In September 2009, the German Institution of Arbitration ("DIS") presented a new set of arbitration rules relating to corporate law disputes. The new rules, which work as an optional supplement to the regular DIS Arbitration Rules, deal with arbitral proceedings on intra-corporate disputes regarding shareholder resolutions.
The new rules reflect a recent decision by the German Federal Supreme Court ("BGH") regarding the "arbitrability" of disputes over shareholders resolutions in limited liability companies1. In its decision, which reinforces the reasoning of an earlier decision of 19962, the BGH has confirmed that disputes regarding shareholder resolutions can be solved by arbitration, provided that the proceedings meet certain formal requirements. This decision has put an end to the debate on whether an arbitration award, which typically only produces an inter partes effect, would apply to disputes on shareholder resolutions, taking into account that such disputes do not only affect the actual parties to the arbitration proceedings (i.e. the shareholders involved in the dispute and the company), but also any remaining shareholders of the company.
In order to safeguard the legal interests of those shareholders not directly involved in the dispute, the BGH has decided that the rules of the arbitral proceedings must ensure that all shareholders, whether a party to the dispute or not, enjoy the same level of legal protection as in proceedings before an ordinary state Court. In order to achieve this, the following requirements must be met:
- all shareholders must have consented to the arbitration agreement;
- all shareholders must be able to participate in the arbitration proceedings as well as influence the choice of the arbitration body; and
l in order to avoid contradictory decisions, all claims relating to one and the same shareholder resolution are necessarily decided by one and the same arbitration body.
As a result of this decision, companies which have an arbitration clause in their Articles of Association are well advised to review the relevant clauses and amend them so as to reflect the formal requirements established by the BGH. In addition to the new supplementary rules themselves, the DIS has also presented a sample arbitration clause to be included in a company's articles of incorporation.
The new rules are likely to be used broadly in practice, as disputes over shareholders resolutions are typically sensitive on confidentiality and time constraints as well as being potentially very complex. Such disputes should therefore benefit from the advantages of arbitral proceedings including confidentiality, flexibility and a specifically chosen expert arbitration body.
The new set of supplementary rules stands in line with the DIS's continued efforts to further improve and facilitate arbitration proceedings in Germany. It was not until 2008 that the DIS launched another set of supplementary rules relating to fast track proceedings. This new procedural framework supports the expedited finalisation of arbitral proceedings within a pre-determined period of time from commencement of arbitration proceedings, namely within six months in the case of a sole arbitrator or nine months in the case of an arbitration body of three arbitrators.