Divergencies Between Courts and the German Legislator: Consequences for Arbitration in Germany

Keywords: Germany, ordre public, dissenting opinion, divergencies, uncertainty, inconsistency, arbitral proceedings

Just in January 2020, the Higher Regional Court of Frankfurt a. M., Germany ruled that the publication of a dissenting opinion may be regarded as a violation of the German ordre public, while the German legislator had originally decided that it may not. Since this is a fairly nascent decision, it is a paragon for the question of the consequences of divergent approaches and the impact they might have on future arbitrations in Germany. This will be demonstrated in the following subsections. Further, the article addresses a lacuna in terms of how divergencies can be avoided in the future and discusses a future perspective.

Consequences and impacts resulting from divergencies

General consequences within jurisprudence

Generally, German courts might have a different legal opinion from federal recommendations published by the German legislator. The above-mentioned decision is very young and the first of its kind, so there is no clear tendency in justice or literature for a future development yet. Therefore, it is well-suited to critically analyze the consequences which may arise out of divergencies. A printed matter from the German Bundestag concerning the revision of the German Arbitration Act included in the ZPO states that the ZPO does not provide a specific regulation on dissenting opinions because dissenting opinions are largely considered applicable. [1] Argumentum e contrario, publishing a dissenting opinion shall not be regarded as a violation of the German ordre public. In this case, the Higher Regional Court of Frankfurt a. M. noticed the printed matter from the German Bundestag and referred to it in its order briefly but came to the conclusion that publishing a dissenting opinion might breach the arbitrator’s secrecy of deliberations anyway. [2] Even though there are detailed court orders and federal printed matters which help in specifying the German ordre public, this case illustrates very well that the courts have their own scope to decide whether the respective case violated the German ordre public. The German ordre public exception [3] contains a blanket clause (Generalklausel) which intends to allow the courts to reserve an award in cases that cannot be covered by one of the previous grounds for annulment. [4] The court may always argue that analysis being done on a case-to-case basis, it needs to be flexible and free in its decision-making. On the downside, losing oneself from federal recommendations which try to concrete the German ordre public, could lead to the danger that the ordre public exception will become more related to the individual case, less concrete and, finally, will result in legal uncertainty. The Higher Regional Court was truly allowed to diverge from the printed matter by the German Bundestag. Still, it may be the case that the lack of a clear line which demarcates the elements that are mandatory parts of the German ordre public and which are at the courts’ discretion, will lead to inconsistency, with contradictory decisions in cases with similar issues.

Impact on Arbitration in Germany

Divergent opinions concerning the scope of German ordre public and its resulting legal uncertainties may further have a deterrent effect on arbitrations in Germany. In terms of recognition and enforcement where finality is an essential feature, [5] parties will certainly look for a stable legal environment and will not be willing to accept any uncertainties in the application of the German ordre public. Taking a dissenting opinion as a potential violation of the German ordre public as an exemplary case, this case has been criticized for creating legal uncertainty as other jurisdictions of internationally recognized places of arbitration do not have such regulations. [6] Indeed, dissenting opinions are rarely used, [7] but generally not forbidden. Therefore, it is of importance to know before starting an arbitration that publishing a dissenting opinion might violate the German ordre public. This situation is a paramount example that indicates that any divergent decisions regarding the scope of the ordre public exception may have a significant impact on Germany’s attractiveness in international arbitration. Especially, in this case, where the decision of the Higher Regional Court of Frankfurt a. M. publishing a dissenting opinion was considered consistent with the German national law, [8] new tendencies of courts will certainly be taken into account by the disputing parties before initiating arbitral proceedings in Germany.

What is the solution to avoid uncertainties like these?

Looking at the approach and the landmark orders of the German Federal Supreme Court which try to shape the broad concept of the ordre public exception, one can see a very restrictive character in terms of affirming a violation of the ordre public. [9] The approach that there needs to be an “intolerable contradiction to German ideas of justice” [10] which needs to be “obviously incompatible” [11] with the German ordre public is already very narrow and should be made suitable to avoid uncertainties. A narrower approach could be too rigid and may bar the courts from finding equitable decisions in individual cases. Furthermore, a narrower approach would contravene the instrument of the blanket clause which allows a certain flexibility and the courts’ independence.

The problem that could rather be seen is that orders and tendencies in previous decisions, literature, or printed matters are not applied uniformly in practice and if applied, they are not always explained very well. Even though there are no precedents in German law, cases and official documents are often used as an interpretation aid in courts. It is always beneficial if the referred documents are clear and concrete.

In this case, the Higher Regional Court did not confirm a violation but just drew the possibility of a potential violation. Instead, a clear line with explanations as to why in this particular case, a publication of a dissenting opinion can be regarded as a violation of the German ordre public would be preferable, rather than detachment from the actual case and mere reference to the independence and impartiality of the arbitrators in general. This would have given the court the opportunity to explain the circumstances under which a violation might be affirmed in a transparent way. Indeed, there would still be a discrepancy from the legislator, but it would be clear as to why the court ruled divergently, thereby laying the foundation for a uniform application in the future. Avoiding uncertainty by providing detailed explanations could be a starting point in avoiding grave divergencies.

Summary and future perspective

Adding one more future perspective, one can state that generally, divergencies cause no harm if they are clear and concrete. They can concrete older approaches and adjust them to today’s times and circumstances. Due to ever new different cases, interpretation is never complete but an ongoing, developing, and dynamic process leaving marks on case law. The current approach can, therefore, be regarded as comprehensive and well-functioning in theory. One could rather say that it is the practice where divergencies arise since orders are not applied uniformly. If the court wants to diverge, it might have a good reason to do so. In such a case, however, the courts should clarify why they decided differently. Only then will it be possible to take advantage of new case law in order to concretise the already existing approaches. Otherwise, divergent opinions will contribute to non-uniformity which will not only lead to legal uncertainty within justice but might also have detrimental effects on future arbitral proceedings in Germany.

ENDNOTES

[1] German Bundestag, printed matter 13/5274 (1996) 59 (direct quote, own translation); also leading scholars in current commentaries: Stephan Wilske/Lars Marker, Beck-online Kommentar ZPO (V. Vorwerk, C. Wolf ed., Beck, 38th ed., 2020) sec 1059, 11-12.

[2] Higher Regional Court (Oberlandesgericht) Frankfurt a. M. order, 16.01.2020 – 26 Sch 14/18, BeckRS 2020, 4606.

[3] Sec 1059 subsec 2, no 2(b) German Code of Civil Procedure (Zivilprozessordnung).

[4] Ingo Saenger, Nomos Kommentar ZPO (I. Saenger ed., Nomos, 8th ed., 2019) sec 1059, 23.

[5] Alexis Mourre/Luca Radicati di Brozolo, Towards Finality of Arbitral Awards: Two Steps Forward and One Step Back in “Journal of International Arbitration” (Volume 23, Issue 2, Kluwer Law International, 2006) 171.

[6] Stephan Wilske/Lars Markert, Beck-online Kommentar ZPO (V. Vorwerk, C. Wolf ed., Beck, 38th ed., 2020) sec 1059, 16.1.

[7] Nigel Blackaby/Constantine Partasides, Redfern and Hunter on International Arbitration (B. Nigel, C. Partasides, A. Redfern, M. Hunter eds., Kluwer Law International; Oxford University Press, 6th ed., 2015) 9.128.

[8] German Bundestag, printed matter 13/5274 (1996) 59.

[9] Joachim Münch, Münchener Kommentar ZPO (W. Krüger, T. Rauscher ed., Beck, 5th ed., 2017) sec. 1059, 39.

[10] German Supreme Court (Bundesgerichtshof) order, 06.10.2016 – I ZB 13/15 (direct quote, own translation).

[12] German Supreme Court (Bundesgerichtshof) order, 28.01.2014 – III ZB 40/13 (direct quote, own translation).

Alexander Lojan is an LL.M. candidate in International Commercial Arbitration Law at Stockholm University.

The views and opinions expressed in the article are those of the author(s) solely and do not reflect the official position of the institution(s) with which the author(s) is /are affiliated. Further, the statements of the author(s) produced herein should not be construed as legal advice.