Enforcing Foreign Arbitral Awards in Germany

Enforcing foreign arbitral awards in Germany: the short answer

Enforcing foreign arbitral awards in Germany follows the 1958 New York Convention, to which § 1061(1) ZPO refers directly. The award creditor applies to the competent Higher Regional Court (Oberlandesgericht) for a declaration of enforceability (Vollstreckbarerklärung), submitting the award or a certified copy. The court does not review the merits. It can refuse recognition only on the grounds in Article V of the Convention, of which the public policy defence is the most frequently invoked and the most narrowly applied. Once declared enforceable, the award can be enforced like a German judgment.

Germany is generally regarded as a friendly jurisdiction for enforcing foreign arbitral awards. Proceedings are concentrated at the Higher Regional Courts, documentary requirements are modest, and the Federal Court of Justice has consistently interpreted the refusal grounds narrowly.

The legal framework for enforcing foreign arbitral awards

An award is foreign if the seat of the arbitration is outside Germany. Under § 1061(1) ZPO, recognition and enforcement are governed by the New York Convention; provisions of other treaties remain unaffected. Germany has made no reciprocity reservation and applies the Convention to awards from any state. The European Convention on International Commercial Arbitration of 1961 may also be relevant in relations with certain states. Awards under the ICSID Convention in investment disputes are subject to a separate regime that excludes review on New York Convention grounds.

The procedure for enforcing foreign arbitral awards

The application is filed with the Higher Regional Court determined under § 1062(2) ZPO. Because there is no German seat, competence follows the respondent's seat or habitual residence, the location of its assets or the subject matter of the claim, with the Kammergericht in Berlin as a fallback. Several federal states have concentrated competence at one court.

The applicant must submit the award or a certified copy (§ 1064(1) and (3) ZPO). Article IV of the New York Convention additionally mentions the arbitration agreement and translations, but under the more-favourable-right principle in Article VII, the applicant may rely on the less demanding German rule. In practice, courts may nevertheless request a translation of an award not in German, and providing one avoids delay.

The court hears the respondent and decides by order. It must order an oral hearing if grounds for refusal come into consideration (§ 1063(2) ZPO). Before the decision, the presiding judge may allow the applicant to enforce the award by way of protective measures, such as attachment, without hearing the respondent (§ 1063(3) ZPO). The respondent can avert this by providing security.

Grounds for refusing enforcement

Under Article V(1) of the New York Convention, the respondent may resist enforcement if it proves that:

• a party was under some incapacity or the arbitration agreement was invalid;
• it was not given proper notice of the appointment of the arbitrator or of the proceedings, or was otherwise unable to present its case;
• the award deals with a dispute not covered by the submission to arbitration or goes beyond its scope;
• the composition of the tribunal or the procedure was not in accordance with the parties' agreement or, failing agreement, with the law of the seat;
• the award has not yet become binding, or has been set aside or suspended at the seat.

Under Article V(2), the court may refuse enforcement of its own motion if the subject matter is not arbitrable under German law or if enforcement would be contrary to German public policy. The burden of proof for the grounds in Article V(1) lies with the respondent.

The public policy defence

The public policy defence is the most frequently invoked ground when enforcing foreign arbitral awards, and German courts apply it narrowly. For foreign awards, courts apply the standard of international public policy (ordre public international): enforcement is refused only if the award violates fundamental principles of German law so clearly that recognition would be intolerable. Typical arguments concern serious procedural violations, such as denial of the right to be heard or lack of impartiality of arbitrators, fraud and violations of mandatory rules such as competition law. Errors in applying the law or assessing facts do not suffice.

Whether a respondent that did not use available remedies at the seat may still raise the same objections in Germany has been debated in case law, and the answer depends on the ground invoked and the circumstances. Respondents should not count on raising objections for the first time at the enforcement stage. Parties should therefore consider challenges at the seat carefully. See our article on setting aside arbitral awards.

Awards set aside at the seat

Under Article V(1)(e) of the Convention, enforcement may be refused if the award has been set aside at the seat. German courts generally follow this rule and do not enforce awards annulled at the seat. If an award is set aside abroad after it has been declared enforceable in Germany, the debtor can apply for the declaration of enforceability to be set aside under § 1061(3) ZPO. Where setting-aside proceedings are pending abroad, the court may, under Article VI of the Convention, adjourn its decision and order the respondent to provide security.

Defences based on the arbitration agreement

Respondents often argue that no valid arbitration agreement exists, for example because the person who signed lacked authority, the clause was not validly incorporated through standard terms, or the dispute falls outside its scope. Under Article V(1)(a) of the Convention, validity is assessed under the law chosen by the parties or, absent a choice, the law of the seat. Article II requires an agreement in writing, but German courts may also apply more favourable domestic form rules by virtue of Article VII. The respondent bears the burden of proving invalidity. Where the respondent participated in the arbitration without objecting to jurisdiction, its later objection may be considered contradictory conduct, depending on the circumstances.

Defences relating to the tribunal's composition or the procedure are measured against the parties' agreement, including the institutional rules they chose, and only subsidiarily against the law of the seat (Article V(1)(d)). A deviation must be significant and must have potentially affected the award. Minor procedural irregularities, such as short extensions of deadlines or decisions on document production within the tribunal's discretion, do not justify refusal.

Costs of recognition proceedings

The court fees and statutory lawyers' fees for recognition proceedings depend on the value of the award to be enforced. The losing party generally bears the costs. Creditors should factor these costs, as well as translation and enforcement costs, into their strategy, and should consider whether the respondent has sufficient assets in Germany to justify proceedings here or whether enforcement in another jurisdiction is more promising. See our article on litigation costs and cost-shifting.

From enforceability to execution

Once the Higher Regional Court has declared the award enforceable, its order is a title for enforcement under the general rules of the ZPO. The creditor can obtain garnishment orders against bank accounts and receivables, seize movable assets, register a compulsory mortgage on real estate and attach shares in German companies. Enforcement against foreign states is subject to state immunity: assets used for sovereign purposes, such as embassy accounts and central bank assets, are generally immune. Asset tracing in advance, through commercial and land registers and the debtor's business relationships, makes enforcement more effective.

Illustration: a hypothetical Swiss supplier obtains an award seated in Zurich against a German distributor for unpaid invoices. It applies to the Higher Regional Court in whose district the distributor has its seat, submitting a copy certified by its lawyer, and asks for permission to attach the distributor's bank accounts under § 1063(3) ZPO. The distributor argues that it was not given enough time to submit evidence. The court rejects this public policy defence because the distributor had not raised the issue during the arbitration or at the seat.

Investment awards and intra-EU issues

Awards rendered under the ICSID Convention are enforced under that Convention, which requires recognition as if the award were a final judgment of a domestic court, without review on New York Convention grounds. Non-ICSID investment awards, for example under the UNCITRAL Rules, fall under the New York Convention. For intra-EU investment awards, the case law of the Court of Justice of the European Union on the incompatibility of intra-EU investor-state arbitration with EU law affects enforcement within the EU. See our article on investment arbitration.

When enforcing foreign arbitral awards, interest and costs awarded by the tribunal are enforceable together with the principal. Currency questions arise where the award is in a foreign currency; Enforcement of a foreign-currency award is possible in Germany; the treatment of conversion should be considered in the application. Creditors should calculate interest carefully in their application to avoid disputes in the enforcement phase.

Finally, timing matters. Recognition proceedings in Germany typically take several months, longer if an oral hearing is necessary or an appeal is lodged with the Federal Court of Justice. Protective measures under § 1063(3) ZPO and early asset tracing bridge this period and prevent debtors from moving assets out of reach.

How TRW & Co helps with enforcing foreign arbitral awards

We act for award creditors seeking enforcement in Germany and for debtors resisting it. We identify assets, apply for declarations of enforceability and protective measures, conduct enforcement against bank accounts, receivables and shareholdings, and represent clients before the Higher Regional Courts and the Federal Court of Justice. Our work connects with our international arbitration and commercial litigation practices. See also enforcing judgments in Germany. To discuss an award, contact us.