A Q&A guide to arbitration in Austria.
The Q&A guide provides a structured overview of the key practical issues including, for example, any mandatory provisions and default rules applicable under local law, confidentiality, local courts' willingness to assist arbitration, enforcement of awards and the available remedies, both final and interim.
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Austria has a long tradition of arbitration. The first arbitration institutions were set up as early as 1883. Arbitration as a form of dispute resolution was first formally included into the law when specific provisions relating to arbitration were inserted into the Austrian Code of Civil Procedure (CCP) (Zivilprozessordnung) which came into effect on 1 January 1898. The last major reform took effect on 1 January 2006, when Austria's well established arbitration law was subject to a major reform to bring it into line with the UNCITRAL Model Law.
Austria has increasingly been named as the venue for the settlement of international disputes through arbitration, as a result of its growing reputation as a neutral, yet attractive and geographically convenient, location in Central Europe. In 1975, a separate body was established as the International Arbitral Centre of the Austrian Federal Economic Chamber (Vienna International Arbitral Centre (VIAC)). The VIAC is now entering its 36th year. Over time, the VIAC has developed into an internationally accepted arbitration institution with worldwide coverage. In 2008 and 2009, the VIAC received approximately 60 new international cases per year. In 2010, there were 68 new international cases, with an aggregated amount in dispute of EUR 3.14 billion (as at 1 August 2011, US$1 was about EUR0.7). In the past three years, parties from more than 40 countries worldwide have used the services of the VIAC.
Generally speaking, large and complex contracts involving at least one non-Austrian party (or no Austrian party at all) tend to contain an arbitration clause. Arbitration is generally perceived to be a better venue when dealing with complex multijurisdictional or politically sensitive cases.
The principal institution in Austria dealing with international arbitration is the VIAC. The VIAC administers international arbitration proceedings under its Rules of Arbitration and Conciliation (2006), better known as the Vienna Rules.
The Vienna Commodity Exchange at the Vienna Stock Exchange, has its own court of arbitration and its own recommended arbitration clause.
Certain bodies and chambers, including the chambers regulating professional bodies, provide for their own arbitration rules and/or administer arbitration proceedings.
The International Chamber of Commerce (ICC) maintains a direct presence through its Austrian National Committee.
The Austrian Arbitration Association (ArbAut, www.arbitration-austria.at) is dedicated to promoting domestic and international arbitration, with the primary focus on promoting Austria as the place of arbitration.
Arbitration law is contained in the Fourth Chapter of the CCP. Arbitration law was the subject of a major reform that took effect on 1 July 2006. That reform brought the law into line with the UNCITRAL Model Law. When amending the law, Austria drew upon the experience gathered in Germany, when German arbitration law was brought into line with the UNCITRAL Model Law with effect from the beginning of 1998.
The Fourth Chapter of the CCP comprises ten Titles. The first eight Titles follow the structure of the UNCITRAL Model Law. There are then two further Titles concerning court proceedings and special provisions relating to consumers.
The definition of arbitration agreement goes further than that in the UNCITRAL Model Law, as arbitration agreements can also be contained in e-mails or other forms of communication between the parties which preserve evidence of a contract.
The new law completely redefines objective arbitrability. Any pecuniary claim that lies within the jurisdiction of the courts is now generally arbitrable. As regards non-pecuniary claims the position remains the same as under the old law, namely the parties to the dispute must be capable of concluding a settlement concerning the matter in dispute. The new law now eliminates many discussions about arbitrability, in particular relating to the arbitrability of shareholder disputes, most of which are now undoubtedly arbitrable.
Regarding the relationship between an arbitration agreement and parallel proceedings before courts, the law provides that a court seized with a matter that is subject to an arbitration agreement must reject the claim, provided the defendant does not enter pleadings on the merits of the case (with the only exception that the court finds that the arbitration agreement is non-existent or is incapable of being performed).
Arbitral tribunals are expressly authorised to grant interim and protective measures, and the courts must enforce interim measures granted by arbitral tribunals if the measure is such that it is not unknown to Austrian law.
Parties who are generally free to deviate from the rules of the Fourth Chapter of the CCP are prohibited to do so in respect of mandatory provisions. The term mandatory includes two types of provisions:
Mandatory provisions which can be waived (for example, the provision on the form of the arbitration agreement).
Strictly mandatory provisions (for example, the provisions on the competence of the courts relating to arbitrations).
Mandatory provisions concern:
The parties' principal rights in the proceedings, for example, the right to be treated in a fair and equal manner, to present their case and the default procedure if a party fails to perform any act provided for in the CCP.
The arbitrator's qualifications and the number of arbitrators, for example, the rules on the impartiality and independence of arbitrators, and that an arbitral tribunal must consist of an uneven number of arbitrators.
The award, which must be in writing, must be signed at least by the majority of all members of the arbitral tribunal and must be reasoned, unless the parties have agreed otherwise.
The arbitral procedure, for example, the scope of the application of the Fourth Chapter of the CCP and the rules on objective arbitrability.
The formation of a valid arbitration agreement.
The court's competence relating to arbitration.
Arbitral tribunals must apply the statute of limitation in the same manner as state courts. The statute of limitation applies if Austrian law governs the contract and the defendant invokes a limitation period. The general limitation period under Austrian law is 30 years. However, there is a substantial number of exceptions, and in most cases a shorter limitation period of three years applies, for example, in the case of pecuniary claims arising from the delivery or provision of goods or services, or for damages claims. The running of the limitation period is suspended at the time the arbitral proceedings are properly initiated (by appointing an arbitrator or by filing the statement of claim). This suspension continues if either:
An arbitral tribunal denies its jurisdiction because of a court's, or another arbitral tribunal's, competence and the action is immediately brought to the competent court or arbitral tribunal.
A court denies its jurisdiction because of an arbitral tribunal's competence and the action is immediately brought to the competent court or arbitral tribunal.
An arbitral award is set aside due to lack of jurisdiction of the arbitral tribunal and the action is immediately brought to the competent court or arbitral tribunal.
If the action is not immediately brought to the competent court or arbitral tribunal, the limitation period is not suspended and therefore the limitation period may have lapsed in the meantime.
What substantive and/or formal requirements must be satisfied?
Is a separate arbitration agreement required or is a clause in the main contract sufficient?
An arbitration agreement can be validly concluded in the form of a separate agreement or as a clause within a contract. An arbitration agreement must:
Sufficiently specify the parties (they must at least be determinable).
Sufficiently specify the subject matter of the dispute in relation to a defined legal relationship (this must at least be determinable and it can be limited to certain disputes or include all disputes). The subject matter of the dispute can be a pecuniary claim that falls within the jurisdiction of the courts, or a non-pecuniary claim where the parties are capable of concluding a settlement concerning the matter. Family law matters, contracts which are at least partly subject to the Austrian Landlord and Tenant Act (Mietrechtsgesetz) or the Austrian Non-profit Housing Act (Wohnungsgemeinnützigkeitsgesetz), and claims in connection with the ownership of apartments, are not arbitrable. In contrast, most shareholder disputes are arbitrable.
Sufficiently specify the parties' intent to have the dispute decided by arbitration, thereby excluding the state court's competence.
Be contained either in a written document signed by the parties, or in telefaxes, e-mails or other communications exchanged between the parties which preserve evidence of a contract.
Although the CCP closely follows the UNCITRAL Model Law, the doctrine of the separability of the arbitration clause was not expressly included within the statute, because the approach adopted in the UNCITRAL Model Law was considered to be "grossly simplified". The separability doctrine is applied on a case-by-case basis by the courts who, in interpreting the contract and the arbitration clause, focus on the objectively reasonable expectations and intentions of commercial parties in the circumstances of the case. In most cases, the Austrian Supreme Court held that the arbitration clause at hand was in fact separable from the remainder of the contract.
Normally, joinder of a third party to an arbitration requires the corresponding consent of the parties, which can either be express or implied (for example, by reference to arbitration rules which provide for joinder). The consent can be given either at the time the request for joinder is made, or at an earlier stage in the contract itself. In Austrian law, the issue is largely discussed in the context of the intervention of a third party that has an interest in the arbitration. Here, it is argued that such a third party intervener must be a party to the arbitration agreement, or otherwise submit to the jurisdiction of the tribunal, and that all parties, including the intervener, must agree to the intervention.
The term joinder is also used to refer to parties that have not signed the arbitration agreement. Succession is the most non-controversial form of joining a non-signatory. This applies to all forms of legal succession, for example to the assignee of a claim who is bound by an arbitration agreement in the contract between the debtor and the assignor, to statutory assignments (Legalzession), the redemption of a debt (Forderungseinlösung), the assumption of a debt (privative Schuldübernahme) and to the judicial conferment of a debt (richterliche Schuldübertragung). Finally, the Supreme Court has held that a non-signatory third party is bound by an arbitration agreement if that party exercises rights under the contract containing the arbitration clause.
An award has the effect of a final judgment and constitutes res judicata only between the parties.
The Austrian Supreme Court has held that the joining of a third party against its will to the arbitral proceedings, or the extension of the binding effect of an arbitration award on a third party, would infringe Article 6 of the European Convention on Human Rights if the third party was not granted the same rights as the parties (for example, the right to be heard) (Judgment of the Austrian Supreme Court Case No. 6Ob170/08f, dated 1 October 2008).
An arbitral tribunal must consist of an uneven number of arbitrators. If the parties have not determined the number of arbitrators, an arbitral tribunal with three arbitrators decides the case.
Arbitrators must be, and remain, impartial and independent. Arbitrators must disclose any circumstances likely to give rise to doubts as to their impartiality or independence, or that are in conflict with the parties' agreement.
An arbitrator can be challenged only if circumstances exist that give rise to justifiable doubts as to his impartiality or independence, or if he does not possess qualifications agreed to by the parties.
The courts are competent to make the necessary default appointments if the parties do not agree on another procedure and if:
One party fails to appoint an arbitrator.
The parties cannot agree on a sole arbitrator.
The arbitrators fail to appoint their Chairman.
Arbitrators can be removed either by way of challenge, or with the termination of their mandate. In both cases, it is ultimately the court which decides upon the request of one party. If early termination of the arbitrator's mandate occurs, the substitute arbitrator must be appointed in the same manner in which the replaced arbitrator was appointed.
Where a claimant fails to file its statement of claim (for example, a statement of request for relief and the facts supporting his claim) within the period of time agreed or determined by the arbitral tribunal, the proceedings must be terminated by the arbitral tribunal. If the defendant does not submit its statement in defence in time, the arbitral tribunal must continue the proceedings and make an award on the basis of the evidence before it, unless the parties have agreed on a different procedure.
The parties are free to agree on the rules of procedure (for example, by reference to arbitration rules) within the limits of the mandatory provisions of the CCP. Where the parties have not agreed on any set of rules, or set out rules of their own, the arbitral tribunal must, subject to the mandatory provisions of the CCP, conduct the arbitration in such manner as it considers appropriate.
Arbitral tribunals have the power to rule on their own jurisdiction. In the absence of any other agreement between the parties, arbitral tribunals can conduct the proceedings as they consider appropriate. Arbitral tribunals have the power to:
Order interim or protective measures.
Appoint experts (and to require the parties to give the expert any relevant information, or to produce or provide access to any relevant documents, goods or other property for inspection).
Request that the courts conduct judicial acts where the arbitral tribunal has no authority to do so. This judicial assistance can also consist of the court requesting a foreign court or authority to conduct such acts.
There are no express provisions in Austrian arbitration law on disclosure of documents. However, arbitral tribunals can refer to Article 303 of the CCP which provides for limited disclosure requests. A party asserting that the relevant document is in the hands of the other party can request a disclosure order. To that end, the requesting party must describe the content of the document as accurately as possible, and describe the facts which are to be evidenced from that document. The other party must then produce the document if:
That party itself referred to the document in its submissions.
That party is obliged to produce the document as a matter of statutory law.
The document is a "joint" document of the parties.
Arbitral tribunals have no power to compel the attendance of witnesses.
The statutory rules on document disclosure have been summarised above (see Question 14). The parties can agree on wider document disclosure, for example, by agreeing to use the IBA Rules on the Taking of Evidence. As a matter of practice, parties often authorise arbitral tribunals to refer to the IBA Rules on the Taking of Evidence for guidance. If rules such as the IBA Rules are referred to or agreed, the scope of disclosure is often wider than disclosure in litigation.
The CCP does not explicitly provide for the confidentiality of arbitration, but confidentiality can be agreed upon between the parties. Furthermore, in court proceedings for setting aside an arbitral award, and in actions for a declaration of the existence, or non-existence, of an arbitral award, or on matters governed by Title 3 of the Fourth Chapter of the CCP (for example, challenge to arbitrators) a party can ask the court to exclude the public from the hearing, if the party can show a justifiable interest for the exclusion of the public.
A court can only intervene in arbitrations if this is expressly provided for in the CCP. In particular the court can (or must):
Grant interim or protective measures.
Appoint arbitrators.
Decide on the challenge of an arbitrator if:
the challenge procedure agreed upon, or the challenge before the arbitral tribunal, is not successful;
the challenged arbitrator does not withdraw from his office;
the other party does not agree to the challenge.
Enforce an interim or protective measure issued by an arbitral tribunal under certain circumstances.
Conduct judicial acts where the arbitral tribunal is not authorised to do so, including requesting foreign courts or authorities to conduct such acts.
A court must reject a claim if the parties agreed on arbitration unless:
The defendant submits a pleading in the matter, or oral pleadings are put before the court without a notification of objection.
The court establishes the arbitration agreement is non-existent or incapable of being performed.
Furthermore, where an arbitration procedure is pending, no other legal proceedings can be carried out by the court, unless an objection to the arbitral tribunal's jurisdiction is raised, at the latest together with entering an appearance in the case, or a decision of the arbitral tribunal cannot be obtained within a reasonable time. Arbitral proceedings can be commenced or continued and an award can be issued by the arbitral tribunal pending the court proceedings. If the arbitral tribunal confirmed its jurisdiction by a separate award, and this award itself is subject to court proceedings to set it aside, the arbitral tribunal can continue its proceedings on the merits and make an award.
Anti-arbitration injunctions are not available under Austrian law.
Austrian law does not contain any express rules on the remedies available if court proceedings are commenced in breach of an arbitration agreement, or if arbitration is commenced in breach of a jurisdiction clause (other than an adverse costs decision in proceedings that should not have been commenced in the first place). Where proceedings are commenced in foreign courts with the aim to frustrate an arbitration in Austria (and if the party directly or indirectly commencing the litigation in the foreign court is domiciled in Austria), a party can contemplate commencing an action for damages for vexatious litigation in the Austrian courts. However, the existing Supreme Court jurisprudence on the point still needs to be tested in this regard.
There is no known case where an Austrian court has enforced an arbitral tribunal's anti-suit order.
The Austrian courts will not grant an injunction to restrain proceedings started elsewhere in breach of an arbitration agreement.
An arbitral tribunal can rule on its own jurisdiction either in a separate award or in the final award on the merits. A party who wishes to challenge the jurisdiction of the arbitral tribunal must raise that objection no later than in the first pleading in the matter. The appointment of an arbitrator, or the party's participation in the appointment procedure, does not preclude a party from raising the jurisdictional objection. A late plea must not be considered, unless the tribunal considers the delay justified and admits the plea. If a party files a claim before a state court where the parties concluded an arbitration agreement, the court must generally reject the claim, unless the defendant has made a notification of objection concerning jurisdiction before he submitted a pleading in the matter, or pleaded orally before the court in the matter. The court must not reject the claim if it establishes that the arbitration agreement is non-existent or incapable of being performed. Nevertheless, arbitration proceedings can be started, or continued, and an award can still be made. Consequently, both courts and arbitral tribunals can determine jurisdictional issues.
Security for costs?
Security or other interim measures?
An arbitral tribunal can (unless the parties have agreed otherwise) grant interim or protective measures considered necessary to the subject matter of the dispute on the premise that either:
The enforcement of the claim would be frustrated or considerably impeded without the measures.
There is a danger of irreparable harm without the measures.
Interim or protective measures can only be granted upon the request of one party once the other party has been heard on the matter.
An arbitral tribunal can also order any party to provide appropriate security in connection with these measures. Security for costs is not explicitly dealt with in the Fourth Chapter of the CCP, but as the arbitral tribunal must decide on the obligation to reimburse costs in the award, or in a separate award, there is no reason why security for costs may not be the subject of interim measures.
Final tribunal remedies normally take the form of an arbitral award, which can include damages, declarations, interest and costs.
Arbitral awards, including both awards on jurisdiction and awards on the merits, can only be challenged by an action for setting aside. This action must be filed within three months from service of the award. Furthermore, a party can also apply for a declaration of the existence, or non-existence, of an arbitral award.
An arbitral award can be challenged on the grounds that:
The arbitral tribunal accepted or denied jurisdiction although no arbitration agreement, or a valid arbitration agreement, exists.
A party was incapable of concluding an arbitration agreement in accordance with the law applicable to that party.
A party was unable to present its case (for example, it was not given proper notice of the appointment of an arbitrator, or of the arbitral proceedings).
The award concerns matters not contemplated by, or not falling within the terms of, the arbitration agreement, or concerns matters beyond the scope of arbitration agreement, or the request for relief and the defect concerns the award as a whole and not only a separable part of it.
The composition of the arbitral tribunal was not in accordance with a provision of the Fourth Chapter of the CCP or the parties' agreement.
The arbitral procedure did not, or the award does not, comply with the fundamental principles of the Austrian legal system (ordre public).
The requirements to appeal a judgment of a domestic court in accordance with Article 530(1), Nos. 1 to 5 of the CCP are fulfilled, for example:
the judgment is based on a document which was initially, or latterly, forged;
the judgment is based on false testimony (of a witness, an expert or a party under oath);
the judgment is obtained by the representative of either party, or by the other party, by way of criminal acts (for example, deceit, embezzlement, fraud, forgery of a document and of specially protected documents, or of signs of official attestations, indirect false certification or authentication or the suppression of documents);
the judgment is based on a criminal verdict which was lifted by another legally binding judgment.
The award concerns matters which are not arbitrable in Austria.
Legal fees are not fixed by law. Parties and counsel are free to agree on a fee structure (for example by reference to an official tariff of legal fees, hourly rates or in some other way).
Where the parties did not agree otherwise, and the arbitration is terminated or the arbitral tribunal declines jurisdiction because there is no valid arbitration agreement, the arbitral tribunal must decide whether to reimburse the costs of the proceedings in the form of an arbitral award (in an award on jurisdiction, or on the merits, or as a separate award).
Where the parties agree to terminate the proceedings, the arbitral tribunal must decide on the obligation to reimburse the costs, if a party applies for that decision, at the time the party notifies the arbitral tribunal of the agreement to terminate the proceedings.
The arbitral tribunal is granted discretion in the allocation of costs, but must take into account the circumstances of the case, in particular the outcome of the proceedings. Where costs are not set off against each other and as far as it is possible, the arbitral tribunal must, at the same time as it decides on the liability for costs, also determine the amount of costs to be reimbursed. As a rule of thumb, costs follow the event and are borne by the unsuccessful party, but the tribunal can also arrive at different conclusions if this is appropriate in the circumstances of the case.
Domestic arbitral awards are enforceable in the same way as domestic judgments (without the need for an exequatur). For further procedures, see Question 28.
Austria has ratified several multilateral and bilateral treaties on the recognition and enforcement of (foreign) arbitral awards, such as the New York Convention, the Convention on the Execution of Foreign Arbitral Awards (Geneva, 26 September 1927) and the European Convention on International Commercial Arbitration (Geneva Convention), as well as bilateral treaties with British Columbia, Liechtenstein, Slovenia, Croatia, Serbia, Montenegro, Kosovo, Bosnia-Herzegovina and Macedonia.
Foreign awards (where the place of arbitration is outside of Austria) are enforceable under:
Bilateral or multilateral treaties.
A legal instrument of the EU.
The Austrian Enforcement Act.
To enforce a foreign award, a party must initiate exequatur and enforcement proceedings in accordance with Article 79ff of the Austrian Enforcement Act (Exekutionsordnung). The applicant must apply for the exequatur and for enforcement. Both applications can be combined in the same motion. Once exequatur is granted, the award is treated as a domestic judgment and can be enforced. Proceedings are initiated at the district court (Bezirksgericht) at the respondent's seat or domicile, or where the object of enforcement is situated. The respondent can appeal against the court's decision granting the exequatur and enforcement within four weeks (if seated within Austria) or within two months (if seated outside Austria). The exequatur can be denied for the reasons enumerated in the New York Convention, or in other recognition and enforcement treaties that Austria has ratified. If the exequatur is denied, the applicant can file an appeal within four weeks.
The duration of enforcement proceedings (that is, the exequatur procedure and writ of enforcement) depends on the workload of the competent court. In most cases, a party should be able to receive the court's decision in a matter of days, rather than weeks.
Main activities. The VIAC is an independent, permanent arbitral institution founded in 1975. It is Austria's main international arbitration institution. Since its establishment, the VIAC has developed into an arbitration institution with worldwide acceptance. To date, the services of the VIAC have been used by parties from more than 40 countries around the world.
Main activities. The ICC and the ICC Court of International Arbitration maintain a presence in Austria through the ICC National Committee. The former provides the ICC Court with proposals of names, if requested, in cases where the ICC Court needs to make default nominations of arbitrators, or acts as the appointing authority. A significant number of ICC arbitrations are seated in Austria.
Main activities. ArbAut is a non-profit association dedicated to promoting domestic and international arbitration, in particular by organising domestic and international conferences. ArbAut is not an arbitral institution and does not administer arbitral proceedings. The association co-operates with the VIAC, the ICC, and other arbitral institutions. It also maintains contacts with international organisations based in Vienna, particularly the United Nations Commission on International Trade Law (UNCITRAL).
T +43 1 515 50 310
F +43 1 515 50 50
E e.boehm@baierboehm.at
W www.baierboehm.at
Qualified. Austria, 1989; England and Wales, 1995 (not practising)
Areas of practice. Dispute resolution; international commercial and investment treaty arbitration; banking and finance; construction; general commercial.
Recent transactions
T +43 1 515 50 285
F +43 1 515 50 50
E a.starlinger@baierboehm.at
W www.baierboehm.at
Qualified. Not yet admitted to the Bar.
Areas of practice. Dispute resolution; international commercial and investment treaty arbitration.
