GERMANY Trends and Developments Contributed by: Tanja Pfitzner and Fabian von Schlabrendorff, Pfitzner Legal
• The Frankfurt Higher Regional Court (26 Sch 9/24) held that enforcement proceedings concerning foreign arbitral awards do not require an oral hear - ing unless grounds for setting aside under Section 1059 (2) ZPO are at issue, thereby harmonising the procedural requirements for declaring foreign and domestic arbitral awards enforceable. • The Karlsruhe Higher Regional Court (10 Sch 3/24) emphasised that the burden of proof for a ground of refusal lies with the party opposing enforcement and that the most-favoured nation principle renders the law that is most enforcement-friendly applica - ble in case of doubt or differences. Exclusion of the German Provisions on General Terms and Conditions in Arbitration Agreements At the beginning of 2025, the Federal Court of Jus - tice (I ZB 48/24) issued a landmark decision with far- reaching implications for the German economy. The case concerned the application of the German law on general terms and conditions ( AGB ), which is often criticised – particularly in international business trans - actions – for being inappropriate and overly rigid in business transactions. For years, it has been viewed as a significant obstacle in cross-border commercial dealings. A potential solution that has long been discussed in practice is the use of an arbitration clause that explicitly excludes the application of German AGB provisions. From the decision of the Federal Court of Justice, which involved a choice-of-law clause that designated German law while simultaneously exclud - ing the AGB provisions, it can be inferred that such an exclusion is permissible – particularly in B2B contexts and in cases with a foreign connection. It has long been the prevailing view in legal literature that the Ger - man law regarding the applicable law in arbitrations (Section 1051 ZPO), which stipulates that the arbi - tral tribunal must decide the dispute in accordance with the legal provisions designated by the parties as applicable to the content of the dispute, allows for a selective application of German law. As to the applicable standard of review, the Federal Court of Justice stated that it is for the arbitral tribu - nal to assess the validity of the choice-of-law clause. This review may be conducted pursuant to Section
242 of the German Civil Code ( Bürgerliches Gesetz- buch ), which enshrines the principle of good faith. This standard affords protection against clauses that are surprising or abusive while allowing for a more nuanced and commercially appropriate review than the rigid requirements under AGB law. State courts may review the ensuing arbitral awards in annulment or enforcement proceedings on the grounds of a violation of public policy ( ordre public ). In this context, the Federal Court of Justice made an important distinction: what matters is not whether AGB law in general forms part of public policy, but whether the specific result of the arbitral award is incompatible with fundamental principles of German law. A violation of public policy could exist “if the arbitral tribunal considers a contractual provision to be valid whose conclusion can no longer be understood as an expression of contractual self-determination, or if a contractual provision leads to contractual conse - quences that are simply no longer acceptable”. How - ever, the Court also reaffirmed that the threshold for establishing a violation of public policy in the event of a review by a state court remains high. Investor-State Disputes Germany is a signatory to the 2020 EU Agreement for the Termination of Bilateral Investment Treaties between Member States of the European Union. This multilateral treaty was concluded in response to the landmark Achmea decision of 6 March 2018 (C-284/16) of the European Court of Justice (ECJ), in which the Court held that the investor-state arbitration clause in the Netherlands–Slovakia bilateral invest - ment treaty was incompatible with EU law. According to the ECJ, such clauses undermine the autonomy of EU law by encroaching on the Court’s exclusive jurisdiction to interpret it. In addition, Germany formally withdrew from the Ener - gy Charter Treaty (ECT) with effect from 20 December 2023. It should be noted, however, that investments covered by the ECT at the time of withdrawal will remain protected under the ECT’s sunset clause for an additional 20 years, allowing investors to invoke the ECT’s protections until 2043.
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