New since 15 March 2024: Third-party notices in DIS arbitration proceedings - The Supplementary Rules for Third-Party Notices (DIS-TPNR)

In state-court proceedings in Germany, third-party notices are a proven remedy to avoid contradictory decisions or suspend a statute of limitations. If a dispute is announced to a third party who is not already a party to that legal dispute, the third party must accept the decision in a subsequent legal dispute against them. The main use of the third-party notice is in constellations where there are claims against a third party for warranty or indemnification. This often involves supply chain and subcontractor relationships or joint and several liability. The third party can join the legal dispute as an intervening party in order to actively participate in the proceedings and support the defense of the main party.

The German Code of Civil Procedure (ZPO) regulates third-party notice in state court proceedings; however, involvement of third parties in arbitration proceedings requires the consent of all parties involved and is therefore more difficult. While the arbitration rules (DIS Rules) of the German Arbitration Institute (DIS) already contain provisions on the involvement of third parties (see Art. 18 f. DIS Rules), they fall short of the concept of third-party notice in the ZPO.

With the Supplementary Rules for Third-Party Notices (DIS-TPNR), effective as of 15 March 2024, it is now possible - similar to the requirements for court proceedings in the ZPO - to notify third parties of a dispute in a simpler and more legally-secure manner in accordance with a standardized procedure. Unlike previously utilized Art. 18 f. DIS Rules, the DIS-TPNR comprehensively regulate the requirements and legal consequences of a third-party notice.

According to Art. 1 DIS-TPNR, the rules apply if the parties have agreed to their applicability. Also according to the DIS-TPNR, it remains the case that all parties must agree in order to be bound by the outcome of arbitration proceedings. Nevertheless, the DIS-TPNR provide model agreements that facilitate this consent, which can be found on the DIS website: German Arbitration Institute (DIS): DIS Model Clauses (disarb.org). When concluding new contracts, the DIS-TPNR can regularly be used even before a dispute arises to enable a later notice of dispute.

The DIS-TPNR in detail:

Admissibility and procedure

A third-party notice is admissible pursuant to Art. 2 DIS-TPNR if a party believes it has a claim for warranty or indemnification against a third party in the event of an unfavorable outcome of the DIS arbitration proceedings or if it is concerned about the claim of a third party. Additionally, the third party must have agreed to a third-party notice in accordance with the DIS-TPNR (based on Section 72 ZPO).

To give the third-party notice, a party submits a written submission to the DIS. The DIS assists by transmitting that submission to the third party being notified and to the other party to the DIS arbitration proceedings (Art. 3, 6 DIS-TPNR). The submission must also specifically name the agreement wherein the third party has acquiesced to a third-party notice under the DIS-TPNR. As is allowed under the rules of the ZPO (Section 75 ZPO), the third party may also join the arbitration proceedings under the DIS-TPNR as an intervening party in support of the party giving notice of dispute (Art. 6.2 DIS-TPNR). In principle, such an intervention must be made within 21 days of the notification of the third-party notice to the third party.

A key aspect of arbitration law is that the parties involved in the proceedings select the arbitrators themselves. The DIS-TPNR ensure that, in addition to the parties, third parties can also influence the selection of arbitrators if they join the proceedings as intervening parties. To this end, it is stipulated that a third-party notice must be issued before the arbitral tribunal is constituted (Art. 4, 7, 8 DIS-TPNR).

The arbitral tribunal may also, however, authorize a third-party notice at a later stage in the arbitration proceedings. This presupposes that the third party agrees to the third-party notice and declares that (a) it raises no objections to the composition of the arbitral tribunal, and (b) it accepts the proceedings as they stand at the time of the third-party notice.

Objections to the validity and effect of the third-party notice

Objections to the validity of the third-party notice may be raised by the parties or the intervening party within 21 days after the intervening party submits the declaration of intervention. Only an intervening third party may raise such an objection as an intervening party. Indeed, Art. 10.1 sentence 2 DIS-TPNR allows a third party to intervene in the arbitration only for the purpose of objecting to the validity of the third-party notice.

The effects of a third-party notice under the DIS-TPNR are also based on the provisions of the ZPO. In particular, the third party will not be heard in relation to the party giving notice of dispute in a subsequent dispute based on the assertion that the dispute was incorrectly decided (Art. 11.1 DIS-TPNR). Due to the third party’s agreement to the DIS-TPNR, the third party is, vis-à-vis the party giving third-party notice, obliged to recognize these effects in the subsequent dispute (Art. 11.2 DIS-TPNR). Furthermore, the limitation period vis-à-vis the third party is suspended (Art. 11.4 DIS-TPNR).

Evaluation and outlook

Overall, the DIS-TPNR are to be welcomed. They regulate third-party notices in DIS arbitration proceedings with legal certainty and thereby take into account the interests of the parties involved in a balanced manner. It should be emphasized that a third-party notice of arbitration under the DIS-TPNR is not only effective if the subsequent proceedings are also DIS arbitration proceedings, but even if they are arbitration proceedings under other rules or state court proceedings. There are other offers for rules on third-party notice in arbitration proceedings, in particular the Munich Rules on the Participation of Third Parties in Arbitration Proceedings (Munich Rules). In comparison, the DIS-TPNR offer a more legally secure option due to their alignment with the German Code of Civil Procedure (ZPO) and the model clauses provided. With the Munich Rules, on the other hand, the effect of the third-party notice depends on questions of interpretation in the relationship between the parties.

The DIS-TPNR are also binding in both the German and English versions, which should make it easier in particular for international parties to reach an agreement. It remains to be seen, however, whether they will become relevant for international constellations, as the involvement of third parties does not naturally correspond to the ZPO model internationally.

The DIS-TPNR are available here German Arbitration Institute (DIS): DIS Rules (disarb.org).

When drafting new arbitration clauses, the possibility of agreeing to the DIS-TPNR should already be considered in order to be able to benefit from it later. It will be interesting to see how the instrument is accepted in practice.