The International Arbitration Review: Austria
i The Austrian Arbitration Act: history, scope and application
Austria has a long-standing history of arbitration; the first legal provisions in the Austrian Code of Civil Procedure (ACCP) on arbitral proceedings date back to 1895. In 2006, the legislator adopted the Arbitration Amendment Act 2006,2 thereby modernising the arbitration provisions mostly based upon the UNCITRAL Model Law on International Commercial Arbitration (Model Law). Although the legislator also maintained certain provisions of the old law (e.g., Section 594(4) on the liability of arbitrators), it is fair to state that Austria considers itself to be a Model Law country. The Arbitration Amendment Act 20133 introduced a major revision to the court system with respect to arbitration-related matters (see Section I.v). Despite the term 'Arbitration Act', the Austrian arbitration law is contained in Sections 577 to 618 ACCP.
Pursuant to Section 577 ACCP, the Arbitration Act is not only applicable if the seat of arbitration is in Austria (Section 577(1) ACCP), but also in certain instances where the seat is not in Austria or has not yet been determined (Section 577(2) ACCP). Thereby, Austrian courts assume jurisdiction in arbitration matters even when the seat is not (yet) determined to be in Austria. This is the case in particular where a claim is brought despite an existing arbitration agreement (Section 584 ACCP), where interim measures are sought (granting or enforcement, or both, by Austrian state courts: see Sections 585 and 593 ACCP) and in other cases of judicial assistance (Section 602 ACCP).
ii Arbitration agreements
The definition of arbitration agreement under Austrian law (Section 581(1) ACCP) resembles that of Article 7 Model Law. Thus, an arbitration agreement may be a separate agreement or a clause contained in a main contract. Both contractual and non-contractual disputes may be subject to arbitration. The jurisprudence (which is confirmed by legal literature) derives from this provision that the following three requirements must be fulfilled for an agreement to qualify as an arbitration agreement under the law: the determination of the parties to the dispute, the subject matter of the dispute that is submitted to arbitration (which can be a certain dispute or all disputes arising out of a certain legal relationship) and an agreement to arbitrate.
Furthermore, Subsection (2) of Section 581 ACCP provides that an arbitration agreement may also be included in statutes – that is, the articles of association of legal entities such as companies or associations – as well as in a testament.
Regarding the form of an arbitration agreement, Austrian law still requires the written form (Section 583(1) ACCP). However, this does not necessarily mean that the arbitration agreement must be signed by both parties: an 'exchange of letters, telefaxes, emails or other means of communications which provide a record of the agreement' also suffices. Apart from the provision in the ACCP, it is generally accepted that Article II of the 1958 Convention on the Recognition and Enforcement of Foreign Arbitral Awards (NYC) is a uniform substantive provision in an international context. Thus, the fulfilment of this uniform standard takes precedence over any stricter requirements under national law.4
Section 582(1) ACCP defines the arbitrability ratione materiae of claims as follows: claims of an economic or financial interest that fall within the jurisdiction of the ordinary civil courts; and claims without any economic or financial interest, but for which parties may conclude a settlement agreement. Pursuant to Subsection (2), the following claims may not be subject to arbitration: claims in family law matters and certain claims related to housing law.
Although this is not a question of arbitrability in the narrow sense of the law, matters of employment law (Section 618 ACCP) or concerning consumers (Section 617 ACCP) are subject to very strict limitations and are thus dealt with under this heading. The requirements are essentially the same for both kinds of persons (consumers and employees), and can be summarised as follows:
- an arbitration agreement with a consumer or employee can only be validly concluded after a dispute has arisen;
- the arbitration agreement must be contained in a separate document signed by the consumer or employee in person. Such document may not contain any agreements other than those relating to the arbitration proceedings;
- prior to the conclusion of the arbitration agreement, the consumer or employee shall receive a written instruction on the major differences between arbitration and litigation before state courts;
- determination of the seat of arbitration and other requirements as to the venue of the hearing;
- the seat of arbitration must be at the place of the domicile of the consumer or employee unless it is the consumer or employee who relies on a seat outside of his or her place of domicile;
- further grounds for setting aside; and
- a three-instance system for setting aside claims.
In conclusion, it is very unlikely that an arbitration agreement with a consumer or an employee is validly concluded in compliance with the above-indicated requirements. Moreover, in arbitration proceedings where individuals are involved, one side might invoke the objection that the individual must be considered as a consumer under the Arbitration Act, and that the arbitral award thus runs the risk of being set aside for this reason.
iv Appointment and challenge of arbitrators
Sections 586 and 587 ACCP stipulate that the parties are free to determine the number of arbitrators and the procedure for appointing them. Absent any agreement of the parties (in particular any agreement on institutional rules) or if the parties agree on an even number, the number of arbitrators shall be three.
Section 587 ACCP stipulates the default procedure for appointing arbitrators if the parties have not reached agreement on their own procedure. Where a party fails to appoint an arbitrator, or the parties fail to jointly nominate a sole arbitrator or a chairperson, it is the Austrian Supreme Court that acts as appointing authority (see Section 615 ACCP). It is noteworthy that in multiparty proceedings, where several parties on one side, despite an obligation to do so, fail to jointly appoint their arbitrator, either party may ask the court to step in for the failing side, but not for the side that has timely appointed its arbitrator (see Subsection (5)). Section 587(6) ACCP is a catchall provision that applies if, for any reason whatsoever, an arbitrator is not appointed within a reasonable period of time.
Sections 588 and 589 ACCP govern the challenge of arbitrators in accordance with Articles 12 and 13 of the Model Law. Thus, a prospective arbitrator has a duty to disclose any circumstances giving rise to doubts as to his or her impartiality or independence. The arbitrator also has the duty to remain impartial and independent throughout the proceedings. Unless the parties have agreed on a certain procedure of challenging arbitrators (in particular by agreement on a set of arbitration rules), Section 589(2) ACCP provides for a default procedure. Irrespective of whether there is an agreed procedure of challenge or the default procedure applies, the challenging party may request the Supreme Court to decide on the challenge if it was not successful.
In numerous recent decisions of the Supreme Court, the question of whether a violation of the arbitrator's duty to disclose may constitute a ground for successful challenge has arisen. The court has confirmed this question in cases where the arbitrator has failed to disclose in a culpable way (very extreme cases). In those decisions, the Supreme Court also explicitly referred to the IBA Guidelines on Conflicts of Interest in International Arbitration as the common international standard.5
v The court system
Since the revision of the Arbitration Act in 2013, Section 615 ACCP provides that the first and final court instance to rule on setting aside claims (Section 611 ACCP) and for claims on the declaration of the existence or non-existence of an arbitral award (Section 612 ACCP) is the Austrian Supreme Court (except for matters involving consumers and matters of employment law). Previously, setting aside proceedings would have undergone three instance proceedings, like any other ordinary civil proceedings. Furthermore, the Supreme Court is also the exclusive instance on all issues regarding the formation of the tribunal and the challenge of arbitrators (i.e., the Third Title of the Arbitration Act). This 2013 revision of the Arbitration Act was preceded by controversial debates among practitioners, scholars and the judiciary. The reason is that the single instance concept is quite exceptional in the Austrian court system, as in ordinary civil proceedings there is generally not only a monetary threshold to be exceeded (€30,000), but the case to be tried before the Supreme Court must also touch upon a question of substantive or procedural law that is considered to be essential for legal unity, legal certainty or legal development. However, under Section 615 ACCP, any arbitral award rendered in Austria may be challenged before the Supreme Court. Another reason why the 2013 revision is considered to be a slight revolution in the court system is the fact that the Supreme Court itself must conduct evidentiary proceedings where necessary, including the examination of witnesses.
Although not required under the law, the revision of 2013 prompted the internal organisation of the Supreme Court to establish a specialised chamber (consisting of five Supreme Court judges) that is competent for all arbitration-related matters. This concentration on a limited number of judges should further enhance the reliability and consistency of the jurisprudence in the field of arbitration.
The introduction of this single instance jurisdiction and the establishment of a specialised chamber within the Supreme Court demonstrate both the Austrian legislators' and judicature's awareness that the legal infrastructure is essential to foster arbitration proceedings seated in Austria.
Apart from the Supreme Court, the other courts dealing with arbitration matters are the district courts, which rule on requests for interim measures, the enforcement of interim measures, and the enforcement of international and domestic awards.
vi Interim measures and judicial assistance
Section 585 ACCP mirrors Article 9 of the Model Law and stipulates that it is not incompatible with an arbitration agreement for a party to request an interim measure from a state court. An Austrian district court has international jurisdiction to issue an interim measure during or prior to arbitral proceedings if the debtor has its seat or habitual residence, or if the assets to be seized are located in, the court's district (see Section I.v). Thus, it is not necessary that the seat of arbitration is also in Austria. Conversely, the fact that the seat of arbitration is in Austria does not necessarily mean that an Austrian district court is competent to issue an interim measure.
Furthermore, Section 593(1) and (2) ACCP contain the requirements for an arbitral tribunal having its seat in Austria to issue interim or protective measures. Subsections (3) to (6) further govern the enforcement of such measures issued by any tribunal. It is noteworthy that these provisions on enforcement apply to measures issued by tribunals irrespective of whether a tribunal has its seat in Austria (see Section 577(2) ACCP). Thus, the Austrian arbitration law enables the enforcement of interim or protective measures issued by foreign arbitral tribunals without any requirement for exequatur proceedings. In addition, if a measure ordered by the tribunal (whether foreign or domestic) is unknown to Austrian law, the competent enforcement court shall, upon request and after having heard the other side, apply such measure that is most similar to the one ordered by the tribunal.
Under Section 602 ACCP, an arbitral tribunal may ask an Austrian court to perform certain acts for which the tribunal has no authority. Again, Austrian arbitration law enables both foreign and domestic tribunals to make use of such requests, and also includes requests for judicial assistance by other courts, including foreign courts' authorities. Therefore, Section 602 ACCP allows, for instance, a foreign arbitral tribunal to make a request to an Austrian court that the Austrian court ask a court in a third country to perform an act of judicial assistance. The most common acts that a tribunal would request relate to measures of interim or protective measures or measures in the taking of evidence (e.g., summoning witnesses and taking oaths from them).
vii Setting aside of arbitral awards
Under the Arbitration Act of 2006 (as revised most recently in 2013), any kind of arbitral award may be challenged under Section 611 ACCP. This therefore includes interim awards, partial awards and awards on jurisdiction. The provision distinguishes between legal grounds that must be revoked by the claimant seeking to set aside the award and legal grounds that are to be reviewed ex officio (see Section 611(3) ACCP). The reasons for setting aside are contained in Section 611(2) ACCP and may be summarised as follows:
- lack of an arbitration agreement and lack of arbitrability ratione personae;
- violation of a party's right to be heard;
- ultra petita;
- deficiency in the constitution of the tribunal;
- violation of the procedural public policy;
- grounds for reopening civil proceedings;
- lack of arbitrability ratione materiae; and
- violation of the substantive public order.
The last two grounds are those that the court must review ex officio.
The time limit to file a setting aside claim is three months starting from the date of notification of the award (Section 611(4) ACCP). The competent court is, except for matters involving consumers and matters of employment law, the Austrian Supreme Court as first and final instance (Section 615 ACCP).
viii Recognition and enforcement of arbitral awards
A domestic arbitral award (i.e., an award rendered in Austria) has the same legal effect as a final and binding court judgment (Section 607 ACCP). This means that such award can be enforced under the Austrian Execution Act (AEA) like any other civil judgment (see Section 1 No. 16 AEA). Once the chairperson of a tribunal (or, in his or her absence, any other member of the tribunal) has declared an award as final, binding and enforceable, the award creditor can make a request for execution under the AEA. The competent court is usually the district court in the district in which the debtor has its seat, domicile or habitual residence, or where the assets to be attached are located.
A foreign award (i.e., an award rendered outside of Austria) may be recognised and enforced under the AEA subject to international treaties and acts of the European Union (see Section 614 ACCP), in particular the NYC and the European Convention on International Commercial Arbitration of 1961 (European Convention). Both Conventions are applicable in parallel. Therefore, a creditor can simultaneously rely on either Convention or on both, while a debtor must invoke grounds under both Conventions to be successful. Under the European Convention, the enforcement of a foreign award may be refused if the award was set aside on certain legal grounds. A violation of public policy is, for instance, not a ground recognised under Article IX of the European Convention. Thus, an arbitral award that was set aside for reasons of public policy at the seat of arbitration can, nevertheless, be recognised and enforced in Austria.
There are currently no acts of the EU applicable to the enforcement of foreign arbitral awards.
A request for exequatur and a request for execution can be jointly filed in the same proceedings under the AEA. The Supreme Court has repeatedly held that in institutional arbitral proceedings, a certified copy of the arbitral award indicating the body or person that has certified the award (including the signatures of the arbitrators) and the reference to the applicable provision under the arbitration rules usually suffice to fulfil the formal requirement. In other words, in institutional arbitration, it is not necessary to have the signatures of the arbitrators certified by a local notary and legalised by the local authority (The Hague Apostille). Furthermore, pursuant to Section 614(2) ACCP, it is not necessary to submit the original arbitration agreement or a certified copy thereof as required under Article IV(1)b of the NYC. Both this legal provision and the Supreme Court's jurisprudence are a clear indication that the recognition and enforcement of foreign arbitral awards in Austria shall not be subject to excessive formal requirements.
ix Arbitral institution
The Vienna International Arbitral Centre (VIAC) attached to the Austrian Chamber of Commerce is the most renowned arbitral institution in Austria. Its recognition and casework are not limited to its geographic region: it has a strong focus on arbitrations involving parties from central, eastern and south-eastern Europe, and is, as of July 2019, the second foreign (and first European) arbitral institution recognised as a permanent arbitration institution in Russia, thus having received a Russian government permit. Parties from (east) Asia as well as from the Americas and Africa have appeared in VIAC arbitrations in recent years.6
As of 1 January 2018, VIAC has revised both its arbitration rules (Vienna Rules) and mediation rules (Vienna Mediation Rules). Under the previous version of the Vienna Rules, VIAC could only accept cases where one of the parties had its place of business or usual residence outside Austria or, if both parties were from Austria, where the dispute was of an international character. Now, VIAC may also administer domestic cases. The other major revision is the introduction of an explicit provision on the tribunal's competence to order security for costs (Article 33(6) and (7) Vienna Rules 2018). Furthermore, VIAC has also adapted its fee schedule whereby the fees of the institution and for the arbitrators have been decreased for lower amounts in dispute and increased at the higher end of the spectrum. In this context, the new rules emphasise the principle of efficiency in conducting arbitration. Thus, not only the tribunal should take this principle into account when allocating the costs between the parties, but also VIAC when determining the costs of an arbitration. As a last resort, VIAC may even increase or decrease the arbitrators' fees by 40 per cent in particular circumstances.
As regards the revision of the Vienna Mediation Rules 2018, they not only provide for a modern procedural framework for mediation proceedings, but also for a combination of arbitration and mediation administered by VIAC and corresponding cost provisions in such a case. All in all, the revision of the Vienna Rules has not changed the nature of VIAC arbitration: it is known throughout the region for its cost-efficient manner of handling arbitration matters to an international standard.
VIAC has published a new (second) edition of its VIAC Handbook Rules of Arbitration and Mediation, which is an article-by-article commentary written by arbitration practitioners (available both in German and in English). On the occasion of its 40th anniversary in 2015, VIAC also published Volume 1 of 'Selected Arbitral Awards'. This work includes 60 arbitral awards rendered by arbitral tribunals under the Vienna Rules, and is a valuable contribution in response to the demand of both practitioners and the public for more transparency in international arbitration in general and of the work of arbitral institutions in particular.
The year in review
i Developments affecting international arbitration
The most important reform under the 2013 revision of the Arbitration Act was the determination of the Austrian Supreme Court as single instance for certain arbitration-related matters (see Section 615 ACCP). It entered into force on 1 January 2014, and applies to all proceedings initiated on or after that date. Simultaneously, the Supreme Court has established a specialised chamber that deals with the matters under Section 615 ACCP (the docket numbers of these decisions start with '18'). As demonstrated below, apart from the matters referred to in Section 615 ACCP (in most instances, setting aside proceedings, and proceedings relating to the constitution and challenge of arbitral tribunals), there are a number of other civil matters that involve issues of arbitration and that may be tried before first and second instance courts with the Supreme Court as final instance. Finally, proceedings on the recognition and enforcement of foreign arbitral awards are usually initiated with district courts, the decisions of which may be appealed and finally also brought before the Supreme Court. Enforcement matters are usually submitted to the chamber specialised in such matters and not to the arbitration chamber. In conclusion, parties can expect that under the Austrian court system relating to arbitration-related matters, in particular those with a foreign or international context, the Supreme Court will have the final say on certain legal issues of essential importance to the Austrian legal order.
ii Arbitration developments in local courts
In August 2019, the Supreme Court rendered a decision in relation to the Austrian state courts' jurisdiction for granting interim injunctions, in case the arbitral proceedings are pending abroad.7 The Supreme Court decided that even if there is an action (be it in front of a state court or an arbitral tribunal) pending abroad, Austrian state courts may render an interim injunction pursuant to Section 387(2) Austrian Enforcement Act, if the Austrian courts have jurisdiction and the decision in the main proceedings abroad is recognised and enforceable in Austria (leaving it, however, open, whether this also applies in case the decision in the main proceedings is not recognised and enforceable in Austria).
In a decision from January 2020,8 the Supreme Court dealt with the right to be heard and the potential violation of the procedural ordre public in relation to requests for evidence or a party's right to a hearing. The Supreme Court confirmed its previous line of jurisprudence and held that an arbitral award may be set aside because of a violation of the right to be heard or a violation of the procedural ordre public only if fundamental procedural principles have been violated. In the present case, the arbitral tribunal cancelled the hearing and decided to render a decision based on the case file because the claimant (in the arbitration proceedings) had not submitted any witness statements within the time period set by the arbitral tribunal. The plaintiff (i.e., claimant in the underlying arbitration) argued that the arbitral tribunal violated its right to be heard or the procedural ordre public by not hearing the requested witnesses (which were nominated by the plaintiff, but no witness statements had been filed). The Supreme Court stated that fundamental values of procedural law would only be violated if the arbitral tribunal had acted arbitrarily. This was, according to the Supreme Court, not the case, as the arbitral tribunal's request for written witness statements was in line with the procedural order agreed on by the parties and the arbitral tribunal could validly assume that no witnesses should be heard. The plaintiff further argued that the arbitral tribunal violated its right to be heard or the procedural ordre public by not holding the hearing as requested but cancelling it instead. The Supreme Court confirmed that in principle, a hearing must take place if requested by one party and if it has not been excluded by mutual agreement and that not holding such hearing would 'regularly' justify the setting aside of the arbitral award. However, not holding a requested hearing does not necessarily violate the right to be heard and justify the setting aside the arbitral award, as the purpose of a hearing is to enable the parties to present their positions, which could also be done by other means (such as written submissions). Yet, such conduct could violate the procedural ordre public, though this is not an absolute principle. For example, in case the request to hold a hearing was only filed at an inappropriate time or the purpose of a hearing is not fulfilled (which should allow the parties to orally present their case or hear witnesses) so that holding a hearing would only be a formality, the arbitral award may not be set aside. In the present case, the plaintiff stated in the arbitration that it was not going to attend the hearing and did not deliver written witness statements. Thus, in the Supreme Court's view, cancelling the hearing did not violate the plaintiff's right to be heard or the procedural ordre public.
The issue of a party's right to a hearing was the subject matter of another decision of the Supreme Court.9 In the arbitration underlying these setting aside proceedings, both parties filed claims regarding several (partly concluded, partly ongoing) business years, with the underlying questions to decide on such requests being basically identical. While the plaintiff (i.e., claimant in the arbitration) filed a specific request for the last business year (which was still ongoing at that time), the defendant (i.e., respondent in the arbitration) only filed a general declaratory request for this business year. After the arbitral tribunal had held a hearing, the defendant amended its general declaratory request regarding the last business year to a specific request for the last business year and the plaintiff specified its previous requests as well. The plaintiff disputed the defendant's request for the last business year and requested that an additional hearing is held. The arbitral tribunal rejected this request for an additional hearing and rendered an award also deciding on the respondent's monetary request for the last business year.
The Supreme Court referred to its previous case law on the right of a party to a hearing and potential grounds for setting aside an arbitral award in this context and applied its rationale to the present case: The issues to be decided for the last business year were basically identical with those of the previous business years and these issues were already the subject matter of a hearing. The arbitral tribunal also gave the plaintiff the right to comment on the defendant's updated request for relief that was filed after such hearing. The plaintiff, however, did not substantiate why another hearing would be necessary. The Supreme Court noted that under these circumstances, the arbitral tribunal rightfully rejected the plaintiff's request for another hearing.
Another decision was rendered on the requirement of translation of an arbitral award.10 The plaintiff filed a claim to set aside an arbitral award rendered under the International Chamber of Commerce (ICC) Rules and submitted the arbitral award, which is considered to be an exhibit in the setting aside proceedings, in English only. Consequently, the Supreme Court returned the plaintiff's action with the instruction to remedy this flaw within four weeks by submitting a German translation of the arbitral award. The court held that written submissions are admissible only if they are in German. Regarding exhibits to submissions, the same applies whenever those exhibits are not only documents of evidence but also form the subject matter of the proceedings, as was the case with the arbitral award in question.
Once again, the Supreme Court had to deal with a case on the distinction between an expert and an arbitrator.11 It defined that while an arbitrator decides the parties' dispute in a binding manner (by rendering an arbitral award), an expert by rendering an expert opinion on certain aspects of a case renders the basis for a resolution of the parties' dispute by the parties themselves. In this context, the Supreme Court confirmed its position in previous rulings that the designation of the contract or the use of the words 'arbitrator' or 'expert' is not decisive per se; yet, the words chosen by the parties may constitute an indication of their intent. The delimitation always depends on interpretation, and the classification of a concrete agreement (whether it is an arbitration agreement or an agreement regarding an expert opinion) is to be examined on a case-by-case basis. As to the effects of an expert opinion, the Supreme Court confirmed that an expert's opinion is in principle binding on the parties and the courts, unless it is against good morals according to Section 879 (1) Austrian Civil Code (i.e., if the expert opinion violates the principles of fairness and equity).
In a 'regular' litigation before the Austrian courts,12 the plaintiff requested the annulment of a purchase contract concluded with the defendant. In the revision proceedings before the Supreme Court, the plaintiff eventually argued that the Austrian courts have jurisdiction because the purchase contract contained both an arbitration clause and a choice-of-court agreement (of a court in Moscow). According to the plaintiff, the two clauses were in contradiction with each other and thus, both clauses should be declared invalid. In its decision, the Supreme Court first referred to Section 584 (1), first sentence of the ACCP, pursuant to which an Austrian should reject a claim, which is subject to an arbitration agreement, a limine litis unless the defendant participates on the merits of the matter or orally without raising a jurisdictional objection. The Supreme Court then confirmed its position that if a contract contains both an arbitration clause and a non-exclusive choice-of-court agreement, both clauses may validly coexist. In that particular case, the court found that neither did the arbitration clause provide for an exclusive application of one of the two clauses nor for a mandatory submission to either of the two institutions (i.e., arbitral tribunal or court). Thus, according to the Supreme Court, the interpretation of the lower court instances that the parties have a right to choose the forum could not be successfully challenged.
In another matter, the Supreme Court dealt with the unsuccessful challenge of an arbitrator.13 In the underlying arbitration under the Vienna Rules, the applicant (respondent in the arbitration) objected to the nomination of a person nominated by the defendant (claimant in the arbitration). In that objection, the applicant said that one of the lawyers of the legal representative of the defendant had a close and permanent relationship with the arbitrator nominated by the defendant. Despite this objection, VIAC confirmed the nomination. Thereafter, the applicant filed a challenge for the same grounds as already raised in its objection. VIAC again rejected the challenge and held that the applicant had not furnished additional grounds in relation to the previous challenge. Subsequently, the arbitrator made a disclosure according to which he and a partner of the law firm representing the party that nominated him had both become members of the board of VIAC, which consisted of 17 members in total. The applicant then challenged him for the second time based on reasons it already alleged in the first challenge and, in addition, on the latest disclosed circumstances. VIAC also rejected the second challenge. The applicant then filed, in accordance with Section 589 (3) ACCP, a request to the Supreme Court by alleging that two partners of the defendant's law firm had – independently from each other – each close relationships with the challenged arbitrator.
In its legal reasoning, the Supreme Court first held that the application was admissible because the applicant did not only rely on the grounds raised in the first challenge (which had not – after the rejecting decision of the VIAC board – been brought before the Supreme Court), but also on new circumstances raised in the second challenge before VIAC. The Supreme Court then discussed its settled jurisprudence on independence and impartiality of arbitrators with reference, among other legal provisions, also to the IBA Guidelines on Conflict of Interest in International Arbitration (IBA Guidelines).
In the present case, the facts were as follows: Partner X of the law firm was president of the Austrian Arbitration Association which co-organised certain lectures and events with the law faculty of the University of Vienna of which the challenged arbitrator was the dean. Furthermore, Partner X was a coach of the Moot Court team of that same law faculty, the coaching team consisting of six coaches in total. Partner X also held a lecture (with other practicing lawyers) at the faculty. Partner Y of the law firm was – as indicated above – one of the 17 members of the VIAC board. The court eventually stated that doubts were not justified as long as the relationship with the law firm representing one party is of a peripheral nature and does not go beyond a factual relationship of a professional nature. According to the Supreme Court, in view of the circumstances of arbitration and the 'network' among the Austrian lawyers, a neutral third party would not see a particular intimacy that would prevent the resolution of a case in an unbiased manner. Finally, the Supreme Court held that the present circumstances were similar to those listed in the 'Green List' of the IBA Guidelines, which should generally not constitute a conflict of interest.
In another decision,14 the Supreme Court had to render a decision the challenge of all members of the arbitral tribunal based on (basically) procedural decisions rendered by the arbitral tribunal. Referring to Section 588 (2) first case ACCP, pursuant to which an arbitrator may only be successfully challenged if justifiable doubts as to his or her impartiality and independence exist, the Supreme Court noted that a challenge of an arbitrator based on alleged procedural violations may only be successful in cases of serious procedural violations. The Supreme Court rejected the challenge as follows: the Supreme Court held that the arbitral tribunal's decision to reject respondents' request for postponement of the hearing leading to a short preparation time for the hearing and to schedule the starting time of the hearing (due to different time zones) for one attendee at 6.00am in casu did not constitute an unfair treatment. Further, the Supreme Court – referencing to the widespread use of videoconferencing in state court litigation and balancing the right to be heard against the right to effective access to justice – held that holding the hearing by videoconference although respondents objected to such approach did not violate the principles of a fair trial and fair treatment. Finally, the Supreme Court decided that an alleged eye-rolling of an arbitrator, even if it indeed had happened, would not constitute justifiable doubts as to his or her impartiality and independence.
In a claim for setting aside15 a partial award rendered under the ICC Rules, the arbitration itself was still pending. The plaintiff (i.e., claimant in the arbitration) belonged to a multilateral energy group involved in the supply and storage of gas. The defendant operated gas pipelines in Austria. In the arbitration, the plaintiff requested, among other reliefs, that the arbitral tribunal declared certain provisions of a capacity agreement null and void. The defendant raised jurisdictional objections. In the partial award, the tribunal confirmed its jurisdiction on rights arising out of the capacity agreement but denied its jurisdiction on the claim for damages because of the allegedly monopolistic position of the defendant (cf. Article 102 TFEU). With regard to two further issues of jurisdiction, the tribunal reserved its decision. The tribunal's main reasoning was that it was not competent to decide on tort claims. The tribunal's reasoning was that the wording claims 'out of a contract' do not include tort claims such as the present ones and relied, in this context, on a previous decision of the Supreme Court16.
In this setting aside proceedings, the Supreme Court followed the argument of the plaintiff and held that the claims related to the allegedly monopolistic position were in close connection to the capacity agreement concluded between the parties. In particular, the plaintiff argued that the performance of its obligations under this contract caused damage, which it claims in the arbitration. The Supreme Court referred to a judgment of the Court of Justice of the European Union (CJEU)17 on a choice of court agreement. In that matter, the CJEU held that damage claims based on Article 102 TFEU were covered by the choice-of-court agreement even if the agreement did not explicitly refer to claims arising out of the breach of competition law.
The Supreme Court further explained why its previous decision 4 Ob 80/08f, on which the defendant relied in its submission before the arbitral tribunal, was not relevant in the present case. In that other decision, the claims relating to competition law were raised independently from the contract that contained the arbitration clause. On the contrary, in the case at hand, the claims on the alleged breach of Article 102 TFEU had a causal link with the contract between the parties. The court thus set aside one decision of the partial award on jurisdiction in accordance with Section 611 (2) lit 1, 2nd case ACCP as the tribunal had wrongfully denied its jurisdiction.
In a matter where the applicant requested an Austrian court to issue an interim measure,18 the defendant raised, among others, an objection to the jurisdiction of Austrian courts and relied on an arbitration clause in a contract between the parties. When the matter was referred to the Supreme Court as third and final instance, the court stated, among several other reasons, that in the matter 4 Ob 80/08f, the claimant in the underlying arbitration had raised non-contractual claims that had merely an 'illustrative context of meaning' and were thus not covered by the arbitration agreement.
iii Investor–state disputes
Under the International Centre for Settlement of Investment Disputes (ICSID) regime, there are currently 11 cases pending in which an Austrian investor has brought a claim against a state (the respondent states are Germany, Tajikistan, Romania, Argentina, Italy, Serbia, Montenegro and Croatia). The most recent claims were filed in the second half of 2019 against Romania and Germany. In June 2018, several investors from various countries, one of which is Austrian, jointly filed a claim against Romania with ICSID. According to news reports, the matter relates to changes in Romania's legal regime on renewable energy. The timing is of particular interest, because the claim was filed after the CJEU rendered its famous Achmea decision, according to which the arbitration clause in a particular bilateral investment treaty between two EU Member States was found to be incompatible with EU law. Further, in 2017, four Austrian banks each filed claims against Croatia because of the mandatory conversion of loans in Swiss francs into loans denominated in euros. One of the four banks has further filed a claim against Montenegro for similar reasons. In the four banking cases against Croatia, the banks are represented by three different law firms, while the state has retained one firm for all four matters. On the other side, Austria was sued by a Dutch company under the bilateral investment treaty between Austria and Malta in 2015. This case has received particular media attention not only because it is the first investment case against Austria, but also because the claimant company belongs to the Anglo Austrian AAB (formerly Meinl Bank) group, which was an Austrian bank. In 2017, the arbitral tribunal declared the proceedings closed. Media reports say that the claim was rejected. Due to an interpellation in the Austrian parliament, it became public that the same claimant – that is, the affiliate of Anglo Austrian AAB – has filed a new claim against Austria, this time before the ICC in Paris.
To date, no other cases under arbitration rules other than those mentioned above are publicly known.
Outlook and conclusions
The amendment of the Arbitration Act in 2013 and the revision of the Vienna Rules in 2018 demonstrate that Austria and its arbitration community constantly observe trends in international arbitration and improve the legal framework where necessary. These efforts are supported by the jurisprudence, particularly since the Supreme Court has established a special chamber that rules on all matters relating to setting aside claims and the composition of arbitral tribunals. The Supreme Court also regularly makes reference to international arbitration standards such as, for instance, the IBA Guidelines on Conflicts of Interest in International Arbitration. These overall developments should enable cost and time-efficient arbitral proceedings and related state court proceedings, both in compliance with international standards and the requirements under the rules of law. Austria (and in particular Vienna) is thus considered to be a regional arbitration hub with a strong focus on countries in the Central and Eastern European (CEE) and Southeastern European (SEE) regions.
As regards investor–state arbitrations, developments in recent years have shown that Austrian investors are more and more willing to make use of their rights under investment treaties. On 29 May 2020, 23 EU Member States concluded the Agreement for the termination of Bilateral Investment Treaties between the Member States of the European Union. According to this Agreement, the concluding Member States terminated their intra-EU bilateral investment treaties and declared, among others, that 'arbitration clauses should not serve as legal basis for new arbitration proceedings' (Article 5). It is noteworthy that Austria – along with Ireland, Finland and Sweden – did not enter into this Agreement although Austria had, on the political level, previously expressed its consent to such a common approach of the EU Member States. It remains to be seen whether this will have an effect on the willingness of Austrian investors to seek investment protection before investment tribunals.
1 Venus Valentina Wong is a counsel and Alexander Zollner is a counsel at Wolf Theiss.
2 Federal Law Gazette I 2006/7.
3 Federal Law Gazette I 2013/118.
4 See Reiner, 'The New Austrian Arbitration Act', Journal of International Arbitration, Section 583, footnote 38.
5 Austrian Supreme Court, 17 June 2013, docket number 2 Ob 112/12b, Austrian Supreme Court, 5 August 2014, docket numbers 18 ONc 1/14 p and 18 ONc 2/14 k, see Wong, Schifferl, 'Decisions of the Austrian Supreme Court in 2013 and 2014', in Klausegger et al., Austrian Yearbook on International Arbitration 2015, 338 et seq.; Austrian Supreme Court, 19 April 2016, docket number 18 ONc 3/15h; Austrian Supreme Court, 15 May 2019, docket number 18 ONc 1/19w.
7 Austrian Supreme Court, 29 August 2019, 6 Ob 142/19d.
8 Austrian Supreme Court, 15 January 2020, 18 OCg 9/19a.
9 Austrian Supreme Court, 2 March 2021, 18 OCg 10/19y; this decision also dealt with other grounds for setting aside of an arbitral award, which are, however, not discussed here.
10 Austrian Supreme Court, 18 June 2020, 18 OCg 4/20t.
11 Austrian Supreme Court, 26 May 2020, 9 Ob 18/20t.
12 Austrian Supreme Court, 20 January 2021, 3 Ob 127/20b.
13 Austrian Supreme Court, 23 July 2020, 18 ONc 1/20x.
14 Austrian Supreme Court, 23 July 2020, 18 ONc 3/20s; cf. also Austrian Supreme Court, 19 January 2021, 18 ONc 5/20k, where the Supreme Court confirmed the approach regarding the challenge of arbitrators because of procedural decisions.
15 Austrian Supreme Court, 29 September 2020, 18 OCg 6/20m.
16 Austrian Supreme Court, 26 August 2008, 4 Ob 80/08f.
17 Court of Justice of the European Union, C-595/17, Apple Sales.
18 Austrian Supreme Court, 20 October 2020, 4 Ob 136/20h.