GERMANY Law and Practice Contributed by: Patricia Nacimiento, Catrice Gayer, Lara Panosch and Theo Pauthonier, Herbert Smith Freehills Kramer LLP
Failure to file an application under Section 1040 (3), second sentence ZPO within the prescribed timeframe precludes the parties from subsequently invoking the arbitral tribunal’s lack of jurisdiction during set-aside or enforcement proceedings. So far, the German Arbitration Act does not grant courts the power to review a tribunal’s negative rul - ing on jurisdiction. The Draft Bill (see 2.2 Changes to National Law ) proposes this review competence. 5.3 Timing of Challenge In Germany, parties may go to court to challenge the jurisdiction of the arbitral tribunal either (1) before the arbitral tribunal is constituted (Section 1032 (2) ZPO) or (2) within one month after the arbitral tribunal has issued a preliminary ruling affirming its jurisdiction (Section 1040 (3) ZPO). A failure to do this precludes the parties from subsequently invoking the arbitral tri - bunal’s lack of jurisdiction during set-aside or enforce - ment proceedings (see 5.2 Circumstances for Court Intervention ). 5.4 Standard of Judicial Review for Jurisdiction/Admissibility When jurisdiction is challenged following the arbitral tribunal’s assertion of competence, the court is not bound by the arbitral tribunal’s factual or legal deter - minations. Rather, German courts undertake a full de novo review when called upon to assess questions of jurisdiction of an arbitral tribunal. In cases brought under Section 1032 (2) ZPO, the court independently evaluates whether a valid arbitration agreement exists and whether the dispute falls within its scope. In prac - tice, German courts follow a pro-arbitration stance and are cautious not to undermine arbitration agree - ments (see also 3.3 National Courts’ Approach ). The court’s inquiry does not extend to admissibility prerequisites such as the expiry of cooling-off periods, nor does it touch upon the merits of the dispute, both of which remain within the arbitral tribunal’s domain. 5.5 Breach of Arbitration Agreement If a party initiates court proceedings in breach of an arbitration agreement, the opposing party must invoke its existence prior to the beginning of the oral pro - ceedings (Section 1032 (1) ZPO). The party initiating
the court proceedings bears the burden of proving the invalidity of the arbitration agreement. The Federal Court of Justice (26 November 2020, I ZR 245/19) has also determined that a motion to stay proceed - ings based on an arbitration agreement is considered timely if it is submitted in an objection to a default judgment. This applies provided that the default judg - ment was issued during the preliminary written stage of the proceedings. This procedure also applies if the seat of arbitration is outside of Germany (Section 1025 (2) ZPO). In prin - ciple, the courts will make a full review of the valid - ity of the arbitration agreement at this pre-arbitration stage (see also 5.4 Standard of Judicial Review for Jurisdiction/Admissibility ). In other jurisdictions, the courts assess the validity of the arbitration agreement only on a prima facie basis. The German approach can save time and costs in case the arbitration agreement was invalid to begin with. 5.6 Jurisdiction Over Third Parties If German law applies to the arbitration agreement, a third party might be bound to it if rights and obli - gations arising from a main contract containing the arbitration agreement have been validly assigned (in application of Section 401 of the German Civil Code by analogy). The inclusion of third parties (who are not assignees) in an arbitration agreement is to be established sepa - rately, depending on the legal basis for the obliga - tion. Recently, however, the Federal Court of Justice (9 March 2023, I ZB 33/22) confirmed that under Ger - man law, the personal scope of an arbitration agree - ment is generally limited to the contracting parties and their legal successors. An extension of the arbitra - tion agreement to non-parties based on the “group of companies doctrine” does not form part of German arbitration law. Additionally, no distinction is made based on whether the third party is German or foreign.
6. Preliminary and Interim Relief 6.1 Types of Relief
German arbitration law empowers arbitral tribunals to grant interim measures (Section 1041 ZPO). However,
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