Pros and Cons of Settling a Civil or Commercial Lawsuit under German Law
German litigation lawyers as well as German judges love it when the parties of a civil dispute enter into a settlement agreement (called “Vergleichsvereinbarung” or simply ”Vergleich“). Why? Because German civil procedure rules and other laws concerning German civil litigation (see this post) provide financial incentives for lawyers if they find a way to resolve the dispute amicably, i.e. if the lawsuit is ended without the need for a judgment or other formal order by a German court.
With regard to the German judge, the motivation to promote a settlement is obvious: If the parties settle, the judge does not need to spend many working hours hearing witnesses, examining documents and writing a judgment.
German Law encourages Settlements
Section 278 German Code of Civil Procedure explicitly rules that the court shall at all stages of the civil lawsuit “work towards an amicable resolution of the dispute”. The original German wording of the relevant statute is:
„Das Gericht soll in jeder Lage des Verfahrens auf eine gütliche Beilegung des Rechtsstreits oder einzelner Streitpunkte bedacht sein.“
This means that a German judge in a civil litigation matter shall proactively attempt to induce the parties to reach such amicable resolution by way of a court recorded settlement agreement (gerichtlicher Vergleich); details are explained below.
