Originally from Dispute Resolution Journal

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GERMANY

In a judgment of the Higher Regional Court of Munich dated January 16, 2019 (Docket No. 7 U 1365/18) the court held that the personal scope of an arbitration agreement concluded by a limited company will only extend to its director under certain conditions. Firstly, the director as a representative of the company has to be involved in the negotiation of the arbitration agreement, and secondly an intent to extend to the director has to be shown by means of interpretation.

Background

In a contract for the purchase of shares of two limited companies (x GmbH and y GmbH) between the shareholders and another limited company (z GmbH) the parties concluded the following arbitration agreement: 

“All legal disputes arising out of and in regard to this contract or measures relating to its execution, including disputes regarding the validity of this contract or this arbitration clause, shall be finally decided by an arbitral tribunal according to the arbitration rules of the German Institution of Arbitration (‘DIS’) without recourse to legal action before state courts.” (Translation by the authors.)

The plaintiff as one of the former shareholders of x GmbH and y GmbH consecutively concluded a separate consulting agreement with the purchaser, z GmbH. The defendant as its director at the time represented z GmbH in both agreements.