Enforcement of Arbitral Awards in Germany

You are general counsel of a U.S. corporation resident in the State of New York. You were responsible for overseeing arbitration proceedings arising out of a cooperation agreement with a Turkish Counterparty ( “Respondent”), where your corporation as claimant (“Claimant”) obtained an arbitration award that orders the Respondent to pay the Claimant approximately €10 million. The seat of the arbitration was in London, England.

So far, the Respondent has chosen to ignore your requests for payment. You know that the Respondent has substantial assets in Turkey, Germany and France. You want to enforce the award in France or Germany and are inquiring how to obtain exequatur, i.e. a declaration by a local court that the award is recognized and enforceable in France or Germany, as the case may be (an “Enforcement Order”).

You are being told not to bother with Germany, because in France you would be able to obtain the Enforcement Order without the Respondent being heard, whereas the German courts would not issue an Enforcement Order without first hearing the Respondent. This appears to you to be an important difference because you consider that it might be difficult and time-consuming to serve the petition for the Enforcement Order on the Respondent.

However, such a warning is entirely unwarranted. While it is true that the Respondent must be heard before an award is declared enforceable in Germany, German law has a procedure designed to enable the Claimant to obtain a preliminary Enforcement Order without the Respondent being heard (“Preliminary Order”). A Preliminary Order allows your client to seize the Respondent’s German assets quickly, before engaging in the exequatur procedure. As a result, the protection that your client may obtain in Germany is by no means worse than in many other countries – and is probably better.

The Enforcement Order

  • Before applying for a Preliminary Order, your client needs to file a petition for the Enforcement Order.

  • Generally, petitions to recognise a foreign (non-German) arbitration award are to be filed with the Higher Regional Court (OLG) agreed in the arbitration agreement. If no court was specified, the petition is filed with the Higher Regional Court having jurisdiction over the Respondent, except if the respondent asserts that recognition or enforcement of the foreign award would violate German or European public policy (ordre public) in the form of competition law (Kartellrecht), in which case the Higher Regional Court with specific jurisdiction over competition matters would deal with the matter. If the Respondent has no residence or place of business in Germany, the Higher Regional Court having jurisdiction over the location of the Respondent's assets that the Claimant intends to attach (“Assets”). In this latter case, your client should be prepared to offer evidence, or at least prima-facie evidence (Anscheinsbeweis), of the existence of the Assets, where they are located and that they are owned by the Respondent. The petition may be submitted in writing or orally, with or without a lawyer. It must be in German, regardless of the language of the arbitration. The original or a certified copy of the award must be attached to the petition. A translation of the award is not required, but it is useful to have at least the arbitration agreement and the operative part of the award translated into German (with certification) to be prepared for any objections by the Respondent and, more importantly, to permit the court to incorporate the operative part of the award into the Enforcement Order in German; without that, the Enforcement Order could not be enforced in Germany.

  • There is no fixed time frame for the proceedings leading to the Enforcement Order. In our experience, they can take between three and twelve months.

  • The Enforcement Order is tantamount to an enforceable judgment issued by a German court.

  • The legal basis for the court's decision – whether or not to grant exequatur of the foreign award – is the Convention on the Recognition and Enforcement of Foreign Arbitral Awards of 7 June 1958 (New York Convention), unless there is another, more specific international treaty that takes precedence over the New York Convention.

  • The Enforcement Order can be appealed on a point of law only. There is no fixed time frame for the appeal proceedings either. In our experience, these can easily take another twelve months.

  • The Enforcement Order can be enforced even if it is appealed without the Claimant being required to post security. If, however, the Claimant makes use of this opportunity and exequatur is later denied, the Claimant will be liable in damages to the Respondent.

  • The Enforcement Order should also state that the Respondent may post security to pre-empt the enforcement and should fix the amount of such security.

  • The costs of the exequatur procedure depend primarily on the value of the matter, normally the amount of the claim to be enforced in euros. German law provides fee schedules both for the court fees and the lawyers’ fees. As an example, obtaining an Enforcement Order from the Higher Regional Court enforcing an award for €10 million would cost approximately €290,000, of which approximately €76,000 would be for the court and approximately €100,000 each for the lawyers on either side, plus disbursements. The parties are free to negotiate higher fees with their lawyers, which is often done in practice. Additional (higher) fees would be incurred if the order of the Higher Regional Court is appealed to the Federal Court of Justice (BGH). The losing party will be required to indemnify the winning party for all court and lawyers' fees incurred in accordance with the statutory fee schedule (but not for any additional legal fees which the winning party may have agreed to pay to its lawyers).

  • To conclude, your client should petition for an Enforcement Order, but also be prepared for a procedure taking one or two years or more. If, as usual, it wishes to proceed faster, it should submit a petition for a Preliminary Order together with the petition for exequatur, or soon thereafter – the sooner, the better.

The Preliminary Order

  • If your client petitions for a Preliminary Order, the judge presiding over the panel of judges at the Higher Regional Court that will hear the petition for the Enforcement Order has jurisdiction to decide whether or not to grant the Preliminary Order. The presiding judge is expected to be able to render a decision within a few days and, indeed, this expectation is often met in practice. The Respondent need not be heard and in practice is rarely heard.

  • The presiding judge has discretion whether or not to issue a Preliminary Order. The claimant will normally move for a Preliminary Order only if it has a specific reason to do so, e.g. if it can show that the respondent is moving assets abroad.

  • The fact that the Preliminary Order can, and often is, granted ex parte obliges the claimant to state in the opinion supporting the motion all relevant facts, whether advantageous or disadvantageous. If it turns out later that the claimant omitted relevant facts, it may be accused of having obtained the Preliminary Order by fraud.

  • If your client expects the Claimant to move for a Preliminary Order it may file a so-called protective brief (Schutzschrift) to advise the court of the reasons it may have to oppose a petition for a Preliminary Order. If the protective brief states (credible) facts that speak against issuing a Preliminary Order, the motion may be rejected.

  • The Preliminary Order can take two forms: It can either permit the preliminary enforcement of the award (e.g. the preliminary freezing of assets to satisfy a claim for payment) or the enforcement of provisional measures which may be already contained in the award, as long as such measures are of preliminary nature as well. Therefore, a farsighted Claimant may want to petition the arbitral tribunal to include certain provisional measures in the award; this may make it easier to obtain a Preliminary Order.

  • The Preliminary Order will normally state that the Respondent is entitled to post security to pre-empt the enforcement, and will fix the amount of such security.

  • If the Claimant makes use of the Preliminary Order and it is later withdrawn or exequatur is denied, the Claimant should not be liable in damages to the Respondent.

  • The Preliminary Order is not a judgment. Therefore, the presiding judge may reconsider the Preliminary Order upon petition of either party, the Respondent or the Claimant, but the Preliminary Order cannot be appealed. This is good in practice for the Claimant. If it obtains the Preliminary Order, the Claimant should be able to make use of it for the entire duration of the exequatur proceedings. If the petition is rejected, the Claimant may try again as soon as it can present at least some new facts.

  • No specific fees will be charged by the lawyers or by the court for the Preliminary Order proceedings. These are considered included in the cost of the exequatur proceedings.