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New German Commercial Court makes its case

Arthur Sullivan
November 2, 2020

From November 2, two new Commercial Courts in Baden-Württemberg are open. The first of their kind in Germany, the hope is that they will enhance the country's reputation for settling international business disputes.

Deutschland Stuttgart Standort Commercial Courts
Image: Justizministerium Baden-Württemberg/Bjoern Haenssler

The German legal system isn't always the easiest for Germans to follow, let alone non-Germans with a limited grasp of the language says Philipp Esser, an attorney-at-law based in Baden-Württemberg, southern Germany.

"Even if you are German, you may only understand half of what is happening unless you are a lawyer in that area," he told DW. "If you also come from a different legal system and don't speak German, then you are totally lost."

Such clients might welcome the news that, from today, two new English-speaking courts are open for cases in the region: Stuttgart Commercial Court and Mannheim Commercial Court.

Although there are other courts in Germany which allow limited use of English, these are the first comprehensive commercial courts in Germany. That means they are specifically designed to be courts where companies can settle commercial disputes of an international nature at a state level.

In establishing the courts, the Baden-Württemberg Ministry of Justice wants to compete with the likes of Dubai, Singapore, Paris and Amsterdam, which have set up similar judicatures in recent years.

Deutschland Stuttgart Standort Commercial Courts
The Stuttgart Commercial Court is being set up at the Fasanenhof Campus, near the airport.Image: Justizministerium Baden-Württemberg/Bjoern Haenssler

But another big driver in the establishment of such courts is Brexit. The London-based Commercial Court of England and Wales has been a major center for the resolution of international business disputes. However, uncertainty over the final nature of the UK's departure from the EU has encouraged the establishment of alternatives within the EU.

Why now?

With international business contracts, an important consideration is what court or legal system will adjudicate in the event of a dispute. Parties can choose to settle disputes in local courts, at international commercial courts or as they often choose, in private courts of arbitration.

Historically, German courts have not been a popular choice for the resolution of international commercial disputes, although incidentally, the Mannheim Regional Court is internationally renowned for its work in major patent disputes, having adjudicated on multi-billion-euro cases involving the likes of Apple, Samsung and Qualcomm.

Academic experts Stefan Lammel and Tina Bieniek recently wrote in a legal blog on the new courts that this unpopularity is not to do with the German legal system but rather to do with procedure in German civil courts: namely that proceedings take too long, that taking evidence in certain technical formats (via videolink) is rarely used, and that the language must be German.

Baden-Württemberg now aims to change that reputation. The new courts will have two chambers: a "Commercial Civil Chamber" in front of three experienced commercial judges, and a second "Chamber for Commercial Matters" in front of one judge as chairman and two honorary commercial judges.

The courts will handle corporate law disputes, issues over company acquisitions and disputes around mutual transactions with values of more than €2 million.

Deutschland Stuttgart Standort Commercial Courts
Witnesses and evidence can be heard through video link technology while English can be used in court, if needed.Image: Justizministerium Baden-Württemberg/Bjoern Haenssler

But where they really hope to attract litigants is in terms of procedures. Witnesses and evidence can be heard through video link technology while English can be used in court, if needed.

Justice delivered in German or English?

Indeed, one of the key selling points of the new courts, according to the Baden-Württemberg Ministry of Justice, is that it will handle its affairs in English. However, it's not quite as simple as that.

"According to § 184 GVG, the language of the court is German," a spokesperson for the Baden-Württemberg Judiciary told DW. "However, all judges of the Stuttgart Commercial Court and the Mannheim Commercial Court will be able to conduct the hearing in English, if this is desired by the parties involved.

"Documents that are the subject of the legal dispute can also be included in the process in English, making extensive translations of contractual documents unnecessary."

In practice, that means some of the court's business can be held in English if wanted by those involved, for example oral hearings and also the submission of some documents. Other courts in Germany already allow similar use of English, such as the Cologne Higher Regional Court and since 2018, Frankfurt am Main and and Hamburg Regional Courts.

The extent to which those courts, like the new Commercial Court, can use English is ultimately restricted by German law though. As that law stipulates that the language of the court is German, written submissions and judgments must be in German. In many other overseas commercial jurisdictions or in private arbitration, English can be used without restriction.

Deutschland Stuttgart Standort Commercial Courts
Arbitration remains a particularly attractive option for commercial disputes, not least because judgments from those are usually enforceable worldwide.Image: Justizministerium Baden-Württemberg/Bjoern Haenssler

There have been attempts by lawmakers to make English an official court language in Germany, but those did not make it past the Bundestag and have since been dropped by lawmakers.

According to Philipp Esser, written submissions are much more important in the German legal system than in English or American systems, where what is spoken before the judges carries more weight. Had it been possible for the new court to accept submissions in English, it "would be quite revolutionary and quite a challenge for the courts, to be informed in English but to decide in German," he says.

Justice in any man's language

"If Baden-Württemberg or Germany wants to make itself attractive for investment, then part of that is to have a good high quality legal system and also enforcement in the courts," says Esser. However, he emphasizes that arbitration remains a particularly attractive option for commercial disputes, not least because judgments from such rulings are usually enforceable worldwide and also because they are held in private.

Nonetheless, many legal experts appear to welcome the new courts as a step in the right direction for Germany's capacity to adjudicate on international commercial matters. Other German states, such as North-Rhine Westphalia, are now keen to follow Baden-Württemberg's lead.

However, it remains to be seen how many cases will ultimately come before the new courts given that large companies, unlike ordinary citizens, clearly have a multitude of options around the world when it comes to seeking justice.