Germany: Arbitrational Proceedings and Covid-19

In summary

This chapter explains the effects of covid-19 on arbitrational proceedings in Germany and the efficiency of any adaptions made to the current process.

Discussion points

• General flexibility of arbitration proceedings
• How modern means of communication can be implemented
• Adaptions made by the DIS in light of the new pandemic
• How these adaptions may or may not have a future post-pandemic state

Referenced in this article

• German Institution of Arbitration (DIS)
• The DIS Arbitration Rules
• Announcement of Particular Procedural Features for the Administration of Arbitrations in View of the Covid-19 Pandemic (2. Ed. July 2017) – DIS
• German Civil Code of Procedure (ZPO)

Introduction

Covid-19 has not only turned our daily life upside down, but has also forced us to confront other challenges that correlate with a new pandemic. With the foregoing outbreak, Germany has had to quickly adapt to the new rules and policies of coming into contact with others by avoiding large crowds or gatherings.

This not only led to the temporary closure of multiple work places, but also caused a major shift from office work to home office. With that being said, the covid-19 pandemic has, of course, had an impact on our arbitration proceedings. The German Arbitration Institute (DIS) has been working diligently to provide a solution to any oncoming complications.

General flexibility

One positive aspect is the fact that Germany’s arbitration proceedings do not underlie particularly strict rules of procedure. This means that the parties as well as the arbitral tribunal, have the option of a customisable solution to adapt to the current circumstances. This also applies to the communication between parties, the delivery of documents or the modality of the hearing of evidence. It just needs to be ensured that the key principles are taken into account, those being a fair hearing, equal treatment of the parties and impartiality and independence of the arbitrators.

Modern means of communication

It has not been uncommon for parties and the arbitral tribunal to turn to electronic means of communication in the past. In fact, article 4.1 of the DIS Arbitration Rules already provides for electronic communication with the DIS as a general rule.

Owing to the increase in digitalisation in the past few years, the exclusive usage of electronic communication has become increasingly popular. In order to ensure the aforementioned principles, the parties and arbitral tribunal will solely communicate via encrypted email or another appropriate platform for submitting pleadings and their annexes. Even the initiation of proceedings can often be carried out electronically in advance and within the specified period (eg, via fax).

This of course is all beneficial towards minimising physical contact between parties and to create a safe environment for parties to pursue their legal interests.

Oral hearings in the form of videoconference

German law does not necessarily require an oral hearing in arbitration proceedings. Instead, the German Civil Code of Procedure (section 1047 (1) ZPO) leaves it up to the parties to decide whether an oral hearing should be held or excluded. Nor does the law specify on how an oral hearing is to take place. Therefore, the transition into a more pandemic-friendly process is not as difficult as would first be assumed, as long as the right to be heard, even in times of a pandemic, is respected and effectively implemented.

While some rules explicitly refer to telecommunication means for the first procedural conference of the arbitral tribunal with the parties, the requirements for the oral hearing are often less explicitly formulated. In some cases, an explicit reference is made to telephone proceedings; in others, the parties are required to first discuss the use of technology. Some rules simply leave this point open without any prohibitions or restrictions. Whether or not the consent of all parties is always required for a virtual oral hearing or if it can also be ordered unilaterally (possibly against the will of one party) by an arbitral tribunal is still a matter of controversy. The current tendency lies more with the arbitral tribunals attempting a consensual approach with the parties.

Particularly in international arbitration proceedings, it has not been uncommon for oral hearings or witness hearings to be held via videoconference. This has been done successfully in the past even before the travel restrictions imposed by Corona. The elimination of travel time makes it easier to arrange appointments and saves costs that might be disproportionately high, especially in disputes of smaller amounts. At the same time, safe, reliable and widely available technical solutions have to be found as well as an agreement on alternative rules of procedure.

Initial ideas have already been developed before the outbreak of the pandemic, in order to ensure, for example, that witnesses cannot be compromised by third parties in the same room or that the credibility of a statement or a witness can be reliably assessed. The spectrum of technical solutions does not end there. Not only is it possible to have a videoconference with all participants as well as shared access to documents, but it is also possible to have closed meeting rooms for just the arbitral tribunal and just the parties with their lawyers. Even the transcription or recording of oral hearings or the involvement of translators in an online format is technically feasible in such formats.

DIS — Announcement of Particular Procedural Features for the Administration of Arbitrations in View of the Covid-19 Pandemic (2nd Edition, July 2020)

With regard to the current pandemic and the new circumstances that now have to be handled accordingly, the DIS released a list of procedural peculiarities for the administration of arbitration proceedings under the DIS Arbitration Rules, for both pending and future arbitration proceedings under the DIS Arbitration Rules of 2018.

Notable is the handling of deadline extensions by the DIS. The DIS now takes the impact of the covid-19 pandemic into account in its consideration of deadline extension requests in accordance with article 4.9 of the DIS Arbitration Rules 2018. The DIS will automatically extend a deadline if the duration in days is not specified in the DIS Rules and the reasoning of the request is based on the covid-19 pandemic.

As mentioned above, article 4.1 of the DIS Arbitration Rules 2018 even specifies the use of electronic communication versus adhering to the regular physical paper form. The DIS emphasizes to continue doing so in an even more reinforced manner. Furthermore, arbitration proceedings should preferably be initiated electronically, through the submission of a request for arbitration via email. Usually, the DIS would be allowed to request a hard copy of an arbitration claim without its annexes according to article 4.2(i) of the DIS Arbitration Rules 2018. However, the DIS now waives its right to request a hard copy until further notice. The DIS has also decided that if all parties agree, it will transmit the arbitral awards in electronic form. This dynamic approach by the DIS enables the arbitral tribunals to continue on with as little delay as possible.

After the covid-19 pandemic

The question remains of whether this new digitalised process has a future past covid-19 or if everything will just return to the way it was before. One benefit of having mostly electronic means of communication is the positive effect on the environment. The more email communication, the less paper will be used.

Time efficiency is another factor. The more oral hearings take place via videoconference, the less time for travelling has to be sacrificed. This also circles back to the environmental factor of having less harmful emissions into the environment.

However, it remains to be seen whether this new digitalised process is just as effective. If all oral hearings and negotiations took place via videoconference, we would need flawless technical resources. This not only holds a major cost factor, but is also not necessarily widely accessible to every party, even though the technological means appear to be more readily available in arbitration proceedings than in court proceedings. In order for the principle of fair trial to be ensured, it would have to be implemented in such a way that no party feels disadvantaged or prevented from participating in an arbitral proceeding. Very often it is also important to perceive the surrounding impressions and not just what is spoken by a party. This often proves to be problematic via videoconference. Facial expressions are more complicated to read and it is not necessarily easy to ensure that no external influence affects the course of the proceedings.

It can currently be observed that due to the above-mentioned deficits, a lot of parties actually decide against having oral hearings via videoconference. They still prefer having a physical presence to ensure an orderly course of procedure. This can be partly due to habit, but appears to be even more common in more complex cases with a larger economic impact. The higher the amount in dispute, the more complex the case and the higher the need to have a physical face to face hearing.

If the above-mentioned deficits can be eliminated to a certain extent, it remains questionable if there would be a shift to a fully digitalised oral hearing. At least in smaller disputes this may be realisable. As of now it appears unlikely in cases of high dispute amounts.

Conclusion

Since we are dealing with a global pandemic, the current measures have proven to be effective. If the arbitration proceedings in Germany were under stricter rules, many proceedings would have come to a standstill. The DIS, as well as all parties involved, have done everything in their power to find long-lasting and flexible solutions in this indefinite state of pandemic and appear to be well equipped for the future.