Frankfurt Court of Appeals on Conciliation Requirement Before Starting Litigation – Suhrkamp

This court decision is part of an on-going litigation battle between the shareholders of Suhrkamp Verlag, one of Germany’s best known publishing houses, with authors such as Hermann Hesse,  Samuel Beckett, Octavio Paz, James Joyce, Peter Handke, Jürgen Habermas or Uwe Johnson to its name, to name just a random few.

The feud between Ulla Unseld-Berkéwicz, the widow of legendary publisher Siegfried Unseld and the other major shareholder may or may not be the kind of stuff novels are made of. In any event, it has made legal history, as it created new case law at the intersection between German corporate and – newly reformed – insolvency laws.

This week’s decision by the Frankfurt Court of Appeals, however, dealt with the relevance of conciliation clauses in the Articles of Association of Suhrkamp-Verlag GmbH & Co. KG. The articles provided that the shareholders could only approach the court in case of disputes, if during a period of two months, trusted representatives (Vertrauensmänner) appointed by the shareholders had not been able to reach an amicable solution.* The time period in which to challenge shareholder resolutions in court was three months. The claimant in this matter wanted to challenge shareholder resolutions. To that effect, she had commenced the conciliation procedure on November 3, 2011 by notifying the other party and nominating her trusted representative, requesting the other party’s response by November 11, 2011. But practically at the same time, on November 4, 2011, she had also formally filed an action seeking annulment of the shareholder resolutions in the Frankfurt courts..

The District Court (Landgericht) Frankfurt am Main as the Court of First Instance had allowed the litigation to proceed, notwithstanding the fact it had been commenced before the expiry of the two months conciliation period, and ruled on the substance matter of the dispute. On appeal, the decision was reversed by the Court of Appeals (Oberlandesgericht) Frankfurt am Main.

The Court of Appeals held that the conciliation procedure did estop the claimant from approaching the court. As the defence (Einrede) had been raised by the other party in good time, i.e. before the first hearing, it rendered the action for annulment inadmissible. The court considered the various counter-arguments that were made in support of the admissibility of the law suit, and dismissed each of them. In short, the court held that the process on which the parties had agreed only makes sense if it is interpreted as not allowing the start of court litigation contemporaneously with the conciliation process. Only if the clause is construed in this way, the internal conflict does not (yet) become public and only then does the conciliation process put pressure on the shareholders to settle. If, on the other hand, the commencement of court litigation simultaneously with the conciliation process would be permitted, there would be a risk that the parties view the conciliation process as a mere formality that they have to comply with in order to be able to go to court.

In my view, this is a highly welcome decision. It shows that mediation and conciliation clauses have teeth, and that the courts are prepared to uphold them even in hotly contested and bitterly fought disputes were the chances of such procedures being successful may be slim to non-existent.

 

 

* In case of disputes or differences of opinion in relation to this contract, the parties in dispute shall each nominate a trusted representative, who shall jointly endeavour to come to an agreement. Only once it has been tried to reach an agreement for a period of 2 months, the parties shall be free to approach the courts. The venue shall be Frankfurt am Main.

Sofern es zu Streitigkeiten oder Meinungsverschiedenheiten im Zusammenhang mit diesem Vertrag kommt, werden die streitenden Parteien jeder einen Vertrauensmann bestellen, die sich gemeinsam um eine Verständigung bemühen sollen. Erst wenn diese Verständigung binnen 2 Monaten versucht worden ist, steht den Parteien der Gerichtsweg offen. Gerichtsstand ist Frankfurt am Main.

 

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