Introduction:
In another rare decision on the setting-aside of an arbitral award, issued on 18 December 2025 (Case No. I ZB 42/25), the German Federal Court of Justice (Bundesgerichtshof, BGH) considered the appeal against the ruling by the Bavarian Supreme Regional Court (BayObLG, case no. 102 Sch 39/24 e), on which we had commented here. The BayObLG had previously set aside an arbitral award in a post M&A dispute in the life sciences sector due to serious violations of due process (rechtliches Gehör) and insufficient reasoning by the arbitral tribunal and remitted the matter back to the arbitral tribunal for re-consideration.

In addition to confirming the decision of the BayObLG, the BGH has now confirmed and further clarified under which circumstances German courts may remit a case to the arbitral tribunal rather than terminating the proceedings, and how violations of procedural rights are to be assessed.

Summary of the Case Facts:
The dispute revolved around a share purchase agreement in the biotechnology sector, in which the buyer promised milestone-based payments tied to the clinical development of novel oncology treatments. Contentious were the parties’ obligations concerning provision and use of tissue samples and clinical data necessary to trigger milestone payments. The sellers alleged that the buyer failed to take all reasonable efforts to support required studies, whereas the buyer emphasized the limits imposed by scientific realities and contractually negotiated restrictions.

Following a complex arbitration, the tribunal found a breach by the buyer, awarding a milestone payment. The buyer then brought an action to set aside the award in state court. The BayObLG allowed this application, ruling that the tribunal had disregarded critical factual submissions concerning industry practice and technical limitations, and had failed to provide sufficiently reasoned findings as required under German law. The judgment stressed that arbitral tribunals must substantively address the parties’ essential arguments, particularly when industry custom and technical feasibility are central, and must give clear reasoning for their conclusions. This case and its full background are presented in detail in the recent post “Rare Decision: BayObLG sets aside award due to violation of due process and inadequate reasoning” on kdb.legal.

Main Findings of the BGH Decision:

  1. Remittal to the Arbitral Tribunal Is Permissible – Not Every Due Process Violation Bars Remittal
    The BGH confirmed that, pursuant to section 1059(4) ZPO, a state court may remit a case to the arbitral tribunal after setting aside an award if the case is “suitable” for such remittal—even if the reason for setting aside is a violation of the right to be heard or insufficient reasoning. Only in cases of particularly egregious or manifest due process violations—such as clear bias or willful disregard of submissions—must the court refrain from remittal and instead terminate the proceedings. The BGH emphasized that routine or explainable errors in handling complex facts will generally not preclude a remittal.
  2. Process Economy and Party Rights
    The Federal Court stressed that the core purpose of remitting a case back to the arbitral tribunal is to promote procedural efficiency. Remittal allows the tribunal, which is already familiar with the technical background and party positions, to address the identified procedural defects in a targeted manner without restarting proceedings from scratch. The court underlined that this pragmatic solution does not contradict the parties’ procedural rights, provided the arbitral tribunal can be expected to reconsider the case impartially and in light of the court’s findings.
  3. Threshold for Withholding Remittal
    The BGH outlined that only in cases of truly serious procedural breaches—such as “obvious and grave” violations indicating a lack of impartiality or willingness to reconsider the matter fairly—should the court withhold remittal. The court offered examples: if a party could successfully challenge one or more arbitrators for bias or if other circumstances undermine the fairness of renewed proceedings, remittal would not be appropriate.

Summary:
The BGH’s decision affirms that German courts will continue to protect due process and the minimum reasoning standards required of arbitral tribunals. At the same time, the ruling clarifies that—contrary to what some parties may hope or expect—not every violation of these standards justifies terminating the arbitration completely. Instead, according to the BGH, the court may remit cases back to arbitration, provided there is no indication of fundamental bias or irreparable procedural unfairness. For practitioners, this ruling underscores the importance of presenting all relevant procedural objections at the earliest possible stage—and of preparing to reargue complex cases before arbitral tribunals if procedural shortcomings are found.

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