The German security and industrial policy change labelled "Zeitenwende"1 is fundamentally reshaping procurement, cooperation and technology trajectories within the defense sector. Safeguarding supply-chain resilience has become a tightrope walk between geopolitical disruption and heightened public scrutiny. Notably, reports of arbitration proceedings involving Ukrainian defense companies have grown since 2022 – particularly cases over weapons that were ordered but never delivered.2 German industrial enterprises are likewise increasingly embracing arbitration,3 and for good reason: Efficient, confidential and party-driven dispute resolution constitutes a significant competitive advantage. Therefor, arbitration offers compelling advantages over traditional litigation in the defense sector: It provides a greater degree of confidentiality (A.) and, by allowing the appointment of specialized arbitrators, greater efficiency (B.). Moreover, arbitration facilitates cross-border enforcement thanks to its political neutrality (C.).
Confidentiality
Trade secrets (pricing and negotiation strategies), operational secrets (bills of materials, manufacturing or testing procedures) and military secrets (operational parameters or export-control details) do not belong in the public domain. However, this principle is challenged by the requirement that state court proceedings be open to the public and the press.4 Arbitration flips that default: arbitration proceedings are, as a rule, not public.
Confidentiality, however, extends beyond merely excluding the public. Parties seek to shield their trade secrets not only from the (media) public, but also from decision-makers on the opposing side of the dispute. In this respect, civil procedural instruments fall short: the new Section 273a of the German Code of Civil Procedure (Zivilprozessordnung, ZPO)5 closes some gaps, but applies only to "trade secrets" (Geschäftsgeheimnisse) within the meaning of the German Trade Secrets Act (Geschäftsgeheimnisgesetz, GeschGehG). Sensitive information that falls outside that definition – for example because it has no commercial nexus – remains unprotected.6 Additionally, full access must be granted to at least one natural person of each party and its legal representative7. For this reason, the German Federal Court of Justice itself has acknowledged a protection gap in Section 273a ZPO.8
Thus, comprehensive protection of confidential information – such as restricting access exclusively to experts bound by non-disclosure – remains a prerogative of arbitration.9 Accordingly, the Arbitration Rules of the German Arbitration Institute (DIS) establish stringent confidentiality obligations for parties, arbitrators, and the institution itself.10 However, even frameworks without strict codification of confidentiality obligations permit tribunal to issue orders thereto.11 For example, a tribunal may direct that documents be held in escrow and permit forensic examination only under the counterparty expert's supervision.12
Furthermore, flexible, tiered access models based on the "need-to-know" principle can be implemented via virtual data rooms – which are standard practice in arbitration. This combines rigorous protection of confidential information with procedural fairness. As a rule, arbitral awards are not published.13
Efficiency Through Expertise: Tailored Decision Makers
Expertise drives efficiency. This quality is critical in the defense sector, where typical disputes are both technically and contractually complex. Supply-chain issues (delay,14 deviations from specification, acceptance), post-M&A disputes (purchase-price adjustments, warranties, compliance/export control), and joint venture disputes15 (governance, deadlock, IP/licensing, cost allocation) call for subject-matter decision-makers. Therefore, in arbitration, the parties are free to select their arbitrators and may contractually stipulate technical expertise as a prerequisite for appointment.16
By contrast, parties have no insight into the technical competence of state court judges, aside from the abstract judicial allocation plan. Moreover, panel continuity is not guaranteed in state courts; reconstitutions due to retirements or other reasons are commonplace. Such changes may prolong proceedings and introduce unwelcome surprises.
Neutrality in International Contexts
Judges are independent and subject only to the law.17 Even so, in security-sensitive projects, parties often find it difficult to accept proceedings before the opposing side's national courts as entirely unaffected by domestic interests.18 An arbitration agreement "de-politicizes" the dispute in two ways: First, it prevents forum fights during contract negotiations, where each side would otherwise push for its home courts. Second, arbitration shifts decision-making to a neutral forum.19 Agreements regarding the nationality of arbitrators, the selection of an arbitration-friendly seat, and – where state entities are involved – explicit waivers of immunity (jurisdictional/enforcement waiver) ensure an independent decision outside national spheres of influence. This strengthens both parties' confidence in the objectivity of the proceedings. The arbitration clause must, however, be drafted with care, as opponents frequently challenge its validity to avoid unfavorable proceedings.20
Conclusion
Arbitration provides the defense industry with a structural advantage: sensitive information remains protected, technical disputes are resolved swiftly by experienced, neutral tribunals, and outcomes are enforceable worldwide. Parties who calibrate their contracts accordingly gain time, operational flexibility and negotiating leverage in critical phases.
1 The term originates from the policy address delivered by then German Chancellor Olaf Scholz on 27 February 2022, before the German Bundestag, which had convened for a special session following Russia's attack on Ukraine three days prior.
2 See https://globalarbitrationreview.com/article/ukrainian-arms-dispute-be-heard-in-london; last accessed: 03.11.2025; https://globalarbitrationreview.com/article/ukrainian-weapons-award-surfaces-in-us; last accessed: 03.11.2025.
3 See the statistics on new case filings involving German companies for 2024 from the German Institution of Arbitration (DIS); available at: : https://www.disarb.org/ueber-uns/unsere-arbeit-in-zahlen; last accessed: 03.11.2025.
4 Section 169 of the German Courts Constitution Act (Gerichtsverfassungsgesetz, GVG).
5 Pursuant to Section 273a ZPO, a court may classify trade secrets as requiring confidentiality, with the consequences set out in Sections 15 et seq. GeschGehG. Section 273a ZPO was enacted as part of the Judicial Hub Strengthening Act (Justizstandort-Stärkungsgesetz), Federal Law Gazette 2024 I No. 302, and entered into force on 1 April 2025.
6 Leuering/Rosa-Schneiders: Der Schutz von Geschäftsgeheimnissen im Zivilprozess, NJW 2024, 3177.
7 Section 19 (1) sentence 3 GeschGehG.
8 See Federal Court of Justice judgment of 13 February 2025 – docket no. III ZR 63/24, NJW 2025, 1116, para. 32.
9 See also Suilmann: Geschäftsgeheimnisschutz nach § 273a ZPO, GRUR 2025, 372; Leuering/Rosa-Schneiders: Der Schutz von Geschäftsgeheimnissen im Zivilprozess, NJW 2024, 3177, para. 18.
10 Article 44 of the DIS Arbitration Rules.
11 See Article 22(3) of the Arbitration Rules of the International Chamber of Commerce.
12 See Libananco Holdings Co. Limited v. Republic of Turkey, ICSID Case No. ARB/06/8, Decision on Preliminary Issues, June 23, 2008, para. 82; available at: https://www.italaw.com/cases/626; last accessed: 03.11.2025.
13 Explicitly stated in Article 44.3 sentence 2 of the DIS Arbitration Rules.
14 See KNDS vs. Greece: The German defense company KNDS and the Hellenic state accuse each other of performance delays; coverage available at: https://globalarbitrationreview.com/article/german-arms-maker-wins-icc-award-against-greece; last accessed: 03.11.2025.
15 See Thales Avionics v. L3 Technologies: The two defense companies are in dispute over Thales's pre-emption right in a joint venture; case information available at: https://jusmundi.com/en/document/decision/en-thales-avionics-inc-v-l3-technologies-inc-memorandum-and-opinion-of-the-united-states-district-court-for-the-southern-district-of-new-york-thursday-22nd-february-2024; last accessed: 03.11.2025; report available at: : https://globalarbitrationreview.com/article/thales-bring-icc-claim-over-aviation-venture; last accessed: 03.11.2025.
16 See Article 9.2 of the DIS Arbitration Rules.
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