Regional Court of Dortmund, Judgment of 13 September 2017 – 8 O 30/16 (Kart)
On 13 September 2017, the Regional Court of Dortmund (“LG Dortmund”) passed a judgment on whether cartel damages claims fall within the scope of an arbitration clause contained in sales contracts.
Previous to this judgment, the Court of Justice of the European Union (CJEU) made a finding in the matter “CDC” (C-352/13) that cartel damages claims are not covered by a jurisdiction clause if the existence of such claims was unknown to parties at the time that the contract was concluded. LG Dortmund now took a different view in the context of interpreting arbitration clauses and declined jurisdiction on the damages claims brought before it in relation to a rail cartel.
The plaintiff is a consortium established for the construction of railway projects and the defendant is the legal successor of a member of what has become known as the rail cartel.
In 2003, the plaintiff purchased construction material and procured services regarding the installation of such material from the defendant’s predecessor under two separate purchase orders. Both orders included arbitration clauses. The first clause stipulated that:
all disputes arising out of the purchase order… of 26 February 2003 shall, to the exclusion of recourse to the ordinary courts, be settled by an arbitral tribunal in accordance with the rules of arbitration for the building industry, issued by the German Concrete Association (Deutscher Betonverein e.V.) and the German Society for Construction Law (Deutsche Gesellschaft für Baurecht e.V.) as amended.
The second clause stated that:
all disputes arising out of the subcontractor agreement, out of any additional orders as well as all disputes arising in connection with the subcontractor agreement or any additional orders shall, to the exclusion of recourse to the ordinary courts, be settled by an arbitral tribunal in accordance with the rules of arbitration for the building industry as applicable at the time the subcontractor agreement is concluded.
The plaintiff filed a claim before LG Dortmund requesting damages for having paid the defendant excessive prices under the two purchase orders. The plaintiff relied on the CJEU’s previous decision in relation to jurisdiction clauses, and argued that the cartel damages claims fell outside the scope of the arbitration clauses since the parties did not foresee any cartel claims when they agreed on the purchase orders. The defendant objected to the jurisdiction of LG Dortmund on the basis of the arbitration clauses (arbitration plea).
The Judgment of LG Dortmund
LG Dortmund dismissed the plaintiff’s claim for lack of jurisdiction.
From the outset, LG Dortmund held that cartel damages claims are arbitrable under German law. To the extent that the former arbitration law provided otherwise, these restrictions had been repealed by the German legislator as part of the reform of the arbitration law of 1998. LG Dortmund then noted that, despite the wording of the first arbitration clause being narrower (“disputes arising out of”) and the second being broader (“disputes arising out of [and] … in connection with”), both clauses comprised tort claims, including the cartel damages claims under consideration.
LG Dortmund held that, while tort claims constitute independent legal remedies, they typically complement contractual claims if the execution of a contract gives rise to the claim. It found that in these situations, the applicability of the arbitration clause should not depend on whether the plaintiff bases its case on tort or contract.
The court then stated that the cartel damages claims under consideration mirrored contractual claims arising out of a wrongful act by the defendant. The court took the view that it would not be justified to provide the plaintiff with a right to choose between litigating its tort claims before state courts and arbitrating its contractual claims before an arbitral tribunal.
LG Dortmund further rejected the view that the cartel damages claims do not fall within the scope of the arbitration clauses because the cartel was already established before the contract was concluded. It found that this reasoning would in effect lead to an unnatural distinction between hard-core cartels, which are established before the individual contracts are concluded, and other improper measures taken by individual business organizations dominating a market, which are embedded in the contract itself.
The court also made it clear that the applicability of the arbitration clause does not depend on the level of fault of the defendant. Judgments previously rendered by the Higher Regional Courts of Stuttgart and Hamburg had been interpreted to stipulate such a distinction. This reasoning had also found its way into the UK High Court Decision in Provimi Ltd vs Roche Products Ltd and other actions (2003, EWHC 961). LG Dortmund however, held that jurisdiction had to be clearly determined before taking a more detailed look into the substantive question of fault.
LG Dortmund reiterated that the existence of a public interest in the matter did not render the arbitration clauses ineffective. The court noted that tort claims against cartel members serve the public interest regardless of whether they are brought before a state court or an arbitral tribunal. LG Dortmund further observed that the principle of effectiveness under EU law does not demand a different result and held that arbitration proceedings represent a sufficient means to safeguard the effective application of EU law.
Finally, LG Dortmund dismissed the notion that the CJEU’s judgment in CDC must be interpreted as excluding cartel damages claims from the scope of arbitration clauses. Several scholars had taken the position that the CJEU’s reasoning on jurisdiction clauses equally applied to arbitration clauses. Emphasizing that the decision of the CJEU extended only to jurisdiction clauses, LG Dortmund, by contrast, took the view that the foreseeability of the claim does not constitute a practicable criterion for determining whether or not a claim falls within the scope of an arbitration clause. On the one hand, both contractual and non-contractual claims are typically not foreseeable for the parties at the time the contract is concluded. On the other hand, it is the very purpose of arbitration clauses to define with certainty a forum for the resolution of an unforeseen disagreement between the parties.
LG Dortmund therefore confirmed the applicability of the arbitration clauses and declined jurisdiction to hear the case.
The judgment of LG Dortmund reflects the arbitration-friendly approach taken by German law. From a practical perspective, under this approach, it is not necessary to expressly mention possible cartel damages claims in order to include them in the scope of an arbitration agreement. It should be noted, however, that the judgment is not yet res judicata as it is subject to appeal before the Higher Regional Court.
Dr. Tilman Niedermaier, LL.M. & Susanne Schwalb