## Facts

- In January 1952, a landowner (lessor/plaintiff) leased land for the mining of quartzite and other fireproof materials to a mining company (lessee/defendant).
- The lease required the lessee to (i) pay the lessor a “material levy” for each ton of quartzite rock and sand extracted and (ii) re-level specified worked areas.
- The material-levy clause set a per-ton amount and tied adjustments to quarry-worker wages, but also provided that the levy would not fall below a stated minimum amount per ton.
- In May and November 1955, the parties executed an arbitration agreement tied to the 1952 lease. It stated, in substance, that differences of opinion or disputes “arising from” the lease would not be litigated in court and would be decided by arbitration under the arbitration provisions of the Code of Civil Procedure (Art. 1025 ff. ZPO).
- In 1958, the lessor consulted the Landeszentralbank regarding whether the material-levy clause required approval under the Currency Law as a value-guarantee clause. The Landeszentralbank indicated approval was required and that the agreed minimum payment was an obstacle to approval.
- The lessor filed a court action seeking performance of the re-leveling obligation.
- The lessee objected that the dispute had to be referred to arbitration and also argued that, if the material-levy clause was invalid under the Currency Law, the entire lease was null and void, eliminating the re-leveling claim.
- The Regional Court granted the lessor relief.
- On appeal, the Court of Appeal (OLG Köln) refused to compel arbitration. It treated the material-levy clause as a non-approvable value-guarantee clause under the Currency Law, concluded the refusal of approval made the lease void under § 139 BGB, and further concluded that § 139 BGB also rendered the arbitration agreement void.
- The lessee appealed on points of law (Revision) to the Bundesgerichtshof (Federal Supreme Court, BGH).

## Issues

1. Does an arbitration agreement providing that disputes “arising from” a contract are to be decided under Art. 1025 ff. ZPO authorize arbitrators to decide whether the underlying contract is effective and, if it is ineffective, the legal consequences?
2. If the underlying contract is alleged (or held) to be void under § 139 BGB because a substantive clause violates the Currency Law, is the arbitration agreement necessarily void as well?

## Decision

- The BGH held that, in cases of doubt, an agreement to arbitrate disputes “arising from” a contract under Art. 1025 ZPO is to be read as extending to disputes about whether the contract is effective and, where applicable, the consequences of its ineffectiveness.
- The BGH rejected the Court of Appeal’s approach that treated the arbitration agreement as automatically invalid merely because the underlying lease might be void under § 139 BGB.
- The validity question raised by the Currency Law objections to the material-levy clause was a dispute allocated to arbitration by the parties’ agreement, rather than a reason for the courts to decide the merits first.
- The BGH therefore overturned the refusal to give effect to the arbitration agreement and required the dispute to proceed in arbitration rather than in court.

## Legal Principles

- An arbitration agreement connected to a contract is not treated as automatically falling with the contract’s possible invalidity; it can stand as a separate procedural agreement.
- Where parties agree that an arbitral tribunal shall decide disputes “arising from” a contract (and refer to Art. 1025 ff. ZPO), that agreement is normally read to include disputes over the contract’s effectiveness and the consequences if it is ineffective.
- Courts should not decide the merits of contract validity when the parties have assigned that validity dispute to arbitration, absent a clear contractual carve-out.

## Conclusion

The Bundesgerichtshof enforced the parties’ arbitration agreement and held that a broadly worded clause covering disputes “arising from” the lease, tied to Art. 1025 ff. ZPO, authorizes arbitrators to decide both whether the lease is effective (including challenges based on the Currency Law and § 139 BGB) and what follows if it is ineffective, so the courts could not keep the re-leveling dispute for judicial determination.


Judgment of 27 February 1970, 6 Arb. Int’l 79 (1970)