_arbitration part 2. without state courts: the arbitration agreement
The arbitration agreement is the contractual basis and, thus the heart of out-of-court dispute resolution. The legislator imposes only minimal requirements on the content of such an agreement: Only basic fairness rules must be observed in the proceedings. The following describes what such an arbitration agreement looks like and what it can cover.
Prerequisites of the arbitration agreement
The arbitration agreement can take the form of a contract (arbitration agreement) or an independent agreement (arbitration agreement), or a clause in an existing contract (arbitration clause) (§ 1029 II ZPO). The prerequisite for a valid agreement is that the parties have arbitrability. Arbitrability means legal capacity, business capacity or capacity to conclude a contract. Legal capacity means that a person or company can be the bearer of rights and obligations. In the German Civil Code, the full legal capacity for natural persons presupposes that they have reached the age of majority and are capable of forming their own will (§§ 2, 104 BGB). In the case of natural persons, the ability to enter into contracts is the same as the capacity to contract. In the case of legal entities, the capacity to conclude exists if the procedural rules of decision-making have been observed.
Necessary contents of the arbitration agreement
Following the principle of party autonomy, only a few details are necessary for the arbitration agreement. Basic procedural rules such as the granting of a hearing and the equal treatment of the parties cannot be waived (§ 1042 ZPO).
Two things must be clear from the agreement: First, the parties agree that all or individual disputes - which have arisen between them or will arise in the future - are to be decided by arbitration second, that the ordinary course of justice is excluded. The agreement is interpreted generously, i.e. it does not have to be concluded as explicitly as just stated. It is sufficient that it is determinable that both parties intend both points mentioned. Furthermore, it must be clear from the agreement where the place of arbitration is and which rules of procedure are to be applied.
The parties making the arbitration agreement do not have to be identical to those participating in later arbitration proceedings. The parties may also be represented in the agreement by a lawyer.
Optional contents of the arbitration agreement
Additional contents of the arbitration agreement are not mandatory but may relate, for example, to the composition of the arbitral tribunal, the language of the hearings, the course of the proceedings, and who will bear which costs in the event of a dispute. In general, the parties can agree on all details of the proceedings. An utterly individual setup of an arbitral tribunal (ad hoc) is possible, but it is also complex, time-consuming and expensive. Various national and international institutions - often chambers of commerce - therefore offer - for a fee - already elaborated arbitration rules (more on this in Part 3).
Subject Matter of the Arbitration Agreement, § 1030 ZPO
As a rule, an arbitration agreement can be concluded for all property law claims. Excluded are claims arising from tenancies of residential property. Non-pecuniary claims can only be decided by arbitration if the parties are entitled to settle. This is possible, for example, in the area of personal rights but not in the area of criminal law standards.
Form of the arbitration agreement, § 1031 ZPO
The arbitration agreement must be concluded in the form of a signed document. Alternatively, another letter exchanged between the parties is sufficient, which can also ensure proof of the agreement.
We will be pleased to advise you on the form of your arbitration agreement and represent you in national and international arbitration proceedings.
Part 3 of the series on arbitration
Contact:
Damon Rahimi Moghaddam, Specialist Lawyer International Commercial Law.
Niki Feric, Lawyer, Associate.
Gerhard Horstmann-Wilke, specialized in US Procedural and Liability Law.