The Future of Dispute Resolution in M&A: The Introduction of the Judicial Location Strengthening Act

With the intention of making the German jurisdiction more attractive and offering appropriate procedural options for large-scale commercial disputes within the German court system, the German legislator established the Commercial Courts with the Justice Location Strengthening Act, which came into effect on April 1, 2025. Due to a general unavailability of appropriate procedural options, large commercial disputes were often negotiated and concluded in other jurisdictions or within private arbitration. With the Judicial Location Strengthening Act, the legislator is pursuing the objective of strengthening Germany as a judicial location by introducing English as the judicial language in commercial civil matters and establishing so-called commercial courts.​

The following section shows how commercial courts can be set up, how they are constituted, what advantages they afford, particularly in the context of M&A transactions, and if they are a viable alternative to arbitration tribunals.

With the introduction of Section 119b (1) of the German Courts Constitution Act (GVG), each German federal state has the power to institute one or more senates as so-called commercial courts at a Higher Regional Court (Oberlandesgericht) or Supreme Regional Court (Oberstes Landesgericht) by means of a statutory order. Consisting of one or more senates, commercial courts are staffed by either three (Higher Regional Court) or five (Supreme Regional Court) members, i.e., professional judges who are expected to be particularly experienced, according to the Federal Ministry of Justice and Consumer Protection. The commercial courts are intended to ensure the efficient and competent handling of complex com-mercial disputes.

According to Section 119b GVG, the commercial courts have competence in the first instance for disputes with a value in dispute of EUR 500,000 or more and the cases specified in Section 119b (1) GVG, which can be interpreted as a general guideline for subject-matter jurisdiction, because these subject-matter areas can be defined in detail by the German federal states, i.e. restricted or extended to other subject areas. 

It is particularly important in the context of jurisdiction that, if the above conditions are fulfilled, the commercial courts only become competent pursuant to Section 119b (2) GVG by explicit or implicit agreement of the parties, which basically constitutes a kind of special agreement on the competent jurisdiction.

Commercial courts could be particularly interesting in future for the area of mergers and acquisitions (M&A), as they are responsible under Section 119b (1) of the German Court Constitution Act (GVG) for disputes arising from or in connection with the acquisition of companies or shares in companies, as well as disputes between the company and members of the management or supervisory board.

But what advantages or opportunities do commercial courts offer compared to ordinary courts, and in which way do they offer an alternative to the well-established arbitration tribunals?

The agreement on the competence of a commercial court enables, for the first time, major commercial cases to be handled in the first instance by the Higher Regional Court or Supreme Regional Court, which means a significant reduction in the number of instances and, as a result, a faster procedure and a reduction in costs. In addition, the legal remedy against a decision of a commercial court is an appeal to the Federal Supreme Court.

Particularly noteworthy is the possibility, available for the first time under Section 184a (1) of the German Court Constitution Act (GVG) (power of the German states to issue corresponding legal regulations), of conducting proceedings entirely in English in the jurisdiction of the ordinary courts, which is particularly important in M&A practice with regard to international corporate transactions. However, specific legal requirements must be observed, particularly those that affect the statement of claim, the parties' pleadings, and the notice of third-party proceedings.

In addition, the introduction of Section 273a of the German Code of Civil Procedure (ZPO) provides a mechanism for maintaining confidentiality, especially with regard to trade secrets, because, at the request of one of the parties, the court can classify information in dispute as confidential, either in whole or in part, which, for example, restricts access to files for third parties or results in administrative fines for breaches of confidentiality.

In comparison to arbitration, the following advantages and disadvantages can be pointed out:

With the introduction of Section 613 of the German Code of Civil Procedure (ZPO), it is now an option to have verbatim minutes taken during proceedings before commercial courts, although the parties agree to this. In contrast, both national and international arbitration tribunals can have verbatim minutes taken even if only one party requests it.

In arbitration proceedings, it is possible to influence the jurisdiction of a particular senate and to choose judges who are highly qualified. However, in commercial courts, the involvement of and hearings before highly experienced judges is guaranteed.

In international contractual constellations, in comparison to arbitration proceedings, one party must “expose” itself to the state jurisdiction of the other party, which may be disadvantageous for that party. However, in this context, the possibility of conducting proceedings in English, which is now available in commercial courts, must also be taken into consideration.

Particularly in the area of transactional law, the advantages of arbitration proceedings remain, especially due to adaptable procedural rules. Nevertheless, the introduction of the Judicial Location Strengthening Act and the commercial courts marks a significant step for Germany toward a modern, internationally oriented civil jurisdiction for major commercial disputes. Therefore, it remains to be shown to what extent the newly established commercial courts will be able to offer a genuine alternative to arbitration proceedings in the near future.