Germany
In your jurisdiction, are there any formal ADR procedures available for resolving commercial disputes other than litigating (or arbitrating) to a final hearing?
There are several options of ADR in Germany which are either as an alternative or parallel to litigation or arbitration. The main types of ADR in Germany are mediation, adjudication, expert opinion and expert determination.
Mediation is a voluntary, private process in which an independent third person supports the parties to reach their own negotiated settlement. The process itself is not binding, although the settlement between the parties is. Mediation can take place at a state court. Some judges are also trained as mediators.
Adjudication is where a neutral third party makes a decision that is binding, pending any subsequent court or arbitral award.
Expert opinion involves an expert answering a series of questions which represent the areas of dispute between the parties. The non-binding process is usually persuasive in influencing the resolution of the dispute without recourse to a hearing.
Expert determination involves the appointment of an expert in the subject matter of the dispute, to make a decision which the parties agree beforehand, to accept as binding. It is usually adopted for specific technical issues. Although generally classified as a form of ADR, this is significantly different from the other methods, most importantly in that the outcome of the process is generally binding on the parties and non-appealable.
Does engaging in ADR have any effect on potential or existing litigation or arbitration?
Engaging in ADR does not itself stop time running for the purpose of limitation of actions nor does it impose an automatic stay on any proceedings or arbitration already commenced, although this can simultaneously be achieved by other means. The right to litigate or arbitrate is also not directly affected by engaging in ADR. Unless the parties have agreed they will try an ADR process before issuing proceedings, litigation or arbitration can be commenced or continued whilst ADR is pursued and will be available if no settlement is secured.
Is ADR compulsory and if so are there any consequences if a party fails to engage in ADR? If it is not compulsory are there any plans for this to change?
Unless contractually agreed by the parties, ADR is usually not compulsory and there are no consequences if a party fails to engage in ADR. The German Code of Civil Procedure stipulates that parties should have attempted mediation before initiating court proceedings. However, there is no formal obligation. In practice, parties rarely attempt mediation before initiating court proceedings.
Can the parties agree, in advance of any potential dispute, to engage in ADR?
Yes. The parties can agree in advance that they will or may try one or more ADR method to resolve any dispute that may arise, and many commercial contracts will include dispute resolution clauses, involving one or more of these methods. This has the advantage of putting ADR automatically “on the agenda” in the event of a dispute and providing a mechanism for reaching a quick solution.
When does ADR generally take place?
There is no specific time for ADR to take place. It can take place anytime from the rising of a dispute until a final judgment or award. The timing will depend on the particular circumstances.
Is ADR subject to without prejudice privilege and/or confidential? If not, is there any other means to protect confidential information?
Not necessarily. The parties usually need to sign an agreement before ADR commences in which they agree to keep matters discussed confidential between the parties.
Does the output from ADR create precedents?
As ADR is private, it does not create a precedent and helps avoid adverse publicity associated with a court judgment. For this reason, it is unsuitable if you need a court decision allocating blame or require an injunction. A settlement achieved through ADR is usually recorded in a written agreement which will be enforceable between the parties. It is generally not binding on third parties.
Who bears the costs of ADR?
Typically the parties share the cost of ADR, albeit it is open to the parties to agree something different as part of the settlement terms.
Is your jurisdiction subject to any specific rules for cross border ADR?
Germany being part of the European Union, is bound by the EU Directive for Cross Border Mediation Regulations from 2011, which gives clear guidelines on how to deal with cross-border mediation in the same way in all member states.
Germany has not signed the United Nations Convention on International Settlement Agreements Resulting from Mediation 2020 (Singapore Convention).
Are there any particularly unusual features of ADR in your jurisdiction that you are aware are different to other jurisdictions?
There is no obligation for mediators in Germany to be legally qualified. However, since 2012 the term “certified mediator” is a protected term.
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