Austria: Arbitration Practice Area Review 2015
Gerold Zeiler of zeiler.partners Rechtsanwälte provides an overview of the Rules of Arbitration and Conciliation adopted by the Vienna International Arbitral Centre, which took effect in 2013.
Arbitration is, without doubt, the preferred method of dispute resolution in Austria for commercial disputes of an international or highly technical nature. The Austrian arbitration law has been widely adapted to the UNCITRAL Model Law in 2006, followed by significant amendments of the annulment proceeding, which became effective in 2014. Simultaneously, the Vienna International Arbitral Centre (VIAC) – still the dominant regional arbitration institution in Austria and CEE, which will celebrate its 40th anniversary this year – has adopted its rules (the so-called Vienna Rules) in 2006 and in 2013. These reforms are described in detail below.
Austrian Arbitration Act 2013 provides for efficient annulment proceedings
Effective 1 January 2014, all claims to set aside an arbitral award must be brought directly before the Austrian Supreme Court, which decides on such claims in first and last instance.
The new regulation is the result of the efforts of a private working group composed of academics and practitioners. A first ministerial draft bill was put forward by the Ministry of Justice in February 2012, but due to lengthy negotiations, it took more than a year until the legislation was finally implemented into Austrian law.
The amended framework for set-aside proceedings is almost unique – in Europe only Ireland and Switzerland have similar rules to challenge an arbitral award.
The new law (section 616 of the Austrian Code of Civil Procedure (ACCP)) now provides that the Austrian Supreme Court is the one and only instance which is competent to decide on claims to set aside an arbitral award and on actions for the declaration of the existence and non-existence of an arbitral award. Also, for disputes arising out of the formation of the arbitral tribunal the Supreme Court is the competent venue. In the course of the formation of the arbitral tribunal the Supreme Court might deal with issues regarding the number of arbitrators as well as their appointment and challenge, the early termination of an arbitrator’s mandate or the appointment of substitute arbitrators in ad hoc proceedings. For the first time in history the Austrian Supreme Court will have to take evidence and, for that purpose, to apply the same procedural rules as Austrian trial courts. Accordingly, from now on, in such matters, the Supreme Court will determine issues of fact.
However, some issues have been left in the jurisdiction of the trial courts. The amendment at hand does not touch the competence of the trial courts to decide on the recognition and enforcement of arbitral awards (section 614 ACCP), to issue preliminary measures (section 593(2) ACCP) or to assist arbitral tribunals (section 602 ACCP).
Also, the amendments do not apply to set aside proceedings where consumers or employees are involved. According to section 617(8) ZPO and section 618 ZPO the trial courts retain jurisdiction in consumer and employment-related challenging proceedings. Hence, such proceedings can pass three procedural levels (trial court, appellate court and Supreme Court). It is noteworthy that, according to the Austrian Supreme Court, the question of whether a person qualifies as consumer must always be assessed under Austrian law if the arbitral tribunal has its seat in Austria. Further, the Supreme Court recently ruled that shareholders of a limited liability company (GmbH) with no influence on the management of the company qualify as consumers and therefore section 617 ACCP (a provision to protect consumers in arbitral proceedings) is applicable to such shareholders as well (16.12.2013, 6 Ob 43/13m). Such protection of consumers means that any arbitration agreement, in order to be valid, must be contained in a separate document, which deals exclusively with the arbitration proceedings and contains no other provisions. Also, where an arbitration agreement is concluded between a consumer and an entrepreneur, it may only refer to disputes that have already arisen. The agreement has to determine the seat of the arbitration and the entrepreneur must advise the consumer on the major differences between arbitration and court proceedings, failing which a subsequent award will be set aside.
New Vienna Rules
A new version of the so-called Vienna Rules came into force on 1 July 2013. Due to practitioners’ broad acceptance of the Vienna Rules in 2006, changes were made only with regard to specific matters. The major focus of the amendments lies on expediting the arbitration proceedings and addressing cost-related issues.
A group consisting of both academics and practitioners worked for approximately one and a half years on revising the Vienna Rules 2006. To evaluate where a need for improvement existed, VIAC launched an international survey which established that both the flexibility and simplicity of the Vienna Rules use were highly appreciated in practice.
On 8 May 2013, the extended chair of the Austrian Federal Economic Chamber approved the amended version of the rules.
One of the most important changes deals with the joinder of third parties (article 14) and the consolidation of arbitration proceedings (article 15). After hearing all persons involved, plus considering all relevant circumstances, the arbitration tribunal upon request of a party or the third party decides about the admissibility of a joinder. Two or more arbitration proceedings can be consolidated on the request of a party if the parties agree to do so or the same arbitrators were nominated or appointed. The latter is decided by the board of VIAC.
Another major reform deals with multiparty arbitrations, and especially with the constitution of the arbitration tribunal. In addition to the regular provision on the constitution of the tribunal (article 17), article 18 provides that in the case of a panel of arbitrators each side – claimant or respondent – shall jointly nominate their arbitrator. Nevertheless, this participation in the joint nomination does not constitute consent to multiparty arbitration. If one side is delayed in appointing an arbitrator, such arbitrator will be appointed by the board of VIAC.
A novelty for VIAC arbitrations has been implemented in article 19 dealing with the confirmation of an arbitrator’s nomination. After an arbitrator has been nominated, the secretary general of VIAC confirms his nomination if no doubts exist as to the arbitrator’s impartiality or independence. The arbitrator shall be deemed appointed only once this confirmation has been provided.
Under the catchword “expediting measures”, several provisions aim to accelerate arbitration proceedings under the Vienna Rules 2013. For instance, article 21 para 2 regulates the possibility that each party may request the removal of an arbitrator who is prevented from exercising his task for more than a temporary period.
The arbitration tribunal will close the proceeding once it is convinced that all parties have had an adequate opportunity to make submissions and to offer evidence. At that point, the arbitration tribunal informs the secretary general and the involved parties of the anticipated date by which the final award will be rendered (article 32).
Article 45 separately regulates the expedited procedure. The supplementary rules on expedited proceedings apply in the case the parties have included them in their arbitration agreement or if the parties subsequently agree on their application. The main difference to the regular proceeding is a shortening of deadlines for several procedural acts.
With regard to the costs of the proceeding, two amendments are worthy of mention. The registration fee decreased to €1,500, but is now non-refundable; in addition, it can no longer be deducted from the party’s advance on cost (article 10). According to article 42 para 4, the arbitration tribunal has the power to order reimbursement of costs by a separate decision if one party has fulfilled payment obligations of another party. Such decision does not affect the arbitration tribunal’s authority and obligation to determine the final allocation of costs.
Austria is now equipped with a modern and efficient regulatory framework for the annulment of arbitral awards. Set-aside proceedings can be expensive, though, because of high court fees; based on the general principle that costs follow the event, the loser pays the bill. As a result, a potential claimant will want to think twice and carefully consider the merits of his or her claim before initiating annulment proceedings.