In a recent order dated 18 December 2025 (docket no. I ZB 42/25), Germany's Federal Court of Justice (FCJ) clarified the conditions for remanding a matter to an arbitral tribunal whose award has been successfully challenged. The possibility of such back-referral by the state court is explicitly provided for in the German Code of Civil Procedure, according to which such remand is permissible in "suitable" cases (Section 1059(4)) with the effect that an initial violation of procedural or substantive law by the arbitral tribunal may be remedied by the same arbitral tribunal.
What qualifies as a "suitable" case has not been specified by the German legislator, even though this issue has considerable impact: In case an award is set aside, the losing party will want to avoid having to (once again) present its case to the same arbitral tribunal due to concerns that it will face the same outcome. By contrast, the prevailing party will strive to argue its case before a tribunal already familiar with the matter, expecting a favorable outcome, greater procedural efficiency and low additional costs. So far, FCJ rulings on suitability for remand to the arbitral tribunal were sparse, indicating that this issue does not arise frequently in practice. It was, therefore, unclear, whether a violation of a party's right to be heard as such would prevent a remand to the arbitral tribunal – a question that the FCJ had left open so far.
The FCJ now stressed that a remand is not limited to exceptional cases. In particular, the annulment of the initial award (e.g. due to a violation of the right to be heard or other aspects of German public policy), in and of itself, does not mean that the case is not suitable to be remanded and does not justify a lack of confidence in the original arbitral tribunal. The FCJ primarily relied on reasons of procedural economy and the assumption that the arbitral tribunal will generally not repeat its mistakes. Consequently, the FCJ upheld the lower court's assessment, according to which in the given case – a post M&A dispute in which the violation of a contractual duty and issues of causality as well as the burden and standard of proof were at stake – there was no reason to expect that the arbitral tribunal might not be willing to reconsider the relevant questions in an open and unprejudiced manner, and take into account the reasoning of the court ruling setting aside the initial award.
However, remand is barred in case of "obvious, severe" (augenfällige, gravierende) violations of a party's procedural rights, in particular if such violations create doubts as to the arbitral tribunal's impartiality. Accordingly, the FCJ excludes a remand if there are indications that a party could successfully challenge an arbitrator or request the termination of the arbitrator's mandate in the reopened arbitral proceeding as the intended procedural economy could then no longer be achieved. The FCJ order provides guidance but no conclusive criteria for determining the "severity" or "obviousness" of a procedural error. The state court has discretion in assessing the suitability of a particular matter for remand, subject only to a limited review by the FCJ. The FCJ's order exemplifies the limits of its review: The FCJ upheld the lower court's assessment according to which the arbitral tribunal had "merely lost track in some instances in light of the sheer volume of the facts" (in Anbetracht der Stofffülle vereinzelt die Übersicht verloren). At the same time, the FCJ stressed that multiple violations of the right to be heard may, but still do not necessarily, exclude a remand. By contrast, if the arbitral tribunal intentionally disregarded a party's procedural right to be heard, this may typically cast doubt on the tribunal's impartiality in conducting new proceedings and, thus, exclude a remand.
In terms of costs, the FCJ – contrary to previous rulings by lower courts – attributed a separate amount in dispute to a remand ruling. Citing the ruling's economic importance, the FCJ argued that it is not merely a follow-up decision to the annulment decision itself and, therefore, does increase the value of the annulment proceedings. Without elaborating, the FCJ set this amount at one-fifth of the value of the main annulment proceedings.
In conclusion, the FCJ's ruling suggests a rather generous interpretation of what constitutes a suitable case for remand to the original arbitral tribunal: a (simple) violation of the right to be heard is insufficient to exclude remand. While the FCJ's decision allows for the efficient resolution of remediable errors by the original arbitral tribunal, the trade-off is that the losing party forgoes the chance of a new hearing before an unprejudiced tribunal. Given the state court's discretion in deciding on a remand, the outcome will in many cases remain unpredictable despite the FCJ's clarifications.
