Sec. 1054, 1059 of the German Code of Civil Procedure ("ZPO"); Art. 103 (1) of the Constitution ("GG")
1. If, contrary to Sec. 1054 (3), sentence 1 ZPO, the arbitral award does not expressly specify the place of the arbitral proceedings, this does not render the award invalid, at least not if the place can be determined in state court proceedings for the purpose of declaring the award enforceable or setting it aside.
2. The inadmissibility of an appeal filed with a higher arbitration tribunal does not preclude the state court from setting aside the arbitral award of the first instance.
3. In two-stage arbitration proceedings, the time limit under Sec. 1059 (3) ZPO does not begin to run until the petitioner has received the decision of the higher arbitration tribunal, even if that court merely dismisses the appeal as inadmissible.
4. In the case of an arbitration agreement providing that all disputes arising out of or in connection with a contract are to be decided by an arbitral tribunal, the arbitral tribunal shall, in case of doubt, also decide on the validity and existence of the contract and on any claims arising from the invalidity or termination of the contract. In such a case, the invalidity or termination of the main contract does not result in the invalidity or termination of the arbitration agreement contained therein.
5. Failure to raise an objection to the arbitral tribunal's jurisdiction in the statement of defence generally results in an uncontested admission, thereby precluding any subsequent objection to the arbitral tribunal's jurisdiction; this preclusion also extends to any proceedings before a state court seeking to set aside or enforce the award following the arbitration proceedings.
6. The right to be heard forms part of the (procedural) ordre public under Sec. 1059 (2) no. 2 lit. b) ZPO. When assessing whether an arbitral tribunal has infringed a party's right to be heard, the same standards must be applied as those applied by a state court.
7. A party is precluded from raising a claim before the state courts that the arbitral tribunal has infringed its right to be heard if it had the opportunity to raise that claim before the arbitral tribunal and, furthermore, if it would have been possible to remedy the infringement.
8. In proceedings for the setting aside or declaration of enforceability of an arbitral award, only particularly serious and clear grounds for setting aside may be raised. These may, where appropriate, lead to the setting aside of the arbitral award pursuant to Sec. 1059 (2) no. 1 lit. d) ZPO or pursuant to Sec. 1059 (2) no. 2 lit. b) ZPO.
Bavarian Higher Regional Court (2nd Civil Senate), decision of 21 January 2026 – 102 Sch 78/25 e, BeckRS 2026, 264
Facts of the Case
The decision concerns an application to set aside an arbitral award rendered by the Arbitration Court of the German Grain and Products Exchange.
Under a contract dated 12 November 2019, a buyer based in Germany agreed to purchase 175 tons of hulled spelt kernels from a Hungarian seller at a price of EUR 360 per ton, with delivery scheduled for November and December 2019. The contract referred to the "Uniform Terms and Conditions in the German Grain Trade" (Einheitsbedingungen im Deutschen Getreidehandel), which included an arbitration clause, and also contained the special condition "trial truck confirming contract".
After the seller failed to deliver despite several call-offs, the buyer set a grace period on 27 January 2020. Following its expiry, the buyer arranged through a broker a covering purchase on 7 February 2020: 100 tonnes were sourced at EUR 920 per tonne and the remaining 75 tonnes at EUR 950 per tonne. The buyer subsequently initiated arbitration proceedings and claimed EUR 100,250.00 as damages representing the price difference between the original purchase price and the covering purchase.
In the arbitration proceedings the seller disputed its liability. It argued, inter alia, that the contract had not been validly concluded, relying in particular on a handwritten addition "no insects" and on the contention that the contractual condition relating to the "trial truck" had never been fulfilled. It further challenged the validity of the grace period and the propriety of the cover purchase.
In its award of 5 February 2025, the arbitral tribunal upheld the claim in full and ordered the seller to pay EUR 100,250.00 plus interest and costs.
The seller initially filed an appeal with the higher arbitral tribunal but failed to pay the required advance on costs. It subsequently applied to the Higher Regional Court of Bamberg to set aside the award, which referred the matter to the BayObLG. For the setting aside of the award the seller relied in particular on procedural defects, an excessive duration of the arbitration, the invalidity of the contract and the granted grace period, a violation of its right to be heard, unequal treatment, bias of the arbitrators, and the contention that the damages claim was excessive.
The BayObLG dismissed the application for setting aside as unfounded. In particular, it found no violations of seller’s right to be heard, no relevant procedural defects, no reasons to assume that the arbitrators were biased, and no violation of the German ordre public. The arbitral award, therefore, remains in force, and the seller was ordered to bear the costs of the annulment proceedings.
Reasons:
20 b) Among the requirements to be examined ex officio in the annulment proceedings is whether there is a valid arbitral award that can be challenged by an application for annulment pursuant to Sec. 1059 ZPO [...]. This is to be assumed in the present case. The arbitral award of 5 February 2025 was submitted by the respondent as a scanned electronic document; its authenticity was not disputed by the claimant [...]. It is true that, as stated above, contrary to Sec. 1054 (3) sentence 1 ZPO, the place of the arbitral proceedings is not expressly indicated. However, the absence of an indication of the place does not render the arbitral award invalid, at least where the place can be determined in state court proceedings for a declaration of enforceability or for the setting aside of the arbitral award [...].
21 c) The application for annulment does not lack a need for legal protection.
22 The respondent in the arbitration could, pursuant to Sections 28, 29 of the Arbitration Rules, file an appeal against the arbitral award and call upon a higher arbitral tribunal. The respondent initially made use of this possibility but then failed to pay the advance on costs within the time limit set pursuant to Section 29(2) sentence 1 of the Arbitration Rules, with the consequence that the appeal is deemed not to have been filed. However, this does not eliminate the need for legal protection for a review of an arbitral award by a state court within the limited scope prescribed by Section 1059(2) ZPO (in particular with regard to the examination of a violation of the ordre public). The inadmissibility of an appeal filed with a higher arbitration court does not preclude the state court from setting aside the arbitral award of the first instance […].
23 d) The time limit for the application for annulment pursuant to Sec. 1059 (3) ZPO is complied with.
24 In the absence of any agreement to the contrary between the parties, the application for annulment had to be filed within three months after the respondent in the arbitration had received the arbitral award. However, in a two-tier arbitral procedure, where the applicant has referred the matter to a higher arbitral tribunal, the time limit does not begin to run until the applicant has received the decision of the higher arbitral tribunal, even if the latter merely dismisses the appeal as inadmissible […]. It is true that in such cases the suspensive condition for the effectiveness of the arbitral award already occurs upon an actual expiry of the time limit for the appeal and not only upon a corresponding decision of the higher arbitral tribunal. Prior to a decision of the higher arbitral tribunal, however, the appellant will regularly have no knowledge of the inadmissibility of its legal remedy. In addition, Section 1059 (3) sentence 2 ZPO expressly refers to receipt of the arbitral award by the applicant […]. In the present case, the higher arbitral tribunal set the respondent in the arbitration a time limit on 14 May 2025 for payment of the advance on costs until 28 May 2025, indicating that, pursuant to Section 29 of the Arbitration Rules, the appeal would otherwise be deemed not to have been filed. Even in such a constellation, for the reasons set out above, it is necessary to refer to the receipt of the decision of the higher arbitral tribunal by the respective applicant […].
25 The application for annulment is, however, unfounded.
27 […] In particular, an arbitration agreement providing that all disputes arising out of or in connection with a contract are to be decided by an arbitral tribunal means, in case of doubt, that the arbitral tribunal is also to decide on the question of the validity and existence of the contract and on the claims existing in the event of invalidity or termination of the contract […]. In such a case, the invalidity or termination of the main contract does not lead to the invalidity or termination of the arbitration agreement contained therein […]. The fate of the main contract and the arbitration agreement may also develop differently in the case of an open dissent, if agreement has already been reached with regard to the arbitration clause, but it remains unclear whether the parties have also reached agreement in other respects […].
28 bb) On this basis, there is a lack of a complaint by the respondent pursuant to Sec. 1059 (2) No. 1 (a) and Sec. 1040 ZPO.
30 According to this, the objection that the arbitral tribunal lacks jurisdiction must be raised at the latest with the statement of defence (in the arbitration proceedings). Failure to raise an objection to the jurisdiction of the arbitral tribunal in the statement of defence regularly leads, as a submission without objection, to the preclusion of the objection of lack of jurisdiction of the arbitral tribunal, which also extends to subsequent annulment or enforcement proceedings before the state courts [...].
32 b) A violation of the arbitral award against the ordre public, Sec. 1059 (2) no. 2 lit. b) ZPO does not exist.
34 A review of the arbitral award as to its substantive correctness is not permissible, as this would be incompatible with the fundamental prohibition of a révision au fond. An incorrect application of the law, as such, does not constitute a ground for setting aside [...].
36 The right to be heard is also a component of the (procedural) ordre public […]. For the assessment of the question whether an arbitral tribunal has violated a party's right to be heard, the same standards are to be applied as in the case of a state court […]. The right to be heard obliges the court in particular to take note of and to consider the submissions of the parties. However, it is only violated where it clearly follows in the individual case that the court has not complied with this obligation […]. If the court does not address, in the grounds of the decision, the essential core of a party's submissions of fact on an issue that is of central importance for the proceedings, this permits the conclusion that the submissions were not taken into account, unless they were irrelevant according to the court's legal view or were manifestly insufficiently substantiated […]. A violation of the right to be heard is relevant to the decision if it cannot be excluded that the arbitral tribunal would have decided differently had it taken into account the submissions that were disregarded […]. Compliance with the ordre public is to be examined ex officio in the annulment proceedings. However, this does not lead to an investigation ex officio of the facts required for this purpose. The principle of party presentation applies, with the result that a violation of the right to be heard can, as a rule, only be examined on the basis of a properly substantiated complaint […].
37 […] It is recognised in the case law that, pursuant to Sec.1027 sentence 1 ZPO, Sec. 1042 (1) sentence 2 ZPO also forms part of the provisions of the 10th Book of the ZPO, according to which each party must be granted the right to be heard. Accordingly, a party is precluded from invoking a violation of the right to be heard by the arbitral tribunal before the state courts if it had the opportunity to raise the violation already before the arbitral tribunal and, in addition, a remedy would have been possible […]. Whether this applies in the same way where a complaint of a violation of the right to be heard by the arbitral tribunal could have been raised in context of appellate proceedings before the higher arbitral tribunal but was omitted (due to the appellate proceedings not being conducted), has, as far as can be seen, not yet been decided in case law [...]. However, a decision on this issue is also not required in the present case, since, as set out below, a violation of the right to be heard by the arbitral tribunal cannot be established in any event.
77 c) From the submissions of the respondent in the arbitration concerning the alleged bias of the arbitrators, neither a ground for annulment under Sec. 1059 (2) no. 1 lit. d) ZPO nor under Sec. 1059 (2) no. 2 lit. b) ZPO arises.
78 aa) The challenge of an arbitrator is, in principle, no longer possible once the arbitral award has been rendered. In proceedings for challenge and for a declaration of enforceability, grounds for bias that have become known only subsequently can, as a rule, likewise no longer be invoked [...]. However, if the arbitrator, by a breach of his duty of disclosure, has deprived a party of the opportunity to file a challenge already in the arbitration proceedings, it must be examined in the proceedings for setting aside or for a declaration of enforceability whether the grounds to be disclosed by the arbitrator would have been sufficient to justify his challenge […]. Apart from that, in annulment and enforcement proceedings only particularly serious and clear grounds for challenge can still be invoked. These may, where appropriate, lead to a setting aside under Section 1059 (2) no. 1 lit. d) ZPO or under Section 1059 (2) no. 2 lit. b) ZPO. In both cases, the grounds for challenge must relate back to a point in time prior to the rendering of the arbitral award. However, the grounds for challenge can no longer be invoked if, at the time the arbitral award was rendered, preclusion had already occurred pursuant to Section 1037 (2) sentence 1 ZPO […].
Remarks:
1. The BayObLG follows the arbitration-friendly approach of German courts by reaffirming the strictly limited scope of review under Sec. 1059 ZPO. The BayObLG makes clear that annulment proceedings are not a vehicle for a review of the merits (revision au fond) but are confined to narrowly defined procedural defects and violations of ordre public.
2. Of particular practical importance is the court's clarification regarding the place of arbitration. The absence of an express designation of the place does not render an arbitral award invalid, provided that the place can be determined in subsequent court proceedings. This significantly enhances legal certainty in practice, especially in cases without a clear or consistent determination of the place of arbitration by the tribunal.
3. The decision also confirms, in line with established doctrine, the separability of the arbitration agreement. Objections relating to the validity or performance of the main contract do not, as a rule, affect the validity of the arbitration clause. The court thereby rejects attempts to circumvent arbitration by attacking the underlying contract.
4. From a procedural perspective, the ruling underscores the strict application of preclusion rules. Parties must raise jurisdictional objections and alleged violations of the right to be heard at the earliest stage of the arbitral proceedings. Failure to do so will generally bar such arguments in subsequent annulment proceedings.
5. Finally, the decision illustrates the high threshold for establishing a violation of ordre public, both procedurally and substantively. Neither the duration of the arbitral proceedings nor the amount of damages awarded will, as such, justify annulment. While this strengthens the finality and efficiency of arbitration, it also reminds parties to actively safeguard their procedural rights during the arbitration itself.
Dr Tobias Pörnbacher
This article first appeared in IWRZ, issue 03/2026.
