AUSTRIA
Filip Boras and Simon Kapferer
A. LEGISLATION AND RULES
A.1 Legislation
International arbitration in Austria continues to be governed by sections 577 to 618 of the Austrian Code of Civil Procedure, to which no legislative amendment has been made since 2013.
However, we expect that one remaining restriction on the conclusions of arbitration agreements could be soon eased: At present, most arbitration agreements can be concluded easily, including by e-mail. By contrast, the power to do so on behalf of a party that is to be bound by the arbitration agreement is still subject to strict formal requirements, including that the relevant power of attorney is in writing. These requirements are expected to be relaxed by upcoming legislation, ensuring that agreements concluded on behalf of someone else are not treated differently.
A.2 Institutions, Rules and Infrastructure
The Vienna International Arbitral Centre (VIAC) became operational on 1 January 1975 and is the leading Austrian arbitration institution founded as part of the Austrian Federal Economic Chamber.
The latest version of the VIAC Rules of Arbitration and Mediation came into force on 1 January 2018 (“Vienna Rules”). These Vienna Rules apply to all proceedings that commenced after 31 December 2017.
The VIAC Rules have three parts: Rules of Arbitration (part I), Rules of Mediation (part II) and Annexes (part III). By equating the position of arbitration and mediation in the Vienna Rules, the VIAC now supports a wider range of alternative dispute resolutions. Registration fees and administrative fees for proceedings pursuant to the Rules of Mediation have been aligned with those of the Rules of Arbitration. The combination of mediation and arbitration at the VIAC provides cost advantages for the parties.
The leading Chinese arbitration institution, the International Economic Arbitration Commission (CIETAC), has opened its first foreign office in Vienna as part of China’s Belt and Road Initiative (BRI). Vienna is planned to become the European center for BRI disputes. This is envisaged to serve a possible compromise in BRI related agreements, where European parties could agree to arbitration administered by CIETAC with Vienna as the seat of arbitration. The application of Austrian procedural law and possible setting aside proceedings before the Austrian Supreme Court (OGH) might be favored by European parties over the application of Chinese procedural law. This step by CIETAC underscores the importance of Vienna in international arbitration and its arbitration-friendly legal framework.[1]
B. CASES
The Austrian Supreme Court is the only (first and final) instance in setting aside proceedings. This leads to generally swift decisions in setting aside proceedings. A specific senate at the Supreme Court deals exclusively with arbitration matters, which ensures that the decisions are well reasoned. Among the cases decided by the OGH in setting aside proceedings in 2019, three decisions are of particular practical relevance: First, the OGH ruled that cooperation between an arbitrator and a counsel in a completely different arbitration constitutes a conflict of interest (B.1). Second, the OGH ruled that special tribunals, such as stock exchange “tribunals” are not ad hoc arbitral tribunals in accordance with the Austrian Civil Procedure Code (ZPO) and thus the cannot be set aside by the OGH (B.2). Third, the OGH decided that an action to set aside an arbitral award is inconclusive if the plaintiffs claim that there is no arbitral award in the first place (B.3).
B.1 Conflict of interest of an arbitrator for working with counsel in other arbitral proceedings
The decision of the OGH of 15 May 2019[2] dealt with the following facts:
One of the co-arbitrators informed the other arbitrators that his law firm had been appointed as counsel in another unrelated arbitration, where the law firm of the respondent was also appointed as counsel by the same party. Thus, the arbitrator’s law firm and a party representative worked for the same third party in another arbitration. These assignments were made independently of each other and without consultation with the law firms. As a result, the co-arbitrator did not consider himself to be in any conflict of interest.
On the basis of this notification, the plaintiffs challenged the co-arbitrator. They argued that pursuant to the IBA Guidelines on Conflicts of Interest in International Arbitration, the cooperation between an arbitrator and representatives of the parties – also in a completely different case – qualifies as a circumstance that gives rise to justified doubts as to the independence or impartiality of the arbitrator.
The arbitral tribunal dismissed the challenge. In its reasoning, the arbitral tribunal argued that the so-called arbitration scene in Austria is limited to a relatively small number of specialized lawyers and university professors. These would regularly appear in arbitral proceedings (as arbitrators or party representatives), at congresses and seminars, at university level or in loose working groups that pursue common goals in the interest of arbitration. The fact that an arbitrator works as counsel together with a legal representative in another case, even if at the same time, appears to be a phenomenon that occurs quite frequently and does not give rise to justified doubts. Such links are part of the economic or professional circumstances which, in themselves, would not suffice for a successful challenge of the arbitrator. On the contrary, further criteria would have to be added which could give rise to the appearance of partiality. However, the plaintiffs had not claimed such further criteria and, in the opinion of the arbitral tribunal, they did not exist. The arbitral tribunal was therefore not able to identify any circumstances that raise justified doubts as to the impartiality or independence of the challenged arbitrator.
Subsequently, pursuant to section 589 ZPO the plaintiffs requested the OGH to grant their challenge and declare the co-arbitrator to be biased. Such an option is foreseen under Austrian procedural law if the seat of arbitration is in Austria and the parties have not agreed on institutional rules or on any other procedure to challenge an arbitrator.
The OGH ruled in favor of the plaintiffs’ challenge and declared that there were justified doubts as to the impartiality and independence of the co-arbitrator.
The OGH applied a standard deriving from both, the standards applicable to state courts and the IBA Guidelines on Conflicts of Interest in International Arbitration. It held that the reputation of state courts, in whose interest a strict standard must be applied to the assessment of any possible bias, must also be considered when assessing the reputation of arbitral tribunals since the acceptance of arbitration presupposes not only professional competence but also the confidence of the parties seeking justice in independent, impartial arbitrators who act free of conflicts of interest.
The OGH also argued that notwithstanding the fact that the IBA Guidelines do not have a normative character and require the agreement of the parties to be directly effective, they may serve as a guide in the assessment of an arbitrator’s partiality.
As a result, the OGH found that some relations between arbitrators and party representatives to the arbitration may give rise to circumstances that raise legitimate doubts as to the impartiality or independence of arbitrators. Such legitimate doubts are not justified if the relationship of an arbitrator with a party representative is peripheral in nature and does not go beyond a factual relationship of a professional nature. However, the cooperation of several legal representatives appointed simultaneously as co-counsel by one party (of another arbitration) usually requires intensive contact. Thus, a challenge against an arbitrator in arbitration who works with counsel of one party as co-counsel in another arbitration must, therefore, be granted. This constitutes a conflict of interest.
B.2 Stock exchange “tribunals” are not arbitral tribunals in accordance with the ZPO
The decision of the OGH of 15 May 2019[3] dealt with the following facts:
The plaintiff sought the setting aside of a default “arbitral award,” by which it was found guilty, to pay the defendant approximately USD 9,600, together with interest and the costs of the “arbitration proceedings.” The defendant had obtained this default award in proceedings before the Arbitral Tribunal of the Stock Exchange for Agricultural Products in Vienna.
The OGH dismissed this claim a limine.
The OGH followed the legal doctrine that stock exchange tribunals are not arbitral tribunals within the meaning of sections 577 et seq. ZPO, but special courts of private law in the form of institutional or statutory “arbitral” tribunals.
The OGH decided that sections 577 et seqq. ZPO regulate ad hoc arbitral tribunals, which are formed on the basis of an agreement or by testamentary disposition or by statutes for the individual case. Stock exchange arbitration tribunals, on the other hand, are established by special statutory orders. Basic rules of stock exchange arbitration regarding jurisdiction, composition and procedure are contained in articles XIII to XXVII EGZPO.
Therefore, in the absence of a special statutory provision, the decisions of the stock exchange “arbitral tribunals” cannot be challenged with a set aside proceeding at the OGH. Such decisions can, however, be challenged before the ordinary courts by means of an action for invalidity or a nullity appeal. In each case, these are actions, which are aimed at setting aside the contested “arbitral award.”
Both these actions have to be brought before the Court of First Instance in commercial matters, in whose district the stock exchange tribunal has its seat. In each case, there is an individual jurisdiction. The OGH, however, is not the competent court to hear such a case.
B.3 Indecisive action to set aside an “arbitral award” if the plaintiff argues that there is no arbitral award
The decision of the OGH of 18 February 2019[4] dealt with the following facts:
After disputes, which were also carried out in the media, the “arbitral tribunal” of the Austrian Juristenverband, an Austrian lawyers association ordered the exclusion of the president and the vice-president of the association. Both the excluded president and vice-president separately filed an action with the OGH to set aside the decision. On the one hand, both plaintiffs argued that the “arbitral tribunal” of the association was only a mediation body pursuant to section 8 of the Austrian Associations Act. On the other hand, they accused the “arbitral tribunal” – with express reference to the relevant provisions under the ZPO – of violations of the formal ordre public (in particular deficiencies in reasoning and a conflict of interest of the arbitrators). They also requested the decision’s effects to be suspended by means of an interim injunction.
The OGH dismissed both actions and the applications for an interim injunction.
The OGH ruled that since the Arbitration Law Amendment Act 2013, the OGH has been indeed the first and last instance for actions to set aside decisions of arbitral awards (i.e. “arbitral awards” within the meaning of the ZPO). The prerequisite, however, is that such an arbitral award actually exists at all.
This did not apply in the specific case, even according to the plaintiffs’ own assertions. They themselves had argued that the “arbitral tribunal” was only an internal mediation body of the association under section 8 of the Austrian Association Act. Thus, the OGH decided the decision of such a body is not an arbitral award that could be set aside by pursuant to the relevant provisions of the ZPO. The submissions of the plaintiffs were therefore inconclusive. This led to the rejection of the two actions and to the dismissal of the applications for interim injunctions.
The OGH explicitly held that the legal situation here is no different from that in the case of an action for divorce, in which the plaintiff himself claims that the marriage to be divorced was in fact never entered into – a non-existing marriage cannot be divorced. Neither can an (alleged) “arbitral award” be set aside if the plaintiff himself claims that this “arbitral award” was not made by an arbitral tribunal within the meaning of the ZPO. Such an “arbitral award” is therefore in reality not an arbitral award within the meaning of the relevant provisions.
[1] Die Presse, Chinas Schiedsinstitut für Wien, published on 20 January 2020; available at: https://www.diepresse.com/5754840/chinas-schiedsinstitut-fur-wien (last accessed on 29 January 2020).
[2] OGH, 15 May 2019, docket no. 18 ONc 1/19w (published on 16 July 2019).
[3] OGH, 15 May 2019, docket no. 18 OCg 6/19k (published on 10 July 2019).
[4] OGH, 18 February 2019, docket no. 18 OCg 2/19x (18 OCg 3/19v) (published on 4 March 2019).
