The Higher Regional Court of Frankfurt (OLG) recently ruled that an arbitration clause in a framework supply agreement can also have effect vis-à-vis third parties benefiting from the supply agreement (decision of 2 January 2025, 26 SchH 1/23). The Court arrived at this conclusion by applying the German law concept of “supplementary contract interpretation” under Sections 133, 157 of the German Civil Code (Bürgerliches Gesetzbuch “BGB”).
Factual Background
In 2007, the pharmaceutical manufacturer (“Alpha”) concluded a long-term framework supply agreement (“framework agreement”) with another company (“Beta”). This agreement was expressly intended to apply to affiliated companies of Beta (“Beta-affiliates”). That means: Beta-affiliates were able to place purchase orders for products under the framework agreement. Subsequently, several individual purchase contracts were concluded between Alpha and Beta-affiliates (although not explicitly referencing the framework agreement with Beta). The framework agreement contained an arbitration clause, while the individual purchase contracts did not.
The products so purchased turned out to be defective. Several Beta-affiliates sued Alpha for damages in an arbitration proceeding. Alpha objected to the jurisdiction of the arbitral tribunal. Alpha argued that the arbitration clause was only concluded in a contract between Alpha and Beta, whereas the Beta-affiliates were no parties to the contract. Thus, in Alpha’s view, there was no binding arbitration agreement with the Beta-affiliates satisfying the (written) form requirements under German law (Section 1031 German Code of Civil Procedure).
The arbitral tribunal affirmed its jurisdiction in a provisional decision in 2022. Alpha contested this decision. Alpha applied to the Higher Regional Court of Frankfurt to declare that the arbitral tribunal lacked jurisdiction.
Decision of the Higher Regional Court of Frankfurt
The Higher Regional Court of Frankfurt rejected Alpha’s application and confirmed that the arbitration agreement in the framework agreement also applied vis-à-vis the Beta-affiliates.
The Court acknowledged that, as a general rule, the subjective scope of an arbitration agreement is limited to the contracting parties of the respective contract (here: Alpha and Beta). By entering into an arbitration agreement, the parties waive their right to the lawful judge under Article 101 I 2 of the German Constitution. An arbitration agreement can therefore only be extended to third parties in exceptional cases. The Court decided that such an exceptional case was to be assumed here. The Court arrived at this conclusion in a two-step approach:
In a first step, the Court decided that the framework agreement constituted a so-called “genuine contract for the benefit of third parties” (Vertrag zu Gunsten Dritter) in the meaning of Section 328 BGB. Such genuine contract to the benefit of third parties grants third parties a title to claim and enforce rights under the contract to which they are not a contracting party. Whether such genuine contract for the benefit of third parties can be assumed is subject to a case-by-case analysis. The general rules of interpretation under Sections 133 and 157 BGB apply: the intention of the parties is determined taking into account the wording, the purpose and background of the agreement, the interests of the parties and other surrounding circumstances.
Here, the Court relied on the parties’ intention when entering into the framework agreement and the overarching contractual structure of that contract. The Court established that it was the parties’ joint intention that Beta-affiliates should be entitled to order products from Alpha (i.e. enter into individual purchase contracts) under the conditions set out in the framework agreement.
In a second step, the Court decided that also the arbitration agreement contained in the framework agreement must be extended to the individual purchase contracts concluded by the Beta-affiliates. The Court based this ruling on the German law concept of a “supplementary contract interpretation” under Sections 133, 157 BGB. Taking into account all circumstances of the case, the Court found that the individual purchase contracts by the Beta-affiliates, while not explicitly mentioning the framework agreement, were inherently linked to it. Thus, in the Court’s view, it was the parties’ intention that the arbitration agreement in the framework agreement should also apply to disputes in connection with the individual purchase contracts between Alpha and Beta-affiliates.
The interesting question here was whether extending the arbitration agreement to the Beta-affiliates would not ultimately render the genuine contract to the benefit of third parties into a (legally impermissible) contract to the detriment of third parties. After all, the Beta-affiliates were not only provided with an “additional” means of disputes resolution (= arbitration), but at the same time were deprived of another means of dispute resolution (= litigation). The Court rejected this view. While being bound by the arbitration clause could be regarded as a certain restriction for the Beta-affiliates, this restriction was “inherent” to the actual benefit granted to the Beta-affiliates under the framework agreement from the outset. In other words: The benefit of being entitled to place orders with Alpha under the conditions of the framework agreement was, from the beginning, combined with a restriction regarding the applicable dispute resolution mechanism. Had the Beta-affiliates not wanted to be bound by the terms of the framework agreement (including the arbitration clause), they could have rejected the rights granted to them under this agreement under Section 333 BGB.
Finally, the Court ruled that also the (written) form requirements for arbitration agreements under Section 1031 German Code of Civil Procedure were satisfied. It was sufficient that the arbitration agreement in the framework agreement fulfilled the respective requirements. In the Court’s view, no additional written document was required when extending the scope of the arbitration agreement to third parties.
Conclusion and Outlook
The decision puts a spotlight on the German law concept of a “supplementary contract interpretation” in the context of extending arbitration clauses in framework agreements to third party beneficiaries. Whether the decision upholds in the (pending) appeal before the German Federal Court of Justice remains to be seen (BGH, I ZB 9/25).
The “lesson learned” for parties in supply chain relationships is: Be accurate when drafting arbitration clauses in framework agreements. The concept of “supplementary contract interpretation” is vague per se and – as the Higher Regional Court emphasized – depends on the circumstances of the individual case. Where parties want to have clarity on the applicable dispute resolution mechanism, they should put unambiguous langue in their respective contracts. This is particularly true where an arbitration clause in the framework agreement should not apply to individual purchase contracts with third party beneficiaries. After all, there is no room for a “supplementary interpretation” where the wording is unambiguous. Otherwise, parties might find themselves in an unintended forum – as the saying goes: In for a penny, in for a pound.
