Recent developments in Germany

12 July 2007

Dr Guido Maria Wiesen, Anne Katrin Bartels

1. Arbitration agreements in standard terms and conditions

In Germany, arbitration agreements frequently appear in standard terms and conditions. This means that such arbitration agreements must comply with the German law governing standard terms and conditions. For example, a clause in general terms and conditions is invalid if it unreasonably discriminates against one of the parties.

The Higher Regional Court of Bremen recently issued a decision which shows an increasing acceptance by the courts of arbitration agreements in standard terms and conditions.[1]

The parties to the dispute had concluded contracts regarding the purchase and delivery of mulberry silk. The contract was concluded under one of the parties’ standard terms and conditions which included a provision that all disputes were to be resolved by the German Wool Arbitration Board, subject to the provision that the seller may resort to the state courts if the buyer defaulted. The buyer claimed the arbitration clause was invalid and objected to the jurisdiction of the arbitral tribunal on the basis that the seller's unilateral right to choose either arbitration or the state courts rendered the arbitration clause invalid according to sec. 138 of the German Civil Code (BGB).

The Higher Regional Court of Bremen ruled that the buyer's objection to the jurisdiction of the arbitral tribunal was unfounded. It decided that the seller’s unilateral right of choice did not render the clause void and found that, in this special case, the present clause did not create any uncertainty for the buyer regarding the forum for which the seller would opt. The Court decided that the seller had a justifiable interest in being able to resort to the more cost-efficient summary proceedings before the state courts in case of default of the buyer.

2. Interpretation of “pathological” arbitration clauses

The issue in the Higher Regional Court of Frankfurt/ Main concerned an impossible – or “pathological” – arbitration clause in an international career service agreement[2]. The relevant clause stipulated that all disputes should be settled according to the arbitration rules of the ICC Brussels or its successor organisations. The place of arbitration was determined to be Brussels, Belgium. In fact, there are no special arbitration rules of the ICC Brussels.

The Higher Regional Court of Frankfurt/Main held that the use of the common abbreviation 'ICC' was sufficient to determine that the parties intended to apply the arbitration rules of the International Chamber of Commerce in Paris. The German court applied Belgian law and decided that the interpretation of the clause should take into account the true intention of the parties. It expressly followed the internationally common practice of courts to generally interpret arbitration agreements in a broad way set up for the benefit of the validity of the arbitration agreement[3]. The Court considered the wording of the clause to be sufficiently clear.

3. Option in case of two existing arbitration clauses

An arbitral tribunal composed under the arbitration rules of the Hamburg Chamber of Commerce had to decide a case in which the parties had agreed upon two different arbitration clauses which both referred to the issue in dispute[4]. The arbitration clauses, which were both included in the same contract, had the following wording:

DISPUTES AND ARBITRATION: Any dispute arising out of this contract, which cannot be resolved by negotiation, shall be settled by arbitration at the MMTA Rules and Regulations.”

“DISPUTES AND ARBITRATION: Any dispute arising out of this contract, which cannot be resolved by negotiation, shall be settled by (sic) arbitration at the HamburgChamber of Commerce in Hamburg, Germany

The final provisions of the contract also included a further regulation regarding MMTA (Minor Metals Trade Association) rules and regulations, which had the following wording:

“All other terms and conditions as per MMTA Rules and Regulations”

In this case the tribunal decided that it was clear that the parties had intended to settle their dispute by arbitration. Therefore, they held that the two different arbitration clauses were both valid. The tribunal found that, where two clauses had been inserted into a contract, the claimant had the right to elect one of the arbitration agreements.

This case is a further example of the tendency of German courts and tribunals to uphold the validity of arbitration agreements where there is a dispute.

[1] OLG Bremen, 28 June 2006, 2 Sch 03/06, SchiedsVZ 2007, 51, 52.
[2] OLG Frankfurt, 10 October 2006, 26 Sch 6/06, not published
[3] See p. KG, BB 2000, incl. 8 p. 13
[4] Hamburg Chamber of Commerce, 14 July 2006, SchiedsVZ 2007, page 55 et seqq.