GERMANY Law and Practice Contributed by: Patricia Nacimiento, Catrice Gayer, Lara Panosch and Theo Pauthonier, Herbert Smith Freehills Kramer LLP
However, this freedom is subject to safeguards. The most significant limitation concerns the impartiality and independence of arbitrators. They are under a continuing duty to disclose any circumstances that may give rise to justifiable doubts in this regard. While there are no statutory nationality requirements, par - ties remain free to impose such conditions contrac - tually. Under Section 1036 (2) ZPO, an arbitrator may be challenged if circumstances exist that give rise to justifiable doubts regarding their impartiality or inde - pendence. Beyond this, party autonomy may be restricted by public policy considerations. Any appointment mech - anism that violates fundamental principles of fairness or procedural equality will be deemed invalid. Sec - tion 1034 (2) ZPO introduces a corrective mechanism where the arbitration agreement grants one party a dominant role in the appointment process – such as the exclusive right to nominate the sole or presiding arbitrator. In such cases, the disadvantaged party may, within two weeks of becoming aware of the arbitral tribunal’s composition, request the competent court to intervene and appoint a substitute arbitrator. 4.2 Default Procedures If there is no agreement between the parties on the appointment procedure, Section 1035 (3) ZPO pro - vides a standard procedure. In the case of a three- member arbitral tribunal, each party appoints its own arbitrator, and the two party-appointed arbitrators then appoint the presiding arbitrator. Should a party fail to appoint its own arbitrator and subsequently fail to do so within one month of a request by the other party, the other party may request the court to make the appointment. If the party- appointed arbitrators fail to agree on the chairperson within one month of their appointment, or if the parties fail to agree on a sole arbitrator, the court will make the appointment upon request of a party. According to Section 1035 (4) ZPO, if the parties have agreed on a procedure for appointing arbitrators and one party fails to act as required, or if the parties or co- arbitrators cannot reach an agreement, the competent court may be called upon to make the appointment.
This ensures that the arbitration process is not stalled due to procedural deadlock. For multiparty arbitrations, the current version of the German Arbitration Act does not provide for any spe - cific rules. The Draft Bill (see 2.2 Changes to National Law ) provides that where parties aligned on one side of the dispute fail to reach consensus on a joint arbi - trator, the competent court will assume responsibility for the appointment. 4.3 Court Intervention In Germany, courts may intervene in the selection of arbitrators, but only under specific conditions and within the framework set out in the ZPO, particu - larly in Sections 1034 and 1036. This intervention is designed to support, not override, party autonomy, which remains a core principle of German arbitration law. The courts will intervene to appoint arbitrators where the parties and/or the co-arbitrators fail to do so (Section 1035 (3)-(5) ZPO, see also 4.2 Default Pro- cedures ). Furthermore, Section 1037 ZPO allows a party to request court assistance if a challenge to an arbitra - tor has been rejected by the arbitral tribunal itself. In such cases, the court will make a final and binding decision on the challenge. Courts will also intervene where the appointment mechanism violates fundamental principles of fair - ness or procedural equality (see also 4.1 Limits on Selection ). 4.4 Challenge and Removal of Arbitrators With regard to challenges, a two-tier system applies: • A party can file a challenge with the arbitral tribunal (Section 1037 (1)-(2) ZPO). • If the challenge is dismissed by the arbitral tribunal, the challenging party may apply to the competent higher regional court to decide on the challenge. Otherwise, the challenging party is generally pre - cluded from invoking the improper constitution of the arbitral tribunal in post-award proceedings that
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