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Summary
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A sales contract on a stallion provided for arbitration at the International Chamber of Commerce (ICC). Following a dispute on the stallion's ability to serve as a dressage and breeding horse, the Buyer initiated ICC proceedings, aimed at annulling the contract and obtaining damages based on alleged deficiencies of the stallion. However, an award was rendered in favor of the Vendor ordering the Buyer to pay the outstanding part of the sales price. The vendor sought enforcement in Germany before the Oberlandesgericht (Higher Regional Court) Saarbrücken. In order to oppose enforcement, the Buyer asserted that the sales price agreed upon had been too high in light of the stallion's actual deficiencie and requested the Court to find that this price gap constituted a violation of the domestic public order which made the contract void in accordance to § 138 BGB (German Civil Code). The Buyer further asserted that since the sales contract was void the arbitration agreement was void.
The Oberlandesgericht Saarbrücken granted enforcement. The Court held that with regard to Article V NYC, there were no reasons in the case at hand to refuse recognition and enforcement of the award. First, with regard to Article V(2)(b) NYC, the Court started out by recalling that a party alleging the invalidity of the arbitration agreement is not required to do so during the arbitration proceedings. A proven violation of German domestic public order would be such a case. However, the Court said, the case at bar is particular because the Buyer based the alleged violation of the domestic public order and the invalidity of the arbitration agreement on a substantive objection: the price gap the Buyer was aware of already during the arbitration proceedings. However, substantive objections are not admissible if the causes on which they are based already existed during the arbitration proceedings. Thus, the Buyer was barred from raising this objection. The Court further reasoned that even if one were to accept the objection as being in principle admissible, the result would not be any different. This is so, said the Court, because the prohibition of reviewing the substance of the case only allows a limited control of the accuracy of the award. Therefore, the public order exception applies only to cases where fundamental and indispensable values of the German legal order needs to be protected. If § 138 BGB as such is certainly part of German domestic public order as it annuls contracts that violate public morality, this cannot mean however that the entire domestic case law on § 138 BGB with all its variations is also part of the domestic public order. This would have the undesirable result that foreign judgments and awards granting claims from a contract which is void according to § 138 BGB are never recognizable and enforceable. Yet, German legal order has to accept that foreign legal orders set less strict rules to the parties' price determination. Thus, the price determination by the parties is not part of the German domestic public order. Finally, the Court found that even though it had accepted the argument, the Buyer was unable to proof its case pursuant to the Danish law the Court found applicable in accordance with the German rules of private international law. Second, with regard to Article V(1)(a) NYC, the Court did not accept the Buyer's argument pursuant to which there was no valid arbitration agreement. It held that since the sales contract was not void. Even more, said the Court, the invalidity of the main contract has no effect whatsoever on the validity of the arbitration agreement.
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Refine your searchGermany / 30 May 2011 / Oberlandesgericht Saarbrücken / 4 Sch 03/10
