Section 24.2 of the applicable Arbitration Rules of the German Institution of Arbitration (Deutsche Institution für Schiedsgerichtsbarkeit, DIS) provides that "the arbitral tribunal shall undertake to obtain from the parties comprehensive statements regarding all relevant facts and the proper applications for relief".

Section 26 sentence 2 of the DIS Arbitration Rules stipulates that "each party shall be given a full opportunity to present his case at all stages of the proceedings".

Both provisions reflect elements of the right of the parties to be heard, which in turn is part of the notion of public policy (ordre public) under German law. According to section 1060, paragraph 2, sentence 1 when taken in connection with section 1059, paragraph 2, no. 2b of the German Code of Civil Procedure (Zivilprozessordnung, ZPO), domestic arbitral awards which violate the ordre public shall not be declared enforceable.

In arbitral proceedings conducted in Stuttgart under the DIS Arbitration Rules, the arbitral tribunal found that the respondent had failed to establish a defence on which it bore the burden of proof. The tribunal accordingly decided against the respondent but construed the relevant contract contrary to the claimant's arguments, with the result that it awarded only EUR1 million to the claimant, instead of the EUR1.5 million claimed.

The claimant applied to the Higher Regional Court of Stuttgart to have the award declared enforceable in respect of the awarded sum and to set aside the partial denial of the claim. Regarding its application to set aside parts of the award, the claimant pointed to the fact that the tribunal had not informed the parties of its legal opinion concerning the construction of the contract and therefore did not give the parties an opportunity to comment, thereby violating its right to be heard. The respondent opposed both applications, arguing that the tribunal had failed to give any indication of its opinion that the respondent's defence was insufficiently substantiated and requested that the full award be set aside. Both parties argued that the tribunal violated their respective rights to be heard and therefore asserted a violation of the ordre public.

The Higher Regional Court of Stuttgart upheld the tribunal's award and declared it enforceable. It found that a violation of the right to be heard will be established only if the tribunal's failure to issue directions explaining its views prevents the parties from making necessary factual assertions. This might be the case, for example, if the tribunal were to deviate in its award from a legal opinion expressly stated in the course of the proceedings, which then caused the parties to refrain from making further submissions, objections or assertions. However, in the absence of any such express statements, the tribunal, in the court's opinion, was not obliged to indicate its legal opinion before rendering an arbitral award.

This decision helpfully adds to the case law on the questions of ordre public and right to be heard and clarifies that an arbitral tribunal is not obliged to give any indication of its legal opinion. However, if it does make statements in this respect, it will be bound to inform the parties should it change its opinion in the course of the proceedings.

Docket No. 1 Sch 3/10.