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Guide to International Civil Procedure: Recognition and enforcement of foreign judgments in Germany

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We would like to inform you whether and how a foreign judgment given outside the EU can be enforced in Germany.

Description of the problem

Once a judgment has been successfully obtained against a German debtor abroad (in a third country), the creditor is faced with the important practical question of how to actually get his money.

If the German debtor does not pay voluntarily, only the enforcement of the judgment will help. However, since in most cases the German debtor only has assets in Germany that could be enforced, the foreign judgment must be enforced in Germany. This requires that the foreign judgment has first been declared enforceable by a German court. This declaration of enforceability is the subject of separate court proceedings against the debtor in Germany, at the end of which, if successful, an enforcement order will be issued.

The following article deals with the content of these proceedings.

Starting point: Necessity of a Recognition Procedure under Section 722 (1) of the Code of Civil Procedure (Zivilprozessordnung/ZPO).

Unless special agreements under international law provide otherwise, a foreign judgment is initially of no value in Germany. Rather, only a successfully obtained enforcement judgment (cf. section 723 ZPO) leads to the enforceability of the foreign judgment in Germany as well.

A foreign creditor wishing to enforce a foreign judgment against a German debtor in Germany must therefore first apply to the competent German court for the foreign judgment to be declared enforceable. This is standardized in Section 722(1) of the German Code of Civil Procedure (ZPO):

“(1) Compulsory enforcement may be pursued under the judgment of a foreign court if such compulsory enforcement is ruled admissible by a judgment for enforcement.”

The object of this enforcement procedure under Section 722(1) of the ZPO is no longer the facts of the case already decided by the foreign court, but only the examination of whether the conditions for recognition set out in Section 328 of the ZPO are fulfilled.

If the German court comes to the conclusion that the foreign proceedings meet these requirements and that the decision was therefore formally justified, enforcement of the foreign judgment is also permitted for the territory of the Federal Republic of Germany. Enforcement is then carried out solely on the basis of the German enforcement order, which in fact merely reproduces the decision of the foreign court.

Grounds for refusal to be examined by the German court

As mentioned above, the enforceability of a foreign judgment in Germany requires that it be recognized in Germany. The enforceability of a foreign judgment is reviewed ex officio by the German court in the enforcement proceedings referred to above under Sections 722 and 723 ZPO.

In the absence of a relevant bilateral agreement between Germany and the plaintiff state, the general rules of international law apply to recognisability. In this general case, recognability is to be measured against section 328(1) of the ZPO:

“(1) Recognition of a judgment handed down by a foreign court shall be ruled out if:

  1. The courts of the state to which the foreign court belongs do not have jurisdiction according to German law;

  2. The defendant, who has not entered an appearance in the proceedings and who takes recourse to this fact, has not duly been served the document by which the proceedings were initiated, or not in such time to allow him to defend himself;

  3. The judgment is incompatible with a judgment delivered in Germany, or with an earlier judgment handed down abroad that is to be recognized, or if the proceedings on which such judgment is based are incompatible with proceedings that have become pending earlier in Germany;

  4. The recognition of the judgment would lead to a result that is obviously incompatible with essential principles of German law, and in particular if the recognition is not compatible with fundamental rights;

  5. Reciprocity has not been granted.”

Accordingly, recognition of a foreign judgment is to be refused in the following cases :

Lack of jurisdiction of the foreign court

The objection of lack of jurisdiction is always the most obvious argument against recognition. This is because the international principle is that, in case of doubt, an action must be brought at the defendant’s domicile or place of business. Consequently, the jurisdiction of the foreign court for an action against a German defendant would have to be based on a special place of jurisdiction or an effective agreement on jurisdiction.

No proper service / breach of the right to be heard

It is not uncommon to raise the objection that the foreign claim has not been properly served. This presupposes, for example, that the German defendant had sufficient opportunity to defend himself properly against the action. Since case law interprets this requirement very narrowly, this objection is usually only helpful in extreme cases, e.g. if there were only a few days between service on the German defendant and the date of the foreign judgment, which is likely to be rare.

In addition, a translation of the complaint into German is usually required. In most cases, this follows from the Hague Service Convention of 15 November 1965, to which a large majority of countries in addition to Germany have adhered.

Incompatibility with other judgments

The objection that the recognition of the foreign judgment is incompatible with a domestic, German court decision is also very relevant in practice and accordingly significant.

This is particularly relevant in the case of an earlier lis pendens of domestic proceedings with the same subject-matter. “Lis pendens” is the point in time at which a validly filed claim has been validly received by the defendant. The time of lis pendens abroad is determined by the foreign law. It is irrelevant whether the foreign court was aware of the domestic proceedings.

Please also read my separate article on this constellation “The negative declaratory action to prevent a foreign action”.

By the way:

The priority of the domestic judgment applies even if the domestic judgment was issued despite the earlier pendency of the foreign proceedings. Domestic judgments therefore always block, even if they should not have been issued at all.

Incompatibility with the so-called ordre public

Finally, the so-called ordre public must be observed. This concerns the compatibility of the foreign judgment in question with the essential principles of German law.

If a foreign judgment is so contrary to the fundamental principles of German law that it would be almost intolerable to declare such a judgment enforceable in Germany, it must be refused recognition.

The above applies above all to violations of fundamental rights (In German: “Grundrechte”). Other examples of judgments that violate German ordre public are those that are based on procedural fraud or judgments whose subject matter is gambling or betting debts.

Lack of guarantee of so-called reciprocity (In German: “Verbürgung der Gegenseitigkeit”)

A mandatory requirement for recognition is also the so-called “guarantee of reciprocity” in relation to the sentencing state in question.

“Reciprocity” means that the recognition and enforcement of a German judgment in the foreign state in question should not encounter significantly greater difficulties than, conversely, the recognition and enforcement of a comparable foreign judgment in Germany. In short: The point is that the “rules of the game” must be reasonably consistent among themselves. It is unacceptable for Germany to recognise a judgment from a country which, on the other hand, refuses to recognize German judgments or only recognizes them under considerably more difficult conditions.

Notice:

The above definition leads to the following problem: The question of so-called reciprocity can only be answered by looking at the actual judicial practice of both countries. This practice is in a constant state of flux, so the question must be examined on a case-by-case basis.

The above-mentioned requirements for the recognition of foreign judgments already have an impact on the German defendant’s decision as to whether he should defend against the foreign action at all.

In principle, the German defendant is free to decide whether to take up the “defense at a distance” – accepting (perhaps) unnecessary and thereby high costs.

For the German defendant, however, it is important to note that objections to the merits of the claim must generally be raised in the main action, i.e. in the foreign proceedings. However, according to the case law of the German Federal Supreme Court (BGH), this does not apply without exceptions. In particular, it is still possible to raise the defense of procedural fraud in the recognition proceedings. In its judgment of 29.04.1999 (X ZR 263/97), the BGH stated that:

“In proceedings for a declaration of enforceability, supplementary factual submissions by the parties are admissible at any rate to the extent that a violation of section 328 (1) no. 4 of the Code of Civil Procedure is to be inferred from the manner in which the judgment to be recognized was reached. (….)

In contrast, both section 328 (1) no. 2 and no. 4 of the Code of Civil Procedure leave it up to the defendant domiciled in Germany to plead abroad at all. If he takes the risk of being sentenced abroad, he takes on the complication of only being allowed to assert narrowly limited defenses in the recognition proceedings. In any case, the plea of fraud is not cut off.”

According to the aforementioned judgment, the German debtor who did not defend himself against the foreign claim could still claim in the subsequent German recognition proceedings that

  • he was never properly served with the claim, and/or
  • the foreign judgment is incompatible with fundamental principles of German law.

Conclusion and Recommendation

The above summaries show that there are various obstacles to the recognition and thus the enforceability of foreign judgments in Germany. It follows that competent advice and, if necessary, representation are indispensable for foreign creditors.

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Entrance to the Royal Court of Justice

Guide to appeal law – Importance of the content of the grounds of appeal for the scope of review by the court of appeal

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This surprisingly widespread view is wrong and – time and again – a reason for the BGH to put a stop to this attempt by many OLGs to get files off the table.

Clarifications by the BGH on the scope of review by the court of appeal

If an appeal meets the statutory requirements, for which it is sufficient that the grounds of appeal contain a single admissible complaint, then the entire substance of the proceedings at first instance will be subject to review by the court of appeal.

In its decision of 28.04.2020 (case no. VI ZR 347/19), the BGH – once again – cleared up this widespread misconception. The reason for this was a ruling by the Higher Regional Court of Munich, which had rejected an appeal that was actually well-founded (!) with the incorrect argument that the appellant had not named the well-founded complaint in question in his grounds of appeal. It was not possible to make up for this in a subsequent pleading. In its decision dated 28.04.2020 (case no. VI ZR 347/19), the BGH commented on this as follows and branded the opinion of the OLG as “manifestly erroneous“:

“(…)

The appeal against denial of leave to appeal is successful and leads to the annulment of the contested judgment and the referral of the legal dispute back to the court of appeal in accordance with Section 544 (9) ZPO. The contested judgment is based on a violation of the plaintiff’s right to a fair hearing under Article 103 (1) of the German Constitution.

  1. In support of its decision, the Court of Appeal stated, among other things, that there was no room for the hearing of witnesses Z. and G., who had been named in the first instance in the statement of October 29, 2014, as requested in the statement of March 26, 2019, in accordance with Section 520 (3) ZPO. This is because the regional court’s failure to hear the two witnesses was not objected to in the grounds of appeal. Thus, at this stage of the proceedings, there is no longer any room to make up for the evidence that was not taken at first instance.
  1. The complaint against denial of leave to appeal rightly asserts that the plaintiff’s constitutionally protected right to a fair hearing was violated by the rejection of his repeated request to hear the witnesses Z. and G. in the appeal instance – after expiry of the time limit for filing the grounds of appeal. The non-consideration of a significant offer of evidence violates Article 103 (1) of the Basic Law if it is not supported by procedural law (established case law, see only Senate decision of May 28, 2019 – VI ZR 328/18, VersR 2020, 317 para. 5 with further references). This is the case here because the opinion of the Court of Appeal that there is no room for the examination of witnesses pursuant to Section 520 (3) ZPO is manifestly erroneous (see Senate decision of September 24, 2019 – VI ZR 517/18, VersR 2020, 379 para.

    a) If the appeal is admissible, then according to the case law of the Federal Court of Justice, the entire procedural material of the first instance, which is evident from the files, is generally transferred to the appeal instance without further ado (BGH, judgments of March 12, 2004 – V ZR 257/03, BGHZ 158, 269, 278; of March 19, 2004 – V ZR 104/03, BGHZ 158, 295, 309; of September 27, 2006 – VIII ZR 19/04, NJW 2007, 2414 para. 16). Accordingly, submissions that were not rejected at first instance become part of the proceedings at second instance without further ado; in principle, there is no need for a new submission in this respect (Senate decision of September 24, 2019 – VI ZR 517/18, VersR 2020, 379 para. 8). The court of appeal must take into account all specific indications that cast doubt on the accuracy or completeness of the factual findings, which have their basis in the submissions of the parties at first instance, even if the appellant has not made the ignoring of this submission the subject of an appeal. If the court of appeal notices, for example when examining other complaints on appeal, that the court of first instance has ignored a fact that is important for the assessment of evidence or a significant offer of evidence, then even without a complaint to this effect, there are concrete indications of doubt as to the correctness of the findings that are relevant to the decision, which oblige the court of appeal pursuant to Section 529 Para. 1 no. 1 half-sentence 2 ZPO (Federal Court of Justice, judgment of March 12, 2004 – V ZR 257/03, BGHZ 158, 269, 279).

Nothing else results from the commentaries on Section 520 (3) ZPO cited in the appeal judgment (Reichold in Thomas/Putzo, ZPO, 39th edition, Section 520 para. 23; Heßler in Zöller, ZPO, 32nd edition, Section 520 para. 41). This is because Section 520 (3) sentence 2 ZPO and the commentaries on this only concern the content requirements to be placed on the grounds of appeal. However, if even one complaint meets these requirements, the appeal is admissible – in relation to one and the same matter in dispute. According to the aforementioned case law, the duty of the court of appeal to examine the case also extends to other specific indications of doubt as to the accuracy and completeness of the factual findings. (…).

Conclusion

In the interests of his clients, every lawyer is well advised to always have this case law of the Federal Court of Justice to hand if a Higher Regional Court – once again – attempts to “dismiss” an appeal on the grounds that the grounds of appeal were limited to a specific point of attack that did not apply in the specific case.

Please also read my contribution on the often unjustified rejection of party submissions by the courts of appeal!

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Vertragsgestaltung im Vertragsrecht – klare Regelungen

Possibilities of contesting a settlement concluded in court

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Overview of the types of court settlements

The Code of Civil Procedure provides for two ways of reaching a settlement with the help of the court:

  • On the one hand, a court settlement can be reached during the oral hearing. In this case, the settlement negotiated during the hearing is recorded by the court in the minutes of the hearing and must then be approved by the parties or their representatives. The approval must also be recorded in the minutes.
  • On the other hand, a court settlement can also be concluded by the parties submitting a written settlement proposal to the court or accepting a written settlement proposal from the court in writing to the court. The court then determines the conclusion and content of the settlement by means of an order.

Effect of the settlement agreement

The settlement effectively concluded in one of the aforementioned ways generally leads to the termination of the legal dispute.

In its ruling of 14.7.2015 (case no. VI ZR 326/14; NJW 2015, 2965), the BGH summarized the legal nature and effect of a court settlement:

“(…)

A court settlement has a dual legal nature. On the one hand, it is a procedural act that ends the legal dispute and whose effectiveness is determined according to procedural law principles. On the other hand, it is a private legal transaction to which the provisions of substantive law apply and with which the parties settle claims and liabilities (BGHZ 164, 190 [193 f.] = NJW 2005, 3576 mwN; cf. also BGHZ 142, 84 [88] = NJW 1999, 2806; BGHZ 79, 71 [74] = NJW 1981, 823; BGHZ 41, 310 [311] = NJW 1964, 1524; BGHZ 28, 171 [172] = NJW 1958, 1970; BGHZ 16, 388 [390] = NJW 1955, 705; OLG Hamm, NJW-RR 2012, 882). Procedural acts and private legal transactions are not separate. Rather, the procedural effects and the substantive legal agreements are interdependent (BGHZ 164, 190 [194] = NJW 2005, 3576; BGHZ 79, 71 = NJW 1981, 823). The court settlement is only effective if both the substantive legal requirements for a settlement and the procedural requirements for an effective court action are met. If one of these requirements is not met, there is no effective court settlement; the effect of ending the proceedings does not occur (BGHZ 164, 190 = NJW 2005, 3576; see also BGHZ 16, 388 = NJW 1955, 705). This also applies to the court settlement within the meaning of Section 278 VI ZPO (see BT-Drs. 14/4722, 82; BAGE 120, 251 = NJW 2007, 1831 para. 15; OLG Hamm, NJW-RR 2012, 882; Assmann in Wieczorek/Schütze, ZPO, 4th ed., Section 278 para. 79; Thomas/Putzo/Seiler, ZPO, 36th ed., Section 794 para. 2 f.).

(…)”

Dispute over the effectiveness of the settlement

In practice, it happens time and again that one party attempts to challenge the validity of the settlement reached.

The starting point here (see the BGH ruling cited above) is that the court settlement is of a dual nature, with the result that grounds for invalidity can arise on two levels. A distinction must therefore be made between two types of conceivable defects:

Level 1: Process-related defects

On the one hand, the court settlement is a litigation contract and could suffer from procedural defects.

The most frequent deficiency at this level is the incorrect logging of the contents of the comparison.

Level 2: Material defects

The court settlement is also a “normal” substantive legal contract between the parties with which they wish to end or settle their dispute.

This contract may also suffer from defects, e.g. in such a way that one of the parties was in error when making the declarations enabling the settlement. Under certain circumstances, this would enable it to contest the settlement on the grounds of error in accordance with Section 119 BGB. The case of Section 779 BGB (error regarding the basis of the settlement), which is expressly regulated by law, also comes into consideration. A right of adjustment may also arise from the point of view of interference with the basis of the transaction (Section 313 BGB)

Procedural consequences of a settlement challenge

If a party asserts defects in the settlement to the court, this leads to the continuation of the proceedings and the examination of the asserted defects by the court.

A distinction must then be made:

  • If the court finds procedural defects, this means that the court settlement is invalid. The legal dispute is still pending. A special situation arises in cases in which the parties had initially reached a substantively effective agreement and this agreement was subsequently incorrectly recorded in the minutes. This is because the merely erroneous recording does not eliminate the previously valid agreement.

    And even in other cases of a court settlement that is ineffective for procedural reasons, it may be contrary to good faith (Section 242 BGB) if a party invokes the procedural defect due to contradictory behavior. The BGH assumed this as follows in the judgment cited above:

    (…)
    However, in accordance with the principle of good faith (§ 242 BGB), the plaintiff cannot invoke the fact that the settlement determined by the appellate court pursuant to § 278 VI 2 ZPO was not valid in procedural terms.

    The principle of good faith also applies in procedural law (…).
    Contradictory behavior of a party (venire contra factum proprium) in the process can be an abuse of rights and therefore inadmissible (…).

    Contradictory conduct is an abuse of rights if a situation of trust has arisen for the other party or if special circumstances make the exercise of rights appear to be contrary to good faith (…). According to the established case law of the BGH, the exercise of rights may be inadmissible if, for example, the overall picture of contradictory conduct arises objectively because the earlier conduct is objectively incompatible with the later conduct and the interests of the other party appear to be primarily worthy of protection in view of this (…).

  • If the court finds material defects that result in the settlement being null and void (i.e. initially ineffective), the situation is as if the settlement had never existed.

    The proceedings continue as normal because the legal dispute was never actually concluded.

  • In cases in which the settlement was initially effective and is only called into question or has become ineffective ex nunc due to circumstances occurring later, e.g. due to a disruption of the basis of the transaction, the situation is more complex because the settlement initially had the effect of terminating the settlement.

    It is then correct to conduct a new trial, as there is no legal basis for reviving the old trial, which has been effectively terminated in the meantime. If the court comes to the conclusion that there are no defects, it will determine the effect of the settlement in terminating the proceedings by means of an appealable judgment.

CONCLUSION

Anyone who believes that the involvement of the court ensures a “clean” settlement is mistaken!

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Quotes

On the bias of judges in civil proceedings: If judges do not read a party’s pleadings, this can justify a motion for recusal!

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Following my overview article on the application for bias according to § 42 ZPO I would like to report on an interesting judgment by the Higher Regional Court of Karlsruhe. According to this ruling, a judge’s failure to read the pleadings submitted by a party can give rise to concerns of bias. In the case in question, a judge had overlooked an application for recusal directed against him, as he had forwarded the pleading containing it unread to the opposing party for comment. This violates the so-called duty to wait pursuant to Section 47 (1) ZPO, according to which only “official acts that cannot be postponed” are permitted from the filing of an application for recusal until it has been dealt with

In its decision of 11.05.2022 (Ref. 9 W 24/22), the Higher Regional Court of Karlsruhe rightly ruled that a judge must read written pleadings! In its decision of 11.05.2022 (case no. 9 W 24/22), the Higher Regional Court of Karlsruhe made a very instructive statement on the criteria by which the question of bias is to be assessed:

In its decision of 11.05.2022 (Ref. 9 W 24/22), the Higher Regional Court of Karlsruhe rightly ruled that a judge must read written pleadings! In its decision of 11.05.2022 (case no. 9 W 24/22), the Higher Regional Court of Karlsruhe made a very instructive statement on the criteria by which the question of bias is to be assessed:

“(…) There are circumstances which are suitable to justify mistrust of the impartiality of the challenged judge at the Regional Court … justify.

1. the decisive factor is whether, from the point of view of a party, there is reason to doubt the impartiality and objective attitude of the judge when all circumstances are reasonably assessed. Only objective reasons come into consideration, although these must be considered from the perspective of the party. The circumstances of the individual case, which must be assessed in their entirety, are decisive. (See Zöller/Vollkommer, Code of Civil Procedure, 34th edition 2022, Section 42 ZPO para. 9 et seq. with case law references).

2. a concern of bias arises from the violation of the recused judge’s duty to wait pursuant to Section 47 (1) ZPO. According to the defendant’s motions for recusal, the recused judge was not authorized to issue the orders of 22.11.2021 (I, 208) and 03.12.2021 (I, 319). From the relevant perspective of the defendant, the violations allow the conclusion to be drawn that the judge clearly lacked diligence in perceiving and considering the defendant’s submissions (cf. on this aspect Zöller/Vollkommer, loc. cit., Section 42 ZPO para. 24 with case law references). From the defendant’s perspective, the infringements give rise to the fear that the rejected judge might not take the defendant’s submissions seriously in an appropriate manner, even in the event of a subsequent decision on the merits.

a) The violations by the rejected judge are serious. The duty to wait pursuant to Section 47 (1) ZPO is not merely of a formal nature; rather, it is an expression of the principle of the statutory judge, which is essential for civil proceedings. Official acts that cannot be postponed are not apparent in the orders of 22.11.2021 and 03.12.2021 and were not asserted by the rejected judge. The motions for recusal were, insofar as procedural errors by the judge in the period prior to the statement of defense were criticized, also admissible from the perspective of the recused judge and not an abuse of law. The orders of 22.11.2021 and 03.12.2021 were therefore not based on an incorrect, but justifiable, legal opinion of the judge (see BGH, decision of 07.03.2012 – AnwZ (B) 13/10 -, cited in Juris).

b) The double overlooking of the motions for recusal by the rejected judge is not comprehensible in the course of normal processing. (…)

The rejected judge’s reference that he only looked at the table of contents when responding to the complaint does not change anything. This does not meet the legitimate expectations of a party, regardless of the length of the pleading. Rather, the provision in section 139 (1) sentence 3 ZPO assumes – irrespective of the judge’s workload – that the judge constantly keeps an eye on the receipt of written pleadings to ensure appropriate procedural support (see Zöller/Greger, loc. cit., section 139 ZPO para. 4 c with references). This requires prompt knowledge of the content of the respective pleading.

Moreover, the judge’s reference to the table of contents of the statement of defense is not sufficient to explain the (first) breach of the duty to wait in the order of 22.11.2021. It is clear from the table of contents that the statements in the statement of defense “on the merits” do not begin until page 7, so that the judge had to expect other procedural statements at the beginning of the pleading (before the statements on the merits), which from the perspective of the defendant’s legal representative may have been of primary importance. The rejected judge also took note of the table of contents only incompletely at best, as the statement of defense was never served on the defendant (cf. I, 1 d) kk) of the table of contents).

In connection with the application for recusal, the defendant rightly points out that Judge at the Regional Court … as the representative of the recused judge promoted the proceedings in the main action by the orders of 10.01.2022 (I, 328) and 08.02.2022 (I, 342), although she was not authorized to do so pursuant to Section 47 (1) ZPO. If it had been a matter of an action that could not be postponed, only the dismissed judge, Judge at the Regional Court …, would have been authorized to decide on these measures himself. From the perspective of the defendant, the question arises as to whether the recused judge – in connection with his own violations of § 47 (1) ZPO – was of the incorrect opinion that, according to the recusal motion, the judge at the Regional Court … as his representative could promote the proceedings in the main action by taking appropriate measures until the final decision on the application for recusal.

c) An “obvious mistake” does not preclude the judge’s recusal.

a) According to the official statement of the dismissed judge dated 12.01.2022, it can be assumed that the violations of Section 47 (1) ZPO were due to an oversight (double overlooking of the motions for recusal). However, there are certain doubts as to whether this oversight was obvious from the relevant perspective of the defendant (see, for example, OLG Brandenburg, NJW-RR 2000, 1091, on an obvious oversight in the event of a breach of Section 47 (1) ZPO), or whether, from the defendant’s perspective, the possibility that the rejected judge did not take his duty to wait seriously was to be expected. However, this question is irrelevant for the decision of the Senate.

b) Even if one were to assume an obvious oversight on the part of the rejected judge, from the defendant’s perspective there are reasonable doubts as to the impartiality of the judge. This is because the oversight can only be explained by an evident lack of diligence on the part of the judge (see above in detail). This means that, from the defendant’s perspective, the errors of the rejected judge justify the fear that the rejected judge might not take sufficient account of the defendant’s submissions and viewpoints and take them seriously in the further conduct of the proceedings, in particular in a subsequent decision on the merits.”

Conclusion

These statements show once again that concerns about a judge’s bias must be assessed from the perspective of the affected party, who cannot know what is really going on in the judge responsible. In the present case, the party concerned had rightly perceived the double “overlooking” of an application as grossly negligent. In such a case, it no longer matters whether the judge was negligent “by mistake”.

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