No German International Jurisdiction for Administrative Fees of a Foreign State

The BGH decided on October 4, 2005 (re VII ZB 9/05, not officially published), upon a claim of the Russian Federation to enforce payment of administrative fees for fly-by permissions.

The creditor founded in 1990/91 together with a Russian administrative office for aviation in St. Petersburg a US-American joint-stock corporation. Having no extra-judicial success for collection, the creditor had legal recourse at the International Arbitrary Court. This court had jurisdiction in accordance with the bilateral treaty between Germany and the Union of Socialist Sowjet Republics on Mutual Protection of Investments of 1989. So, they had recourse at the International Arbitrary Court. The International Arbitrary Court gave a reward that the creditor was to pay USD 2.35 mill. on fees and interest. Berlin’s Supreme Civil Court acknowledged this award as permissible for execution in Germany. Upon applying to seize claims on fees for fly-by permissions the third-party debtor and the debtor both appealed.

They argued that German courts had no international jurisdiction. The court of appeal argued that the application of execution was not permissible lacking distinction because the creditor wanted to also seize “further claims". Furthermore, the permission of rights for fly-bys or transits are not subject to enforceability because these were foreign sovereign rights, which means that the claims are not domestically located and therefore not subject to German jurisdiction. This would have to be considered if the foreign sovereignty renounced its immunity. Subordinating itself to an arbitrary award, shows some renouncement but only for the arbitration. In addition, referring to the UN Treaty of Recognition and Enforcement of Foreign Arbitrary Awards of June 10, 1985, the Higher Regional Court of Cologne also stated that the rules to determine location of claims had not yet been totally clarified, and that an appeal on this question was to be permitted.

Surely, every court must have competence to legally decide something; this is called (domestic) jurisdiction. International jurisdiction has to be tested in cases with foreign elements. German courts will have international jurisdiction for execution whenever property on domestic territory is to be seized. If place of execution is to be abroad then theoretically permission of the other state is required. Practically, foreign courts will govern execution on their territory and German courts will only deny their jurisdiction. The question if property located in the country of execution will be answered by the lex fori, i.e. court of recourse in the matter. A claim is domestically located if there are sufficient connections to home.
As Russia stated in court, the fees to be collected were to be allocated by the aviation office for the administration of air traffic. The qualification of a claim if it arises from sovereign rights or not is answered by the law of the court judging the case – i.e. German law. Administration of air traffic is in the understanding of German law purely administrative law, so that the fees for fly-by rights were also a matter of sovereignty. This now shows that the connections of this claim point directly to Russia and they were, therefore, foreign claims. Germany does not have jurisdiction over foreign claims. Therefore, German courts may not seize fly-by or similar rights.
Did subordination under the UN-Execution Treaty imply that sovereignty in regard to the arbitrary award was waived? Following the regulations of this treaty, awards issued in accordance with the treaty must be acknowledged and executed if local procedural rules do not result in essentially higher costs as local arbitrary awards (Art. 3, 10 IV UN-Execution Treaty). International treaties are to be construed that the envisaged goal can be reached and not go beyond that goal. Following these premises, subordination under the UN-Execution Treaty means that the state does not in total give up its sovereignty but only for these proceedings. It only opens the general possibility for execution but does not renounce state sovereignty in general. Relating to local procedural rules means to also obey international law – i.e. law on diplomatic protection.

Does this mean that execution is always impermissible against a foreign state? No. Impermissible are acts of state force that infringe on a state’s immunity. What can that be? An example would be seizing payments for overpaid operating costs from renting an office space.




Published on the old CMS: 2006/8/2
Read on the old CMS till November 2008: 375 reads