Germany / 25 January 2011 / Bundesgerichtshof / XI ZR 350 / 08
|Germany, Bundesgerichtshof (Federal Court of Justice)
|25 January 2011
|XI ZR 350 / 08
|Applicable NYC Provisions
|VII | II | II(2)
|The three Claimants, all German citizens living in Germany, sought damages from a brokerage house in the United States, the Defendant, for losses arising from stock option transactions on the US stock exchange. The Defendant cooperated with various agents worldwide who conducted financial transactions on US stock exchanges via an online platform. Following a telephone advertisement, the Claimants signed standard form contracts with one of the Defendant’s agents for the provision of stock option services. In addition, they also signed the Defendant’s “Option Agreement and Approval Form”, which contained an arbitration clause. The Defendant opened individual investment transaction accounts for each of the Claimants. Subsequently, the Defendant sent its standard Terms and Conditions to Claimants, which contained a different arbitration clause from the one contained in the broker’s standard form contract and which, moreover, foresaw the application of New York substantive law. The Claimants subsequently terminated the brokerage agreements and raised tort claims before the Landgericht (Regional Court) Duesseldorf. The Defendant objected to the jurisdiction of the German court, arguing, inter alia, that the dispute should be referred to arbitration based on the existence of an arbitration agreement between the parties. The Landgericht rejected the Claimants’ claims, following which the Claimant’s appealed to the Oberlandesgericht (Higher Regional Court) Duesseldorf. The Oberlandesgericht held that it had jurisdiction over the dispute and granted the majority of the Claimants’ claims. The Defendant appealed to the Bundesgerichtshof (Federal Supreme Court) on points of law, seeking a reversal of the Oberlandesgericht's decision and the reinstatement of the Landgericht’s decision. The Bundesgerichtshof rejected the Defendant’s appeal and upheld the Oberlandesgericht’s finding on jurisdiction, finding the respective arbitration clauses to be either non-binding or invalid. It held that the arbitration agreement that the Claimants had signed had not become binding on one of the Claimants pursuant to Section 37(h) of the Wertpapierhandelsgesetz (German Securities Trading Act), since that party was not a merchant and hence subjectively not capable to arbitrate pursuant to that legislation. The Bundesgerichtshof held that as regards the other two Claimants, the arbitration agreements were invalid for formal reasons, as they neither fulfilled the requirements of Article II(2) NYC nor those of the less stringent German law, which would apply pursuant to the more-favorable-right provision at Article VII NYC. The Bundesgerichtshof reasoned that the contracts containing the relevant arbitration agreements were consumer contracts under German law and hence, under Section 1031(5) of the German Civil Procedure Code, subject to the more strict form requirements for arbitration agreements involving consumers. It concluded that the arbitration agreements did not meet these requirements since, inter alia, they had not been signed by both parties. The Bundesgerichtshof upheld the Oberlandesgericht’s decision on merits granting damages to the Claimants.
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