When negotiating complex international contracts today, parties must make a critical strategic decision.

For a long time, the state judiciary in Germany was considered a second-rate choice for complex commercial conflicts. Conventional civil litigation is often difficult to forecast and mandates the use of the German language. Our experience over recent years shows that the German civil justice system is at its limits:

• Overburdened chambers struggle to actively manage proceedings; frequent changes in judicial assignments further delay the process and often necessitate the re-taking of evidence.
• Unexpected deadlines for pleadings, routine extensions, and the rescheduling of hearings mean that first-instance proceedings can sometimes last three or more years.

Since April 1, 2025, the “Act on the Strengthening of Germany as a Judicial Venue for Business Disputes” has offered a modern alternative: the Commercial Courts.

Does this model hold up when compared to established International Arbitration in hubs such as Paris, London, Zurich, Vienna, Geneva, or Stockholm?

I. The New Offering: Commercial Courts in Germany

1. Legal Basis: Sec. 119b GVG (Amended)

Germany has responded to the competition between judicial venues by introducing the Commercial Courts. Sec. 119b of the Courts Constitution Act (“GVG”) allows state governments to establish specialized divisions at the Higher Regional Courts, so-called Commercial Courts.

To date, nine federal states have utilized this option, including Baden-Württemberg (Stuttgart), Bavaria (Munich), Berlin, Hamburg, Hesse (Frankfurt), and North Rhine-Westphalia (Düsseldorf).

2. Key Features

a) Party Agreement

A Commercial Court has jurisdiction as a first instance court over disputes with an amount in dispute of at least EUR 500,000, provided the parties agree to it.

b) Case Management

Similar to arbitration, the court schedules a mandatory early case management conference to establish the entire procedural timeline (Sec. 612 Code of Civil Procedure, “ZPO”, amended).

c) English as the Court Language (Optional)

The parties may conduct the entire proceedings, including the judgment, in English (Sec. 184a para. 3 GVG, amended). However, this requires a corresponding agreement.

d) Streamlined Appellate Route

The process bypasses the traditional appellate level. Anyone wishing to challenge the judgment goes directly to the Federal Court of Justice (BGH) for a “leapfrog” appeal on points of law that does not require prior leave (Sec. 614 ZPO, amended).

II. Arbitration versus Commercial Courts: A Balancing Test

1. Features of the Commercial Courts

The Commercial Courts improve the state judicial offering. They are intended to minimize the risk of slow proceedings through more active judicial case management.

a) High Quality of Decisions

German judges at the Higher Regional Courts are highly qualified. Specialized panels of three judges ensure the quality of the decisions (Sec. 610 ZPO, amended, Sec. 122 GVG).

b) No Document Production

Unlike common-law proceedings, German law dispenses with extensive “Document Production” (as provided, for example, in Art. 3 of the IBA Rules on the Taking of Evidence). This keeps the process lean.

On the other hand, it limits the parties’ options for attack and defense. In German civil procedure, the principle of “nemo tenetur edere contra se” (no party is obliged to produce evidence that is disadvantageous to their own case) still prevails, which regularly leads to friction with the procedural duty of truthfulness.

c) Legal Complexity

ZPO-based litigation remains extremely technically demanding, even before Commercial Courts. In our experience over the past years, the conduct of proceedings before German courts is unforgiving in terms of deadlines or preclusion rules. Without significant procedural routine, the margin for error is high; cases are frequently decided by the tactical skill of counsel. Retaining experienced counsel is key.

2. Advantages of International Arbitration

a) Flexibility

Arbitration traditionally excels through its enormous flexibility, rooted entirely in party autonomy. The parties not only freely determine the language and venue, but also choose the applicable substantive law and the specific procedural rules. A decisive strategic advantage remains the free choice of arbitrators: this allows parties to appoint experts with specific industry experience or technical expertise to ensure a tailored and highly sophisticated decision.

b) Efficiency and Time Management in Arbitration

Normally, arbitral tribunals work very efficiently because the parties shape the process and adhere strictly to the agreed procedural calendar. However, our experience shows that especially technically complex proceedings with multi-million-dollar (or EUR) claims can still drag on. This is usually due to (i) excessive pleadings running hundreds of pages and exhibits, (ii) duelling expert reports, (iii) burdensome document production, and (iv) occasionally, a lack of stringent case management by the tribunal.

Modern institutional rules now actively counter this

• According to Art. 31 ICC Rules, the tribunal must generally submit the draft award no later than 6 months after the signing of the Terms of Reference.
• According to Art. 37 DIS Rules 2018, the tribunal should generally transmit the draft award for review within 3 months of the final hearing or submission. The DIS Council may also reduce arbitrator fees in the event of delays.
• According to 43 SCC Rules, the tribunal must render the final award no later than 6 months after the case is referred to it.
• According to Art. 15 LCIA Rules, the tribunal shall render the award as soon as possible after the final submission, generally targeting a 3-month deadline.
• According to Art. 32 Vienna Rules, the award shall be rendered no later than 6 months after the final hearing or submission.

c) Costs

In German state courts, the prevailing party is only reimbursed for legal fees according to the statutory (RVG) rates. In contrast, arbitration rules allow for the recovery of actually incurred, reasonable costs (Art. 33 DIS Rules, Art. 38 ICC Rules, Art. 49 SCC Rules, Art. 28 LCIA Rules, Art. 38 VIAC Rules). Furthermore, we are increasingly seeing tribunals award “party costs” (e.g., internal costs for fact-finding) as recoverable.

d) Enforceability

Ultimately, the primary argument for arbitration in international settings is its uncomplicated global enforceability. While enforcing state court judgments outside the EU is often difficult, arbitral awards can be recognized and enforced relatively easily in over 170 states under the New York Convention. This makes arbitration an indispensable risk-management tool, particularly for projects in regions like Brazil or Asia.

Conclusion

The new Commercial Courts in Düsseldorf, Hamburg, or Frankfurt offer an excellent package for disputes within the EU when German law applies. They combine state authority with a modern procedural framework.

For major global projects, however, arbitration at hubs like Paris, London, or Vienna remains the method of choice, particularly as awards can be enforced seamlessly in over 170 states thanks to the New York Convention.