These days, a court decision related to Russia is likely to attract special attention. Therefore, it is worth pointing out at the outset that this matter is unrelated to Russia’s war against Ukraine. The Koblenz Court of Appeals (Oberlandesgericht) happened to hand down its decision in March 2022, but the matter dates back to 2019.
Facts of the Case
In 2003, German drinks group Eckes, a leading producer of juices and fruit beverages, decided to enter the Russian market. To that end, Eckes co-operated with an entrepreneur, the applicant in the Koblenz proceedings. The applicant and a German limited liability company (GmbH) within the Eckes group concluded several contracts. These contained an arbitration clause and provided for arbitral proceedings under the rules of the Moscow Chamber of Commerce and Industry.
However, things did not work out as planned for Eckes and their business partner. The business partner commenced arbitration against various Eckes legal entities in Russia, seeking damages on the basis that Eckes had frustrated the performance of the contracts. In May 2019, an arbitral tribunal in Moscow issued an award against the Eckes defendants in the order of EUR 49 million plus interest and costs.The applicant then brought the Russian award to Germany, seeking its recognition and enforcement in the Koblenz Court of Appeals.
The Koblenz court denied the application. Its order is based on two arguments:
First, the Koblenz court denied the recognition on the basis that the arbitral tribunal in Moscow had exceeded the scope of the arbitration agreement. The arbitration agreement had only been entered into, on the Eckes side, by one of the respondents, namely the aforementioned GmbH. The other respondents in the arbitration against whom the award granted damages were independent legal entities within the Eckes Group. They were found not to be bound by the arbitration agreement.
Furthermore, the Koblenz court held that the claims for damages asserted in the arbitration action did not fall within the scope of the arbitration clause. In both respects, the arbitral tribunal had exceeded its powers. On that basis, the court denied the recognition of the Russian arbitral award.
In doing so, the court applied the New York Convention, which the German Code of Civil Procedure (Zivilprozessordnung, ZPO) incorporates for the recognition of foreign awards by way of reference in Sec 1062 ZPO.
This post is based on the court’s press release. We will revisit the matter once the full order is available, as it certainly has the potential to contribute to the tricky issues around the scope of the arbitration agreement in a group context and the law governing these issues. So let’s hope the order provides insights into the approach under German (procedural) law to the Group of Companies Doctrine
Court of Appeals (Oberlandesgericht) Koblenz, order (Beschluss) dated 31 March 2022, file no. 2 Sch 3/20
Photo: Holger Weinandt, Koblenz im Buga-Jahr 2011 – Preußisches Regierungsgebäude Dienstvilla, CC BY-SA 3.0 DE – the villa built in 1905 as the offical residence of the President of the Prussian provincial government today houses the Court of Appeals.