One of arbitration’s defining features is finality. Under section 1059 ZPO, an arbitral award may be challenged only through set-aside proceedings on narrow statutory grounds. The court does not reopen the case merely because one side thinks the tribunal misread the evidence or interpreted the contract incorrectly. The available grounds include the absence of a valid arbitration agreement, serious due process defects, decisions exceeding the scope of the arbitration agreement, lack of arbitrability and conflict with public policy (ordre public). That narrow scope of judicial review is exactly why many commercial parties favour arbitration. It reduces the prospect of a long appellate chain and provides earlier closure.  

That finality debate may become sharper if the current German arbitration reform should be enacted in its current form: proposed section 1059a ZPO-Draft would introduce a restitution-type remedy in exceptional cases, even after expiry of the ordinary annulment period.

But finality is not always a benefit. It depends on what the client values more: closure or correctability. 

Litigation offers a different balance. Under German civil procedure, a Berufung (appeal on facts and law) may be available against a first-instance judgment under section 511 ZPO. A subsequent Revision (appeal on points of law) to the German Federal Court of Justice (Bundesgerichtshof, BGH) may also be available under sections 542 and 543 ZPO, subject to the statutory requirements and, generally, admission of the appeal. That broader system of judicial review can be commercially important where the legal issue is novel, the amount at stake is exceptional, or a company would not be willing to accept a first-instance merits result without the possibility of real correction. The price, of course, is time, cost, and a longer period of uncertainty.  

This is therefore not a technical drafting point. It is a board-level risk appetite question. Arbitration’s finality is only an advantage when the company is willing to live with the limited scope of judicial correction if the award goes the wrong way.

Key takeaway 

Before opting for arbitration, in-house teams should ask one uncomfortable question early – if the first decision is seriously wrong, will we care more about finality or about having a real route to challenge it?

German Disputes Bites series

We hope you are enjoying our series of blogs on Litigation vs Arbitration. This series will cover different aspects of the choice between a litigation or arbitration forum. Previous posts in the series:

German Disputes Bites – Arbitration vs Litigation: confidentiality doesn’t make a dispute invisible

German Disputes Bites – Arbitration vs Litigation: deciding who decides?

German Disputes Bites – Arbitration vs Litigation: tribunal choice is key strategic phase

German Disputes Bites – Arbitration vs Litigation: procedural flexibility advantage only if managed

German Disputes Bites – Arbitration vs Litigation: choosing the right forum for enforcement

German Disputes Bites – Arbitration vs Litigation: Arbitration gets messy when dispute is not bilateral 

German Disputes Bites – Arbitration vs Litigation: speed depends on lifecycle realities 

German Disputes Bites – Arbitration vs Litigation: urgency often sends arbitration users back to court