Jurisdiction(s):
United Kingdom

German Federal Court of Justice upholds arbitration clause despite exclusion of general terms and conditions law; severability confirmed; tribunal decides applicability, with potential ordre public review; section 1032 application allowed.

Published on: 17 March 2025

Published by a LexisNexis Arbitration expert

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Article summary

What are the practical implications of this case?

German rules on standard terms are frequently faulted as excessively rigid and demanding, particularly in cross-border settings. Consequently, commercial contract writers commonly opt to disapply it. Paired with an arbitration clause, this carve-out is viewed by some arbitration specialists as an inventive way to sidestep the exacting content control set out in sections 305 to 310 of the German Code of Civil Procedure (Zivilprozessordnung, ZPO). As a matter of substantive law, the approach remains contentious. Here, the applicant—also the claimant in the pending arbitration—asked the German Federal Court of Justice whether inserting that exclusion into the arbitration clause makes the arbitration as a whole inadmissible. The court decided that the arbitration clause stands, and that it is for the arbitral tribunal to rule on whether German terms-and-conditions law applies. Accordingly, the exclusion alone does not undermine the clause’s validity, so this drafting option remains on the table. In other words, it is the tribunal, rather than the state courts, that should determine any dispute over that regime...

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