Company A, solely owned by the claimant, sold to the defendants, two natural persons, the entire shares of Company B, which owned the entire shares of Company C. On the same date, Companies B and C entered into a contract with the claimant and Company D, wholly owned by the claimant, whereby Company D would act as consultant to Companies B and C for a development project on land owned by the latter two companies. Claimant and Company D failed to satisfy their obligations under the consulting agreement, whereupon the defendants withdrew, realizing that the project would never be achieved. The claimant brought arbitration proceedings against the defendants for breach of contract and subsequently sought to make Companies B and C parties to the arbitration. The ICC International Court of Arbitration decided under Article 8(3) of the 1988 ICC Rules of Arbitration that the case should proceed only with regard to the defendants, but not with regard to Companies B and C. In the ensuing proceedings, the defendants argued that the arbitral tribunal lacked jurisdiction under the arbitration clauses in the sales and consulting agreements.

'Having heard the parties' arguments . . . and taking in consideration all their briefs the Arbitral Tribunal has to decide whether the claim against the . . . Joint Defendants is admissible.

A) The admissibility of the claim is denied by the majority of the arbitrators based on the following deliberations:

1. Claimants Petitum of . . . is exactly what should be paid as "Consideration" (§ 3) and "Profit Sharing" (§ 4) under the Consulting Agreement . . . Therefore the alleged breach of contract could only refer to this contract i.e. the Consulting Agreement.

2. A claim based on the breach of this contract could only be filed against someone who is party to this contract as far as substantive law is concerned. As to the procedure an Arbitral Tribunal has only jurisdiction over such a claim if the parties have signed the arbitration clause.

a) The Consulting Agreement was concluded between [Company D], [Company B] and [Company C] and [Claimant] . . . One of the Joint Defendants . . . signed the Agreement but not as a party to the contract. He signed on behalf of the two companies [B] and [C]. These corporations are parties to the contract but - pursuant to the decision of the International Court of Arbitration . . . - cannot be defendants in this arbitration . . .

b) Therefore a claim against the [Defendants] based on the Consulting Agreement could only be founded if they could be treated as a party of the Consulting Agreement although they did not sign it.

Claimant takes this position. He argues that "the doctrine of piercing the corporate veil provides the possibility of disregarding the formal separation of two legal entities" . . . In this context Claimant refers also to the "doctrine of patrimonies confusion" . . . and the doctrine of the "Durchgriff" for both quoting some older German publications . . .

3. It is true that the German law - applicable and therefore only relevant in this arbitration - knows the doctrine of piercing the corporate veil. Although disputed in scholarly writing the major handbooks acknowledge this doctrine and so does the Federal Court in its rulings (e.g. BGHZ 22, 226, 230 s.; 61, 380, 383 s.; 78, 318, 333 s.). However, the principle is the separation of the legal entity ("Juristische Person") from the individuals behind it ("Trennungsprinzip"). Therefore the doctrine of lifting or piercing the corporate veil ("Durchgriff") is the "ultima ratio" (Lutter, Holding Handbuch, 1995, p. 256; BGHZ 61, 380, 383: "Über die Rechtsfigur einer juristischen Person darf deshalb nicht leicht hinwegegangen werden") and only can be applied if certain requirements are met. What these requirements are and whether they are cumulative or alternative is controversial (see for all this K. Schmidt, Gesellschaftsrecht, 2nd Edition, 1991, § 9).

a) In the case at hand we have not to look at all these controversial points. Claimant asks for compensation of damages as explicitly stated in the Request for Arbitration: "As a result of the breach of the contract by [Defendants], they must compensate [Claimant] for the damages caused . . . Compensation for damages includes not only the value of losses incurred - damages directly resulting from the contractual breach - but also the value of the profits which have not been obtained" . . .

b) The question to be answered therefore is whether the [Defendants] could be liable for damages caused by [Companies B and C]. This is a problem of the liability of the individuals behind the legal person - in German law the "Durchgriffshaftung". Rulings of the courts and German doctrine have elaborated criteria which are requirements for the "Durchgriff" such as the confusion of the spheres in personal or financial matters ("Vermögensvermischung" i.e. confusion of patrimonies - conf. BGHZ 95, 330) or lack of sufficient financial resources ("Unterkapitalisierung").

c) Here is no need to discuss these requirements in detail because there is one precondition for any kind of "Haftungsdurchgriff": To pierce the corporate veil is only necessary and permitted if the company which is originally liable is unable to fulfill its obligations because it has no assets or financial resources. Only then it could be an abuse of rights ("Rechtsmissbrauch") of the individuals behind the company by using it as a shield (BGHZ 22, 226, 230) to protect their personal assets and funds.

Neither does the Claimant maintain nor are there any grounds to suppose that [Companies B and C] are unable to fulfill financial obligations. To the contrary they own the . . . estates as explicitly asserted in the Purchase Sale and Assignment Agreement . . .

d) Given these facts it is evident that the preconditions for a liability of the [Defendants] as shareholders of [Companies B and C] ("Haftungsdurchgriff") are not met. Consequently there can be no claim against the [Defendants] based on the Consulting Agreement. Therefore a jurisdiction of the Arbitral Tribunal for this claim cannot be founded on the arbitration clause in § 5 Sect. 8.5 of the Consulting Agreement.

4. Claimant's second argument is that the Arbitral Tribunal should disregard the separation of the two contracts, i.e. the Purchase Sales and Assignment Agreement and the Consulting Agreement, and consider both as one legal transaction. The reasoning is that the aim of the whole transaction was [a development project] on the . . . estates and that the separation in several contracts with different parties was merely technical (. . . "make up a single economic unit"). Although not explicitly said the argument seems to be that the [Defendants] then would be liable also for the breach of the Consulting Agreement since this was not an independent contract.

a) The question whether separately concluded contracts could be treated as being one contract is a problem of interpretation. Interpretation of contracts in German law is regulated in two provisions of the BGB which are correlated and complementary. It is § 133 BGB ("Bei der Auslegung einer Willenserklärung ist der wirkliche Wille zu erforschen und nicht an dem buchstäblichen Sinn des Ausdrucks zu haften") and § 157 ("Verträge sind so auszulegen, wie Treu und Glauben mit Rücksicht auf die Verkehrssitte es erfordern"). Interpretation following these rules first has to look at the real intention ("wirklicher Wille") and then and only if the "wirkliche Wille" cannot be established to find out what reasonable people in this situation would have meant by using these words (conf. for all that Staudinger-Dilcher, Kommentar zum BGB, 12th Edition 1979, § 133/157 N 7 ss, N 15 ss.).

b) The interpretation has to start with the factual situation and is based primarily on the text of the contract (Palandt-Heinrichs, Bürgerliches Gesetzbuch, 55th Ed. 1996 § 133 N 14; BGH in NJW 1992, 1882; 1994, 189 and 850). The text of the contract is supposed to be complete and reflect the will of the parties (for this presumption see BGH NJW 1991, 2082).

aa) The factual situation is clearly described in the above quoted decision of International Court of Arbitration stating that there are "different contracts entered into by different parties" . . .

bb) The text of the Purchase Sales and Assignment Agreement describes in § 2 ("Sale and Purchase of Shares") and in § 3 ("Purchaser's Duties at Closing Date") the obligations of both parties. The wording is clear and not ambiguous. There is no sign in the text of the whole contract that it would be not an autonomous and independent regulation. The [development project] is mentioned in § 4 Sect. 4.6 with the duty to make the documentation available to the [Defendants]. But neither the Consulting Agreement is mentioned nor any other link to that contract or at least to the cooperation in performing the [development project] is to be found.

cc) The same is true with the Consulting Agreement. § 2 describes the obligations of the consultant ([Company A]) in detailed manner and the above . . . quoted § 3 specifies the consideration to be paid for the services rendered. Of special interest is that these "payments including all expenses that [Company A] or its employees might incur for e.g. traveling (flights, train, cars) accommodation (hotels), general living expenses, telephone, telefax etc." (Sect. 3.3 of § 3). Also § 4 which provides a profit sharing shows clearly that these are compensations for the services rendered by the consultant . . . Thus, also in the Consulting Agreement are no indications for any link to the Purchase Sales and Assignment Agreement. Instead its regulations are independent and self-explanatory.

The interpretation of the clear wording of both contracts leaves no doubt that these are different and separate contracts.

c) If the outcome of the interpretation of the wording of a contract is not ambiguous the result is normally binding. Only if special circumstances indicate that the wording does not really reflect the will of the parties the judge may look for further elements of interpretation. Those may be the "history" of the contract the behaviour of the parties or the "systematic" interpretation.

aa) The systematic aspect means that the judge has to look at the contract as a whole and examine whether the regulations match each other and make sense. It has been seen that in both contracts the obligations of the parties are well related and typically for a sales or a consulting contract.

bb) The history of the contract shows that the parties after long negotiations and deliberations decided to enter in two different contracts . . . Sometimes the history shows that the separation was not the real intention of the parties (conf. decision of the BGH, dated 23.02.1983, published in NJW 1983, 1843) because one of the contracts was only fictitious (conf. § 117 BGB). It is clear from the affidavit of Mr . . . submitted by the Claimant . . . that the concluding of the Consulting Agreement was not fictitious. Instead it was a separate legal transaction which the parties entered into. The above given analysis of the regulations of the Consulting Agreement shows that there are obligations of both parties that make sense and form the typical structure of a service contract. Therefore the Consulting Agreement cannot be qualified as a fictitious contract.

cc) Both contracts were signed on the same day. Claimant says that this separation was formal and the contracts were "linked and interconnected" . . . This may be true in an economical sense. But the parties were aware of this economical link but they decided to regulate their relation in two different contracts. Whatever the reasons may have been the interpretation of the contracts has to respect the decision of the parties. The judge has no right to "correct the parties" by interpretation. This is true as long as the interpretation of the will of the parties based on the text of their agreement comes to a clear result which makes sense even if someone else would have regulated the same matter in a different (and perhaps better) way (conf. BGHZ 20, 109). The legal base for all this is the fundamental principle of freedom of contract ("Vertragsfreiheit") and the right of self-determination in German contract law ("Privatautonomie").

d) Therefore the Arbitral Tribunal cannot disregard that there are two different contracts with different parties and separate arbitration clauses. Consequently it has no jurisdiction over the [Defendants] because there is not "one legal transaction".

5. Having taken in consideration all these aspects the majority of the Arbitral Tribunal was of the opinion that it has no jurisdiction over the [Defendants] for this claim and that therefore the claim had to be dismissed as inadmissible. . . .'