Germany 29 November 2001 Appellate Court Karlsruhe (Medication case) [translation available]
[Cite as: http://cisgw3.law.pace.edu/cases/011129g1.html]
DATE OF DECISION:
CASE NUMBER/DOCKET NUMBER: 19 U 14/01
CASE HISTORY: 1st instance LG Freiburg (10 O 32/00) 18 December 2000 [reversed]
SELLER'S COUNTRY: Netherlands (plaintiff)
BUYERS' COUNTRY: Germany (defendants)
GOODS INVOLVED: Medication
APPLICATION OF CISG: Yes
APPLICABLE CISG PROVISIONS AND ISSUES
Key CISG provisions at issue:
Classification of issues using UNCITRAL classification code numbers:
4B1 [Scope of Convention (issues excluded): validity under domestic law]
4B1 [Scope of Convention (issues excluded): validity under domestic law]
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CITATIONS TO ABSTRACTS OF DECISION
(a) UNCITRAL abstract: Unavailable
(b) Other abstracts
CITATIONS TO TEXT OF DECISION
Original language (German): Click here for German text of this case; see also OLG Report Karlsruhe (2002) 155-156
Translation (English): Text presented below
CITATIONS TO COMMENTS ON DECISION
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Queen Mary Case Translation Programme
29 November 2001 [19 U 14/01]
Translation [*] by Veit Konrad [**]
Edited by Jan Henning Berg [***]
FACTS OF THE CASE
The Dutch Plaintiff [Seller] sells and distributes drugs for the prevention and treatment of cardiovascular diseases and circulatory disorders. The German Defendants [Buyers] and the [Seller] have had established business relations with one another for several years.
The subject of the dispute is two deliveries of the drug "Rowland Formula" in 1999, for which [Seller] invoiced DM (Deutsche Mark) 79,600.00 on 15 June 1999 and DM 78,300 on 15 October 1999.
[Seller] claims that the Defendants [Buyers] should be held jointly liable to pay
|-||10 percent interest on the amount of DM 79,600.00 since 15 July 1999; and|
|-||10 percent interest on the amount of DM 78,300.00 since 15 November 1999|
[Buyers] seek the dismissal of [Seller]'s claim.
[Buyer]'s allege that they have never received any of the two invoiced deliveries. They also argue that the pharmaceuticals in question are to be considered as medication under German law. They allege that the import of those goods violated § 73(1) No. 1 of the German Medication Act (Arzneimittelgesetz; AMG) [*]. Therefore, the contracts concluded between the parties for the delivery of these goods are to be considered void under § 134 of the German Civil Code (Bürgerliches Gesetzbuch; BGB).
In addition, they argue that the preparations do not have the promised physiological effect and are thus deficient. Concerning this last point, [Seller] relies on limitation of time.
Proceedings in First Instance
In the First Instance, the District Court (Landgericht; LG) granted the part of [Seller]'s claim that concerned payment for the delivery of 440 bottles of "Rowland Formula" for the price of DM 44,000.00 on 12 October 1999, as stipulated in an isolated sales contract that had been concluded between the parties. Assuming that the drugs in question indeed fell under the German Medication Act, the Court nevertheless held the contract to be valid and found it established beyond doubt that the [Buyers] have indeed received and accepted the deliveries. The Court reasoned that the import restriction stated in § 73 AMG is only binding upon [Seller] as the addressee of this provision. The fact that the [Buyers] intended to illegally resell the drugs to their customers was not the subject of the contract at issue, on which [Seller] bases its claim for payment, and therefore did not affect the validity of that agreement. The Court of First Instance further held that, pursuant to § 477 of the German Civil Code (Bürgerliches Gesetzbuch; BGB), the [Buyers] cannot rely on any breach of contract by [Seller] due to limitation of time.
[Buyers]' appeal (Berufung)
In the appellate proceedings, the [Buyers] keep to the objections raised against [Seller]'s claim before the Court of First Instance. They seek to have the partial judgment of the District Court of Freiburg of 18 December 2000 (10 O 32/00) set aside and [Seller]'s claim dismissed.
In eventu, the [Buyers] want the case remanded to the Court of First Instance. The [Seller] seeks the dismissal of the appeal.
For all other submitted arguments, the Court refers to the parties' pleadings.
The [Buyers]' appeal (Berufung) is admissible and justified. As the sales contract that was concluded between the parties is void pursuant § 134 of the German Civil Code (Bürgerliches Gesetzbuch; BGB), there is no legal ground for [Seller]'s payment claims.
1. The parties' mutual obligations are regulated primarily by the applicable United Nations Convention on Contracts for the International Sale of Goods (hereafter referred to as CISG). However, as the CISG is not concerned with the validity of the contract at issue or any of its provisions (Art. 4, sentence two (a) CISG), the domestic law which applies according to the rules of private international law of the forum governs such issues (see Schlechtriem/Ferrari, Kommentar zum Einheitlichen UN-Kaufrecht, 3d ed., Art. 4 CISG note 6). In the proceedings before the Court of First Instance, the parties referred to the national law of Germany to govern the validity of their contract. Therefore, the Court assumes that German law has been implicitly designated as the applicable law to govern those issues of the contract that fall beyond the scope of the CISG (judgment of the German Federal Supreme Court (Bundesgerichtshof; BGH) in NJW 1999, pp. 950/1). Under German law, the sales contract that was concluded by the parties violates the statutory prohibition of the import of unlicensed medication, as stated in § 73(1) No. 1 of the German Medication Act (Arzneimittelgesetz; AMG). Pursuant to § 134 of the German Civil Code (Bürgerliches Gesetzbuch; BGB) this contract is void.
2. The Court deems it unnecessary to take the opinion of an expert witness the Court and concludes that the drugs at issue were medication that had to be licensed under the Medication Act (Arzneimittelgesetz; AMG).This further concurs with the definite non-appealable decision of the administrative authority of the District of Freiburg. The decision is an administrative act / order (Verwaltungsakt, VA) rendered by the government of the Freiburg District on 6 November 2000 (25-5482.9) --
Whether or not drugs are medication in the sense of § 2(1) AMG depends on the purpose for which they are ordinarily used. Yet, the preparations do not need to be fit for any of the purposes named under Art. 2(1) AMG. The purpose of a drug is defined by the effect of its compound active substances, on the one hand, and, on the other hand, by the effect that has been guaranteed by the manufacturer, respectively, the distributor of that pharmaceutical product. Therefore, it may be the case that a preparation which objectively is not even used as medication, counts as medication under § 2(1) AMG because of the curing effect that has been promised by its manufacturer (see Judgments of the German Federal Supreme Court (Bundesgerichtshof; BGH) in: WRP 1995, pp. 386, 389; NStZ 1998, p. 258/9; see also Erbs/Kohlhaas/Pelchen, Strafrechtliche Nebengesetze A 188 (AMG) § 2 note 1; Rehmann, AMG, § 2 note 2).
For the distribution of the product, the parties referred to a prospectus with the title:
"Say No to Cardiovascular Diseases - Vascular Cleaning is the Solution."
On page two -- put in a highlighted frame -- the brochure claims:
"Cardiac infarction -- the No. 1 cause of death -- can be defeated in a natural way: Prevention and treatment of cardiovascular diseases und circular disorder; The first clinically documented natural reversal of coronary sclerosis."
Thus it must be concluded that [Seller]'s product is meant to cure and prevent diseases, illnesses, and bodily damages in the sense stated in § 2(1) AMG. Therefore, it is a proprietary medical product under § 4(1) AMG, which has to be licensed due to § 21(1), sentence 1 AMG. Accordingly, [Seller], in its complaint, has properly referred to the goods as "medication".
3. [Seller] as well as the [Buyers] violated the prohibition of import stated under § 73 AMG: [Seller]'s staff delivered the pharmaceuticals to Germany. The [Buyers], on the other hand, had placed an order for the drugs and thus initiated their illegal import. The prohibition under § 73 AMG does not bind only one party to a sales contract, but indeed everyone who takes part in an unlicensed import of medication in any way.
According to the contract concluded by the parties, the goods should be delivered from the Netherlands to Germany, where the [Buyers] intended to distribute the drugs among their customers. Hence, each of the parties bound itself to performances that violate the prohibition of the import of unlicensed drugs.
4. The prohibition of the import of unlicensed medication stated under § 73 AMG aims to ensure that medication is examined by an official authority for its quality, physiological effect and safety (§ 1 AMG). Preparations, which do not meet the applicable standards, shall be filtered out before they are being brought into the Federal Republic of Germany (see the excerpt of the law gazette published in: Kloesel/Cyran, Arzneimittelgesetz, § 73 AMG (version of 1 September 2000)).
The Act concerning the Amendment of the Law of Medication (Bundesgesetzblatt (BGBl) I 2445, enacted on 24 August 1976) was put into effect on 1 January 1978. This act altered the hitherto applicable system of a mere formal registration of a drug without prior examination (see Rehmann, ibidem, Einführung notes 2, 4) by introducing licenses. This new system was chosen because the former registration procedure proved insufficient to prevent bodily damages caused by unexamined drugs. A system of licensing controlled by state authorities and reliant on the expertise of medics checking on the risk and safety of the imported medication promised to be more successful. For the protection of patients and consumers, a stricter examination of the effectiveness of medication was deemed necessary, as the purchase of ineffective medication not only caused the consumers material damages but also risks to the health of those who relied on regular effective medication (Kloesel in: NJW 1976, p. 1769).
The current legal situation is not comparable to that of 23 April 1968, the time when the German Federal Supreme Court (Bundesgerichtshof; BGH) decided its Case [IV ZR 217/65] (published in NJW 1968, pp. 2286/7). Back then, the Federal Supreme Court categorized the regulations on pharmacy-only-medicine and prescription-only-medicine as public health regulation, i.e., as part of public policy law. These regulations were not meant to generally disqualify the situation when a consumer gets medication through channels other than from doctors and pharmacies -- or its economic outcome. Instead, the primary aim behind these provisions was to prevent the health and safety risks that were possibly implied in such consumer supply.
Today, by contrast, a violation of the import restriction in § 73 AMG may not merely be qualified as a typical breach of public policy regulations which would not justify the avoidance of the contract by § 134 of the German Civil Code (Bürgerliches Gesetzbuch; BGB). In addition to public health policies, § 73 AMG nowadays has the purpose to generally ensure that medication will not fall in the hands of consumers without having passed a procedure of thorough examination under the strict substantive standards introduced by the amended Medications Act. This aim is pursued by denying any legally binding effect of those agreements which impose duties in violation of provisions of the German Medication Act.
Hence, the prohibition stated under § 73(2) No. 1 AMG more broadly aims to prevent any private transaction concerning unlicensed medication -- and its economic outcome -- as such, in order to ensure that such products will not be offered to German consumers. With its wider scope, the provision enforces public health and safety policies more indirectly and tackles health and safety risks to the consumer far more completely than the previous system did.
It is irrelevant that the provision is sanctioned not through any criminal penalty but only through fines under § 94(2) No. 8 AMG. The decisive question is whether a statutory prohibition in the particular case at issue requires the avoidance of the contract in order to fulfil its legal purpose (see Judgment of the German Federal Supreme Court (Bundesgerichtshof; BGH) in: NJW 1983, p. 2873). For the aforementioned reasons, this is the case here.
The Contract between the parties is void under § 134 of the German Civil Code (Bürgerliches Gesetzbuch; BGB) as it violates a statutory prohibition. There is no legal indication that the Court should deviate from this rule (see Mayer-Maly/Armbrüster, in: Münchener Kommentar 4th ed., § 134 BGB note 90; Sack in: Staudinger § 134 note 208 (version of January 1996); Heinrichs in: Palandt, 60th ed., § 134 BGB note 16)
5. The partial judgment rendered by the District Court in the first instance must be replaced by a dismissal of [Seller]'s claim. As for the costs, the provisional enforceability and the admissibility of further appeal, the decision relies on §§ 91, 708 No. 10, 713, 546(1) and (2) of the German Code of Civil Procedure (Zivilprozessordnung; ZPO).
* All translations should be verified by cross-checking against the original text. For purposes of this translation, the Dutch Plaintiff is referred to as [Seller]; the German Defendant are referred to as [Buyers].
Translator's note: The German Medication Act (Arzneimittelgesetz) is referred to as AMG.
** Veit Konrad has studied law at Humboldt University, Berlin since 1999. During 2001-2002 he spent a year at Queen Mary College, University of London, as an Erasmus student.
*** Jan Henning Berg has been a law student at the University of Osnabrück, Germany, and at King's College, London. He participated in the13th Willem C. Vis Moot with the team of University of Osnabrück. He has coached the team of the University of Osnabrück for the 14th Willem C. Vis and 4th Willem Vis (East) Moot.Go to Case Table of Contents