I also spent quite some time with this issue, so that's my solution:
String urlString2Decode = "http://www.test.com/äüö/path with blanks/";
String decodedURL = URLDecoder.decode(urlString2Decode, "UTF-8");
URL url = new URL(decodedURL);
URI uri = new URI(url.getProtocol(), url.getUserInfo(), url.getHost(), url.getPort(), url.getPath(), url.getQuery(), url.getRef());
String decodedURLAsString = uri.toASCIIString();