Arbitration

OVERVIEW

Among business people, there has always been a need for quick, simple and inexpensive procedures to settle legal disputes. Arbitration was already recognised as an extrajudicial form of dispute resolution in the Roman Empire. Today, the basic features of arbitration proceedings in Germany are governed by the 10th Book of the Code of Civil Procedure (ZPO) and the 1958 New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards guarantees minimum international standards. Within this framework, the parties are free to determine the procedure themselves. In doing so, they can also make use of specific rules, such as those provided by the GMAA.      

The first requirement for arbitration is an arbitration agreement between two or more parties. This excludes legal recourse to the state civil courts (in Germany, these are the district court, regional court, higher regional court and federal supreme court). In shipping, arbitration agreements (also called "arbitration clauses") are often found in charter, shipbuilding, management and partnership agreements. However, an arbitration agreement can also be agreed after the event, e.g. after a collision.  

In case of a dispute, the arbitrators are appointed by the parties themselves and decide the dispute by means of an arbitral award which, like the judgment of a state court, is binding on the parties and can be declared enforceable. If the parties agree on a settlement during the proceedings, the arbitral tribunal may also record this by way of an award ("award with agreed wording").

In contrast to state court proceedings, arbitration proceedings in Germany generally have only one instance, i.e. the decision itself cannot be appealed. The setting aside of an arbitral award by a state court is only possible at the request of a party and only on the grounds set out in Article V of the New York Convention or § 1059 ZPO.    

FAQ

TO ARBITRATION

Differences between arbitration and conciliation, mediation, adjudication and expert determination

In arbitration, the arbitral tribunal makes a final and binding decision on a dispute. In a conciliation, the conciliator, after hearing the parties, prepares a (written) proposal for amicable settlement between the parties; the parties are free to accept or reject this proposal. If the proposal does not meet with the parties' approval, the conciliation procedure ends without a result and the claimant must decide whether to start new proceedings (arbitration or trial before a state court, depending on the parties’ agreement). The GMAA offers rules for both types of proceedings. In practice, the GMAA arbitration procedure is predominantly chosen. One reason for this is that in Germany (unlike in common law countries, i.e. England and the USA in particular) the arbitration procedure also includes an attempt at conciliation (§ 13 Arbitration Rules).

Arbitration proceedings are designed to resolve a dispute by means of an arbitral award, which can usually be enforced. As before state courts, the parties first present their respective positions to the arbitral tribunal in written submissions. In an oral hearing, these are then elaborated upon and questions from the arbitral tribunal are answered. If the parties reach an amicable agreement during the arbitration proceedings, it is possible to record this agreement in a so-called arbitral award with agreed wording, which in turn can be enforced.

The mediator, on the other hand, does not decide the dispute. His/her role is to ensure an orderly, goal-oriented discussion in which the parties themselves work out ways of finding a solution and, if necessary, reach a viable, sustainable agreement that is in line with their interests. The mediation negotiations, which usually last several hours, run according to a fixed, strictly structured scheme that ensures that all aspects of a conflict, which is often multi-layered, are discussed appropriately and brought to a lasting solution. The outcome of a mediation is not enforceable.

In an expert determination, the expert answers a clearly defined, abstract question of detail. This question is mostly of a factual nature (e.g. it may concern technical or nautical issues). However, the expert can also decide questions of law. The law (§ 317 of the German Civil Code) speaks of the parties leaving the determination of the performance to a third party - the expert. In contrast, the arbitral tribunal decides by way of an arbitral award whether the claim asserted by the claimant is founded or not. In arbitration, a legal dispute is decided, whereas an expert determination resolves a preliminary question of fact or law.

As in the case of an expert determination, the project adjudicator resolves individual legal, technical and commercial issues. However, the aim of adjudication is to resolve these there and then during the project. Since the adjudicators are regularly appointed at the beginning of the project and accompany its progress (e.g. by regularly visiting the construction site), they do not need a long preparation period once a conflict arises. In contrast, the arbitral tribunal decides by way of an arbitral award whether the claim asserted by the claimant is founded or not. In arbitration, a legal dispute is resolved, whereas in project adjudication, a preliminary question of fact or law is resolved.

Why arbitration instead of state courts?

In contrast to the state courts, the parties choose the arbitrators themselves. Depending on the subject-matter of the dispute, special expertise and legal competence as well as practical experience can be taken into account. Arbitrators do not have to be lawyers.

If there is any doubt as to the independence and impartiality of an arbitrator, the arbitrator may be challenged by application to the competent court. This also applies if an arbitrator does not fulfil his contractual obligation in the arbitration proceedings.

In contrast to state court proceedings, arbitration proceedings in Germany have only one instance, i.e. there is no appeal against the decision of the arbitral tribunal. However, at the request of a party, a state court can set aside the arbitral award in its entirety if one of the grounds listed in Article V of the New York Convention or in § 1059 ZPO applies, i.e. if

  • the arbitration agreement is invalid,
  • a party was not aware of the arbitration or was otherwise unable to assert its means of attack or defence,
  • the dispute was not covered by the arbitration agreement,
  • the constitution of the arbitral tribunal or the arbitral procedure has not complied with any provision of the agreed rules of procedure,  
  • the subject-matter of the dispute is not arbitrable under German law, or
  • the recognition or enforcement of the arbitral award leads to a result contrary to public policy (ordre public).

It is not only due to the absence of a right of appeal that arbitral proceedings can usually be completed much faster. According to the rules of arbitration, arbitrators are required only to accept an arbitral appointment if they are able to carry it out both professionally and in a reasonable time frame.

§ 5 (2) of the GMAA Rules, for example, stipulates that the arbitrators have a duty to conduct the proceedings expeditiously and to complete them within a reasonable period of time.   

The parties are free to agree on the language of the proceedings.  

The parties can structure the arbitral proceedings themselves by means of appropriate agreements. This is often already done by agreeing on special rules of procedure (such as the GMAA Arbitration Rules). But the arbitration rules can also be adapted to the individual needs of the parties. Such agreements may relate, inter alia, to the number or scope of submissions, time limits in this respect, the documents to be submitted and the requirement to hold oral hearings.  

A state court must decide a legal dispute on the basis of the applicable law. In doing so, it must take into account all applicable and relevant norms of that law in its decision. The choice of a foreign law is only possible if the contract has a foreign connection. This follows from Art. 1 (1) in conjunction with Art. 3 (1) of the European Rome I Regulation. In addition, only entire legal systems can be chosen. There are further restrictions for contracts with consumers.

The contracting parties may not deviate from mandatory regulations.

According to the prevailing opinion, the situation is different in arbitration proceedings. This is based on the wording of § 1051 (1) of the German Code of Civil Procedure (ZPO), which only applies to arbitration proceedings and not to proceedings before the state courts. It states:

„The arbitral tribunal shall decide the dispute in accordance with the legal provisions chosen by the parties to apply to the substance of the dispute.“

From the possibility to choose individual legal provisions of a national law is derived (conversely) the entitlement to exclude the application of individual (including mandatory) legal provisions of a national legal system, at least in the B2B context.

The explanatory notes pertaining to section 1051 (1) ZPO state:

"Party autonomy "[...] is particularly taken into account by the fact that the parties can choose the relevant "legal provisions"; they are thus not limited to choosing the overall legal system of a particular state, but can choose legal provisions from various national laws or also those that have been developed at the international level.“

 

As a rule, arbitration proceedings are not public. This allows confidentiality to be maintained.

Arbitral awards are in principle enforceable in every signatory state to the 1958 New York Convention.   This currently englobes 168 out of a total of 195 states recognised by the UN. This means that arbitral awards are also enforceable in states with which there are no enforcement agreements for court judgments. China is a prominent example.

Whereas in state courts it is only possible to take action against biased judges by filing a motion for partiality, in arbitration there is an additional corrective via the second or, if necessary, a third arbitrator.  

In most cases, the third arbitrator is appointed by a neutral organisation or the competent court of appeal. Furthermore, biased arbitrators (just like biased judges) can be challenged. In the case of arbitrators, bias can arise from a certain economic dependence. For example, the International Bar Association (IBA) has developed guidelines with a traffic light for conflicts of interest. These guidelines describe circumstances (1) which categorically preclude the arbitrator from accepting the appointment, (2) which the parties, if aware of, nevertheless allow the arbitrator to accept, or (3) which the arbitrator must disclose but which do not directly constitute bias. In Germany, the higher regional court with jurisdiction over the place of arbitration decides whether an arbitrator who does not resign of his own accord is biased.

The decision of an arbitral tribunal can only be extended to a third party with its express consent. There is no third party notice procedure to draw a third party into arbitration proceedings. This would deprive the third party of its constitutionally guaranteed right to go before a state court. However, neither is the arbitral tribunal bound by findings and decisions of a state court before which the dispute was notified to one party to the arbitration. This can be disadvantageous in certain constellations.

Why arbitration according to the GMAA rules?

The maritime expertise of GMAA members forms the basis for our rules of procedure.    

As a rule, a GMAA arbitration panel consists of two arbitrators. However, the parties may also agree on a sole arbitrator. A third arbitrator is only required if the arbitrators fail to reach a joint decision in a two-arbitrator tribunal. This can save considerable costs.       

A GMAA arbitration is initiated without the involvement of an institution solely by notifying the opponent of the appointment of an arbitrator. The opponent must then appoint the second arbitrator. This creates much leaner and more cost-effective arbitration structures than arbitral institutions where a secretariat or office administers the proceedings.  

In many other (often foreign) arbitration rules, arbitrators are assigned a rather passive role and only decide on the facts presented to them by the parties. In GMAA proceedings, arbitrators are called upon to actively contribute to the clarification of the matter by asking pertinent questions and issuing orders.

In this context, the arbitrators - in contrast to English proceedings, for example - are explicitly allowed to make settlement proposals. In Germany, the arbitrator is always also the mediator of the dispute, both conducting the proceedings and encouraging settlement at all times.

Some further differences between the systems in Germany and England are highlighted by Klaus-A. Gerstenmaier in "The 'German Advantage' - Myth or Model?", SchiedsVZ 2010, 21.

In GMAA proceedings, the so-called principle of submission and the German rules on the burden of proof generally apply. This means that each party must present and prove the facts favourable to it within the applicable time frame. Undisputed facts do not have to be proved. The arbitral tribunal then decides on the basis of the undisputed and/or proven facts. The arbitrators may themselves contribute to the clarification of the facts and take evidence. They are not dependent on a request by the parties for this.  

This avoids extensive disclosure procedures, under which arbitrators may order parties to give their opponent prior access to all documents, data and e-mails that may be relevant to the decision, regardless of whether the fact to be proved is in dispute or not. This also includes such business documents that are prejudicial to the party's own case, provided that they are or were in the party's possession or the party otherwise has or has had access to them.

The arbitrators receive a fixed fee dependent on the amount in dispute. The fee table and a fee calculator can be found here.

However, the tribunal´s fees also depend on how many arbitrators are involved and on the number of parties. As a rule, the arbitral tribunal decides as a two-person tribunal. A third arbitrator is only required if the arbitrators do not reach a joint decision in a two-arbitrator tribunal. However, the parties may also agree on a sole arbitrator, with the corresponding reduction in fees.   

The increase in fees for multi-party proceedings, which is provided for in principle, expressly does not apply to insurance law disputes involving the same risk.

By agreeing on fast track procedures, a further acceleration can be achieved due to fixed deadlines and a reduction in costs due to the mandatory sole arbitrator.

There is no simple reason. In a dissertation from 2006, J.J. Rieckhoff examined and compared both procedures in detail. After 343 pages, he comes to the following conclusions: "London's lead as a place of arbitration for maritime law is actually based more on traditional considerations than on normative advantages of the English system". And: "This means that Hanseatic maritime arbitration in Hamburg/Bremen is already at the present time at least equivalent, if not already preferable, to English maritime arbitration in London".

Klaus-A. Gerstenmaier ("The 'German Advantage' - Myth or Model?", SchiedsVZ 2010, 21) writes: "I'm convinced that the German system might serve as a useful model to increase efficiency in international arbitration and, thereby, to reduce the level of costs and the duration in particular of complex cases".

Main features of the GMAA arbitration procedure

The arbitration proceedings commence as soon as the claimant has appointed an arbitrator and notified the respondent thereof by letter, fax or e-mail (§ 9 of the GMAA Arbitration Rules). The respondent must then appoint its arbitrator.

Generally speaking, GMAA arbitration can be agreed upon in any contract. Due to the proximity to the maritime industry, disputes arising out of contracts of affreightment, charter parties, bills of lading, ship sale & purchase and shipbuilding contracts, management contracts, bunker supply contracts etc. are often the subject of GMAA proceedings. However, GMAA arbitration proceedings can also be agreed after the event, e.g. in case of a casualty.   

Yes, in principle the parties are free to choose the rules of procedure and the seat of the arbitration. However, the seat of the arbitral tribunal, the so-called place of arbitration, determines the legal rules for the arbitral proceedings. Thus, if the place of arbitration is in Germany, the provisions of the 10th Book of the Code of Civil Procedure apply, unless otherwise agreed by the parties.  The GMAA Rules are adapted to these German provisions. Arbitral tribunals which have a foreign seat must be particularly attentive as to whether the GMAA Rules conflict with the arbitration rules at the place of arbitration. Independent of the place of arbitration is the place of the hearing. Thus, even if the place of arbitration is in Germany, the arbitral tribunal may hold individual hearings abroad - also in the context of taking evidence.

Yes, if the place of arbitration is in Germany, even individual legal provisions from different legal systems can be chosen.

In international maritime contracts - for example charter parties - it is often agreed that English law applies. This has developed over the centuries. There are no (more) objective reasons for this. Nevertheless, in shipping it is often difficult to convince one's contractual partner to deviate from these traditions.  The advantages of German law are impressively shown in a brochure "Law made in Germany" published by German legal professional associations.

There is no obligation to be represented by a lawyer. Each party can represent itself or be represented by a third party. In more complex cases, however, it may be advisable to retain a lawyer.

 

 

The arbitral tribunal has numerous possibilities to encourage defaulting parties to cooperate or to proceed without their cooperation. If a respondent does not appoint an arbitrator, the appointment is made by the chairperson of the GMAA. If a respondent does not file its statement of defence in time or does not appear at the scheduled hearing, an arbitral award can nonetheless be rendered quickly.

In contrast to state court proceedings, there is no appeal against the arbitral tribunal's decision. However, at the request of a party, a state court may set aside the arbitral award in its entirety if one of the grounds set out in Article V of the New York Convention or in § 1059 of the Code of Civil Procedure applies, i.e. if

  • the arbitration agreement is invalid,
  • a party was not aware of the arbitration or was otherwise unable to assert its means of attack or defence,
  • the dispute was not covered by the arbitration agreement,
  • the constitution of the arbitral tribunal or the arbitral procedure did not comply with any provision of the agreed rules of procedure,  
  • the subject-matter of the dispute is not arbitrable under German law, or
  • the recognition or enforcement of the arbitral award leads to a result contrary to public policy (ordre public).

This is decided by the arbitral tribunal. Usually, the losing party bears the costs of the proceedings. If one side only loses in part, it only has to bear the corresponding part of the costs. If the proceedings end in a settlement, the settlement usually contains a provision on the allocation of costs.

No. However, since costs according to the GMAA fees schedule are dependent on the value in dispute, "small claims" also have "small costs". By agreeing to the GMAA fast track procedure, a further acceleration can be achieved due to fixed deadlines and a reduction in costs due to the mandatory sole arbitrator.

Yes, an arbitral tribunal can also decide by way of proceedings in writing. However, in this case it is much more difficult for the arbitral tribunal to reach an amicable settlement because it does not meet the parties at a hearing.

As a rule, none. The GMAA does not administer arbitration proceedings, it merely provides effective rules of procedure under which the individually appointed arbitrators act autonomously. The honorary board and the secretariat have no influence whatsoever on the actual arbitration proceedings and their outcome. Only in exceptional cases is it incumbent on the board to appoint one or more arbitrators, e.g. in the event that the respondent fails to comply with its obligation to appoint within the time limit or several respondents cannot agree on one arbitrator.

Yes. Anyone who enjoys your confidence and seems suitable to you to decide independently and objectively can be appointed as an arbitrator in GMAA proceedings.

No. The two arbitrators appointed by the parties must consider the matter independently and in accordance with the law and usually come to a consensus on the legal position. Only in rare cases do they not agree. Then a third arbitrator is appointed so that a majority decision can be achieved.

Yes. The proceedings are private. Every arbitrator and every member of the board who performs tasks according to GMAA rules is bound to secrecy. Not even the GMAA secretariat is informed about the content of the proceedings

Arbitration clauses

It is recommended that the following standard clause for agreeing on GMAA arbitration be included in a contract:

"All disputes arising out of or in connection with this contract or concerning its validity shall be finally settled by arbitration in accordance with the Arbitration Rules of the German Maritime Arbitration Association."

If an initial attempt is to be made to resolve the conflict through mediation, the following clause is recommended:

"Any dispute arising out of or in connection with this contract shall, prior to the commencement of arbitration, be submitted to mediation according to the Mediation Rules of the German Maritime Arbitration Association. After completion or termination of the mediation process, any remaining disputes between the parties shall be submitted to arbitration according to the Arbitration Rules of the German Maritime Arbitration Association ".

The short form is equally legally binding:

"GMAA Arbitration"

The detailed GMAA arbitration clause has the same effect, though it provides even more clarity, especially for contracting parties who have not had any previous experience of GMAA arbitration.

"GMAA Arbitration Clause"

  1. Procedure
      1. All disputes arising out of or in connection with this Contract or its validity shall be finally settled by arbitration in accordance with the Arbitration Rules of the German Maritime Arbitration Association (GMAA) current at the time when the arbitration proceedings are commenced.
      2. The arbitration tribunal shall consist of two arbitrators unless the parties agree that it shall consist of three arbitrators or a sole arbitrator. If the two arbitrators cannot agree on a decision in the proceedings they shall appoint a third arbitrator.
      3. If a party fails to appoint an arbitrator within two weeks after being requested to do so in writing (e.g. by letter, fax or e-mail) by the other party, the Chairman or Vice Chairman of the Board of GMAA shall appoint the arbitrator at the request of the other party. The foregoing shall apply correspondingly in respect of the appointment of a substitute arbitrator.
      4. Unless the parties have agreed upon the place of arbitration, the arbitral tribunal shall fix either Hamburg or Bremen as place of arbitration.
    2. Law
    1. In the absence of an express choice of law the parties are deemed to have elected German law as the proper law governing the underlying Contract.
    2. The arbitration tribunal shall take into account accepted customs of the trade.
    3. The arbitration tribunal is only authorized to decide on the basis of equitable principles ("ex aequo et bono") if expressly and jointly so authorized by the parties."

Costs of the arbitration

Compared to many other arbitration rules, parties to GMAA proceedings can calculate exactly how much they will have to pay in arbitration fees before the proceedings even begin. These are based on a fixed tariff, the GMAA Rules for the Remuneration of the Arbitral Tribunal. A fee calculator facilitates the application of the fee table.

This does not include the fees of the lawyers involved, possible expenses of the arbitral tribunal nor the costs of any necessary taking of evidence by way of examination of witnesses or expert opinions.

All arbitration fees are due to the arbitrators. The GMAA does not receive any payments from the parties. It is financed exclusively by the contributions of its members.

Fee calculator

To determine one fee pursuant to § 1(1) of the GMAA Rules for the Remuneration of the Arbitral Tribunal, please enter the amount in dispute in euros or in US dollars. The fee will then be calculated in accordance with § 3 of the Rules.

 

Please note that each arbitrator earns one fee, if an order for evidence is issued, half a fee per arbitrator is added. Example: If the amount in dispute is EUR 320,000, each arbitrator will receive EUR 9,000, if an order for evidence is issued it will be EUR 13,500. Even if the calculator is used, it is recommended to check the calculation according to § 3 of the Rules relating to fees.

 

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Here you will find the members of the GMAA who are willing to act as arbitrators

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Notifying the GMAA of an arbitration

Form for the notification of a GMAA arbitration

The notification shall be made by the arbitrator appointed by the claimant; in the case of a sole arbitrator, by the sole arbitrator.

Please add 8 and 6.

Templates for arbitration proceedings

Members of the GMAA can view this section once they have logged in

Code of Ethics

The members of the GMAA have adopted the following Code of Ethics, which may be made part of the proceedings by express agreement between the parties