Decision of the Higher Regional Court (OLG) Zweibrücken, October 1, 2024 – Case No.: 4 U 74/24
An ongoing arbitration proceeding does not preclude a state court from deciding in urgent legal protection matters. This was clarified by the Higher Regional Court (OLG) Zweibrücken in its decision dated October 1, 2024 (Case No.: 4 U 74/24).
In the context of international trade disputes, arbitration proceedings can offer several advantages over litigation in a state court. According to the commercial law firm MTR Legal Rechtsanwälte, with extensive experience in litigation including international trade disputes, arbitration awards are often easier to enforce internationally compared to judgments from national courts.
Dispute Between International Business Partners
The OLG Zweibrücken clarified that arbitration proceedings do not prevent state courts from deciding on urgent legal protection matters. In the case at hand, a company from Indonesia was in a legal dispute with a machinery lessor regarding the provision of machinery and the supply of production materials. The Indonesian company had been leasing the machinery for over ten years.
The dispute arose when the company claimed a purchase option on the machinery, leading to a disagreement between the parties. Consequently, the lessor terminated the lease agreement as of July 21, 2024, demanding the return of the machinery and the release of know-how. Additionally, the lessor requested the company to cease using the machinery. In accordance with a contractual agreement, the parties attempted to resolve the dispute through arbitration proceedings starting in September 2018.
Request for Urgent Legal Protection
Before the arbitration award was issued, the Indonesian company applied for urgent legal protection in June 2024, requesting the state court to order the lessor to continue providing the machinery, including production materials, for the time being.
The Regional Court of Frankenthal dismissed the application, and the OLG Zweibrücken upheld this decision upon appeal, making it legally binding. The court reasoned that the urgency required for granting interim legal protection was lacking due to the company’s conduct. Following the lease termination and the demand for the machinery’s return, the company waited about five months before filing for urgent legal protection at the Regional Court of Frankenthal. Additionally, the company had itself argued that the outcome of the arbitration should be awaited before any urgent legal protection could be granted.
State Courts Not Bound by Arbitration Proceedings
The OLG Zweibrücken emphasized that state courts are neither temporally nor substantively bound by ongoing arbitration proceedings. Even though this may result in a state court decision influencing the arbitration process, the OLG justified its position by stating that state courts and arbitration tribunals have concurrent jurisdiction for interim measures.
Procedures before state courts can sometimes lead to quicker decisions than arbitration proceedings. Moreover, only measures ordered by state courts are directly enforceable without additional steps, according to the OLG Zweibrücken.
Advantages of Arbitration Proceedings
Despite this, arbitration can offer significant advantages in international trade disputes. Arbitration proceedings are often faster and more cost-effective. Arbitration awards are also easier to enforce internationally. While judgments by national courts are not always enforceable abroad, more than 160 countries have signed the 1958 New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards, obligating them to recognize and enforce arbitration awards from other countries. This allows for arbitration awards to be enforced virtually worldwide, carrying the same binding effect as a court judgment. Furthermore, arbitration proceedings are not public, safeguarding the reputation of companies involved in the dispute.
Tailored Solutions for Legal Disputes
Whether a court proceeding or arbitration is the better approach to resolving a conflict depends on several factors. Both methods have their respective advantages and disadvantages.
MTR Legal Rechtsanwälte has extensive experience in litigation and can provide tailored advice on the most suitable approach in each case.
Feel free to contact us!
