Recent decision reinforces Germany as a seat of predictable arbitration

The decision, Reference: I ZB 42/25 of 18 December 2025, provides detailed guidance on when a case qualifies as “appropriate” for referral by a regional court back to the same arbitral tribunal when a state court sets aside an arbitral award. Section 1059(4) of Germany’s Code of Civil Procedure (ZPO) empowers a regional court to do so on a party’s request and where appropriate, but what qualifies as an appropriate case has remained open until now.

The Supreme Court’s ruling followed a decision by the Bavarian Supreme Regional Court to set aside an arbitral award on the grounds of violations of a party’s right to be heard, and thus refer the matter back to the original arbitral tribunal. The right to be heard guarantees every party the right to comment on the facts of a case before a court issues its decision.

The Supreme Court upheld the regional court’s decision on the grounds of section 1059(4) of the ZPO, and decided that a referral back to the same tribunal only becomes inappropriate if the procedural errors cannot be remedied through renewed consideration by that tribunal. Whether a violation of the right to be heard crosses this threshold is dependent on whether, in the court’s view, the original tribunal can no longer decide objectively.

Sibylle Schumacher, an expert in arbitration at Pinsent Masons, said: “By confirming that even significant procedural errors do not automatically require restarting proceedings, the German Supreme Court provides comfort to businesses relying on arbitration for high-value transactions.  Parties in an arbitration benefit from reduced costs and time exposure because a referral back to the original tribunal remains possible unless impartiality is truly compromised.”

The Supreme Court ruled that the annulment of an arbitral award based solely on a violation of the right to be heard does not, in itself, make it inappropriate for the dispute to be referred to the same tribunal. It further confirmed that an order referring a case back to the same tribunal can be separately appealed to the Federal Court of Justice.

Sandra Gröschel, an expert in arbitration at Pinsent Masons, said: “This decision gives clarity to parties who choose Germany as their preferred seat of arbitration.”

“Both international and local businesses and organisations that operate in Germany should take note of their options in regards to matters where an arbitral awards have been set aside,” she said.