The draft bill to strengthen Germany as place of jurisdiction

The federal government’s plans to further strengthen Germany as place of jurisdiction are taking shape. Following the key points paper that was published in January 2023, the draft bill on the act to strengthen Germany as place of jurisdiction is now available. In this article, we take a closer look at what are arguably the biggest changes compared to the existing system, i.e. the possibility of using English as the language of the proceedings throughout the court instances and the confidentiality of the proceedings.

We already analysed the key issues paper in detail here: Plans to strengthen Germany as place of jurisdiction (noerr.com)

English as the language of proceedings

According to the draft bill, the Bundesländer will be authorized to set up special divisions at the Regional Courts (Landgerichte) where proceedings can be conducted entirely in English. In addition, the Bundesländer are to be allowed to set up specialised senates for certain commercial disputes at the Higher Regional Courts (Oberlandesgerichte). These trial courts, referred to as “commercial courts”, will then have first instance jurisdiction for certain commercial disputes and will also be able to conduct their proceedings in English. The idea behind this approach is to enable certain courts to concentrate on and specialise in specific subjects to ensure high-quality jurisprudence tailored to typical problems arising in commercial disputes.

In the future, it will not only be possible to conduct the oral proceedings in English, but also to draft both the written submissions and the judgment handed down by the court in English. This would be a big step towards the internationalisation of German court proceedings.

Under the current law, only the hearing itself can be held in English, and this only if both parties agree and waive the use of an interpreter. Written submissions and decisions such as judgments or orders currently must be drafted in German. Due to these restrictions, there have only been a few cases in which the parties have made use of the option to conduct proceedings in English. However, the issue of adequate and sufficient language skills already came up in the past and it is still unclear how the judiciary intends to ensure the linguistic quality of the hearings and the decisions handed down in English for the newly introduced English-language Commercial Courts.

The draft bill now also provides that appeal proceedings can be conducted in English in the future. This represents a major change compared to the current legal situation and should contribute to legal certainty, especially for international parties. Indeed, under the current law, the English language cannot be used in courts of second instance. This has not exactly contributed to German courts being attractive as a dispute resolution forum at an international level. Even in those of the Bundesländer where so-called commercial courts have already been installed at the level of the regional courts through special allocation in the regional laws, such as in the cities of Stuttgart and Mannheim in Baden-Württemberg, appeal proceedings are currently only held in German. Regarding the third instance for appeals on points of law, the draft bill further provides that proceedings conducted in English at the previous instances can also be conducted in English at the competent senates at the Federal Court of Justice. However, it is envisaged that the competent senate of the Federal Court of Justice will have to agree to proceedings being conducted in English.

In connection with the conduct of proceedings, the draft bill now contains a provision on the holding of an organizational meeting. In arbitration proceedings, a so-called case management conference involving the parties and the arbitral tribunal already is regularly held. At these conferences matters such as deadlines for written pleadings and the date of the oral hearing are discussed and coordinated. This facilitates the planning of the proceedings for all parties involved. It is therefore a great step forward that the draft bill now expressly provides the option of such organizational meeting for proceedings before the Commercial Courts.

Confidentiality

In the German judicial system, the principle of public hearings is a procedural law maxim. Thus, oral hearings before the courts are generally open to the public, although there are restrictions on this principle under specific laws. In the past, this principle has been perceived as a disadvantage compared to arbitration, where closed hearings and thus confidentiality of the proceedings are usually considered to be essential elements. These criteria have often proven to be decisive for the parties’ decision on which dispute resolution mechanism to choose.

The disclosure of a major civil dispute can cause lasting damage to a business relationship, and to the reputation of a company. The current legal situation thus does not give companies the necessary assurance that their internal affairs or trade secrets will not be disclosed in legal proceedings.

The draft bill now provides for the possibility of classifying certain information in international commercial disputes before German courts as confidential as of the filing of the statement of claim at the request of one of the parties. This means that all the parties have to treat the proceedings as confidential, which should also increase the attractiveness of German courts as dispute resolution forum. Furthermore, there is the possibility of explicitly excluding the public from hearings. This combination of an exception to the principle of hearings being public and the broad application of the law on the protection of trade secrets meets the desire for more confidentiality frequently expressed by internationally operating parties.

Conclusion:

The draft bill is a step in the right direction towards strengthening Germany as place of jurisdiction. The fact that German arbitration law is also to be revised almost in parallel (cf. the recently published key issues paper on this topic: BMJ | Pressemitteilungen | Modernisierung des deutschen Schiedsverfahrensrechts: Bundesjustizminister legt Vorschläge vor, German version only) shows that the Federal Government is comprehensively addressing the issue of Germany’s attractiveness as place of jurisdiction.