GERMANY Law and Practice Contributed by: Patricia Nacimiento, Catrice Gayer, Lara Panosch and Theo Pauthonier, Herbert Smith Freehills Kramer LLP
depends on the substantive law applicable to the dis- pute. 8.4 Mitigation of Damages The duty to mitigate its losses is recognised as a general principle of international public law. In Ger- man civil law, it is expressly stipulated in Section 254 BGB and rooted in the principle of full compensation ( Grundsatz der Naturalrestitution ) of Section 249 para. 1 BGB. Germany is a contracting state to the New York Con- vention and has adopted its provisions without reser- vation. Specifically, Germany has not entered either the commercial or reciprocity reservations permitted under Article I(3) of the Convention. Pursuant to Sec- tion 1061 (1) of the Code of Civil Procedure, the rec- ognition and enforcement of foreign arbitral awards in Germany are governed directly by the Convention. To initiate enforcement proceedings in Germany, the applicant must submit a written application or make a formal declaration at the court registry (Section 1063 (4) ZPO). The application must be accompanied by the arbitral award or a certified copy thereof (Section 1064 (1) ZPO). Unlike the stricter documentary requirements under Article IV of the New York Convention, German courts apply the more liberal standard permitted by Article VII(1), meaning that a translation, typically of the dispositive part, is submitted in practice, though not strictly required. 9. Enforcement of Awards 9.1 Enforcement Procedure German courts may refuse enforcement on any of the grounds listed in Article V of the New York Convention (ie, for invalidity of the arbitration agreement, lack of proper notice or inability to present one’s case, excess of jurisdiction, irregular composition of the arbitral tribunal or procedure, award not yet binding or set aside, subject matter not arbitrable under German law, or recognition or enforcement would be contrary to ordre public ). The Federal Court of Justice (12 January 2023, I ZB 33/22) has given up its previous position and found
that Section 110 (1) ZPO providing for security for costs applies to the recognition and enforcement pro- ceedings by analogy. Additionally, awards rendered in the form of a consent award (ie, awards on agreed terms) in foreign arbi- tral proceedings are enforceable under Section 1061 ZPO, as confirmed by the Bavarian Superior Court (20 November 2023, 102 Sch 173/23e). The Federal Court of Justice (9 March 2023, I ZB 33/22) has held that a foreign court’s refusal to annul an award does not preclude German courts from inde- pendently assessing enforceability. Where set-aside proceedings are pending at the seat, German courts may suspend enforcement proceedings in accord- ance with Article VI of the New York Convention. This discretionary power is exercised on a case-by-case basis, taking into account the likelihood of annulment and the interests of procedural efficiency. Under German law, a state or state entity may only invoke sovereign immunity successfully if the enforce- ment measure would interfere with sovereign (as opposed to commercial) activity. The burden lies with the state to demonstrate that the act in question quali- fies as acta iure imperii. This principle is also reflected in Article 31 (4) of the Vienna Convention on Consular Relations, which was ratified in Germany through the Consular Relations Act ( KonsÜbkG ). The Higher Regional Court ( Kammergericht ) of Berlin (4 June 2012, 20 Sch 10/11) ruled on the sovereign immunity defence in enforcement proceedings and established that states have no general immunity in enforcement proceedings. In particular, the state waives its sovereign immunity when concluding an arbitration agreement to the extent of the agreement. German courts are generally supportive of enforce- ment of investment arbitration awards, as well as of investor–state arbitration proceedings. However, specifically with regard to intra-EU disputes, German courts have aligned with the decisions ren- dered by the European Court of Justice in its recent judgments in the Achmea and Komstroy cases, pursu- ant to which arbitration clauses are considered invalid
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