Concilitation and Arbitration proceedings

Arbitration is a dispute resolution instrument that makes use of a private, non-governmental body, the arbitration court. The task of the arbitration court is to apply the law and make a decision by means of an arbitral award. There are two procedural options, institutional arbitration and ad hoc arbitration.

In the institutional procedure, an already existing arbitration institution is consulted. The German Institution of Arbitration e.V. may be considered, for example (DIS), the International Court of Arbitration of the International Chamber of Commerce in Paris (ICC International Court of Arbitration), the International Court of Arbitration London (LCIA London Court of International Arbitration), the International Arbitral Centre of the Austrian Federal Economic Chamber (VIAC Vienna International Arbitration Centre), the International Commercial Arbitration Court at the Chamber of Commerce and Industry of the Russian Federation (MKAS), as well as many other institutions.

In ad hoc proceedings, the parties themselves, on the basis of a clause in the contract, provide for the establishment of an arbitration court, including its composition and administration of the proceedings. The arbitration court will only act if the parties have agreed to it in their contract. The arbitration agreement excludes legal recourse to the state courts. Such an arbitration agreement is not unusual among business persons, so that the court of arbitration is of great importance.

An arbitral court usually consists of three arbitrators. These are appointed by the arbitral institution or the respective parties, depending on the agreed upon procedure. The chosen arbitrators then appoint a third arbitrator as chairman. However, it is also possible to appoint two arbitrators or only one single arbitrator. This is considered especially from the point of view of efficiency. In some cases such a procedure is already prescribed by arbitration rules.

Yes, the ZPO (German civil process order) contains basic provisions on the admissibility and conduct of arbitration proceedings in §§ 1025-1066 ZPO. However, these are mainly dispositive, so that they only intervene if the parties have not considered certain points of regulation. They also include mandatory provisions, such as the right to be heard.
The UNCITRAL Arbitration Rules are applicable in international arbitration proceedings. The rules contained therein cover all aspects of arbitration proceedings.

Yes, German courts can set aside an arbitral award if the appointment of the arbitral tribunal, the proceedings of the arbitrators, the arbitration proceedings or the arbitral award was significantly flawed. However, there is no appeal or review body in the arbitration process, so that unpopular decisions cannot simply be set aside.

Advantages:

Non-publicity of arbitration proceedings: The proceedings are not open to the public, so trade secrets and other confidential information do not become public or available to competitors. The arbitrators and parties are also subject to confidentiality rules.

Since the arbitrators are freely chosen, the parties can ensure that they are familiar with the applicable law and have sufficient experience. As a result, they regularly distinguish themselves by their professional expertise, which is far above average. This is of particular advantage in technically demanding industries, such as automotive, healthcare, telecommunications, but also construction and real estate.

Arbitral awards are enforceable in Germany and in most foreign countries. Due to the New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards of 1958, the enforcement of arbitral awards is in many countries easier than the enforcement of decisions of state courts.

Saving time and money: Arbitration proceedings have only one instance (no appeal and revision instance), so that the proceedings can be brought to a quick conclusion. In addition, the choice of language and venue can save costs, as translation and travel expenses may not be incurred.

Disadvantages:

It should be noted that, depending on the arbitral institution, the costs of arbitration may be higher than in state proceedings.

In some cases the parties waive their right to be heard and are limited to gross procedural violations in the context of possible complaints. Incorrect decisions can therefore no longer be corrected. The lack of an appeal and review body also reflects this danger.