Litigation and enforcement in Germany: overview
A Q&A guide to dispute resolution law in Germany.
The country-specific Q&A gives a structured overview of the key practical issues concerning dispute resolution in this jurisdiction, including court procedures; fees and funding; interim remedies (including attachment orders); disclosure; expert evidence; appeals; class actions; enforcement; cross-border issues; the use of ADR; and any reform proposals.
To compare answers across multiple jurisdictions visit the Litigation and enforcement Country Q&A tool.
This Q&A is part of the global guide to dispute resolution. For a full list of jurisdictional Q&As visit www.practicallaw.com/dispute-guide.
Main dispute resolution methods
Large commercial disputes in Germany are generally resolved through litigation or arbitration. Although litigation is the most common method of resolving disputes, the revision of the German arbitration law in 1998 has led to an increasing number of arbitrations, particularly in cross-border disputes. Alternative dispute resolution does not yet play a significant role in Germany.
Germany is a civil law country based on the Roman law tradition. Generally, the German civil courts do not investigate the facts relevant to the litigation, but leave the production of facts to the parties. However, in contrast to common law countries, the judge plays an active role in the proceedings by:
Selecting and retaining experts.
Structuring the proceedings.
The applicable standard of proof for a claim to succeed is that the court must reach a subjective conviction regarding the relevant facts by taking into consideration the:
Entire content of the file.
Entire content of the hearings.
The general limitation period for bringing a claim is three years. However, limitation and other preclusion periods (such as the obligation to notify the other party about defects) vary depending on the subject matter of the dispute, ranging between only few days and 30 years.
A special statutory limitation period of ten years applies, for example, to claims for:
The transfer of ownership of real property.
The assignment of real property rights.
Respective monetary consideration claims.
The limitation period of 30 years applies only to certain claims, particularly claims:
That are declared final and absolute.
For the return of property.
Under enforceable settlements or enforceable documents.
For the reimbursement of the costs of enforcement.
Limitation periods generally start running at the end of the year in which the claim arises, and in which the claimant becomes aware, or but for its gross negligence should have become aware of both the:
Circumstances giving rise to the claim.
Identity of the defendant.
The statute of limitations is suspended, for example, if:
Negotiations take place between the relevant parties.
A statement of claim is filed.
Proceedings are initiated at one of the registered conciliation institutions (Gütestellen).
With respect to payment claims, the statute of limitations is also suspended by the initiation of collection proceedings (Mahnverfahren).
It is common for a claimant to ask the potential defendant to waive its right to plead the statute of limitations for an agreed period of time. This gives the claimant time to investigate the claim fully, without having to bring court proceedings solely to stop the claim from becoming time-barred.
In civil and commercial matters, the local civil courts (Amtsgerichte) and the regional civil courts (Landgerichte) have jurisdiction as courts of first instance.
Regional courts generally have jurisdiction to hear all civil and commercial matters where the value in dispute exceeds EUR5,000. Therefore, large commercial disputes are generally brought before the regional courts. If the value in dispute is below that threshold, local courts will have jurisdiction. Parties must generally be represented by an attorney in all courts higher than the local courts.
The regional courts are organised in chambers (Kammern) of three professional judges. In large commercial disputes, the full chamber usually hears the case. However, if proceedings present no major difficulties in terms of both facts and law, the dispute can be heard by the presiding judge alone. In larger regional courts, there are special chambers for commercial matters (Kammern für Handelssachen) with one professional judge presiding and two members of the business community sitting as lay judges. However, legal disputes can only be referred to this chamber by motion of one of the parties.
Larger regional courts also have special chambers for specialist legal disputes, such as unfair competition law, intellectual property law, maritime law and banking law. These specialised chambers are organised as either chambers for commercial matters or as standard civil chambers. Special patent dispute chambers at certain regional courts such as Düsseldorf and Mannheim have jurisdiction for patent disputes.
The answers to the following questions relate to procedures that apply in the civil courts. Different rules apply to claims heard by administrative courts (Verwaltungsgerichte), labour courts (Arbeitsgerichte), financial courts (Finanzgerichte) and social courts (Sozialgerichte).
Rights of audience
Rights of audience/requirements
In the regional and higher regional courts, only attorneys (Rechtsanwälte) admitted to the German bar (Rechtsanwaltskammer) have rights of audience. To be admitted to the German bar, the attorney must be qualified to sit as a judge under the German Judge Act. This involves completing studies of law at a university with the first state examination and completing a two-year period of legal clerkship with the second state examination.
Only an attorney from the specialist bar of attorneys who have their practices at the seat of the Federal Court of Justice (Bundesgerichtshof) can appear before that court.
Foreign lawyers (including lawyers qualified in an EU member state) can only conduct cases in German courts if they have been admitted to the German bar (see above, Rights of audience/requirements).
Fees and funding
Court fees are governed by the Court Fees Act (Gerichtskostengesetz) and depend on the value of the matter in dispute. The court also charges for other expenses, such as the costs of:
Service of process.
Translation of documents.
In large commercial disputes, court fees can be substantial.
Parties can negotiate legal fees with their lawyers but the fees must be explicitly agreed on. Larger law firms in particular will normally charge by hourly rates or enter into negotiated fee arrangements with their clients.
In the absence of an agreement on fees, the attorneys' fees are fixed by law and governed by the Federal Attorney Remuneration Act (Rechtsanwaltsvergütungsgesetz). Fees under this Act are primarily calculated on the basis of the value of the matter in dispute. In the case of court proceedings, lawyers must charge the amount of the statutory fees, at least.
Contingency fees are permissible but only under very limited circumstances.
Third-party litigation funding is available and an increasing number of private companies in Germany offer third-party funding (Prozessfinanzierung) in exchange for a share of the amount received in a successful claim.
If a party cannot afford to pay the court fees or a lawyer, it can apply for legal aid (Prozesskostenhilfe) with the court, which will generally only be granted if the claim has a reasonable chance of success.
Insurance for litigation costs (Rechtsschutzversicherung) is available and is relatively common for private persons. Although not generally available for commercial disputes, insurance cover is frequently included in special insurance schemes, such as product liability insurance or directors' and officers' liability insurance.
Court hearings are subject to a general principle of publicity (Öffentlichkeitsgrundsatz), which allows the public to be present at hearings (subject to available space) but does not extend to photographs, sound recordings or to TV/radio transmissions from the court room. The documents in the court files are not publicly available. However, third parties who can show a legal interest in the case may gain access to the court files.
The court can exclude the general public in certain circumstances, for example, to protect:
Important trade or other secrets.
The life or safety of a person.
However, in commercial cases this is rare.
There are no specific pre-action protocols or similar rules governing pre-action conduct. In particular, procedures such as pre-trial discovery do not exist in Germany (see Question 16). However, it is standard practice to send a warning letter to the other party before initiating court proceedings (see Question 22).
In addition, mediation may be mandatory in certain circumstances and parties may also be bound by contractual agreements to attempt alternative dispute resolution before starting court proceedings (see Question 31).
Court proceedings are initiated by filing a statement of claim with the court. The statement of claim must specify the:
In terms of particulars, the statement of claim must, as a minimum, specify the subject matter and the grounds for the claim raised. It should also include a statement of the value of the matter in dispute. In practice, a statement of claim in large commercial disputes is usually a full brief, which provides evidence of the claim and is accompanied by exhibits.
In addition, the claimant must make a pre-payment of the court costs (see Question 5).
Notice to the defendant and defence
The statement of claim is served on the defendant by the court. If domestic service cannot be effected, the court will arrange for it to be served abroad in accordance with the applicable law. At the same time, the court will generally set a time limit (normally two weeks) for the defendant to indicate whether it will defend itself and a second time limit (at least another two weeks) for the defendant to file a statement of defence.
The subsequent stages of a claim are as follows:
Briefs are exchanged in preparation for a hearing (schriftliches Vorverfahren).The court can also set a preliminary hearing (früher erster Termin).
If the defendant does not respond to the statement of claim within the time limit, the court can, on application of the claimant, give a default judgment (Versäumnisurteil). If the defendant does not object to the default judgment within a specified time period, the judgment becomes legally binding (rechtskräftig).
German law provides for one oral hearing in which witnesses can be heard and other evidence taken. However, in practice, the oral hearing, particularly in large or complex cases, can be adjourned several times and therefore the parties and the court may meet several times for a hearing.
Court proceedings often end by a settlement between the parties with the assistance of the court or even on settlement terms suggested by the court at the beginning of the oral hearing. Otherwise, proceedings usually end by way of a judgment. Most court decisions can be appealed to the higher courts (see Question 20).
There is no specific rule in German law providing for a summary judgment or the court's power to strike out a claim.
However, if the claim is clearly unfounded, the court can dismiss the case on the merits after a short hearing and without taking evidence. In addition, if a claimant brings an action for summary proceedings based on documentary evidence or on a bill of exchange, the parties can only rely on documents and party testimony for evidence. This will expedite the proceedings, but will only lead to a judgment subject to a reservation (that is, a judgment that is enforceable, but can be overturned at a later stage with additional evidence).
In the appeal proceedings, the court can dismiss the appeal by way of court order without oral hearing if all judges deciding on the case are unanimously of the opinion that the appeal does not have any chances of success.
A claimant residing outside the EU member states or the European Economic Area must generally provide security for costs (Prozesskostensicherheit) on request of the defendant. There are various exceptions to the rule, for example, if:
International conventions provide for a different rule.
A claim for reimbursement of costs can be enforced on the basis of international conventions.
The claimant holds sufficient real property in Germany to cover a potential claim for the reimbursement of costs.
In proceedings for interim remedies, the claimant generally does not have to provide security for costs. However, security may be required in interim proceedings where the court schedules an oral hearing.
Availability and grounds
The interim injunction (einstweilige Verfügung) is one of the two types of interim remedies provided by German law. An interim injunction secures the future enforcement of non-monetary claims (Sicherungsverfügung). The most common injunctions are prohibitory injunctions, particularly in unfair competition law. The claimant can also seek to have a legal relationship temporarily regulated by the court to avoid substantial disadvantages (Regelungsverfügung).
The application for an interim injunction must contain the facts establishing:
An injunction claim.
An injunction reason.
The claimant must provide the court with prima facie evidence of all three requirements. This evidence can be provided by sworn affidavits.
A decision without an oral hearing can only be given in very urgent cases. In such cases, the presiding judge can, on a motion by the claimant, make the decision alone without the two other judges of the chamber (see Question 3) and the interim injunction can be issued within one or two days.
In rare cases, the claimant can seek performance of a claim by way of a mandatory injunction (Leistungsverfügung).
Rights of appeal
An interim injunction that was rendered without hearing is subject to an objection (Widerspruch) by the defendant. If an objection is filed, the first instance court will render a judgment either confirming or setting aside the interim injunction. This judgment is subject to an appeal by the unsuccessful party to the appeal court within one month of the judgment being rendered by the first instance court.
Availability and grounds
The other type of interim remedy provided under German law is an attachment order (dinglicher Arrest). The creditor of a monetary claim can apply for an attachment order to preliminarily secure the future enforcement of a judgment to be obtained in the main proceedings. The application must provide prima facie evidence of the facts establishing:
An attachment claim.
An attachment reason.
The court can notify the defendant of the application and schedule an oral hearing. However, attachment orders can be, and usually are, issued without notice and without a hearing. They are usually issued within one or two days but can sometimes even be issued within a couple of hours.
The main proceedings do not generally have to be issued in the same court or jurisdiction as the attachment proceedings. For example, if the main proceedings are pending in a foreign jurisdiction and/or the German courts have no jurisdiction over the main proceedings, a German local court can hear attachment proceedings if the assets are located within the court's judicial district. The local court, which has jurisdiction on that basis can also seize assets within other German judicial districts.
Preferential right or lien
The attachment order is enforced by seizing assets in Germany (for example, claims, tangible personal property or real property). The seizure creates an attachment lien in favour of the claimant over the seized assets. In the case of real property, the attachment lien is entered into the land register.
Damages as a result
If the attachment order is set aside after having been enforced, the claimant is liable on a no-fault basis for all damages suffered by the defendant as a result of the enforcement.
The court can make the enforcement of the attachment order conditional on the claimant providing security for potential damages resulting from the enforcement of the attachment.
At the full trial stage, there are three different types of relief available:
Action for performance (Leistungsklage), that is, specific performance, payment or damages.
Action for declaratory judgment (Feststellungsklage), that is, seeking a declaration of the existence or non-existence of a legal relationship between the parties.
Action for alteration of a legal relationship (Gestaltungsklage), aiming at changing an existing legal relationship by way of judgment.
German law does not allow for punitive damages; damages are only compensatory.
Generally, the standard of proof is that the judge must be convinced, to the extent that reasonable doubts are excluded. However, in limited circumstances, the judge can estimate damages, especially by taking into account the likelihood of their occurrence.
Generally, each party bears the burden of proof for the facts on which its claim or defence is based. The parties are generally free to decide which facts and documents they will submit to the court and are not obliged to disclose all information, even if it is relevant to the case. However, all allegations of fact must be true and correct.
The German legal system does not provide for procedures such as pre-trial discovery or full disclosure (see Question 8). There are only limited disclosure obligations. If, for example, a document referred to is in the other party's or a third party's possession, that party may be ordered by the court to produce it. However, in practice these orders are quite rare.
As the parties are generally not obliged to disclose documents, the need for privilege does not usually arise. However, third parties requested to testify as a witness or to produce documents can invoke, for example, the following privileges:
Family privilege, which applies to close relatives of a party.
Subject matter privilege, which applies to certain kinds of information (for example, trade secrets of non-parties).
Public servant privilege, regarding matters that public servants learned of in their official capacity.
Professional privilege, which applies to various persons who, by virtue of their profession, are entrusted with confidential information (for example, attorneys, certified auditors or tax advisers).
In contrast to external lawyers, in-house counsel only enjoy limited professional privilege. This is especially true for privilege regarding criminal proceedings. In practice, this becomes relevant in circumstances, such as during raids in relation to antitrust proceedings, where confidential business documents may be seized quite easily. In addition, the in-house counsel's right to refuse to testify only exists in civil litigation, not in criminal proceedings.
Other non-disclosure situations
Attorneys have a duty to maintain confidentiality in their professional relationship with their clients (professional privilege), unless the client releases them from their duty. The same applies to certain other professions, such as certified auditors or tax advisers.
Examination of witnesses
Witnesses of fact do not submit written evidence. However, they must testify in an oral hearing, in the presence of the parties and their attorneys.
Witnesses are examined primarily by the court. The court asks the witness for his personal knowledge of the relevant facts outside the presence of other witnesses. However, witnesses whose statements are contradictory can be confronted with one another. The court can order that the witnesses' testimony is confirmed by oath, yet this is not common practice.
Right to cross-examine
The parties and their attorneys have the right to ask the witness questions. However, the courts usually do not allow extensive cross-examination.
Third party experts
Third-party experts are generally appointed by the court, but the court has to hear the parties prior to the appointment. In practice, the court often asks the parties to suggest suitable experts. If the parties agree on one expert, the court generally follows this suggestion.
Role of experts
The court-appointed expert does not represent the interests of one party, but provides independent and impartial advice to the court. Each party can also submit a written expert's opinion. However, these opinions are not considered independent evidence but part of the respective party's pleadings. Only the evidence given by a court-appointed expert is considered proof by expert testimony.
Right of reply
Court-appointed experts usually submit their opinions in writing to the court. The parties then have the opportunity to comment in writing on the findings of the expert. In addition, each of the parties can ask the court to summon the expert to an oral hearing, where they can question the expert on the written opinion. The examination of an expert is similar to the examination of witnesses (see Question 18) and is also usually not done in the form of a cross-examination.
The party who has the burden of proof on the facts to be addressed by the court-appointed expert must make an advance payment of the expert's fees. The expert's fees will ultimately be allocated between the parties according to the final outcome of the case.
Judgments given by the regional courts in the first instance can generally be appealed to the competent higher regional courts. Judgments of appeal given by the higher regional courts can be appealed to the Federal Court of Justice. If the court of appeal finds the appeal not admissible, it can dismiss the appeal by court order without an oral hearing. Otherwise, it will decide on the merits.
Grounds for appeal
The main function of the first appeal (Berufung) to the higher regional court is to review the judgment and to correct any errors of law made by the lower court. The set of facts established in the first instance is only re-examined if there are specific reasons to doubt the correctness and completeness of the lower court's findings.
The second appeal (Revision) to the Federal Court of Justice is only allowed if the matter is of fundamental significance, or if a decision is required to further develop or maintain the consistency of the law. The second appeal is limited to points of law. New factual allegations or fresh evidence are not admissible.
An appeal must be filed within one month of service of the respective judgment. The grounds for the appeal are usually stated in a subsequent written pleading, which must be filed within two months of service of the respective judgment. The other party must then submit a statement of defence within a certain time limit set by the court.
Class actions (as they are widely known) are not available in Germany.
It is possible for several claimants or defendants to join in one civil action, provided that the asserted claims are legally or factually related (subjektive Klagehäufung, Streitgenossenschaft). However, parties are still treated individually and each party's claim must be examined on its own merits.
There is a law providing for a specific procedure, which allows for a uniform decision of the competent higher regional court on certain points of fact or law, which are relevant for multiple investors' claims (Act on Model Proceedings for Investment Suits (Kapitalanleger-Musterverfahrensgesetz)). This uniform decision will be binding for the regional courts that hear the individual claims. However, it will only address particular points of fact or law and the regional courts must still make their decision based on the merits of each individual case. The Act remains in force until November 2020.
In addition, in certain areas of law (for example, consumer protection law or competition law) certain associations (for example, the Chambers of Industry and Commerce) can bring claims on behalf of their members or the general public (Verbandsklage).
The costs arising from the lawsuit are allocated between the parties on a pro-rata basis according to the outcome of the case. As a general rule, the unsuccessful party must bear the court costs, his own costs and reimburse the successful party's costs. The same applies in case the action is withdrawn by the claimant..
These costs mainly consist of the successful party's legal fees, which are reimbursed at the rates set out in the Federal Attorney Remuneration Fees Act, regardless of any negotiated agreements between the attorney and his client.
The court fees can be reduced if, for example, the proceedings are terminated early by a withdrawal of the action or a settlement. Further, the claimant may be ordered to pay court fees if he has not sent a warning letter to the other party before initiating court proceedings, and the defendant acknowledges the claim instead of submitting a defence (sofortiges Anerkenntnis). However, pre-trial offers to settle are not considered in the costs award.
Courts have no direct power to limit or otherwise control costs during the proceedings. In limited circumstances, however, the court can, for example, deny a party’s request to hear further experts if they consider this process to be too costly (see Question 19).
Interest on costs accrued in the course of the proceedings is generally not awarded. However, interest on costs accrued after the judgment has been given can be awarded. In the proceedings on costs, which follow the main proceedings, the applicant can request that interest on costs be awarded from the time the court receives the application. The rate of interest on costs is five percentage points above the base interest rate set by the European Central Bank.
Courts have no direct power to limit or otherwise control costs during the proceedings. In limited circumstances, however, the court may for example deny a party's request to hear further experts if they consider this process to be too costly (see Question 19).
Enforcement of a local judgment
On motion by the successful party, the judgment is enforced against the unsuccessful party.
In relation to the enforcement of judgments on monetary claims, the successful party can file an application for garnishment measures with the local court that has jurisdiction over enforcing the judgment (Vollstreckungsgericht). The application must identify the claims or rights of the debtor to be garnished, such as deposits in bank accounts, or claims against third parties. In addition, or alternatively, the judgment creditor can file an application with the bailiff (Gerichtsvollzieher) to enforce against the debtor's tangible personal property.
A creditor can also enforce a judgment against the debtor's real property by filing an application for a compulsory mortgage (Zwangshypothek) or for the compulsory sale of the real property (Zwangsversteigerung). If the real property generates income, the creditor can also apply for compulsory administration (Zwangsverwaltung).
The enforcement of judgments other than monetary judgments follows different rules. Judgments for delivery or recovery of goods, as well as for surrendering possession of property are enforced by the bailiff. Judgments for the performance of, refraining from or acquiescence to, an act are enforced by the court by ordering coercive penalty payments or detention of the judgment debtor.
German courts will generally respect a choice of law clause in a contract. As a basic principle under German private international law, the parties can choose which law governs their contract. However, the following exceptions apply to this free choice of law:
If the parties have chosen a certain law, but all facts underlying the contract point to another jurisdiction, the mandatory provisions of that jurisdiction will apply.
If the relevant contract qualifies as a consumer or an employment contract.
Certain mandatory provisions of German law, for example, regarding exchange regulations or embargoes, can apply, despite an otherwise valid choice of law.
Generally, German courts respect the choice of jurisdiction under a contract. Under Regulation (EU) 1215/2012 on jurisdiction and the recognition and enforcement of judgments in civil and commercial matters (Recast Brussels Regulation), a jurisdiction clause between parties domiciled in member states and non-member states is generally respected if certain (mostly formal) prerequisites are met. However, this will not apply if the clause violates certain provisions of the Recast Brussels Regulation relating to jurisdiction for insurance matters, consumer contracts and employment contracts.
In addition, local courts will have exclusive jurisdiction over a dispute despite the choice of jurisdiction in the following matters:
Rights in rem in real property.
The validity of the constitution, the nullity or the dissolution of companies or decisions of their organs.
The validity of entries in public registers.
Registration or validity of patents, trade marks and designs.
As of 1 October 2015, the HCCH Convention on Choice of Court Agreements 2005 entered into force. The Convention, which has been ratified by Mexico and the European Union, aims at ensuring the effectiveness of choice of court agreements between parties to international commercial transactions.
Within the EU, Regulation (EC) 1393/2007 on the service in the member states of judicial and extrajudicial documents in civil or commercial matters (Service of Documents Regulation) applies. Under its provisions, there are mainly two methods of service available:
Service through designated agencies.
Service by mail.
In Germany, the designated agencies are the local courts where the service is to be effected. Therefore, the transmitting agency in the state where the proceedings are pending must address the request for service directly to the respective local German court, which then effects service. For service by mail, service can also be effected by the transmitting agency itself, but only through registered mail with return receipt.
A judicial document can be served by either method or by both methods.
Germany is also a party to the HCCH Convention on the Service Abroad of Judicial and Extrajudicial Documents in Civil and Commercial Matters 1965. Generally, service under this convention is effected through central authorities to which the request for service must be addressed. Due to Germany's federal structure, the request must be transmitted to the central authority in the relevant German state.
Germany has also entered into a number of bilateral treaties. In addition, if no international treaty exists between Germany and the respective foreign state, the foreign authorities can address their request to diplomatic and consular officials or to the German authorities directly. There is no obligation under international law to grant judicial assistance but in practice it is usually given. However, it is often a rather lengthy process.
For proceedings within the EU (except Denmark), Regulation (EC) 1206/2001 on co-operation between the courts of the member states in the taking of evidence in civil or commercial matters applies. Under its provisions, the requesting court (that is, the court before which the foreign proceedings are pending) directly transmits the request for the taking of evidence to the requested German court. The German court must then execute the request within 90 days of receipt.
Germany is also a party to the HCCH Convention on the Taking of Evidence Abroad in Civil and Commercial Matters 1970 (Hague Evidence Convention). Under the Hague Evidence Convention, requests for taking evidence are transmitted through a central authority designated by each of the signatory states. However, Germany has declared that it will not execute requests for obtaining pre-trial discovery of documents.
In addition, Germany is a party to the Hague Convention relating to Civil Procedure 1954, and to a large number of bilateral treaties on judicial assistance in civil matters.
If no international treaty on judicial assistance exists between Germany and the respective foreign state, the foreign authorities can request diplomatic and consular officials to conduct the taking of evidence in Germany. They can also address the German authorities directly.
Enforcement of a foreign judgment
The enforcement of foreign judgments is governed by the law of the European Union, multilateral and bilateral treaties, and domestic procedural rules.
Under Regulation (EU) 1215/2012 on jurisdiction and the recognition and enforcement of judgments in civil and commercial matters (Recast Brussels Regulation) (see Question 26), a judgment given by the court of another EU member state (inter alia a UK judgment) is usually enforceable in Germany without any declaration of enforceability required. The enforcement can only be refused under very limited conditions, for example if such enforcement is manifestly contrary to public policy.
For judgments given by courts in Switzerland, Norway or Iceland, the Lugano Convention on jurisdiction and the recognition and enforcement of judgments in civil and commercial matters 2007 (New Lugano Convention) applies. In the absence of an international treaty, enforcement of foreign judgments (for example US judgments) is effected through special proceedings (Exequaturverfahren). The following prerequisites for the recognition of the judgment must be met:
The foreign court that gave the judgment had proper jurisdiction to hear the case.
Proper service of process on the defendant.
No incompatibility of the judgment with an earlier judgment of a German court or with a judgment of a foreign court that is to be recognised in Germany.
No violation of German public policy.
Guarantee of reciprocity.
US judgments are recognised by German courts quite liberally. However, in certain situations claimants are prevented from enforcing US judgments in Germany, for example if punitive damages were granted (see Question 15).
Alternative dispute resolution
Mediation is the most common form of ADR in Germany. Mediation can take place out of court on the basis of an ADR agreement of the parties or in court. Courts can refer a court dispute to a particular division of a court specialising in ADR (court mediation) or suggest conducting ADR proceedings, namely mediation, out of court. A mediation conducted out of court is governed by the German Mediation Act. However, it does not contain comprehensive provisions on the mediation procedure so parties must agree on how the mediation proceedings are to be conducted.
In addition, there are several conciliation bodies established by certain professional associations (such as, the lawyers' bar association, banks and insurance companies, the energy industry and public transport organisations) that can be asked to resolve disputes between its members and their customers. As a matter of professional ethics and conduct, members of these professional associations must participate in conciliation proceedings initiated by a customer. However, the approach of these conciliation bodies is informal and their findings are usually, at least for the customer, non-binding. Further, a consumer can initiate ADR proceedings before a conciliation body in matters relating to consumer contracts. However, a party cannot be forced to participate in the ADR proceedings and the proceedings will not lead to a legally binding decision.
Sometimes in factual disputes the parties can agree on an independent expert, which decides the dispute with binding effect. In the field of construction, there is a tendency to establish ADR proceedings resembling ''adjudication'' proceedings.
The court must try to reach an amicable settlement of the dispute at each stage of the proceedings. The court must also conduct a conciliation hearing before hearing the case. In practice, this conciliation hearing is often integrated in the first oral hearing.
Courts have discretion to refer a dispute they deem to be suitable for ADR to a particular division of the court specialising in ADR that is not authorised to render a binding decision. In this case, the ADR mechanism chosen by this particular division is mandatory for the parties and forms an integral part of the court proceedings. If an amicable settlement cannot be reached, the case will be referred back to the division of the court that is competent to render a binding decision, and the formal court proceedings must continue.
Otherwise, ADR methods are non-compelling. Each party has the constitutional right to have a dispute decided by a court. However, if both parties agreed on applying an ADR method before initiating court proceedings, the court is likely to find that the claim is inadmissible unless the parties have made an attempt to settle the dispute in the agreed ADR proceedings.
There are no specific rules governing the taking of evidence in ADR. The parties are therefore free to agree on any specific manner of taking evidence.
There are no statutory rules providing for full confidentiality of ADR proceedings. Agreements or institutional sets of rules governing ADR usually contain confidentiality provisions. Otherwise, any information, documentation or evidence produced in ADR proceedings could be used in later court proceedings to the detriment of the party having disclosed this information.
In general, there are no rules governing the costs in ADR proceedings. The allocation of the costs of ADR usually either forms part of the settlement or is included in the agreement governing the ADR.
Conciliation proceedings before the conciliation bodies of professional associations are in most cases free of charge, at least for consumers.
The main bodies offering ADR services are:
The German Institution of Arbitration (Deutsche Institution für Schiedsgerichtsbarkeit), which provides mediation and conciliation services (www.disarb.de).
The European Institute for Conflict Management (Europäisches Institut für Conflict Management e.V.), which provides mediation services (www.eucon-institute.com).
Various local Chambers of Commerce (Industrie- und Handelskammern), which offer services for conciliation and mediation of commercial disputes.
Proposals for reform
A fundamental reform of the structure of civil proceedings has been discussed for many years. These discussions gained some momentum in 2014 when one of Germany's most influential associations of members of all legal professions initiated a new discussion. However, there have not yet been any specific proposals for draft legislation.
One subject of ongoing discussion is the Ministry of Justice’s intention to implement elements of class action proceedings into procedural law. Recently, the Ministry of Justice has presented draft legislation in relation to representative declaratory judgments (Musterfeststellungsurteile). If implemented, the law would allow various consumer associations and Chambers of Commerce to initiate a specific procedure, which allows for a uniform decision on certain points of fact or law, relevant for multiple claimants.
German Ministry of Justice
Description. Official website of the German Ministry of Justice containing the official texts of German legislation. The website also provides non-binding English translations of the following:
Code of Civil Procedure (www.gesetze-im-internet.de/englisch_zpo/index.html).
Courts Constitution Act (www.gesetze-im-internet.de/englisch_gvg/index.html).
Act on Model Proceedings for Investment Suits (www.gesetze-im-internet.de/englisch_kapmug/index.html).
Act on the Remuneration of Attorneys (www.gesetze-im-internet.de/englisch_rvg/index.html).
Mediation Act (www.gesetze-im-internet.de/englisch_mediationsg/index.html).
Professional qualifications. Attorney (Rechtsanwalt), Germany, 1994
Areas of practice. Litigation and arbitration (with an emphasis on banking and finance, capital markets, corporate law, joint ventures and M&A).
Representing and advising UniCredit in civil litigation relating to ''cum/ex'' tax structures.
Advising and representing a major international bank with regard to the Madoff financial scandal.
Defending Heta Asset Resolution in its defence against various German institutional bondholders.
Professional qualifications. Attorney (Rechtsanwalt), Germany, 2005
Areas of practice. Litigation and arbitration (with a focus on disputes related to M&A transactions, joint ventures, banking and finance, and cross-border cases).
Advising a foreign bank on all aspects of German law in a cross-border dispute with German, Swiss and Austrian financial investors in connection with the sale of structured financial instruments.
Representing a US private equity investor in a DIS arbitration against its joint venture partner regarding an offshore wind farm project.
Defending a German mortgage bank in a dispute against a US bank over claims arising from the sale of an NPL portfolio.
Professional qualifications. Attorney (Rechtsanwalt), Germany, 2006
Areas of practice. National and cross-border litigation and arbitration (with an emphasis on commercial law, product liability law, distribution law and product recalls).
Advised Hypo Real Estate AG in a litigation and one of the first model law proceedings brought by investors in Germany with an amount in dispute of more than EUR1 billion.
Advised German Healthcare Funds against TÜV Rheinland in connection with recourse claims because of defective silicon breast implants in the context of the ''PIP scandal''.
Advised Bayer04 Leverkusen against TelDaFax in connection with the insolvency proceedings of TelDaFax and the defence against recourse claims of its insolvency administrator.