Germany’s English-speaking commercial courts – an alternative to international commercial arbitration?

June 2025  |  SPECIAL REPORT: INTERNATIONAL DISPUTE RESOLUTION

Financier Worldwide Magazine

June 2025 Issue

Despite Germany’s status as a global leader in international trade, its courts lack a similar level of appeal as a forum of choice for resolving large-scale commercial disputes. Businesses often favour arbitral tribunals or courts in other jurisdictions, such as the London High Court, over German state courts. In an effort to better compete with established venues, Germany is in the process of establishing specialised commercial courts aimed at handling complex, international disputes. This article examines the benefits and shortcomings of these commercial courts and explores the scenarios in which they can pose a viable alternative to international arbitration.

Legislative framework

The foundation for the new commercial courts was laid in summer 2024, when the German parliament passed the Act to Strengthen Germany as a Centre of Justice (Justizstandort-Stärkungsgesetz). As of 1 April 2025, this legislation empowers Germany’s federal states to establish commercial courts. States like Baden-Württemberg, Berlin, Hamburg and North Rhine-Westphalia have already acted, with more states expected to follow suit in setting up commercial courts.

The primary goal behind the commercial courts is to provide an efficient, high-quality litigation process tailored to large-volume (international) commercial disputes. The reform seeks to address longstanding issues that have deterred businesses from choosing German courts, such as the requirement to conduct proceedings exclusively in German, limited confidentiality protections and lengthy case durations.

Structure and jurisdiction

Commercial courts are being established as special divisions (senates) within higher regional courts (Oberlandesgerichte). They will serve as the first instance for certain commercial disputes of €500,000 in value or more, provided that both parties expressly or impliedly agree to their jurisdiction. The federal states can limit the subject matter jurisdiction as they see fit. Decisions rendered by commercial courts can be appealed directly to the Federal Court of Justice (Bundesgerichtshof).

Proceedings are thus limited to two instances instead of three under traditional German court procedures. By starting cases at the higher regional courts, which typically hear appeals, commercial court proceedings skip the first instance regional courts entirely. The aim is to streamline the proceedings and shorten their overall duration.

Procedural innovations

Several procedural changes have been introduced to improve efficiency, many of which draw directly from established practices in international arbitration. To this end, a case management conference shall be held “as early as possible” in the proceedings. These conferences allow parties and judges to agree on the organisation and conduct of the proceedings, ensuring trials are well-coordinated.

Another notable feature inspired by arbitration practices is the option for real-time verbatim records of oral hearings. Commercial courts will provide such transcripts if both parties request them. This marks a much-awaited departure from traditional German civil court practice where only high-level summaries are recorded.

One key advantage of arbitration over state courts is that the parties can elect to keep the entire proceedings confidential. German court hearings and judgments, on the other hand, are generally public. To address this, the new legislation introduces measures to protect business secrets. Upon successful application by a party, the court will take steps to keep all information that falls under the German Act on the Protection of Trade Secrets confidential. This may go as far as to exclude the public from the oral hearing – a drastic step for a jurisdiction which deems the public nature of civil proceedings one of its core principles.

Perhaps the most widely discussed feature of the new commercial courts is the option to conduct proceedings entirely in English. This novelty in the German judiciary has long been petitioned for by practitioners advocating for greater accessibility in cross-border cases. Appeals before the Federal Court of Justice may likewise be conducted in English; however, unlike commercial courts, the Federal Court of Justice retains discretion on whether to honour party agreements on language.

Where commercial courts excel

Do these innovations enable commercial courts to successfully compete with international arbitration? For some aspects this will become apparent only with experience over time. It will depend, among other things, on whether the federal states provide adequate financial investment, especially in terms of human resources and technical infrastructure. Predictions may already be made about other aspects.

The option to conduct proceedings in English takes a major consideration out of the deliberation between state (commercial) courts and arbitration. While it is regrettable that the German parliament found itself unable or unwilling to extend the binding effect of a party agreement to conduct proceedings in English to the Federal Court of Justice, the risk of German court proceedings likewise exists with every arbitration: parties seeking to enforce or set aside an arbitral award in Germany must do so before German courts, where the same language requirements are in place as for regular state court proceedings. This levels the playing field between commercial courts and arbitration in terms of language.

New protections for business secrets in commercial courts are an improvement. Under certain circumstances, these limited protections may even be preferable to full confidentiality of the entire dispute in arbitration. This could apply to cases in which a party expects to benefit from its opponent’s restraint in disclosing facts that might aid its case but be harmful in the court of public opinion. In many cases, however, businesses will continue to prefer the confidential setting of arbitral proceedings.

Where arbitration retains its edge

One advertised benefit of the commercial courts is to allow for greater specialisation and thus greater expertise of judges at the higher regional courts. This aims to answer one of the benefits of commercial arbitration, where the parties select the arbitrators based on the requirements of each specific dispute. For example, a cross-border dispute involving a complex M&A deal will likely benefit from an arbitrator with experience in this field.

The institutional experience of higher regional court judges is especially valuable for ensuring consistent jurisprudence. This expertise will be sufficient for many disputes. When it comes to subject-matter experts as judges, however, it is difficult to beat arbitration’s established practice of handpicking the most suitable arbitrators for the individual case. It will be difficult to guarantee a similar level of specialisation for each dispute in commercial courts as can be achieved in arbitration. Such specialisation is not always required, but arbitration offers the option of appointing arbitrators with a specific legal, scientific or even intersectional background tailored to the dispute in question. For some cases, this will be an aspect on which parties do not want to compromise and therefore favour arbitration.

Another aspect to consider when deciding between commercial courts and arbitration is the substantive law applicable to the dispute. While, in theory, commercial courts may apply foreign substantive law, this tends to complicate proceedings, and it undermines the commercial court benefit that their judges are experts in German law. German substantive law, however, is often criticised for its strict review of the validity of standard terms even in B2B constellations. In arbitration proceedings, the free choice of arbitrator makes the application of foreign law easier. Additionally, the Federal Court of Justice recently held that parties to an arbitration are also entitled to opt out of the review of standard terms even if otherwise sticking to the choice of substantive German law.

In terms of case duration, arbitration will remain preferable over commercial courts in most circumstances. Whereas reducing instances from three to two will shorten the duration of disputes to a degree, it is unlikely that this will reach the one-to-two-year timeframes that can realistically be achieved through arbitration with its single instance. This holds even more true considering arbitral institutions’ ongoing efforts to expedite arbitral proceedings.

Another major benefit of arbitration over any state court proceedings is enforceability. Arbitral awards can be enforced almost globally under the New York Convention. Within the European Union (EU), commercial courts may have an advantage because, unlike arbitral awards, commercial court judgments can be enforced under the Brussels I-bis Regulation without requiring recognition and enforcement applications. Outside the EU, however, no equivalent law exists for state court judgments; rather, enforcement of commercial court decisions outside the EU follows the procedural laws of each country, causing uncertainty and potential for additional obstacles.

Lastly, it must be noted that arbitration typically allows full recovery of all costs associated with the proceedings by the successful party, whereas commercial court rulings will only award statutory costs. On the flip side, this means that costs are much more predictable in state court proceedings than in arbitration.

Bottom line

Commercial courts in Germany offer a new option for high-volume B2B disputes. Allowing English language proceedings is a welcome innovation which significantly increases accessibility in cross-border cases. Businesses should consider commercial courts particularly in cases where enforcement is sought within the EU and which do not require judges to have specific subject matter expertise. When it comes to confidentiality, parties must be mindful of their interests in and risks of confidentiality in arbitration versus transparency with business secret protection in commercial courts.

For many commercial relations, arbitration will remain the preferred method of dispute resolution. Notably, arbitration will likely be recommended when parties prioritise speedy decisions, enforceability outside the EU, strict confidentiality and full recoverability of costs. Perhaps most notably, parties may continue to prefer handpicked arbitrators with tailored expertise, particularly when the dispute involves non-German substantive law.

 

Mathäus Mogendorf is a partner and Claudius Pietzcker is a junior associate at Hengeler Mueller. Mr Mogendorf can be contacted on +49 30 20374 529 or by email: mathaeus.mogendorf@hengeler.com. Mr Pietzcker can be contacted on +49 30 203740 or by email: claudius.pietzcker@hengeler.com.

© Financier Worldwide

BY

Mathäus Mogendorf and Claudius Pietzcker

Hengeler Mueller

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