Sep 2023

Germany

Law Over Borders Comparative Guide:

Commercial Litigation and Cross-border Enforcement

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1 . What is the structure and organisation of local courts dealing with commercial claims? What are the main procedural rules governing commercial litigation?

Germany is a civil law jurisdiction and, as such, civil proceedings are primarily governed by the German Code of Civil Procedure (Zivilprozessordnung (ZPO)) and the Courts Constitution Act (Gerichtsverfassungsgesetz (GVG)).

Small commercial cases (claims with a value below EUR 5,000) fall within the jurisdiction of the local courts (Amtsgericht) and are heard by a single judge. Commercial disputes above EUR 5,000 are heard by the regional courts (Landgericht).

Some regional courts have established commercial chambers (Kammer für Handelssachen) and before some of them (e.g. Hamburg and Frankfurt), cases may be heard in English with the consent of the parties to the proceeding. The number and type of judges hearing the cases is determined by the matter in dispute.

Germany has a two-tier appeal system. First appeals, which deal with both the facts and the law of the case, are heard by the regional court or the higher regional court (Oberlandesgericht) if filed against a trial judgment issued by a local or a regional court respectively. Second appeals against first-appeal judgments, which only pertain to points of law, are heard by the Federal Court of Justice (Bundesgerichtshof). Only a limited number of attorneys are authorised to bring actions before this highest civil court (Rechtsanwaltbei dem Bundesgerichtshof).

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2 . What pre-action considerations apply?

The ZPO does not provide for pre-action considerations prior to commencement of a commercial claim. Therefore, usually, the parties do not have to observe any particular formality in regards to pre-action considerations before filing the lawsuit. Exceptionally, in regards to minor disputes (small claims under EUR 750, neighbourhood disputes etc.), the parties might be obliged to try to reach an amicable settlement before they can take a claim to court.[1] 

However, it should be noted that the claimant runs the risk of being ordered to pay the entire costs of the litigation if the defendant has not disputed the existence of a claim.[2]


[1] Section 15a EGZPO.

[2] Section 93 ZPO.

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3 . What are the main alternative dispute resolution (ADR) methods used to settle large commercial disputes?

The ZPO does not contain any mandatory statutory provisions regarding ADR methods. The rules pertaining to such ADR methods are based on the principle of freedom of contract, i.e. the rules the parties have agreed on will be binding on them. However, the courts try to encourage the parties to reach an agreement via a conciliation hearing before the regular oral hearing.[3] 

The main ADR methods used to settle large commercial disputes are arbitration (institutional or ad hoc) and mediation (with a trained mediator or conciliation judge). The German Arbitration Institute (Deutsche Institution für Schiedsgerichtsbarkeit e.V. (DIS)) has been the leading institution in Germany for the administration of arbitration and other alternative dispute resolution proceedings for national and international commercial disputes. 


[3] Section 278 ZPO.

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4 . How long, on average, do court proceedings take to reach trial?

Compared to other European jurisdictions the German legal system performs well in terms of its efficiency in civil and commercial matters. On average it takes about 11 months to obtain a decision at the regional court level.[4] A high number of cases are settled in less than a year from their commencement due to the courts’ proactive assistance. Only about one in five proceedings takes longer than 12 months.

The essence of German civil procedure is of written nature. The oral hearing as a “trial” is essentially held to allow the judge to verify the credibility of the disputing parties and witnesses and to discuss outstanding issues. 

The phase of reaching the trial is short as court proceedings are initiated by the claimant filing a statement of claim.[5] Shortly after receiving the claim sought, the court usually initiates a written preliminary proceeding (schriftliches Vorverfahren). The defendant then has the right to indicate its intention to defend itself (Verteidigungsanzeige) and to respond to the claim. After that, the claimant may reply to the defendant’s statement of defence. Usually the oral hearing will be held shortly after the written procedure. 

It is possible that, in the written preliminary proceedings, a default judgment (Versäumnisurteil) would be issued if the defendant does not indicate its intention to defend itself.


[4] Federal Office of Statistics, Civil Courts Subject Series 10 Number 2.1, pp. 56-58.

[5] Section 276 ZPO.

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5 . What disclosure obligations apply? Are parties required to disclose unhelpful documents as well as those on which they rely?

The principle of evidence production under German law requires the respective parties to a civil lawsuit to establish and produce any evidence necessary. The Anglo-American system of including a formal pretrial discovery or disclosure process does not exist under German civil law and the duty to produce documents is very restricted. 

Consequently, and in principle, each party must prove its case based on the evidence in its own possession. With respect to the disclosure of adverse evidence, the general rule is that the parties do not need to raise such evidence as it would not support their claim.

Nonetheless, and exceptionally, according to sections 142, 421 ZPO and the relevant case law, a court has discretion to order the production of both helpful and unhelpful documents and may – in this regard – take into consideration the principle of proportionality and the legitimate interests of the parties in maintaining confidentiality. However, the case law pertaining to the application of sections 142, 421 ZPO is rather sparse as it is a clear exception to the applicable principles of proof.

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6 . Can witnesses be required to attend trial and face cross-examination?

Every witness summoned by a German civil court must appear in court to testify. Otherwise, the court will impose an administrative fine under section 380 paragraph 1 ZPO. The scheduled trial will then be continued at a later date and the witness will be required to appear or face another penalty. 

Exceptionally, a witness – such as fiancé(e)s, spouses, life partners and some relatives – can refuse to testify or make a witness statement, for instance, for personal reasons under section 383 ZPO. The right to refuse to testify exempts a witness from appearing in court.[6]

The witness hearing is primarily carried out by the court in order to clear up any ambiguities. Although the parties can ask follow-up questions, it does not amount to an Anglo-American style cross-examination. The witnesses are questioned one by one and in the absence of other witnesses. 


[6] Section 386 paragraph 3 ZPO.

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7 . What discretion do the courts have in making costs orders?

The German system of civil litigation costs is based on the principle that the loser of the litigation must compensate all costs and fees incurred by the winner.[7] As a rule, courts are not permitted to deviate from this principle, save for the allocation of additional or unnecessary costs for which courts are provided with a limited discretion under section 96 ZPO. 

In this context, it is worth mentioning that only “necessary” costs need to be reimbursed for appropriate legal action. It is to be determined by the court, if the expended costs would have been incurred by an objectively reasonable and economical thinking party in the position of the winning party.[8] As a result, the determination of the question of the “necessity” of costs can be equated to a “discretion” which the courts have in making costs orders.


[7] Section 91 ZPO.

[8] Federal Supreme Court (BGH), Court Order dated 07.02.2018 – XII ZB 112/17.

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8 . What are the main types of interim remedies available?

Interim remedies can be issued within a short time period, e.g. within a day(s)/week. In Germany, there are two types of interim remedies: freezing orders (Arrest) and preliminary injunctions (Einstweilige Verfügung).

Freezing orders allow a party to attach assets before the judgment is handed down in order to secure the enforcement of monetary claims. Whereas the function of a preliminary injunction is to maintain the status quo for all non-monetary claims. 

The condition for granting interim remedies is that the current legal status is endangered. In this context, both variations of interim remedies can be granted only under exceptional circumstances and the claimant must demonstrate:

  • the urgency of the matter; and
  • the existence of an underlying claim under the substantive law. 

As regards the standard of proof, it is not required that the judge is fully convinced that a certain fact is true and, therefore, a sworn statement (Versicherung an Eides statt) is sufficient. 

The interim remedies request must be filed with the court which has jurisdiction to hear the main claim. The chances of success of a lawsuit are estimated by the court, and interim legal protection is to be denied if a claim would obviously be futile. 

However, if the court deciding the main claim draws the conclusion that the freezing order or preliminary injunction was granted without merit, the party to which the order was granted must compensate the opposing party for any damages suffered as a result of the interim remedy.[9]


[9] Section 945 ZPO.

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9 . What approach do the local courts adopt with respect to arbitration? What arbitration law applies and is it based on the UNCITRAL Model Law?

Arbitrations seated in Germany are governed by the 10th Book of the ZPO. It is based on the UNCITRAL Model Law. 

The local courts have a supportive role (e.g. taking of witness evidence) in respect of arbitration proceedings. In accordance with the UNICTRAL Model Law, the decisions of arbitral tribunals are binding on state courts. In principle, state interventions are only permissible under narrowly defined conditions and otherwise not provided. A possible supervisory role and involvement of state courts is limited to specific issues such as a potential violation of the right to be heard or a lack of impartiality of an arbitrator.

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10 . Can arbitrators grant interim relief?

Upon its constitution, an arbitral tribunal may order interim measures whenever it deems it necessary.[10] Additionally, the existence of an arbitration agreement does not preclude a state court from granting interim relief before or after the commencement of an arbitration proceeding.

As per section 1041 paragraph 2 ZPO, the enforcement of an interim relief ordered by the arbitral tribunal depends on the exequatur decision of a court. Therefore, only the courts have the power to declare decisions as enforceable, including those rendered by arbitral tribunals, as arbitral tribunals do not have the power to enforce interim orders. Upon request of a party, a court may order the enforcement of such measures with the use of coercive means if necessary. Hence, it might be recommended that the claimant seek interim relief at the state court as this will simplify and accelerate the enforcement.


[10] Section 1041 ZPO.

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11 . On what grounds can an arbitration award be appealed?

In principle, the German arbitration law does not provide for an appeal mechanism. However, in the event of serious procedural irregularities or violations of fundamental principles of law (e.g. ordre public), domestic arbitral awards can be set aside by state courts under section 1059 paragraph 2 ZPO. Unless the parties have agreed otherwise, an application to set aside an arbitral award must be filed with the higher regional court within a period of three months from the date of receipt of the award.

A setting aside proceeding is not a révision au fond. As a result, state courts are not allowed to review an arbitral award on facts and law. In concrete terms, an arbitral award may be set aside only if:

1. the party filing the application shows sufficient cause that:

a) one of the parties concluding the arbitration agreement pursuant to sections 1029 and 1031 did not have the capacity to do so pursuant to the laws personally relevant to such party, or that the arbitration agreement is not valid under the laws to which the parties have subjected it or, if the parties have not made any determinations in this regard, that it is invalid under German law; or that

b) the party filing the application had not been given proper notice of the appointment of an arbitrator or of the arbitral proceedings, or that the party filing the application was otherwise unable to assert the means of attack or defence available to them; or that

c) the arbitral award deals with a dispute not contemplated by the separate arbitration agreement or not covered by the terms of the arbitration clause, or that it contains decisions that are beyond the scope of the arbitration agreement; however, where it is possible to separate that part of the arbitral award relating to points at issue that had been submitted to arbitration from the part relating to points at issue that had not so been submitted to arbitration, only the latter part of the arbitral award may be set aside; or that

d) the formation of the arbitral tribunal or the arbitral proceedings was not in accordance with a provision of the present Book or with an admissible agreement in place between the parties, and that this presumably has had an effect on the arbitral award; or if

2. the court finds that

a) the subject matter of the dispute is not capable of settlement by arbitration under German law; or

b) the recognition or enforcement of the arbitral award will lead to a result that is contrary to public policy (ordre public).[11]

Exceptionally, it has been recognised by the Federal Supreme Court that arbitration awards in antitrust disputes are fully reviewable under German law. In this area, the principle of the independence of arbitration decisions is overruled. This is justified by the fact that German antitrust laws belong to elementary German legal principles. This is due to the highly complex nature of such disputes and the importance of antitrust bans as a national concern. A limitation of the court to obvious and mostly formal errors would not do justice to the high protective value of the German antitrust laws.


[11] Section 1059 paragraph 2 ZPO.

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12 . What international conventions and agreements on enforcement of judgments or arbitral awards is your jurisdiction a party to?

Germany has signed and ratified several international conventions and agreements on the enforcement of judgments and arbitral awards. In particular, Germany has not opted out or restricted the application of any EU regulation pertaining to the enforcement of foreign judgments or arbitral awards. 

The following EU regulations apply in respect of commercial judgments (excluding arbitral awards) within the European Union:

  • Brussels I Regulation No. 1215/2012.
  • European Enforcement Order Regulation No. 805/2004.
  • European Small Claims Procedure Regulation No. 861/2007.

Germany is also bound by the following EU enforcement regulations:

  • Enforcement of Succession Regulation No. 650/2012.
  • Protection Measures in Civil Matters Regulation No. 606/2013.
  • European Account Preservation Order Regulation No. 655/2014.

In the case of non-EU judgments, Germany is party to the following multilateral treaties: 

  • Lugano Convention 2007 on jurisdiction and the recognition and enforcement of judgments in civil and commercial matters.
  • Treaty of 19 July 1966 between Germany and Tunisia on legal protection, legal assistance and the recognition and enforcement of foreign judicial decisions in civil and commercial matters and on commercial arbitration.
  • Treaty of 20 July 1977 between Germany and Israel on the mutual recognition and enforcement of judgments in civil and commercial matters. 
  • Hague Convention on the Recognition and Enforcement of Decision Relating to Maintenance Obligations 1973.

Additionally, regarding the enforcement of an arbitral award, Germany is a party to the New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards 1958.

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13 . What types of judgments in commercial matters are enforceable and what types are excluded?

In general, enforcement can be sought on the basis of a final and binding judgment. A judgment is final and binding when it can no longer be appealed.[12] On request, the court issues a certificate confirming the judgment’s final and binding nature. 

Where the judgment has not yet reached the binding state, mainly because it is still appealable, the court can order interim enforceability. The declaration of interim enforceability is for the reason that, otherwise, the creditor would always have to await a final appeal decision before requesting foreclosure. For the protection of the debtor, however, a security deposit must then be provided in the event of enforcement.

Regarding foreign judgments, enforcement has to be requested at the court. The procedure differs between judgments from non-EU member states and judgments from EU member states.

First, the recognition of a foreign judgment is granted ipso iure. As a result, German law does not provide for a recognition procedure. However, a party may file a request with the state courts in order to obtain a declaration that a foreign judgment does not meet the requirements set out in section 328 ZPO. Therefore, foreign judgments are automatically recognised so long as the said requirements are met and no grounds for refusal are invoked.

Second, the enforcement of a foreign judgment requires a declaration of enforceability (exequatur) decision by a competent German court (Vollstreckbarkeitserklärung), unless the Recast Brussels I Regulation No. 1215/2012 according to section 722 ZPO applies. 

Since January 2015, the exequatur requirement no longer applies to judgments rendered by courts from EU member states. These judgments are recognised and enforceable ipso iure pursuant to section 1112 ZPO. As a result, a claimant from inside the EU may reach out to a court without any additional procedure. 

Deviating from this, judgments from non-EU member states must be declared enforceable by a national court, if they are:

  • legally binding; 
  • enforceable in the state of origin; and
  • recognisable under section 328 ZPO.

A foreign judgment from a non-EU member state is not considered to be binding under section 328 ZPO and excluded from enforcement, if:

  • The foreign courts which handed down the judgment do not have jurisdiction according to German law.
  • The defendant, who has not participated in the proceedings and invokes its non-participation, has not been duly served the document on which the proceedings were initiated or has been served but not in such time to allow the defendant to defend itself. 
  • The judgment is incompatible with a judgment rendered in Germany, or with an earlier judgment handed down abroad that is to be recognised, or if the proceedings on which such judgment is based are incompatible with pending proceedings in Germany.
  • The recognition of the judgment would lead to a result that is obviously incompatible with essential principles of German law, in particular if the recognition is not compatible with a fundamental right.
  • Reciprocity has not been granted.

[12] Section 705 ZPO.

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14 . What is the process for registration of foreign judgments and arbitral awards?

There is no uniform procedure for the recognition of foreign judgments. Judgments rendered by courts of EU member states are legally binding and enforceable without any further procedure.

In principle, and in reverse to section 328 ZPO (which only declares the reasons for ineffectiveness), non-EU judgments are automatically recognised as valid except for divorce judgments. This general effectiveness also covers arbitration awards as Germany is a party to the New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards 1958. Hence, there is no special procedure of registration necessary in regards to the effectiveness of judgments and arbitral awards. 

However, despite their recognition as of right, foreign judgments do not have the same legal effects as German judgments so long as they are not enforceable. As only German judgments are directly enforceable, a declaration of enforceability is required for foreign judgments (Vollstreckbarkeitserklärung). Such a declaration can be obtained in enforcement proceedings pursuant to section 723 ZPO, during which a court determines whether the enforceability requirements are met. In this regard, the court will examine whether the foreign judgment violates essential principles of German law. Such violation is rare in practice as only serious violations of law would lead to the non-enforceability of a foreign judgment in Germany.

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15 . Once the judgment or award is registered, what are the available methods of execution?

Once a foreign judgment has been recognised as enforceable, it has the same force and effect as a German judgment and enforcement proceedings can be initiated.

An enforcement proceeding takes place as follows:

  • The creditor must obtain an enforcement title with an enforcement clause.
  • The enforcement title must then be served on the debtor.
  • The creditor has different options for the type of enforcement desired. In the case of a claim for monetary payment, the creditor may choose between the following common enforcement measures:
    • compulsory execution against movables (seizing off a movable item);
    • order of attachment (attachment of wages and bank accounts, third party debt order); or
    • initiation of forced sales.

Regarding compulsory execution against movables the seized movable item has to be auctioned and the creditor will receive the revenue (Zwangsversteigerung). The costs of enforcement must be met by the debtor.[13] The execution takes place through state bodies. The bailiff (Gerichtsvollzieher) is not directly commissioned by the creditor but by a court. 


[13] Section 788 ZPO.

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16 . What interim measures are available pending enforcement?

Interim or provisional measures may be ordered at any time to ensure the effectiveness and enforceability of a pending enforcement. The following interim measures are available: 

  • Security for costs. This is an interim measure usually requested by the claimant, if there are reasonable grounds to believe that the defendant is insolvent.
  • Applications for the preservation or detention of property. Although less common, they are equally as important. However, this measure must be ordered with caution as the preservation or detention of property may have serious and adverse consequences for a party that needs to use or sell their property.

EXPERT ANALYSIS

Chapters

Bermuda

Charlotte Donnelly
Keith Robinson
Mahogany Bean

British Virgin Islands

Kate Lan
Nicholas Lee
James Noble

Canada

Robert J.C. Deane
Sean Gallagher

Cayman Islands

Amelia Tan
Joni Khoo
James Noble

China

Jessica Fei

England and Wales

Ben Bruton
Jake White
Suzanne Labi

Guernsey

Elaine Gray
Rebekah Johnston
Robin Gist

Hong Kong

Ian De Witt
Natalie Lam

Japan

Claire Chong
Kaori Sugimoto

Jersey

Christopher Tan
John Kelleher

Malaysia

Janice Ooi Huey Peng
Sharon Chong Tze Ying

Norway

Carl E. Roberts
Eline Hellem Langeland

Pakistan

Mansoor Hassan Khan

Saudi Arabia

Fahad AlDehais AlMalki
Salman AlAnazi
Talal AlOtaibi

Singapore

Calvin Ong
Monisha Cheong
Wendy Lin
Josephine Choo

South Korea

Daniel Chua
SeungMin Lee
Youjoun Ha

Taiwan

Angela Y. Lin
Joyce N. Chang

Thailand

Jittipong Champreechar
Napassorn Panitchewakul
Sarocha Thongperm

United Arab Emirates

Ayman Ibrahim
Hassan Al Shaqsi
Nasser Al Osaiba
Sleiman Jorr

United States

Arthur Schoen
Julia Mano Johnson
Natalie Holden

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