30.01.2025 On the Enforcement of Foreign Arbitral Awards in Germany - Bavarian Supreme court (BayObLG), Resolution dated 15th January 2025 - 102 Sch 250/23

A court must refuse to declare a foreign arbitral award enforceable if the arbitration tribunal was in breach of the right to hear a party. A party is precluded from raising such breach if it had the possibility to do so within the arbitral proceedings.

In order to enforce a foreign arbitration award in Germany, a German court must first recognize the award formally and declare it enforceable. The German court may only refuse to do so in the case that certain fundamental procedural rights were not complied with during the arbitration proceedings. The court does not check if there are other reasons why the award might be incorrect or if the arbitration tribunal applied the law incorrectly. The fundamental procedural rights, which the court must consider though, are stipulated in § 1061 ZPO in connection with Art V of the United Nations Convention on the Recognition and Enforcement of Foreign Arbitral Awards (New York, 10 June 1958). One of these rights is that the recognition or enforcement of the award must not be contrary to the “public policy” of country where the enforcement declaration is sought. It is widely accepted that a party’s right to be heard is part of the public policy in Germany and breaching such right is therefore grounds for a court to refuse declaring an arbitral award enforceable.

In the case at hand the parties argued over whether an arbitration award by an Austrian arbitration tribunal should be declared enforceable by a German court, the Bavarian Supreme Court (Bayerisches Oberstes Landesgericht). The defendant claimed that it should not, as a number of the issued raised by the defendant were allegedly not considered by the arbitration tribunal. In the opinion of the defendant this was evident as these issues were not reflected in the text of the arbitral award and consequently, the defendant’s right to be heard was breached. The party applying for the enforcement declaration argued that the defendant was indeed precluded from raising a breach of the right to be heard. The defendant should have raised such breach directly in the arbitration proceedings. The defendant explained that that was not possible as only when the award was actually received did it become apparent that the arbitration tribunal had ignored the issues raised by the defendant.

The Bavarian Supreme Court decided the matter as follows:

First, the court confirmed the principles on preclusion as set out by the Federal Court of Justice in previous decisions: i.e. that no party is obliged to appeal against the arbitral award. Consequently, by not appealing a party cannot be precluded from raising the right to be heard under any proceedings for the enforcement an arbitral award.

However, the court also held that a party is precluded from raising the breach of the right to be heard if it had the possibility to raise such breach within the arbitral proceedings themselves (until the award as issued). This, it held, was not the case though here. The defendant raised all arguments on the fact that the breach of the right to be heard only became apparent in the text of the issued award.

Still, while in the case at hand the right to be heard was not precluded, the court held that such right was not breached: The court confirmed that it must generally be assumed that the court considered all issues and that there is no obligation that every argument raised by the parties must also be reflected in the reasons of the (arbitral) award. Only if an issue of primary importance for the proceedings is not reflected in the reasons of the award, can it be assumed that it was ignored and hence, “not heard”. In the case at hand the court thoroughly analyzed all issues raised by the defendant and if and how they were reflected in the reasons to the award. And for each issue it came indeed to the conclusion that the right to be heard was not breached.

Leinemann Partner gehört zu den führenden Kanzleien für Baurecht, Immobilienrecht und Vergaberecht in Deutschland. Seit der Gründung am 1.1.2000 hat sich die Kanzlei zu einem der Marktführer in diesem Bereich entwickelt und ist deutschlandweit beratend tätig. Die Sozietät hat einen weithin sichtbaren Schwerpunkt bei Infrastruktur-Großprojekten, wie dem Neu- und Ausbau zahlreicher Autobahnen, Bahnstrecken und Wasserstraßen ebenso wie Industrie-, Kraftwerks- und Anlagenbau, Flughäfen, Shopping-Center und von Stadtentwicklungsprojekten. Bekannteste Mandate sind u. a. der Bau des Fehmarnbelt-Tunnels und mehrerer LNG-Terminals, die Batteriefabrik von Volkswagen in Salzgitter, der Neubau der Rheinbrücke der A 1 bei Leverkusen, der Prozess um die ÖPP-Autobahnstrecke der A 1 Hamburg-Bremen und die Anbindung der Offshore-Stromerzeugung auf See über neue Hochspannungstrassen.