One possibility in reaching this particular desire can be offered by arbitration courts within the framework of arbitration proceedings. These arbitration courts are non-governmental courts, where the disputing parties conclude a contract, the so-called arbitration agreement. The arbitral tribunal shall be considered only on the basis of this agreement and shall pronounce as a judgment so-called arbitral awards, which shall be legally binding on the parties to the dispute and enforceable in state courts.

Procedure of Arbitration

The conventional and common arbitration procedure is regulated in the German Code of Civil Procedure (ZPO) in §§ 1025 ZPO. Especially because the arbitration agreement is reflected as a contract, the parties can vary in their demands and adapt the procedure in many places to their current situation and circumstances, within the principle of freedom of contract.

The first step in an arbitration proceeding is the initiating letter from the claimant to the respondent stating the parties, the subject matter of the dispute and the reference to the arbitration agreement. This is followed by the appointment of the arbitrators, who are determined by the parties themselves. Speaking in general, there are three arbitrators, one for each party, who then agree on a chairman (arbitrator). Even if the judges resp. chairmen partially belong to one party, they still must be impartial and independent. Unlike state courts, an oral argument is only considered optional within the arbitration procedure. Furthermore, the arbitral tribunal has no coercive powers and cannot, for example, have witnesses compulsorily produced. In such cases, the arbitral tribunal relies on the support of the state courts. Finally, as the last step within the procedure, a written arbitration award is issued, which has the same effect on the parties as a final judgment and can also be enforced by the state courts. If the parties can arrange a settlement, they have the option of having it pronounced as an arbitration award with agreed wording.

Advantages and disadvantages of arbitration

Depending on certain cases the private arbitration route is seen as a better alternative to the state courts.

The procedure can be adapted much more flexibly from the needs of the parties to the dispute; for example, the place of the hearing can be freely chosen. In addition, the arbitrational procedure offers a much more faster conflict resolution in complex proceedings. In this regard, the arbitrational procedure can also be much more economical in disputes with a high level of dispute value. From the point of view of privacy interest, which also marks an important factor for enterprises in keeping their positive image, the arbitration procedure supports this factor, unlike court proceedings. Arbitration proceedings are often not public, which helps the parties to arrange an arbitration agreement secretly and confidential. By choosing arbitrators freely, the parties can be sure that persons with the appropriate professional knowledge will be appointed as arbitrators. To avoid any unwanted advantages from the applied law, especially in international disputes, the parties frequently use the arbitration. The application of international arbitration goes back to 1958 New York Convention, which also allows foreign arbitration awards to be enforced by state courts, often more easily than a state judgment.

However, this goal of expedited dispute resolution also brings disadvantages. First of all, the costs of arbitration are very high and are only worthwhile if the amount in dispute is very high. In addition, the regular legal process is not contested, which means that the risk of incorrect decisions that are not corrected is higher than in the case of recourse to the state courts. The arbitrators, who are selected by the parties are professional lawyers themselves, which means that independence and impartial judgment cannot always be guaranteed. Furthermore, arbitration tribunals are not completely independent of state courts, but require the assistance of a state court when ordering coercive measures.

Types of arbitration

If the parties have managed to agree that they would like to resolve their dispute with arbitration, they can choose different types of arbitration.

Probably the simplest type is the so-called ad hoc arbitration. Here, the organization of the proceedings lies entirely with the parties. They must adhere to the rules of procedure and agree on the appointment of arbitrators and the place of proceedings. The administrative effort is higher, but the parties can adapt the procedure very flexibly to their needs.

Another type is so-called institutional arbitration. Here, institutions provide their own procedural rules and support the parties in organizing the proceedings and selecting the arbitrators. The largest arbitration institution in Germany is the German Institution of Arbitration (DIS) based in Bonn. Major organizations regarding economic arbitration include: the American Arbitration Association (AAA) in New York City, the International Chamber of Commerce (ICC) in Paris, and the London Court of International Arbitration. In addition, and beside these organizations, there are also „permanent“ arbitration tribunals established by chambers of commerce and industry, bar associations, by companies or within political parties.

Disputes between states can also be settled by arbitration courts. The World Trade Organization (WTO) aims to reduce trade barriers and increase international trade. If a member country does not comply with the agreed regulations, the WTO General Council acts as a court of arbitration. In this way, the member states can be sued, so to speak, and the WTO can impose penalty taxes.

Conclusion

For disputes to be resolved, the path does not necessarily have to lead directly to the state courts. Arbitration courts offer companies in particular a flexible and uncomplicated way of resolving conflicts with other companies, and thus facilitate efficient economic action. The parties are more flexible in the process and can either organize everything themselves or be assisted by agencies created individually for this purpose. Nevertheless, there are fixed procedural rules that guarantee that the procedure is always correct and lawful.

O.Law is a modern and dynamic law firm working in cooperation with highly motivated, professionals offering legal advice in the heart of Dusseldorf. We are characterized by our cooperation with a tax advisor and a network of lawyers in Eastern Europe.

O.Law supports in all legal requests regarding commercial law, focusing on our international cooperation. In view of the intensity of German-Turkish trade relations and the importance of them, we established a Turkey Desk.

Solutions that are efficient and economically sensible, with creative approaches are defining O.Law’s hallmarks. O.Law offers legal services in German, Turkish  and English and can support double culturally. To speak a common language is important to us.

O.Law – International Law Firm

Attorney at Law Hülya Oruç, LL.M.

Goethestr. 30

40237 Düsseldorf

+ 49 211 976 358 -19

info@olaw.eu

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O.Law is a law firm based in Düsseldorf. Working for entrepreneurs worldwide, making their dreams come true.

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This article is intended to provide a brief overview of the short-term changes for companies. A number of changes in civil law, insolvency law and company law have been passed, which are particularly relevant for companies. The aim is to make the economic consequences of the Covid 19 pandemic as little noticeable as possible.

Changes in civil law
For a limited period of time, Article 240 of the EC Treaty introduces provisions which are intended to give debtors the possibility of refusing or discontinuing the performance owed without fear of legal consequences.

Micro-enterprises are given the right to refuse performance in the case of continuous obligations if the contract was already concluded before 8 March 2020. The right of refusal is valid until 30 June 2020. Micro-enterprises are companies with up to 9 employees and an annual turnover of up to € 2 million. Again, the prerequisite is that the circumstances leading to the refusal of the service must be attributable to the Covid 19 pandemic. This is to be assumed if the company cannot provide the service or if the company would not be able to provide the service without endangering the economic basis of its operations. However, the right to refuse performance is excluded if it is unreasonable for the creditor. This should be the case if the economic basis of the creditor would cease to exist. In such cases, however, the law provides for a right of termination for the microentrepreneur.

Moreover, the above-mentioned regulations for continuing obligations do not apply to rental and lease relationships, loan agreements and claims under labour law.

However, other changes have been decided for tenancies. For example, a landlord may not terminate a lease in the period from 1 April 2020 to 30 June 2020 in the event of non-payment of rent if the rent cannot be paid due to the Covid 19 pandemic. A connection with the Covid 19 pandemic must be substantiated. This may mean that in the event of a substantively false credibility, criminal prosecution may also be threatened. The rent is therefore only deferred and must be paid in any case after the end of the above-mentioned period. The changes made to the lease concern both private and commercial rents.

If necessary, the above-mentioned regulations can be extended by the Federal Government until 30 September 2020.

Changes in insolvency law

The obligation to file for insolvency pursuant to section 15a InsO and section 42 BGB is suspended until 30 September 2020. The obligation to file for insolvency is only suspended if the insolvency maturity is due to the Covid 19 pandemic or if there are prospects of insolvency. It is assumed that if there was no inability to pay on the cut-off date of 31 December 2019, there was no insolvency due to the Covid 19 pandemic.

The consequence is that if the obligation to file for insolvency is suspended

– payments which are made in the ordinary course of business are deemed to be compatible with the due care of a prudent and conscientious manager
– the repayment of a loan granted until 30 September 2023 of a new loan granted during the suspension period and the provision of collateral is not considered to be detrimental to the creditor
– granting of credit and collateral are not considered to be an immoral delay in filing for insolvency
– a challenge is not possible if legal acts have been carried out which have led to security or satisfaction
The main purpose of these measures is to keep the farms going and, for example, to provide an incentive for the granting of loans. The limitation of the rescission is intended to allow existing business relationships to continue.

The Federal Ministry of Justice is granted the authorization to extend the above-mentioned amendments until March 31, 2021 in the event of continued deterioration.

Changes in company law
From now on, stock corporations will have the possibility to hold virtual general meetings without existing regulations in their articles of association. To this end, various parts of the German Stock Corporation Act concerning the Annual General Meeting have been amended. Thus, the Annual General Meeting can be convened with a notice period of 21 days. The notice period is usually 30 days. In deviation from the old version, the Annual General Meeting can also be convened after one year to accept the adopted annual financial statements. In this case a period of 8 months applied. The changes affecting public limited companies are applicable to the partnership limited by shares and to the European Company (SE).
For the GmbH, it applies that shareholder resolutions may be passed in text form or by written submission of votes even without the consent of all shareholders. § Section 48 Paragraph 2 GmbHG actually provides for a mutually agreed resolution here.
Here too, the Federal Ministry of Justice is authorised to extend these provisions until 31 December 2021 at the latest if necessary.

We will be glad to be at your disposal as a team for questions and support in these difficult times.
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