A. LEGISLATION AND RULES
International arbitration in Austria continues to be governed by sections 577 to 618 of the Austrian Code of Civil Procedure (ZPO), to which no legislative amendment has been made since 2013.
Since the last reforms of Austrian procedural law in 2013, Austria is perceived as an arbitration-friendly jurisdiction. The Austrian Supreme Court (OGH) is the only court that can set aside an arbitral award according to section 615 ZPO, and the grounds for annulment are limited. Moreover, according to section 584 ZPO, Austrian state courts shall automatically dismiss a claim where the parties involved have concluded an arbitration agreement.
The discussions to further strengthen Austria as a place of arbitration by amending section 617 ZPO, which determines that an agreement between an entrepreneur and a consumer may only be validly concluded for disputes that have already arisen, have not led to a legislative amendment so far. It is envisaged to exclude legal and natural persons, who act formally as consumers, but functionally as entrepreneurs, from the special protections of section 617 ZPO to facilitate the conclusion of arbitration agreements.
A.2 Institutions, rules and infrastructure
The Vienna International Arbitral Centre (VIAC) is the leading Austrian arbitration institution. It is part of the Austrian Federal Economic Chamber and was founded in 1975. In July 2021, VIAC released the Vienna Rules and Vienna Mediation Rules 2021 as well as the Vienna Investment Arbitration Rules and Vienna Investment Mediation Rules 2021.
The revision of the Vienna Rules 2021 entailed, amongst others, the inclusion of special rules for inheritance disputes (annex 6). Moreover, the revised Vienna Rules account for the use of virtual hearings and electronic communication in arbitral proceedings. The new Vienna Investment Arbitration Rules 2021 provide an affordable alternative for lower value disputes between investors and States. Both sets of rules apply to proceedings commenced after 30 June 2021.
As mentioned, the OGH is the first and final instance in setting aside proceedings of an arbitral award in Austria. At the OGH, a specified senate of judges is responsible for arbitration matters, which ensures high-quality decisions.
In 2021, the OGH decided several cases in setting aside proceedings, of which two are of particular interest for practitioners: In the first case, the OGH decided on the application to set aside an award for disregarding a party’s request to hold another hearing (B.1). In the second case, the OGH held that a contract, which contains a jurisdiction clause as well as an arbitration agreement, confers a right of choice for the parties as to which forum will adjudicate the legal dispute (B.2). A third case worth mentioning is the Austrian Constitutional Court’s (VfGH) decision regarding a dispute in the energy sector, which strengthened the acceptance of arbitration as a dispute resolution mechanism in public law matters (B.3).
B.1 Refusal to set aside an award because the arbitral tribunal disregarded a party’s request to hold another hearing
The OGH rendered its decision of 2 March 2021 based on the following facts:
On 16 March 2018, the claimant initiated ICC arbitration. In the course of the arbitration proceedings, a hearing took place. After the hearing, the respondent filed supplementary applications in written form. The claimant was afforded the opportunity to respond in writing. Nevertheless, the claimant requested to hold another hearing. The arbitral tribunal dismissed the claimant’s request in the final award. Subsequently, the claimant applied to set aside certain parts of the award according to section 611 paragraph 2 ZPO and relied on the following arguments:
- According to section 598 paragraph 2 ZPO, the arbitral tribunal has to hold a hearing upon a party’s request, unless the possibility of a hearing was expressly excluded. Furthermore, article 25(6) of the ICC Rules 2017 states that the arbitral tribunal may decide the case solely on the documents submitted by the parties unless any of the parties requests a hearing. Thus, by dismissing the claimant’s request for a hearing, the arbitral tribunal would have violated both, section 589 paragraph 2 ZPO and article 25(6) of the ICC Rules 2017.
- By disregarding the claimant’s request for another hearing regarding new applications of the respondent, the arbitral tribunal violated the claimant’s fundamental right to be heard.
The OGH held that the arbitral tribunal’s refusal to hold another hearing did not constitute a reason for setting aside the award. Thereby, the OGH departed from its previous jurisprudence where it had regularly concluded that the possibility of only written statements did not ensure a fair right to be heard by the arbitral tribunal. In its recent decision, the OGH still emphasized that the principle of orality would not only be a central pillar of proceedings in front of state courts but also apply in arbitral proceedings. However, it no longer considered not holding a hearing as a violation of the right to be heard, as long as the parties have had an opportunity to present their position in a different form than by oral testimony. The OGH elaborated on the instances when the refusal of a hearing may not constitute a reason for setting aside an award, i.e. when the request for a hearing is filed at an inappropriate point in time and, e.g., only delays the proceedings, and/or when the hearing amounts to mere formality and does not serve the purpose of further taking of evidence.
In the case at hand, the OGH reasoned that another hearing was not necessary because the essential questions of the case had already been discussed in a previous hearing. The refusal of another hearing by the arbitral tribunal was therefore neither violating the right to be heard, nor the procedural ordre public.
B.2 A jurisdiction clause and an arbitration agreement in the same contract provides claimant with a choice of forum
The OGH decision of 20 January 2021 dealt with the following facts:
The contract from which the dispute arose contained not only a jurisdiction clause for Moscow courts but also an arbitration agreement for arbitration seated in Vienna. The claimant assumed that this contradiction would invalidate both agreements. Consequently, the competent court would have to be determined by the Austrian jurisdictional rules because that was the court at the seat of the respondent. However, the Austrian court of first instance disagreed and dismissed the case for lack of competence.
The claimant appealed the decision, which ultimately lead to a decision of the OGH. The OGH, amongst others, pointed out that if there is a non-exclusive jurisdiction clause in favor of a state court and an arbitration agreement in the same contract, they can exist next to each other. Against this background, the OGH confirmed the decision of the first instance court regarding its lack of competence. The OGH held that there was a jurisdiction clause and an arbitration agreement in the same contract, and no specific will of the parties could be inferred from the wording of the clauses, thus the parties can choose to either resort to the agreed state court or initiate arbitration proceedings.
B.3 Compliance of arbitration with the Austrian Constitution
The decision of the Austrian Constitutional Court (VfGH) dated 26 June 2020 relates to a dispute in the energy industry:
The party filing the application with the VfGH operates a gas pipeline throughout Austria. The pipeline operator concluded long-term gas transportation contracts with a party having a right to access the pipeline (the shipper). The contracts contained an arbitration agreement, covering all disputes arising out of the contractual relationship. The shipper initiated arbitration proceedings in September 2015 against the pipeline operator. The pipeline operator invoked a mandatory pre-litigation settlement procedure administered by the regulator (E-Control, Austrian Regulatory Commission on Energy), which is prescribed by the Austrian Natural Gas Act (Gaswirtschaftsgesetz) as a condition precedent for filing a claim with the state courts. The pipeline operator argued that the shipper had not followed the mandatory pre-litigation procedures and therefore its claim before the arbitral tribunal was premature. The Natural Gas Act is silent on the question of whether the mandatory pre-litigation settlement procedure applies to situations where the parties concluded an arbitration agreement.
The arbitral tribunal stayed the proceedings and referred the shipper to the pre-litigation procedures before the regulator. The regulator dismissed the request stating that the pre-litigation procedures do not apply to arbitration, but only to state court litigation. The pipeline operator appealed to the Austrian Federal Administrative Court (BVwG). The Federal Administrative Court dismissed the appeal.
Finally, the pipeline operator filed a constitutional complaint before the VfGH, claiming a violation of its fundamental right to a lawful judge. It argued that the Natural Gas Act provides for mandatory procedures before the regulator and therefore the regulator would be the lawful judge in this case. The regulator’s refusal to conduct the proceedings in favor of arbitration proceedings would be unlawful and deprive the pipeline operator of its lawful judge.
The VfGH examined the arbitrability of claims against pipeline operators under the Natural Gas Act and assessed the question of whether parties can exclude the competence of the regulator – a public body – in favor of arbitration. It concluded that disputes falling under the Natural Gas Act are generally arbitrable and that there is no public interest in the conduct of pre-litigation proceedings. The main reason for pre-litigation proceedings is to reduce the caseload of state courts, which is also achieved when the parties agree to arbitrate their dispute. The VfGH drew a parallel that where the parties are entitled to settle the dispute, they must also be entitled to agree to arbitrate it. As a result, an agreement for arbitration does not only exclude state court proceedings but also the competence of the regulator, because the regulator acts as the body resolving contractual relationships in this case. Therefore, the right to a lawful judge had not been violated.
 OGH, 2 March 2021, docket no. 18 OCg 10/19y (published on 24 March 2021).
 OGH, 20 January 2021, docket no. 3 Ob 127/20b (published on 18 February 2021).
 VfGH, 26 June 2020, docket no. E 4233/2019.