_arbitration part 1. without state courts: an overview
Arbitration is a private civil court. This means that it is a non-governmental procedure for settling disputes. The parties involved can agree contractually on the rules of procedure and the arbitrators. How such a procedure works and what are the advantages and disadvantages.
What is arbitration?
Arbitration proceedings are governed by the German Code of Civil Procedure (§§ 1025-1066 ZPO). It is a legal procedure for dispute resolution that is alternative to the ordinary state courts. As a rule, the proceedings end with an arbitration award. This is legally binding for the parties. Enforcement can be obtained before the ordinary courts. It is characteristic that there is regularly only one instance.
A typical feature of arbitration proceedings is that contractual agreements can be reached on the rules of procedure and on the parties' participation in the proceedings. The competent higher regional court may set aside the arbitration award but does not review the award itself. Such an annulment is only possible for gross violations of the rules of procedure. Another characteristic feature of arbitration proceedings is that they are not open to the public. Confidentiality can be agreed upon by contract.
The arbitration agreement
The parties are free in their arbitration agreements. Only basic procedural rules, such as the granting of a hearing and the equal treatment of the parties, cannot be stipulated (Section 1042 ZPO). The parties may determine the number of arbitrators (§ 1034 ZPO). An arbitral institution may be designated, or a complete arbitral tribunal of one's own (ad hoc) may be established. If an institution is selected, the procedure shall be governed by the rules of procedure drawn up by that institution. Chambers of commerce and the German Institution of Arbitration (DIS) offer such procedures. If an ad-hoc arbitration court is agreed upon, the contractual agreement comprehensively refers to the detailed design of the arbitration body.
Pros and cons of arbitration
The advantage of arbitration is that confidentiality about the hearing contents can be agreed upon. Furthermore, arbitration proceedings often produce results faster and low-priced than an ordinary court. In addition, the language and place of the hearing can be contractually agreed. Furthermore, the result of arbitration proceedings can usually be enforced worldwide.
A disadvantage could be the lack of an appeal procedure. This creates the risk of an incorrect decision that cannot be corrected. Furthermore, no means of coercion can be used directly in arbitration proceedings. For this, recourse to an ordinary court is necessary.
We will be happy to advise you on the form of your arbitration agreement and represent you in national and international arbitration proceedings.
Part 2 of Arbitration Series:
Contact:
Damon Rahimi, Specialist Lawyer International Economic Law.
Niki Feric, Lawyer, Associate.
Gerhard Horstmann-Wilke, specialized in US Procedural and Liability Law.