Can German court decisions be enforced outside of Germany?
Court decisions – of German or other state courts – may have the disadvantage of not being enforceable in other states. The background is that court decisions are part of the sovereignty. Sovereignty, however, is always limited to the territory of the respective state. To exercise jurisdiction abroad, for example to enforce the judgment against assets which are based in a foreign state, the consent of the respective foreign state is required. Such consent is usually laid down in bilateral or multilateral treaties or in the national laws.
In the European Union court decisions from other member states are accepted like the decisions of their own courts. An enforcement in an EU member state is therefore possible.
This is different in non-EU states and will also become different in the UK should the UK decide to leave the European Union without a withdrawal agreement. Whether bilateral or multilateral agreements or the national law accept the enforcement of respective foreign court decisions depends on the particular state and case.
In case the UK leaves the EU without an withdrawal agreement, some experts further expect that English law may drift slightly away from the EU law as the English courts will then not be bound by the case law of the European courts anymore, in particular of the European Court of Justice.
Is there a better solution available?
The question remains whether there is a better solution. And indeed there is one by way of agreement on an arbitration clause in a respective contract, instead of agreeing on state court proceedings.
Arbitral tribunals can decide on disputes if so agreed by the parties to the dispute. One of the advantages of arbitration is that the parties, under most arbitration rules, are free to choose their arbitrators. Therefore, the parties may choose arbitrators who are able to handle the whole arbitration in the English language and are also educated in English law. The arbitration rules for example of the German Maritime Arbitration Association (GMAA) – as well as many others – allow the parties to choose an arbitrator who is trained in English law (only). Thus, it is not necessary for the parties to incur costs for translations and/or legal experts. Moreover, most of the arbitration proceedings are more efficient and less time consuming than state court proceedings.
Arbitration awards are enforced on the basis of the UN Convention on the Recognition and Enforcement of Foreign Arbitral Awards. This convention has been ratified by more than 150 states worldwide. These ratifying states have declared to accept the enforcement of foreign arbitral awards in their country. Therefore, the enforcement of arbitration awards is possible in many more states compared to state court decisions.
Contracts may provide for the application of English law and jurisdiction of German courts. However, there are better alternatives. If the parties want to agree on the application of English law but would like to have a dispute resolution in Germany, the contractual agreement should provide for an arbitration clause with the place of arbitration in Germany instead of a jurisdiction of state courts.
By agreeing on arbitration as the means of dispute resolution the parties can make sure that the proceeding is completely handled in the English language and that the arbitrators are familiar with English law. Arbitration awards have the additional advantage of being enforceable in more states than court decisions can be enforced in.
For more information on arbitration clauses and the handling of arbitration proceedings please feel free to contact Dr Nicoletta Kroeger or Dr Jan Backhaus, partners of CORVEL LLP, Hamburg, Germany.