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Do dissenting opinions in arbitral awards violate German public policy?
Do dissenting opinions in arbitral awards violate German public policy?
18 June 2020
Series
Blogs
18 June 2020
While dissenting opinions in arbitral awards are common practice in some (especially common law) countries, others, including Germany, are hesitant to embrace them. A 2020 decision of the Higher Regional Court of Frankfurt calls into question the enforceability of German domestic awards containing a dissenting opinion. This article explains the consequences of this ruling for parties seeking to arbitrate or enforce arbitral awards in Germany.
In a recently published decision of 16 January 2020, the German Higher Regional Court of Frankfurt (26 Sch 14/18) set aside an ICC award due to a violation of the right to be heard. In the same decision, the court held obiter dictum that there is “much to suggest” that domestic arbitral awards with dissenting opinions violate German national public policy. Consequently, awards with dissenting opinions could be set aside.
The decision highlights an ongoing debate in Germany around the admissibility of dissenting opinions and their potential conflict with the confidentiality of court deliberations. For the time being, parties seeking to arbitrate with a seat in Germany are well advised to actively prevent arbitrators from issuing dissenting opinions, ideally by party agreement, so as not to risk unenforceable awards. Likewise, arbitrators should not submit dissenting opinions. The enforcement in Germany of international awards with dissenting opinions remains, however, unaffected.
Background
While some jurisdictions are very familiar with the concept of dissenting opinions, both in litigation and arbitration, Germany has traditionally been following a different approach. It is a fundamental principle of German law that the votes and deliberations of judges remain secret. The purpose is to facilitate open debate among the panel of judges and to foster the finality and authority of judgments. This principle is enshrined in section 43 of the German Judiciary Act (DRiG):"A judge shall preserve secrecy regarding the course of deliberations and voting also after his service has ended."
Only the German Federal Constitutional Court (section 30 para. 2 BVerfGG) and some State Constitutional Courts are exempted from this rule and explicitly allowed to issue dissenting opinions.
As there is no provision addressing whether dissenting opinions are allowed in arbitration, the consequences of the secrecy of deliberations rule for arbitral awards have been subject to scholarly debate for some time. Many suggest that the rule for judges does not apply to arbitrators, at least if parties agree on dissenting opinions being admissible. Others maintain that dissenting opinions are a threat to the integrity of the arbitral proceedings as well as to the independence of the arbitrators, arguing against their admissibility.
Surprisingly, the usually arbitration-friendly Higher Reginal Court of Frankfurt in its recent judgment took a somewhat extreme position.
Not only did it follow the latter opinion, highlighting the “special importance of the secrecy of deliberations for the protection of the independence and impartiality of the arbitrators”. The court considered this rule part of the German procedural public policy, thus potentially giving grounds to setting aside a German domestic award.
Also, the court held that the secrecy of deliberations was removed from party autonomy, meaning that even by explicit agreement of the parties and with all arbitrators agreeing, a dissenting opinion should be inadmissible.
Implications
The Frankfurt decision could affect a large number of arbitrations. Most arbitration rules of major institutions, e.g. ICC, DIS and LCIA, do not explicitly regulate the possibility of dissenting opinions but implicitly consider them generally possible.
It is important to note that the decision only mentions domestic arbitral awards and the court’s reasoning cannot be transferred to international awards. The rule on secrecy of deliberations only applies on a national level, and the standard of international public policy is generally less strict than that of national public policy.
In consequence, the decision only concerns parties seeking to arbitrate in Germany. For the time being, arbitral tribunals seated in Germany should refrain from issuing awards with dissenting opinions. If possible, in case a minority arbitrator submits a dissenting opinion, the arbitrators forming the majority should indicate to the responsible arbitral institution that the dissenting opinion should not be delivered to the parties. Parties interested in enforceable awards should actively prevent dissenting opinions, ideally in the arbitration clause.
On a policy level, it is at least surprising that the court would disallow dissenting opinions even if all parties and arbitrators agree. The decision of the court is being appealed to the German Federal Supreme Court (BGH). Hopefully, the German Federal Supreme Court will take the opportunity to comment on the admissibility of dissenting opinions in arbitration proceedings and reinforce the basis and backbone of arbitration, being party autonomy.