Dissenting Opinion as violation of public policy? The recent annulment decision of the Higher Regional Court of Frankfurt in context
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In a recently published annulment decision, the Higher Regional Court of Frankfurt (docket no. 26 Sch 14/18) by way of obiter dictum expressed its views on dissenting opinions in domestic arbitration proceedings. Although the court's view is of limited applicability, it revived the long-standing question of the admissibility of dissenting opinions under German law.
The decision of the Higher Regional Court of Frankfurt
The arbitration proceedings concerned a post-M&A dispute between the insolvency administrator of company X and its former parent company (and its legal successors). The arbitration was seated in Frankfurt, and the Rules of the International Chamber of Commerce ("ICC Rules”) applied. The core issue before the tribunal was the liquidation value of company X. The arbitration lasted over a decade and the parties relied on various experts. The independence of one of these experts and subsequently the tribunal's independence was challenged. After the tribunal had already appointed an expert and the subsequent appointment of experts by the parties, the tribunal appointed expert F to estimate the liquidation value. On 31 May 2018, the tribunal rendered its final award and dismissed the claims of the insolvency administrator of company X. On 1 June 2018, arbitrator B issued its dissenting opinion. Arbitrator B criticized the expert F's opinion and the conclusions the tribunal drew from it.
In October 2018, the insolvency administrator filed an application for annulment of the award. The Higher Regional Court of Frankfurt ("Court") granted the application for annulment based on a violation of public policy. After assessing the parties' submissions in detail, the Court found that the arbitral tribunal infringed the insolvency administrator's right to be heard. The tribunal had not adequately considered the insolvency administrator's submissions, in particular on expert F's opinion.
Although the Court had already determined the annulment of the award due to a violation of a right to be heard, the Court made the following observations (obiter dictum) with respect to the dissenting opinion:
"Dissenting opinion: It can be left open whether a further ground for setting aside the award for violation of public policy pursuant to Section 1059 para. 2 no. 2 (b) [...] is the disclosure of the dissenting opinion of Arbitrator B, in which he departed from the majority opinion. In the Senate's view, taking into account the legislator's considerations when refraining from a provision on this issue (BT-Document no. 13/5274, p. 56), there are good reasons to suggest that the disclosure of a dissenting opinion is inadmissible in domestic arbitration proceedings and violates the principle of secrecy of deliberations, which also applies to domestic arbitral tribunals […].
The special significance of the secrecy of deliberations for the protection of the independence and impartiality of arbitrators may also suggest that the principle – even after final deliberation and rendering of the arbitral award – is not a dispositive issue for either the parties or the arbitrators and forms part of the procedural public policy (ordre public)."
Dissenting Opinions in German (domestic) arbitration proceedings
As the quote highlights, the secrecy of judicial deliberations holds a special position under German procedural law. Secrecy of deliberation covers the course of deliberations and voting. In practice, it means that it must not be apparent from the judgment's reasons whether there were differences of opinion among the judges and how the majority vote was formed.1 The secrecy of deliberations aims at protecting the judges' independence and impartiality and strengthening the finality of judgments. As such, dissenting opinions are generally inadmissible in German state court proceedings.2
Due to the principle of secrecy of deliberations – which applies only to judges – the admissibility of dissenting opinions in arbitration proceedings is subject to a long-standing debate in Germany. During the reform of arbitration law in 1996, the German Bundestag addressed the question. In the passage referred to by the Court in the quote above, it stated – unfortunately without providing any reasoning – that a specific provision was not required and that dissenting opinions are "predominantly considered admissible under the current law". In line with the views expressed by the legislator, several commentators are of the opinion that dissenting opinions in arbitration are admissible, unless expressly excluded by the parties.3
It appears that the Court was inspired by a more rigid view in the German literature, pursuant to which arbitrators like judges are bound by the principle of the secrecy of deliberations and thus not permitted to issue dissenting opinions.4 According to this view, the publication of a dissenting opinion could constitute a procedural violation and a breach of the arbitrator's contract and thus the award could be set aside under section 1059 para. 2, no. 1(d) of the German Code of Civil Procedure ("ZPO"). However, as a consequence of the principle of party autonomy in arbitration, at least some commentators supporting this view argue that the parties can release the arbitrators (in the arbitration agreement or by separate agreement during the proceedings) from the obligation of maintaining secrecy in deliberations. However, it is disputed whether it is required that the arbitrators consent to such agreements concluded by the parties.5
By arguing that the publication of a dissenting opinion could qualify as a violation of public policy pursuant to section 1059 para. 2, no. 1(d) of ZPO, the Court goes even a step further and takes a position that – as far as can be seen – has not even been expressed by the stricter voices in literature. Based on the Court's view, even if parties and arbitrators agreed on its admissibility, a dissenting opinion could still qualify as a violation of public policy, as the secrecy of deliberations "is not a dispositive issue for either the parties or the arbitrators".
The dissenting opinion as a basis for challenging an award in other jurisdictions
Challenging an award on the basis of a dissenting opinion is not new. More often, however, it is the content of the dissenting opinion, rather than its disclosure, that provides the ammunition for a challenge.
The English decision in F Ltd v M Ltd6 is a neat example. In that case, the minority's dissenting opinion shone a light on an important error in the majority's calculation of damages. That error led to a successful challenge on the basis of serious irregularity under Section 68 of the Arbitration Act 1996.
A more colourful example comes from the case of CME v. Czech Republic, where the dissenting opinion extensively criticised the conclusions of the majority and alleged that the majority had excluded the minority from deliberations for the award.7 The Czech Republic challenged the award before the Swedish courts, partly on that basis, but the Swedish court of appeal determined that the minority's allegations about being excluded from deliberations were "close to groundless". 8
Both cases are examples of where a dissenting opinion revealed (or allegedly revealed) a basis to challenge the award. The decision of the Higher Regional Court of Frankfurt, however, raises the possibility that the disclosure of a dissenting opinion – regardless of its content – could be cause for annulment.
This procedure over substance approach is not unique to the German courts. Fellow civil law jurisdictions Belgium and France take a similar line, for instance, and extend the principle of secrecy of deliberations to dissenting opinions. Yet while Belgium and France have specific carve-outs for arbitration, the German legislature made no specific provision, as noted above.9
Conclusions
Regarding the practical impact of the decision by the Higher Regional Court of Frankfurt, which seems to be the first decision on this issue, it should be kept in mind that the Court's view on dissenting opinions (i) was only expressed in an obiter dictum, (ii) only applies to domestic arbitrations in Germany, and (iii) hardly provided any reasoning. It thus does not appear very likely that other Higher Regional Courts or the German Federal Court of Justice will share the Court's view which is not supported by the German literature and is at odds with practice in other jurisdictions.
Nevertheless, there may, in the short-term, be heightened awareness among counsel, tribunals and institutions with regard to dissenting opinions. Where parties are likely to want to enforce their awards in Germany, steps may be taken to ensure that no dissenting opinion is published. And institutions may also err on the side of caution. In an ICC arbitration, for instance, a dissenting opinion should not be notified to the parties if it would imperil the validity of the award at the place of arbitration, or in any country in which recognition or enforcement of the award is likely to be sought.10
1 Graf in: Beck Online Commentary on the Courts Constitution Acts (Gerichtsverfassungsgesetz, GVG), 7th ed. 2020, Section 193 mn. 19.
2 Only judges of the Federal Constitutional Court are allowed to issue dissenting opinions (section 30 para. 2 BVerfGG).
3 Bartels, Geheimnisverrat des Dissenters im schiedsrichterlichen Verfahren, SchiedsVZ 2014, p. 133 et seq.; Wilske/Markert in: Beck Online Commentary on the German Code of Civil Procedure (Zivilprozessordnung, ZPO), 36th ed. 2020, Section 1052 mn. 13.
4 Schütze, Sondervoten im Schiedsverfahren – eine Bestandsaufnahme in: Fairness Justice Equity: Festschrift für Reinhold Geimer zum 80. Geburtstag, 2017, p. 641 (646).
5 See Kahlert, Vertraulichkeit im Schiedsverfahren: Eine Untersuchung nach deutschem Recht mit internationalen Bezügen, 2015, p. 233.Lachmann, Handbuch der Schiedsgerichtsbarkeit, 3rd ed. 2008, mn. 1775; Schütze, Sondervoten im Schiedsverfahren – eine Bestandsaufnahme in: Fairness Justice Equity: Festschrift für Reinhold Geimer zum 80. Geburtstag, 2017, p. 641 (645 et seq).
6 [2009] EWHC 275.
7 SVEA COURT OF APPEAL, Case no T 8735-01
8 SVEA COURT OF APPEAL, Case no T 8735-01
9 See, Code de procédure civile, Article 1513; Code Judiciaire, Article 1711.
10 The ICC Scrutiny Process and Enhanced Enforceability of Arbitral Awards, Gustav Flecke-Giammarco, Journal of Arbitration Studies, Vol. 24 No. 3, 1 September, 2014, pp. 47~77.
Jan Bernhardt, a legal intern at White & Case, assisted in the development of this publication.
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