citibank had not paid a debt to the Russian bank PAO Sovkombank. PAO Sovkombank attempted to recover the debt from the Russian entity of the Citibank group, AO KB Citibank, as a debtor that was jointly and severally liable. All the lower courts had ruled in favour of the Russian bank.

The Russian Supreme Court did not exclude the possibility that Russian companies might be held liable for the actions and debts of a foreign company of their group. The wording of the court decision implies that Russian companies can be held jointly and severally liable, provided that certain preconditions are met.

The Russian Supreme Court stated that debtors only become jointly and severally liable if this is stipulated by contract or established by law. However, in exceptional cases a participant in a corporation and other controlling entities may be held liable to the creditor of the given legal entity if:

• the inability to meet the claims of the creditor was provoked by implementing the will of controlling entities;
• the behaviour of the controlling entities does not meet the criteria of being reasonable and in good faith;
• the behaviour of the controlling entities is unrelated to market factors and other objective factors or to the business risk inherent in business activity.

When deciding the issue of joint and several liability, the courts should examine the extent of the foreign company’s control over the Russian Subsidiary, based on the following criteria:

• the property criterion, specifically the scope of investments in the Russian Subsidiary;
• the amount of the foreign company’s property that is being used by the Russian Subsidiary;
• the presence and appurtenance of monetary funds received from the foreign company for the use of the Russian Subsidiary.

b) Its consequences

Since the Supreme Court has remanded the dispute for a new hearing in the court of first instance, it is still too early to talk about established case law on the issue of the joint and several liability of all group companies for obligations towards a Russian counterparty.

On the one hand, it follows from the decision of the Supreme Court that the mere fact of belonging to the same group of entities is insufficient for the legal entities within this group to be held jointly and severally liable. The position of the Supreme Court reflects the need for the lower courts to be more attentive when they apply the concept of joint and several liability, and to take a more rigorous approach as to what must be proven in this category of disputes.

On the other hand, in this category of disputes the Supreme Court has allowed broad criteria to be used for the joint and several liability of a group of entities; these criteria were initially developed for legislation on bankruptcy and have only been applied in extremely rare cases in non-bankruptcy disputes. The terms “behaviour unrelated to market factors and other objective factors”, “property criterion”, “business risks” and so on are matters of judgment, and may be interpreted differently by the lower courts.

In view of the foregoing, we presume that there is a clear risk for Russian subsidiaries that are part of the same group as foreign companies that they may be held jointly and severally liable for the defaulted obligations of foreign companies of this group to Russian counterparties.

The examples cited above show that Russian Companies risk being drawn into major court disputes as co-respondents regarding contracts between Russian and European entities which had not been performed owing to sanctions. At the same time, interim measures might be imposed on the property of the Russian Companies throughout the protracted litigation, such as the attachment of assets, injunctions on the sale of shares, etc. In this instance, the only option for the Russian Companies would be to proactively present their position in the Russian state court in order to challenge the Russian claimant’s bid to hold them jointly and severally liable and to have interim measures imposed.

If the Russian state court were to satisfy the claims of the Russian claimant with the assets of the Russian Companies, the European parent company might then be entitled to demand the collection of losses from the Russian claimant based on Article 11 a of Council Regulation (EU) No. 833/2014 (for more details, see No. IV below).

III. Battle of Russian and Foreign Anti-Suit (Anti-Arbitration) Injunctions

1. Injunctions issued by Russian state courts

Article 248.1 of the Russian Code leads to situations in which European parties will initiate arbitration proceedings or state court proceedings outside of Russia and will face parallel proceedings in Russia. If a European party wants to commence arbitration proceedings against a sanctioned Russian party at an arbitration institute, the Russian party is entitled, based on Article 248.2 of the Russian Code, to file a petition with a Russian state court and receive a court order which prohibits the foreign party from continuing the arbitration or court proceedings in the foreign jurisdiction or risk a fine (an anti-arbitration injunction).

Similarly, Article 248.2 of the Russian Code allows a court to issue an injunction on the discontinuation of the judicial proceedings in a foreign state court (anti-suit injunction).[5]

If a European party has assets in the Russian Federation and violates an injunction issued by a Russian state court (hereinafter the “Russian injunction”), then the Russian party is entitled to enforce the fine and satisfy its claim from the Russian assets of the opponent (hereinafter the “Fine”) equal in amount to the claim filed with the Russian arbitration institute (Article 248.2(10) of the Russian Code). It is common practice for a Russian state court to impose such a Fine in favour of a Russian party for the non-compliance by the foreign entity with a valid court injunction.[6] One of the largest Fines in the amount of USD 5 billion was issued by a Russian state court against Port Petrovsk Ltd should the company continue its judicial proceedings against PAO Transneft in the High Court of Justice.[7]

If a case is won by a Russian party, the decision of the Russian state court may be enforced with the Russian assets of the foreign party. The same applies if the Fine is awarded to the Russian party based on Article 248.2 of the Russian Code. In particular, in the dispute of UniCredit Bank vs RusChemAlliance, UniCredit had to withdraw the English injunction as otherwise it would have faced a Fine of EUR 250 million imposed by the Russian state courts. UniCredit pointed out that the English injunction was practically unenforceable as RusChemAlliance did not have assets outside Russia.[8] At the same time, however, maintaining the injunction carried the risk of a significant increase in UniCredit’s liabilities in Russia which could have been enforced with UniCredit’s assets in that jurisdiction.

For example, let us presume that European party X commences arbitration in Paris under the ICC Rules against Russian party Y, in which it demands the value of the work performed in the amount of EUR Z. The arbitral tribunal finds the claims filed by X to be substantiated and satisfies the lawsuit. In parallel, Y files a claim with a Russian state court, demanding that it prohibits X from continuing the arbitration in Paris under the ICC Rules, and – if the injunction is not observed – that X be fined EUR Z in favour of Y. The Russian judge holds that Y’s claims are substantiated and satisfies the lawsuit.

It is clear that subsequently X would secure the recognition and enforcement of the ICC arbitral award in the courts of the contracting states of the New York Convention of 1958 where Y has assets. In turn, Y would secure the recognition and enforcement of the Russian state court’s decision on the collection of the Fine in those countries with which Russia has concluded agreements on recognising court orders and in which X has assets. For the time being, we can only conjecture as to how a foreign court might respond if Y and X were to secure the recognition and enforcement of contradictory decisions in one and the same jurisdiction. Such settlements would result in Russian and European entities running through various jurisdictions in search of each other’s assets.

In the example above the European party X risks losing some or all of its Russian assets. At the same time X cannot fully rule out the risk that the decision of the Russian state court might be recognised in those jurisdictions with which Russia has bilateral agreements on the mutual recognition of the decisions of state courts in commercial disputes. The issue of recognising and enforcing the decision of a Russian state court issued based on Article 248.1 and/or Article 248.2 of the Russian Code would be subject to a review by a foreign court at the place of exequatur, in compliance with the norms of the national law of this state.

As such a decision of the Russian state court on the collection of the Fine would run counter to the provisions of the arbitration agreement and Article 2 of the New York Convention, we assess the likelihood that such a court order might be enforced outside of Russia as low (even in those countries with which the Russian Federation has concluded bilateral agreements on the recognition of court orders). Regarding recognition in the EU, EU courts are required by Article 11 c of Regulation (EU) No. 833/2014 not to enforce any decision based on Article 248 of the Russian Code.

2. Influence of a Russian injunction on arbitration proceedings

Such Russian injunctions may have an influence on arbitration proceedings as well. However, as arbitration is based on the competence-competence principle, which allows arbitrators to independently determine their jurisdiction, subject only to the mandatory rules of the applicable lex arbitri and the law applicable to the arbitration agreement (should it differ from the lex arbitri), it is highly likely that the arbitral tribunal would disregard the Russian injunction. For example, in the case of Uniper vs Gazprom[9] the arbitral tribunal disregarded the Russian injunction and issued an arbitral award in the amount of EUR 13 billion.

3. Injunctions outside Russia

In order to protect its procedural and legal position a European party may be entitled to take countermeasures against a Russian injunction. In particular, a European party is entitled, after the commencement of arbitration, to demand an interim injunction in a foreign court stipulating that the Russian counterpart takes all the necessary steps to seek a stay of the Russian proceedings and refrain from further action there, and also refrain from commencing or pursuing, either within Russia or elsewhere, any other proceedings pertaining to disputes, differences or controversies arising out of, relating to or in connection with the contract, in respect of which the dispute is being considered by the arbitration institution.

For example, the High Court of Hong Kong supported the German bank OWH SE i.L. (previously VTB Bank (Europe) SE) in a dispute with VTB which prohibited the collection of a Fine of EUR 112.6 million from the bank in Russia.[10] By contrast, the Russian commercial court issued a diametrically opposed decision on prohibiting VTB Bank (Europe) SE from commencing proceedings in the High Court of the Hong Kong Special Administrative Region, the Hong Kong International Arbitration Centre (HKIAC), and in other state courts, arbitral tribunals and arbitration courts located outside the Russian Federation. The injunction also included a section regarding the filing of motions and lawsuits on prohibiting the commencement of judicial proceedings in state courts within Russia. The Russian commercial court issued a Fine of approximately EUR 112.6 million to be collected from VTB Bank (Europe) SE in favour of PAO VTB Bank should VTB Bank (Europe) SE breach this injunction.[11]

Similar practice can be seen in the decision of the Court of First Instance of the High Court of Hong Kong in the dispute of Linde vs RusChemAlliance.[12] Notwithstanding the Russian injunction, the foreign court supported the demand of the German party and prohibited the Russian party from commencing court or arbitration proceedings in Russia or third countries arising from the contract.

4. Divergent requirements for issuing injunctions

However, there are different prerequisites for issuing injunctions, depending on the specific jurisdiction. For example, on 17 June 2024, the Higher Regional Court of Düsseldorf held that it was not competent to issue an anti-anti-suit injunction on conducting foreign arbitral proceedings or protecting assets abroad.[13] The Higher Regional Court of Munich issued a different decision in a patent-related case concerning an anti-suit injunction in the US.[14] Furthermore, the Higher Regional Court of Hamm decided that an anti-anti-suit injunction may be admissible and substantiated regarding an anti-suit injunction against the recognition and enforcement of an ICSID arbitral award in the USA.[15] Also in other cases requests for anti-anti-suit injunctions have received mixed results in Germany.[16]

A Dutch state court, which had to decide a request by a Dutch subsidiary of Linde Group to issue an injunction against RusChemAlliance, drew similar conclusions as the Higher Regional Court of Düsseldorf: it held that it lacked the necessary competence.[17]

Consequently, a European party seeking an anti-suit injunction against a Russian party should take note of the national specifics where the injunction has been requested. Furthermore, a European party should be aware of the fact that it may be exposed to fines in Russia.

IV. Potential Claims to be Filed by Foreign Parties in Connection with the Violation of Arbitration and Jurisdiction Agreements

In view of the apparent practice at present where Russian parties and state courts disregard choice of court or arbitration agreements, foreign parties may seek ways to file claims against Russian companies for damages. The issue as to whether claims might be filed directly against the Russian Federation is not covered in this article.

European parties, however, may have a claim for compensation against Russian parties under Article 11 a of Council Regulation (EU) No. 833/2014 (hereinafter “Regulation No. 833/2014”) (see No. IV.1 below). Furthermore, German parties may also have a claim under Section 280 (1) of the German Civil Code (see No. IV.2 below). German parties may recover damages incurred in the Russian proceedings as well as in proceedings for anti-suit injunctions (see No. IV.3 below). European parties can seek the payment of damages in front of arbitral tribunals or state courts of EU member states (see No. IV.4 below).

The 18th sanctions package against Russia, enacted on 20 July 2025, introduced a new potential claim for damages under Article 11 e of Regulation No. 833/2014. This provision specifically pertains to investor-state dispute settlement proceedings. Given that the same underlying rationale applies to Article 11 e as it does to Article 11 a of Regulation No. 833/2014, this article will not provide further elaboration on this new provision.

1. Claims under Article 11 a of Council Regulation (EU) No. 833/2014

In principle, Article 11 a and 11 b of Regulation No. 833/2014 give a claim for damages against a Russian party that filed a lawsuit in breach of an arbitration agreement. To date there is no case law on this new provision in Germany or, to the best knowledge of the authors, in any other member states of the EU. The reason could be that Article 11 a of Regulation No. 833/2014 has only been introduced by the 14th EU sanctions package against Russia in June 2024 and that there are a number of problems in connection with the unclear and vague wording of Article 11 a of Regulation No. 833/2014.

In general, Article 11 a of Regulation No. 833/2014 provides a new opportunity to claim damages against Russian parties:

“Any person referred to in Article 13, point (c) or (d), shall be entitled to recover, in judicial proceedings before the competent courts of a Member State, any direct or indirect damages, including legal costs, incurred by that person or by a legal person, entity or body that the person referred to in Article 13, point (d), owns or controls, as a consequence of claims lodged with courts in third countries by persons, entities and bodies referred to in Article 11(1), point (a), (b) or (c), in connection with any contract or transaction the performance of which has been affected, directly or indirectly, in whole or in part, by the measures imposed under this Regulation, provided that the person concerned does not have effective access to the remedies under the relevant jurisdiction.”

Article 11 a of Regulation No. 833/2014 is closely connected to the prohibition of performance under Article 11 of Regulation No. 833/2014. Article 11 a of Regulation No. 833/2014 concerns scenarios where an EU party does not perform its contractual obligations due to the sanctions and a Russian party sues its counterpart before Russian state courts.

As only limited options are available to enforce judgments and arbitral awards in Russia (for more details, see No. V below), it has been discussed that this provision should at least provide EU parties with an offset option. However, the prerequisite is that the EU party has no effective access to legal remedies in the territory concerned. This in turn mirrors Article 248 of the Russian Code.[18]

In general, Article 11 a of Regulation No. 833/2014 does not provide much guidance for its applicants. The provision is vague and practical issues will arise in conjunction with the proof that must be provided as well. In any event, a lawsuit may be brought before European state courts for the recovery of the legal costs incurred in the judicial proceedings in Russia.[19]

2. Claims under Section 280 (1) of the German Civil Code

In addition, in general a claim for damages may be filed pursuant to Section 280 (1) of the German Civil Code. In its judgment dated 17 October 2019 – III ZR 42/19 – the Federal Court of Justice decided that a culpable breach of a jurisdiction agreement triggers the obligation to pay damages.[20] The issue as to whether these principles can be applied to a lawsuit filed in a state court in breach of an arbitration agreement is disputed in literature.[21] The Federal Court of Justice, so far, had no chance to decide on this. English courts and some arbitral tribunals, however, have already awarded damages in some cases.[22]

According to one opinion in literature, the principles of the Federal Court of Justice on the breach of a jurisdiction agreement can also be applied to arbitration agreements.[23] An arbitration agreement has the same meaning and purpose as a jurisdiction agreement: the parties should be able to rely on the agreement in order to achieve legal certainty.

The decisive factor in this respect is whether the requirements of Section 280 (1) of the German Civil Code are met. This presupposes that there has been a breach of duty, that the opposing party is liable and that the German party has suffered damages within the meaning of Section 249 of the German Civil Code:

a) Breach of duty

The issue as to whether conduct in breach of an arbitration agreement constitutes a breach of duty within the meaning of Section 280 (1) of the German Civil Code is disputed in literature. In the opinion of some legal scholars an arbitration agreement merely has a procedural effect. This procedural effect is that it waives the jurisdiction of the state courts and establishes the jurisdiction of a private court.[24] According to other scholars, in addition to the procedural effect, an arbitration agreement should also have the substantive obligation on the exclusive use of arbitration courts.[25]

The Federal Court of Justice adheres to the latter opinion. In its judgment dated 17 October 2019 the Federal Court of Justice decided that a choice of court agreement does not exclude the existence of substantive obligations and that, in addition to procedural obligations, a distinction must be made between the effects of the jurisdiction agreement in terms of disposition and obligation. However, this does not imply that these effects cannot be established simultaneously. This can be compared to a court settlement which has both substantive law and procedural effects.[26]

These principles can also be applied to arbitration agreements. The purpose of a jurisdiction agreement is legal certainty. The contracting parties want to create legal certainty and minimize litigation risks. An agreement on the place of jurisdiction makes it clear to the parties where they can assert their rights in the event of a dispute.[27] Arbitration agreements pursue the same objectives. Against this background, it can also be held that arbitration agreements have the duty of preventing damages if a claim is brought before state courts.[28]

b) Responsibility for breach of duty

According to Section 280 (1) sentence 2 of the German Civil Code, the plaintiff (in our case the Russian party) is responsible for breach of duty. The latter is in general responsible for intent and negligence under Section 276 (1) sentence 1 of the German Civil Code. In the event of conduct in breach of an arbitration agreement or a choice of court agreement, exculpation will only be possible in exceptional cases.

Russian parties may argue that they have not acted in a culpable manner as they merely used a provision provided by Russian law, i.e. Article 248 of the Russian Code. As Article 248 of the Russian Code contradicts (i) the parties’ intention when entering into an arbitration or choice of court agreement and (ii) the New York Convention, it may still be culpable if a Russian party utilizes this provision in its favor. Within the last years Russian courts started to decide most of the cases in favour of a Russian party. Thus, the Russian party’s behavior may be abusive and, therefore, a culpable or at least negligent breach of an underlying arbitration or choice of court agreement.

3. Damages that may be recoverable

Under Article 11 a of Regulation No. 833/2014 and Section 280 (1) of the German Civil Code, legal costs and probably other damages are recoverable. The German or European party must be placed in the same position as it would have been in if the Russian party suing in breach of the arbitration or choice of court agreement had complied with such agreement and initiated arbitration or state court proceedings. This derives from Section 249 of the German Civil Code.

If a Russian state court has not yet made a legally binding decision, the legal costs may be fully recoverable.[29] If the Russian state court had decided against the German or European party and compels it to assume all the costs, the German or European party must demonstrate that it would have obtained a more favourable decision in an arbitration or state court. It is only in this case that the European or German party is eligible for the difference between the value of the claim that would have been awarded if the case had been considered in the competent arbitration or state court and the value of the claim in the Russian state court ruling. Additionally, it is necessary that the arbitral tribunal or the state court does not recognise the substantive legal force of the Russian decision.[30]

A claim under Article 11 a of Regulation No. 833/2014 is explicitly not limited to legal costs. A European party may recover “any direct or indirect damages, including legal costs”. These direct or indirect damages could also be additional legal costs such as costs in conjunction with anti-(anti-)suit and anti-arbitration injunctions. Furthermore, if a Russian state court decides in favour of the Russian party and the European party is able to demonstrate that a competent court or arbitral tribunal would have decided differently on the merits, the overall loss may be recoverable as well.

Following the Federal Court of Justice, jurisdiction agreements can be interpreted in such a way that they oblige the parties to bring an action before the agreed court. If a party fails to do so, and the derogated court recognizes its lack of jurisdiction, the other party must reimburse the costs incurred on bringing the action before a court that had no jurisdiction.[31]

It should be noted that the derogated court declared that it did not have the necessary jurisdiction in the case resolved by the Federal Court of Justice, which dismissed the case without any deliberation on the reimbursement of legal fees. If some of the costs are awarded to the defendant in breach of the agreement, this amount should be deducted when calculating the damages.[32] If a German state court declares that it has no jurisdiction, the respective decision on costs generally takes priority over an additional claim for reimbursement of costs.[33] However, a claim may be made for the reimbursement of preparatory costs and any costs not covered by the decision of the German state court.[34]

It is highly unlikely that a decision on costs by a Russian state court would take priority over a claim under Article 11 a of Regulation No. 833/2014. Otherwise, the addition to the wording regarding legal costs within Article 11 a of Regulation No. 833/2014 would be meaningless.

It is also highly unlikely that a Russian state court would decline its jurisdiction. In particular, because of Article 248 of the Russian Code, the possibility that a European party will be reimbursed for its costs is largely theoretical. Instead, it can be assumed that the Russian state court would affirm its jurisdiction and rule in favour of the Russian party. Therefore, a European or German party would likely be entitled to claim damages for any losses arising from a negative decision by the Russian state courts. These damages may not be limited to legal costs but could include all direct or indirect losses.

4. Competent forum

If there is a claim for damages, European or German parties must determine the competent forum to decide this claim. In principle, jurisdiction is determined by the contractual agreements between the companies. Accordingly, if there is an arbitration agreement, the arbitration tribunal is responsible for deciding claims for damages arising in connection with circumvention of the arbitration agreement, to the extent that they are covered by its scope.

The objective and subjective scope of application of the arbitration agreement is a matter of interpretation subject to the law applicable to the arbitration agreement. There are essentially two starting points here: (i) the substantive law applicable to the contract as it may also apply to the arbitration agreement or (ii) the law of the seat of arbitration. The issue as to how to effectively determine the law that is applicable to the arbitration agreement is subject of a lively debate in court and legal literature.[35]

Under German law the following applies: Arbitration agreements are in general subject to broad interpretation. Even if claims for the breach of the arbitration agreement do not constitute a dispute based on the meaning of the main contract, they are related to it.[36] Such claims for damages in connection with a breach of the jurisdiction agreement must be brought before the duly designated court.[37] This rationale can be applied to claims under Section 280 (1) of the German Civil Code.

However, the specific forum that has jurisdiction if a claim for damages is brought under Article 11 a of Regulation No. 833/2014 is debatable. According to Article 11 a of Regulation No. 833/2014, the claim should be brought before the competent court of a member state, i.e. a state court. However, there are no clear reasons that prohibit a party from bringing a claim under Article 11 a of Regulation No. 833/2014 in an arbitration proceeding. According to Section 1030 (1) sentence 1 of the German Code of Civil Procedure, any pecuniary claim may be the subject of an arbitration agreement. A claim for damages under Article 11 a of Regulation No. 833/2014 is such a pecuniary claim. In any event, the claim for damages would be arbitrable under German law.

The issue as to whether a German party is required to initiate arbitration proceedings for claims under Article 11 a of Regulation No. 833/2014 if there is an arbitration agreement in a contract has not been discussed or decided yet. At first glance it would appear easy to resolve this issue by looking at the choice of court or arbitration agreement in the contract. However, it is highly likely that a German party could also initiate proceedings in a German state court. A Russian party could probably not raise an objection in connection with the arbitration agreement, as this could be interpreted as the inadmissible exercise of rights and contradictory behaviour. In most cases it has been the Russian party that violated the arbitration agreement.

In Germany there is no general or specific jurisdiction for such claims. Therefore, an international jurisdiction of the German state courts could be considered in this respect.

It might be advisable and helpful to bring such claims to the competent forum which has been chosen in the main contract. If a European party decides to claim before a state court of a member state of the EU under Article 11 a of Regulation No. 833/2014, an opposing Russian party may raise the argument that Article 11 a of Regulation No. 833/2014 imposes the same effect as Article 248 of the Russian Code. Under Article 11 a of Regulation No. 833/2014 a European party may as well be able to avoid an arbitration or choice of court agreement. Claiming damages out of such a breach and conducting a potential breach at the same moment may qualify as contradictory behaviour. In order to avoid a discussion in this respect, a European or German party should bring claims to the contractually agreed forum.

When choosing the forum for bringing such claims, the European or German party should consider whether the recognition and enforceability of the decision in Russia or other foreign countries is needed (see No. V below). If the Russian party has no assets outside of Russia, the recognition and enforceability in Russia would be crucial. If there are assets in Europe or any other country worldwide, either a judgment of a state court or an arbitral award would be most favourable. In order to enforce into assets in Germany, a German state court decision would be sufficient and most practicable.

V. Recognition and Enforcement of Decisions in Connection with the Violation of Arbitration and Choice of Court Agreements in Russia and Abroad

If a European or German party obtains a favourable decision regarding its claim for damages, the recognition and enforcement of this decision as well as the recognition and enforcement of a Russian decision is highly relevant. In the end recognition and enforcement is decisive for the financial benefit deriving from a favourable decision.

The recognition and enforceability of a decision in a foreign jurisdiction is contingent on several separate issues. A key factor is whether it is the decision of a state court or an arbitral award. An arbitral award benefits from the New York Convention and can be enforced in 172 member states[38] with less procedural effort than a foreign state court decision. State court decisions may in general be enforceable abroad, either if there are conventions such as the Lugano Convention[39] or the Hague Convention[40] or there is reciprocity between both states involved.

The issue as to whether a decision can be enforced or recognized must be addressed with respect to each jurisdiction individually. The article will focus on the recognition of German state court decisions and arbitral awards issued in Germany in Russia and vice-versa. This question is relevant for the question whether decisions under Article 248 of the Russian Code or decisions on claims for damages due to the violation of arbitration or choice of court agreements can be enforced in Russia and/or Germany.

1. Enforcement and recognition of arbitral awards

a) Enforcement of arbitral awards issued in Russia in Germany

In general, the enforcement of arbitral awards issued in Russia in Germany does not differ from any other foreign arbitral award issued in any other country that is a contracting state of the New York Convention. Under German law, the recognition and enforcement of arbitral awards is covered by Sections 1060 to 1061 of the German Code of Civil Procedure.

According to Section 1061 of the German Code of Civil Procedure, foreign awards can be recognised. These regulations enshrine the principle of the New York Convention. The Higher Regional Court of Munich held that the European Convention on International Commercial Arbitration of 1961 would in principle take precedence before the New York Convention in the case of arbitral awards issued by an arbitral tribunal located in Russia. However, the most favourable set of rules must be applied.[41] Thus, the enforcement of arbitral awards issued in Russia may be even easier than under the New York Convention. Article IX (2) of the European Convention on International Commercial Arbitration of 1961, for instance, limits the reasons for declining the recognition and enforceability of foreign arbitral awards under Article V (1)(e) of the New York Convention to the reasons listed in Article IX (1) of the European Convention on International Commercial Arbitration of 1961.

Contrary to this decision, on 13 May 2025 the Higher Regional Court of Stuttgart refused to enforce an arbitral award issued in Russia and held that it could not be recognised in Germany.[42] This decision is not a sign that German courts will be less arbitration-friendly in future. It is instead indicative of the European-Russian relations in the past years, i.e., the sanctions regime.

The dispute in question pertaining to the arbitration proceedings conducted in Russia derived from a supply contract between a German party and a Russian party. The contract included an arbitration agreement on the resolution of any disputes in Russia. After February 2022, the German party decided to stop delivering goods to Russia and to discontinue its business relations with Russia.

The Russian party initiated arbitration proceedings in Russia for the repayment of an advance. The German party referred to the sanctions against Russia and argued that it was unable at present to repay the advance. Additionally, the German party filed claims against the Russian party. The arbitral tribunal issued an arbitral award holding that the German party must pay to the Russian party. The Russian party initiated proceedings in the Higher Regional Court of Stuttgart for the recognition and enforcement of this arbitral award.

The Higher Regional Court of Stuttgart decided to refuse to recognise the arbitral award for the moment on the grounds that the recognition and declaration of the enforceability of the award would contravene the fundamental principles of the German legal system, i.e. ordre public, existing at the moment. A violation of the ordre public is assumed if the enforcement of the obligations arising from the arbitral award is not allowed under German law.

The Higher Regional Court of Stuttgart decided that the enforcement of the arbitral award would violate Article 3 k (1) of Regulation No. 833/2014. Article 3 k (1) of Regulation No. 833/2014 prohibits the direct or indirect delivery of certain goods to Russia. As the goods delivered by the German party are included in the respective list of goods in Annex XXIII of Regulation No. 833/2014, under Article 11 (1) of Regulation No. 833/2014, all claims in connection with contracts or business relating to these goods are not to be exercised and executed as long as a Russian person or party requests execution. Therefore, it was held that the repayment of the advance was prohibited under Article 11 (1) of Regulation No. 833/2014.

Such a violation of the EU sanctions against Russia would have constituted a criminal offence under Section 18 et seq. of the German Foreign Trade Act or would have qualified at the very least as an infringement under Section 82 of the German Foreign Trade Act. As the lifting of the EU sanctions cannot be predicted at the moment, the Higher Regional Court of Stuttgart decided that the arbitral award contravenes ordre public at the moment and, therefore, cannot be recognised and enforced in Germany. As the Higher Regional Court of Stuttgart has not acknowledged any of the other arguments raised by the German party, the arbitral award may be recognised whenever the EU sanctions in this respect are lifted.

The decision of the Higher Regional Court of Stuttgart is attributable to the EU sanctions against Russia. Consequently, the sanctions apply not only to the repayment of advances for the delivery of goods per se, but also to the recognition of arbitral awards which contravene EU sanctions. The Higher Regional Court of Stuttgart correctly pointed out that the recognition of such arbitral awards contravenes German law at present. If the EU sanctions are lifted, the recognition and enforcement of foreign awards concerning the performance of obligations previously subject to sanctions should no longer constitute a violation of ordre public. Consequently, and little surprisingly, the Kammergericht, i.e. the Higher Regional Court of Berlin, confirmed in proceedings under Section 1032 (2) of the German Code of Civil Procedure that arbitration is admissible even if one party is subject to sanctions in general.[43]

Following the enactment of the 18th sanctions package against Russia on 20 July 2025, Regulation No. 833/2014 has been amended to include provisions in Article 11 (2) stating that decisions not issued by a court of an EU member state, arising from investor-state dispute settlement proceedings in connection with measures imposed under Regulation No. 833/2014 and Regulation No. 269/2014, shall not be recognized or enforced. This applies equally to requests for assistance during investigations or any other adverse outcomes arising from such proceedings.

b) Enforcement of arbitral awards issued by arbitral tribunals outside Russia before Russian state courts

The procedure for recognising arbitral awards in Russia is based on the New York Convention, Articles 34–36 of Law No. 5338-1 of the Russian Federation dated 7 July 1993 “On International Commercial Arbitration” and Articles 241–246 of the Russian Code.

It is clear that arbitral awards issued by an arbitral tribunal in breach of a Russian injunction (for more details, see No. III above) will not be recognised in Russia. Regarding arbitral awards that do not violate a Russian injunction, there is still a risk that such arbitral awards may not be recognised in Russia.

Even though the Russian Federation is a contracting state of the New York Convention, at present there is a perceptible negative trend before Russian state courts regarding the recognition and enforcement of arbitral awards issued by foreign arbitration institutes in so-called “unfriendly” jurisdictions.

In a recent case the Russian Supreme Court refused to recognise and enforce a foreign arbitral award in the Russian Federation stating, inter alia, the following:[44]

• “The introduction of sanctions for political motives leads one to doubt that the dispute would be heard in a foreign jurisdiction in compliance with the guarantees of a fair trial, in particular, from the perspective of the impartiality of the court;”
• “If there are circumstances that indicate to an objective external observer that it is possible that the judge will be unable to hear the case in an absolutely unbiased manner, then his objective impartiality is placed in doubt, even if the judge’s subjective attitude is irreproachable.”

At present this negative approach is not predominant in Russian judicial practice. However, given the current sanctions regulations, one cannot rule out the risk that it might become more common.

2. Enforcement and recognition of state court decisions

a) Recognition of Russian judgments and state court decisions in Germany

The recognition of Russian judgments and state court decisions in Germany is subject to legal restrictions, primarily due to the lack of reciprocity required under Section 328 (1) No. 5 of the German Code of Civil Procedure. This means that in general Russian judgments and state court decisions are not recognised because Russia does not systematically recognise German judgments in return.

An exemplary decision in this context is the judgment of the Hanseatic Higher Regional Court of Hamburg dated 13 July 2016, in which the court denied the recognition of a Russian judgment due to the lack of reciprocity.[45]

In a notable exception, in a decision dated 23 October 2024 the Commercial Court of Saint Petersburg and Leningrad Region recognised the judgment of the Regional Court of Stuttgart dated 27 May 2021. This was based on the principle of international comity, despite the lack of a bilateral treaty between Germany and Russia.[46] This decision was recently overturned and is now being reconsidered.[47]

Unless Russia begins to recognise German judgments and state court decisions consistently or a binding agreement is established, Russian judgments and state court decisions will continue to face significant hurdles for recognition in Germany.

b) Recognition of foreign judgments and state court decisions in Russia

Foreign judgments and state court decisions must be recognized by a Russian state court before they can be enforced in Russia. Recognition and enforcement are carried out by a commercial court further to the respective application of a party. A judgment is recognised and enforced if there is a respective international treaty or in certain instances subject to the application of the principles of international comity and reciprocity.

The Russian Federation has concluded agreements with Algeria, Argentina, Armenia, Azerbaijan, Belarus, China, Egypt, India, Kazakhstan, Tajikistan, Tunisia, Uzbekistan, Vietnam and a number of other countries on the reciprocal recognition of court decisions.

Pursuant to Article 244 of the Russian Code, a Russian court may refuse to recognize a foreign judgment or court decision in instances where

• the respondent had not been notified of the judicial proceedings;
• the judgment or decision has still not entered into legal force;
• the decision of the court had been assigned to the exclusive competence of the Russian court (an exception to this rule occurs if the Russian party covered by the provisions of Article 248.1 of the Russian Code had not objected to the consideration of the dispute by the foreign court with its participation, inter alia, it had not filed a petition on prohibiting the initiation or continuation of the proceedings in the foreign court);
• a court in the Russian Federation is considering a case in a dispute between the same parties, on the same subject matter and on the same grounds in respect of which proceedings had been commenced prior to the commencement of the proceedings in the case in the foreign court, or the court in the Russian Federation was the first court to agree to consider a petition in a dispute between the same parties, on the same subject matter and on the same grounds;
• the limitation period for enforcing the foreign judgment or court decision had expired and this period had not been restored by the commercial court;
• enforcement of the foreign judgment or court decision would contravene the public policy of the Russian Federation.

The grounds for refusing to recognise judgments and court decisions may differ, depending on the provisions of the respective international treaty concluded between the Russian Federation and a foreign country, but are similar in most instances.

In addition, as indicated above, Russian courts may recognise and enforce foreign judgments and court decisions based on the principle of reciprocity. To do so, the applicant must not only provide the court with references to Russian and foreign procedural law, but also refer to the positive judicial practice in that foreign state which demonstrates that the judgments of Russian courts are recognised in that foreign state. The principle of reciprocity on recognising judgments and court decisions is stipulated by Russian law, namely by the bankruptcy laws (Article 6 of Article 1 of the Russian Bankruptcy Law), but can also be found in law enforcement practice in other branches of the law.[48]

In most instances, if there is no international treaty, Russian courts refuse to recognise foreign judgments and court decisions as the petitioner failed to prove that there is reciprocity in the foreign state.[49]

c) Recognition of Russian judgments and state court decisions outside the EU

As indicated above, the Russian Federation has concluded agreements with a number of countries on the reciprocal recognition of court decisions (see lit. b) above). In connection with this fact, there is a significant risk that the decision of a Russian state court on the collection of the Fine (see No. III.1 above) and/or decisions or judgments on the merits rendered by Russian state courts in breach of the arbitration agreement (or choice of court agreement) (see Nos. II.1 and III.1 above) might be recognised in the indicated jurisdictions.

Therefore, there is a significant risk that Russian judgments and state court decisions will be recognized and enforced in some jurisdictions. European parties with subsidiaries and assets worldwide will therefore face a financial risk in any of these jurisdictions.

3. Non-recognition and non-enforcement of decisions under Article 248.1 of the Russian Code in Europe

Within the EU, Russian judgments and decisions of a Russian state court under Article 248.1 of the Russian Code will not be recognized. In order to guarantee legal certainty for European parties Article 11 c of Regulation No. 833/2014 has been introduced. Article 11 c of Regulation No. 833/2014 expressly prohibits EU courts from recognizing and enforcing such Russian judgments and decisions. This might also apply to decisions by courts outside the EU on recognising or enforcing Russian state court decisions.

In June 2024 the Higher Regional Court of Düsseldorf decided that an anti-anti-suit injunction cannot be granted, inter alia, as the Russian decision under Article 248.1 of the Russian Code was legal under Russian law.[50] Applying this rationale to the recognition and enforcement of Russian judgments and decisions under Article 248.1 of the Russian Code, it could be argued that such judgments and decisions may also be recognisable and enforceable. This uncertainty has been resolved with Article 11 c of Regulation No. 833/2014 in the 15th sanctions package in December 2024.

Under Article 11 c of Regulation No. 833/2014, the opinion of the Higher Regional Court of Düsseldorf may no longer be correct. Russian judgments and decisions under Article 248.1 of the Russian Code are no longer considered to follow EU law. Consequently, the question whether a decision is legal under Article 248.1 of the Russian Code is not relevant for the recognition and enforcement in the EU.

Summary

In addition to the ongoing geopolitical tensions between the EU and Russia, legal systems in both regions have equipped parties to pursue reciprocal claims. While Article 248.1 of the Russian Code has long permitted Russian courts to assert jurisdiction despite arbitration or choice of court agreements, the EU has recently introduced countermeasures. Similar to the anti-anti-suit/arbitration injunction mechanism, the possibility of claiming damages in the courts of an EU member state under Article 11 a of Regulation No. 833/2014 forms part of the EU’s judicial defence system.

European parties without current business relationships to Russia and without any plans to conduct business there in the near future may wish to consider claiming damages in an EU state court or before a competent arbitral tribunal. Those with ongoing business in Russia risk having their Russian assets seized and lost, as it is safe to assume that Russian parties will seek injunctive relief against these proceedings or claim damages against them in Russia.

Attempts to have such judgments/arbitral awards against Russian parties recognised and enforced outside the EU may be challenging. Furthermore, European parties may face negative consequences if countries outside the EU recognise Russian judgments and decisions against them. Article 11 a of Regulation No. 833/2014 could help to offset those losses.

Overall, the international legal landscape has become significantly more complex. Companies operating across borders must adapt to these developments. Regulation No. 833/2014 reinforces the position of European parties seeking to uphold arbitration or choice of court agreements, aiming to ensure that disputes are resolved by the designated competent forum.

In any event, a European party must carefully consider whether to accept a potential breach of such an agreement or to actively challenge proceedings initiated in Russia. Regardless of the approach taken, it is advisable to safeguard the European party’s interests on all fronts – in Russia, within the EU, and in any other relevant jurisdiction.

Zusammenfassung (Deutsch)

Zusätzlich zu den anhaltenden geopolitischen Spannungen zwischen der EU und Russland haben die Rechtssysteme beider Regionen die Parteien befähigt, gegenseitige Ansprüche geltend zu machen. Während Artikel 248.1 des russischen Gesetzbuchs den russischen Gerichten seit langem erlaubt, trotz Schieds- oder Gerichtsstandsvereinbarungen ihre Zuständigkeit geltend zu machen, hat die EU kürzlich Gegenmaßnahmen eingeführt. Ähnlich wie der Mechanismus der Anti-Anti-Suit-/Arbitration Injunction ist die Möglichkeit, vor den Gerichten eines EU-Mitgliedstaates gemäß Artikel 11 a der Verordnung Nr. 833/2014 Schadensersatz geltend zu machen, Teil des Rechtsschutzsystems der EU.

Europäische Unternehmen, die derzeit keine Geschäftsbeziehungen zu Russland unterhalten und auch nicht vorhaben, in nächster Zeit dort Geschäfte zu tätigen, könnten in Erwägung ziehen, vor einem staatlichen Gericht in der EU oder vor einem zuständigen Schiedsgericht Schadensersatzansprüche geltend zu machen. Diejenigen, die derzeit Geschäfte in Russland tätigen, riskieren, dass ihre russischen Vermögenswerte beschlagnahmt werden und verloren gehen, da davon auszugehen ist, dass russische Parteien Unterlassungsklagen gegen diese Verfahren erheben oder in Russland Schadensersatzansprüche gegen sie geltend machen werden.

Versuche, solche Urteile/Schiedssprüche gegen russische Parteien außerhalb der EU anerkennen und vollstrecken zu lassen, sind schwierig umzusetzen. Außerdem könnten europäische Parteien mit negativen Folgen rechnen, wenn Länder außerhalb der EU russische Urteile und Entscheidungen gegen sie anerkennen. Artikel 11 a der Verordnung Nr. 833/2014 könnte dazu beitragen, diese Verluste auszugleichen.

Insgesamt ist die internationale Rechtslandschaft deutlich komplexer geworden. Grenzüberschreitend tätige Unternehmen müssen sich auf diese Entwicklungen einstellen. Die Verordnung Nr. 833/2014 stärkt die Position der europäischen Parteien, die Schiedsgerichtsvereinbarungen oder Gerichtsstandsvereinbarungen aufrechterhalten wollen, um sicherzustellen, dass Streitigkeiten durch das zuständige Gericht beigelegt werden.

In jedem Fall muss eine europäische Partei sorgfältig abwägen, ob sie eine mögliche Verletzung eines solchen Abkommens akzeptiert oder aktiv gegen ein in Russland eingeleitetes Verfahren vorgeht. Unabhängig von der gewählten Vorgehensweise ist es ratsam, die Interessen der europäischen Partei an allen Fronten zu wahren – in Russland, innerhalb der EU und in allen anderen relevanten Rechtsordnungen.

Dr. Tobias Pörnbacher
Natalia Bogdanova

Note: This article was originally published in IWRZ – Zeitschrift für Internationales Wirtschaftsrecht, 2025, p. 239.

^{1 The scenarios described concern not only European parties, but also parties from other jurisdictions that the Russian Federation considers “unfriendly” (including, for example, Australia, Canada, Japan, Singapore, Switzerland and the USA).}

^{2 For example, the decisions of Russian state courts in cases No. A40-302798/2023 (see https://kad.arbitr.ru/Card/40b71ef4-10e6-433f-a073-844e86c9123e), No. A40-167352/2023 (see https://kad.arbitr.ru/Card/40b71ef4-10e6-433f-a073-844e86c9123e), No. A56-26171/2024 (see https://kad.arbitr.ru/Card/a70273f5-0aca-4386-b4ab-d2115ab53586), No. A56-61398/2023 (see https://kad.arbitr.ru/Card/cd4a18bd-def6-4777-9fe5-a6719608aea5) and No. A57-348/2024 (see https://kad.arbitr.ru/Card/a4b94071-2aba-4e41-888d-9ee335174a45). In all of these and many other cases, the Russian state court disregarded the objections of the foreign respondent that the Russian state court was not competent to hear the dispute given that the contracts contained arbitration agreements in favour of such foreign arbitration institutions as LCIA, SCC, ICC, VIAC, and SIAC, and declared itself competent to hear the dispute on the merits.}

^{3 For example, the decisions of Russian state courts in case No. A40-258467/2022 (see https://kad.arbitr.ru/Card/cf2fddd9-3057-4e5c-85d3-ce0304ea9c14) and case No. A56-74595/2023 (see https://kad.arbitr.ru/Card/63751406-8c80-4adc-aa30-5e3c325e96dd).}

^{4 See Ruling No. 305-ES24-12635 of the Russian Supreme Court dated 12 May 2025 in case No. A40-167352/2023 (see https://kad.arbitr.ru/Card/0bc95653-db00-44dc-97a7-03c58001f0a7).}

^{5For example, see the ruling of the Russian state court in case No. A56-118993/2024 in the dispute of RusChemAlliance LLC vs Linde Group (see https://kad.arbitr.ru/Card/d6ba9ec3-db9e-42af-9039-48cca8305e6a).}

^{6 For example, see the rulings of Russian state courts in cases No. A56-13299/2024 Ruskhimalyans LLC vs Linde GmbH (see https://kad.arbitr.ru/Card/fcd79813-37a2-410c-9ae4-8c25bb7f7e3f), No. A56-103943/2023 PAO VTB Bank vs VTB Bank (Europe) SE (see https://kad.arbitr.ru/Card/2ec5b31c-c967-46ae-9d14-1e5e200f0fbb), No. A28-4778/2024 Mr A.S. Kuvyati vs AS PNB Banka (see https://kad.arbitr.ru/Card/51bff9a1-bee2-4c12-a05f-d127969798e9) and No. A56-90977/2024 RusChemAlliance LLC vs UniCredit Bank GmbH (see https://kad.arbitr.ru/Card/7177a44a-2840-403f-8611-9700baa404c3).}

^{7 See the ruling of the Commercial Court of Moscow in case No. A40-23676/2024 (see https://kad.arbitr.ru/Card/4a820032-5a7b-466f-a97c-64aee4c8e8ed).}

^{8 Judgment of the Court of Appeal of London (Commercial Court) dated 11 February 2025, UniCredit Bank GmbH vs RusChemAlliance LLC – [2025] EWCA Civ 99 (see https://www.bailii.org/ew/cases/EWCA/Civ/2025/99.html).}

^{9 While this decision has yet to be published, information appeared in the mass media, referring to Uniper (see https://www.reuters.com/markets/commodities/uniper-terminates-russian-gas-supply-contracts-after-arbitration-ruling-2024-06-12/).}

^{10 See the High Court of the Hong Kong Special Administrative Region, judgment dated 24 September 2024 – [2024] HKCFI 2529.}

^{11 See the decisions of the Russian state courts in case No. A56-103943/2023 PAO VTB Bank vs VTB Bank (Europe) SE (see https://kad.arbitr.ru/Card/2ec5b31c-c967-46ae-9d14-1e5e200f0fbb).}

^{12 See the judgment of the High Court of the Hong Kong Special Administrative Region dated 27 September 2023 – [2023] HKCFI 2409 (see https://jusmundi.com/en/document/decision/en-linde-gmbh-and-linde-plc-v-ruschemalliance-llc-decision-of-the-court-of-first-instance-of-the-high-court-of-hong-kong-2023-hkcfi-2409-wednesday-27th-september-2023).}

^{13 See the judgment of the Higher Regional Court of Düsseldorf dated 17 June 2024 – 26 W 7/24, ZASA 2024, 549.}

^{14 See the judgment of the Higher Regional Court of Munich dated 12 December 2019 – 6 U 5042/19, GRUR 2020, 379.}

^{15 See the judgment of the Higher Regional Court of Hamm dated 2 May 2023 – 9 W 15/23, EuZW 2023, 1062.}

^{16 In favour: judgment of the Higher Regional Court of Munich dated 12 December 2019 – 6 U 5042/19, GRUR 2020, 379; judgment of the Higher Regional Court of Hamm dated 2 May 2023 – 9 W 15/23, EuZW 2023, 1062; judgment of the Regional Court of Munich dated 20 July 2023 – 7 O 5416/23, GRUR 2023, 1683; judgment of the Regional Court of Munich dated 2 October 2019 – 21 O 9333/19, BeckRS 2019, 25536; Against: judgment of the Higher Regional Court of Düsseldorf dated 17 June 2024 – 26 W 7/24, ZASA 2024, 549; judgment of the Higher Regional Court of Düsseldorf dated 7 February 2022 – I-2 U 25/21, GRUR 2022, 318; judgment of the Regional Court of Essen dated 12 April 2024 – 2 O 447/22, BeckRS 2024, 9781.}

^{17 Judgment of the Rotterdam District Court dated 20 December 2024 in case No. KG ZA 24-1037 (see https://jusmundi.com/en/document/decision/nl-linde-gmbh-and-linde-plc-v-ruschemalliance-llc-uitspraak-van-het-rechtbank-rotterdam-friday-20th-december-2024#decision_71292).}

^{18 See Happ, ZASA 2024, 450.}

^{19 See also Happ, ZASA 2024, 450; Wuschka/Wachholz, SchiedsVZ 2024, 285, 291.}

^{20 See the judgment of the Federal Court of Justice dated 17 October 2019 – III ZR 42/19, NJW 2020, 399.}

^{21 See Schatz, LMK 2019, 422740; rejecting the judgment of the Federal Court of Justice: Kalin, GPR 2020, 234.}

^{22 See Pfeiffer/Weiler, RIW 2020, 641, 648.}

^{23 See Antomo’s notation to the judgment in EuZW 2020, 143.}

^{24 See Pfeiffer/Weiler, RIW 2020, 641; Sandrock, RIW 2004, 809; Korte, GWR 2020, 48; Köster, Haftung wegen Forum Shopping in den USA, 2001, 86; Gottwald in MüKoZPO, 6. Aufl. 2022, Art. 25 Ia-VO Rn. 102.}

^{25 See Pfeiffer/Weiler, RIW 2020, 641; Schatz, EWiR 2020, 95; Skauradszun, DB 2020, 100. If the agreement is not intended to have any binding effect, it should be expressly excluded, see Resch, NZG 2020, 241; arguing that adding the word “exclusively” is preferable to strengthen the legal consequences, see Graf von Westphalen, IWRZ 2020, 39.}

^{26 See the judgment of the Federal Court of Justice dated 17 October 2019 – III ZR 42/19, NJW 2020, 399 (401).}

^{27 See the judgment of the Federal Court of Justice dated 17 October 2019 – III ZR 42/19, NJW 2020, 399 (403).}

^{28 See Pfeiffer/Weiler, RIW 2020, 641; Antomo, in: BeckOK ZPO, Vorwerk/Wolf, 55. Ed. 1.12.2024, Brüssel Ia-VO Art. 1 Rn. 117.1.}

^{29 See Pfeiffer/Weiler, RIW 2020, 321, 328.}

^{30 See Pfeiffer/Weiler, RIW 2020, 321, 328.}

^{31 See the judgment of the Federal Court of Justice dated 17 October 2019 – III ZR 42/19, NJW 2020, 399 (402).}

^{32 See Pfeiffer/Weiler, RIW 2020, 321, 328.}

^{33 See in general the decision of the Federal Court of Justice dated 30 January 2007 – X ZB 7/06, NJW 2007, 3289, m.n. 6.}

^{34 See Schulz, in MüKo ZPO, 7th ed. 2025, Sec. 91 m.n. 28 et seq.}

^{35 See for example Mankowski, IPRax 2009, 23; Gebauer, in FS für Kaissis, 2012, 267; Epping, Die Schiedsvereinbarung im internationalen privaten Rechtsverkehr nach der Reform des deutschen Schiedsverfahrensrechts, 1999, 52; Geimer in Zöller, 35. Aufl. 2023, § 1029 Rn. 112; Münch in MüKoZPO, 6. Aufl. 2022, § 1029 Rn. 38.}

^{36 See the judgment of the Federal Court of Justice dated 17 October 2019 – II ZR 42/19, para 36 et seqq., NJW 2020, 399.}

^{37 See Pfeiffer/Weiler, RIW 2020, 641, 648.}

^{38 See https://www.newyorkconvention.org/contracting-states.}

^{39 See https://eur-lex.europa.eu/eli/convention/2007/712/oj/eng.}

^{40 See https://www.hcch.net/en/instruments/conventions/full-text/?cid=98.}

^{41 See the judgment of the Higher Regional Court of Munich dated 8 November 2021 – 34 Sch 34/18, BeckRS 2021, 44914, m.n. 22.}

^{42 See the judgment of the Higher Regional Court of Stuttgart dated 13 May 2025 – 1 Sch 3/24, IWRZ 2025, 206.}

^{43 See the decision of Kammergericht dated 1 June 2023 – 12 SchH 5/22, BeckRS 2023, 51295.}

^{44 See the ruling of the Supreme Court of the Russian Federation dated 26 July 2024 in case No. A45-19015/2023 (see https://kad.arbitr.ru/Card/90f33ca8-00fd-4247-a3ad-833287c15b3f).}

^{45 See the judgment of the Higher Regional Court of Hamburg dated 13 July 2016 – 6 U 152/11, BeckRS 2016, 15565; m.n. 27 et seqq.}

^{46 See the judgment of the Commercial Court of Saint Petersburg and Leningrad Region dated 23 October 2024 in case No. A56-49800/2024 (see https://kad.arbitr.ru/Card/5c4b5cc8-b202-4e7c-8a6f-002151c0da94).}

^{47 See the ruling of the Commercial Court of the North-West District dated 1 April 2025 in case No. A56-49800/2024 (see https://kad.arbitr.ru/Card/5c4b5cc8-b202-4e7c-8a6f-002151c0da94).}

^{48 Ruling of the Ninth Commercial Court of Appeals dated 24 September 2020 in case No. A40-308642/2018; Ruling of the Commercial Court of the North-Western District dated 4 December 2018 and 10 December 2018 in case No. A56-71378/2015; Ruling of the Commercial Court of the North-Western District dated 6 May 2019; Ruling of the Commercial Court of the Moscow District dated 19 June 2019 in case No. A40-68312/2018).}

^{49 Ruling of the first court of appeal of general jurisdiction dated 14 August 2024 in case No. 66-2003/2024; Ruling of the Commercial Court of the Moscow District dated 1 April 2019 in case No. A40-188140/2018; Ruling of the First Cassation Court dated 21 January 2021 in case No. 8G-27788/2020; Ruling of the Fifth General Court of Appeals dated 14 April 2021 in case No. 66-343/2021.}

^{50 See the judgment of the Higher Regional Court of Düsseldorf dated 17 June 2024 – 26 W 7/24, ZASA 2024, 549, m.n. 51; see Wuschka/Wachholz, SchiedsVZ 2025, 27; Wuschka/Wachholz, SchiedsVZ 2024, 285.}

Case Background

The underlying case involves a German plaintiff, a consumer, who subscribed to profit participation rights in a German public limited company (AG) in October 2007. Following corporate restructuring, the company was converted into a GmbH and merged with a London-based company (the defendant) on 31 December 2018. When informed of the merger in February 2019, the plaintiff terminated her participation without notice in May 2019 and demanded repayment of EUR 7,438.99.

After the defendant refused payment, the plaintiff filed a lawsuit in November 2022 at the Regional Court of Munich I, which upheld the claim. However, the Higher Regional Court of Munich ("OLG Munich") overturned this judgment on 16 September 2024, dismissing the action for lack of international jurisdiction. The OLG Munich argued that the Brussels Ia Regulation was no longer applicable to the UK after Brexit, citing Article 67 (1a) and Article 126 of the Withdrawal Agreement. 

Key Aspects of the Judgement

Application of Brussels Ia Regulation

The BGH confirmed that the Brussels Ia Regulation remains applicable for determining international jurisdiction in cases involving UK defendants. The BGH emphasized that the UK's withdrawal from the EU does not automatically affect the Brussels Ia Regulation's applicability in EU Member States, particularly in the absence of explicit provisions in the Withdrawal Agreement excluding consumer protection mechanisms.

The BGH draws its reasoning from Article 216 Treaty on the Functioning of the European Union (TFEU), which allows the EU to conclude binding agreements with third countries. Since the end of the transition period on 31 December 2020, the UK is considered a third country, but this status alone does not preclude the application of EU jurisdictional rules designed to protect consumers.

Consumer Status and Jurisdictional Requirements

The BGH analyzed why the plaintiff qualifies as a consumer under Article 18 (1) Brussels Ia Regulation. The BGH confirmed the established jurisprudence of the BGH and ECJ that investments in profit participation rights constitute consumer transactions when made for private wealth management rather than professional purposes. The BGH noted that the defendant's predecessor had clearly directed its commercial activities toward German consumers, satisfying the requirements for establishing jurisdiction under the Brussels Ia Regulation. 

Relationship with Withdrawal Agreement

A key aspect of the BGH's judgment is the interpretation of the Withdrawal Agreement. The BGH found that the Agreement does not contain explicit provisions excluding Article 18 Brussels Ia Regulation's application. The BGH reasoned that excluding consumer protection provisions would render many of the Agreement's jurisdictional rules largely meaningless and would place EU consumers in a disadvantageous position compared to their dealings with traders from other third countries.

The BGH applied the "acte clair" doctrine, determining that the correct interpretation of the Withdrawal Agreement was so obvious that no reference to the ECJ was necessary under Article 267 TFEU.

Procedural Outcome and Significance

The BGH overturned the Higher Regional Court of Munich's decision and confirmed the international jurisdiction of German courts under Article 18 (1) Brussels Ia Regulation. However, rather than ruling on the merits, the court remanded the case to the Munich Higher Regional Court for further proceedings, as the lower court had not addressed the substantive issues raised in the defendant's appeal.

This decision aligns with recent jurisprudence from several German Higher Regional Courts (Frankfurt, Hamburg, Köln, Karlsruhe, Celle, and Stuttgart) and reflects academic commentary supporting the continued application of EU jurisdictional rules in post-Brexit scenarios.

Implications and Legal Context

The judgment has far-reaching implications for cross-border litigation involving UK parties. It strengthens legal certainty for EU consumers by ensuring that the special jurisdictional rules of Article 18(1) Brussels Ia Regulation remain available, even when dealing with UK-based traders. The decision underscores the continuing relevance of the Brussels Ia Regulation framework in determining competent courts for consumer matters, maintaining a level playing field for EU consumers regardless of whether they face defendants from within the EU or from the UK.

Looking ahead, an important question arises whether the principles outlined by the BGH will extend to B2B situations. While the BGH's reasoning was firmly grounded in consumer protection arguments the underlying interpretation of the Withdrawal Agreement's relationship with the Brussels Ia Regulation could have broader application. The BGH's analysis that the Withdrawal Agreement does not contain explicit provisions excluding the Brussels Ia Regulation's jurisdictional rules may provide a foundation for similar arguments in commercial disputes. However, the absence of equivalent protective considerations in B2B contexts could lead courts to adopt a more restrictive approach, potentially limiting the judgment's impact to consumer cases.

The BGH's approach reflects a balanced interpretation of the Withdrawal Agreement that preserves consumer protection rights while respecting the UK's new status as a third country, demonstrating how EU legal principles can continue to provide effective remedies in the post-Brexit legal landscape.

Dr Tobias Pörnbacher

D&O insurance taken out without disclosing the 'front director' status

In the case at hand, the 'front director' sued the D&O insurer for payment. He had stepped in when the founder of a German private limited liability company (GmbH) joined the civil service as a police officer and had to resign as managing director for legal reasons. As a result, the plaintiff had himself entered in the commercial register as managing director in June 2018 and granted the former managing director power of attorney for all commercial matters (Prokura). The former managing director continued to run the company's business alongside his main occupation as a police officer. The plaintiff was - in his own words - a 'managing director on paper' only. 

In May 2020, the plaintiff, as the legal representative of the GmbH, took out a D&O insurance policy with the defendant. When doing so, he failed to disclose the true management situation. The policy contained a clause stating that the defendant waived the right to contest the contract on the grounds of fraudulent misrepresentation, but that the persons committing the fraud were excluded from insurance cover.

On 1 October 2022, insolvency proceedings were opened over the company's assets and the insolvency administrator made a claim against the plaintiff under section 64 of the old version of the German Limited Liability Companies Act (GmbHG) (now section 15b of the German Insolvency Code (InsO)) for payments made by the company after it had become insolvent. The plaintiff sought indemnification from the insurer, who refused to provide cover. After the plaintiff had lost the first instance and lodged an appeal, the Hamm Higher Regional Court issued the commented decision.

No D&O cover provided for 'front directors'

The Hamm Higher Regional Court ruled that the defendant did not have to provide any insurance cover. The plaintiff had fraudulently misled the defendant when taking out the policy. Under the principles of good faith, he should have informed the defendant of this circumstance even without being asked about it.

The Court concluded this from the explanatory memorandum on section 19(1) of the German Insurance Contracts Act (VVG), which did not exclude avoidance for fraud. According to this rule, there was only an obligation to provide information on circumstances involving a significant risk that was requested by the insurer. A spontaneous duty of disclosure therefore had to meet high standards. It only applied where there existed obviously risk-relevant circumstances that were so rare and remote that the insurer could not be blamed for not having enquired about them.

It was evident that a merely formal managing director who is neither willing nor capable of fulfilling his duties as managing director was not acting with the due care of a prudent businessman. He therefore significantly increased the risk of becoming liable to pay damages to the company. This certainly applied if, as was the case here, the de facto managing director was unable to fulfil his corporate responsibilities due to his other, principal professional activities. Since the insurer would not have issued the policy if the required information had been provided and the Court assumed wilful intent, the Court affirmed fraudulent misrepresentation.

Disclosure of 'front director' status is necessary even when not asked for

D&O policies usually cover the liability of all managing bodies and senior executives of a company and its subsidiaries. This generally includes all formal and actual directors. Before an insurance policy is issued, the insurer regularly assesses the risk on the basis of a more or less standardised list of questions. Hence, insurers are free to ask risk-related questions to determine the circumstances that are relevant for deciding whether or not to issue a D&O policy to a company. If an insurer does not ask a question about a particular circumstance, the policyholder can generally assume that this circumstance has no relevance for the insurer's risk assessment.

With the commented decision, however, the Hamm Higher Regional Court makes it clear that the policyholder's duty to provide information to a D&O insurer is not limited to answering the risk-related questions truthfully. The Court sets high standards for a spontaneous duty to provide information and follows the strictest view expressed in legal literature, which has become the predominant view in the rulings of higher regional courts by now. A policyholder only has to disclose such circumstances without being asked that, on the one hand, have an obvious risk potential and, on the other hand, are so unusual that an insurer cannot reasonably be expected to ask any specific questions about them. In the commented decision, the 'front director' status of the sole managing director was such a circumstance.

The decision is therefore hardly surprising. In a ruling of 4 May 2016 (case no. 1 O 143/14), the Mönchengladbach Regional Court had also considered the status as a 'front director' to require disclosure. The Mönchengladbach Regional Court, however, found no evidence of fraudulent misrepresentation in that case, as it remained unclear whether the insurer was informed of the 'dummy' construct when the insurance was taken out. The plaintiff nevertheless did not receive cover in this case either, as the defendant D&O insurer was able to invoke exclusion on the grounds of wilful breach of duty. According to the Mönchengladbach Regional Court, the timely filing of an insolvency petition is a cardinal obligation where a breach of duty is presumed to be intentional.

The fact that the insurer became aware of the 'front director status' and was also able to prove this in court was, in the commented decision of the Hamm Higher Regional Court, largely due to the statements made by the formal managing director following the notification of the claim.

High risk involved for 'front directors'

The risk for 'front directors' is extremely high: they may be held liable with their personal assets (e.g. under section 15b(4) sentence 1 InsO, section 69 sentence 1 of the German Fiscal Code (AO) or section 43(2) GmbHG) even if they stay completely out of the company's business, and they must also fear that a D&O insurer may refuse to provide cover. The commented decision once again underlines that a registration in the commercial register as a matter of courtesy and without the intention of actually running the company's business can have devastating consequences and should not be made without careful consideration.

Dr Florian Weichselgärtner
Etienne Sprösser

This article was first published in the Versicherungsmonitor magazine on 13 January 2024. Here you find the original article (available in German only).

First of all: BAFA's explanations are not a law, but the legal opinion of the supervisory authority, which may not always be correct. It is therefore worth seeking expert advice when you are confronted with requests for information from BAFA as the addressee of the Supply Chain Act in order to set the right priorities. This is all the more important in view of the new reporting channel created by BAFA for suppliers feeling that they are being treated inappropriately by those bound by the Act. It would almost be a miracle if this new reporting channel, which can be used anonymously, did not lead to a large number of incident-related enquiries from BAFA to the addressees of the LkSG. But more on that further below.

According to BAFA, the FAQ paper is primarily meant to 'complement' the guidances on risk analysis, on collaboration in the supply chain and on appropriateness (BAFA - Guidances) with the aim of 'explaining how companies can effectively implement their due diligence obligations'. Whether BAFA has actually achieved this goal with the FAQ paper is a matter of personal judgement. The new FAQ paper clearly builds on the existing guidances, in particular on collaboration in the supply chain, so that companies subject to the obligations will find much familiar information in it.

• Companies are expected to obtain an overview of their suppliers, identify risks using an abstract risk analysis based on general sources and only then, if necessary, examine the risks so identified in detail with the suppliers concerned.
• Companies are to prioritise those risks on the basis of the appropriateness criteria and do not need to address all risks.
• Companies cannot simply replace the risk analysis by referring to contractual assurances or corresponding certificates of risk-free supply chains from suppliers.
• Suppliers not included in the 'general risks' identified during the abstract risk analysis of the company's supply chain do not need to be examined in the detailed risk assessment.
• General and indiscriminate enquiries to a supplier not falling within the identified general risks are inappropriate.
• Confronting suppliers with prevention measures such as training, contractual obligations or codes of conduct on an indiscriminate basis, regardless of the identified risk exposure, may be deemed inappropriate and generally ineffective by BAFA.

BAFA's desire to protect SMEs, as those indirectly affected by the LkSG, from unreasonable efforts is evident. However, BAFA is also emphasising the advantages for the actual addressees of the Act: they have much leeway in deciding which risks to tackle first, which measures make sense and which (high-risk) suppliers to focus on. They can and should prioritise. The LkSG does not stipulate a specific minimum or maximum number or a specific percentage. It is also an advantage for the addressees of the Act to have to deal with a much smaller number of supplier responses.

That is certainly true in principle. In reality, it is not uncommon for large companies to have more than 10,000 direct suppliers. The abstract risk analysis alone requires much effort here and even if abstract risks were identified for only 10% of these direct suppliers, it would still be an almost insurmountable mammoth task to examine the abstract risks in concrete terms and, if specific risks were identified, to agree individually customised preventive measures with hundreds of direct suppliers, as BAFA apparently expects according to the guidance and the FAQ paper. BAFA emphasises that companies should deploy their resources in a targeted manner but leaves it open which resources the business must use in order to be able to fulfil the mammoth task of a specific, individualised approach. As though this were not enough work, BAFA also states that companies should, as a rule, favour direct contact with those indirect suppliers in the deeper supply chain who are most likely to pose risks given the results of the risk analysis. Any company that has ever tried to contact raw material producers outside Europe across several stages of the supply chain knows that this is more of an adventure than part of normal business. That is, if you get the contact details of the indirect supplier at all. In its guidance on risk analysis, BAFA stated that companies are 'encouraged' to 'successively endeavour to increase transparency in the supply chain'. Although this sounds sensible at first, it leaves essential questions unanswered, for example as to the legal basis for the requirement and the scope of the successive endeavours that may be required.

What does all this mean for the addressees of the LkSG? Suppliers for which no risks are apparent when analysing industry and origin should not be bothered with questionnaires or codes of conduct. This is certainly a relief. Beyond that, however, it becomes difficult to give a recommendation. We believe that the key must unavoidably be the depth of the specific risk analysis and a strict prioritisation of a handful of truly relevant risks that the company can realistically tackle with the ambition and expectation of improving the situation. Wait, wasn't that actually the aim of the LkSG? Extensive organisational work with questionable benefits in terms of the rights to be protected by the Act certainly was not.

The FAQ paper also fails to explain how to sensibly proceed as suggested. Instead, when considering specific risks, the paper simply states that it is 'at the discretion of the company to choose an appropriate and effective method for obtaining information when determining the risks'. General and indiscriminate enquiries to a supplier beyond the identified general risks would not count as such. What would? General and indiscriminate enquiries to all suppliers within an identified general risk area? Or even asking individualised, specific questions to all suppliers within the general risk areas? Encouraging the addressees of the Act to limit themselves to realistically manageable queries and data volumes with a view to the aforementioned objective should clearly look different. A modular system for questionnaires might be an option, from which only certain modules will be used, depending on the industry and region of origin, once the suppliers have been clustered according to abstract risks. But even then, the company is likely to be confronted with a substantial data volume as a result. But what for if only a few priority risks will be left for the subsequent prioritisation anyway?

More trouble is looming when it comes to preventive measures. It is our belief that companies should continue to agree supplier codes of conduct, which are used by most of the addressees of the Act and beyond, at least with their high-risk suppliers. Customisation does not appear to be practical or necessary in this respect, even though BAFA apparently takes a different view. Standardised supplier codes of conduct were used in the market long before the LkSG came into force and were widely recognised as being effective. What exactly should be unreasonable or inappropriate about obliging your direct suppliers to respect fundamental human rights? After all, BAFA has not (yet?) challenged companies' internal practice of having employees sign a code of conduct with comparable obligations as being inappropriate. It is clear, however, that the supplier code of conduct must not go beyond the intended purpose and impose duties of care on suppliers that have originally been imposed only on the addressees of the Act, such as the implementation of a risk management system, in particular for the purpose of communicating the results of the risk analysis to the client/addressee of the Act or a complaints procedure. How the agreement of a customised supplier code of conduct is to be successfully agreed on an ad hoc basis in an ongoing contractual relationship as a preventive measure for identified specific risks relating to a supplier, and what the advantage is compared to an abstract general commitment to essential human rights, remains BAFA's secret.

Yet, BAFA also uses the FAQ paper to announce the key topic for the next inspections of companies: from now on, it will pay particular attention to the implementation of the risk-based approach by companies in its inspections and sanction any infringements. 'Anyone who fails to take a risk-based approach or who attempts to pass on their due diligence obligations to other companies is neither acting adequately nor acting effectively on a systematic basis and is therefore not fulfilling their own obligations.'

And it gets even better: Suppliers who are contacted by a contractual partner bound by the LkSG on a blanket and non-risk-related basis can now report this to BAFA (also anonymously) at the following contact address: LKSG.Kontrolle@bafa.bund.de. BAFA may use such information to initiate an audit by sending a written request for information to the company. Disputes with suppliers over the completion of standardised questionnaires and excessive codes of conduct may therefore fall back badly on the addressee of the Act in the form of a request for information from BAFA. The problem is that not every tip-off from a supplier is automatically justified.

Although the information provided by BAFA in the guidances and FAQs, as already said, is not legally binding and no court rulings have been handed down on the issues raised, it is unpleasant enough for companies to have to undergo intensive investigations by BAFA and to possibly be fined, even if the decision is later revoked by a court.

But it does not have to come to that. At least the last sentence in BAFA's FAQs sounds reasonable for the addressees of the Act: 'BAFA will appropriately consider plausible presentations of the risk-based approach with a view to the company’s efforts to meet the corporate due diligence obligations.' This means that companies know what they have to do, at least in principle: if they have not already done so, they should document and implement a coherent concept in which, based on the risk analysis, a large part of their suppliers remain unaffected and suppliers with clearly identified risks are required to comply with a moderate supplier code of conduct and, where necessary, are subjected to additional preventive measures such as targeted training and checks.

Dr André Depping
Dr Daniel Walden

Case Background

The dispute arose from an asymmetrical jurisdiction clause in an international contract related to a project undertaken by two individuals. The contract specified that disputes would be resolved by the court of Brescia, Italy. However, it also granted SIL the right to initiate legal proceedings in any other competent court, whether in Italy or abroad.

This type of clause is characterized by granting one party discretionary choice of jurisdiction, while binding the other party to a fixed forum. In this instance, SIL retained the ability to select the jurisdiction, whereas Agora was restricted to the court of Brescia.

Following alleged defects in project execution, both SIL and Agora were sued for liability and damages before the Regional Court of Rennes, France. Subsequently, Agora initiated proceedings in France against SIL based on a guarantee. SIL contested the French court’s jurisdiction, but both the Regional Court of Rennes and the Cour d'Appel ruled in favour of French jurisdiction.

Legal Issue

The Cour de Cassation referred the matter to the ECJ, questioning whether the asymmetrical jurisdiction clause aligned with the Brussels I Regulation and consumer protection principles. Specifically, the ECJ was asked to assess whether such a clause placed the weaker party at an unlawful disadvantage and whether it was legally enforceable. This necessitated an interpretation of Article 25 (1) of the Brussels I Regulation, particularly regarding the validity of jurisdiction clauses.

Key Aspects of the Judgment

The ECJ determined that an asymmetrical jurisdiction clause is not inherently invalid. Such clauses may be upheld if they comply with the Brussels I Regulation and do not impose an unfair disadvantage on the weaker party.

The court emphasized that the validity of such clauses must be assessed on a case-by-case basis. In this instance, the ECJ found no undue disadvantage for Agora, ruling that the clause remained effective as it did not contravene the Brussels I Regulation. Since the contract was purely commercial and concluded between two businesses, the consumer protection provisions of the regulation were deemed inapplicable.

The ECJ reaffirmed that jurisdiction clauses contribute to contractual freedom and legal certainty, both of which are protected under the Brussels I Regulation. Given that both parties had freely negotiated and agreed to the terms, the fact that Agora lacked the same jurisdictional flexibility as SIL did not constitute an impermissible disadvantage.

Conclusion

The ECJ's ruling in the SIL v. Agora case has significant implications for the enforceability of asymmetrical jurisdiction clauses in international commercial contracts. The judgment reinforces legal certainty in cross-border agreements and clarifies that such clauses are not inherently invalid but must be scrutinized on an individual basis to ensure compliance with the Brussels I Regulation and applicable legal principles. Ultimately, the ruling affirms that commercial parties’ contractual autonomy influences the validity of jurisdiction clauses.

Dr Ralf Hafner
Dr Tobias Pörnbacher

This is the third post in a series of blog posts on the topic of Football and the Law. While the first post (here) looked at the competitions and the second at the clubs (here), this third post focuses on the players. The article highlights the latest legal developments in relation to players and explains why a large number of further legal disputes (litigation) can be expected.

Fifa Regulations and national law

Professional football players are fundamentally employees, which means that their respective contracts fall under national (employment) law while the rules of the various football associations also apply. These are laid down by FIFA, the world football association, but are implemented by each national association. The FIFA "Regulations on the Status and Transfer of Players" (RSTP) stipulate, among other things, that a professional football player cannot change employers at will. Instead, player transfers must be registered with the national association within certain time frames, the so-called transfer periods, and players are not allowed to participate in competitions without registration. Failure to comply with these rules can result in significant penalties for both clubs and players. Furtherrules of association law can be drastic for professional footballers.

The case of Dani Olmo and Financial Fair Play

The case of Spanish international Dani Olmo is an example of how of the overlaps between national employment law and the self-imposed rules of Football associations can restrict the activities of players and clubs. Following his transfer from RB Leipzig to FC Barcelona, Dani Olmo was recently denied registration and thus eligibility to play in the second half of the Spanish league because his club, FC Barcelona, allegedly failed to comply with UEFA's Financial Fair Play rules. It was only after FC Barcelona had improved its balance sheet by selling usage rights to VIP boxes that the Spanish FA granted temporary permission to play (see reports here Dani Olmo: Barcelona forward granted temporary permission to play - BBC Sport and here: Laporta cierra un acuerdo de 100 millones para inscribir a Olmo y Pau Víctor | Marca). A final decision on the registration is still pending. 

Limits under European law

However, the far-reaching effects of the FIFA Regulations, as illustrated by the Dani Olmo case, are subject to the limits of European law. These limits have been shifted in favour of the players in current proceedings. The proceedings are based on the case of the player Lassana Diarra, whose change of club failed due to a lack of registration in accordance with FIFA rules. The player sued FIFA and the Belgian national football association for damages. The case is pending before the Court of Appeal in Mons (Belgium), which referred the question of whether FIFA's transfer rules (RSTP) comply with European law to the Court of Justice of the EU (CJEU) for a preliminary ruling. 

In its ruling of October 4, 2024, the CJEU (C-650/22 Link: CURIA - Documents) ruled that FIFA's rules on player transfers violate European law. Although FIFA may regulate the transfer market in the interest of sport, it must also respect the free movement of workers in accordance with Art. 45 of the Treaty on the Functioning of the European Union (TFEU) and may not unlawfully hinder competition in accordance with Art. 101 TFEU. The CJEU generally finds that the RSTP violates European law and criticizes in particular the harsh sanctions and the undefined legal terms of the RSTP. 

The Diarra proceedings have not yet been concluded and will continue before the Court of Appeal in Mons (Belgium). However, it confirms a trend that is already known from the Superleague ruling of the CJEU (judgment of December 21, 2023 European Superleague Company, C-333/21, EU:C:2023:1011). In this case, the CJEU also found that competition was unlawfully impeded and ruled that the organisation of football competitions constitutes an economic activity to which European competition law applies. In the Diarra case, the CJEU applied this reasoning to the players. Consequently, the practice of sport by players (as well as the organisation of competitions) is also an economic activity to which the rules of EU law apply. Also with regard to players, the CJEU subjects FIFA and UEFA to stricter control than before and thus continues the development that began with the Superleague ruling (see the first blog post in this series here). Dani Olmo could also benefit from this development.

Effects and Outlook

The CJEU has ruled that FIFA's rules are in principle contrary to European law. However, FIFA's rules could be covered by exceptions, the existence of which must now be decided by the Court of Appeal in Mons. In order to make use of the exceptions, FIFA would have to show that its rules are necessary for the proper conduct of club competitions. 

However, the CJEU's clear criticism of FIFA's transfer rules should prompt FIFA to reform its transfer rules, regardless of the outcome of the Diarra case. The reform should lead to greater flexibility for players when changing clubs. This could in turn lead to lower transfer fees in the future, as the selling clubs would have fewer opportunities to retain a player. The record-high transfer fees of the last transfer period would then be a thing of the past.

In addition, an increase in legal disputes is to be expected. In disputes with clubs, players can invoke the increased control density of European law. At the same time, clubs may be prompted to take action against players in breach of contract using national contract and tort law. For the further disputes to be expected in the area of sport, the applicable arbitration agreements, which can supersede state jurisdiction, must always be taken into account. The Diarra case was also initially brought before arbitration courts before it reached the CJEU. 

We are proud to have qualified in the Legal 500 league as one of the "Firms to watch" in Commercial Litigation (The Legal 500 Germany 2025) with ADVANT Beiten and are happy to advise you on all aspects of dispute resolution in and out of court, whether in or out of sport and whether before arbitration tribunals or state courts.

Philipp Sahm
Chiara-Lucia Peterhammer

The Corruption Directive-D is intended to overcome obstacles that have been identified in cooperation between the authorities of the various Member States. The existing instruments, i.e. the Council Framework Decision 2003/568/JHA and the Convention on the fight against corruption involving officials of the European Communities or officials of Member States of the European Union, are not comprehensive enough in the opinion of the Council, as corruption is prosecuted differently from Member State to Member State. The recitals of the Corruption Directive-D state, among other things, that:

[…] These instruments are, however, not sufficiently comprehensive, and the current criminalisation of corruption varies across Member States hampering a coherent and effective response across the Union.

"[…] Corruption is a transnational phenomenon that affects all societies and economies. Measures adopted at national or Union level, should recognise this international dimension. […]"

In Chapter 2 "Corruption Offences", the Corruption Directive-D provides for minimum standards for

• offences (see 1),
• penalties and measures for natural persons and/or legal persons (see 2), and
• a catalogue of mitigating circumstances (see 3).

1. Offences under the Corruption Directive-D

The following offences are proposed:

• Bribery in the public sector, Art. 7 Corruption Directive-D,
• Bribery in the private sector, Art. 8,
• Misappropriation, Art. 9,
• Trading in influence, Art. 10,
• Abuse of functions, Art. 11,
• Obstruction of justice, Art. 12, and
• Enrichment from corruption offences, Art. 13. 

Articles 7 to 9, Article 12 and Article 13 define minimum standards for offences already contained in the German Criminal Code (Sections 331 et seq., 299, 266, 246 (2), 240 and 261 of the German Criminal Code). In this respect, adjustments may need to be made at most. Necessary adjustments with regard to the definition of advantage (see 1.1) and the effects of the definition of "public official" (see 1.2) are to be emphasised.

Articles 10 and 11, on the other hand, define minimum standards for criminal offences that are not yet known in this form in German criminal law and would therefore have to be newly introduced. Of particular note here is the trading in influence (Art. 10) (see 1.3). Unlike the European Commission's proposal of 03 May 2023, the Corruption Directive-D does not provide for attempted criminal liability (see 1.4).

1.1 The "undue" advantage 

Art. 7 defines advantage differently from Sections 299 and 331 et seq. German Criminal Code. While any advantage is sufficient for criminal liability under Sections 299 and 331 et seq. German Criminal Code, Art. 7 requires an undue advantage. The German Criminal Code already recognises this addition from Sections 108e and 108f German Criminal Code. According to the explanatory memorandum to Section 108e German Criminal Code, it is intended to take account of the special nature of bribery of members of parliament, as there are benefits in the political arena that appear to be permissible under general parliamentary practice. However, it is doubtful whether this principle can also be applied to the other corruption offences under the German Criminal Code. 

1.2 The definition of "public official"

The term "public official" is used throughout Art. 7 et seq. and is legally defined in Art. 2 para. 2. Public officials are accordingly Union or national officials of a Member State or a third country as well as persons who have been entrusted with public functions under national law and carry out such functions or persons who have been entrusted with public functions for an international organisation or international court and carry out such functions.

The term ‘national official’ according to Art. 2 para. 2 lit. a) ii) covers any person holding an executive, administrative, or judicial office at national, regional or local level. Thus, the Corruption Directive-D assimilates any person holding a legislative office to a national official. According to these guidelines, the German legislator would have to abandon the current differing criminal law treatment of elected representatives and public officials and establish a harmonised system.

1.3 Trading in influence, Art. 10

Art. 10 criminalises the so-called trading in influence. In contrast to the bribery offences under the German Criminal Code, an offence is to be introduced in which the advantage is not promised or granted to a public official. The advantage is promised to a person who "exerts illicit influence over a decision or measure to be taken by a public official in the exercise of that official’s functions" with a view to obtaining an undue advantage from that public official. As a result, a preparatory act in a tripartite constellation of persons is criminalised, which the German Criminal Code has known for the first time since the introduction of Section 108f German Criminal Code and which we have already examined here.

1.4 Attempted misappropriation

Unlike the Proposal for a Directive of the European Commission on combating corruption dated 03 May 2023, the Corruption Directive-D does not provide for attempted criminal liability. The reason for this could be the criticism of the introduction of attempted misappropriation.

2. Penalties and measures for natural and legal persons

For natural persons, Art. 15 provides for minimum standards for a maximum term of imprisonment (at least two years to four years as a maximum). In addition, it will be possible under Article 15 para. 4 to impose further sanctions such as fines, the removal, suspension and reassignment from a public office, or withdrawal of permits and authorisations to pursue activities that resulted in or enabled the relevant offence.

For legal persons, the turnover-related fine (Art. 17 para. 3) is to be emphasised in particular. According to this, the maximum level of such fines should not exceed 3% or 5% of the total worldwide turnover of the previous financial year of the legal person, or alternatively at least EUR 24 million or EUR 40 million, depending on the offence.

3. Mitigating circumstances

Art. 18a contains a catalogue of mitigating circumstances that can be transposed into national law. This includes, in particular,

• the implementation of internal controls and compliance programmes to prevent corruption (both prior to or after the commission of the offence), and
• the voluntary self-disclosure and the initiation of remedial measures.

In particular, the consideration of compliance programmes in the assessment of fines now corresponds to established case law. 

4. Outlook for companies

As a result, companies are likely to face higher sanctions in cases of corruption. Companies should monitor further developments in order to be able to adapt their compliance requirements in good time if necessary. 

Dr Oliver Ofosu-Ayeh

This is the second in a series of blog posts on the topic of football and the law. Based on current developments, the second instalment deals with the question of why football clubs establish cooperatives.

What is a cooperative?

A cooperative is a company the purpose of which is to promote the economic, social or cultural interests of its members through joint business operations. In contrast to other forms of company where the focus is on making a profit, cooperatives focus on the cooperative members and their support. Cooperatives are characterised by the so-called identity principle, which states that the members are at the same time co-sponsors of the cooperative's decision-making, investors by paying into the shares, and business partners of the cooperative. A cooperative is allowed to make profits, but must convert profits into support services (and not just money) for the benefit of its members. Furthermore, the cooperative is described as particularly democratic, as each member has one vote in principle, regardless of how many cooperative shares they have subscribed to. Members of the cooperative are not personally liable.

Cooperatives in professional Football

While the role of cooperatives as banks (providing their members with banking services) or in housing construction (providing their members with housing) has a long tradition in Germany, the interest of football clubs in this legal form is new. In the case of FC Schalke 04 and FC St. Pauli, the clubs want to secure their financing by founding a cooperative, issuing cooperative shares in return for the payment of a sum of money and raising a total of tens of millions. Financing through the issuance of cooperative shares is intended to strengthen equity without the clubs having to borrow money from outside investors. Purchasers of cooperative shares get a say in the cooperative and a share of the profits in return. In fact, according to their own statements, both football clubs have already issued over 10,000 cooperative shares and collected several million each (cf. reports by FAZ and The Athletic).

At both football clubs, the new cooperatives are to operate their respective stadiums. However, the legal form of a cooperative is not suitable for the licensed players' section. These are subject to the so-called 50+1 rule of the DFB statutes. According to this rule, the parent club must hold at least 50% of the voting rights plus an additional voting share. The (controversial) rule deserves its own blog post and is intended to prevent investors from gaining complete control over club teams. Compliance with the 50+1 rule is not possible in a cooperative because each member has one vote. Although multiple voting rights are possible, they are subject to strict limits.

Reform of the Cooperatives Act

The interest of football clubs in cooperatives coincides with a reform of the Cooperatives Act which came into force in January 2025. The aim of the reform was precisely to increase the attractiveness of this legal form. In particular, the cooperative projects at Schalke and St. Pauli directly benefit from the fact that the reform removes the written form requirement. Previously, membership of a cooperative could only be acquired by submitting a written declaration of accession. The legislator no longer considered a handwritten signature on paper to be in keeping with the times. Since the beginning of January, a declaration of accession in text form has been sufficient, meaning that membership can now also be acquired online. It is therefore possible to issue cooperative shares digitally.

The establishment of (funding) cooperatives as a financing vehicle is a form of crowdfunding. It is not limited to football and requires - in addition to compliance with the special features of cooperatives - a wide reach. Football clubs with a large number of members already have the latter. However, there are also large clubs outside of sport for whom this form of financing could be both interesting and viable.

Philipp Sahm
Chiara-Lucia Peterhammer

This is the first post in a series on the topic of football and the law. The series takes current developments in the sport as an opportunity to shed light on legal issues. In this first article, we examine who is allowed to organise football competitions and why the courts are involved. The article shows how litigation has developed and will continue to shape the law of the beautiful game.

The Super League is back

When plans to establish a new European club competition called the „Super League“ were published by 12 football clubs in April 2021, this sparked so much resistance that the project was abandoned within a few days. Now the Super League is back: on 17 December last year, A22 Sports Management S.L. launched a new attempt to obtain official recognition from UEFA and FIFA for the new competition in a modified form and with a new name: "Unify League" (see reports by the FAZ and The Guardian). The project has prominent supporters in Real Madrid and FC Barcelona.

The "constitution" of Football 

Who is allowed to approve football competitions? The question is not only economically exciting, but also legally. This is because there is no special state "football law" or European "sports regulation". Instead, football law is a self-imposed (internal) law of the clubs. So what prevents a private company, such as the initiator of the Super League – now Unify League- , from running its own football competition? The answer: it is the sanctioning power of the associations, in particular FIFA and UEFA. Football is organised by associations in the form of a pyramid. The individual football clubs are subordinate to regional and state associations and, in Germany, to the DFB as the supreme umbrella organisation. In Europe, the "Union of European Football Associations" (UEFA) stands above this. UEFA is in turn one of the six continental confederations of FIFA, the world football association. The upper associations exercise sanctioning power over the subordinate associations.

Although a club could decide to take part in a competition not approved by UEFA, such as the Super League, it would then face sanctions from the associations and could be excluded from playing in the Bundesliga, for example. The football associations can de facto make participation in competitive competitions impossible by imposing severe sanctions and thus act as "gatekeepers" for the market of professional football competitions.

European law and free competition

However, the traditional set up, of football is increasingly being called into question. New court rulings in particular have contributed to this by further developing the application of competition law to football. The starting point for the changes was a commercial court in Madrid, which referred the matter to the Court of Justice of the EU (CJEU) for a preliminary ruling. The CJEU ruled that EU competition law also applies to football and that the monopoly position of FIFA and UEFA is in breach of European law. The Treaty on the Functioning of the European Union (TFEU) is decisive for the question of whether football associations are allowed to prevent competitions. This regulates the European internal market, in particular the free movement of goods and services. As football competitions are a cross-border economic activity, the rules of European competition law apply to them. In the Super League case, the CJEU ruled that the sanctions threatened by the football associations constitute an unlawful restriction of competition. UEFA was exploiting its dominant market position in an unlawful manner. Instead, it must establish transparent and non-discriminatory criteria for the approval of new competitions. In May 2024, the Madrid Commercial Court finally ruled (see reports here by Sportschau and BBC Sport) that UEFA and FIFA had abused their market power by arrogating to themselves the power to prohibit participation in third-party competitions.

What does this mean for the Football associations?

However, the special position of UEFA and FIFA was not completely abolished. On the contrary, the CJEU has even strengthened the role of football associations in certain respects. It has recognised that football has a special social and cultural significance. This, as well as the large number of national and international competitions, justify the standardisation and coordination of football by uniform associations. The associations may monitor compliance with the necessary rules and, if necessary, impose sanctions, without this necessarily constituting an abuse of a dominant position. However, the special characteristics of professional football do not justify UEFA and FIFA being allowed to prevent any competitor from accessing the market. The associations do not have to admit every competitor, but they are obliged to establish transparent and non-discriminatory rules for admission. The decisions of the CJEU and the Madrid Commercial Court therefore do not mean that new competitions cannot be prohibited by the football associations. The CJEU has not fundamentally abolished the commercial monopoly of FIFA and UEFA, but it is subject to stricter controls.

What does this mean for the Super League?

Whether the new UEFA rules meet the legal criteria of the CJEU is already controversial. Due to their economic importance alone, further litigation on the topic of football competitions be expected in the future. It is therefore right to speak of "Super League = Super Litigation" (as Jan Zglinski does in his article "Who Owns Football" which is well worth reading). At this point in time, it is so not clear if any games will ever be played in the Super League (or Unify League). But it is very likely that further court cases will be brought about.

Philipp Sahm
Chiara-Lucia Peterhammer

Introduction

The discussion about the irrebuttable presumption of joint action where there are family connections in business affiliations continues to cause confusion and considerable legal uncertainty with regard to their final accounts. In particular, the publication of the new guidelines by the Federal Ministry of Economics and Technology (Bundeswirtschaftsministerium, BMWK) on 19 July 2024 has not made the situation any easier, but has led to more controversial issues instead. The current practice of the granting authorities remains confusing.

Irrebuttable presumption or just a general rule?

Until mid-2024, the general rule of the granting practice was that family ties (for instance between spouses, parents and children or siblings) were always regarded as the basis of a business affiliation. This irrebuttable presumption (unwiderlegbare Vermutung) in many cases led to businesses being classified as affiliated although they operated independently.

With the new guidelines of 19 July, the BMWK appears to have watered down this general principle. It no longer speaks of an irrebuttable presumption, but merely of joint action to be 'generally' assumed where there are family connections. At the same time, it emphasises that atypical cases must be taken into account.

This statement, however, raises new questions:

• What is an atypical case? The guidelines do not provide any clear criteria as to which constellations could deviate from the general rule.
• Legal uncertainty: granting authorities and applicants must assess for themselves whether their situation constitutes an atypical case, something that will inevitably lead to inconsistent assessments and legal disputes.

Moving backwards: practice in Bavaria and other German federal states

While the BMWK gives the impression that the irrebuttable presumption has been abandoned, policies practiced in Bavaria point in a completely different direction. A circular from the Chamber of Industry and Commerce for Munich and Upper Bavaria dated September 2024 confirms that:

• The concept of the irrebuttable presumption still applies in Bavaria.
• No atypical cases are recognised, unless the individuals involved are travelling showpeople or divorced spouses.

This directly contradicts the BMWK's stance that administrative practice must leave room for deviating decisions. It becomes clear that the implementation of the guidelines continues to depend heavily on the regional granting practice, which can lead to considerable distortions of competition.

Other German federal states have not yet taken a clear position on what could be an atypical case either. We see different statements on the issue in practice. As a rule, atypical cases should be cases that deviate so far from the standard that it would be disproportionate to rely on the presumption. The question of when this should apply, however, remains completely open.

Conflict: guidelines and administrative practice

The inconsistency between the BMWK guidelines and regional practice reveals a fundamental conflict:

• BMWK position: in our view, the FAQs and the guidelines are intended to ensure uniform administrative practice nationwide and fair competition between companies. The granting authorities, however, dispute this, arguing that only their administrative practice matters.
• Granting authorities: administrative practice is defined at state level and the FAQs are not regarded as binding law.

This contradiction poses a dilemma for companies and tax consultants: should they rely on the BMWK's nationwide interpretation or strictly adhere to the statements of the regional granting authorities?

Practical consequences and risks for tax consultants

The legal uncertainty surrounding the topic of business affiliations entails considerable risks, particularly for tax consultants who advise their clients on these issues. Typical challenges:

1. Incorrect assessment of an atypical case: tax consultants run the risk of misclassifying family connections, which can lead to repayment claims and potential liability claims.
2. Ignoring the administrative practice of the relevant federal state: even if the BMWK guidelines formally apply, the granting authorities decide on the basis of their own administrative practice.
3. Neglected documentation: without clear and full documentation, including cover letters or expert opinions, clients have almost no protection against claims for repayment.

Recommendations

• Cover letter: every application or final account statement should be accompanied by a legally sound cover letter detailing the individual situation. Such letter can (and should in many cases, especially in contentious ones) also be submitted later. Tax consultants' chambers have informed their members that it is important to justify any deviation from established administrative practice in writing.
• Obtain an expert opinion: in complex cases, an experienced lawyer should be involved to minimise risks.
• Be honest: all relevant family connections and business structures should be disclosed to avoid later sanctions.

An outlook on possible legal developments

The inconsistencies between the FAQs, the new guidelines and regional practice will inevitably end up in court. It is foreseeable that these disputes will go as far as the German Federal Administrative Court (Bundesverwaltungsgericht) or even the European Court of Justice. The focus is particularly on the following question:

• Binding nature of the FAQs: are the guidelines of the BMWK actually binding or can granting authorities set their own rules?
• Is the current practice compatible with constitutional law, in particular Article 6 of the German Basic Law (Grundgesetz) (protection of marriage and family) and Article 3 of the Basic Law (principle of equal treatment)?
• Is the interpretation of the granting authorities compatible with EU law, especially EU fundamental rights?

Tax consultants and companies should therefore be prepared for lengthy disputes and document their cases as well as possible. Experienced lawyers should be consulted in the event of queries from the granting authorities on the subject of business affiliations and families.

Conclusion

The confusion about the irrebuttable presumption for business affiliations once again shows the challenges and uncertainties in dealing with the temporary coronavirus aid. Companies and tax consultants must adapt to regional deviations and at the same time keep an eye on the BMWK's nationwide line.

It is essential for tax consultants to comprehensively inform their clients and to obtain legal support in order to minimise potential liability risks. You can also use the temporary aid network to exchange information with other experts and keep up to date with the latest developments.

We at ADVANT Beiten will be happy to assist you. Please feel free to contact us at any time.

Dennis Hillemann
Tanja Ehls

Amphenol is one of the world’s largest designers, manufacturers and marketers of connectors and interconnect systems, antennas solutions, sensors and high-speed cable.

Luetze International Group is active worldwide and consists of various companies in a holding structure. The group of companies has a tradition of over 60 years in automation and is one of the leading companies in the industry today. Luetze Group offers innovative solutions in the areas of highly flexible cables, cable assemblies, interfaces, power supply and monitoring as well as control cabinet wiring.

Luetze Group's range of services complements Amphenol's portfolio in various segments of the fast-growing electronics market and underlines Amphenol's future-oriented, cross-border positioning.

In this transaction, ADVANT partner firm ADVANT Altana advised on French law, Fox Williams advised on UK law, Havel & Partners advised on Czech law, Kellerhals Carrard advised on Swiss law and E+H advised on Austrian law.

ADVANT regularly advises Amphenol on European M&A projects, most recently ADVANT Altana and ADVANT Beiten jointly advised Amphenol on the acquisition of the CMR Group based in France.

Advisor Amphenol Corporation: ADVANT Beiten: Dr Christian von Wistinghausen, Tassilo Klesen (both lead partners in charge), Olga Prokopyeva (all Corporate/M&A, Berlin), Susanne Rademacher, Lelu Li, Kelly Tang, Dr Jenna Wang-Metzner (all Corporate/M&A, Beijing), Michael Riedel (Labour & Employment, Berlin), Carsten Pütger, Danah El-Ismail (both Real Estate, Berlin), Mathias Zimmer-Goertz, Christian Döpke (both IP/IT/Media, Dusseldorf), Uwe Wellmann (Antitrust Law, Berlin), Christoph Heinrich (Antitrust Law, Munich), Dr Marion Frotscher and Simon Bauer (both Tax, Hamburg).

Advisor Sellers of Luetze Group: Heuking Kühn Lüer Wojtek: Dr. Rainer Herschlein, LL.M., Dr. Emanuel Teichmann (both Corporate/M&A, Stuttgart), Dr. Stefan Bretthauer, Jia-Xi Liu (both Antitrust Law, Hamburg).

Public Relations
Frauke Reuther
Manager Kommunikation
ADVANT Beiten
+49 (69) 75 60 95 - 570
frauke.reuther@advant-beiten.com

Developments like the revision of the UNICITRAL Model Law on International Commercial Arbitration in 2006, as well as various reforms of national arbitration laws and arbitration rules of arbitral institutions, plus the constantly advancing digitalisation of procedural law, were considered for the draft bill as well.

The key objective of the proposed draft bill is (i) to make German arbitration law more efficient, (ii) to adapt it to modern needs and (iii) to promote Germany's attractiveness as a place for arbitration. The last comprehensive reform of the German arbitration law dates back to 1998. With the draft bill, the Federal Government of Germany does not want to regulate German arbitration law anew, but to (i) eliminate some ambiguities that have emerged over time and (ii) adapt it to the realities of today's world. Therefore, the Federal Government of Germany has included only very few completely new regulations and only slightly adapted others to adjust or clarify their scope of application:

1. The New Commercial Courts, Sec. 1062 (5), 1063a, 1065 (3) ZPO-Draft

The biggest innovation in German arbitration law is the introduction of commercial courts which was already introduced in the "Justizstandorts-Stärkungsgesetz" [see our blog: Federal Government of Germany approved on the establishment of Commercial Courts | Advant Beiten (advant-beiten.com)]. The German arbitration law delegates the competence to introduce commercial courts to the Federal States (which are referred to as "Land", or plural "Länder" in the draft). The idea is to establish special divisions at a particular Higher Regional Court or a Supreme Court in the "Länder". Those divisions will be the commercial courts with special expertise in trade and commerce. "Länder" may also create a joint commercial court. Over time the commercial courts will acquire special experience in the deciding of arbitration matters.

What makes a commercial court special is not merely the expertise but that the proceedings can be conducted in English. If such proceedings are appealed to the Federal Court of Justice, the Federal Court of Justice may also on application of a party conduct the proceedings in English. The commercial courts shall promote Germany as a place for arbitration and establish a useful basis of case law.

This regulation depends very much on whether the Federal Court of Justice agrees to the proceedings being conducted in English. It could nullify the advantages of the commercial courts if the Federal Court of Justice does not play along.

2. Loosening of the Form Requirement for an Arbitration Agreement, Sec. 1031 ZPO-Draft

Generally, the arbitration agreement must be in writing. This form requirement shall be abandoned for all-party commercial transactions. The form requirement was entered into the German arbitration law in the changes as to 1 January 1998. Since 2006 the UNCITRAL Model Law foresees the possibility to agree on arbitration without any form requirement, Article 7 Option II. This approach was introduced to the working group by Mexico. It is notable that Art. 1416 (1) sentence 2 Mexican Commercial Code now stipulates that arbitration agreements must be included into a contract or an independent agreement while in Belgium, Luxembourg, Ireland, Scotland and Sweden there is no form requirement. However, most countries still require some form of writing, especially to ensure proof (e.g. Austria, Spain, Italy and the US).

In the event of an all-party commercial transaction the parties do not require the special protection given by the form requirement. The free form of the conclusion of arbitration agreements shall live up to the complex supply chains and framework agreements. If it is unclear which parties may be involved and has obligations to fulfil, the parties may not include an arbitration agreement at first even though they in general agree on arbitration as mechanism for dispute resolution.

Nevertheless, each party is entitled to demand that the other party provides a confirmation of the arbitration agreement's substance in text form. This serves the interest of the parties in documenting their transactions and clarifying the substance of the agreement. Whether such documentation exists, however, has no effect on the existence of the arbitration agreement. Being one of the most criticized changes for its potential to raise conflicts about the existence of an arbitration agreement it remains to be seen whether this change will make it to the final draft. This provision will cause further uncertainties for the parties whether arbitration is the agreed forum for dispute resolution or not. The risks of the provision outweigh in our view the benefits by far.

3. English language, Sec. 1063a/b ZPO-Draft

The introduction of commercial courts and the possibility to conduct proceedings in English is accompanied by the new regulation that any document in English that had been prepared or submitted in arbitral proceedings may be submitted without a translation in a proceeding that is conducted in German. This should help to save time and most importantly costs for the parties as English is the lingua franca in arbitration. A translation must only be submitted if there is a special need. The Federal Government of Germany explains that such a special need may exist if the court does not have sufficient command of the English language. However, the court has the discretion to decide when the threshold of a special need is met.

This proposal follows the needs of arbitration practice. It also follows the practice of many judges at the German courts not asking for translations of English language documents.

4. Electronic documents and video hearing, Sec. 1054 (2), (5), 1064 (1), 1047 (2), (3) ZPO-Draft

The Federal Government of Germany tries to keep up with the constantly advancing digitalisation with the following two innovations. For one, the arbitral award may be issued as an electronic document, if the parties have not agreed otherwise. In any event, it remains possible to request a traditional hard-copy of the arbitral award signed by all arbitrators as an electronic document may not be recognized in other jurisdictions as an arbitral award for enforcement. However, in Germany an arbitral award in the form of an electronic document may be declared enforceable even if only the electronical form is transmitted to the state court.

The other innovation is the recognition of video hearings. The German arbitration law thereby follows the increasing practice of the last years. The arbitral tribunal may hold an oral hearing via video conference. The parties do not have a right to be heard in person. The arbitral tribunal has the procedural discretion to order a video hearing. In deciding this, the arbitral tribunal must weigh the right to be heard of the opposing party with the other party's right to access to justice. Additionally, factors such as climate neutrality, the substance of the arbitration, and the obligation to conduct arbitral proceedings in an efficient manner may also be taken into consideration.

Those steps are welcomed to help German arbitration law to keep up with digitalization. Especially the introduction of video hearings eliminated uncertainties in practice where they are already widely used and accepted.

5. Publication of Awards, Sec. 1054b ZPO-Draft

Generally, arbitral awards are confidential and do not get published like judgments from state courts. This is a source for criticism for years: the confidentiality leads to a lack of development regarding those disputes which are almost exclusively heard by tribunals like post M&A disputes. Following this critique, the Federal Government of Germany has included a provision on the publication of arbitral awards. With the consent of the parties, the award and any concurring or dissenting opinion may be published, as a whole or in part, in anonymised or pseudonymised form. The balance between the interest to further develop law on one hand and the interest of the parties in confidential proceedings on the other hand is held by the fact that the parties must agree to the publication which will be anonymous or pseudonymised. However, the agreement of the parties is assumed if they don't object to publication within one month of being requested to do so by the arbitral tribunal. It is doubtful whether the suggested change will lead to more transparency. The users value the confidentiality of arbitration highly. In many cases no matter what is undertaken competitors will be able to identify the parties of the dispute. And the "German way" may lead to unpleasant surprises if the parties do not pay attention at a time when the arbitration is already closed.

6. Request for retrial, Sec. 1059a ZPO-Draft

The draft bill introduces a novel possibility that allows an arbitral award to be set aside by a state court even though the deadline for set aside proceedings has expired. The arbitral award may be set aside by a state court if the party filing the request shows sufficient cause that the prerequisites for an action for retrial of the case are given. A request for retrial is only admissible if the party filing the request was unable, through no fault of its own, to assert the cause for retrial in earlier proceedings. The request must be filed within a statutory period of one month following the detection of the grounds for retrial. As grounds for a retrial are in general quite rare, the number of successful applications for a retrial are expected to be low.

Grounds for a retrial may exist if (i) a document on which the award is based was falsely drawn up or falsified, (ii) in a testimony or expert opinion on which the arbitral award is based, the witness or expert is guilty of a punishable breach of the duty to tell the truth, (iii) the arbitral award was influenced by an offence committed by a party's representative or by the opposing party or its representative in relation to the dispute, (iv) an arbitrator who is guilty of a criminal offence in relation to the dispute has participated in the making of the arbitral award, (v) the judgment of a court or another award on which the award is based has been set aside by another final judgment or a final order, (vi) the party finds or is enabled to use a judgment or arbitral award rendered in the same case which has previously become final and binding or (vii) the party discovers or is enabled to use another document which would have resulted in a more favourable decision.

7. Clarifications

There are several points the Federal Government of Germany has now clarified with the draft bill by slightly adapting already existing regulations.

7.1 Appointment of arbitrators in Multi-party arbitration, Sec. 1035 (4) ZPO-Darft

Regarding the appointment of arbitrators, a paragraph has been added to clarify the appointment of an arbitrator in multi-party arbitrations. This will only apply to arbitral proceedings with more than one arbitrator. Unless otherwise agreed, joined parties must jointly make the appointment of an arbitrator. If an arbitrator is not appointed within one month following receipt of a corresponding request to do so from the other party, then the state court is to appoint the arbitrator upon request of the other party. However, the court may also appoint an arbitrator for the other party as well. The mandate of the arbitrator already appointed ends upon such an appointment. Therefore, the regulation grants judicial discretion to the state court as to appoint an arbitrator only for one side or to appoint arbitrators for both sides.

​​​​​​​7.2 Enforcement of foreign arbitral awards on interim measures, Sec 1025 (2), 1041 (2) ZPO-Draft

The question of whether foreign arbitral awards on interim measures can be enforced by German state courts are a matter of dispute under the current German arbitration law. Sec. 1025 (2) ZPO-Draft now clarifies that interim measures issued by foreign arbitral tribunals may be enforced in Germany by way of a state court order.

The Federal Government of Germany has also clarified the wording of Sec. 1041 (2) ZPO. This provision governs the procedure for the state court order permitting enforcement. The new Sec. 1041 (2) ZPO-Draft contains in particular a statement of reasons as to when an application for enforcement is to be dismissed, such as (i) if one of the grounds for setting aside the arbitral award is given, (ii) if an application for a corresponding interim measure already has been filed with a state court, (iii) if the arbitral tribunal's requirement as to the provision of security has not been complied with or (iv) if the interim measure has been terminated or suspended by the arbitral tribunal.

This regulation is welcomed in order to reduce the existing uncertainties. It facilitates the enforcement of foreign arbitral awards on interim measures. However, it is unclear whether this section also applies to foreign arbitral awards on interim measures by emergency arbitrators.

​​​​​​​​​​​​​​7.3 Court Review, Sec. 1040 ZPO-Draft

The state courts already have the jurisdiction to review a decision by an arbitral tribunal in which it declares itself to have jurisdiction. The state courts' jurisdiction has now been extended to review also negative decisions, i.e. when an arbitral tribunal holds that it does not have jurisdiction to decide the dispute. This possibility had been repeatedly called for by German legal scholars to strengthen a valid arbitration agreement.

​​​​​​​​​​​​​​7.4 Concurring or dissenting opinion, Sec. 1054a ZPO-Draft

With the draft bill it has now been clarified that, in arbitration proceedings seated in Germany with more than one arbitrator, it is possible to submit a concurring or dissenting opinion. This is to eliminate the concern that arbitral awards which contain a concurring or dissenting opinion do not comply with procedural public policy (ordre public) in Germany. This concerns date back to an internationally and nationally badly received obiter dictum by the Higher Regional Court of Frankfurt (OLG Frankfurt, decision dated 16. January 2020 – 26 Sch 14/18, BeckRS 2020, 4606). The Federal Government of Germany clarifies that such opinions do not violate the principle of secrecy of deliberations. A violation of the principle would only occur if insights into the deliberation process were to be provided. Thus, the draft achieves legal clarity and internationally accepted standards.

8. Summary

The draft bill includes various provisions which may increase efficiency or adapt to the needs of today's world. The DIS has provided a markup version of the relevant provisions of the ZPO comparing the current ZPO with the draft bill (Deutsches_Schiedsverfahrensrecht_mit_den_vom_RegE_vorgesehenen_Aenderungen.pdf (disarb.org)). As the Federal Government of Germany follows the suggestion of the draft bill of the Federal Ministry of Justice, it will be interesting to see which ideas will survive the debates of the Bundestag (Federal Parliament) and whether the comments from the arbitration scene will have any influence on the draft.

Dr Ralf Hafner
Dr Tobias Pörnbacher

Today, the European Council gave its final green light for the so-called EU Corporate Sustainability Due Diligence Directive (CSDDD or CS3D) which is the European sister of the German Supply Chain Act. EU member states will have to transpose the CSDDD into national laws within two years after its entry into force (probably already in June 2024).

Which companies will be affected?

The EU CSDDD will apply to companies both from the EU and third countries and holding companies that have more than 1000 employees and a turnover of more than 450 million euro, as well as to companies that have entered a franchising agreement and have a turnover of more than 80 million euro, where royalties account for at least 22.5 million euro of this turnover.

The CSDDD foresees generous transition periods. Thus, irrespective of the transposition into national laws within the next two years, the new obligations may have the following staggered application:

• For companies with more than 5,000 employees and 1.5 billion in turnover: three years after the entry into force of the CSDDD (i.e. in summer 2027)
• For companies with more than 3,000 employees and 900 million in turnover: four years after the entry into force of the CSDDD (i.e. in summer 2028)
• For companies with more than 1,000 employees and 450 million in turnover: five years after the entry into force of the CSDDD (i.e. in summer 2029).

But even if your company does not meet the above criteria, it will be indirectly affected by the CSDDD if it is part of the relevant supply chain of the above mentioned companies (the CSDDD uses the term "chain of activities" which mainly refers to the upstream part of the supply chain). This is because the CSDDD will require companies to reach out to their business partners in their chain of activities with regard to human rights and certain environmental prohibitions.

And in terms of time, direct and indirect effects of supply chain legislation are already apparent today due to national laws that have already come into force independently of the CSDDD – such as the German Supply Chain Due Diligence Act which applies to companies domiciled in Germany with more than 1,000 employees in Germany (turnover is not a criterion insofar).

Further information

For more information on the CSDDD, reference is made to the today's press release of the European Council Corporate sustainability due diligence: Council gives its final approval - Consilium (europa.eu) as well as our previous blog post on the CSDDD EU Corporate Sustainability Due Diligence Directive - Agreement and Text | Advant Beiten (advant-beiten.com).

The final text of the resolved CSDDD can be found here: pdf (europa.eu)

German Supply Chain Act as a blue print

Irrespective of the differences between the EU and the German Supply Chain Act, the implementation of the latter can serve as a blue print for the implementation of the former. German companies that have already implemented the German Supply Chain Act will therefore definitely have a head start in terms of knowledge and processes. For more information on the German Act, please refer to our respective flyer: The German Act on Corporate Due Diligence Obligations in Suppy Chains | Advant Beiten (advant-beiten.com)

Dr. André Depping
Dr. Daniel Walden
 

The German Federal Court of Justice (BGH) takes the stance that a supervisory board member boycotting the board by repeatedly being absent does not give rise to the right to have an additional member appointed to the supervisory board by a court, even if that means that the supervisory board therefore permanently lacks quorum. By decision of 9 January 2024 (case no. II ZB 20/22), the BGH upheld the judgment of a registration court. The BGH argues that it is indeed possible to pass a valid resolution on filing a petition for a court to remove a boycotting supervisory board member from office pursuant to s 103 (3) German Stock Corporation Act (AktG) with the votes of the two remaining supervisory board members even when the permanently boycotting board member is not present. It seems highly questionable whether this measure is enough to stop a supervisory board member passively stalling the process in practice.

Background

If one member of a three-person supervisory board is absent for a meeting, the supervisory board does not have a quorum. This may render the supervisory board unable to operate. While the shareholders have the right to remove such supervisory board member - even without good cause - at any time, this mostly requires qualified majorities as prescribed by law or by-laws in this context. When there is good cause relating to this supervisory board member (the member permanently being absent should constitute good cause), the supervisory board itself may file the petition for removal from office by court if the board has a quorum and the required majorities are reached. The appointment of an additional supervisory board member by a court, however, is only possible if the supervisory board has been understaffed for a certain period of time due to not having the required number of members.

As a result of this decision, the BGH put an end to a discussion in legal literature whether and to which extent a supervisory board member boycotting the work of the board by being absent may be equated to a resigned supervisory board member and an additional board member may be appointed by court. As much as a clarification on this matter may seem welcome, it may also pose immense difficulties in practice and render the affected corporation permanently incapable of taking action.

Background

A stock corporation with a three-person supervisory board had two shareholders (two companies), each holding a 50% interest. One supervisory board member was the mother of one of the shareholders' partners and therefore a related person. These partners and the supervisory board member formed a community of heirs (Erbengemeinschaft). When the stock corporation meant to assert claims against this community of heirs for which the management board required the approval of the supervisory board, the supervisory board member failed to attend the board meetings. As a consequence, the supervisory board lacked quorum and the corporation was unable to take action.

Quorum

According to s 108 (2) 2nd sentence AktG, the supervisory board has a quorum only if at least one half of the members of which it must be comprised, according to the law or the by-laws, participates in the adoption of the resolution, where no quorum has been stipulated by law or in the by-laws. At first glance, two members would therefore suffice to reach a resolution. However, sentence 3 of said provision prescribes that in any case at least three members must participate in adopting the resolution. In other words: a single member may stall any resolution of the supervisory board by not taking part in the adoption of the resolution, in particular by failing to attend board meetings.

Even when it comes to larger boards, supervisory board members who are permanently absent may boycott the adoption of resolutions when by-laws or rules of procedure provide for participation or majority requirements which exceed statutory requirements or are very particular.

Weaknesses of Remedies in Practice

1. REMOVAL BY GENERAL MEETING

A supervisory board member who does not fulfil his or her duties, in particular participating in meetings and adoptions of resolutions, may be removed from office by the general meeting at any time, s 103 (1) AktG. In this context, it does not even depend on the failure to act; the removal does not require a cause. What constitutes an - often insurmountable - obstacle, however, is the fact that while supervisory board members are elected by a simple majority, they may only be removed from office by a majority of three quarters of the votes cast unless the by-laws provide for a different majority or further requirements which hardly ever is the case; this is to prevent an arbitrary "coming and going". While it is true that seats on the supervisory board may be allocated as a shareholder or a group of shareholders sees fit subject to a simple majority, the removal of a member is only possible with the corresponding support of other shareholders. However, it is very rarely the case, especially in small stock corporations, that the supervisory board is appointed only in accordance with the intentions of the majority shareholder holding the simple majority. It is much more common that the shareholders attempt to reflect the proportions of equity interests or family lines or something similar.

When there are two shareholders with equal shares, two representatives of these shareholders are often complemented by a neutral supervisory board member; as an alternative, the two shareholding parties divide the appointment of the supervisory board, on the one hand, and the appointment of the management board, on the other hand, between themselves according to corresponding agreements. Boycotting the supervisory board by not participating in its meetings seriously disturbs this very balance of power and this cannot be resolved (anymore) in the event of disputes by removing such members on the basis of a resolution adopted by the general meeting due to a majority of three quarters of the votes being required by law.

2. SUPERVISORY BOARD FILING FOR A REMOVAL BY COURT

Apart from that, the law merely offers one other remedy. The court may remove a member of the supervisory board from office if grave cause is given in the person of that member pursuant to s 103 (3) AktG. The court removing a member, however, requires the supervisory board itself filing a corresponding petition. This begs the question, from a legal point of view, as to how the supervisory board is to decide on said petition when it does not have a quorum due to one member being absent. Regardless of this matter, the practical question arises as to how a majority within the supervisory board may be obtained in the above scenario when a corresponding part of the supervisory board members are partial to the boycotting member. Therefore, this sword, too, is probably too dull in most cases and does not qualify as an adequate remedy.

3. COURT APPOINTMENT IN CASE OF UNDERSTAFFING

Thus, the pivotal question is now whether and to which extent additional members may be appointed for the supervisory board by a court pursuant to s 104 (1) AktG. After all, a petition for this may be filed by, among others, the management board, a member of the supervisory board or by an individual shareholder. According to this view, it is assumed that the supervisory board does not have the number of members required - at least factually - for a quorum in case of a permanent boycott.

The BGH has now disagreed with this assumption. A member permanently being absent cannot be compared to a member leaving, for example due to death or resignation. Thus, the only options remaining are the removal of the member from office either by the general meeting or - if good cause is presumed and a petition of the supervisory board is reached - by a court. By means of teleological interpretation, the BGH extended the quorum of s 108 (2) 3rd sentence AktG beyond its express wording in its decision by granting the supervisory board the right to make a decision on filing a petition for removal from office by court for good cause even without the participation of the boycotting member, i.e. with just two members. Similarly pragmatic albeit dogmatically quite unconvincing solutions had already been created by the BGH in case of a voting prohibition of a supervisory board member (cf. BGH, decision of 2 April 2007, case no. II ZR 325/05).

Significance of the Decision in Practice

The opinion of the BGH is consistent and corresponds to the wording and the intention of the law. At the same time, it is hardly any help for the corporations affected which cannot simply vote out and replace a boycotting supervisory board member by a new one but are instead dependant on the assistance of a court.

In the end, there is a legal loophole in these cases which the BGH did not rectify with its judgment. It is unclear whether this was a conscious or unconscious decision but the latter cannot be excluded as the BGH expressly points out that the boycott of the supervisory board must be addressed by removing the relevant supervisory board member. According to the BGH, the remaining supervisory board members may file a petition with a court to remove the boycotting supervisory board member for good cause. In many cases, however, this is not an option because the proportions of the votes and interests amongst the shareholders or supervisory board members do not allow for it. To put it differently: the management board and the supervisory board generally only resort to the courts when the shareholders or the supervisory board as a body can indeed not agree on the removal of a boycotting supervisory board member or a petition to court for the removal for good cause. Filing a petition for an additional supervisory board member should usually be the last resort in case of a permanently boycotting supervisory board member. Contrary to what the BGH claims, the solution described by the BGH will in fact not be possible in a multitude of cases.

Very often, the power structures are very carefully balanced and each disturbance to this structure can result in substantial disputes and therefore cause damage. The one suffering from this is, first and foremost, the corporation, in particular the management board; there is a long list of business transactions that require the approval of the supervisory board according to the law, by-laws or rules of procedure. The BGH obviously did not consider the damages that can occur when a supervisory board is unable to take actions or pass important resolutions for a long period of time or when unpopular members of the supervisory board take advantage of the system pushing it to the very limits of legality.

Avoiding Disputes

Therefore and insofar as possible, precautions should be taken in the by-laws or - if this is not possible due to legal certainty - in a shareholders' agreement for the case that a supervisory board member boycotts the activity of the supervisory board by being absent, i.e. it should be possible for specific shareholders, in particular for the 'opposing' party, to remove this member in cases of doubt if good cause is given in the person. It should at least be agreed that the general meeting may remove a member and appoint a new one. It should also be considered to determine a provision deviating from the majority comprising at least three quarters of the votes cast pursuant to s 103 (1) 2nd sentence AktG.

Roland Startz

This blog post also appears in the Haufe Wirtschaftsrechtsnewsletter.

Overview of the most relevant features:

• Qualified consumer organizations can bring similar claims of consumers against a company by means of an action for redress.
• Qualified entities from EU member states can also bring cross-border actions for redress before German courts.
• Companies with less than ten employees and an annual turnover below EUR 2 million may join an action for redress in the same way as consumers.
• In order to bring an action for redress at least 50 consumers have to be potentially affected. Consumers must register their claims in a register. With the action for redress consumer organizations can directly sue for payment to consumers.
• The court can furthermore determine a collective total amount for all claims raised. Within the framework of an implementation procedure, a court-appointed trustee fulfils the claims of the concerned consumers out of this amount.

The new action for redress can significantly relieve the courts' workload in the coming years. This is to be welcomed. It will also make it easier for consumers to pursue their claims. Whether organizations and consumers will accept the action for redress as a new option for legal protection will be seen in the course of the next few years.

Dr. Ralf Hafner
Tobias Pörnbacher

1. Disputes in the area of intellectual property, copyright and under the Act against unfair competition (Gesetz gegen unlauteren Wettbewerb) shall not be brought before a commercial court (Sec. 119b (1) s. 2 GVG (new)).
2. If a third party is involved in the legal dispute, it shall no longer be possible to change the language of the proceedings from English to German. The third party may request for an interpreter (Sec. 184a (4) GVG (new)).
3. A third party may also be included in the proceedings by means of a legal document in English. The third party may object the service of this document within two weeks only if he or she does not understand English (Sec. 616 (1) ZPO (new)).
4. In addition to enforceable court decisions, it shall now be possible to translate settlement agreements pursuant to Sec. 794 (1) No. 1 ZPO into German. A translation shall only be made upon the request of a party (Sec. 617 (1), (2) ZPO (new)).
5. It should also be possible to refer a legal dispute to a commercial court if the jurisdiction of a commercial court is only established by a counterclaim or an extension of the statement of claim (Sec. 620 (2) ZPO (new)).
6. The commercial court at first instance shall agree with the parties as early as possible in an organisation meeting on the organisation and conduct of the proceedings. These agreements are to gain in greater significance through the application of Sec. 224, 296 and 356 ZPO (Sec. 621 sentence 2 ZPO (new)).

Among other things, the limit of EUR 1 million for the amount in dispute, which was already provided in the draft bill, and the possibility for the Federal Court of Justice to continue the proceedings in German at its own discretion have been retained. Thus, the Federal Government's draft retains two provisions that could reduce the attractiveness of the commercial courts. It remains to be seen whether further proposed amendments will be incorporated into the bill in the upcoming parliamentary process in the German Federal Parliament (Bundestag) and Federal Council (Bundesrat).

Tobias Pörnbacher
 

Christina Weinzierl

What to do if you want to prevent your counterparty from starting or continuing legal proceedings in a foreign country? There might be good use for an anti-suit injunction. These injunctions could become even more relevant after Brexit. In the following we will briefly explain the fundamentals of these injunctions and show what is happening in the UK after Brexit. Recent developments in France and Germany show that there could be also some new measures against these injunctions. In any event, an anti-suit injunction should always be considered in a cross-border dispute: On the one hand as a measure to prevent proceedings outside the chosen jurisdiction for proceedings and on the other hand regarding the consequences and defence against a potential anti-suit injunction.

Anti-suit injunctions are by no means new. The concept of anti-suit injunctions has a long history, dating back to the period from the Norman Conquest (1066) to the reign of Henry III (1261-1272), which witnessed the inception and growth of the common law administered by the King's Justices. Inter alia, the Court of Chancery granted commonly injunctions to refrain proceedings before the Courts of Common Law. Injunctions have been issued to both, parties and counsels.

What is an anti-suit injunction?

In a nutshell, an anti-suit injunction is a judicial order that restrains one party from initiating or continuing a lawsuit in another court or jurisdiction. This action is typically taken against the applicant in an ongoing lawsuit and the primary aim of it is to prevent the party from initiating parallel or continuing concurrent proceedings in one or several different jurisdiction(s). In the common law countries, in particular, anti-suit injunctions are widespread. They are often used to prevent so-called ‘forum shopping’, where a party deliberately chooses a jurisdiction that seems more favourable to its position.

Considering pre-Brexit, the recast Brussels I Regulation prohibited intra-EU anti-suit injunctions. Specifically, English courts were unable to grant such injunctions if another EU Member State had jurisdiction over the dispute. However, Brexit has revived the issue of anti-suit injunctions in English courts concerning disputes already before EU Member State courts.

Anti-suit injunctions can be particularly helpful in situations where a party is attempting to initiate or continue proceedings in a foreign court that could potentially affect the jurisdiction and sovereignty of other courts. This could jeopardize the right to effective legal protection. For instance, a party might seek an anti-suit injunction to prevent the other party from disregarding an arbitration agreement by turning to a state court in a foreign country. In such cases an English court could also order an anti-suit injunction. In general, anti-suit injunctions are used to protect the choice of arbitration or choice of jurisdiction clauses.

Anti-suit injunctions in the EU - before Brexit

Before Brexit it was quite clear that - even regarding the UK - an anti-suit injunction regarding another EU-member state was not admissible. The legal basis for an anti-suit injunction in the UK was and is Sec. 37 (1) Supreme Court Act 1981. This provision remained unchanged since its introduction. The competence to issue injunctions in general and anti-suit injunctions, in particular, is also acknowledged for arbitral tribunals under Sec. 44 (1), (2) (e) Arbitration Act 1996. Under the Brussels Regime both, an anti-suit injunction to support a jurisdiction or an arbitration clause was not admissible. The European Court of Justice decided in 2004 (C-159/02 Turner v Grovit [2004] ECR I-3565) that " the Convention is to be interpreted as precluding the grant of an injunction whereby a court of a Contracting State prohibits a party to proceedings pending before it from commencing or continuing legal proceedings before a court of another Contracting State, even where that party is acting in bad faith with a view to frustrating the existing proceedings." This consequence was based on the principle of mutual trust between the courts of EU-members states laid down in the Brussels I Regulation.

The European Court of Justice, furthermore, outlined in 2009 (Case 185/07 Allianz v West Tankers [2009] ECR I-00663) that the same rationale applies regarding anti-suit injunctions which were directed to support arbitration clauses. Such an anti-suit injunction undermines the effectiveness of the general regime in the Brussels I Regulation. Since 31 December 2020 this rationale does not apply anymore.

The return of the anti-suit injunction? - First decision after Brexit

For the post Brexit times the opinions diverged as to whether the UK will revert again to the anti-suit injunctions. Two recent judgments show what will be the standard now. The decision of the UK not to implement the Brussels I Regulation recast and the respective EU case law into domestic law gave already an indication. In general, the EU legislation in the form of the English language version was brought under certain premises into domestic law pursuant Sec. 3 of the European Union (Withdrawal) Act 2018. Even EU case law could be included in the transfer into domestic law. However, the UK decided to exclude the Regulation (EU) No 1215/2012, i.e. the (recast) Brussels Regulation in Regulation 89 of the Civil Jurisdiction and Judgments (Amendment) (EU Exit) Regulations 2019. Hence, the mutual trust between EU-Member states regarding courts and jurisdiction could no longer be applied to the UK decisions. The UK decided to bring the courts of EU-Member states down to the same level of trust like any other foreign court.

The consequence of this decision can be illustrated with the judgments Ebury Partners Belgium SA/NV v Technical Touch BV & Anor [2022] EWHC 2927 (Comm) of 18 November 2022 and QBE Europe SA/NV and another v Generali España de Seguros y Reaseguros [2022] EWHC 2062 (Comm) of 1 August 2022. While Ebury v Technical Touch concerns jurisdiction agreements in (i) the terms and conditions and (ii) a personal guarantee and indemnity in favour of the English courts between two Belgian companies, QBE v. Generali relates to a dispute resolution clause with reference to arbitration in London.

The initial proceedings in Ebury v Technical Touch started in Belgium concerning the validity of the agreements between the parties. The respondent of the Belgium proceedings brought the issue to England and asked for an anti-suit injunction. In essence the reasoning for the request was a potential breach of the jurisdiction agreement in favour of the English courts. The court considered, inter alia, the probability of the incorporation of an agreement on jurisdiction in the contract.

The legal situation concerning QBE v. Generali was a little more complicated as the anti-suit injunction related to an insurance contract. The proceedings in Spain were directed between the insurance company of harmed and the at-fault party. Under Spanish law a decision in such proceedings may be directly enforced against the insurer. As the insurance contract included the arbitration clause and the proceedings in Spain concerned a quasi-contractual relationship, since the respondent's insurer was not actually a party to the underlying policy that contained the arbitration agreement. Nevertheless, the court granted an anti-suit injunction in favour of the arbitration clause.

Both judgments referred to the key principles for granting anti-suit injunctions (QBE v. Generali, para 10; Ebury v Technical Touch, para 20). Following these principles, "the injunction applicant must establish with a "high degree of probability" that there is an arbitration or jurisdiction agreement which governs the dispute in question". The injunction will be granted if the defendant has not presented "strong reasons to refuse the relief". The defendant bears the burden of proof for these strong reasons.

Regarding the "high degree of probability" component, in the case Ebury v Technical Touch it was enough "to demonstrate that the jurisdiction clause contained in standard terms was incorporated into the agreement between the parties" (Ebury v Technical Touch, para 23). Meanwhile, in the case QBE v. Generali, there was direct arbitration agreement between parties, however according to English law, the court follows a similar approach as it would in a regular contractual arbitration agreement. Thus, in the second case, abovementioned component was satisfied, because defendant was seeking to advance claims, that essentially amounted to an attempt to enforce contractual rights within the insurance policy (QBE v. Generali, para 16).

These two judgments set out what can be expected in future regarding anti-suit injunctions concerning proceedings in EU-Member states. Moreover, parties based in EU Member States should consider the potential consequences of initiating legal proceedings in EU Member State courts when they have entered into contracts that include an exclusive jurisdiction clause favouring the courts of England and Wales, or an English law arbitration clause.

How to defend against anti-suit injunctions? - The era of anti-suit injunctions?

Anti-suit injunctions from the UK or any other country outside the EU can be an impediment for proceedings in courts of EU-Member states. A new and competitive approach could be anti-anti-suit injunctions. These injunctions are directed against the party that requests for an anti-suit injunction in another jurisdiction. An anti-anti-suit injunction orders the applicant of the anti-suit injunction to refrain from commencing anti-suit injunction proceedings. Anti-anti suit injunctions have been granted in France and Germany in specific circumstances. A judgment of March 2020 by the Court of Appeal of Paris granted an anti-anti-suit injunction concerning the application for an anti-suit injunction in the US.

Two recent German decisions had also relations to US proceedings for anti-suit injunctions. The anti-anti-suit injunctions were awarded by the Higher Regional Court of Hamm on 2 May 2023 and by the Higher Regional Court of Munich on 12 December 2019. The Higher Regional Court of Munich decided in a overall patent related dispute between Continental and Nokia (judgment of 12 December 2019 – 6 U 5042/19; English summary here). The Higher Regional Court of Hamm decided in relation to enforcement proceedings of an investment arbitration award (judgment of 2 May 2023 – 9 W 15/23). The party seeking for an anti-suit injunction in the US tried to prevent the other party from claiming before the Regional Court of Essen. The proceedings in Essen were directed at prohibiting an enforcement of the arbitration award outside Europe. The legal basis for the authority to render anti-anti-suit injunctions derives from substantive law and not, as in the UK, from a procedural principle. The right that might be violated by the party seeking for an anti-suit injunction is the entitlement to justice (Justizgewährleistungsanspruch). This fundamental right is laid down in Art. 19 (4) of the German Constitution. Even though the German courts are not capable to render anti-suit injunctions concerning proceedings in EU-Member states, the substantive law gives the parties the opportunity to prevent anti-suit injunctions in non-EU jurisdictions with requests for anti-anti-suit injunctions.

What's next? - Case by case decision

The essence of the German judgments is that it is possible to successfully apply for anti-anti-suit injunctions in Germany. An anti-anti-suit injunction can be a direct answer to the opposing party's attempt to obtain an anti-suit injunction abroad. Whether this approach will be successful or what other measures could also be used, has to be determined on a case by case basis. Brexit and the recent decisions of UK courts make it likely that anti-suit injunctions and the question of how to respond will be more relevant in the future. This highly complicated assessment of the right measures has to be done by the parties in short notice. The breach of an anti-suit injunction or anti-anti-suit injunction could be quite expensive due to potential orders for a fine against the party. The breach of an injunction in Germany can be fined with up to EUR 250,000.00 for each breach. Other countries might have even higher fines.

Christina Weinzierl
Dr. Tobias Pörnbacher
Alexander Braun

On 25th of June 2023, the deadline for implementation of the EU Directive on representative actions for the protection of the collective interests of consumers expired. On 7th of July 2023, the last session day before the summer recess, the German Bundestag adopted the draft law on Consumer Rights Enforcement Act with the votes of the government factions, against the votes of the CDU/CSU and AFD, while the faction Die Linke abstained from voting.

In our blog, we have already reported on the preliminary draft (blog post of February 17, 2023), the government's draft (blog post of March 31, 2023), and the hearing in the Legal Affairs Committee (blog post of May 11, 2023).

The Consumer Rights Enforcement Act introduces a new form of collective action, the action for redress by qualified entities, and incorporates the provisions of the model declaratory action from the Code of Civil Procedure. The Federal Government expects that the action for redress will provide relief to citizens, the economy, and particularly the courts. The aim is to replace 22,500 individual actions by 15 actions for redress.

"Who Can Sue and How?" - Qualified Entities and Actions for Redress

An action for redress is a lawsuit filed by qualified entities on behalf of a multitude of consumers against companies in civil law disputes. Small companies with fewer than ten employees and an annual turnover or balance sheet total below EUR 2 million shall be considered to be consumers under the scope of this act. Qualified consumer organizations and entities registered in the corresponding European Union register shall have the right to initiate actions for redress. Qualified consumer organizations must (i) not derive more than 5% of their funding from companies and (ii) be listed in the register pursuant to Sec. 4 of the Act on Injunctive Relief (Unterlassungsklagegesetz). The qualified entities, along with the register for representative actions, must publish about actions for redress and inform consumers about how they can participate. An injunctive measure shall only be admissible if it is comprehensibly demonstrated that claims from at least 50 consumers may be affected.

The Consumer Rights Enforcement Act restricts the financing of an action for redress by third parties. The financing must be independent of the success of the action and the company sued. It must be disclosed to the court at the time of filing, along with the agreements made.

An action for redress can be directed either towards providing payment or performance to the affected consumers or towards the payment of a collective sum. The claims asserted by the consumers must be substantially similar. Substantially similar facts and issues of fact and law that are relevant to the decision are decisive. Consumers must register their claims in the register for representative actions. Registration is even possible up to three weeks after the conclusion of the oral hearing.

The Higher Regional Court at the registered seat of the company concerned is competent for any action for redress. An appeal on points of law is provided for by law without the need for admission in the judgment.

"What does a litigation procedure end with?" - Judgment, Redress Judgment on Liability, Settlement and Final Redress Judgment

As a rule, an action for redress shall end with a judgment, settlement or final redress judgment. Prior to a final redress judgment, a redress judgment on liability is issued. A redress judgment on liability shall be issued if an action for redress is substantiated on the merits and not directed towards providing payment to a consumer. A redress judgment on liability shall contain specific requirements for consumer eligibility and the proof of eligibility to be provided for this purpose.

If a collective sum is awarded, the judgment must include either the amount per eligible consumer or the method for determining the individual amounts due.

If a redress judgment on liability is initially rendered, the parties may be requested by the court to submit written settlement proposals.

If no settlement is reached, the procedure concludes with a final redress judgment.

"How do consumers obtain their money?" - The Implementation Procedure

The action for redress is followed by the implementation procedure. If the collective total amount determined is insufficient, it can be increased on request. The competent court for the action for redress shall remain competent for the implementation proceedings. A trustee is appointed to implement the judgment. In the process, an implementation fund is set up into which the determined amounts are to be paid. The trustee fulfills legitimate consumer claims from this implementation fund. Only consumers who have validly registered their claims with the register for representative actions may participate in the implementation procedure.

The trustee examines the claims of participating consumers and determines their eligibility based on the specific requirements and evidence established in the judgment. Consumers or companies can file an objection against the trustee's decision. The final decision on the objection is made by the court. The implementation procedure concludes with the trustee's final report, which is reviewed by the court. The termination of the implementation procedure is determined by a court decision. In individual cases where a consumer's claim has not been positively considered in the implementation procedure, the option of subsequent individual litigation against the company remains available.

"Unnecessary or innovative?" - Outlook into the Future

The German government hopes that the action for redress and the Consumer Rights Enforcement Act will make it easier for consumers to assert their claims. This is expected to significantly alleviate the burden on the judiciary. The jurisdiction of the Higher Regional Courts, applying the rules for firstinstance proceedings before the Regional Courts, effectively limits the admissible legal remedies to appeals on point of law. In all cases, at the very least, appeals are permitted. However, there is no further legal remedy for decisions by the Higher Regional Court on objection in the implementation procedure.

In particular, the latest amendments in the Committee on Legal Affairs will influence the dynamic picture of the action for redress in the future. Qualified entities need only to demonstrate that 50 consumers may be affected and need not to elaborate on actual affectedness. Small companies, like consumers, can participate as affected parties in representative actions and actions for redress. The ability to register for the representative action even after the oral hearing will influence consumer behavior.

The coming years will show whether the new representative action will be accepted by practitioners and whether the Consumer Rights Enforcement Act will achieve the anticipated effects.

Dr Ralf Hafner
Tobias Pörnbacher

According to the Regional Court of Berlin, a corporation in the UK, for instance. a private company limited by shares (Ltd.) or a public company limited by shares (PLC), which still has its administrative seat in Germany, is subject to the German "seat theory". Its substantive legal consequence is the classification as a private partnership company / sole trader and thus the personal liability of the shareholders. Therefore, the shareholders of the UK corporation may be sued directly or a judicial title (like a judgment) already obtained against the UK corporation can be transferred to the shareholder(s) of the UK cooperation without the need for further evidence to enforce the judicial title against the shareholder(s).

Application of the Seat Theory to UK companies

Under German international company law, the so-called "seat theory" applies: the applicable company law is determined by the actual administrative seat of a company. In Germany, an exception is made to the "seat theory" for reasons of European law. The European Court of Justice had ruled in several cases that the application of the seat theory to companies from EU member states that follow the incorporation theory violates the freedom of establishment. In the UK, the incorporation theory applies: Following the incorporation theory the applicable company law is solely determined by the law in which the company was incorporated. Therefore, during the UK's membership in the EU, the Limited and PLC were recognised in Germany as a corporation with the corresponding English law limitation of liability even if it had its registered office in Germany.

After the end of the transitional period on 31 December 2020, the legal form of the Limited. and PLC as such no longer exists in Germany. However, these company forms are not a legal nullity in Germany. Rather, they will be treated as a legally responsible company - depending on its form under German company law, for instance as a OHG, GbR (variants of private partnership companies with direct liability) or sole trader (if there is only one shareholder). The Limited or PLC therefore will carry on a "double life" as under UK law registered company and as a private partnership company or sole trader under German Law. In the case decided by the Regional Court of Berlin, the Limited consisted of only one shareholder, thus, from a German law perspective, it continued to exist as a sole trader company. This also results in the personal liability of the shareholder.

The Regional Court of Berlin came to this conclusion by applying and confirming the "seat theory". The aforementioned case law of the European Court of Justice on the application of the incorporation theory does not apply to third countries, which – post Brexit – also affects now the United Kingdom. The application of the incorporation theory is also not regulated under any state treaty. In particular, the Trade and Cooperation Agreement between the EU and the UK does not establish a freedom of establishment as granted in the EU. The protection of legitimate expectations does not hinder the application of the seat theory either, since a conversion of the Limited into a recognised legal form was possible during the transition period and since no confidence in the perpetual existence could arise anyway due to the withdrawal clause of Art. 50 TEU. Although there are isolated dissenting opinions in the literature on this issue, at present the aforementioned application of the seat theory in relation to UK corporations should be still applicable.

Material Legal Consequence of the Seat Theory

Consequently, a UK corporation that still holds its administrative seat in Germany, will now be treated as a sole trader or private partnership company (GbR or OHG) in Germany.

Therefore, a direct liability of the shareholders is possible in Germany.

There may be a considerable liability risk here that one may not have in mind. It is highly recommended to deal with this if the constellation of a UK corporation and an actual administrative seat in Germany exists. This is clearly illustrated by the example of the insolvency administrator of Air Berlin PLC who is suing Clearstream Banking AG as registered shareholder of Air Berlin PLC in the shareholders' register for approximately EUR 500 million in front of the Regional Court of Frankfurt. A decision in this matter has not yet been made, but this again clearly shows the explosive nature of this complex of issues.

Procedural Implications

Since the shareholders could be personally liable for the company's debts in Germany, they can also be sued directly before a German court for fulfilment of the respective debt.

If a title has already been obtained before the end of the transitional period, i.e. before 31 December 2020, as in the case of the Regional Court of Berlin, the conversion into a private partnership company/sole trader is not seen as a genuine legal succession pursuant to sec. 727 of the German Code of Civil Procedure. The foreign company is converted ex lege according to the modified "seat theory". As a consequence, a legal succession clause is issued for the enforcement order without further proof, which can then be enforced against the shareholder. The non-application of sec. 727 of the German Code of Civil Procedure thus simplifies the enforcement procedure against the shareholder, making the whole topic even more important.

Christina Weinzierl
Dr. Tobias Pörnbacher
Alexander Braun

Recognition and Enforcement of State Court Judgments after the Transitional Period

At the end of the transitional period on 31 December 2020, the final "hard" Brexit occurred. The Trade and Cooperation Agreement between the European Union and the United Kingdom does not include any regime for civil procedure law. This has far-reaching consequences for parties in civil proceedings. Once a decision has been rendered, the prevailing party must follow the route of enforcement, unless the losing party voluntarily performs. This phase is particularly critical in a cross-border context as a title can be worthless if it cannot be enforced where there are sufficient assets of the losing party.

Pre-Brexit the rules on recognition and enforcement of judgments from the United Kingdom in Germany and vice versa were regulated by EU's Brussels Ia Regulation on Jurisdiction and the Recognition and Enforcement of Judgments (EU No. 1215/2012). According to Art. 36 of the "Brussels Ia Regulation" a judgment rendered in a Member State shall be recognised in the other Member States without any special procedure being required.

Since the Brussels Ia Regulation does no longer apply post-Brexit and after the transitional period, a direct procedure for the recognition and enforcement of judgments is not regulated anymore. The United Kingdom could not accede the Lugano Convention, as the European Commission blocked its accession. It is in particular unclear whether the Brussels Convention on jurisdiction and the enforcement of judgments in civil and commercial matters dated 27 September 1968 (the "1968 Brussels Convention") will revive. This Convention has largely been superseded by the Brussels Ia Regulation by the European Union; therefore, it is unclear whether courts may apply this Convention. This question seems to be more of an academic approach, as there are no court decisions rendered regarding the application of this Convention The same situation applies for the Anglo-German Treaty on Legal Relations of 20 March 1928.

The 2005 Hague Convention on Choice of Court Agreements ("Hague Convention") is applicable as the United Kingdom acceded this Convention in 2021. The Hague Convention provides regulations regarding the recognition and enforcement of judgments given by a court in an exclusive choice of court agreement. However, as this Convention only applies to exclusive choice of court agreements, it does not cover the recognition or enforcement of rendered judgments based on non-exclusive jurisdiction clauses.

In the absence of any international agreement, national governing law on civil procedure is applicable. For instance, in Germany, judgments rendered in the UK will require an extra proceeding according to Sections 328, 722 of the Code of Civil Procedure.

Clearly there is no specific agreement between the European Union and the United Kingdom regarding the recognition and enforcement of judgments, therefore national procedural law must be applied. This is a huge challenge for cross-border civil proceedings, as it makes the recognition and enforcement of judgments more complex, costly and time-consuming. Consequently, when entering a British-German commercial contract, it should be considered to agree on an exclusive choice of court clause in order to make the Hague Convention applicable. This will secure a direct enforceability of judgments between the companies.

Recognition and Enforcement of Arbitral Awards

The paradox of the cross-border recognition and enforcement of national court judgments post-Brexit makes the conclusion of an arbitration agreement the more attractive: The enforcement of international arbitral awards is well regulated by international conventions.

More than 170 States have agreed to recognize and enforce arbitral awards issued in other contracting states in accordance with the New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards of 1958. The United Kingdom has been a member since 1975 and Germany even longer, namely since 1961. The Brexit left the legal situation regarding the enforcement of arbitral awards untouched.

In the United Kingdom, the relevant regulations for the recognition and enforcement of foreign arbitral awards are regulated in Sec. 99 et seqq. Arbitration Act 1996. The text of the New York Convention is adopted as the basis of these rules. The reasons to refuse the recognition and enforcement of a so called "New York Convention award" can be found in Sec. 103 Arbitration Act 1996. These reasons are very similar to the reasons in Art. V. of the New York Convention. The recognition and enforcement of a foreign arbitral award can be refused, inter alia, if the dispute is not governed by the arbitration clause or if there was a procedural issue with the composition of the arbitral tribunal. The Arbitration Act 1996 does also not include a general révision au fond. Sec. 103 Arbitration Act 1996 foresees merely a refusal if the award violates public policy.

Under German law, the recognition and enforcement of arbitral awards is covered by Sec. 1060 to 1061 of the German Code of Civil Procedure. According to Sec. 1061 ZPO, foreign awards can be recognized. These regulations also refer to the recognition and enforcement of the New Yorker Convention. The standards for recognition and enforcement of foreign arbitral awards are, therefore, comparable to those in the United Kingdom.

In contrast to the enforcement of judgments of state courts, the situation regarding recognition and enforcement of arbitral awards remains unchanged. The continuous member status to the New York Convention results in an unchanged initial situation regarding the recognition and enforcement of foreign arbitral awards in the United Kingdom and Germany. In the future, the procedural conditions for recognition and enforcement procedures in Germany might improve. According to the recently published first cornerstones for the reform of German arbitration law (see our Blog of 19 April 2023) commercial courts shall get the competence for these proceedings (see our Blog of 27 April 2023 thereto). There, proceedings can be continued in English if the language of the arbitration proceedings was English too.

To be continued.

Christina Weinzierl
Dr. Tobias Pörnbacher
Alexander Braun

In our series of blog posts, we examine constellations in civil disputes that are increasingly arising in practice in connection with Brexit and German Law. In our first article, we explain the influence of the Brexit on the choice of law and jurisdiction. The second article deals with the enforceability of German or British titles while the third deals with a case recently decided by the Regional Court of Berlin concerning a limited company with its administrative seat in Germany. Our last article sets out the consequences of Brexit in litigation or arbitration proceedings regarding anti-suit injunctions.

Commercial contracts usually contain governing law and jurisdiction clauses. Before Brexit, a well-structured legal framework governing cross-border disputes between the United Kingdom and the European Union including Germany existed. Since the United Kingdom's withdrawal from the European Union, the general European rules on the choice of law and jurisdiction no longer apply. What is the applicable position now?

Choice of Law

Generally, Brexit does not have an impact on governing law clauses irrespective whether they are governed by German law and point to the UK or whether they are governed by English, Northern-Irish or Scots law and point to Germany.

A choice of law clause is a term of a contract in which the parties to the contract specify that any dispute arising under the contract (including the interpretation of the contractual terms) shall be determined in accordance with the law of a particular jurisdiction. In general, the parties are free in their choice of law, but also bound by their choice.

Before Brexit, the rules regarding the choice of law were set out in the Rome I Regulation on the law applicable to contractual obligations (593/2008) and the Rome II Regulation on the law applicable on non-contractual obligations (864/2007). Post-Brexit, the United Kingdom has transferred these "Rome-regulations" into British law. As it relates to the applicable law provisions, it follows that EU member states must generally respect such provisions regard-less of whether the law chosen is that of an EU member state or of a "third country", like England and Wales.

Consequently, there is no big difference towards pre-Brexit times. The parties may govern their contracts under their preferential law. Brexit should, therefore, not have any influence for the parties from choosing either English or German law. The only possible negative impact of Brexit could be that the case law of the European Court of Justice will be no longer applicable. British courts may interpret case law on a different approach. However, as the "Rome-Regulations" are still applicable, British courts will probably continue interpreting the case law by reference to the case law of the European Court of Justice.

Choice of Jurisdiction

The situation regarding the forum selection clauses is different. Pre-Brexit, the courts applied the EU's Brussels Ia Regulation on Jurisdiction and the Recognition and Enforcement of Judgments (EU No. 1215/2012). Post-Brexit, the courts determine their own jurisdiction according to the law of their own jurisdiction, so called "lex fori". English courts determine their jurisdiction from the perspective of the laws of England & Wales, the EU Member States, as Germany, from their perspective of national applicable law. This carries the risk of conflict in the choice of jurisdiction and parallel proceedings on both sides of the Channel: A party sued in Germany and domiciled in the UK is no longer prevented from bringing the dispute already pending before an English court.

But let's start from the very beginning: A forum selection or choice of jurisdiction clause regulates in which country's court the civil dispute should be resolved and settled. If the contract contains a choice of jurisdiction clause, the contractual situation is clear. The parties are bound by the chosen place of jurisdiction. If the chosen place of jurisdiction is in England, the parties must litigate the civil dispute in England. But what happens if the British party also wants to take legal action in Germany despite of a jurisdiction clause pointing to the English courts? Or how should the court handle the opposite case, if a German party wants to take legal action in England despite a German choice of jurisdiction clause?

As already mentioned, since the United Kingdom's withdrawal from the European Union, the general European rules on civil procedure law no longer apply. The only remaining option is the applicability of international conventions:

As of 21 January 2021, the United Kingdom has acceded to the Hague Convention on Choice of Court Agreements ("Hague Convention"). The Hague Convention applies in international cases only to exclusive choice of court agreements in civil or commercial matters. If the jurisdiction clause is exclusive, the court of the contracting state designated in this exclusive choice of court agreement shall have jurisdiction to decide a dispute to which the agreement applies, Art. 5 (1) of the Hague Convention. For instance, if a jurisdiction clause between German and British parties gives exclusive jurisdiction to German courts, the German courts must hear the case. The British court shall suspend or dismiss proceedings to which an exclusive choice of court agreement applies.

Other international conventions are not apparent. An attractive alternative would have been the Lugano Convention, which has the same background as the EU Brussels regulations. Contracting states, are in addition to the EU also Norway, Iceland and Switzerland. However, in summer 2021 the European Commission blocked the accession of the UK to the Lugano Convention.

It is also uncertain whether the Anglo-German Treaty on Legal Relations of 20 March 1928 applies. This agreement has been superseded by the EU's Brussels Ia Regulation on Jurisdic-tion and the Recognition and Enforcement of Judgments. It is disputed whether this Treaty and others are revived due to the Brexit.

In any case, it is apparent that none of these agreements would help over any exclusive English or German jurisdiction clause.

Christina Weinzierl
Dr. Tobias Pörnbacher
Alexander Braun

Facts of the case

The claimant was the insolvency administrator of a GmbH & Co. KG (the “debtor”). The articles of association of the debtor provided that only the limited partner, U-GmbH, managed the business. The defendant was a director of U-GmbH. U-GmbH was also the managing partner of other investment companies. The debtor raised funds for a stock company (AG) and made these funds available as loans for real estate investments. The loan agreement provided comprehensive collateral as security. The claimant sought recourse from the director for an amount of EUR 200,000 because of payments made to the insolvent stock company. The defendant did not play a part in the transfer.

Judgment of the BGH

Like the lower courts, the Second Senate of the BGH affirmed the debtor’s claim for damages against the director of the GmbH under § 43 (2) of the GmbHG.

Under § 43 (2) GmbHG, the scope of protection of the board and employment relationship between the limited partner GmbH and its directors extends to the KG in the case of negligent management. Managing the business of the limited partnership does not need to be the sole or central task of the GmbH.

BGH affirms contract with protective effect to benefit the KG

The Senate affirmed the requirements of a contract with protective effect to benefit a third party:

1. Under the articles of association, the KG will experience the services of the director when the limited partner GmbH manages the KG. Failures of the directors of the GmbH will always negatively affect the KG.
2. There is a legitimate interest in including a third party – here the KG. A director of the managing GmbH exercises their duties in the interests of the GmbH & Co. KG.
3. There is a good faith need to protect the KG. A breach of the director’s duties when managing the business of the KG will be particularly detrimental to the KG. The KG does not generally have a right to instruct the director. The rights to revoke the power of attorney and object to directors are not contrary to the need for protection.
4. The interests of the KG in being included under the scope of protection is apparent to the GmbH and the extension of the protection is reasonable for the GmbH. This applies even where U-GmbH also managed other funds so that the management of the GmbH & Co. KG was not its sole or material task. The latter issue remained open until now. The BGH followed the judgments of the higher regional courts and the prevailing view in the literature: the fact that directors manage multiple companies does not change their duties. A KG must be able to trust that the director will discharge their duties with care and diligence, regardless of the number of other companies it manages.

Liability, regardless of the internal division of responsibilities

The defendant is also liable when, in line with the internal division of responsibilities, the director was not primarily responsible for managing the debtor. While responsibilities may be divided up, directors will nevertheless remain jointly responsible. In any case, directors will have a supervisory duty. They must follow up on any irregularities or negative developments in areas that are not their direct responsibility. There is no objective reason to limit the protective effect for the KG. The Senate confirmed that the defendant had breached her duty of supervision as she did not prevent the transfers. A report found that the AG had not made enough security available and that only a certain percentage of the investor monies were invested in real estate. If the director had exercised her duties diligently, she would have noticed the maladministration of the core business of the debtor.

Summary

The landmark BGH judgment tightens director liability by extending the scope of the protection inherent in the board and employment relationships of the director. Under the jurisprudence of the BGH, this protection and, accordingly, the liability of directors under § 43 (2) of the GmbHG applies to the limited partner GmbH of a GmbH & Co. KG and extends to the limited partnership. The BGH clarified that the board and employment relationships of a director of a managing limited partner-GmbH lead to protection for the benefit of the limited partnership. The director is therefore also liable to the limited partnership for breaches of their duties under § 43 (2) of the GmbHG.

Dr Florian Weichselgärtner
Valerie Hoffmann

According to the draft bill, the following proposals, among others, are to be implemented:

• The federal states will be authorised to set up senates at the higher regional courts or highest regional courts, which will have jurisdiction for civil law disputes between entrepreneurs exceeding an amount in dispute of EUR 1 million. The parties may expressly or tacitly agree on the jurisdiction of these commercial courts. The federal states are per-mitted to bundle jurisdiction of the commercial court in one court and thus save resources across the federal states.
• The federal states may provide for English as the language of proceedings at the commercial chambers of the regional courts and the commercial courts. This is intended to facilitate proceedings before these courts: Translations of English-language documents are no longer required. However, the courts are free to call in an interpreter at any stage of the proceedings. In the revision proceedings, it is then up to the Federal Court of Justice whether the proceedings are continued in German or English.
• At the request of a party, information classified as confidential under section 2 No. 1 of the Act on the Protection of Trade Secrets shall be protected.
• The involvement of third parties, e.g. by way of a notice of dispute, can quickly negate the advantage of English-language proceedings: The third party can object to the language of the proceedings within two weeks after the written pleading involving the third party.
• The Commercial Courts should explicitly hold procedural conferences, so-called case management conferences or CMCs. CMCs have been common practice in arbitration proceedings for years in order to structure and actively manage arbitral proceedings.
• Also reproduced from arbitration practice is the possibility of producing live verbatim transcripts.

Commercial Courts have certain parallels to arbitration without really being more attractive. The great advantage of arbitration is not so much the choice of any language but rather the expertise of the arbitrators: the parties can determine the arbitrator they consider most suitable. Commercial Courts are a first step towards modernising German civil procedure. However, they do not solve its fundamental problems. The current draft bill already contains some points that reduce the attractiveness of these courts. One example is that the amount in dispute must exceed EUR 1 million. However, the complexity and internationality of proceedings are rarely related to the amount in dispute.

Tobias Pörnbacher
Christina Weinzierl

• The form-free conclusion of arbitration agreements between commercial business partners is intended to eliminate possible legal uncertainties that arise when arbitration agreements are concluded orally or in electronic form only. No changes are planned for arbitration agreements with consumers.
• In multi-party arbitration proceedings mechanisms for the appointment of arbitrators are to be introduced, which are to guarantee a clear and legally certain procedure, especially if multiple parties on one side of the proceedings disagree.
• The practice of conducting arbitration hearings by video conference, which is already in place today, is to be codified.
• Furthermore, arbitral awards shall be published with the consent of the parties. Thereby, arbitral awards may contribute to the further development of the law. Transparency would be increased.
• While it was previously merely possible to set aside positive decisions on the jurisdiction of arbitral tribunals pursuant Sec. 1040 (3) sentence 2 of the German Code of Civil Procedure (ZPO), in future this would also be possible for negative decisions.
• There is to be a further simplification for English-language arbitration proceedings and documents in English. In future, these will no longer have to be translated for proceedings before state courts that are conducted in conjunction with arbitration proceedings. This will significantly reduce the duration and expense of enforcement and annulment proceedings. This should also affect assistance of state courts in taking of evidence pursuant Sec. 1050 ZPO.
• To the extent the federal authorities have set up commercial courts, these shall be responsible for setting aside and declaring arbitral awards enforceable. (Regarding commercial courts see also the blog post of 7 February 2023: Globalisation of court proceedings through so-called commercial courts | Advant Beiten (advant-beiten.com)).

In addition to these projects, further measures are to be taken to accelerate both proceedings and the enforcement of decisions. In particular, it should be easier to enforce arbitral decisions regarding interim relief. This even applies if the place of arbitration is abroad.

The German Federal Ministry of Justice also provides an outlook on which other projects it will work on in the near future. The relevant keywords are emergency arbitrators, dissenting opinions, the concentration of jurisdiction across federal borders in Germany and the allocation of the assistance by state courts to the Higher Regional Courts.

Since it has been 25 years since the last reform of arbitration law, the project is to be supported without further ado. It remains to be seen which of the BMJ's proposals will make it into the draft law. As experience with institutional arbitration has shown, the proposed opt-in provision for the publication of arbitral awards is unlikely to achieve the desired goal. We will keep you up to date on this.

Dr Ralf Hafner
Tobias Pörnbacher

Strict liability means product liability is a significant risk for companies. On 28 September 2022, the European Commission released a draft for a new EU product liability directive, which could significantly increase this risk for companies. The new EU directive reflects the increasing number of digital products on the market. Accordingly, the scope is expanded in several ways. For example, the directive clarifies that software is a “product” under European product liability law. Until now, this has been subject to dispute. The scope of liability for personal use has also been expanded. In the future, companies will face product liability risks where they would not have previously. The elimination of both the limits of liability and the excess increases this risk.

You must identify imminent risks and take action to safeguard against them in the best way possible. Any safeguard should have multiple levels: when drafting contracts, you should include appropriate specifications and rights of control, and allocate liability. Careful design and documented production and quality controls are essential. Above all, companies should ensure they are adequately insured and regularly review their insurance coverage, making adjustments where necessary.

Who is the producer under the Product Safety Act?

To assess the risks, it is important to identify the producer under the Product Safety Act. The term “producer” is defined more widely in the Act than one would assume from the way the term is used in everyday language. The manufacturer of the product, but also the manufacturer of any component part built into the product are both considered producers under the Act. In the future, under product safety law, a company will even be liable as a producer if they make “substantial modifications” to a product.

European importers will also be liable as if they were a producer, even if they only put their logo or brand on the imported product (so-called quasi-manufacturer). In this respect, quasi-manufacturers need to consider whether they should put their trademark or brand on a third-party product.

Manufacturers, importers, and quasi-manufacturers should ensure that, where they acquire (part)products from a supplier, their contracts contain appropriate limitations of liability and quality assurance obligations. Where the parties agree to an assumption of costs in the case of liability, the supplier should also be required to provide proof of appropriate insurance.

If numerous parties are liable to pay compensation for the same damage, e.g., manufacturer and importer, they shall have joint and several liability. The injured party can choose to seek damages from the party they prefer and will generally choose the party best placed economically. The party from which the injured party seeks damages can, in turn, demand compensation from the other responsible party(ies). In the case of international supply chains, importers can have difficulty enforcing claims against foreign manufacturers.

A distributor can even be held liable if the manufacturer can’t be identified, or the distributor fails to provide the name of the manufacturer or the manufacturer’s supplier within one month of an incident. In order to be able to provide this information in an emergency, a distributor should maintain a list of the relevant information about the manufacturer or importer. Above all, they should not distribute any products without knowing the identity of the manufacturer.

In the future, in addition to the manufacturer, quasi-manufacturer and importer, the manufacturer’s authorised representative and fulfilment service providers within the meaning of product safety law will be liable for defective products in the same manner as the manufacturer. This means economic actors, which were previously not confronted with such direct or indirect liability, must now also prepare for significant product liability risks. It remains to be seen whether the authorised representative model established under product liability law has a future in its current form if the new rules are adopted.

Definition of product

A product is a moveable that is placed on the market. Medicines expressly fall outside the scope of the directive. If moveables, such as construction materials, are integrated into a building, they will continue to be a product under the directive.

Increasing digitalisation has also impacted product liability law. In the future, European product liability law will not only apply to moveables but will also expressly apply to digital manufacturing files and software. The term software includes artificial intelligence (AI) systems. This change significantly increases the scope of product liability law.

When is a product “defective”?

A product is defective within the meaning of the Product Liability Act when it doesn’t provide the safety an average customer would expect, justifiably considering all circumstances. This will not change in the future, although new aspects, such as cybersecurity, will be added. In contrast to the definition of “defective” under commercial warranty law, the safety aspect is the sole element for a product to be “defective” under product liability law.

The proper legal safety standard for a product depends on the seriousness of the risk, i.e., the likelihood that damage will occur, as well as the expected extent of damage, the status of the legal asset concerned, and the intensity of the damage.

If the product is designed to be used by different groups of users, the safety standard must be based on the weakest user group. The price of the product can also influence safety expectations. However, even cheap products must comply with basic safety.

The product must be safe to use in any manner that can be reasonably expected: this includes the proper use, as well as any predictable or usual incorrect use. For example, children will put toys in their mouths. When conducting product monitoring, manufacturers should therefore watch for any incorrect use of their product. Normally, the manufacturer will not be liable for improper use, where that use is considered reckless in the circumstances.

Whether a product is defective under the Product Liability Act must be assessed on a case-by-case basis and will often only become clear after an expert has prepared a report for the insurer or as part of legal proceedings. In many cases, this will involve independent proceedings for the taking of evidence.

Generally, a distinction is made between the following three categories of defects:

• Production defect:
  The product differs from the standard specifications for the product series. The manufacturer will almost always be liable for production defects. They will even be liable for “outliers” which are very unlikely to occur due to elaborate quality control measures. In any case, full control of all products supplied, with careful documentation, can be enough in some cases to prove there was no production defect when the product was placed on the market.
• Construction defect:
  In the case of a construction defect, the question is whether, when the product was placed on the market, an alternative construction would have prevented the damage from occurring. From a construction perspective, therefore, the generally accepted rules of technology should be determined, observed, and documented. Where necessary, any construction changes in later series should also be assessed to limit the identified product risk or implement new technology standards. Generally, a cost/use analysis can be conducted as part of this assessment.
• Instruction defect:
  An instruction defect occurs when the consumer is not or not sufficiently informed about the method of use and related dangers. This requires an analysis of the potential hazards of a product. The manufacturer should therefore provide clear and appropriate instructions for use. In some cases, it may be necessary to place warnings (pictograms) on the product. Product packaging should also be carefully planned as the manufacturer can be liable for any misuse of the packaging. The same applies to advertisements about the product.

Where serious risks are later discovered, manufacturers must subsequently warn users about the product risks in an appropriate manner.

In any case, manufacturers are generally not required to provide warnings when the product is clearly or generally known to be dangerous, such as alcohol, tobacco, and sweets (for the risk of diabetes), unless specific laws require such warnings. The tendency in the US legal system to provide warnings for everything has so far had little influence on the European liability system.

Time of assessment

At present, the decisive point in time for the evaluation of whether the safety expectations were fulfilled is when the product was placed on the market. A product placed on the market without defects will not subsequently be defective. However, new safety standards can establish additional information and recall obligations.

In the future, placing on the market will not be the only decisive time. The manufacturer will also be liable when they can control the product after it has been placed on the market (e.g., through software updates).

Easing the burden of proof for injured parties

Generally, injured parties must prove the defect, the damage, and the causal link. They will benefit from an easing of the burden of proof: for example, prima facie evidence of the typical course of events, including life experience, will be deemed to be true. In the future, the burden of proof for injured parties will be further eased. The necessary causal link between the product defect and the damage will be assumed in favour of the injured party where the damage arose because of an “obvious malfunction of the product under normal conditions of use.” In addition, companies will be forced to provide the injured party with copies of any evidence (e.g., construction documents, documented findings from product monitoring) the company has in their possession which the other party needs to establish their claim. If the manufacturer fails to (completely) comply with this requirement, they could lose a lawsuit because the defective nature of the product will then be assumed under statute. A “disclosure of documents” inspired by the Anglo-American model, would be an innovation for German civil procedure law.

Exculpatory evidence

• The manufacturer must prove all circumstances that could exclude their liability. The Product Liability Act provides various scenarios in which a manufacturer would not be liable, despite the defect, if they can prove the relevant facts: the manufacturer did not manufacture or distribute the product for sale to make money or within the framework of professional activity.
• The manufacturer, importer or quasi-manufacturer did not willingly put the product into circulation; instead, an unauthorised third party did so.
• The product is only defective because of an unforeseen change to the established state-of-the-art technology after the product was placed on the market.
• The defect was not yet recognisable, despite the state-of-the-art science and technology when the product was put in circulation.
• The product is only defective because it was produced in accordance with mandatory legal requirements.
• If a supplier supplied a defective component and the defect only occurred during the production of the end product, the supplier of the component part shall not be liable for the damage.

These already very narrow exclusions of liability will be even narrower in the future. For example, the fact a defect is not recognisable when the product is placed in circulation will no longer exclude manufacturer liability if a software or security update could have remedied the defect. The tech industry will not be the only industry that will have to consider whether it can afford to cease security updates for older products after just a few years.

Extent of liability and insurance

The damages companies must pay in product liability cases can quickly run to several tens of millions of euros. If a product causes injury to numerous individuals, the maximum total amount of damages is EUR 85 million. There is no maximum limit for property damage, but the injured party must pay up to EUR 500 in excess. Under the new EU directive, national legislators may no longer establish maximum limits for damages or self-participation for injured parties.

The obligation to indemnify cannot be contractually excluded or limited in advance. A waiver or limitation of the obligation to indemnify can only be agreed upon with the injured party after the damage has occurred.

Claims under the Product Liability Act become time-barred three years after the injured party should have become aware of the damage, the defect in the product, and the identity of the party liable to pay damages. The claim expires ten years after the product which caused the damage was put into circulation unless measures that stop the limitation period were introduced.

Overall, despite all precautions, there is still a high long-term risk of claims under product liability law, especially for dangerous products. Such claims can even threaten the continued existence of the company. This risk will be even greater in the future. It is therefore vital your contracts shield you as much as possible from these risks. In addition, you must closely monitor both production and the products sold and carefully document all control measures. Even with the best preventative measures in place, it is not always possible to avoid product liability. Sufficient insurance against this risk is, therefore, essential. Every company that could be liable should therefore regularly assess whether the insured sum and the subject of its product or business liability insurance correspond to the existing product liability risks. As soon as you become aware of a possible liability case, you should inform the insurer or the insurance agent and agree on the next steps. It also makes sense to obtain legal advice at this early stage – insurers will often bear these costs with their approval - as this prevents mistakes which are difficult to rectify or cannot be rectified later.

Dr André Depping
Katharina Pöhls

Dr Kathrin Bürger, Dr Silke Dulle, Christina Kamppeter, Susanne Klein, Dr Ralf Hafner, Dr Georg Tolksdorf and Dr Sebastian Weller represent five different legal areas and are spread across five locations.

• Dr Kathrin Bürger (Labour Law, Frankfurt and München), Licensed Specialist for Labour Law, advises particularly on collective labour law issues. She assists companies with collective bargaining changes and (in-house) collective bargaining negotiations as well as strike preparation measures. Beyond that, Dr Bürger advises companies on the negotiation with works councils, also as a part of conciliation boards, as well as on all kinds of individual labour law issues.
• Dr Silke Dulle (Corporate/M&A, Berlin), Licensed Specialist for Medical Law, provides legal advice to clients of the healthcare sector, especially in the area of hospitals and health insurance companies. Her legal consultancy covers hospital law, social security and pharmaceutical law, procurement law and corporate law.
• Christina Kamppeter (Labour Law, Munich), Licensed Specialist for Labour Law, advises national and international companies on all aspects of individual and collective labour law, in particular regarding negotiations with works councils and trade unions. One focus of her work is on providing labour law advice on restructurings.
• Susanne Klein (IP/IT/Media, Frankfurt), Licensed Specialist for Information Technology Law, is a renowned expert in data protection law. In addition, she advises her national and international clients in IT and copyright law.
• Dr Ralf Hafner (Litigation & Dispute Resolution, Munich), advises his national and international clients in complex international disputes on dispute resolution out of court and represents them in arbitration and state court proceedings.
• Dr Georg Tolksdorf (Assets/Succession/Foundations, Hamburg) provides legal advice in the area of inheritance and foundation law as well as (tax-optimized) succession planning for private individuals and (family-owned) companies. Another focus of his work is on the execution of (corporate) wills.
• Dr Sebastian Weller (Corporate/M&A, Dusseldorf) focuses on Corporate/M&A as well as Private Equity/Venture Capital, particularly providing legal advice for take-overs, participations and restructuring projects. He provides support on all issues relating to corporate and transformation law as well as corporate compliance.

In addition to the seven new Equity Partners, the following Salary Partners have been appointed Local Partners:

• Dr Anne Dziuba, Labour Law, Munich
• Dr Daniel Fischer, Real Estate, Frankfurt
• Dr Christina Hackbarth, IP/IT/Media, Munich
• Christian Hipp, Antitrust Law, Berlin
• Tanja Hogh Holub, IP/IT/Media, Munich
• Sylvia Jenoh, Tax, Frankfurt
• Dr Klaus Kemen, Real Estate, Berlin
• Dr Markus Ley, Corporate/M&A, Berlin
• Jörn Manhart, Labour Law, Dusseldorf
• Carsten Pütger, Corporate/M&A, Dusseldorf
• Dr Jochen Reuter, Real Estate, Frankfurt
• Dr Winfried Richardt, Corporate/M&A, Dusseldorf
• Dr Florian Weichselgärtner, Dispute Resolution, Munich
• Mathias Zimmer-Goertz, IP/IT/Media, Dusseldorf

Furthermore, the following colleagues successfully continue their career path and have been appointed from  Senior Associates to Salary Partners:

• Annalena Benz, Real Estate, Munich
• Jens Ledermann, Tax, Frankfurt
• Dr Martina Schlamp, Labour Law, Munich

Beyond growth from its own ranks, ADVANT Beiten also continues its course of targeted growth with lateral hires in selected areas and confirms the salary partnership of the following colleagues:

• Christian Burmeister, Corporate/M&A, Freiburg/Berlin
• Dr Moritz Jenne, Corporate/M&A, Freiburg
• Dr Sebastian Kroll, Labour Law, Munich
• Markus P. Linnartz, Tax, Dusseldorf
• Dr Ariane Loof, Labour Law, Berlin
• Dr Michael Matthiessen, Labour Law, Berlin
• Dr Birgit Münchbach, Corporate/M&A, Freiburg
• Kristin Müller-Nedebock, Tax, Hamburg

"All seniority levels are of central importance for the future of our law firm. We are therefore all the more pleased to be able to accompany so many colleagues of different seniority levels, legal areas and locations on their career paths, comments Philipp Cotta, Managing Partner of ADVANT Beiten, and adds: Our modified career track offers all colleagues even more flexibility in their individual career planning and allows us to emphasise our professional expertise across the different levels even more clearly to our clients."

Congratulations to all elected and confirmed partners.

However, even though the German Association of Judges publicly states that the administration of justice is not at a standstill during the coronavirus pandemic, it can nevertheless be noticed that in civil proceedings numerous oral hearings are postponed or not scheduled at all for fear of contagion. Still, these numerous postponements would not even be necessary. Video hearings are also permitted in civil proceedings. What very few people know: According to section 128a of the German Code of Civil Procedure, ZPO, the possibility of a "hearing for oral argument using image and sound transmission" has existed already since the ZPO reform law of 2001. Nevertheless, the "video hearing" has not yet become established in court practice. The corona pandemic might change that.

1. Hearing for oral argument using image and sound transmission pursuant to section 128a ZPO

Pursuant to section 128a ZPO, hearings for oral argument using image and sound transmission have been generally permitted since 2001. This provision allows parties to proceedings to take actions in the proceedings or be heard in a place other than the courtroom via an audio-visual connection. Section 128a ZPO aims at procedural economy by using modern technical possibilities as well as saving time and costs by eliminating the need to travel long distances to and from the place of jurisdiction. In times of corona, in addition to avoiding long journeys under difficult conditions, it is also important to avoid the risk of contagion by reducing the number of people present in the courtroom.

2. Legal and technical requirements for video hearings

The video hearing according to section 128a (1) ZPO first of all requires a decision by the court. This decision allows a party to the proceedings (or more parties) to audio visually connect from a place other than the courtroom, the broadcasting location. This is done at the request of the parties to the proceedings or can also be done ex officio. Although the consent of the party concerned is no longer required since an amendment in 2013, it is always possible to appear in person, even if the video hearing is ordered. The decision is at the court's discretion which has to take into account in particular the costs and time involved for the concerned party.

It is further required that it is technically possible to simultaneously broadcast image and sound of the hearing to the courtroom and to the broadcasting location. Recording and playback devices are necessary at both locations. The person participating by videotelephony must be able to follow the entire hearing. The events in the courtroom must be transmitted where at least the Court itself must be physically present, as well as the other participants, whether they are in the courtroom or also participating by videotelephony. The parties participating by videotelephony must be broadcast to the courtroom. The public ‑ which is only allowed in the courtroom ‑ must only be able to follow the broadcast sound. The broadcast images and sound must not be recorded pursuant to section 128a (3) sentence 1 ZPO. Its content is documented in the minutes as part of the oral hearing.

The technical requirements for broadcasting do not have to be particularly high. A recognisable broadcast of the image and the comprehensible broadcast of sound are sufficient, which can be guaranteed nowadays without major technical and financial expenditure. In some courts, for example, the use of the software "Skype for Business" has become established, where the party participating by videotelephony only needs a computer equipped with camera and microphone. Only the court needs a more comprehensive technical equipment. In addition to the broadcasting software, recording and playback devices must be available for the courtroom. Some courts are equipped with video conference rooms, while some courts also have mobile equipment that can be taken to the respective courtroom. So far, however, not all courts are by far equipped with the necessary technology.

If the technical equipment is available, the court still might have doubts about the suitability of the video hearing. Broadcasting is certainly not equivalent to personal presence. The disadvantage is the reduced immediacy, the lack of an impression obtained when personally faced with someone. However, that is not necessarily needed in every hearing. For example, if there is no extensive taking of evidence or only short formal matters are involved, no physical presence is usually required.

3. The parties' right to file an application

The party may request that a video hearing be opened by means of an application. However, there is no legal claim that courts have the necessary technical equipment, nor that it will be used in a specific case. Moreover, the discretionary decision of the court on section 128a ZPO cannot be contested (in isolation). Experience has shown that it therefore depends on the respective court or judge whether the possibility of video hearings can be used, which can usually be clarified in advance.

4. Conclusion

During the coronavirus pandemic, video hearings in civil proceedings are an effective means of avoiding the risk of contagion and, at the same time, a standstill in the administration of justice.

Once the crisis is over, digital oral hearings do not have to become the norm. However, with the technical possibilities of video hearings once created - and possibly an increased willingness to do so due to good experience or at least less reluctance - the purpose of section 128a ZPO could be achieved in the long term: in appropriate cases, the avoidance of considerable time and travel expenses for parties to proceedings with only insignificant disadvantages for the hearing by means of digital broadcasting to the courtroom. In this respect, the coronavirus pandemic can also be understood as an opportunity.

Finally, the legislator intends to further promote the possibility of video hearings in other court proceedings as well. For example, the draft of section 114 of the German Labour Law Courts Act (ArbGG) even provides for the possibility of the participation of lay judges in labour law court proceedings by means of video and audio broadcasting in addition to section 128a ZPO.

If you have any questions in connection with this blog post or regarding the possibilities of litigation in times of the coronavirus pandemic, please do not hesitate to contact Dr Florian Weichselgärtner.

On the other hand, reasonable cooperative solutions have probably never been more urgently needed in the economy than now. Experts agree that the economic system and its players will only survive the corona crisis relatively unscathed if the problems are solved together and not by acting against each other.

Online mediation can help to overcome this crisis. With speed, the pursuit of cooperative and constructive solutions and distance communication, online mediation offers the most important criteria that are currently required.

In mediation proceedings, the parties to the conflict are supported by an all-party mediator in resolving their conflict. With the help of the mediator, the conflict is considered in its entirety and it is worked out which interests the parties to the conflict actually pursue and which emotions, wishes and needs play a role in the conflict. On this basis, the participants jointly and independently develop a solution that in the ideal case turns their conflict into a win-win situation. A win-win situation in this context may even be a solution that distributes the resulting damage in such a way that the economic survival of both participants is initially secured and lays the foundation for new projects after the crisis.

Mediation proceedings may not be suitable for every conflict and do not require a careful examination of the legal situation which each party to the conflict should in any case carry out on its own to assess the opportunities and risks before entering into conflict resolution. In the current special situation, however, three fundamental advantages of mediation as compared to court proceedings are obvious:

1. The result of mediation, if successful, is an actual and forward-looking solution to the conflict which may also - or even only - contain elements that are not litigable at all, e.g. the agreement on team-building events, the development of new projects or the handling of future conflicts. There are hardly any limits to the creativity of the participants as long as the desired solution does not violate applicable law. The judge, in turn, can only decide on applications that have been submitted in due form on the basis of the legal and factual situation. Generally, this happens in relation to the past and can even lead to a situation where a process won does not help a party to solve its actual current problem. In the corona crisis, for instance, there may be a need for transitional solutions and contract adjustments that are difficult to achieve through legal proceedings.
2. After successful mediation, a solution is found that satisfies both sides and often helps maintain the business relationship. It is not uncommon for both parties to lose with the judge's decision. Even if one party is fully granted justice, the lawsuit has usually destroyed the business relationship.
3. Mediation proceedings usually lead to a solution of the conflict within a few weeks, if all parties involved pursue it vigorously, with careful preparation, holding a maximum of two meetings and coordinating the final agreement. Even in the first instance, court proceedings rarely take less than a year.

Mediation thrives on communication which also contains non-verbal elements. The option of online mediation thus seems to be unsuitable at first sight. So far, there have been only tentative approaches to online mediation, while the mass of mediators rejected procedures without face-to-face contact. This will probably have to change now. Modern technology now makes many things possible that no longer require face-to-face mediation. The real room can be replaced by a virtual room. Conceivable here are chat functions, audio and video technologies or even a complete digital room. As with face-to-face mediation, it is possible to make scanned documents visible to everyone, visualise ad hoc topics and even use creative technology options. This way, individual phases of mediation or even the entire mediation can be conducted online - provided that mediator and participants have access to an Internet-connected computer or laptop with a camera. Technically, online mediation requires little prior knowledge of the participants.

It should be taken into account that there are higher risks with regard to confidentiality in online mediation as it is not possible to prevent other people from being present in the background, even if all participants initially confirm in writing that no other people will enter the "virtual room" with them - which is to be recommended.

It should also be mentioned that mere telephone mediation is also a viable option. This type of conflict resolution is already successfully offered by some legal expenses insurers in consumer matters and is even used in the Netherlands, for example, in family conflicts. In commercial law, however, such mere telephone mediation will only be appropriate if the dispute is not very complex and must be resolved very quickly, and the technical requirements for online mediation are not available.

We will be pleased to advise you on the possibilities of rapid and cooperative conflict management and, if you wish, our experts, who have been trained as mediators, can also conduct online mediations. Should we be unable to guarantee our neutrality, for instance due to existing client relationships with your company, we will make recommendations for suitable mediators and accompany you through the mediation process.

Dr. André Depping
(Lawyer)