In a judgment of the Higher Regional Court of Berlin (Kammergericht Berlin) dated February 7, 2019 (Docket No. 12 Sch 5/18) the court refused to recognize and enforce a foreign arbitral award under the New York Convention to the extent that the award ordered a party to pay penalty interest at a rate contrary to German public policy. The court furthermore held that it may not reduce the rate of penalty interest in enforcement proceedings to an extent compatible with German public policy.
In their sales contract of March 2017, the parties agreed to have any disputes arising out of the contract settled by arbitration at a chamber of commerce. Furthermore, they agreed that – in case of a breach of contract – the breaching party shall pay 0.5 % of the respective value of the goods per day of delay as penalty interest.
In April 2018 the arbitral tribunal ordered the respondent to pay EUR 206.379,14 to the claimant for the breach of contract, as well as EUR 69.137,00 as penalty interest and USD 24.372,44 for the costs of the proceedings.
The claimant then applied to the Higher Regional Court of Berlin requesting that the award be declared enforceable.