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The decision by the Federal Supreme Court concerns the binding effect that an arbitration clause in the statute of an association can have on members that have not consented to it. Although the ruling is based on provisions of the German Code of Civil Procedure in force before the adaptation of the UNCITRAL Model Law (MAL), the decision is also relevant to cases decided pursuant to the MAL.

The plaintiff is a member of the registered association for the breeding of German Shepherd dogs. The Association, the defendant in these proceedings, introduced an arbitration clause into its rules through a majority vote by its members without Plaintiff's assent.

When a penalty was imposed on the Plaintiff by the Association, the Plaintiff filed a claim in the Regional Court (LG Augsburg). The Court declined jurisdiction because of the arbitration clause contained in the rules. On appeal, the Higher Regional Court of Munich affirmed the decision (OLG München, 30 U 709/97; 09. February 1999). The Federal Supreme Court reversed and remanded the case to the Higher Regional Court.

The Supreme Court stated that the provisions of the Civil Code of Procedure in force before the adaptation of the MAL applied, since the arbitration clause had been included into the statute when these provisions were still in force.

The Court held that while an arbitration clause could generally be introduced into the rules of an association under § 1048 (now § 1066) of the German Code of Civil Procedure, this did not necessarily mean that a member of the Association would automatically be subject to the clause if it was later added without its assent. The Court stressed that the rights to be judged by one's lawful judge and to have recourse to state courts were constitutional rights. These constitutional rights could only be waived by a conscious decision based on the free will of the concerned party. The members who had assented to the arbitration clause had made this conscious decision. However, the dissenting members had not. A waiver of the mentioned constitutional rights could only be construed if a member still chose to remain a member of the Association even though it had the possibility of resigning its membership. The Court, however, emphasized that such a construction could not be contemplated in the case of an association whose members were not in a position to decide about their membership free from economic, social or other constraints. Since it was not possible to breed German Shepherd dogs outside the Defendant's Association, the factual consequences of resigning its membership would have been unbearable for the Plaintiff. Accordingly, the fact that the Plaintiff had remained a member of the Defendant's Association could not be construed as a waiver of its right to have recourse to state courts.

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