by Prof. Dr. Dres. h.c. Burkhard Hess, Executive Director Max Planck Institute Luxembourg for Procedural Law
Against the backdrop of Brexit, an initiative has been launched to strengthen Frankfurt as a hot spot for commercial litigation in the European Judicial Area. On March 30, 2017, the Minister of Justice of the Federal State Hessen, Ms Kühne-Hörmann, organized a conference at which the Justice Initiative was presented. More than 120 stakeholders (lawyers, judges, businesses) attended the conference. The original paper was elaborated by Professors Burkhard Hess (Luxembourg), Thomas Pfeiffer (Heidelberg), Christian Duve (Heidelberg) and Roman Poseck (President of the Frankfurt Court of Appeal). Here, we are pleased to provide an English translation of the position paper with some additional information on German procedural law for an international audience. The proposal has, as a matter of principle, been endorsed by the Minister of Justice. Its proposals are now being discussed and shall be implemented in the next months to come. The paper reads as follows:
1. Background Information
In the European Judicial Area, London has positioned itself as the most important hub for cross-border disputes arising from the European internal market. According to statistics, in around 80% of all commercial cases at least one party is foreign, while almost 50% of all claims issued in the London court concern only foreigners. The value of disputes before the London Commercial Court is regularly in the 6 – 7-digit range. The court hears approximately 1,000 procedures per year, of which almost 200 concern parties from the continent (see here). A key focus is on financial disputes. Often, the jurisdiction of the High Court of London is based on jurisdiction agreements (Article 25 Brussels Ibis Regulation).
The upcoming Brexit will change this situation in relation to parties from the continent. In the future, the United Kingdom as a state will no longer benefit from the benefits of the European Judicial Area; the UK will rather be a third country. Parties to civil disputes must already consider whether they prefer to choose other courts within the European Judicial Area. The liberal rules of jurisdiction laid down in Article 25 of the Brussels Ibis Regulation and the special jurisdiction rules established in Articles 7 and 8 of the Brussels Ibis Regulation promote appropriate strategies. In financial contracts, jurisdiction clauses do not only provide for London, but also for other courts in the European Judicial Area, such as Frankfurt. Therefore, Germany can become a competing judicial hub. With the expected relocation of the financial center from London to Frankfurt (and indeed, likely to other European locations) a relocation of the judicial hub is also to be expected. It is submitted that one should strive for a shift of financial disputes to Frankfurt; even today, the Frankfurt judiciary is characterized by the existence of its special expertise in commercial areas. Indeed, the Frankfurt civil courts already have a high degree of specialization to hear financial and banking disputes.
Attracting high-profile, commercial disputes entails positive effects with regard to the legal services sector, in particular the legal profession, but also the courts of ordinary jurisdiction. Corresponding developments can be observed with regard to patent litigation. In this highly-specialized area of law, the courts of Düsseldorf, Mannheim and Munich have already established themselves as sought-after throughout Europe.
For these reasons, the Justice Initiative proposes that the attractiveness of the civil and commercial courts of Frankfurt should be strengthened through some targeted (mainly organizational) measures. A simultaneous information campaign would also increase Frankfurt’s visibility as an attractive place for the solution of international commercial disputes. Our considerations are linked to and continue to advance earlier initiatives (“Law Made in Germany”) that aim to strengthen Germany as a compelling place for dispute resolution.
In particular, the authors propose the following measures:
A. A comprehensive strategy to strengthen Frankfurt as a hub for international dispute settlement
I. The core concern relates to the further specialization of the dispute resolution bodies within the state courts in order to promote the efficient resolution of cross-border commercial disputes. A combination of targeted measures, including the provision of a well-equipped court and experienced judges with good language skills as well as a modern process design shall enable a practical, user-friendly framework for the settlement of international commercial disputes
II. The initiative shall be accompanied by the comprehensive involvement of the judiciary, of the business sector (the Chamber of Industry and Commerce) as well as of the legal profession (including lawyers’ associations and lawyers’ chambers).
III. Simultaneous strengthening of arbitration in Frankfurt (via the creation of a Center for International Dispute Resolution).
B. Establishment of Chambers for International Commercial Matters at LG Frankfurt as well as of appropriately specialized senates at OLG Frankfurt
I. Composition of the Chamber for International Commercial Disputes with judges who have:
- In-depth experience of business law (and, if possible also experience as lawyers) as well as;
- Good English language skills.
II. Occupation of the commercial lay judges in consultation with the Chamber for Commerce with experts from the fields:
- Finance and banking;
- International commercial matters;
Here again, adequate language skills must be ensured.
III. Sufficient equipment of the Chamber for International Commercial Disputes:
- Comprehensive use of the electronic support system, for example by providing an IT tool in order to enable an “electronic process and case file management”;
- Adequate equipment of the registrar of the Chamber / Senate with a staff, which also disposes of a sufficient knowledge of foreign languages and is able to manage (partially or partly) foreign-language files;
- Borrowing best practices from arbitration with regard to the secretary/registry who adopts active support functions (as a case manager).
C. Process design
I. In respect of its own procedural practice, the Kammer für international Handelssachen should borrow “best practices” from patent litigation and international commercial arbitration:
- The court should establish a “road map” with the parties at the start of the process; this would structure the course of the procedure. In this respect, it would seem to be a good idea to use the first hearing as a “Case Management Conference” with the parties:
- Intensive use of the obligation of the court to provide information on open legal and factual issues under section 139 ZPO (German Code of Civil Procedure – the text is reproduced at the end of the document), in order to facilitate a speedy and transparent procedure;
- Written preparation statements of witnesses shall generally be permitted (see § 377 (3) ZPO);
- Increased use of sections 142 to 144 ZPO to enable a (structured) exchange of evidence between the parties under the control of the court (“German disclosure”);
- Recording of the hearing and preparation of a textual record (sections 160 to 164 ZPO) – as an electronic document.
II. Extensive use of the English language within the existing framework of sections 184 and 185 (2) of the Court Organisation Act (but no English-speaking hearings per se). The court should decide at its own discretion whether and to what extent the hearing is held in English. The proposals of the parties must be respected as far as possible.
- No translation of documents which are drafted in the English language (as already foreseen by section 142 (3) ZPO):
- Witness will be heard in their original tongue or in English;
- Extensive use of video conferencing:
- Elaboration of judgments in a way which allows for their speedy translation into foreign languages.
D. The implementation of the initiative
I. Obtaining the support of lawyers, the judiciary and politicians in Hesse (Fall 2016)
II. Opening symposium on the 30th of March 2017;
III. Establishment of a working group with the aim of defining the necessary measures to be taken;
IV. Development and implementation of an accompanying communication strategy;
V. Establishment of a chamber for international trading at Regional Court of Frankfurt and a parallel specialization at the the Heigher Regional Court preferably on January 1, 2018 (within the business distribution plan of 2018).
All in all, the undertaking of the necessary organizational endeavor as well as the timetable for the implementation of the initiative both appears to be feasible. The implementation requires, in particular, the establishment of the Chamber for International Commercial Disputes (Kammer für international Handelssachen) within the District Court of Frankfurt. The following disputes could be assigned to the Chamber from the date of its establishment: international disputes, where the jurisdiction of the Landgericht Frankfurt (District Court of Frankfurt) is based on the Brussels Ibis Regulation or the Lugano Convention. Within the District Court, the respective disputes would be allocated to the specialized chamber via the business distribution plan of the court.
Code of Civil Procedure (Zivilprozessordnung – ZPO)
Section 139 Direction in substance of the course of proceedings
(1) To the extent required, the court is to discuss with the parties the circumstances and facts as well as the relationship of the parties to the dispute, both in terms of the factual aspects of the matter and of its legal ramifications, and it is to ask questions. The court is to work towards ensuring that the parties to the dispute make declarations in due time and completely, regarding all significant facts, and in particular is to ensure that the parties amend by further information those facts that they have asserted only incompletely, that they designate the evidence, and that they file the relevant petitions.
(2) The court may base its decision on an aspect that a party has recognisably overlooked or has deemed to be insignificant, provided that this does not merely concern an ancillary claim, only if it has given corresponding notice of this fact and has allowed the opportunity to address the matter. The same shall apply for any aspect that the court assesses differently than both parties do.
(3) The court is to draw the parties’ attention to its concerns regarding any items it is to take into account ex officio.
(4) Notice by the court as provided for by this rule is to be given at the earliest possible time, and a written record is to be prepared. The fact of such notice having been given may be proven only by the content of the files. The content of the files may be challenged exclusively by submitting proof that they have been forged.
(5) If it is not possible for a party to immediately make a declaration regarding a notice from the court, then the court is to determine a period, upon the party having filed a corresponding application, within which this party may supplement its declaration in a written pleading.
Section 142 Order to produce records or documents
(1) The court may direct one of the parties or a third party to produce records or documents, as well as any other material, that are in its possession and to which one of the parties has made reference. The court may set a deadline in this regard and may direct that the material so produced remain with the court registry for a period to be determined by the court.
(2) Third parties shall not be under obligation to produce such material unless this can be reasonably expected of them, or to the extent they are entitled to refuse to testify (…).
(3) The court may direct that records or documents prepared in a foreign language be translated by a translator who has been authorised or publicly appointed by the authorities of a Land, under the stipulations of Land law, for the preparation of translations of the nature required, or who is deemed to have equivalent qualifications. The translation shall be deemed to be true and complete where this is confirmed by the translator. The confirmation is to be set out on the translation, as are the place and date of the translation and the translator’s authorisation/appointment/equivalency, and the translated document is to be signed by the translator. It is admissible to prove that the translation is incorrect or incomplete. The order provided for in the first sentence hereof may not be issued to the third party.
Section 143 Order to transmit files
The court may direct the parties to the dispute to produce the files in their possession to the extent they consist of documents concerning the hearing on the matter and the decision by the court.
Section 144 Visual evidence taken on site; experts
(1) The court may direct that visual evidence is to be taken on site, and may also direct that experts are to prepare a report. For this purpose, it may direct that a party to the proceedings or a third party produce an object in its possession, and may set a corresponding deadline therefor. The court may also direct that a party is to tolerate a measure taken under the first sentence hereof, unless this measure concerns a residence.
(2) Third parties are not under obligation to so produce objects or to tolerate a measure unless this can be reasonably expected of them, or to the extent they are entitled to refuse to testify pursuant to sections 383 to 385. Sections 386 to 390 shall apply mutatis mutandis.
(3) The proceedings shall be governed by the rules applying to visual evidence taken on site as ordered upon corresponding application having been made, or by those applying to the preparation of reports by experts as ordered by the court upon corresponding application having been made.
Section 377 Summons of a witness
(3) The court may instruct that the question regarding which evidence is to be taken may be answered in writing should it believe that, in light of the content of the question regarding which evidence is to be taken and taking into consideration the person of the witness, it suffices to proceed in this manner. The attention of the witness is to be drawn to the fact that he may be summoned to be examined as a witness. The court shall direct the witness to be summoned if it believes that this is necessary in order to further clear up the question regarding which evidence is to be taken.
Court Organisation Act
The language of the court shall be German. The right of the Sorbs to speak Sorbian before the courts in the home districts of the Sorbian population shall be guaranteed.
(1) If persons are participating in the hearing who do not have a command of the German language, an interpreter shall be called in. No additional record shall be made in the foreign language; however, testimony and declarations given in the foreign language should also be included in the record or appended thereto in the foreign language if and to the extent that the judge deems this necessary in view of the importance of the case.(…)
(2) An interpreter may be dispensed with if all the persons involved have a command of the foreign language.