I. Introduction
Independence from a particular national legal system by opting for a neutral tribunal of arbitrators is considered to be one of the key advantages of international commercial arbitration[1]. To accommodate this, minimal judicial intervention is frequently regarded[2] as a key element in enhancing a country’s appeal as a preferred seat of arbitration. However, given the significant implications of arbitral awards, some degree of judicial oversight remains indispensable, requiring the possibility of judicial recourse against certain tribunal decisions. One of the most important issues a jurisdiction faces when creating its national arbitration law is therefore navigating this delicate balance.
A particularly controversial issue in this context is whether judicial recourse should be available against arbitral tribunals’ decisions denying their own jurisdiction. Under German law, such recourse is currently unavailable following a Federal Court of Justice’s (BGH) landmark decision in 2002[3]. The BGH held that the UNCITRAL Model Law on International Commercial Arbitration (“Model Law”), as implemented in Germany, permitted recourse only against decisions affirming jurisdiction[4], with no basis for extending this through statutory analogy due to the lack of a legitimate protective interest for the opposing party[5]. Germany is currently in the process of reforming its arbitration law[6], and one of the key proposals under consideration is the introduction of judicial recourse against negative jurisdictional decisions by arbitral tribunals[7].
As the divergent opinions in official comments from interest groups and experts on the proposed Cabinet Draft show[8], there is considerable debate if this change is consistent with the reform’s goal of making Germany a more attractive seat for arbitration. This paper examines the principal arguments in this debate, structured around three aims commonly regarded as critical to the development of an arbitration-friendly legal framework.
II. Analysis of the intended aims
1 – The aim of minimal state interference
One of the arguments frequently raised in the context of an arbitration friendly law is that an effective and attractive arbitration law must function with minimal state interference to promote efficient and expedient dispute resolution[9]. Judicial control of arbitral decisions should be limited to instances where compelling reasons justify such intervention[10], as in cases where a tribunal affirms its own jurisdiction. In such situations, judicial review is deemed essential to prevent tribunals from illegitimately extending their jurisdiction without any external validation[11]. Moreover, in rule-of-law states, the constitution usually contains some form of a right of access to justice that guarantees individuals the ability to seek recourse in state courts unless they have validly waived this right – for example through a valid arbitration agreement[12]. Safeguarding this right can only be ensured through the availability of judicial review of positive decisions on jurisdiction. By contrast, it is held that when an arbitral tribunal denies its own jurisdiction, these concerns are largely absent making recourse to state courts unnecessary to ensure effective legal protection[13]. A negative jurisdictional decision, by its nature, directs the parties to state courts, thereby ensuring access to judicial protection. From a policy perspective, it has been argued that, given the lack of necessity for protection, this remedy would contravene the principle of minimal state interference and undermine the objective of creating arbitration friendly legislation[14]. This reasoning, for instance, led the Hong Kong legislature to reject such a method of recourse, emphasizing the importance of ensuring finality in arbitration wherever possible[15].
While this reasoning highlights a conceptual distinction between the wrongful refusal to enforce an arbitration agreement and the improper exercise of jurisdiction by an arbitral tribunal, it fails to adequately account for the practical realities of modern arbitration. An arbitration friendly legal framework must consider the implications for its prospective users. In the context of purely domestic arbitration in a country like Germany, where the court system is highly reliable, one might argue that parties require no additional protection against a tribunal’s refusal to exercise jurisdiction, as subsequent litigation in state courts would likely yield an acceptable outcome[16]. However, this reasoning does not hold in international arbitration which is precisely the type of arbitration the German reform aims to attract[17].
When parties to arbitration come from different countries, the alternative to arbitration is often not recourse to a German court but to the national courts of one of the parties. This dynamic undermines the assumption that parties need no protection in the case of a tribunals denying its jurisdiction because of different reasons. First, the ability to litigate in one’s home jurisdiction is frequently perceived as advantageous[18]. From the perspective of a jurisdiction seeking to position itself as arbitration friendly, it is irrelevant whether this perception is objectively justified, because its mere existence is enough to dissuade parties from choosing that jurisdiction’s arbitration framework.
Second, the seat of arbitration is often selected in a neutral third country, particularly when one party originates from a jurisdiction with a dysfunctional or unreliable judiciary[19]. In this case, having to sue opposing party in that jurisdiction will often lead to having no recourse against the party at all, therefore ultimately denying access to justice for one party.
Finally, one of the key advantages of arbitration is the relative ease of enforcing arbitral awards under the New York Convention. Even if a judgment from a reliable state court would not significantly disadvantage the claimant in substantive terms, the more difficult enforcement process would likely create a significant disadvantage[20]. The existence of these significant gaps in legal protection in international disputes demonstrates that wrongful negative determinations on jurisdiction represent precisely the type of situation where even a system committed to the principle of minimal state interference should make an exception[21]. This was also the realization that led the Austrian legislature, during the 2006 reform of Austria’s arbitration law, to introduce a ground for setting aside arbitral awards based on wrongful negative jurisdictional decisions[22].
2 – The aim of upholding party autonomy
One of the most commonly invoked arguments put forth by proponents of the introduction of a mechanism for reviewing negative jurisdiction awards is that such a mechanism is necessary to uphold party autonomy by ensuring the protection of the parties’ intention to submit their disputes to arbitration[23]. In particular, the parties’ intent to avoid the otherwise applicable jurisdiction of foreign state courts, which they sought to exclude by opting for arbitration, should be upheld[24]. Given the potentially severe consequences for parties in international disputes outlined above, it could reasonably be argued that the parties’ intent to avoid proceedings in state courts carries greater weight than their intent for the arbitral tribunal to have the final say on all matters.
A valid counterargument to this position is, however, that the parties explicitly entrusted the resolution of their dispute to the arbitral tribunal, without providing for substantive review of its decisions[25]. It remains unclear why the tribunal should not be allowed to make a final determination regarding its own jurisdiction[26]. The German Federal Bar Association has similarly argued in its position paper on the proposed reform that the old approach consequently better reflects the parties’ intent[27]. The decision of the dispute resolution body chosen by the parties should be accepted as final[28]. This argument is further supported by the fact that cases potentially affected by the proposed reform are likely to involve jurisdictional questions that are not easily answered with a simple “yes” or “no.” More often, these cases will require the interpretation of the specific arbitration agreement at issue. In borderline cases, it is often possible to persuasively argue both sides of the question concerning which disputes fall within the scope of the arbitration agreement. This leads to the question of why the decision of a state court would necessarily be more accurate than that of the arbitral tribunal – particularly when the parties have demonstrated greater trust in the tribunal than in the state courts they sought to exclude.
These conflicting outcomes in pursuit of the same goal of upholding the parties’ intentions demonstrate that this objective[29] alone cannot provide a clear argument either for or against the introduction of a mechanism for judicial recourse against negative jurisdictional decisions.
3 – The aim of unification
One of the primary goals Germany pursued in the comprehensive reform of its arbitration law in 1997, mainly by brining the law in line with the Model Law, was to offer parties a globally recognized and reliable legal framework[30]. Providing a structure that was both well-established and familiar to the international arbitration community should[31] and eventually turned out to[32] increase the frequency of arbitration proceedings conducted with a German seat. Since the Model Law is silent as to the reviewability of decisions by arbitral tribunals denying their jurisdiction, it is not surprising that an argument frequently raised against the introduction of a possibility of recourse against such a decision is an alleged departure from the central guiding principle of unification aimed at by adopting the Model Law[33]. Section 1059 ZPO, containing the enumerative reasons for setting aside an arbitral award, largely mirrors Article 34 of the Model Law. Introducing an additional ground for annulment would constitute a significant deviation from the Model Law on a fundamental issue and, thus, conflict with the core objective of unification[34]. Not deviating too much from Article 34 of Model Law was notably one of the main reasons why the German legislator decided against including false negative decisions on jurisdiction by the arbitral tribunal as a ground for the annulment of an arbitral award in the reform of 1997[35]. The Hong Kong legislature took the same approach in its 2010 arbitration law reform[36]. This position is further supported by the drafting history of the Model Law, which shows that numerous proposals addressed responses to arbitral tribunals denying their own jurisdiction[37]. In the end, however, none of these were adopted, as the issue proved too controversial, leading to the prevailing view that the Model Law does not provide for a review of a negative jurisdictional decision[38].
Ultimately, however, this does not reflect the current realities. A comparative analysis of arbitration laws across various jurisdictions suggests that the adoption of such a mechanism of recourse could even further the goal of unification, or at the very least, does not undermine it. Notably, several jurisdictions implementing the Model Law – such as Singapore[39], Belgium[40], and Austria[41] – explicitly incorporate provisions enabling this approach. Moreover, leading jurisdictions for arbitration, including Switzerland[42], France[43], and the United Kingdom[44], similarly allow for such recourse, underscoring its acceptance within globally significant jurisdictions for arbitration.
III. Conclusion
Ultimately, an analysis of the key issues demonstrates that the arguments in favor of introducing judicial recourse against negative jurisdictional decisions are more compelling. Although concerns about minimal state interference and adherence to international harmonization are legitimate, they fail to account for the practical realities of arbitration. The growing acceptance of similar provisions in other leading arbitration jurisdictions, Model Law and others, highlights the necessity of such a mechanism and demonstrates that the goal of unification does not argue against such a reform but rather supports it. Moreover, the significant consequences of wrongful negative jurisdictional decisions in cross-border disputes such as limited enforcement options and unequal access to justice underscore the potential of this reform to advance Germany’s objective of becoming a more attractive seat for arbitration.
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Mika Maximilian Hellmuth is an LL.M. Candidate at the NYU School of Law, specializing in International Business Regulation, Litigation & Arbitration. Prior to attending NYU, he completed his First State Exam in Law (J.D. equivalent) at the University of Passau in Germany.
[1] Franco Ferrari & Friedrich Rosenfeld, International Commercial Arbitration: A Comparative Introduction 14 (John Fellas ed., 2021).
[2] E.g., Kun Fan, The New Arbitration Ordinance in Hong Kong, 29 Journal of International Arbitration, 715, 720.
[3] Bundesgerichtshof [BGH] [Federal Court of Justice] June 6, 2002, Neue Juristische Wochenschrift [NJW] 3031 (2002).
[4] Id. at 3032.
[5] Ibid.
[6] At the time of submitting this paper, the reform proposal was undergoing the parliamentary legislative process. For the current status, see Deutscher Bundestag, https://www.bundestag.de/dokumente/textarchiv/2024/kw42-de-schiedsverfahrensrecht-1023816#:~:text =Gesetzentwurf%20der%20Bundesregierung,-Zentrales%20Ziel%20des&text=Dezember%201997%20„punktuelle%20Änderungen %20des,Deutschlands%20als%20Schiedsstandort%20zu%20stärken (last visited Feb. 20, 2025).
[7] The proposed § 1040(4) ZPO would allow parties to seek judicial recourse against arbitral tribunal’s decisions to deny jurisdiction in annulment proceedings. This follows the internationally not undisputed (cf. Gary B. Born, International Commercial Arbitration 1090-91 (3rd ed. 2021)) but in Germany prevailing view (cf. Regierungsentwurf [Cabinet Draft], Deutscher Bundestag: Drucksachen [BT]13/5274, at 32.) that such decisions constitute final awards, challengeable only via annulment.
[8] Opposing or expressing doubt: German Federal Bar Association, Association of German Chambers of Industry and Commerce, German Arbitration Institute (DIS); Supporting: Federal Association of Corporate Counsel, German Bar Association, German Maritime Arbitration Association. The position papers on the German Ministry of Justice’s key issues paper can be found on: https://www.bmj.de/SharedDocs/Gesetzgebungsverfahren/DE/2023_Modernisierung_Schiedsverfahrensrecht.html (last visited Feb. 20, 2025).
[9] Fan, supra note 2, at 720.
[10] Reinmar Wolff, Empfiehlt sich eine Reform des deutschen Schiedsverfahrensrechts?, 14 SchiedsVZ 293, 303 (2016).
[11] Ibid.
[12] In the German constitution for instance this right can be found in Art. 101 Section 1 sentence 2 which provides that “No one may be deprived of their lawful judge.”, cf., BGH, NJW 3031, 3032 (2008).
[13] Wolfgang Voit, Die Entscheidung des Schiedsgerichts über die eigene Unzuständigkeit als Prüfstein der dogmatischen Grundlagen des Schiedsverfahrensrechts, in Festschrift für Hans-Joachim Musielak 595, 612 (Christian Heinrich, ed., 2004)
[14] E.g., The Hong Kong Arbitration Ordinance Commentary and Annotations 218 (John Choong, Romesh Weeramantry eds., 2nd ed. 2015)
[15] Ibid.
[16] Stefan M. Kröll, Recourse against Negative Decisions on Jurisdiction, in 20 Arbitration International 55, 66 (2004).
[17] Regierungsentwurf, supra note 6, at 1.
[18] Kröll, supra note 16, at 66-67.
[19] Hilmar Raeschke-Kessler, Gedanken zur Novellierung des Zehnten Buchs der ZPO, in Siegfried H. Elsing 433, 440 (Werner F. Ebke et al., ed., 2015)
[20] Born, supra note 7, at 1196.
[21] Like this also reflected in the position paper of the German Maritime Arbitration Association (Position paper, supra note 8, at 3.)
[22] Hubertus Schumacher, Ein Schiedsspruch – und was nun? – Berichtigung, Erläuterung, Ergänzung und Aufhebung des Schiedsspruchs nach dem neuen österreichischen Schiedsverfahrensrecht, 4 SchiedsVZ 70, 74 (2006).
[23] Kröll, supra note 16, at 67; Born, supra note 7 at 1194.
[24] Raeschke-Kessler, supra note 19, at 440.
[25] Wolff, supra note 10, at 303.
[26] Id.
[27] Position paper, supra note 8, at 4.
[28] Ibid.
[29] A country that prioritizes party autonomy in its approach to negative decisions on jurisdiction is the Netherlands. Article 1052(5) of the Dutch Code of Civil Procedure denies recourse against such decisions unless the parties have explicitly agreed otherwise. While this approach appears reasonable in theory, it is unlikely that most parties will be aware of this this issue and consequently address it at the time of entering into an arbitration agreement.
[30] Regierungsentwurf, supra note 6, at 1.
[31] Ibid.
[32] Id. at 12.
[33] Wolff, supra note 10, at 303.
[34] Id. at 10.
[35] Cf. Regierungsentwurf [Cabinet Draft], Deutscher Bundestag: Drucksachen [BT]13/5274, at 58.
[36] The Hong Kong Arbitration Ordinance Commentary and Annotations, supra note 14, at 217-18.
[37] Kröll, supra note 16, at 60-61.
[38] Id.
[39] Section 10(3)(b) of the Singapore International Arbitration Act for international arbitration and Section 21(9)(b) of the Singapore Arbitration Act for domestique arbitration.
[40] Art. 1690 § 4 of the Belgian Judicial Code.
[41] § 611(2) No. 1 of the Austrian Code of Civil Procedure
[42] Art. 190 Section 2(b) of the Suisse Federal Act on Private International Law for international arbitration and Art. 393(b) of the Suisse Code of Civil Procedure for domestique arbitration.
[43] Art. 1520 No. 1 of the French Code of Civil Procedure for international arbitration and Art. 1492 No. 1 for domestique arbitration.
[44] Although not explicitly stated in the text of the British Arbitration Act, the ability to seek judicial recourse against both positive and negative awards can be inferred from the parties’ right to “challenge any award of the arbitral tribunal as to its substantive jurisdiction” under Section 67(1)(a) of the Act. See, e.g., Kröll, supra note 16, at 1308-09.