Address unknown - impact on the enforcement of an arbitral award under German law

Germany

German Federal Supreme Court, Decision of 12 March 2020, I ZB 64/19

In a 12 March 2020 decision, the German Federal Supreme Court (BGH) held that a declaration of enforceability of an arbitral award must be served to an address, which is presently used by the defendant. Yet the defect in formal service can be remedied by sending a copy of the court document to the defendant by email.

Necessity of service of the application for enforcement to the defendant 

If an arbitral award is to be enforced in Germany, the application to declare the award enforceable must be formally served on the defendant. In practice, this can lead to considerable difficulties and delays, especially if the defendant is located abroad or his current residence is unknown. 

Facts of the Case

In the present case, the applicant sought to enforce an arbitral award in Germany that was rendered in Russia. A first attempt to serve the application for a declaration of enforceability failed as the defendant could not be located at the address indicated in the application. The application was then served to another address for the defendant, which had been obtained from the German residents’ registration office. 

The competent Higher Regional Court of Berlin then granted the application and declared the award enforceable. The court’s declaration of enforceability was also served to the address obtained from the registration office.

Under German law, a declaration of enforceability of an arbitral award can only be appealed to the BGH within one month of service of the declaration (Section 575(1) German Code of Civil Procedure). 

In the present case, the defendant appealed the declaration of enforceability before the BGH two months after the declaration had been served to the address obtained from the registration office. This means that if that service had been valid, the defendant would have missed the deadline and her appeal would be inadmissible.

The defendant, however, submitted that the service of the declaration of enforceability was invalid and therefore unable to trigger the statutory one-month period. The defendant argued that although the address provided by the residents’ registration office was temporarily valid, the court documents were delivered after the defendant had moved houses and removed her name from the doorbell. The defendant only became aware of the court documents when her former landlord told her about them in a telephone conversation several weeks after their delivery. The landlord then scanned the court documents at the defendant’s request and sent it to her by email on the same day. Thereupon, the defendant filed an appeal against the declaration of enforceability with the BGH within a few days. 

Decision of the BGH

To determine the admissibility of the appeal, the BGH had to decide in a first step whether the application for declaring the arbitral award and the declaration of enforceability by the Higher Regional Court of Berlin were duly served to the defendant. If this was the case, the appeal would be time-barred and inadmissible. 

The BGH held that the delivery of the court documents was invalid. If a court document cannot be served to the recipient in person, it may be placed in a letterbox belonging to the residence or the business premises of the recipient (Section 180 German Code of Civil Procedure). The document will then be deemed served, with the affidavit of service acting as an indication that the document was indeed received by the recipient. Yet in the present case, the defendant was able to refute this presumption by proving that she no longer lived at the premises at the time of service. This led the BGH to conclude that the delivery of the court documents was invalid.

Yet any defects in the formal delivery of documents can be remedied under German law: an unduly served document will be deemed served once it is actually received by the recipient (Section 189 of the German Code of Civil Procedure). In the present case, the defendant became aware of the court documents when they were emailed to her by her former landlord. The BGH therefore had to decide in a second step whether the defective delivery of the court documents had been remedied by receipt of the documents by email.

Up until the BGH’s decision of 12 March 2020, it was disputed among the lower courts and legal scholars whether any defects in the service of documents can only be remedied upon receipt of the original documents. The BGH ruled that an electronic copy suffices and that receipt of the original document is not necessary. Yet this requires that the actual receipt of the electronic copy is undisputed – as in the present case – or can be established with sufficient certainty. The BGH also clarified that a mere oral transmission or a handwritten or typewritten copy is not sufficient as these are more prone to errors. 

On that basis, the BGH found the defendant’s appeal against the declaration of enforceability admissible as it had been filed within one month after receipt of the email. The BGH further held that the appeal is well founded, as the application to declare the award enforceable had not been duly served to the defendant. Given that the defendant only became aware of the application after the Higher Regional Court of Berlin had already declared the award enforceable, the BGH found that the defendant had been unable to defend herself against the application, which violated her constitutional right to be heard. This led the BGH to conclude that the declaration of enforceability was invalid and to remand the case to the Higher Regional Court of Berlin.

Conclusion

In its recent decision of 12 March 2020, the BGH has provided guidance on some of the practical challenges that can arise when a foreign arbitral award is enforced in Germany. The present case underlines how important it is to carefully determine the serviceable address of the defendant. If service of the initial application for a declaration of enforceability turns out to be invalid, this can jeopardise the enforceability of the award.
 
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