In January 2016, the German Federal Supreme Court had to deal with the question whether an arbitral tribunal has jurisdiction to decide on a claim if the parties agreed on expert determination proceedings prior to arbitration but the claimant directly filed a request for arbitration. The Federal Supreme Court ruled that a pactum de non petendo included in an agreement on expert determination does not affect the arbitral tribunal’s competence to rule on a claim which is subject to arbitration. In addition, the court interpreted the expert determination agreement between the parties thereby giving general guidance as to what kind of disputes fall within the scope of such agreements.
The dispute related to a contract between the parties for construction of a sailing yacht. In particular, it provided for the following arbitration clause:
“16.2 REFERENCE TO EXPERT OR ARBITRATION
If any dispute or difference may arise or claim be made by any of or between the Parties hereto out of or in relation to or in connection with this Contract both Parties are to discuss the problems so arisen in a fair and reasonable manner for the purpose of obtaining an amicable settlement. In case no amicable settlement will be arrived at disputes shall be settled as follows:
16.2.1 Technical disputes (being disputes, differences or claims regarding any technical matter arising out of, or relating to or in connection with the construction of the Vessel) shall at the written request of either Party be referred to a mutually acceptable technical expert who shall act as such (and not as an arbitrator) and whose opinion on the matter shall be final and binding upon the Parties. […]
16.2.2 All other disputes arising out or in connection with this Contract shall be submitted to and settled by arbitration in Hamburg in accordance with the G.M.A.A.-Rules (latest edition).”
The purchaser initiated arbitration proceedings and claimed payment from the contractor because of alleged defects of the yacht. The contractor objected to the competence of the arbitral tribunal arguing that the claim is not actionable and that the tribunal therefore lacks jurisdiction over the asserted claim because the purchaser failed to request a decision of a technical expert. The tribunal issued a preliminary ruling and upheld its jurisdiction. The contractor’s application for a court decision that the arbitral tribunal lacks jurisdiction was rejected. Both the Court of Appeal Hamburg and the Federal Supreme Court confirmed the tribunal’s decision for two reasons.
- Scope of Agreement on Expert Determination With Respect to Warranty Claims
The courts interpreted section 16.2.1 of the contract and found that the dispute between the parties about an asserted warranty claim of the purchaser did not fall within the scope of the agreement on expert determination. In the courts’ opinions, section 16.2.1 provides for a so-called narrow agreement on expert determination which only relates to disputes about facts and technical matters. The parties did not agree that the expert shall also be entitled to settle disputes about the parties’ contractual rights and obligations (so-called wide agreement on expert determination). This follows in particular from the wording of section 16.2.1 pursuant to which the technical expert “shall act as such (and not as an arbitrator)”. According to the courts, in the case at hand, legal questions (dispensability of a deadline for supplementary performance, statute of limitations) were primarily relevant for the purchaser’s asserted warranty claim which were not to be determined by the technical expert. Consequently, the purchaser was not obliged to initiate expert determination proceedings prior to a request for arbitration.
The case could have been decided differently if the asserted warranty claim had primarily been subject to factual issues, e.g. if the parties only argued about the question whether or not the yacht was defective and/or complied with a specific technical standard. In this case, expert determination proceedings could have been the appropriate and most efficient way to settle the dispute as the arbitral tribunal may also have needed assistance from a technical expert to decide the relevant questions.
- Pactum de non Petendo Does not Exclude Jurisdiction of Arbitral Tribunal
In addition, the courts held that even if the dispute had fallen within the scope of the agreement on expert determination, the arbitral tribunal nevertheless would have had jurisdiction to decide on the claim provided that it was covered by the arbitration agreement. In the courts’ opinions, an agreement on expert determination may include a pactum de non petendo which temporarily excludes the right of a party to bring a claim before a court or arbitral tribunal. However, the legal consequence of such an agreement would “only” be that arbitration proceedings are either temporarily inadmissible or the claim has to be dismissed as temporarily unfounded until the expert determination proceedings have been completed. In any case, a pactum de non petendo does not exclude the arbitral tribunal’s competence to decide on the claim. Thus, the tribunal had correctly found that it had competence over the asserted claim.
German Federal Supreme Court, 14 January 2016, I ZB 50/15