Arbitration

An arbitral tribunal is a non-public and flexible alternative to the state courts. Parties can bring about a legally binding and legally enforceable decision in a single instance. In addition, parties can appoint as "judges" persons with expertise based on their knowledge of a particular industry. Especially complex disputes can thus be decided in a professionally competent and legally binding manner in only one instance. The costs of arbitration proceedings are often lower than corresponding proceedings before state courts which extend over multiple appellate instances. The oral hearings in arbitration proceedings are not public, but instead take place in a private and confidential setting. Arbitration proceedings are more flexible than proceedings before state courts, and parties can tailor the proceedings to fit their needs. Arbitral awards are enforceable in Germany once a declaration of enforceability by the competent Higher Regional Court has been obtained. Internationally, arbitral awards, unlike judgments of state courts, are enforceable essentially on a global basis by means of the 1958 New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards.

For many companies and other disputing parties, arbitration is ultima ratio. Since arbitration binds valuable resources, an amicable settlement is desirable even after the initiation of arbitration proceedings. Because of its flexibility, arbitration offers many possibilities for an amicable settlement even after the initiation of proceedings, thus paving the way for future collaboration with the business partner. If parties cannot settle their dispute amicably, the arbitral tribunal appointed by the parties will render an enforceable decision (arbitral award). Annulment of an arbitral award is possible essentially only in case of serious procedural errors. This risk of annulment can be significantly reduced by choosing an institutional arbitration in which the institution itself specialized in arbitration proceedings monitors compliance with the procedural rules.

In order to allow for the conduct of arbitration proceedings, parties need to enter into an agreement to do so in the form of an arbitration agreement. The contracting parties can agree on an arbitration clause when concluding their contract. Although an arbitration agreement can also be concluded after a dispute has arisen, in practice it is rarely possible at this stage to reach an agreement. In such cases, the only remaining possibility for the parties is to refer their dispute to the state courts.

By choosing arbitration rules of a recognized arbitration institution with long traditions, parties benefit from the expertise and experience of the institution. Arbitration rules are regularly revised to reflect national and international developments in case management. The DIS provides a model clause free of charge which can be used in contract negotiations and which ensures that any arbitration proceedings are conducted in accordance with the DIS Arbitration Rules.

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The DIS Arbitration Rules include several special features that distinguish them from the rules of other institutes.

• Promotion of amicable settlement. In contrast to rules of other institutes, the DIS Arbitration Rules, in line with the tradition of German commercial arbitration, place a special emphasis on the amicable settlement of disputes.
• Dispute Manager. The DIS Arbitration Rules provide for the possibility to appoint a Dispute Manager under the Dispute Management Rules before or after the commencement of arbitration proceedings. The Dispute Manager assists the parties in selecting the dispute resolution mechanism best suited to resolve their dispute.
• Procedural flexibility. In the course of an arbitration, parties may choose to use another alternative DIS dispute resolution procedure. A settlement reached in this procedure can be recorded in the form of an arbitral award on agreed terms.
• Procedural efficiency and expedited proceedings. The DIS Arbitration Rules contain numerous provisions aimed at speeding up the procedure and provide instruments to ensure that disputes between parties are resolved as quickly and as cost-efficiently as possible without sacrificing the characteristic quality of arbitral decisions. These instruments and measures ensure, among others, the rapid constitution of three-member arbitral tribunals, increased use of sole arbitrators, early filing of the answer to the request for arbitration together with a possible counterclaim, continuous process management including mandatory discussions concerning the structure of procedure, and incentives for the efficient conduct of proceedings by means of provisions on costs and remunerations.
• A solution for complex disputes. The growing complexity of business and contractual relationships also means an increasing number of disputes between more than two parties or disputes arising from more than one contract. A fundamental principle of the rules for multi-contract and multi-party proceedings, and the inclusion of additional parties into proceedings, is that all parties must agree to the application of these rules. Since in practice there is often no express agreement for the application of such additional rules, the arbitral tribunal must examine the existence and scope of the agreement in each individual case on the basis of applicable rules of interpretation. It is important to note that no prima facie scrutiny, as known in the practice of other arbitration institutes, is carried out by the DIS.
• Transparency and procedural integrity. The Arbitration Council of the DIS is divided into committees consisting of three members. Each ongoing arbitration at the DIS is allocated to one of these committees, which is then responsible for all decisions concerning the procedure throughout the entire duration of the proceedings. These include decisions on requests for conducting proceedings by a sole arbitrator, challenges and removals of arbitrators, determination of fees in the event of premature termination of proceedings, decisions on any increase of arbitrators’ fees due to a particular complexity of the proceedings, review of decisions of the arbitral tribunal regarding the amount in dispute, and reduction of arbitrators’ fees in the event of a delay in rendering the award.

Expedited proceedings are carried out within a shorter time frame and at reduced cost. In DIS expedited proceedings, the arbitral tribunal shall issue an arbitral award within six months after the conclusion of the case management conference. In addition, when establishing the procedure for the arbitration, the arbitral tribunal must take into account the parties’ interest in expediting the proceedings at all times. Expedited proceedings administered by the DIS require that the parties have agreed to resolve their dispute pursuant to Annex 4 of the DIS Arbitration Rules. This agreement can take the form of a provision in a commercial contract or the parties can agree on expedited proceedings after the dispute has arisen, for example during a case management conference.

The DIS Arbitration Rules do not provide for the automatic application of expedited proceedings depending on the value of the dispute. Instead, they give priority to party autonomy to agree on expedited proceedings from the outset by means of a corresponding arbitration clause or as a result of an agreement made during a case management conference. Therefore, only if the parties have agreed to the rules of expedited proceedings (initially or after a dispute has arisen) will these rules apply.

Expedited proceedings can be carried out by arbitral tribunals of three arbitrators or by a sole arbitrator.

The DIS Model Clause for Expedited Proceedings can be found here.

Parties may agree on the Supplementary Rules for Corporate Disputes (Annex 5 to the DIS Arbitration Rules) supplementing the DIS Arbitration Rules. The DIS Arbitration Rules remain applicable to proceedings conducted under the Supplementary Rules for Corporate Disputes to the extent that these Rules do not contain more specific provisions.

The Supplementary Rules for Corporate Disputes have been developed for disputes under company law, especially for disputes concerning deficient resolutions and structurally similar disputes, such as actions for dissolution or actions for annulment. These disputes arise between shareholders or between a corporation and its shareholders in connection with articles of incorporation.

The Supplementary Rules are particularly suitable for disputes within limited liability companies and can also be used for disputes in connection with partnerships.

The DIS advises all parties wishing to make reference to the Supplementary Rules to include the DIS Model Clause in their articles of incorporation.

One of the most efficient ways to reduce time and costs is to resolve disputes at an early stage. This can primarily be achieved by choosing the most suitable dispute resolution procedure for the specific dispute already from the outset, even if the parties to a dispute have already agreed on arbitration.

Under the DIS Arbitration Rules, the DIS can appoint a Dispute Manager to advise and assist the parties in selecting the dispute resolution procedure best suited to their dispute.

The DIS has been offering Dispute Management Rules since 2010. In 2018, these rules were streamlined and included in Annex 6 of the DIS Arbitration Rules.

The DIS recommends that all parties wishing to make reference to the Dispute Management Rules  include the DIS Model Clause in their contract.