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. Furthermore, other statutory provisions may stipulate other non-arbitrable matters.
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 mentioned in Section 615 ACCP (see Section II.i). 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 as well as other civil courts (see Section II.i).
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 plaintiff 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 unless the court expressly so requests. 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 July 2021, VIAC has revised both its arbitration rules (Vienna Rules) and mediation rules (Vienna Mediation Rules). The revision of the Vienna Rules was triggered by the drafting of the new VIAC Rules of Investment Arbitration and Mediation (VRI), which also entered into force on 1 July 2021. The VRI are stand-alone investment arbitration and mediation rules, which apply to disputes involving a state, a state-controlled entity or an intergovernmental organisation that arise under a contract, treaty, statute or other instrument. Though based on the Vienna Rules, the VRI contain certain adjustments to account for the unique features and needs of investment disputes involving the participation of sovereign parties and the consideration of public interest issues and matters of public policy. VIAC also provides for specific model clauses regarding investment arbitration (e.g., standard arbitration clause and clause for VIAC as appointing authority or VIAC as administering authority).
As regards the revision of the Vienna Rules, its revision as a result of the drafting of the VRI was taken as an opportunity to also adapt the existing rules for commercial disputes to new needs and developments, and to open up for new business fields such as inheritance disputes for which specific rules were included in Annex 6. The new version of the Vienna Rules provides for VIAC's authority to administer investment proceedings as well as to act as appointing or administrating authority in ad hoc proceedings and to administer proceedings based on unilaterally foreseen arbitration agreements. Further, because third-party funding is more widely used, a definition of third-party funding and further provisions on third-party funding to create the framework for this instrument, mainly to ensure the independence and impartiality of the arbitrators through appropriate disclosure, were included. Also, the Vienna Rules explicitly state that oral hearings may be conducted in person or by other means (e.g., videoconferencing technology, for which VIAC enacted the 'Vienna Protocol – A Practical Checklist for Remote Hearings'). Finally, the Vienna Rules contain a time limit for the issuance of the award: it shall be rendered no later than three months after the last hearing concerning matters to be decided in an award or the filing of the last authorised submission concerning such matters, whatever is the later. The Secretary General may extend this period upon reasoned request or on its initiative.
VIAC has published a new (second) edition of its VIAC Handbook Rules of Arbitration and Mediation (dealing with the Vienna Rules 2018 and the Vienna Mediation Rules 2018), 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 a decision of December 2021,7 the Supreme Court had to assess an arbitral tribunal's decision on costs in a multi-party arbitration regarding post M&A claims arising from a transaction between one Chinese and three Croatian parties. In its award, the arbitral tribunal dismissed the first plaintiff's claims, but awarded the second plaintiff part of its claim and compensation for costs. The plaintiffs in the arbitration requested the Supreme Court to partially set aside the award, also in relation to the cost decision; in this context, the plaintiffs, among other things, challenged the cost decision in the award based on an alleged violations of the substantive and procedural ordre public and violations of the right to be heard. The Supreme Court dismissed the plaintiffs' arguments that the underlying (contingency) fee agreement between the Croatian defendants and their Croatian representatives was void as a quota litis pursuant to Section 879(2) No. 2 Austrian Civil Code (ABGB) and that the fee agreement would be an invalid contract to the plaintiffs' detriment because it allowed the respondents to litigate without the risk of costs. The Supreme Court decided that Section 879(2) No. 2 ABGB, though a mandatory provision under Austrian law, does not fall under the narrow scope of protection of Section 611(2) No. 8 ACCP in case of a fee agreement between the Croatian defendants and their Croatian representatives for arbitration proceedings with links to Austria and China. As to the plaintiffs' litigation without risk-argument, the Supreme Court stated that Section 879(2) No. 2 ABGB serves to protect the client, but not the opposing party. In this context, the Supreme Court added that it is also permissible under Austrian law to involve a third-party funder and, thus, to litigate without any cost risk. The plaintiffs further alleged a violation of the right to be heard as they had no opportunity to comment on the defendants' representation costs, on which the arbitral tribunal based its decision on costs. The arbitral tribunal closed the proceedings two days after the submission of the cost statements and – in an addendum to the arbitral award – declared the arguments of the plaintiffs to be precluded. The Supreme Court reflected on the legal literature in this respect and decided that the arbitral tribunal did not violate the plaintiffs' right to be heard by not providing a possibility to comment on the cost statement.
In a series of decisions, the Supreme Court dealt with numerous requests in relation to one arbitration. In one of those decisions,8 the Supreme Court was faced with a request for legal aid to allow the requesting party to bring a setting-aside claim regarding an (alleged) arbitral award deciding on jurisdiction. The requesting party argued that the arbitral tribunal decided in a procedural order by one sentence on its jurisdiction and reserved the reasoning for the arbitral award; such 'arbitral award' would – already as a result of the fact that there was no reasoning – be null and void and thus must be set aside. The Supreme Court decided that declarations that do not meet the minimum requirements for a classification as an arbitral award are ipso jure ineffective without requiring a setting-aside pursuant to Section 611 ACCP. Given that the procedural order was neither from an objective view to be understood as arbitral award (in particular, as it was clear that the arbitral tribunal did not want to formally decide on jurisdiction, but reserved the reasoning for the arbitral award) nor did it comply with the formal requirements for an arbitral award (as it was only signed by the chairman), a setting-aside claim would not have to be filed; against this background, the Supreme Court did also not grant legal aid. In three other decisions relating to this arbitration,9 the Supreme Court had to render decisions on 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 or a persistent and major preferential or disadvantageous treatment of one party. The arguments pleaded by the party filing the challenge (e.g., communication via email [instead of facsimile] though the party objected to such means of communication, insisting on written pleadings by a party not represented by an attorney, lack of proper instruction of a party not represented by an attorney, conducting a case management conference via telephone conference) did not constitute such sufficient reasons. In another decision in relation to this arbitration,10 the Supreme Court decided that it is not competent for judicial assistance in arbitration proceedings as provided for in Section 602 ACCP (pursuant to which the arbitral tribunal, arbitrators appointed by the arbitral tribunal, or any party with the consent of the arbitral tribunal, may request a state court to perform judicial acts that the arbitral tribunal is not authorised to perform), but rather that district courts are competent for such requests.
In another decision of April 2021,11 the Supreme Court dealt with questions in relation to arbitration and private foundations: the beneficiary of a private foundation asserted claims against the private foundation before an arbitral tribunal. The plaintiff (also claimant in the arbitration) based the jurisdiction of the arbitral tribunal on an arbitration clause contained in an earlier version of the supplementary foundation deed. The arbitral tribunal denied its jurisdiction because the current supplementary foundation deed, which was court-approved, did not contain an arbitration clause anymore. In the setting-aside proceedings, the plaintiff argued that for its alleged claims still an arbitral tribunal would be competent. As a preliminary question, the Supreme Court had to assess its own jurisdiction in light of Section 617 ACCP, which limits a consumer's ability to conclude an arbitration agreement where the consumer is confronted with an entrepreneur; in such cases, Section 617(8) ACCP provides that setting-aside proceedings run over all three levels of the Austrian court system, with the regional courts having jurisdiction in the first instance. Yet, the Supreme Court held that this provision is not applicable when a beneficiary of a private foundation asserts claims against the private foundation. The Supreme Court also decided that a private foundation's declaration, which is to be recorded in the foundation deed and supplementary foundation deed, falls under the concept of the statutes within the meaning of Section 581(2) ACCP so that an arbitration clause can be included both in the foundation deed and in the supplementary foundation deed. As to the question of which disputes are covered by an arbitration clause, the Supreme Court noted that this is to be determined based on the arbitration clause's content, which needs to be interpreted. According to the Supreme Court, a foundation's declaration (such as the articles of association of a company) are to be interpreted objectively like general norms of statutory law according to Sections 6 and 7 ABGB. By applying such objective interpretation, the Supreme Court decided – based on a variety of reasons – that there are no reasons that would allow for a setting aside of the arbitral award.
In a decision of February 2021,12 the Supreme Court was faced with a setting-aside claim based on numerous reasons of which only the two most important are to be discussed here. On the one hand, the plaintiff in the setting-aside proceedings (respondent in the arbitration) alleged partiality of the sole arbitrator and that such partiality became only known to it in the course of preparing the setting-aside claim. The Supreme Court confirmed its previous jurisprudence that the partiality of an arbitrator can also constitute grounds for setting aside an arbitral award as a result of a lack of composition of the arbitral tribunal pursuant to Section 611(2) No. 4 ACCP in case the partiality was not asserted in the arbitration proceedings according to Section 589 ACCP; yet, this only applies in case the grounds for partiality came to light after the arbitral award was rendered, because in such a case it was not possible for the party to challenge the arbitrator in the arbitration. The Supreme Court left open whether the latter was the case as it decided that the grounds pleaded by the plaintiff (namely that the arbitrator is a member of the International Advisory Board of VIAC and the representatives of the defendant in the arbitration are members of the Domestic Advisory Board of VIAC and that the arbitrator and one representative of the defendant in the arbitration held lectures at the same university programme and conference) do not constitute a partiality of the arbitrator. 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, and stating that the IBA Guidelines on Conflict of Interest in International Arbitration (IBA Guidelines) may give guidance when deciding on the challenge of an arbitrator, the Supreme Court in line with its previous jurisprudence held that justifiable doubts do not exist in case the relationship between the arbitrator and the party representative is only of a peripheral nature and does not go beyond a factual relationship of a professional nature. The Supreme Court also confirmed its previous case law that an arbitration agreement concluded without a written special power of attorney (pursuant to Section 1008 ABGB) is cured if the party on which's side the formal defect is present (i.e., the party not being represented by a person having a written special power of attorney), based on the arbitration agreement, files an arbitration claim itself by an authorised lawyer; in such case, the power of attorney of a lawyer pursuant to Section 31(1) ACCP replaces the requirement of a written special power of attorney pursuant to Section 1008 ABGB.
In an enforcement matter13 (which was already discussed in an earlier edition14), the Austrian Supreme Court had to decide again – as third and final court instance – on an application for an 'extra-ordinary revision' filed by the award debtor. In the first course of enforcement proceedings, the Supreme Court had remitted the case to the first instance to obtain a legal opinion on Cypriot law regarding the validity of the underlying arbitration agreement. In the second course of the proceedings, the first instance court followed this instruction, confirmed the validity of the arbitration agreement in accordance with Cypriot law and thus approved the enforcement of the arbitral award which was then confirmed by the second instance court. The present application for extra-ordinary revision is directed against the latter decision. In its decision, the Supreme Court confirms its long-standing jurisprudence that the interpretation of an arbitration agreement is decided on a case-by-case basis, which also applies to the question of the validity of an arbitration agreement. The Supreme Court further says that it is not responsible for the unity or development of foreign law. Where foreign law should be applied, a fundamental legal question (as a statutory requirement for the Supreme Court to look into a revision) necessary to be clarified by the Supreme Court only exists if (1) the foreign law was ascertained in a faulty manner, (2) a prevailing legal view has been disregarded or (3) the second instance court committed a serious mistake in the application of the law that would need to be corrected for reasons of legal certainty. The Supreme Court denied the fulfilment of these requirements. In addition, the Supreme Court also stated that the question of an alleged binding effect of the civil court in Nicosia was already decided in the previous course of proceedings and may not be addressed again in the second course. Also for this reason, the Supreme Court rejected the award debtor's request to submit the relevant legal questions to the Court of Justice of the European Union (CJEU).
On a side aspect of the apparently same enforcement matter,15 the Supreme Court upheld the decision of the second instance court. The lower court stated that it is not under a duty to review any alleged violation of the public order when it comes to the enforcement of a cost decision (rendered by a Swedish court in proceedings on a claim for setting aside an arbitral award) as Article 19 of The Hague Convention of 1954 on Civil Procedure does not so provide. Thus, in view of the Supreme Court, because this multilateral treaty governs this question, there is – as rightly stated by the second instance court – no need for a filling of a legislative gap in accordance with the Austrian Enforcement Act as unsuccessfully argued by the award debtor. In particular, the Supreme Court also holds that this question is not of fundamental legal importance for the Austrian jurisprudence.
In another enforcement matter,16 the applicant was a Belarusian company (Party A) which applied for the recognition and enforcement of an arbitral award rendered on 2 December 2019 by the International Arbitration Court of the Belarusian Chamber of Industry and Trade against an Austrian award debtor (Party B). The first instance court apparently approved the recognition and the enforcement at least partially. Against this (partial) approval, Party B filed an appeal and relied on Article V(2)(b) of the New York Convention (NYC) by alleging that already on 15 December 2014, it had obtained a favourable arbitral award of the same arbitration institution against Party A. However, according to Party B, the arbitral award was set aside upon request of Party A on 30 September 2015. The reason for the setting aside was – according to the Belarusian court – that the name of one of the three arbitrators was spelled in a wrong manner and that Party A was not informed of the correction of this spelling mistake. Being desperate, Party B then claimed the same amount in the second arbitration again in which Party A raised a counterclaim for the same amount after it had actually already satisfied the first award. By the second arbitral award (which is the subject matter of the present enforcement proceedings), the claim of Party B was dismissed while Party A was awarded its claim. In order to argue a refusal of the enforcement (of the present second arbitral award), Party B alleges, among others, that there was merely a change in the spelling of the name of the respective arbitrator, but no replacement of the arbitrator in the first arbitration. Party B also submits that the setting aside of the first arbitral award was in breach of the Austrian public order as it allegedly revealed arbitrariness of the state. Party B further submits that the present case was actually a res iudicata and that the enforcement of the second arbitral award would effectively mean the recognition of the arbitrary setting-aside decision on the first arbitral award which in turn would – in view of Party B – amount to an intolerable result in breach of the Austrian public order. The second instance court approved the appeal and remitted the case to the first instance court for further investigation of the issue of the constitution of the tribunal. The application of an 'ordinary revision' by Party A is – according to the Supreme Court – admissible, but not justified. In view of Article V(1)(e)NYC according to which an arbitral award may be refused recognition and enforcement if it had been set aside in the country of origin, the Supreme Court stated that one of the requirements for a refusal would be that the underlying (foreign) setting-aside decision does not violate the public order. Therefore, according to the Supreme Court, a setting aside of the first arbitral award in breach of the public order would have immediate effect on the decision on recognition and enforcement of the second arbitral award as the payment order of the second award (based on unjust enrichment regarding the first award) cannot exist without the setting-aside decision regarding the first award. The Supreme Court explicitly stated that if the setting-aside decision of the Belarusian Supreme Court is against public order, then the second arbitral award may not be enforced. In conclusion, the Supreme Court confirmed that the appeal court rightly remitted the case back to the first instance court.
In formally two separate proceedings, but relating to the same prominent matter,17 a stock company as universal legal successor and assignee for collection filed, before the Vienna regional court for civil matters, a claim for damages in the total amount of approximately €1.9 billion against the Republic of Austria and the provincial state Carinthia, with further two natural persons joined as third parties on the side of the defendants. The present civil lawsuit is filed by the legal successor of a tender consortium, which allegedly offered the best bid but was not awarded the contract, and is based on a confidentiality agreement concluded between the second defendant and the bank which was mandated to organise the tender. Thus, the plaintiff raises a claim out of a 'contract with protective effects' to the benefit of third parties taking the position that it should be considered as such kind of third party. The second defendant raised a jurisdictional objection arguing, among others, that the plaintiff is bound by the arbitration clause contained in the confidentiality agreement. While the first instance court rejected this jurisdictional objection, the second instance court overturned the decision of the first instance court and thus rejected the lawsuit against the second defendant. Because, in the view of the appeal court, there was no jurisprudence of the Supreme Court as to whether a third party which raises a claim out of a contract with protective effects to the benefit of third parties is bound by an arbitration agreement if it is contained in such contract, the appeal court allowed the application for a 'ordinary revision'. The plaintiff indeed filed such an application, however, without success eventually. In the present judgment, the Supreme Court confirmed its jurisprudence18 that where a third party asserts a claim out of a contract to the benefit of third parties which includes an arbitration clause, the third party may assert the claim only in the manner contractually foreseen and is thus bound by the arbitration agreement. The Supreme Court then quoted various legal literature which takes the position that a third party in a contract with protective effects to the benefit of third parties should also be bound by an arbitration agreement contained in such contract and then endorsed this legal view. Among others, the Supreme Court also stated that the plaintiff apparently overlooked that a third party may not assert claims to a greater extent than an injured contractual party and that for that reason, a contractual debtor may raise any defence it has against the contractual creditor also against the contractual third party which enjoys the beneficial protective effects. This consideration applies – according to the Supreme Court – not only to issues of limitation of liability, but also to the manner in which the contractual claims should be asserted (i.e., by way of arbitration).
iii Investor–state disputes
Under the International Centre for Settlement of Investment Disputes (ICSID) regime, there are currently nine cases pending in which an Austrian investor has brought a claim against a state (the respondent states are Slovenia, Germany, Tajikistan, Romania, Argentina, Italy and Croatia). The most recent claims were filed in November 2021 against Romania and in March 2022 against Slovenia. According to news reports, the claim against Romania relates to changes in Romania's legal regime on renewable energy and the claim against Slovenia, filed by an Austrian bank, relates to a law retroactively imposing an upper limit for the foreign exchange rate of loans in Swiss francs. The Austrian bank has already filed claims against Croatia (pending) and Montenegro (concluded) and is represented by the same law firm it is represented by in its dispute against Croatia. 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 was the first investment case against Austria, but also because the claimant company belonged 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 2021 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. The status of being a recognised hub for international arbitration can also be seen in the opening of a regional office of the Permanent Court of Arbitration (PCA) in Vienna in April 2022, which adds a further international organisation in Austria.19
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, 15 December 2021, 18 OCg 5/21s; this decision also dealt with other grounds for setting aside of an arbitral award, which are, however, not discussed here.
8 Austrian Supreme Court, 22 September 2021, 18 OCg 4/21v.
9 Austrian Supreme Court, 19 January 2021, 18 ONc 4/20p; Austrian Supreme Court, 19 January 2021, 18 ONc 5/20k; Austrian Supreme Court, 14 April 2021, 18 ONc 2/21w.
10 Austrian Supreme Court, 19 January 2021, 18 ONc 1/21y.
11 Austrian Supreme Court, 14 April 2021, 18 OCg 1/21b.
12 Austrian Supreme Court, 17 February 2021, 18 OCg 5/20i.
13 Austrian Supreme Court, 21 October 2021, 3 Ob 152/21f.
14 The International Arbitration Review, 10th edition, Austria, page 84 (Austrian Supreme Court, 19 December 2018, 3 Ob 153/18y).
15 Austrian Supreme Court, 20 January 2021, 3 Ob 198/20v.
16 Austrian Supreme Court, 24 March 2021, 3 Ob 2/21x.
17 Austrian Supreme Court, 20 April 2021, 4 Ob 36/12d and 4 Ob 43/21h.
18 Legal Ruling RS0053109.