In a decision of 27 March 2026 (Docket No. 102 Sch 104/25 e), the Bavarian Supreme Court (Bayerisches Oberstes Landesgericht, “BayObLG”) declared enforceable in Germany a Czech arbitral award that had been issued in electronic form with qualified electronic signatures of the arbitrators. The decision is of interest for three procedural reasons, but also from a substantive perspective: First, it confirms that an e-award can be enforced under the New York Convention where the applicable arbitration law permits electronic signatures. Second, it confirms that a German enforcement court is not bound by the fact that set-aside proceedings at the seat had been unsuccessful. Third, it confirms that the threshold for refusing enforcement on due process or public policy grounds remains high. Substantively, the decision addresses whether a substantial contractual penalty agreed in an SPA violates public policy.
Factual Background
The claimant, a Czech individual, sold his minority shareholding in a Czech holding company to a Bavarian company under a share purchase agreement (SPA) for a purchase price of EUR 7.11 million. Under the SPA, which was governed by Czech law, the buyer undertook to ensure that, within a few business days after closing, the registered seats of the holding company and its subsidiaries were relocated. The obligation was backed by a contractual penalty of EUR 5,000 per day of delay. The SPA contained an arbitration clause in favor of the Arbitration Court attached to the Economic Chamber and the Agricultural Chamber of the Czech Republic in Prague.
The buyer did nothing to move the seats until the seller called upon it to act. The required resolutions were then passed promptly, but some 150 days late. The seller claimed penalties of EUR 2.29 million plus interest and costs. The buyer argued that the penalty was void because: (i) The obligation had been impossible to perform within the agreed time limits, given mandatory notice periods for shareholder meetings under Czech company law and its position as a minority shareholder. (ii) The penalty was excessive and thus violated public policy. (iii) He had been assured during the negotiations that the penalty clause was a mere formality or would be deleted.
The Tribunal rejected the impossibility and invalidity defenses. It held that the contractual penalty served to protect a legitimate interest of the seller. The buyer’s obligation was clearly and transparently defined, and contractual penalties are a common commercial means of reinforcing parties’ contractual obligations. Nevertheless, the Tribunal reduced the daily penalty, mainly because the seller had himself remained passive for months. The Tribunal found, however, that the alleged assurances regarding deletion of the penalty clause had not been proven. Before the Tribunal, the buyer had named a witness on the pre-contractual negotiations. The Tribunal directed the parties to ensure the attendance of their witnesses at the next hearing. The buyer submitted only a written statement, did not bring the witness, and later confirmed that it had no further requests for evidence.
The Tribunal awarded EUR 1,160,800 plus interest and costs. The award is dated 4 April 2025, and the three arbitrators signed it electronically between 15 and 24 April 2025.
The buyer applied to set aside the award at the Prague Municipal Court. The Court dismissed the application. The buyer appealed and also filed criminal complaints alleging fraud. In the German enforcement proceedings, the buyer raised a broad range of objections, including the authenticity and formal validity of the award, violation of its right to be heard and public policy.
The Decision of the Bavarian Supreme Court
The BayObLG rejected all the buyer’s objections and declared the award enforceable.
Electronic signatures suffice
The court held that a foreign award may be declared enforceable even if it was signed only electronically, provided the applicable arbitration law permits this and the award’s authenticity is sufficiently established. Under the more-favorable-right principle (Art. VII(1) NYC), the less demanding requirements of Section 1064 of the German Code of Civil Procedure apply instead of Art. IV NYC. It thus suffices to provide in the enforcement proceedings the original or a certified copy of the award, as according to German law, no legalization and no production of the arbitration agreement is required.
No binding effect of dismissal of the set-aside application at the seat
Relying on recent guidance from the German Federal Court of Justice[1], the BayObLG confirmed that German courts conduct their own assessment of the grounds for refusal under Article V NYC and are not bound by the courts at the seat’s refusal to set aside an award. The BayObLG thus examined the buyer’s objections independently.
Alleged, but disputed, fraud in relation to the penalty clause does not establish a violation of public policy or the right to be heard
The BayObLG noted that it was disputed in the arbitral proceedings whether the seller had misled the buyer with respect to the penalty clause. The Tribunal had dealt with the issue and had found that the buyer had not proven its allegation. The BayObLG reasoned that arbitral tribunals had broad discretion in evidentiary matters. Requiring a party to secure the attendance of its own witness was unobjectionable, particularly since tribunals had no coercive powers over witnesses. Where a party failed to bring its witness, the tribunal did not need to give separate reasons for not hearing that witness.
In addition, the BayObLG found that the Tribunal had thoroughly considered the buyer’s submission that the obligation to change seats of the companies had been impossible to perform within the agreed time limits.
Against that background, the BayObLG denied both a violation of the right to be heard and a public policy violation.
Amount of contractual penalty does not violate German public policy
The amount of the penalty, in the BayObLG’s view, did not violate German public policy. The court stressed that an award does not violate international public policy merely because it grants an excessive contractual penalty or excessive or liquidated damages. As regards German public policy, the court’s review was limited to the result in the specific case, not to the contractual clause or the foreign law applied. The court emphasized the commercial context in which the penalty had been agreed. Nor was it objectionable that the penalty secured an ancillary contractual obligation without requiring proof of actual loss. The awarded amount was mainly due to the long delay and the fact that three companies were affected. It corresponded to around one-sixth of the purchase price and the Tribunal had already reduced it. The BayObLG thus denied a violation of German and international public policy.
Comments
The BayObLG provided a welcome, pragmatic clarification on electronically signed awards. German commentators remain divided on whether a domestic award can satisfy the written-form and signature requirement of Section 1054 of the German Code of Civil Procedure by qualified electronic signature. The BayObLG clarified that, for foreign awards, the form of the award is governed by the lex arbitri and the applicable rules, not by Section 1054 of the German Code of Civil Procedure. The New York Convention does not prohibit electronic awards, and German law contains no rule requiring foreign awards to be in hard copy.
The decision reflects the established German approach to due process objections, which is strict but fair. Tribunals are free to require evidence to be available at the hearing, whether in the form of documents, written witness statements or witnesses brought by the parties. A party that does not comply with such directions, does not object at the time, and confirms that it has no further requests for evidence will generally not be heard to argue at the enforcement stage that it was deprived of the opportunity to present its case. The court also refused to take into account a notarized witness statement that had never been submitted in the arbitration. This is consistent with international practice and the principle that procedural objections must be raised promptly.
Furthermore, the decision confirms that German courts will not use public policy to second-guess the size of contractual penalties awarded under foreign law between commercial parties. For parties resisting enforcement, a public policy challenge to the amount of a penalty or liquidated damages will rarely succeed unless the result is truly intolerable.
Conclusion
The BayObLG’s decision is a clear, enforcement-friendly ruling that is to be welcomed.[2] It brings German practice in line with the growing use of electronic awards in international arbitration, applies the more-favorable-right principle consistently, and confirms that Germany remains a reliable jurisdiction for enforcing foreign awards under the New York Convention.
[1] BGH, Decision of 9 March 2024, Docket No. I ZB 33/22.
[2] See also Bauer, IWRZ 2026, 205 (207 et seq.) and Finkelmeier/Bauer, IWRZ 2026, 262 (264 et seq.).
