German Supreme Court reverses ruling on double exequatur

In a decision of July 2, 2009,^[1] the German Federal Supreme Court abolished an anachronism in the German law of arbitration.

In two rulings in 1984,^[2] the Federal Supreme Court had held that a party to foreign arbitration proceedings (normally, but not necessarily, the claimant) had a choice to either apply for recognition and declaration of enforceability of the foreign arbitral award itself (under Sec. 1061 ZPO and the New York Convention) or of a foreign exequatur judgment declaring the award enforceable (under Art. 32 et seq. of the Brussels Regulation or Secs. 722 et seq. ZPO). This phenomenon, which came to be known as "double exequatur," was a strange exception to the general rule applicable to recognition and enforcement of state court judgments: "L'exequatur sur l'exequatur ne vaut." It is generally recognized that only a foreign judgment on the merits of the case can be the subject matter of an exequatur decision in Germany, but not a foreign exequatur judgment.

Under the Federal Supreme Court's previous rulings, this general rule did not apply, however, where the procedural law of the foreign exequatur state followed the "doctrine of merger" in which the exequatur judgment incorporates all of the arbitral tribunal's findings of fact and law. The court reasoned that a "double exequatur" was to be permitted in such cases, because in applying the "doctrine of merger," the foreign exequatur court did not confine itself to declaring an award enforceable, but rendered a judgment in its own right. In such a case, the exequatur judgment fully absorbed the award with the consequence that only the foreign exequatur judgment itself remained as a subject matter proper of exequatur proceedings in Germany. However, the Federal Supreme Court did not draw the obvious conclusion not to permit the exequatur of the (fully absorbed) foreign award, but instead granted the applicant a choice between having either the exequatur judgment or the award declared enforceable.

The case that gave the Federal Supreme Court the opportunity to change this somewhat bizarre state of jurisprudence concerned a judgment by which the Superior Court of California had confirmed and declared enforceable an award from an international arbitral tribunal. Following the "doctrine of merger," the exequatur judgment was considered a complete incorporation of all the tribunal's findings. The respondent had been ordered to pay USD $243,211.75 and to bear the costs of the arbitration proceedings. When the claimant applied for recognition of the exequatur judgment in Germany, the courts of first and second instance (District Court Berlin^[3] and Kammergericht (Court of Appeal Berlin)^[4]) granted this application based on the authority of the Federal Supreme Court.

The Federal Supreme Court quashed the lower courts' decisions and dismissed the application. In doing so, the court's Ninth Senate expressly declared that it would not uphold its previous decisions that had been contrary to rulings of the Reichsgericht ^[5] and the prevailing opinion in academic literature^[6]. Instead, the court now recognizes that - even where the "doctrine of merger" applies - the only purpose of a foreign exequatur judgment is to enable the enforcement of an arbitral award in the territory of the exequatur state. The Ninth Senate further declared that for exequatur purposes, arbitral awards and judgments from state courts must be treated equally: if it is accepted that foreign exequatur decisions that declare judgments from state courts enforceable cannot be recognized in Germany, the same must apply to foreign exequatur judgments concerning arbitral awards. Also, in the interest of protecting the award debtor from a "double jeopardy" situation in which he may be faced with more than one application to declare a foreign decision enforceable, such applications must only be allowed with respect to the award itself, not the foreign exequatur judgment.

Finally, the Federal Supreme Court pointed out that allowing an application for recognition of a foreign exequatur judgment opens the door for a circumvention of the requirements that have to be fulfilled under the New York Convention: judgments from state courts are subject to different tests under both Art. 32 et seq. of the Brussels Regulation and Secs. 722 et seq. ZPO. In particular, the specific obstacles to recognition of arbitral awards under Art. V of the New York Convention (e.g., invalidity of the underlying arbitration agreement; lack of opportunity for one party to present its case or other procedural deficiencies; decision on matters beyond the scope of the submission to arbitration; irregularities in the composition of the arbitral tribunal; or lack of a binding award) are not necessarily considered by the foreign court, ^[7] and it is generally impossible to tell from the foreign judgment whether they were taken into account in the first exequatur proceedings.


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^{[1] File no. IX ZR 152/06, SchiedsVZ 2009, 285.
[2] NJW 1984, 2763 and NJW 1984, 2765.
[3] Decision of February 16, 2005, File no. 81 O 44/03.
[4] Decision of June 13, 2006, File no. 14 U 78/05.
[5] RGZ 5, 397; 30, 368; RG JW 1938, 468.
[6] Geimer, in Zöller, ZPO, 28th ed., Sec. 1061, note 8; Schwab/Walter, Schiedsgerichtsbarkeit, 7th ed., Chapter 30, note 15; Münch, in: Münchener Kommentar zur Zivilprozessordnung, 3rd ed., Sec. 1061, note 13.
[7] To safeguard compliance with the standards of Art. V of the New York Convention, the Federal Supreme Court considered in passing the possibility of extending the ordre public of the exequatur state to these requirements. However, not all of the instances that are obstacles to recognition of a foreign award qualify as "basic principles of German law."}