As reported previously, the draft law on English language proceedings in international commercial matters is currently being deliberated in parliament. Martin Illmer, a senior research fellow at Max Planck Institute for Comparative and International Private Law in Hamburg, was one of the experts who testified before the German Parliamnet (Bundestag) on Wednesday this week. He has kindly agreed to provide a guest post and provide an insider’s view:
“On November 9, 2011, the Committee on Legal Affairs (Rechtsausschuss) of the German Parliament (Bundestag) held a public hearing on a draft bill to introduce special chambers at the district courts conducting the entire proceedings in the English language. The Committee had appointed nine experts to present their views with subsequent questions by the members of the Committee. The author was one the experts.
The draft bill has to be seen against the background of an increasing competition not only for the applicable law but also for the place of the proceedings which parties in B2B transactions are free to choose by virtue of a choice of court agreement. Since English is the lingua franca in international business transactions, jurisdictions where the proceedings are conducted in English (including England, the United States, Singapore, Hong Kong but also new players such as Dubai and Qatar) as well as arbitral tribunals before which the parties are free to choose the language have a natural advantage: The proceedings can be conducted in the language that the parties used in their contract negotiations and finally as the language of the contract. Since parties often strive to align the jurisdiction of choice with the applicable law an attractive jurisdiction regularly promotes its substantive law. The draft bill aims at removing the respective disadvantage of proceedings before the German courts. To achieve this goal, it offers parties in international commercial disputes to jointly opt for English as the language of the entire proceedings (submissions to the court, oral hearing, judgment etc.).
While, however, first and second-instance courts are bound by the parties’ choice for the English language, the Federal Supreme Court (Bundesgerichtshof) may conduct the proceedings in German despite the parties’ choice for English. According to a Federal Court judge also present as an expert at the hearing, none of the Federal Court’s chambers (which will always sit with five judges) is currently in a position to conduct the proceedings in the English language.
In the first parliamentary debate on the draft bill in late September 2011 all political parties apart from the left-wing socialists (Die Linke) were open to adopt the bill despite critical comments on several aspects of it. The majority of the experts in the public hearing (seven out of nine) were strongly in favour of the draft bill. It was common ground amongst them that the bill would strengthenGermanyas an international litigation venue since German courts are well recognised for their quality, neutrality, speed and efficiency. By enabling English-language proceedings one of the major obstacles for choosing German courts to settle international disputes would be removed (as a related obstacle for choosing German law the control of general terms and conditions even in B2B transactions was mentioned). This would strengthen the bargaining position of small and medium-sized companies in particular when negotiating a choice of court agreement in favour of German courts. In addition, the draft bill might gain back ground for the German courts in areas of the law which are currently nearly exclusively litigated before international arbitral tribunals or foreign courts. It was also stressed that on the part of the attorneys it would not be the large international law firms that would benefit in the first place. Rather, medium-sized firms and spin-off boutiques would benefit since they might be more willing to choose less profitable German court proceedings instead of arbitration or Anglo-American-style litigation.
Despite the strong support for the draft bill, the experts suggested several amendments to it. These included, as detailed in the experts’ written statements the proposal to offer English-language proceedings not before the Chambers for Commercial Matters (Kammern für Handelssachen – consisting of one professional judge and two lay judges from the business community) but before ordinary chambers (consisting of three professional judges). Furthermore, it was questioned whether the final judgment of the court should be in English or German (or both) and whether the decision on costs and the enforcement proceedings should also be in English. Finally, it was suggested to expand the draft bill to proceedings before German state courts in support and control of arbitration proceedings (such as declaratory proceedings on the existence and validity of the arbitration agreement and setting aside-proceedings) to further promoteGermany as an arbitral venue. The likely return to the German language in final appeal proceedings before the Federal Court was regarded as a remaining problem which could hardly be remedied. It was, however, noted that the number of cases that go to a final appeal is not too high. Only one of the experts raised concerns regarding the compatibility of the draft bill with the German constitution (Grundgesetz) and European law. Finally, the experts agreed that the need for English-language proceedings and the corresponding success of the draft bill would not be assessable for some time since the parties would first have to react to the new legislation by implementing the respective choice of court agreements in their contracts.
It is to be hoped that the draft bill will pass Parliament quickly and that word is spread about it in order to further promote Germany as the jurisdiction of choice for international commercial litigation as well as arbitration.”
Dr Martin Illmer, MJur (Oxford) read law law at the universities of Mainz, Cambridge and Oxford. He qualified as a Mediator and has been admitted to the German bar since 2004. From 2004 to 2007 he was with Allen & Overy LLP in Hamburg and Frankfurt in the firm’s intellectual property and dispute resolution practice groups. Since 2007 he is senior research fellow at the Max Planck Institute for Comparative and International Private Law, Hamburg, Germany. His research focuses on national and international civil procedure, private international law, international arbitration, European and national private law, all in a comparative perspective. For further information about Martin and a list of his publications see http://www.mpipriv.de/ww/de/pub/mitarbeiter/illmer_martin.cfm.