Germany 26 June 2006 Appellate Court Frankfurt (Printed goods case) [translation available]
[Cite as: http://cisgw3.law.pace.edu/cases/060626g1.html]
DATE OF DECISION:
CASE NUMBER/DOCKET NUMBER: 26 Sch 28/05
CASE HISTORY: Prior instance Award of Court of Arbitration of the Graphics Industry, Netherlands 20 April 1995 [enforcement of award denied]
SELLER'S COUNTRY: Germany (plaintiff)
BUYER'S COUNTRY: Netherlands (defendant)
GOODS INVOLVED: Printed goods
GERMANY: Oberlandesgericht Frankfurt 26 June 2006
Case law on UNCITRAL texts (CLOUT) abstract no. 722
Reproduced with permission of UNCITRAL
Following an application for enforceability of an arbitral award, the Higher Regional Court of Frankfurt had to decide whether an arbitration clause becomes a legally effective part of the contract, if the arbitration clause means an additional term to the offer by the replying party.
The applicant, a Dutch company, and the opponent, a customer from Germany, entered into a contract for the production and delivery of printed matters for the packaging of CDs. The opponent sent two written orders by fax to the applicant containing the specific notice that only its own general terms and conditions were applicable. The applicant confirmed the placing of orders by fax, with the reply pointing out that the provisions of the Graphics Industry of the Netherlands, containing an arbitration clause in its article 21, were part of the contracts. Since the respondent did not pay the invoice after the applicant's performance, the applicant instituted arbitration proceedings, with the court of arbitration ordering the respondent to pay the remunerations pursuant to the contracts plus interest and costs.
The Higher Regional Court dismissed the application for enforceability denying the recognition of the arbitral award.
The court found that according to article II (2) of the United Nations Convention on the Recognition and Enforcement of Foreign Arbitral Awards of New York, 10 June 1958 (New York Convention), which is to apply under § 1061 (1) German Code on Civil Procedure (ZPO) to foreign arbitral awards, the arbitration clause had not become a legally effective part of the contract, since article II (2) New York Convention requires a written agreement of the parties. Therefore the one-sided sending of order confirmations did not establish an arbitration agreement. The court also discussed whether, notwithstanding article II (2) New York Convention, an arbitration agreement had been reached by the one-sided reference to the standard provisions of the Graphics Industry of the Netherlands pursuant to § 1031 ZPO. Under § 1031 (1) and (3) ZPO an arbitration agreement may be reached by reference to general terms and conditions in case of business transactions. The court argued, that the specific emphasis to the exclusive validity of general terms and conditions excludes different or additional terms of the other party, and that the resulting discrepancy between the terms of the parties however does not frustrate the validity of the contract itself provided that the contract has been performed amicably. Furthermore, holding that according to article 3 (1) CISG the case is subject to CISG, the court stated that the validity of the arbitration clause cannot be derived from article 19 (2) CISG. An arbitration clause, as provision concerning the settlement of disputes, is always considered to alter the offer materially under article 19 (3) CISG, thus the silence of the respondent can not be considered as acceptance of the applicant's general terms and conditions.Go to Case Table of Contents
APPLICATION OF CISG: Yes
APPLICABLE CISG PROVISIONS AND ISSUES
Key CISG provisions at issue:
Classification of issues using UNCITRAL classification code numbers:
4A [Issues covered: effective conclusion (validity) of standard terms]; 18A3 [Criteria for acceptance of offer: silence or inactivity generally insufficient]; 19C [Modifications that are material: provisions for settlement of disputes]
4A [Issues covered: effective conclusion (validity) of standard terms];
18A3 [Criteria for acceptance of offer: silence or inactivity generally insufficient];
19C [Modifications that are material: provisions for settlement of disputes]
CITATIONS TO OTHER ABSTRACTS OF DECISION
CITATIONS TO TEXT OF DECISION
Original language (German): CISG-online.ch website <http://www.cisg-online.ch/cisg/urteile/1385.pdf>
Translation (English): Text presented below
CITATIONS TO COMMENTS ON DECISION
UnavailableGo to Case Table of Contents
Case text (English translation)
Queen Mary Case Translation Programme
26 June 2006 [26 Sch 28/05]
Translation [*] by Jan Henning Berg [**]
Edited by Institut für ausländisches und Internationales
Privat- und Wirtshaftsrecht der Universität Heidelberg
Daniel Nagel, editor [***]
The arbitral award rendered by the Court of Arbitration of the Graphics Industry, seated in Amstelveen, The Netherlands, on 20 April 2005 will not be recognized in Germany.
Costs and expenses are to be borne by Plaintiff [Seller].
The resolution of this court denying recognition of the arbitral award is preliminarily enforceable.
[Seller] requests the declaration of enforceability of an arbitral award under which Defendant [Buyer] was ordered to pay the purchase price for delivered goods.
In June 2004, the parties agreed that [Seller] should produce and deliver several printings for CD packaging for [Buyer]. Following a previous telephone conversation, whose content is in dispute between the parties, [Buyer] submitted to [Seller] two written orders by fax dated 17 June 2004 and pointed towards the exclusive standing of its standard purchase terms. [Seller] confirmed the orders by fax the same day. Both order confirmations hinted at a clause providing that the order was governed by the "Provisions of the Graphics Industry of the Netherlands", which contained an arbitration clause in its Art. 21.
Pursuant to [Buyer]'s failure to effect payment, [Seller] commenced arbitral proceedings. It is in dispute between the parties whether [Buyer] was properly involved in the proceedings. At any rate, the arbitral tribunal ordered [Buyer] to pay EUR 32,761.76 plus interest and costs by arbitral award of 20 April 2005.
[Seller] asserts to have already pointed out during the telephone conversation that it was only willing to contract under the terms of the Graphics Printing Industry. [Seller] alleges that [Buyer] had not objected to this statement. Moreover, the standard business terms had been attached to order confirmations.
POSITION OF THE PARTIES
Position of [Seller]
[Seller] has requested to declare the arbitral award, rendered by the Court of Arbitration of the Graphics Industry, seated in Amstelveen, The Netherlands, comprised of arbitrators […] of 20 April 2005 as enforceable. By virtue of this award, [Buyer] was ordered to settle the primary claim of EUR 32,761.76 plus an interest claim of EUR 96.97 until 15 August 2004 as well as statutory interest since 15 August 2004 until the date of full payment as well as out-of-court costs of EUR 1,158 and costs of arbitral proceedings amounting to EUR 2,680.48.
Position of [Buyer]
[Buyer] requests the dismissal of [Seller]'s request for enforcement of the arbitral award.
[Buyer] argues that failing an effective inclusion of standard business terms, there had not been any agreement for arbitration between the parties. Consequently, it was inadmissible to declare the award enforceable.
Regarding the factual submissions of the parties, reference is made to [Seller]'s memoranda of 18 October 2005, 21 December 2005, 17 March 2006 and 31 March 2006; and to [Buyer]'s memoranda of 8 November 2005, 23 February 2006 and 13 April 2006, each with its additional exhibits.
REASONING OF THE COURT
The request for a declaration of enforceability of the arbitral award of 20 April 2005 is admissible (§§ 1025(4), 1061(1)(1), 1064(1)(1) ZPO [*], Art. VII(1) United Nations Convention on the Recognition and Enforcement of Foreign Arbitral Awards of New York, 10 June 1958 (New York Convention), BGBl [*] 1961 II, p. 121. The Court has jurisdiction under §§ 1025(4), 1062(1) No. 4, (2) ZPO; [Buyer] has its place of business in the region of Hesse, Germany.
However, the request is not justified. The recognition of the arbitral award in Germany is to be denied (§ 1061(2) ZPO), because the arbitral award was not sufficiently authorized by an "agreement in writing" in terms of Art. II(2) New York Convention (Art. III(1), Art. V(1)(a) New York Convention). Since the absence of a valid arbitration agreement must generally be put forward during foreign arbitral proceedings, this defense can no longer be raised during the proceedings aiming at a declaration of enforceability. However, this preclusion is not effective as far as the required written form under Art. II New York Convention is in dispute (cf. BayObLG [*] RIW [*] 2003, 383; Schwab/Walter, Schiedsgerichtsbarkeit, sec. 57 para. 2). This requirement of written form is not fulfilled in the present case. According to Art. II(2) New York Convention, an "agreement in writing" in terms of Art. II(1) New York Convention is defined as an arbitration clause in a contract or an arbitration agreement that has been signed by the parties or is contained in letters or telegrams that have been exchanged. The burden to prove that a corresponding agreement has been effected is on the party requesting the declaration of enforceability (cf. Musielak/Voit, ZPO, 4th ed., § 1061 para. 14; BayObLG, ibidem). Considering the submissions of [Seller], it cannot be determined that an arbitration agreement was made in the required form.
The purported oral agreement would not satisfy the requirements of Art. II(2) New York Convention; hence, any arbitral award would not have been legitimated by the parties.
[Seller] has not succeeded in presenting a written contract that has been signed by the parties and that contains an arbitration clause or a signed arbitration agreement. Likewise, a corresponding agreement cannot be found in the course of the parties' correspondence. The second alternative of Art. II(2) New York Convention requires mutual correspondence. With reciprocity being the decisive criterion, a one-sided sending of a contract draft is insufficient just like any one-sided written confirmation of an oral agreement. Neither an oral nor an implied acceptance of a contract offer are sufficient to constitute an effective arbitration agreement in terms of the second alternative of Art. II(2) New York Convention (cf. BayObLG, ibidem; MünchKomm/Gottwald, ZPO, 2nd ed., vol. 3, Art. II New York Convention para. 11; Baumbach/Lauterbach/Albers, ZPO, 60th ed., Art. II New York Convention para. 2; Musielak/Voit, § 1031 para. 18; Schwab/Walter, sec. 47 para. 7).
In the light of this background, there is no correspondence between the parties that would fullfil the requirements set out by the second alternative of Art. II(2) New York Convention. In its orders, [Buyer] had pointed to the applicability of its standard terms which apparently do not contain any arbitration clause. Following the order confirmations by [Seller] -- to which its standard terms for delivery had been purportedly attached --, [Buyer] did not give any response in the affirmative by means of letter, telegram or fax.
Moreover, it cannot be held that the requirement of a mutually signed arbitration agreement in writing or a mutual correspondence was dispensable by considering Art. VII(1) New York Convention, § 1061(1)(2) ZPO. In particular, [Seller] is not allowed to rely on the lower prerequisites for an effective arbitration clause contained in § 1031(2) and (3) ZPO. It can already be questioned whether a recourse to § 1031 ZPO is at all admissible for proceedings at an international place of arbitration. German law explicitly refers to the New York Convention by way of § 1061 ZPO (denying that possibility: Musielak/Voit, § 1031 para. 18 with further references; in the affirmative: Stein/Jonas/Schlosser, ZPO, 22nd ed., Anhang zu § 1061 para. 159; Schwab/Walter, sec. 44 para. 12; expressly unresolved by BGH [*] NJW [*] 2005, 3499). Even assuming an (underlying) approach favoring recognition of the principle set out by Art. VII(1) New York Convention and § 1061(1)(2) ZPO, an effective arbitration agreement can still not be adjudged in the present case. Pursuant to § 1031(2) and (3) ZPO, an arbitration agreement may be concluded in business transactions through reference to standard terms of a party, e.g., by way of an order confirmation, without the standard terms being actually attached to the correspondence. However, [Seller]'s standard terms have not effectively become part of the contract. Both parties have pointed towards the validity of their own standard terms. By virtue of having employed the term "exclusively", [Buyer] had clearly pointed out that it would not be willing to accept standard terms of its contracting partner. A corresponding defensive clause excludes not only contradictory, but also complementary clauses by the other party (cf. BGH [*] NJW-RR [*] 2001, 484 for German law). This applies likewise to contracts that are governed by the CISG (BGH NJW [*] 2002, 1651; cf. Schlechtriem/Schwenzer, CISG, 4th ed., Art. 19 para. 20). However, the apparent corresponding dissent does not hinder the validity of the contract under the notion of § 306 BGB [*] as long as the parties moved on to execute the contract amicably (cf. BGH, ibidem; Schlechtriem, ibidem; cf. also Palandt/Heinrichs, BGB, 65th ed., § 305 para. 55 with further references).
The validity of [Seller]'s standard terms cannot be adjudged under Art. 19(2) CISG, as any provisions for the settlement of disputes are always considered as material amendments (Art. 19(3) CISG). Therefore, the silence of [Buyer] to [Seller]'s order confirmations is not to be considered as an affirmation of [Seller]'s standard terms referred to. It follows from Art. 1(1), Art. 3(1) CISG and Art. 28(1) and (2) EGBGB [*] that the contract at hand is governed by the provisions of the CISG. Both Germany and the Netherlands are Contracting States to the UN Convention of 11 April 1980.
Furthermore, [Seller] has not substantiated that the validity of its standard terms should have been considered under Dutch law. Moreover, Dutch law would probably be inapplicable to this question of law. A recourse to domestic law with regard to effective inclusion of standard terms is generally barred whenever the CISG is applicable (cf. Schlechtriem, Art. 8 para. 52).
Moreover, the lack of form has not been cured during arbitral proceedings when considering the undisputed factual basis at hand. A possible cure of the lack of form is possible by an express declaration of submission to arbitration to the arbitral tribunal's protocol, by a mutual intent in correspondence geared at the appointment of the arbitral tribunal in order to have it settle a certain dispute, or at least by an uncontested acceptance of commencing arbitral proceedings (cf. Musielak/Voit, § 1031 para. 18; MünchKomm/Gottwald, Art. II New York Convention para. 16; OLG [*] Hamburg, NJW-RR [*] 1999, 1738). None of these requirements is fulfilled in this case. Particularly, the fact that [Buyer] refrained from making a declaration to the arbitral tribunal can not be qualified as an uncontested acceptance. The defense of an ineffective arbitration agreement can not be excluded in those cases where a party did not state any views during the arbital proceedings (cf. BayObLG [*], ibidem).
In conclusion, the Court denies recognition of the arbitral award in Germany. The decision on costs and expenses is based on § 91(1) ZPO [*].
The procedural value of the claim is based on § 3 ZPO.
* All translations should be verified by cross-checking against the original text. For purposes of this translation, Plaintiff of The Netherlands is referred to as [Seller] and Defendant of Germany is referred to as [Buyer]. Amounts in the uniform European currency (Euro) are indicated as [EUR].
Translator's note on other abbreviations: BayObLG = Bayerisches Oberstes Landesgericht [Supreme Court of the State of Bavaria]; BGB = Bürgerliches Gesetzbuch [German Civil Code]; BGBl = Bundesgesetzblatt [German Federal Law Gazette]; BGH = Bundesgerichtshof [German Federal Supreme Court]; EGBGB = Einführungsgesetz zum Bürgerlichen Gesetzbuche [German Code on Private International Law]; NJW = Neue Juristische Wochenschrift [German law journal]; NJW-RR = Neue Juristische Wochenschrift Rechtsprechungsreport [German law journal]; OLG = Oberlandesgericht [German Appellate Court]; RIW = Recht der Internationalen Wirtschaft [Journal on International Commercial Law]; ZPO = Zivilprozessordnung [German Code on Civil Procedure].
** Jan Henning Berg is a law student at the University of Osnabrück, Germany and participated in the 13th Willem C. Vis Moot with the team of the University of Osnabrück.
*** Daniel Nagel has been a law student at Heidelberg University since October 2002 and an exchange student at Leeds University in 2004/2005.Go to Case Table of Contents