Case 408: Art. 1(2), 20, 34 MAL
Germany: Higher Regional Court Düsseldorf; 6 Sch 2/99
23 March 2000
Original in German
Published in: DIS Online Database on Arbitration Law
The decision, arising out of an action to set aside an award, concerns the determination the place of arbitration. Although the award made reference to the sole arbitrator's domicile in Düsseldorf, the Court declined its jurisdiction because it concluded the award was a foreign arbitral award.
The parties disputed the value of two business partnerships after the withdrawal by one of the parties. In the course of the negotiations over the value of the two partnerships, the parties agreed on a particular expert to conduct an appraisal. Both parties declared in separate written statements that they would accept the decision by the expert, acting as a single arbitrator. Though the parties exchanged several drafts of an arbitration agreement, no formal agreement was ever signed. After an unsuccessful settlement attempt in Düsseldorf, the arbitrator undertook an audit of the partnerships at their places of business in Zurich, Switzerland. Further negotiations took place for more than two years. Finally, upon motion of the Claimant, the arbitrator rendered an arbitral award.
The Respondent filed an application to set aside the award before the Court where the award was executed.
The Court declined its own jurisdiction to rule on the validity of the award. It held that the arbitral award at issue was not a German domestic arbitral award but a foreign arbitral award.
The Court based its decision on the German arbitration law that was in effect until December 1997, since the new provisions, adapted from the MAL, became effective after the arbitration proceedings had commenced. Applying the standard of the previous law, the Court considered that the award was foreign because, according to the draft arbitration agreements exchanged by the parties, both parties intended the dispute to be decided under "Chapter 12 of the Swiss Federal Statute on Private International Law".
Moreover, the Court also held that it lacked jurisdiction under the current arbitration law. According to section 1025 (1) German Code of Civil Procedure the provisions on arbitration only apply if the place of arbitration is situated in Germany. This rule also applies to the proceedings for setting aside an award pursuant to section 1059 (adapted from article 34 MAL). The Court found that the place of arbitration was neither agreed upon by the parties, nor was it determined by the arbitrator in accordance with section 1043 (article 20 MAL), as required by section 1054 (3) (article 31 (3) MAL). The award merely stated the arbitrator's address. Under these circumstances, the Court defined the place of arbitration to be the actual, effective place of arbitration. Only if no particular place could be determined, the place of the last oral hearing was considered the place of arbitration.
In the case at issue, all relevant actions the auditing and the subsequent negotiations with both parties took place in Zurich. Therefore, and regardless of where the award itself was issued, the effective place of arbitration was not situated in Germany.
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