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Arbitrability of Shareholder Disputes
The German Perspective
Dr. Patricia Nacimiento
Partner Norton Rose LLP
Dispute Resolution and Litigation
21 September 2012
Introduction
Disputes between shareholders amongst each other or between
shareholders and corporation related to the challenge of
shareholder resolutions
Shareholders prefer arbitration over litigation because of
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Confidentiality
Flexibility of procedure
Choice of arbitrators with tailored experience and expertise
Problem:
Not all shareholders are parties to the dispute but parts or all of
them will be affected by the outcome of the dispute
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Dr. Patricia Nacimiento - Arbitrability of Shareholder Disputes
Statutory Context
Section 1030 (1) of the German Civil Procedural Code
Arbitrability
Any claim involving an economic interest
("vermögensrechtlicher Anspruch") can be the subject of an
arbitration agreement. An arbitration agreement concerning
claims not involving an economic interest shall have legal
effect to the extent that the parties are entitled to conclude a
settlement on the issue in dispute.
Arbitrability of Shareholder Disputes has been carved out by
the courts
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Dr. Patricia Nacimiento - Arbitrability of Shareholder Disputes
Case Law on Arbitrability of Shareholder Disputes
Decisions by Federal Court of Justice
Judgement dated 4 July 1951
 No arbitrability of shareholder disputes
– Reason: Exclusive jurisdiction of the courts according to statutory law
Judgement dated 29 March 1996 (“Arbitrability I”)
 No arbitrability of shareholder disputes
– Reason: Arbitral awards do not bind all shareholders and organs of the
corporation, contrary to judgements pursuant to statutory law
Judgement dated 6 April 2009 (“Arbitrability II”)
 Arbitrability of disputes related to the challenge of shareholder
resolutions is subject to strict prerequisites
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Dr. Patricia Nacimiento - Arbitrability of Shareholder Disputes
In particular: The “Arbitrability II” Judgement
Prerequisites for arbitrability of disputes related to the challenge of
shareholder resolutions
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
Consent of all shareholders to the arbitration agreement in or
outside the articles of incorporation

Possibility of all shareholders to participate in the arbitration

Possibility of all shareholders to influence the choice of arbitrators
or choice of arbitrators by a neutral institution

Decision of all disputes arising from challenges of a certain
shareholder resolution by one arbitral tribunal
Dr. Patricia Nacimiento - Arbitrability of Shareholder Disputes
Consequences in Practice
Case Law of lower courts interpreting the “Arbitrability II”
Judgement
No arbitrability of disputes related to the challenge of shareholder
resolutions
– Reason: Strict prerequisites in terms of the “Arbitrability II” Judgement not
fulfilled in the respective individual cases

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Introduction of Supplementary Rules for Corporate Law
Disputes (“Supplementary Rules” by the German Institution
of Arbitration in September 2009
Implementation of the prerequisites carved out by the “Arbitrability
II” Judgement by insertion of a respective model clause into the
articles of incorporation
Dr. Patricia Nacimiento - Arbitrability of Shareholder Disputes
Model Clause of the Supplementary Rules
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
Applicability of the Arbitration Rules and the Supplementary Rules
for Corporate Law Disputes of the German Institution of Arbitration

Extension of an arbitral award to those shareholders that have
been identified as Concerned Others within the time limits
provided in the Supplementary Rules

Binding effect of the arbitration agreement on former shareholders

Corporation shall raise arbitration agreement as defence against
any related claim filed in the ordinary courts
Dr. Patricia Nacimiento - Arbitrability of Shareholder Disputes
Key Stipulations of the Supplementary Rules
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
Claimant shall identify Concerned Others in its Statement of Claim

Respondent may identify additional Concerned Others until 30
days after receipt of Statement of Claim

Possibility of a joinder by Concerned Others as party or
compulsory intervenor
Dr. Patricia Nacimiento - Arbitrability of Shareholder Disputes
Key Stipulations of the Supplementary Rules
(continued)
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
Duty of the arbitral tribunal to provide continuous information to
Concerned Others that chose not to join

The arbitral proceedings initiated first preclude any arbitral
proceedings initiated at a later point in time

Extension of the effects of the arbitral award to those Concerned
Others that have been identified as such within the provided time
limits irrespective of their joinder
Dr. Patricia Nacimiento - Arbitrability of Shareholder Disputes
Experiences with Supplementary Rules in practice
Supplementary Rules for Corporate Law Disputes have been in
force for only three years


Many corporations have adopted the Supplementary Rules
Model Clause has been accepted by the German courts
Open issues
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Quorum for a change of existing arbitration agreements in articles
of incorporation
Requirement of notarisation of the arbitration agreement
Applicability to Joint Stock Companies
10 Dr. Patricia Nacimiento - Arbitrability of Shareholder Disputes