Federal Court of Justice decision on specification of foreign arbitral award in enforcement proceedings concerning decision on costs and interest | Practical Law

Federal Court of Justice decision on specification of foreign arbitral award in enforcement proceedings concerning decision on costs and interest | Practical Law

Stephan Wilske (Partner) and Claudia Krapfl (Associated Partner), Gleiss Lutz

Federal Court of Justice decision on specification of foreign arbitral award in enforcement proceedings concerning decision on costs and interest

Published on 28 Feb 2012Germany
Stephan Wilske (Partner) and Claudia Krapfl (Associated Partner), Gleiss Lutz
In a decision dated 30 November 2011, but only recently published, the Federal Court of Justice held that a German court requested to enforce a foreign arbitral award may specify costs and interest in order to make an arbitral award enforceable in Germany, just as a corresponding German judgment would be.

Facts

The applicant in the enforcement proceedings had been sued by the opponent of the enforcement proceedings in arbitral proceedings in Spain for payment of commission fees. The arbitral tribunal had dismissed the claim and ordered the claimant to bear all costs of the proceedings. In a further arbitral award, the tribunal specified the attorneys' fees to be €24,145.15. Additionally, it held that interest was to be paid from the date of certified request for payment until the date of payment.
The applicant then requested enforcement of the award in Germany and specified the court costs at €10,214.73 by referring to a certificate issued by the arbitral tribunal citing these costs, as well as the €24,145.15 attorneys' fees plus 4 percent interest since 24 April 2009. With regard to the interest rate, the applicant referred to the statutory interest rate under Spanish law as being 4 percent. The applicant argued that it was not necessary, and not common practice under Spanish law, to specify this interest rate in judgments or arbitral awards, unless the interest rate varied from the statutory rate. The applicant also provided a copy of its certified request for payment to the opponent dated 24 April 2009.
The Higher Regional Court of Düsseldorf declared the awards enforceable, but refused to quantify the costs and interest decision as requested by the applicant. It explained that a state court was not empowered to change the content of an award. The applicant appealed this decision to the Federal Court of Justice.

Decision

The Federal Court of Justice reversed the decision of the Higher Regional Court of Düsseldorf, finding that the lower court had erred in not quantifying the costs and interest in the enforcement proceedings.
The court confirmed that a state court may not change the content of an arbitral award and clarified that in cases where an arbitral award contains no decision whatsoever on costs or interest, this cannot be rectified in enforcement proceedings.
However, the court held that it is the duty of the enforcement court to ensure that the decision can be executed in the same manner as a corresponding German judgment. In some events, this might mean that the enforcement court must take evidence on the applicable foreign law and quantify fees and interest rates from secondary sources.
This means that where there is a costs and interest decision which can be specified by referring to further documents or foreign law, such specification and quantification by the enforcement court is permissible and necessary. The court found that this was particularly true in cases where a foreign award or judgment refers to statutory interest without specifying the interest rate. In this regard, there had been various decisions holding that a specification in enforcement proceedings is possible.

Comment

In this decision, the Federal Court of Justice clarifies that German courts requested to enforce a foreign arbitral award have a duty to specify a cost and interest decision by a foreign arbitral tribunal, insofar as this is possible by taking evidence on the foreign law in order to make such an award executable in Germany. If it becomes necessary for a German court to take evidence on foreign law, this will of course prolong enforcement proceedings and make them more costly. Therefore, it is advisable for parties to ensure that an arbitral award is clear in its operative part, including setting out issues which are self-evident under national law.