Arbitral Succession in German Re-Unification: A Decision* – Vol. 2 No. 4

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AuthorDaniel Levin**

Published: December 1991

Categories of Disputes
Commercial Disputes

Description: In a decision of December 30, 1991, the District Court (Landgericht) of Hamburg, Germany ruled in a case of first impression that the arbitration clause in a contract providing for arbitration before the Arbitration Court of the Chamber of Foreign Trade of the former German Democratic Republic (“GDR”) was no longer effective after the dissolution of the Arbitration Court during German Re-Unification in 1990.

In 1988 the parties had signed a contract that included a provision designating the competent tribunal in the event of any contractual dispute. The provision stated: “It is agreed upon that the Arbitration Court of the Chamber of Foreign Trade shall have jurisdiction.”
This provision was reinforced by § 10(1) of the contract (“concluding remarks”) which indirectly referred to the Arbitration Court of the Chamber of Foreign Trade by declaring the Standard Sales Terms (“Allgemeine Verkaufsbe-dingungen”) of the GDR applicable to all questions and situations not expressly and specifically provided for in the contract itself.
In a final effort in February 1991, i.e. after the Re-Unification of Germany, to resolve a dispute regarding their contractual obligations without resort to the courts, the Plaintiff maintained unequivocally that GDR law should apply, including the arbitration clause designating the Chamber of Foreign Trade as the competent tribunal.

The Plaintiff, however, in an apparent change of position, filed suit in the District Court in Hamburg. Evidently, he now considered the original arbitration clause in the contract to have been necessary only in the context of the legal reality in the former GDR. According to the Plaintiff, under the former GDR regime only an international arbitration court such as the one within the Chamber of Foreign Trade had been able to guarantee the parties an objective and fair proceeding, as opposed to the State Courts which by no means enjoyed judicial independence. This rationale for choosing arbitration had ceased to exist with the expiration of the GDR, since united Germany would presumably be able to provide a fair proceeding of high, or at least sufficient, legal quality. Therefore the Plaintiff renounced the arbitration clause in the contract due to a “change in the decisive circumstances.”

The Defendant asked the District Court to dismiss the Plaintiff’s claim for lack of jurisdiction, claiming that only an arbitration court would be competent to hear the matter, as set forth in §§9(3) and 10(1) of the contract.

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*Arbitral & Judicial Decisions
**Lic. iur. (1988), Dr. iur. (1990), University of Zurich, Switzerland. Member of the Israel Bar. LL.M. Candidate, Columbia University School of Law, 1993.