German Court cracks down on abuse of ADR mechanisms to suspend limitation periods

It is common in many jurisdictions for the legal system to include mechanisms under which the normal limitation period for commencing court proceedings can effectively be suspended while the parties are seeking to resolve their dispute by a form of ADR.  (Notably, the EU Mediation Directive and ADR Directive both require an extension of any limitation period that would otherwise expire while the parties are undertaking ADR to which the respective Directive applies).   Such provisions can be beneficial in removing a possible obstacle to the parties fully exploring the potential for ADR before court proceedings are commenced.

However, in a recent decision, the German Federal Supreme Court has sought to limit what it appears to have regarded as a widespread misuse of one such mechanism available in Germany.  Specifically, the court held that applications for conciliation proceedings under the German Civil Code, which can operate to suspend the relevant limitation period, will not have that effect if the application is too generic and does not contain a certain minimum level of detail of the relevant claim.  In particular, the Court held that there must be sufficient detail to enable the opponent to assess the merits of the claim and its suitability for conciliation, as well as allowing the conciliatory body to prepare for its task of conducting the conciliation.

The decision, which may result in thousands of claims pending in German courts being dismissed as time-barred,  must be seen as a strong message from the Federal Supreme Court that it will not tolerate such mechanisms being used by parties solely for the purpose of securing an extension of the limitation period, without any genuine intention to pursue ADR.

Click here to read our Frankfurt office's briefing on the decision.