In a decision of November 2016, the Higher Regional Court of Munich (Oberlandesgericht MĂŒnchen; hereinafter the âCourtâ), clarified some general principles underlying a challenge of an arbitrator for lack of impartiality (Decision of 17 November 2016, 34 SchH 13/16, BeckRS 2016, 20169). The decision is part of a somewhat curious series of decisions by the Court in the same matter.
The Facts
In 2001, Claimant and Respondents had entered into a partnership under the German Civil Code (Gesellschaft bĂŒrgerlichen Rechts) for the purpose of performing architectural services. The Parties agreed that any dispute arising from the partnership should be settled by an arbitral tribunal consisting of three members. Subsequently, Claimant resigned from the partnership and brought a claim for payment, disclosure of information and accounts regarding his credit balance. During the course of the arbitration, the Parties argued over various reports assessing the value of the partnership, which both Claimant and Respondents had submitted. Since 2012, Claimant challenged the arbitrators twelve times (!) for lack of impartiality, alleging inter alia bias and an arbitrary handling of the proceedings. Each time, the arbitrators declined to resign. Therefore, each time, Claimant filed an application with the Court to challenge the arbitrators according to Section 1037 of the German Code of Civil Procedure (Zivilprozessordnung; hereinafter âCCPâ). Under this section, a party may file an application that the court take a decision on the challenge if the prior challenge of the arbitrator was unsuccessful under the agreed arbitration rules or the rules set out in Section 1037(2) CCP. The Court rejected all of Claimantâs applications and the subsequent objections to the Courtâs decisions (see Decision of 25 February 2015, 34 SchH 21/13, SchiedsVZ 2016, 51 and Decision of 22 September 2016, 34 SchH 14/15, NJOZ 2016, 1717). The present decision deals with Claimantâs latest challenge of the arbitrators for lack of impartiality. Claimant argues that the arbitrators are biased because â upon Claimantâs request â they did not order Respondents to submit (more) substantiated comments on Claimantâs valuation report, nor did the arbitrators explain why they refrained from doing so. Further, Claimant essentially argues that the arbitrators are biased because of their previous decisions not to resign. Moreover, the reasoning for the decision not to resign was allegedly empty phrased. The arbitrators again refused to resign. Claimant once more turned to the Court and filed another application to challenge the arbitrators according to Section 1037(3) CCP. As with the previous applications, Claimant additionally challenged the judges of the Court for lack of impartiality based on their handling of Claimantâs previous applications.
The Decision
Using strong language, the judges of the Court rejected the challenge of themselves as âabusiveâ and âobviously serving extraneous purposesâ. The Court held that Claimant was using the challenge of the judges âsystematically as an instrument to control and fight against judicial actionsâ when these actions were detrimental to Claimantâs position. The Court further rejected Claimantâs application to challenge the arbitrators under Section 1037(3) CCP. The Court pointed out that the reasons for challenging a court judge (as set out in Sections 41 et seq. CCP) can generally indicate whether doubts exist as to the impartiality or independence of an arbitrator. Whether an arbitrator is in fact not impartial or independent is to be determined from an objective point of view â not from the view of the challenging party. The Court further explained that the challenge procedure generally does not serve to assert procedural errors prior to the rendering of the final award. What is more, the challenge procedure is not intended for the Court as a means to control the legal views and application of the law by the arbitral tribunal. Mistakes in the conduct of the arbitral proceedings, fact finding and application of the law can only justify a concern of partiality if these mistakes happen in a particular frequency and severity. These mistakes must quite distinctly point to a biased or arbitrary handling of the case by the arbitrator. Against this background, the Court held that there are no circumstances that give rise to justifiable doubts as to the arbitratorsâ impartiality or independence (cf. Section 1036(2) CCP). Particularly, the Court explained that it was not a procedural mistake â let alone a reason to infer a lack of impartiality â that the arbitral tribunal did not order Respondents to submit more substantiated comments on Claimantâs valuation report. Within the boundaries set out above, it is up to the arbitral tribunal to assess the subject matter of the dispute, including the degree of required (additional) substantiation of submissions. Moreover, the arbitral tribunal was not obligated to explain why it did not order Respondents to comment on Claimantâs report. The Court further explained that the constitutional right to a fair hearing neither encompasses the right to know the legal opinion of the arbitral tribunal in advance nor the right to a legal discussion with the arbitral tribunal. Finally, the Court held that the arbitratorsâ previous decision not to resign did not show bias. While Claimant continuously asserts the arbitratorsâ previous refusals to resign as new grounds for challenge, this would essentially only lead back to Claimantâs previous (rejected) allegations. What is more, the arbitratorsâ decision was neither arbitrary nor otherwise significantly flawed nor was it empty phrased.
The End â or is it?
Again, Claimant objected to the Courtâs decision (Section 321a CCP; AnhörungsrĂŒge) and challenged the judges of the Court for lack of impartiality. Recently, the Court rejected the challenge as âabusiveâ and the objection as inadmissible (Decision of 9 January 2017, 34 SchH 13/16, BeckRS 2017, 100077). The Court ruled that it will not consider further objections in this matter, concluding that â[t]he guarantee of judicial protection against alleged infringements of rights does not provide unlimited recourse to the courts.â