Our New Germany Construction & Infrastructure Disputes Newsletter

We recently launched the first edition of HSF Kramer's Germany Construction & Infrastructure Disputes Newsletter in which we highlight recent developments in German construction law as well as international developments in construction and dispute resolution law and practice relevant to the German construction industry.

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Germany's construction and infrastructure sector continues to be shaped by evolving dispute-resolution practices, increasing regulatory focus on large-scale projects, and a challenging global environment.

Domestically, while bureaucratic hurdles, skills shortages, and high construction costs are unlikely to improve, the sector is expected to recover and return to growth from 2026 onwards, underpinned by substantial public investment in infrastructure and climate neutrality. However, the ongoing conflict in the Middle East is having repercussions well beyond the region itself and is likely to impact such recovery. Rising energy prices will drive higher costs for key construction materials, while disruptions to global supply chains and transport routes increase the risk of delays in the delivery of imported materials. These developments will again sharpen parties' focus on contractual risk allocation, with force majeure provisions, price‑adjustment mechanisms and hardship regimes likely to come back into the spotlight.

Set against this increasingly complex risk environment, this edition examines the recent German Federal Court of Justice decision clarifying the limits of "new for old" deductions in construction defect claims, emerging policy developments surrounding Germany's national data centre strategy, and FIDIC's latest Practice Note on the preparation of Dispute Board decisions.

BGH clarifies limits of "new for old" deduction in construction defect claims

Under German construction law, a question has sometimes arisen as to whether defect remediation that results in a structure benefitting from a longer remaining service life justifies a "new for old" deduction [Abzug neu für alt] in favour of the contractor. Earlier case law had already limited the extent to which remediation costs owed by the contractor could be reduced to reflect any such alleged betterment. For example, in 1984, the German Federal Court of Justice (BGH) held that such deductions were not permissible where any benefit to the employer resulted merely from delayed remediation – in particular, where the employer had been required to tolerate a defective structure for years and the supposed "advantage" consisted only in a later commencement of the repaired structure’s service life. However, it remained unclear whether such deductions might apply where a defect only becomes apparent many years after completion and the employer has suffered no loss of use in the interim.

In its decision of 27 November 2025 (VII ZR 112/24), the BGH has now clarified this issue. The case concerned defects in a concrete agricultural silo. The appellate court had reduced the quantum of statutory advance payment [Vorschuss] for remediation works on the basis that the owner had used the structure for several years without impairment. The BGH rejected this approach. It held that no "new for old" deduction is permissible when defects are remedied, even where the defect manifests relatively late and the employer has suffered no interim disadvantage.

The BGH reasoned that remediation merely fulfils the contractor's original performance obligation. Allowing a deduction would undermine the statutory risk allocation regime and effectively reward defective performance. Advantage compensation remains possible only in limited cases, for example, where remediation involves costs that would have arisen even with proper performance, such as the replacement of components that would in any event have required renewal.

This decision will be welcomed particularly by employers as it clarifies that contractors cannot rely on a "new for old" argument to reduce liability for remediation costs, even where repairs extend the structure's service life.

From policy recommendations to regulation: Germany's path toward a national data centre strategy 

In January 2025, an expert report commissioned by the Federal Ministry for Economic Affairs and Climate Action assessed Germany's competitiveness and digital sovereignty as a location for data centres. It identified structural, regulatory and technical hurdles slowing large-scale infrastructure projects and offered recommendations to align sector development with policy objectives.

Following a public consultation held between August and September 2025, the federal government is now preparing a national data centre strategy, expected to be announced in the first quarter of 2026.

Stakeholders from industry and infrastructure sectors have repeatedly emphasised the urgent need for regulatory predictability, particularly around planning and permitting, where fragmented and protracted procedures continue to delay investments. The reforms called for include binding timelines, digitalised approval processes, and centralised contact points to streamline development. Grid access has also emerged as a critical bottleneck, with operators urging reforms to the allocation of grid connection capacity and prioritisation of data centres in regional energy planning. Concerns have been further raised in relation to the implementation of new sustainability obligations under the Energy Efficiency Act (EnEfG), especially regarding the mandatory reuse of waste heat. Operators have highlighted the lack of clarity around technical feasibility, liability for delivery failures, and cost-sharing models with municipalities and heat network operators.

The government's strategy is expected to prioritise faster grid connections, free waste-heat delivery, and a revision of the EnEfG, with a view to improving integration of data centres into the energy system. From a construction sector perspective, the strategy is likely to accelerate project pipelines while simultaneously increasing interface risks, particularly in relation to grid connection, permitting timelines, and compliance with evolving energy‑efficiency requirements. These factors are, in turn, expected to become a more prominent source of delay and cost overruns in data centre projects.

FIDIC Practice Note III (December 2025): Dispute board decisions in focus 

FIDIC's standard forms are widely used in international construction and infrastructure projects and embed detailed dispute resolution mechanisms in the contract conditions. The 2017 editions enhanced the existing dispute board procedures in an attempt to strengthen real‑time dispute resolution and to provide decisions that may later influence arbitral proceedings. Given their potential significance (both commercially and procedurally), the quality of such decisions is critical.

In December 2025, FIDIC published a Practice Note on the preparation and composition of dispute board decisions. The Note is non-binding but establishes a best-practice benchmark. It emphasises that decisions are intended to be legally enforceable and should therefore be drafted with their potential later use in arbitration clearly in mind. To that end, the Note sets out practical guidance covering the entire process. Particular emphasis is placed on how the decisions are written. FIDIC stresses clarity, logical structure, and completeness: decisions should "tell the story", address the losing party's case directly, avoid unnecessary rhetoric, and clearly set out operative directions. A well-drafted decision, the Note emphasises, is more likely to be complied with and less likely to be reopened later.

For parties and counsel working with FIDIC contracts, the Note is a useful reference point. Not only for Dispute Board members, but also for assessing the quality, robustness, and strategic weight of the decisions in complex construction disputes.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.