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Arbitration agreements

Validity
What are the validity requirements for an arbitration agreement?

The arbitration agreement must be signed by both parties (Section 1031 of the Code of Civil Procedure). It is also sufficient if the parties exchange letters/faxes or other means of communication which include the arbitration agreement.  

Under certain circumstances, it might also be possible for one party to provide the other with a document that refers to a previous agreement to arbitrate. However, this will very much depend on common usage, the status of previous negotiations and the applicable law of the place where the recipient of the document is located.

Unless one of the parties is a consumer, it might also be possible to include arbitration clauses in standard terms and conditions.

Specific requirements apply where a consumer is a party to an arbitration agreement: the agreement must be set out in a separate document which is signed by both parties and contains no provisions other than the arbitration clauses. This does not apply if the agreement is recorded by a notary public. The written form may be substituted by a qualified electronic form (Section 126a of the Civil Code).

Any failure to comply with these formal requirements will be remedied if the respondent does not object by submission of the statement of defence at the latest (Section 1036(6) of the Code of Civil Procedure).

As a matter of German substantive law, arbitration agreements in employment contracts are invalid.

Article V(1)(a) of the New York Convention explicitly permits choosing the law applicable to the arbitration agreement and provides that the law of the seat of arbitration will apply by default. In a modern interpretation of the New York Convention, the conflict of law rule set out in Article V(1)(a) of the New York Convention also applies when the arbitration clause is drafted, pursuant to Article II of the New York Convention. 

Enforcement of agreements
How are arbitration agreements enforced in your jurisdiction? What is the attitude of the national courts towards arbitration agreements?

Generally speaking, the German courts are pro-arbitration. Arbitration agreements are enforced by initiating arbitration proceedings or by invoking the arbitration agreement on the first occasion before an ordinary court (Section 1032(1) of the Code of Civil Procedure). 

Consolidation
Can an arbitral tribunal with its seat in your jurisdiction consolidate separate arbitral proceedings under one or more contracts, and, if so, in what circumstances?

Only if the same parties are concerned and the parties consent.

Choice of law
How is the substantive law of the dispute determined? Where the substantive law is unclear, how will a tribunal determine what it should be?

The tribunal will decide the matter in accordance with the statutory provisions that the parties have designated as applicable to the subject of the dispute (Section 1051 of the Code of Civil Procedure).

Such choice of law may also occur indirectly through the choice of arbitration rules containing a choice of law clause (eg, Article 35 of the UNCITRAL Arbitration Rules) or the choice of international rules containing a choice of law rule (eg, Article 23 of the German Institution of Arbitration Rules, Article 21 of the International Chamber of Commerce Rules or Article 35 of the Rules of the Chinese European Arbitration Centre, which is located in Germany).

In the absence of a direct or indirect choice of law clause, Section 1051(2) of the Code of Civil Procedure requires the application of the law with the closest connection to the dispute.

In addition to the substantive law applicable to the contract, and depending on the circumstances of the case, the tribunal will applyoverriding mandatory German and EU law and consider the application of overriding foreign mandatory law.

In matters under the Convention on the Contract for the International Carriage of Goods by Road 1956/78, the tribunal will apply the convention.

With regard to issues that are beyond the scope of the substantive contract law, the tribunal will determine the applicable law with due regard to private international law (eg, see Article V(1)(a) of the New York Convention, which sets out the requirements related to a party’s capacity to enter into an arbitration agreement under the law applicable).

Separability
Are there any provisions on the separability of arbitration agreements?

Arbitration agreements which are concluded with consumers must be separate from other written agreements (Section 1031(5) of the Code of Civil Procedure). 

Multiparty agreements
Are multiparty agreements recognised?

German law includes no explicit provisions on multiparty arbitration. However, it is recognised in practice that more than two parties may enter into an agreement to arbitrate. It is advisable to agree that both multiple claimants and multiple respondents (eg, shareholders of a company that are on the same side of a claim) each jointly nominate one arbitrator and the two arbitrators nominated by the parties will then nominate the chair of the tribunal (see the German Federal Supreme Court decision dated April 6 2009 – II ZR 255/08 (OLG Köln) and April 16, 2015 - I ZB 3/14).

Although it is within the parties’ autonomy to agree on a procedure for constituting the tribunal, the parties must have equal opportunity to influence the constitution of the tribunal (Section 1034(2) of the Code of Civil Procedure). In order to meet this challenge in multiparty agreements, the parties could agree on a procedure for constituting the tribunal whereby all arbitrators are appointed by a neutral third party.

The Arbitration Rules of the German Institution of Arbitration (DIS) foresee that the DIS Appointing Committee will nominate all arbitrators if the respondents fail to agree on a joint nomination. In such case any nomination made by the claimant(s) is superseded by the DIS Appointing Committee’s nomination (Section 13 of the DIS Rules). Article 23 of the International Chamber of Commerce Rules provides for a similar system. If the agreed procedure is not entirely clear, the parties may be forced to agree on a procedure for multiparty arbitration even after a dispute has arisen.

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