GERMANY Law and Practice Contributed by: Patricia Nacimiento, Catrice Gayer, Lara Panosch and Theo Pauthonier, Herbert Smith Freehills Kramer LLP
Corporate disputes have been the subject of a series of landmark rulings by the Federal Court of Justice, known collectively as the Schiedsfähigkeit decisions: • The court initially rejected the arbitrability of chal - lenges to shareholder resolutions in limited liability companies (GmbH), citing concerns over the bind - ing effect of arbitral awards on non-participating shareholders (29 March 1996, II ZR 124/95, “ Schiedsfähigkeit I ”). • The court later reversed its earlier stance, recognis - ing the arbitrability of such disputes, provided the arbitration procedure ensures equivalent protection to that offered by state courts. This includes safe - guarding minimum participation rights and ensur - ing access to legal remedies for all affected parties (6 April 2009, II ZR 255/08, “ Schiedsfähigkeit II ”). • The court then extended the procedural safeguards established in Schiedsfähigkeit II to disputes within partnerships (eg, Kommanditgesellschaften ), affirming that similar standards apply (6 April 2017, I ZB 23/16, “ Schiedsfähigkeit III ”). • The court clarified that these enhanced require - ments apply only where the partnership agreement stipulates that disputes over resolution validity are to be resolved with the partnership itself, rather than among individual partners (23 September 2021, I ZB 13/21, “ Schiedsfähigkeit IV ”). 3.3 National Courts’ Approach In assessing which law governs the validity of an arbi - tration agreement, the Federal Court of Justice follows a structured approach grounded in Article V(1)(a) of the New York Convention, as clarified in its judgment of 26 November 2020 (I ZR 245/19). As a starting point, if the parties have expressly desig - nated a particular legal system to govern the arbitra - tion clause, that choice will generally be upheld – even if it diverges from the law applicable to the underlying contract. Where no explicit choice is made, the court will examine the circumstances to determine whether an implied choice of law can be inferred from the agree - ment or the broader contractual context.
If neither an express nor an implied choice is evident, the fallback rule is to apply the law of the arbitral seat. This default ensures predictability and aligns with international practice, particularly where the seat has a close connection to the arbitration proceedings. Germany is an arbitration-friendly jurisdiction and arbitration agreements are enforced by courts, as long as they are not null and void (ex tunc invalidity, eg, for lack of the required form), inoperative (ex nunc inva - lidity, eg, where the arbitration agreement was termi - nated) or incapable of being performed. Where some provisions of an arbitration agreement are erroneous (eg, where it designates a non-existent arbitration institution), German courts will attempt to give effect to the arbitration agreement by way of supplementary interpretation ( ergänzende Vertragsauslegung ). 3.4 Validity German arbitration law follows the principle of separa - bility, under which the arbitration clause is treated as legally distinct from the main contract (Section 1040 (1), second sentence ZPO). This means that the arbi - tration agreement must be evaluated independently in terms of its existence, validity, and scope. As a result, the arbitration clause does not automatically become invalid if the main contract is found to be void or termi - nated, and the enforceability of the arbitration agree - ment remains intact even if the underlying contract ceases to exist. However, the principle of separability does not preclude that both the arbitration agreement and the main contract may be affected by the same underlying defect. In particular, if there is a lack of consent to the main contract (eg, if one of the parties signed the contract following threats), this will gener - ally extend to the arbitration clause contained within it.
4. The Arbitral Tribunal 4.1 Limits on Selection
Parties are allowed to freely determine the number of arbitrators, the method of their appointment, and the qualifications they should possess. In domestic arbi - tration proceedings especially, it is not uncommon for professionals such as engineers, accountants or other subject-matter experts to be selected as arbitrators, depending on the technical nature of the dispute.
269 CHAMBERS.COM
Powered by FlippingBook