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Alternative dispute resolution - Germany

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TABLE OF CONTENTS

1. A general question first: what are the various methods of alternative dispute resolution? 1.
General General
Legal disputes between consumers and companies (in the broadest sense) Legal disputes between consumers and companies (in the broadest sense)
Disputes between companies Disputes between companies
Disputes between employees and employers Disputes between employees and employers
a) Conciliation boards for disputes relating to apprenticeships and traineeships a)
b) Consensus board pursuant to the Employees' Representation Act (BetrVG) b)
c) Conciliation relating to collective bargaining agreements c)
Family disputes Family disputes
Disputes arising from the application of the law relating to bank transfers or abuse in connection with payment cards Disputes arising from the application of the law relating to bank transfers or abuse in connection with payment cards
Disputes between individuals Disputes between individuals
2. Is the use of a form of alternative dispute resolution (ADR) laid down by statute or mandatorily required on the basis of a court decision? 2.
3. Are there statutory regulations in this respect? 3.
4. There are contractual terms relating to the performance of a contract which first require the use of ADR proceedings once disputes have arisen. The dispute can only be brought before a court of law once these proceedings have run their course. Are such terms binding on the parties? 4.
5. Which kinds of disputes are suitable for solution by means of ADR? 5.
Disputes between companies Disputes between companies
Disputes between employees and employers Disputes between employees and employers
Family disputes Family disputes
Disputes between individuals Disputes between individuals
Other specific cases (e.g. relations with government offices Other specific cases (e.g. relations with government offices
6. If ADR procedures are used, how can guarantees comparable to those of the courts be secured? In particular, how can confidentiality of negotiations be guaranteed? 6.
7. Is it necessary to obtain legal advice? What role do lawyers play in ADR proceedings? 7.
8. Is it possible to carry out alternative dispute resolution by means of “distance” proceedings? (In particular, is it possible to employ electronic media?) 8.
9. Are there fees for ADR procedures? If there are, how are costs distributed? Is there provision for legal aid? 9.
10. If the out-of-court attempt to resolve a dispute has failed, is it still possible to bring the case before a court of law? Does this affect statutory limitations in court proceedings? 10.
11. If there is mutual agreement between the parties as a result of ADR proceedings, how is this put into effect? What happens if the solution reached is not immediately put into practice? Can the usual enforcement proceedings be applied? Is it still possible to bring the case before a court? 11.

 

1. A general question first: what are the various methods of alternative dispute resolution?

General

Arbitration, conciliation and mediation procedures are the characteristic types of alternative dispute resolution procedures in the Federal Republic of Germany. These procedures can be used to supplement each other, but each is distinctive.

Arbitration proceedings play a special role. The court of arbitration is an institution which is not part of the state justice system but an institution designated by the parties by virtue of an arbitration agreement. The court of arbitration makes a final decision in place of the state court.

Conciliation aims at bringing about mutual consent between the disputing parties by means of a compromise suggested by the conciliator. Should this prove to be impossible, the good offices of the conciliator will play an important role, as they will enable the parties to pick up their dialogue from where they left off and work on a solution acceptable to both sides.

Mediation does not provide the parties with a solution to the dispute; the solution has to be worked out by the parties themselves by common agreement. The mediator helps with the process of communication and with negotiations and consensus. Unlike a judge, he has no decision-making powers and, unlike an arbitrator or a conciliator, he does not make any direct suggestions for the solution of a conflict.

Legal disputes between consumers and companies (in the broadest sense)

There are in the Federal Republic of Germany many conciliation boards which deal with the amicable resolution of  consumer-related conflicts before they reach the courts. The conciliation boards are mostly organised by professional bodies (associations and confederations) and therefore define their competence according to their line of business.

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Thus, conciliation boards exist in the field of vehicle repair, cleaning of textiles and other trades (building trade, radio and television engineers etc.)

  • In nearly all larger cities, arbitration tribunals and conciliation boards are part of the services offered by their chamber of industry and commerce as well as their chamber of handicrafts (Handwerkskammer). There are also conciliation boards run by the motor trade which deal with vehicle repairs and those run by the motor dealers which deal with defects in second-hand vehicles.
  • There are conciliation services offered by the liberal professions. The medical councils and architects' associations have them in nearly every federal state. The professional associations of lawyers, patent agents, tax consultants and chartered accountants are bound to mediate, if called upon, in disputes between their members and their members' clients.
  • Mention must also be made of the private banks' ombudsman, who deals with all kinds of business related to money and the banks.

If the conciliation boards make recommendations, these are not as a rule binding on the parties. However, the board's award sometimes places one-sided obligations on the business undertaking. Nevertheless, proceedings are only finally concluded when the parties have achieved a consensus and reached a settlement.

Disputes between companies

Mediation in commercial matters is on the increase in Germany. Lawyers and representatives of the world of business are making various attempts to set up mediation procedures and guarantee appropriate quality standards.

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Disputes between employees and employers
a) Conciliation boards for disputes relating to apprenticeships and traineeships

For the resolution of disputes arising from existing relationships between employers and those in vocational training, committees can be set up by the relevant bodies (in trades these are the craft guilds) in accordance with Section 111(2) of the Labour Courts Act – ArbGG. If such a committee has already been set up there is a compulsory procedural requirement for the case to be brought before it.

The conciliation award is binding on the parties if they accept it within one week. Enforcement takes place on the basis of the settlements arranged before the committee, or the awards made by the committee, which the parties have accepted. If no settlement has been arranged, or if the conciliation award has not been accepted, the parties can bring an action before the labour court which has jurisdiction within a period of two weeks.

b) Consensus board pursuant to the Employees' Representation Act (BetrVG)

An application can be made to the consensus board for the resolution of disagreement between employers and the works council (Betriebsrat) pursuant to Section 76 of the Employees' Representation Act – BetrVG. The board has an in-house conciliatory function within the company. It has to be made up of equal numbers of members representing the two sides, the employers and the works council. There must also be a chairman who is neutral and on whom the two parties have to agree. In cases of dispute, a labour court has to decide on the person who is to chair the board and on the number of the board's members.

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This discretionary decision of the consensus board, and a possible exceeding of discretionary powers, can be reviewed by the labour courts in response to an application made by one side within a fortnight.

c) Conciliation relating to collective bargaining agreements

If the parties to collective bargaining agreements have not managed to reach agreement in their negotiations, conciliation proceedings are often started in order to balance opposing interests and avoid industrial disputes breaking out. The aim of conciliation is always to help bring about a collective bargaining agreement and thus maintain industrial peace.

For the most part, the parties to collective bargaining have negotiated special conciliation agreements. This means that they are of considerable importance in practical terms. The members of the conciliation board are generally representatives of the opposing parties in the collective bargaining process and an impartial chairperson. If they fail to put forward a proposal for consensus, or if the proposal is rejected by one or both of the parties involved in collective bargaining, then the conciliation procedure is at an end. The next stage is industrial dispute.

Family disputes

In family conflict situations mediation, as laid down in the Social Security Code (Sozialgesetzbuch), is regularly provided by local authorities within the context of their youth welfare programmes in the form of help towards self-help. It is supposed to enable parents to work out a solution to their conflicts by mutual consent and on their own responsibility, a solution that will do justice to their joint needs and interests.

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Lawyers offer extrajudicial mediation and settlement of conflicts especially where disputes relate to family law. In addition, many points of the law require the court to work towards an amicable settlement between the parties at every stage of the judicial proceedings, especially in legal disputes relating to parental responsibility. Examples of this are extrajudicial settlement of conflicts pursuant to Section 52 of the Non‑Contentious Litigation Act (FGG) or the introduction of mediation proceedings in disputes relating to parental contact pursuant to Section 52a FGG.

In the extrajudicial area, mediation between family members has become increasingly important for the regulation of the consequences of separation and divorce. Family mediation deals with the sorting out of (family) conflicts between married, unmarried and formerly married couples and between formerly cohabiting couples, where settlements have to be sought which will take into account the interests of all the parties involved. In cases of parents separating or divorcing, mediation proceedings aim to develop a mutual concept of joint parental responsibility for father and mother after they have separated or once their divorce has gone through. Mediation sets itself the goal of finding a solution to the unresolved points of dispute in a divorce, enabling the couples to see and understand their underlying conflicts. For example, it is possible to conclude agreements on maintenance, assets, property and parental responsibility.

Disputes arising from the application of the law relating to bank transfers or abuse in connection with payment cards

For disputes arising in the area of financial services (bank transfers) a conciliation board  been set up at the German Central Bank. For banks which are members of certain banking associations (Federal Association of Public Ownership Banks, Federal Association of German Banks, Federal Association of German Cooperative Banks, the Associations of Savings and Clearing Banks) conciliation procedures are conducted by these associations.

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The Federal Association of German Banks has created a conciliation procedure for clearing up general disagreements between banks and their clients (Customer Complaints Department, Bundesverband deutscher Banken, P.O. Box 04 03 07, 10062 Berlin).

Disputes between individuals

The various federal states can provide mandatory conciliation procedures based on Section 15a of the Act Introducing the Code of Civil Procedure (EGZPO)

  • for disputes relating to proprietary rights coming under the jurisdiction of a local court (Amtsgericht) and where the amount of the claim in dispute does not exceed 750 euros,
  • in certain disputes relating to the law concerning neighbours and the interests of adjoining owners and
  • in disputes relating to defamation claims, where the derogatory remarks were not made via the press or broadcasting media.

Pursuant to Section 15a(2) EGZPO, conciliation procedures are not necessary in the following cases:

  • Petitions to modify a judgment, supplementary actions for security deposits, actions relating to the recognition of judgments from abroad, cross-actions and actions which have to be filed within a statutory or judicial period of time,
  • Disputes in family matters,
  • Motions for a new trial,
  • Claims under deed or bill-enforcement proceedings,
  • Litigious procedure, where a claim is being asserted under summary proceedings for the recovery of a debt, and
  • Actions pertaining to enforcement measures.

Furthermore, conciliation procedures are not allowed if the parties do not live or have their registered office or branch in the same country.

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The federal states can apply state laws to restrict the scope of application of Section 15a(1) EGZPO and to extend the reasons for exclusion in Section 15a(2) EGZPO.

2. Is the use of a form of alternative dispute resolution (ADR) laid down by statute or mandatorily required on the basis of a court decision?

German Law does not place a general duty on the contending parties to attempt to resolve their dispute extrajudicially before bringing their matter before the courts.

However, pursuant to Section 15a of the Act Introducing the Code of Civil Procedure (EGZPO), a federal state can require by law that an action shall only be brought before a court once an attempt to achieve consensus has been made at a recognised conciliation office. This applies to disputes relating to proprietary rights where the value in dispute does not exceed 750 euros as well as to certain defamation disputes and disputes relating to the law concerning neighbours and the interests of adjoining owners. If an action were brought in this case without an attempt to reach a consensus it would be dismissed as being inadmissible. Not all the federal states have so far availed themselves of the possibility to demand an extrajudicial attempt to achieve consensus.

With reference to judicial proceedings of the first instance, Section 278(2) of the Code of Civil Procedure (ZPO) makes a basic provision for consensual discussions to precede the (contentious) court hearing in order to achieve an amicable settlement of the dispute. This principle fails to apply only when discussions to achieve a consensus have no prospect of success because an attempt to reach consensus had already been made at an extrajudicial conciliation office, e.g. under a federal state law pursuant to Section 15a EGZPO, or it is obvious for other reasons that consensual discussions are hopeless. Instead of requiring consensual discussions according to Section 278(2) ZPO, in suitable cases a court can also suggest that the parties resolve their dispute extrajudicially (Section 278(5) Sentence 2 ZPO).

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3. Are there statutory regulations in this respect?

Yes, refer to point 2.

4. There are contractual terms relating to the performance of a contract which first require the use of ADR proceedings once disputes have arisen. The dispute can only be brought before a court of law once these proceedings have run their course. Are such terms binding on the parties?

In principle, yes.

An opposing party may bring a plea leading to the dismissal of an action if one of the parties fails to perform his contractual duty to submit to ADR proceedings before the action is filed.

If a term of this kind is contained in the general terms and conditions, its contents are subject to scrutiny by the court pursuant to Section 307 of the Civil Code (BGB). This says that a stipulation is invalid if one partner uses it to put the other partner to the contract at an unfair disadvantage. The overriding principle guiding examination should be whether the procedure is fair and unbiased, and whether a reasonable partner to a contract would have based his plea on this term or whether he would have gone straight before a court. A further point for consideration is that according to point q of Annex 1 to Council Directive 93/13/EEC, a contractual term may be regarded as unfair if the consumer's right to take legal action or exercise any other legal remedy is excluded or hindered.

5. Which kinds of disputes are suitable for solution by means of ADR?

Alternative dispute resolution is suited to the resolving of many and varied kinds of disputes on account of its flexibility and the many forms it can take, as long as the use of alternative dispute resolution procedures is not a mandatory requirement for the bringing of a case before a civil court.

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Disputes between companies

In the area of commercial mediation, mediation can help keep the relationship between the disputing parties at its former level or even make it stronger. Another advantage of mediation procedures is the guarantee of confidentiality through the exclusion of the public.

Commercial mediation is used importantly for areas covering above all complex legal and factual  conflicts between business associates. Disagreements which are in part highly personal are also suitable for conciliation procedures and mediation, including conflicts under company law or conflicts where the parties are of different nationalities. The use of commercial mediation can be recommended for all areas of business in which relationships between the parties are to continue fruitfully in spite of the conflict and after its resolution too.

Disputes between employees and employers

Mediation procedures and other extrajudicial dispute conciliation services do not offer much opportunity for success in those areas where statutory regulations or the law on collective bargaining offer successful and well-rehearsed conciliation procedures. This is particularly true of fields in which the settlement of a dispute before a court of law is mandatory. Mediation proceedings are used above all in labour law cases relating to individual employees.

Family disputes

Refer to point 1 “Family dispute”.

Disputes between individuals

First interim results of evaluation studies suggest that extrajudicial proceedings for dispute conciliation, mediation and consensus-building could above all become standard procedure in neighbour disputes and claims relating to defamation of character. Mediation procedure is often especially suited to conciliation in disputes relating to long-term contractual relationships, because in these cases the contending parties work out a solution to their conflicts on their own responsibility, which is the best way of putting them in a position to continue their contractual relationship.

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Other specific cases (e.g. relations with government offices

Mediation procedures are used in Germany in cases relating to public law or administrative actions, especially in environmental law. They are used for regional planning, official approving of plans and authorisation proceedings. The aim is to achieve a greater degree of co-operation and flexibility in administrative actions through solutions which are reached by negotiation.

6. If ADR procedures are used, how can guarantees comparable to those of the courts be secured? In particular, how can confidentiality of negotiations be guaranteed?

Mediation procedures are not laid down by statute, unlike regulations for arbitration or consensus-building, for example, which are governed by national or federal state laws and which produce guarantees comparable to those which normally result from court proceedings.

Confidentiality of proceedings can only be assured if the participants in mediation proceedings conclude a contract to agree this. The mediator only has the right to decline to answer questions if he belongs to a professional group which is accorded a comprehensive right to decline to answer questions on all points of evidence which relate to work done in his professional capacity. This refers especially to lawyers and notaries public.

With reference to alternative dispute resolution procedures arising from the application of the law on bank transfers, the regulations on conciliation office proceedings (SchlichtVerfVO) provide for the independence of conciliators in their capacity as such and their freedom from mandatory instructions (cf Section 2(2) SchlichtVerfVO), as well as their duty to observe confidentiality (Section 2(4) SchlichtVerfVO).

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7. Is it necessary to obtain legal advice? What role do lawyers play in ADR proceedings?

There is no stipulation binding on the participants in mediation or conciliation proceedings which requires them to take legal advice.

In Germany, there is no uniform professional background for persons carrying out ADR activities. Conciliators and mediators are not only recruited from the legal profession, but also especially from the ranks of professional practitioners of psychology, education, business and social sciences. 

Lawyers acting as conciliator or mediator  are subject to the rules laid down in the law governing their professional conduct, the lawyers' occupational regulations. They can only bear the title of “Mediator” if they can prove that they are fully conversant with the principles of mediation procedure on account of their having been suitably trained.

8. Is it possible to carry out alternative dispute resolution by means of “distance” proceedings? (In particular, is it possible to employ electronic media?)

First private law attempts at carrying out mediation proceedings on-line via the Internet are taking place in Germany.

9. Are there fees for ADR procedures? If there are, how are costs distributed? Is there provision for legal aid?

The general rule for forms of alternative dispute resolution is that the costs of such proceedings have to be borne by the parties.

Where conciliation offices have been set up in the private sector to deal with customer complaints, the procedure is as a rule free of charge for the customer. In these cases the customer merely has to bear his expenses for things like postage or telephoning.

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Parents and children who make use of the youth welfare conciliation and support services do not have to pay for these.

With reference to costs for mandatory extrajudicial consensus proceedings, the general regulation laid down in Section 15a(4) EGZPO lays down that the consensus board costs are to be considered as part of the costs for the following court case within the meaning of Section 91 of the Code of Civil Procedure (ZPO). Therefore the party which has lost the case has to pay the costs if there are court proceedings following on unsuccessful conciliation proceedings.

For legal advice in connection with extrajudicial dispute resolution proceedings, a disputing party will be granted state legal aid if the party is without the necessary means as a result of his or her personal and economic circumstances, if there are no other appropriate sources of aid and if the litigant is not wanton in asserting his rights (Section 1 of the law relating to aid for legal advice).

10. If the out-of-court attempt to resolve a dispute has failed, is it still possible to bring the case before a court of law? Does this affect statutory limitations in court proceedings?

In principle, the use of alternative means of dispute resolution does not pre-empt the parties from going to court afterwards.

Within the framework of mandatory conciliation proceedings (cf Section 15a EGZPO), the failure of an attempt to reach a consensus is a precondition for the admissibility of an action. It is thus possible to bring the matter before a court if no solution to the dispute has been reached. If consensus proceedings pursuant to Section 278(5) of the Code on Civil Procedure (ZPO) are unsuccessful, the proceedings are converted into contentious ones as a result.

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If there has been an attempt at extrajudicial dispute settlement before a conciliation institution in the private sector of the economy in response to a customer complaint, the participants can bring the case before the court if they have not accepted the conciliation offer. Reference is made here to the submission of the conciliation offer (Section 5(3) Sentence 1 of the rules of procedure for conciliation boards (Schlichtungsstellenverfahrensordnung)).

During an attempt to settle a dispute extrajudicially, the statute of limitations is suspended with reference to the claims of the parties to the dispute. For consensus and arbitration proceedings before state-run or recognised consensus boards, this is a direct consequence of the provision made in Section 204(1) No 4 of the German Civil Code (BGB).

For other forms of alternative dispute resolution, it is a consequence of Section 203 Sentence 1 BGB. This has the effect of not pressurising the parties into bringing their extrajudicial negotiations to a close before the period of limitation runs out.

11. If there is mutual agreement between the parties as a result of ADR proceedings, how is this put into effect? What happens if the solution reached is not immediately put into practice? Can the usual enforcement proceedings be applied? Is it still possible to bring the case before a court?

The basic aim of alternative dispute resolution proceedings is to bring about a mutually agreed settlement. As a rule, a settlement like this will be written down and will have contractual character. It will therefore be binding on the parties, so that if one of the parties disregards it, the other can have it enforced by introducing judicial proceedings.

A settlement agreement often constitutes a settlement within the meaning of Section 779 of the German Civil Code (BGB) because agreements of this kind mostly involve mutual concessions (albeit slight ones) on the part of both parties with reference to uncertainties regarding their contractual relationship or the carrying out of legal action to enforce their respective claims. Such a settlement can be enforced directly without first having to obtain a judgment through judicial proceedings if it is concluded by the disputing parties' lawyers in the form of a so-called lawyers' settlement. If, in this case, the party liable submits to immediate enforcement, and if the settlement is deposited at a Local Court (Amtsgericht), the settlement can be declared enforceable by the competent court in response to an application by one of the parties (Sections 796a, 796b in conjunction with Section 794(1) point 4b of the Code of Civil Procedure (ZPO)).

It is also possible to conclude the settlement in the form of a notarial deed which can be used to effect enforcement directly if the party liable has submitted to immediate enforcement (Section 794(1) point 5 ZPO).

A settlement reached before a state-run or state-recognised consensus board within the meaning of Section 15a EGZPO constitutes, like a settlement reached before a court, a writ of execution, on the basis of which enforcement can take place (Section 794(1) point 1 ZPO).

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Last update: 07-04-2006

 
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