German Institution of Arbitration: New Arbitration Rules 2018

dis-logoThe German Institution of Arbitration DIS has comprehensively revised its rules and regulations. The new rules come into force on March 1, 2018. I have summarized the key changes for Frankfurter Allgemeine Zeitung, and here is an English version of this short article: 

Arbitration is the method of choice for complex business disputes: Tailored to the parties’ requirements, optimized in their processes and always in tune with the times, they promise a modern form of dispute resolution for the problems of a modern world. It is almost surprising that the German market leader in this field, the German Institution of Arbitration (DIS), has refrained from changing its rules and regulations for 20 years: the current rules were adopted in 1998. After new rules for arbitration proceedings had been adopted by competitors in Austria and Switzerland and by the International Chamber of Commerce (ICC) in Paris in recent years, the time had also come for a new edition in of the DIS rules.

The new rules were guided by three main objectives: The procedures should firstly be faster, secondly more efficient and cost-effective and thirdly more transparent. To this end, the arbitral tribunal will be relieved of both administrative tasks and decisions concerning the tribunal itself.

The period within which the defendant shall appoint its arbitrator and the period within which the party-appointed arbitrators have to agree on the chairperson have each been reduced from 30 to 21 days. After the expiry of these deadlines, the DIS Appointing Committee may now appoint a chairperson itself without a request from the parties. The time limit for the answer to the request for arbitration is now 45 days and begins with the service of the application instead of being set only after the constitution of the arbitral tribunal. These changes should accelerate the procedure by a few months in total. Finally, the new arbitration rules provide for the arbitral tribunal to hold a case management conference within 21 days in which it discusses the timetable for the arbitration proceedings with the parties and, in particular, discusses a catalogue of measures to optimise efficiency and costs.

It is also new that in proceedings with parties of different nationalities, the sole arbitrator or, in the an arbitral tribunal, the chairperson must have a different nationality from the parties if appointed by the DIS. This practice is already common at the ICC.

In the event of disputes in which up to now it could have appeared that the arbitral tribunal would decide “on its own behalf”, the DIS will play a more active role in the future. Up to now, for example, the arbitral tribunal itself decided on a challenge against an arbitrator. The transfer of this decision to the newly created Arbitration Council, an independent body, will increase the transparency of the process. It is hoped that the acceptance of decisions on arbitrator challenges increase and that state courts will be less frequently become involved in this context. The Council is also responsible for requests to remove an arbitrator from office. It has the power to adjust the fees of the arbitral tribunal if an arbitration ends without an award or by settlement. At the request of the parties, the Council shall also review the determination of the amount in dispute by the arbitral tribunal, as it forms the basis on which the fees for the arbitrators are determined. Last but not least, it may reduce the arbitrators’ fees if they have not brought the proceedings to a conclusion swiftly enough.

The new arbitration rules also take account of the increasing complexity of business disputes, as reflected in particular in the high proportion of multi-party arbitration proceedings. They provide, on the one hand, for the combination of several arbitration proceedings and, on the other hand, for the resolution of several disputes arising from different contractual relationships in one single arbitration. Finally, the accession of further parties to arbitration proceedings has been provided for.

Since 2010, the DIS arbitration rules have been supplemented by further offers for alternative dispute resolution, namely conciliation proceedings, mediation proceedings and adjucation proceedings. However, these types of proceedings have not yet achieved great practical relevance – last year there were only five of them. The new arbitration rules seek to enhance the permeability between the different types of proceedings by encouraging the arbitral tribunal to discuss with the parties at the case management conference whether switching to one of the other dispute resolution options might be appropriate. In this context, the arbitration rules also clarify that the arbitral tribunal is authorised to communicate its preliminary assessment of the factual and legal situation and to work towards an amicable termination of the arbitration proceedings.

The new procedural rules also bring with them higher costs: DIS speaks of a “moderately increased” minimum administration fee; in addition, the DIS fees will be based on the cumulated value of claims and counterclaims. The fees of the arbitrators will be slightly increased, but remain largely unchanged from a value in dispute of EUR 100,000 upwards.

The new arbitration rules certainly represent an important milestone for the German arbitration scene, but they are unlikely to have any significant impact on the number of proceedings before the ordinary courts. As Germany’s leading arbitration institution, DIS administered 125 commercial and civil arbitration proceedings last year, plus 27 sports arbitration proceedings, the majority of which were doping cases. Even if these figures were to rise due to the new rules, they could not even rudimentarily explain the massive decline in proceedings before the ordinary courts that has been going on for years. However, the comparison of the amounts in dispute is interesting: last year, DIS proceedings had an average value of EUR 8.3 million – with a range from EUR 5,000 to EUR 270 million. Foreign parties participated in 44 percent of the proceedings, and one third of the proceedings were conducted in English. More than two parties were involved in a more than one-fourth of the proceedings. Compared to 2016, the number of cases has declined slightly, but the total value of the dispute is on the same scale as in the previous year.

As the president of the Frankfurt Oberlandesgericht (Court of Appeals) has stated, the state judiciary is struggling with complex civil lawsuits. If the amount in dispute, the involvement of several parties and international aspects are indicators of complexity, the figures of the DIS confirm the assumption that complex disputes will migrate to arbitration. The judiciary would therefore be well advised to look closely at the changes made by DIS. More than 300 DIS members have participated in the reform process, most of whom are users and interpreters of the rules as counsel and arbitrators. The new rules should therefore reflect very well what the majority of users expect from modern dispute resolution. The DIS figures also lead to a suggestion for the location of a German International Commercial Court, which has been discussed on several occasions recently: By far the most arbitration proceedings were based in Frankfurt am Main, followed by Munich and Hamburg. For its part, the DIS looks well-equipped to compete with both the state courts and other arbitration institutions on the basis of its new arbitration rules.

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