The action for a negative declaratory judgment to prevent a foreign action is relevant in the following case constellation, which in the author’s experience is not uncommon:

If a dispute arises with a foreign business partner, e.g. regarding alleged claims arising from a contract, it is advisable from the perspective of the German contractual partner to think about possible procedural scenarios at an early stage in the event that an agreement fails. If, contrary to the agreements made, it is to be expected that the foreign partner intends to file a lawsuit in the home country, you should immediately consider filing a preventive so-called negative declaratory action at the agreed German place of jurisdiction. This is suggested by the fact that the legal costs abroad are usually considerably higher than in Germany. In addition, the German partner will usually lack a suitable legal contact in the country concerned.

Such an action, which is intended to prevent foreign proceedings, would be aimed at establishing that the claims asserted by the foreign partner do not exist.

The following article provides an overview of what needs to be taken into account in an action for a negative declaratory judgment to prevent a foreign action.

Starting point: Be faster!

In order not to fundamentally jeopardize the chances of success of the intended action for a negative declaratory judgment, you should definitely be quicker than the foreign partner in order to avoid the objection of another international lis pendens that would oppose the action for a negative declaratory judgment.

The consideration of a conflicting international lis pendens requires that the parties in both proceedings are identical, that the subject matter of the dispute is identical and that the foreign lis pendens occurred prior to the lis pendens before a German court (priority principle).

Lis pendens arises upon effective service of the respective action. It is therefore not sufficient to file the action for a negative declaratory judgment with the court as quickly as possible. It is also necessary for the action to reach the other party in a legally effective manner. It is therefore advisable not to simply leave the service of the action for a negative declaratory judgment to the German court seized and wait. It has proven to be a good idea to contact the competent judge directly and coordinate the fastest possible service with him.

Jurisdiction of the German court

The defense against an action for performance abroad by means of a negative declaratory action only has a chance of success if the German court would actually have jurisdiction for the action for performance from a legal perspective.

The jurisdiction of the German court generally follows from the prevailing principle that the plaintiff in an action for a negative declaratory judgment can bring an action at his place of residence or business, i.e. where, conversely, the action for performance would have to be brought against him (Volkommer in: Zöller, ZPO, 29th edition 2012, Section 12 marginal no. 3).

A jurisdiction agreement according to which the parties have agreed on a place of jurisdiction at the registered office of the German business partner would additionally or alternatively establish the jurisdiction of the German court:

Agreements on the place of jurisdiction generally stand up to a review of the content of general terms and conditions in accordance with Section 307 BGB: It is already recognized in national legal transactions that the jurisdiction clauses expressly provided for in Section 38 ZPO between entrepreneurs are in principle not objectionable (see for example OLG Schleswig, decision of 21. 6. 2006, Ref.: 2 W 88/06; OLG Karlsruhe NJW 1996, 2041). In international legal transactions, the need for jurisdiction agreements is even greater. This is because only through them can the parties determine in advance the procedural law and thus indirectly also the relevant substantive law according to which the effectiveness of the contractual provisions is determined. Jurisdiction agreements are at the heart of every transnational contract. In principle, jurisdiction clauses in general terms and conditions are therefore neither surprising nor inappropriate in terms of their content, even more so in international legal relations (see Wurmnest in: Münchener Kommentar zum BGB, 6th edition 2012, Section 307 para. 249).

Special case: Several German plaintiffs

In the event that there are several parties on the German side, only one of which can invoke a jurisdiction agreement, the Munich Higher Regional Court has made a welcome decision. The Munich Higher Regional Court correctly stated (decision of 18.08.2009, ref.: 31 AR 355/09):

“If, exceptionally, the plaintiff is permitted to bring an action at his place of residence, several plaintiffs may, as active parties to the dispute, choose from among the various courts of the plaintiffs’ place of residence even if the plaintiff’s place of jurisdiction is not exclusive (here: plaintiff’s place of jurisdiction for an action for a negative declaratory judgment).”

It can be deduced from this that other plaintiffs can join a negative declaratory action permissibly brought in Germany, provided that the subject matter of the dispute is the same.

Existence of an interest in a declaratory judgment for a negative declaratory action to prevent a foreign action

In addition to the jurisdiction of the German court, a negative declaratory action to prevent a foreign action requires the plaintiff to have an interest in a declaratory judgment.

The interest in a declaratory judgment required for a negative declaratory action regularly arises if the defendant is aware of a claim (see e.g. BGH NJW 2008, 2842).

In the present constellation, the plaintiff’s aim is to prevent an action for performance abroad. At the same time, he would like to create legal certainty with regard to the claims asserted by the foreign partner.

This sufficiently justifies an interest in a declaratory judgment to file a negative declaratory action.

No loss of interest in declaratory judgment – exceptionally no subsidiarity of the negative declaratory action if the action for performance is inadmissible

According to the correct view, the initially justified interest in a declaratory judgment does not cease to exist if the foreign defendant brings an action for performance before his home court.

In the present constellation, such an action for performance would not be suitable to supersede the action for a negative declaratory judgment. It does not take precedence, as no decision on the merits can be made on the action for performance, as the action for performance is inadmissible due to the lack of jurisdiction of the foreign court.

Principle: Priority of the action for performance

The subsidiarity of the action for a negative declaratory judgment vis-à-vis an action for performance on the same subject matter is a fundamental principle of procedural law and is justified by considerations of procedural economy and legal protection(Foerste in: Musielak, Kommentar zur ZPO, 10th edition 2013, Section 256, para. 16).

The requirements for this principle were already formulated by the Reichsgericht and have been carried forward by the highest courts and literature (instead of all: judgment of the BGH of December 21, 2012, X ZR 17/03).

Accordingly, the interest in a declaratory judgment does not automatically cease to exist due to the filing of an action for performance. Rather, it must be examined in each individual case whether the action for performance is suitable for displacing the already ongoing proceedings for a declaratory action or whether there are recognized exceptions to the principle of subsidiarity that require the continuation of the proceedings (judgment of the Reichsgericht of 25 March 1936, page 69 at the top).

Exception: No judgment on the merits could be issued on an action for performance

The essential prerequisite for displacing the negative declaratory action that was first pending is that the action for performance can produce a judgment on the merits.

The Reichsgerichtshof has made a fundamental statement in this regard (judgment of the Reichsgericht of March 25, 1936, page 69 at the bottom):

“(… It depends) solely on the fact that at the time of the final hearing in the present legal dispute it could be assumed that the Berlin legal dispute [note: action for performance] would lead to a substantive decision.”

The reason for ousting the action for a negative declaratory judgment is therefore that the decision on the action for performance renders the action for a declaratory judgment superfluous and the proceedings therefore no longer need to be continued. However, this circumstance must also be compelling in order to justify the termination of the ongoing proceedings.

The Federal Court of Justice stated (BGH ruling of October 18, 1967, para. 63):

“It is conceivable that the interest in a declaratory judgment is eliminated in an action for a declaratory judgment denying performance if the opponent brings an action for performance of the claim whose non-existence is to be determined and can no longer unilaterally withdraw this action (RGZ 151, 65 f). However, this can only apply if the action for performance clarifies the legal relationship in dispute in a way that is just as suitable from a procedural point of view as the action for a declaratory judgment denying the claim, i.e. if a declaratory judgment is no longer required to eliminate the uncertainty.”

Only if the dispute can be decided on the merits as part of the action for performance does the interest in a declaratory judgment no longer apply and the action for performance takes precedence(Becker-Eberhard in: Münchener Kommentar zur ZPO, 4th edition 2013, Section 256, para. 61). The priority effect of the action for performance therefore requires a judgment on the merits. A judgment on the merits can only be issued if the action for performance is admissible. An inadmissible action does not result in a judgment on the merits. For this reason, the inadmissible action for performance has no effect.

This was expressly stated by the Federal Court of Justice (BGH, judgment of December 11, 1996 – VIII ZR 154/95):

“By way of exception, the interest in a declaratory judgment does not cease to apply if […] the counterclaim for performance […] filed in the appellate instance is inadmissible.”

It follows that an inadmissible action for performance has no priority effect.