German court rules lack of signature and failure to state a reason can lead to invalidity of arbitral award

Under German law, it suffices that an arbitral award rendered by more than one arbitrator is being signed by the majority of the arbitrators if reasons for the absence of a signature are provided. In a decision of 27 April 2023, the Higher Regional Court of Frankfurt ruled that the note on the signature page of an arbitral award stating that the signature of an arbitrator could not be obtained is an insufficient explanation and leads to the invalidity of the award.

One signature missing on award’s signature page

The Higher Regional Court Frankfurt am Main was asked to consider whether to set aside an arbitral award or alternatively to declare it null and void. The underlying arbitration administered by the ICC concerned a post-M&A dispute. Under the arbitration agreement, the arbitral tribunal was composed of three arbitrators, two of whom were appointed by the parties and the third selected by the co-arbitrators. The arbitrators' final award, dated 10 August 2022, dismissed the Claimant's arbitration claim. On the signature page of the final award, the signature of the co-arbitrator appointed by the applicant was missing and the signature field contained the typed note "signature could not be obtained". 

Court found award to be invalid

The Frankfurt Higher Regional Court found that this note was not sufficient for the award to be considered formally valid pursuant to Section 1054 I 2 of the German Code of Civil Procedure (ZPO). According to the court, the award was invalid. The court therefore dismissed the application for setting aside as inadmissible and held that the alternative application for a declaration of invalidity of the award was admissible and well-founded.

Pursuant to Section 1054 I ZPO, an arbitral award must be made in writing and signed by the arbitrator or arbitrators. In arbitral proceedings with more than one arbitrator, the signatures of the majority of the members of the arbitral tribunal suffice, provided that the reason for any missing signature is stated. 

Signatures fulfil different objectives

According to the Frankfurt court, this provision serves different purposes. First, the signature of the award ensures that the arbitrators assume responsibility for the award and its proper issuance. Second, the signature documents that the award corresponds to the result of the tribunal’s deliberations. The court added that the reason for the absence of an arbitrator’s signature is potentially significant for set-aside proceedings (e.g. if the non-signing arbitrator was prevented from participating in the deliberations) and cannot be dispensed with.

The court found that the “signature could not be obtained” merely indicated that the signature was missing, but did not state the reason. This led the court to conclude that the formal requirements of Section 1054 I ZPO were not met. While not decisive in the present case, the court also pointed out that it needs to be clear from the award who assumed responsibility for stating the reason for the absence of an arbitrator’s signature.

Finally, the court added that in the absence of a valid arbitral award the arbitral proceedings are not yet concluded.

Different possibilities to remedy the formal deficiency

While the decision is likely to be appealed to the German Federal Supreme Court, it raises the interesting question of whether and how the formal deficiency of the award can be remedied. There are three possibilities:

• The arbitrator who did not sign the final award does so now. Given that the arbitration is not yet concluded and the tribunal still in place, it can still issue a valid final award.
• The two arbitrators who signed the invalid award make another attempt to obtain the third arbitrator’s signature and, if they fail to obtain it, issue and sign another award in which they indicate the reason for the absence of the third arbitrator’s signature.
• The applicant initiates a legal action against the non-signing arbitrator before a state court and seeks a ruling compelling the arbitrator to sign the award. Legal commentators are not in agreement whether such an action would be admissible given that an award can be validly issued by the majority without an arbitrator’s signature as long as the reason for the absence of this signature is indicated.

For more information on this ruling and how it could affect your German-based arbitration, contact your CMS client partner or these CMS experts: Tilman Niedermaier, Marcus Weiler