International Arbitration 2021

Last Updated August 17, 2021

Austria

Law and Practice

Authors



KNOETZL is Austria’s first large-scale dispute resolution powerhouse and has successfully developed into Austria’s largest dispute resolution team. The arbitration practice encompasses international commercial arbitration, investment protection and arbitration-related court proceedings. Key industries include construction and engineering, energy, banking, automotive and aviation, IT and telecommunications, life sciences, and healthcare and pharmaceuticals. Members of the arbitration team have successfully acted as counsel in some of the largest and most complex disputes in the CEE region in recent decades, under all the major arbitration rules. KNOETZL lawyers act as arbitrators in a large number of arbitration cases in a wide array of industries. Members of the firm are recognised as leading arbitration specialists and hold functions in major arbitral institutions and arbitration associations.

Austria has long been established as a European hub for international arbitration and Vienna in particular, as the capital city, is a preferred venue for arbitrations related to the SEE and CEE regions. The legal community boasts a number of arbitration specialists providing high-end counsel and arbitration services. The Vienna International Arbitral Centre of the Federal Economic Chamber (VIAC) provides excellent administration of international arbitrations. In general, arbitration is increasingly the preferred method of resolving larger business disputes in Austria.

Before the outbreak of the COVID-19 pandemic, VIAC had already implemented several changes to its arbitration rules to allow for electronic filings and encourage the efficient conduct of proceedings. Most recently, the VIAC Rules of Arbitration and Mediation 2021 entered into force on 1 July 2021. The revised Vienna Rules explicitly state that oral hearings may be conducted by other means than in person – eg, remotely via videoconferencing. In support of remote hearings, VIAC has published the "Vienna Protocol – A Practical Checklist for Remote Hearings". The Vienna Protocol aims to provide guidance for arbitrators and the parties in determining and assessing the relevant parameters to consider for a remote hearing.

VIAC also introduced an online case management system for the secure communication and exchange of case-related documents (the VIAC Portal). The provisions on the submission of statement of claims and on the transmission of documents have been adapted accordingly. The Vienna Rules now also expressly provide that, if it is not possible or feasible to send the award in hard copy form within a reasonable time or if the parties so agree, a copy of the award may be sent in electronic form, followed by a hard copy.

These measures are designed to stay in place after the COVID-19 pandemic subsides.

The COVID-19 pandemic has caused disruptions to numerous business sectors and as such is giving rise to an increase in disputes. There has been a notable increase in arbitration activity in domestic disputes, particularly concerning energy-related disputes, as well as in construction and engineering. The financial services and banking sector is also increasingly turning to arbitration for dispute resolution. This increase is primarily due to the increased perception of arbitration as the “normal” form of dispute resolution for more complex disputes.

The majority of international arbitrations in Austria are administered either by VIAC under the Vienna Rules or by the International Court of Arbitration of the International Chamber of Commerce (ICC) under the Rules of Arbitration of the ICC.

A particular point of note is that VIAC recently rendered a complete new set of Investment Arbitration and Mediation Rules, in force since 1 July 2021, and thus expanded its institutional competence to investment arbitration cases.

A number of arbitrations are also conducted under the rules of other renowned arbitral institutions, such as DIS, LCIA and the Swiss Rules, as well as under the UNCITRAL Rules.

Since 1 January 2014, Austrian law has provided for direct recourse to a specialised chamber of the Austrian Supreme Court as first and final instance in proceedings to nominate or challenge arbitrators and to set aside an arbitral award. Practice has shown that a well-reasoned decision is rendered expeditiously (six to eight months on average in setting-aside proceedings).

Regarding enforcement proceedings, the competence for the recognition and enforcement of foreign arbitral awards remains with the district courts, generally at the place where the debtor or the assets are located.

If the seat of the arbitration is in Austria, the arbitration proceedings will be governed by Austrian arbitration law, which is contained in the Fourth Chapter of the Austrian Code of Civil Procedure (Sections 577-618).

Since 2006, the legislation governing arbitration in Austria has been strongly based on the UNCITRAL Model Law, with only a few minor deviations. Significantly, Austrian arbitration law does not differentiate between domestic and international arbitration.

There have been no changes to Austrian arbitration law in the past year, nor are there any changes planned in the immediate future. Any discussions regarding possible legislative changes are limited to clarifications (eg, regarding the delimitation of consumer and corporate disputes), reinforcing Austria as an arbitration-friendly jurisdiction.

Austrian law requires that the arbitration agreement must identify the parties and the dispute (or a defined legal relationship) that are subject to the arbitration clause. Furthermore, the arbitration agreement must be in writing, either as part of a document signed by the parties or as an exchange of letters, telefax, emails or any other means of communication that provides a record of the arbitration agreement. Regarding the exchange of documents, the Austrian Supreme Court has clarified that “exchanged documents” do not need to be signed, regardless of the means of communication used. Additional formal requirements must be met if consumers or employees are parties to the arbitration agreements.

The definition of arbitrability is broad. The general rule is that pecuniary claims are usually considered arbitrable, while non-pecuniary claims are considered arbitrable if the parties have the capacity to enter into a settlement agreement with regard to the specific claim. Disputes that fall under the competence of the administrative authorities are not arbitrable.

Family law matters and all claims based on contracts that are – even only partly – subject to the Tenancy Act (Mietrechtsgesetz) or the Non-Profit Housing Act (Wohnungsgemeinnützigkeitsgesetz) cannot be made subject to an arbitration agreement, nor can claims concerning condominium property. In addition, certain (collective) labour and social security matters are not arbitrable.

Disputes involving consumers or employees may only be made subject to an arbitration agreement (with additional formal requirements) after the dispute has arisen. The additional formal requirements are extensive and lead to a very high threshold to validly conclude an arbitration agreement with consumers or employees, rendering arbitration agreements in these areas impracticable.

Austrian arbitration law does not provide rules to determine the law applicable to the arbitration agreement. The Austrian Supreme Court applies the conflict-of-laws rule contained in Article V(1) lit a of the New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards (the New York Convention) to determine the law applicable to the arbitration agreement outside the context of enforcement proceedings. Accordingly, the Austrian Supreme Court applies the law selected by party agreement. Such choice of law may also be agreed implicitly. A choice-of-law-clause in the main contract may also extend to the arbitration agreement.

At the same time, the Austrian Supreme Court has recognised the separate legal nature of an arbitration agreement and has emphasised that it is appropriate to determine the law applicable to an arbitration agreement on a case-by-case basis (see, eg, 18 OCg 1/15v). In the absence of a choice of law, the law of the seat of the arbitration governs the arbitration agreement (see, eg, 3 Ob 153/18y).

Austrian legislation and the courts are arbitration-friendly in terms of enforcing arbitration agreements. In practice, courts apply the principle of “in favorem validitatis” – ie, when in doubt, interpret the intended scope of an agreement to favour arbitration.

Although legislation governing arbitration in Austria is based on the UNCITRAL Model Law on International Commercial Arbitration, the specific wording of Article 16 (1) of the Model Law regarding separability was not adopted. However, the doctrine of separability is recognised by the courts, which evaluate the question of the validity of an arbitration clause contained in an invalid contract on a case-by-case basis by interpreting the intention of the parties. In practice, this will usually lead to the determination that the parties’ intent was that the arbitration agreement remains valid where the contract is null and void or otherwise terminated. If the main contract is terminated with consent, the courts have held that the arbitration clause contained in the contract may also be considered terminated if the parties’ intention was to terminate the entire contractual relationship.

The parties are free to agree on a procedure to select the arbitrators. The only limitation under Austrian arbitration law is that an arbitral tribunal must not consist of an even number of arbitrators, and that sitting Austrian judges are prohibited by law from accepting arbitrator mandates.

Austrian law provides for a default procedure if the parties have failed to designate a method for selecting arbitrators or if the chosen selection procedure fails. However, in most cases, the parties will have chosen a set of institutional arbitration rules that deal with this issue.

As a default, Austrian law states that there shall be three arbitrators. In principle, each party shall nominate the same number of arbitrators. However, Austrian law does allow for the joint appointment of one arbitrator by several parties – eg, in the case of multi-party arbitrations.

If the parties have not specified a procedure, a sole arbitrator shall be jointly nominated by agreement of the parties, and an arbitral tribunal shall be appointed by each party appointing one arbitrator and the two party-appointed arbitrators appointing the president of the arbitral tribunal. If a party fails to appoint an arbitrator or if no agreement can be found regarding the appointment of a sole arbitrator or the president of the arbitral tribunal or in multi-party arbitrations, a party may apply to the Austrian Supreme Court to make the default appointment.

Courts are only involved in the appointment of arbitrators upon the application of (one of) the parties to support the arbitral process. If there is no default procedure agreed upon by the parties, a party can request the court to appoint an arbitrator if the other party fails to do so, or if no agreement can be reached regarding the appointment of the sole arbitrator or the president of the arbitral tribunal or in multi-party arbitrations. Unless the parties have provided otherwise, the courts may also be called upon to decide on the application to remove an arbitrator – eg, due to lack of independence or impartiality.

Austrian law provides for a default procedure if the parties have failed to designate a challenge procedure. It foresees that a party will first submit a written statement of the reasons for the challenge to the arbitral tribunal, which gives the challenged arbitrator the opportunity to resign from office, or the other party may agree that the challenged arbitrator will be removed. If the challenged arbitrator does not resign or is not removed upon mutual agreement of the parties, the arbitral tribunal (including the challenged arbitrator) must decide on the challenge. If the challenge before the sole arbitrator or the arbitral tribunal is unsuccessful, the challenging party may then – within four weeks – apply to the Austrian Supreme Court as the court of first and last instance to decide on the challenge.

If a challenge pursuant to an agreed challenge procedure (eg, contained in arbitration rules) is not successful, the challenging party may also apply to the Austrian Supreme Court for a review of the challenge decision within four weeks of receiving the decision. The possibility to appeal to the Austrian Supreme Court in these cases is mandatory and may not be waived.

The grounds for the challenge of an arbitrator are justifiable doubts as to their impartiality or independence, and the failure of an arbitrator to meet specific requirements set out in the parties’ agreement. The Austrian Supreme Court routinely applies the IBA Guidelines on Conflicts of Interest in International Arbitration as non-binding guidelines. The mere fact that an arbitrator has not disclosed circumstances that may give rise to doubts as to their impartiality or independence alone is not per se a ground for a challenge.

Arbitrators are required to be independent and impartial. Both Austrian law and the Vienna Rules state that the prospective arbitrator must disclose any circumstances that are likely to give rise to doubt as to their impartiality or independence, prior to accepting an appointment. The obligation to disclose such circumstances is ongoing throughout the arbitral proceedings.

According to case law, the test is whether the circumstances of the case objectively lead to justifiable doubts regarding the arbitrator's independence and impartiality (see, eg, 18 ONc 1/19w).

Disputes that fall into the competence of the administrative authorities are not arbitrable; the same applies to certain (collective) labour and social security matters, and to family law matters and claims based on contracts that are – even only partly – subject to the Tenancy Act or the Non-Profit Housing Act, as well as claims concerning condominium property. Please see 3.2 Arbitrability for further details.

Austrian arbitration law recognises the principle of “competence-competence”, so the arbitral tribunal may rule on a party’s challenge to its own jurisdiction.

Lack of jurisdiction of the arbitral tribunal may also be raised as a ground to set aside an arbitral award, including a partial award on jurisdiction. If the place of arbitration is Austria and such proceedings are initiated, the question of jurisdiction will be reviewed and ultimately decided by the Austrian Supreme Court.

Under Austrian law, the courts may only address matters concerning arbitration in limited cases and upon the request of a party.

The rules on jurisdiction generally favour arbitration over court proceedings. Therefore, if a court action involving a matter that is subject to an arbitration agreement is initiated prior to arbitral proceedings, the court must dismiss the claim, unless the other party enters into the merits of the dispute without raising a jurisdictional objection, or if – after an objection has been raised – the court finds that the arbitration agreement does not exist or is incapable of being performed.

If an action is brought before a court whilst arbitral proceedings are already pending, the court will dismiss the action, unless a party has already challenged the jurisdiction of the arbitral tribunal in the arbitration proceedings and if, exceptionally, the arbitral tribunal is not expected to reach a decision within a reasonable period of time.

Neither of the above actions prevents an arbitration from being initiated or continued, nor an award from being rendered.

Ultimately, the issue of whether (or not) an arbitral tribunal has jurisdiction may also be raised as a ground for setting aside an arbitral award, including an award on jurisdiction.

As a general rule, parties may only challenge the jurisdiction of the arbitral tribunal in setting-aside proceedings before the Austrian Supreme Court, which may be initiated after a (partial) arbitral award has been rendered.

However, the parties have the right to go to court to challenge the jurisdiction of the arbitral tribunal during pending proceedings, if a party has already challenged the jurisdiction in the arbitration proceedings and if, exceptionally, the arbitral tribunal is not expected to reach a decision within a reasonable period of time.

In setting-aside proceedings, the Austrian Supreme Court may assess questions of jurisdiction without being bound to the findings of the arbitral tribunal. In practice, there is a discernible bias in favour of upholding arbitral jurisdiction in review proceedings.

The approach of Austrian courts toward a party who commences court proceedings in breach of an arbitration agreement will be to dismiss the action, unless the other party enters into the merits of the dispute without raising a jurisdictional objection or if – after an objection has been raised – the court finds that the arbitration agreement does not exist or is incapable of being performed, or if arbitral proceedings are already pending but the arbitral tribunal is not expected to reach a decision on its jurisdiction within a reasonable period of time. The courts are generally arbitration-friendly and will observe an arbitration agreement.

Austrian law does not contain explicit provisions allowing an arbitral tribunal to assume jurisdiction over individuals or entities that are neither party to an arbitration agreement nor signatories to the contract containing the arbitration agreement. However, case law has established that both single and universal legal successors, assignees of a claim or contract, and third party beneficiaries of contracts are bound by an arbitration agreement even if they are not signatories to the contract (see, eg, 4 Ob 43/21h). The difference between transfer of rights and novation is sometimes difficult to determine, and must be evaluated on a case-by-case basis.

Unless otherwise agreed by the parties, arbitral tribunals may award preliminary or interim relief. Such relief may only be awarded by the arbitral tribunal after the other party has been given an opportunity to be heard. A further requirement is that the enforcement of a claim would otherwise be frustrated, or that there is a danger that one of the parties may suffer irreparable harm. The relief granted will be considered binding and is enforceable if it is ordered in writing, signed, and served on the parties. Enforcement will only be refused if the order suffers from a defect that would allow it to be set aside (if the seat of arbitration is in Austria) or to be refused recognition or enforcement (if the seat of the arbitration is outside Austria).

If an arbitral tribunal grants preliminary or interim relief that contains a remedy unknown to Austrian law, Austrian arbitration law expects that the enforcing court will look to the purpose to be achieved by the remedy and – by means of interpretation, reformulation or even modification of the remedy granted by the arbitral tribunal – grant an equivalent remedy available under Austrian law.

Under Austrian arbitration law, parties may turn to the courts or the arbitral tribunal to grant preliminary or interim relief while arbitration proceedings are pending. There are no provisions on emergency arbitrations.

Whilst the parties may by agreement exclude the arbitral tribunal's power to grant preliminary or interim relief, the courts can always be called upon to grant preliminary or interim relief upon the application of a party both before and after constitution of the arbitral tribunal. Preliminary or interim relief granted by a court can only be lifted by the courts, and cannot be reversed by an arbitral tribunal.

Only the courts have the power to enforce preliminary or interim relief awarded by an arbitral tribunal, including by an emergency arbitrator.

Courts may refuse to enforce measures that would be incompatible with an Austrian court measure that was either requested or issued previously, or with a foreign court measure that was issued previously and must be recognised.

Austrian arbitration law does not contain a provision explicitly granting an arbitral tribunal the power to order security for costs. However, this power is understood to be implied in the competence of an arbitral tribunal to award preliminary or interim relief, and in the fact that Austrian courts may order security for costs if the enforcement of the cost decision is seriously impaired (ie, due to the lack of enforceability of a judgment abroad).

The Vienna Rules 2018 introduced a provision explicitly granting an arbitral tribunal the power to order security for costs.

Austrian arbitration law grants the parties extensive autonomy in determining the conduct of the arbitration, with only a few mandatory legal provisions that cannot be waived by agreement of the parties. It also provides a framework of default rules that govern the procedure of arbitration if the parties have failed to provide for (institutional or other) rules to govern their arbitration proceedings.

The parties are largely free to agree on the manner in which their arbitration proceedings are to be conducted. In the absence of such an agreement (which may also be a reference to a set of rules to be administered by an institution), Austrian arbitration law applies as a default rule, and it is otherwise in the discretion of the arbitral tribunal to govern the proceedings. Under the VIAC Rules, the arbitrators are free to conduct the proceedings at their discretion (without being required to apply the Austrian non-mandatory arbitration rules), subject to mandatory law and if the parties have not agreed otherwise.

As a mandatory requirement, the arbitrators must observe the parties’ right to fair treatment and each party’s right to be heard.

The arbitral tribunal has the following powers:

  • to decide on its own jurisdiction as well as the merits of the case;
  • to decide on the conduct of the proceedings, where there is no agreement among the parties; and
  • to decide on the admissibility of evidence, and to determine its relevance, materiality and weight.

In the course of proceedings, the arbitral tribunal may also grant preliminary or interim relief. It has the duty to treat the parties fairly, and must ensure that each party’s right to be heard is observed. Every arbitrator has the duty to remain independent and impartial throughout the arbitration, and has an ongoing obligation to disclose any circumstances that may call their independence or impartiality into question.

There are no particular qualifications or other requirements for legal representatives in arbitration proceedings. In particular, there are no restrictions as to the nationality and/or qualification of counsel.

In proceedings to set aside an arbitral award, there is an obligation to be represented by a lawyer who is admitted to the Bar in Austria.

Austrian arbitration law does not contain any explicit provisions regarding the collection and submission of evidence.

In practice, most arbitrators adopt a hybrid approach and will take both civil and common law rules on evidence into consideration. For example, extensive discovery is rare in international arbitrations conducted in Austria, whereas document production, the use of written witness statements and extensive cross-examination are standard features of arbitral proceedings in Austria.

Although the client/attorney relationship is privileged under Austrian law, the scope and rules regarding legal privilege are regulated according to the civil law tradition and thus differ from the common law concept of privilege.

Austrian law does not stipulate rules of evidence that apply specifically to arbitral proceedings. The general principle is the free evaluation of evidence. The IBA Rules on the Taking of Evidence in International Arbitration are frequently referred to as guidelines.

In general, arbitral tribunals do not have any powers of compulsion but may instead request the courts’ assistance regarding the collection of evidence or the interrogation of a witness. Specifically, arbitral tribunals have no power to force a witness to testify or to enjoin a refusing party to produce a document.

An arbitral tribunal that has its seat in Austria may turn to Austrian and foreign courts for legal assistance, and may by these means obtain the testimony of a reluctant witness or the production of a document.

There is no difference between the witness testimony of parties and unrelated third parties.

Austrian arbitration law does not contain any explicit provisions on the confidentiality of arbitral proceedings.

There is no provision in Austrian law obliging the parties to keep the arbitral proceedings confidential (including pleadings, documents and the award). If confidentiality is desired, the parties are advised to agree on the confidentiality in the arbitration agreement or elsewhere.

The Vienna Rules contain provisions binding the arbitral institution and arbitrators to confidentiality, but not the parties.

Austrian arbitration law does provide that the public may be excluded from setting-aside proceedings if this is requested by one of the parties.

In arbitral proceedings with more than one arbitrator, any decision of the arbitral tribunal shall be made by a majority of the arbitrators, including any arbitral award. The parties may, however, agree otherwise and require a unanimous decision to be rendered. The further requirements for an arbitral award are that it must be made in writing, state the date on which it was rendered and the seat of the arbitration, and be signed by the arbitrator(s).

Unless the parties have agreed otherwise, the award must also state the reasons on which the decision is based.

The delivery of the award is not subject to any time limits, unless so agreed by the parties. The revised Vienna Rules 2021 explicitly set a time limit for the issuance of the award – ie, the award 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 later. This time period may be extended by the Secretary General upon reasoned request or on its own initiative.

Austrian arbitration law does not contain any explicit provisions on the types of remedies that an arbitral tribunal may award. Generally, the available remedies as well as any limits thereto or prescription periods must be determined by reference to the law applicable to the merits.

The remedy of punitive damages is not known under Austrian law and, in principle, the concept of punitive damages is considered contrary to Austrian public policy.

Austrian arbitration law does not contain any explicit provisions on whether the parties are entitled to recover interest. In most cases, this will depend on the law applicable to the merits.

Unless the parties have agreed otherwise, they are entitled to recover legal costs, upon request (encompassing the reasonable costs of legal representation, the fees of the arbitrators and – where applicable – the administrative costs charged by the institution). Both Austrian law and the Vienna Rules foresee that the arbitral tribunal must render a decision on costs upon termination of the proceedings, including in cases where the arbitral tribunal ultimately finds it has no jurisdiction. The general practice with regard to allocating costs between the parties is to take into account all circumstances of the case, with a particular focus on the outcome of the proceedings. Under the revised Vienna Rules, the arbitral tribunal may – at any stage of the arbitral proceedings, and at the request of a party – make a decision on legal costs (ie, excluding the administrative and arbitrator’s fees) and order payment. This is primarily intended to apply in cases with separate phases  eg, in case of bifurcation between jurisdiction and merits.

Within three months of receiving the arbitral award, a party is entitled to file an action for the award to be set aside based on one (or more) of the following grounds:

  • a valid arbitration agreement does not exist, or the arbitral tribunal has denied its jurisdiction despite the existence of a valid arbitration agreement, or a party was under an incapacity to conclude a valid arbitration agreement under the law governing its personal status;
  • a party was not given proper notice of the appointment of an arbitrator or of the arbitral proceedings, or was unable to present its case for other reasons;
  • the award deals with a dispute not covered by the arbitration agreement, or contains decisions on matters beyond the scope of the arbitration agreement or the plea of the parties for legal protection; if the default concerns only a part of the award that can be separated, only that part of the award shall be set aside;
  • the composition or constitution of the arbitral tribunal was not in accordance with a provision of this chapter or with an admissible agreement of the parties;
  • the arbitral proceedings were conducted in a manner that conflicts with the fundamental values of the Austrian legal system (ordre public);
  • the requirements according to which a court judgment can be appealed by an action for revision under section 530 paragraph (1) numbers 1 – 5 have been met (note that the grounds for revision referred to all relate to the circumstance that the decision was based on a fraudulent action or forged document, or a criminal verdict that has since been reversed, and that the three-month time period to file the action for setting aside does not apply to this ground);
  • the subject matter of the dispute is not arbitrable under Austrian law; or
  • the arbitral award conflicts with the fundamental values of the Austrian legal system (ordre public).

Additional grounds are available to set aside an arbitral award rendered in arbitral proceedings in which either a consumer or an employee was involved.

The action to set aside an award is to be filed with the Austrian Supreme Court, which will decide as first and last instance – ie, without possibility of a further appeal. Practice has shown that a well-reasoned decision will be rendered within six to eight months on average.

Under Austrian law, parties cannot agree to exclude or expand the scope of an appeal or challenge.

It is firmly established in the case law of the Austrian Supreme Court that there is no révision au fond of the merits of the case. This principle is strictly applied and the Austrian Supreme Court has consistently refused to entertain a review of the merits of the arbitral decision when claimants in setting-aside proceedings have requested this in the guise of annulment grounds.

Austria has ratified the New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards without reservation. Austria is also a contracting state to several other multilateral conventions on the recognition and enforcement of arbitral awards, including the 1961 European Convention on International Commercial Arbitration and the Geneva Convention on the Execution of Foreign Arbitral Awards (1927), as well as a number of bilateral agreements governing the reciprocal recognition and enforcement of arbitral awards. Moreover, Austria has ratified the Washington Convention on the Settlement of Investment Disputes between States and Nationals of Other States, and a number of bilateral investment treaties.

Arbitral awards are deemed to be equivalent to judgments of state courts and, thus, will be enforced the same way by means of application to the District Court (Bezirksgericht) of the district where the respondent has its seat, or where the object, asset or third-party debtor that will serve to satisfy the claimant's request for enforcement is registered or located.

An authenticated original or a duly certified copy of the arbitral award must be submitted together with the application for enforcement. The original or a certified copy of the arbitration agreement must only be presented upon a request from the court.

If the arbitration was seated outside Austria, the award will first have to be formally recognised and declared enforceable (pursuant to the New York Convention or other multilateral or bilateral treaties) by the District Court that is competent for enforcement. The application for recognition can be made together with the request for enforcement, and the courts will decide simultaneously on both requests. After being declared enforceable, the foreign award is treated as a domestic arbitral award – ie, equivalent to the judgment of an Austrian Court.

There is no automatic suspension of the enforcement of an arbitral award if setting-aside proceedings have been initiated. However, upon the application of a party (usually the award debtor), the court may – but is not obliged to – stay enforcement proceedings until a final decision is rendered in the setting-aside proceedings. A pragmatic solution employed by Austrian courts in this situation is to make continuation of the enforcement subject to the posting of security by the award creditor.

If the arbitral award is set aside, the effects thereof depend on the applicable law and the international treaty governing its recognition and enforcement. An arbitral award that has been set aside by the Austrian courts will not be enforced in Austria. Regarding foreign awards, the Austrian courts do not normally enforce arbitral awards that have been set aside under the regime of the New York Convention. By contrast, the Austrian courts have recognised and enforced a foreign arbitral award that had been set aside governed by the European Convention.

At the enforcement stage, a state or state entity may attempt to raise the defence of sovereign immunity. However, Austrian courts will only consider sovereign immunity in connection with sovereign acts, but not if the state or state entity acted in a private capacity. The burden of proof for these circumstances lies with the state or state entity invoking immunity.

The general approach of the courts toward the recognition and enforcement of arbitral awards is pragmatic, and the grounds listed in the applicable conventions are interpreted restrictively.

Whilst the opposing party will be granted the opportunity to raise grounds based on which it believes the recognition and enforcement of the award will be refused, these grounds are interpreted narrowly. This applies in particular to public policy grounds, which must reach a high threshold in order to be considered sufficient reason to refuse recognition and enforcement.

Austrian law does not provide for specific class action or group actions in general. Accordingly, there are also no provisions governing class-action or group arbitration.

In Austria, various rules that apply to multi-party proceedings are used as bases for group actions in court proceedings. Provided there is a valid arbitration agreement in place, there is no reason to assume that the same cannot apply to group arbitrations, given the fact that Austrian arbitration law contains rules regarding the appointment of arbitrators in multi-party arbitrations.

The conduct of the legal profession in Austria is subject to the Code of Professional Conduct for Lawyers (Rechtsanwaltsordnung), and to numerous EU regulations. While none of these expressly refer to international arbitration, it is common practice to apply them also in arbitral proceedings. Lawyers must not make allegations they know to be false. However, there is no obligation to verify the truthfulness of the information given by a client or a witness. Foreign lawyers acting in arbitrations seated in Austria are not bound by Austrian professional ethics rules but are generally understood to be bound by the ethics rules of their respective home jurisdiction.

The Austrian market shows that third-party funding is a well-established practice in litigation and arbitration. This is also evident from the increasing number of third-party funders active in the Austrian market.

The revised Vienna Rules have sought to bring more transparency to the process by requiring parties to disclose the existence of any third-party funding and the identity of the third-party funder (as defined in Article 6 of the Vienna Rules). This shall ensure the independence and impartiality of the arbitrators through appropriate disclosure.

Otherwise, there are no express provisions on third-party funding under Austrian law, although there are two rules that could be understood to limit it.

  • First, Austrian law requires the claim to be made (litigated) by the person who owns it – ie, it is not permissible for a claim to be made in one person’s name but on behalf of another person.
  • Second, it is forbidden for attorneys to enter into contingency fee arrangements.

Whilst Austrian arbitration law does not provide for rules regarding the consolidation of separate arbitral proceedings, it is considered permissible.

The Vienna Rules allow for the consolidation of separate arbitral proceedings – eg, if the seat of arbitration in all of the arbitration agreements is the same and the parties agree to the consolidation, or if the same arbitrators were nominated for all proceedings concerned.

As a general rule in Austria, only the signatories of an arbitration agreement are bound by it, although there are exceptions. In particular, it has been established by case law of the Austrian Supreme Court that legal successors and third-party beneficiaries are bound by the arbitration agreement. Please see 5.7 Third Parties for further details.

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KNOETZL is Austria’s first large-scale dispute resolution powerhouse and has successfully developed into Austria’s largest dispute resolution team. The arbitration practice encompasses international commercial arbitration, investment protection and arbitration-related court proceedings. Key industries include construction and engineering, energy, banking, automotive and aviation, IT and telecommunications, life sciences, and healthcare and pharmaceuticals. Members of the arbitration team have successfully acted as counsel in some of the largest and most complex disputes in the CEE region in recent decades, under all the major arbitration rules. KNOETZL lawyers act as arbitrators in a large number of arbitration cases in a wide array of industries. Members of the firm are recognised as leading arbitration specialists and hold functions in major arbitral institutions and arbitration associations.

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