Have they opened the dispute as 'item not received' or 'item not as described'?
Is it a paypal disute or an ebay one?
If ebay, you should just work through the resolution centre and shouldn't matter where their account is registered.
Would have thought Paypal would work similarly.
Get in touch with customer services for whichever it is through if you are having issues resolving it because of the German thing, they are there to help.