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A.1       Legislation

Austrian arbitration law is governed by sections 577 to 618 of the Austrian Code of Civil Procedure (ZPO). It does not distinguish between national and international proceedings and applies to disputes in commercial and other matters. The last significant amendment to Austrian arbitration law dates back to 2013 when the Austrian Supreme Court (OGH) became the only court competent to decide on actions to set aside an arbitral award and actions to determine the existence or nonexistence of an arbitral award (section 615 ZPO). Austria has increasingly been perceived as an arbitration-friendly jurisdiction.

Nonetheless, when it comes to arbitration between businesses and consumers, Austrian arbitration law is restrictive. To further promote Austria as a place of arbitration, substantial amendments to the law on consumer arbitration have been expected for years. For example, under section 617 ZPO, an arbitration agreement between an entrepreneur and a consumer can only be validly concluded for disputes that have already arisen. The proposal is to exclude legal and natural persons, who formally act as consumers but functionally as entrepreneurs, from the scope of section 617 ZPO. The adoption of the proposed amendment would make Austria a more attractive arbitration venue for corporate disputes.

A.2       Institutions, rules and infrastructure

The Vienna International Arbitral Centre (VIAC) is the leading Austrian arbitration institution and is considered the most important international arbitration institution in Central and Eastern Europe. Founded in 1975 as a department of the Austrian Federal Economic Chamber, VIAC has steadily increased its caseload in recent years involving parties from Europe, the Americas and Asia.

As one of the first European arbitral institutions, the Russian government granted VIAC the status of a permanent arbitration institution in Russia, authorizing VIAC to administer certain types of Russian corporate and procurement as well as domestic disputes.

On 1 July 2021, VIAC released a new version of Arbitration and Mediation Rules and introduced Investment Arbitration and Mediation Rules. Both sets of rules apply to proceedings commenced after 30 June 2021. The revised Vienna Rules account for the use of virtual hearings and electronic communication in arbitral proceedings through the new VIAC Portal, an online case management platform. The new Investment Arbitration and Mediation Rules make VIAC an affordable alternative for lower-value disputes between investors and states.

B.         CASES

As mentioned, in Austria the OGH is the first and final instance in setting aside proceedings of an arbitral award. The OGH provides a special senate of judges for arbitration matters, ensuring high-quality decisions.

In 2022, the OGH decided several cases in setting aside proceedings, of which two are of particular interest to practitioners: In the first case, the OGH decided on the application to set aside an award based on the impecuniousness of an arbitration party (see B.1 below). In the second case, the OGH decided on the applicability of the New York Convention in Austria as well as on the ground for refusing the enforcement of an arbitral award under article V(1)(c) of the New York Convention (see B.2 below).

B.1       Refusal to set aside an arbitral award due to unproven impecuniousness

The OGH decision of 4 May 2022 dealt with the following facts:[1]

A Spanish company (“Claimant”) initiated a VIAC arbitration against a French company (“Respondent”). The Respondent filed a counterclaim with an amount significantly higher than the main claim. As provided for under the applicable Vienna Rules, the advance on costs was calculated based on the total amount in dispute and was to be borne equally by both parties. The Claimant declared the termination of the arbitration agreement, alleging that it could no longer afford the arbitration proceedings due to the significantly increased costs by the counterclaim. Accordingly, the Claimant did not make an advance payment for the Respondent’s counterclaim. This led the arbitral tribunal to disregard the Claimant’s claim in the proceedings. Thus, the counterclaim constituted the sole subject matter of the arbitral proceedings.

The arbitral tribunal had to decide whether it had jurisdiction. Specifically, it had to decide whether the Claimant’s termination of the arbitration agreement was valid and whether the arbitration agreement was unenforceable due to the Claimant’s alleged lack of financial means. While the arbitral tribunal, in principle, recognized that under Austrian law, the indigence of a party could constitute a reason to terminate the arbitration agreement, it denied that Claimant lacked financial means on the factual level as it did not consider the Claimant’s assertions plausible.

The Claimant applied to set aside the arbitral award invoking that it violated both substantive and procedural public policy under section 611 paragraph 2 cif 5 and 8 ZPO. In essence, the Claimant argued that it was impecunious, and, to enjoy legal protection in accordance with article 6 of the ECHR, it had terminated the arbitration agreement for the purpose of obtaining legal aid before the state courts.

The OGH dismissed the Claimant’s application, reasoning that it invoked the wrong grounds for setting aside the award. The Claimant should have based its application on section 611 paragraph 2 cif 1 ZPO, which addresses the validity of arbitration agreements. The OGH held that under Austrian law, it is possible to terminate an arbitration agreement if an important reason exists that makes it unreasonable for a party to the arbitration to further conduct the proceedings. This is the case if a fair trial or effective legal protection can no longer be guaranteed. In this context, the OGH specifically referred to an earlier judgment of 1936, which qualified the impecuniousness of the Claimant in an arbitration as a reason to terminate the arbitration agreement. However, with regard to setting aside the proceedings at hand, the OGH stated that merely asserting the lack of financial means without the support of factual proof was not sufficient to render the application plausible.

B.2 Invoking grounds for refusal of enforcement under the New York Convention by a nonsignatory

The OGH decision of 8 September 2022 dealt with the following facts:[2]

An Austrian company sought enforcement of an arbitral award rendered under the auspices of ICSID on the basis of the dispute settlement clause contained in the bilateral investment treaty between the Republic of Austria and Libya (BIT). As Libya is not party to the Convention on the Settlement of Investment Disputes between States and Nationals of Other States (“ICSID Convention“), the arbitration was conducted under the ICSID Additional Facility Rules, which provide a framework for ICSID-administered proceedings where at least one party (or a party’s home state) is not party to the ICSID Convention. With its final award, the arbitral tribunal ordered Libya to pay damages to the Austrian company.

The Austrian company applied for enforcement of the arbitral award in Austria. Both the court of first instance and, following Libya’s appeal, the court of second instance declared the arbitral award enforceable, holding that Libya could not rely on the grounds for refusal of enforcement under the New York Convention because it had not ratified this Convention.

After Libya’s appeal, the OGH annulled the judgments of the previous courts and referred the case back to the court of first instance, most notably because the lower courts failed to make material findings of fact. The OGH held that Libya could rely on the grounds for refusal of enforcement stipulated in the New York Convention, even though it had not ratified it. The OGH reasoned that the applicable ICSID Additional Facility regime did not provide for its own recognition and enforcement mechanism of arbitral awards. As a result, the law of the place of arbitration (in this case, Washington), including all applicable international treaties, governed the recognition and enforcement of the award. Since, under the applicable ICSID Additional Facility Rules, the place of arbitration could only be located in states that are signatories to the New York Convention, arbitral awards rendered under these rules must always be recognized and enforced in accordance with the Convention.

Moreover, given that Libya objected to the enforceability of the award, among others, on the ground that the arbitral tribunal exceeded its jurisdiction, the OGH made findings as to the scope of the relevant arbitration agreement. In this context, the OGH stated that the jurisdiction of the arbitral tribunal was based on the BIT, which provided that disputes may be administered by ICSID under the Additional Facility Rules. The OGH stated that under these rules, the ICSID Secretary-General must approve any agreement to arbitrate before any proceedings may commence. This raised the question whether the parties of the arbitration had based their dispute solely on the BIT or whether they had concluded a separate arbitration agreement. As the previous courts made no findings on whether such separate arbitration agreement existed, the OGH argued that it could not determine whether the arbitral tribunal exceeded its jurisdiction. For this reason, the OGH concluded that the matter must be referred back to the court of first instance to make specific findings on the (non)existence of a separate arbitration agreement.

[1] OGH, 4 May 2022, docket no. 18 OCg 1/22d.

[2] OGH, 8 September 2022, docket no. 30 Ob 80/22v.


Désirée Prantl is counsel in Baker McKenzie's Vienna office. Désirée focuses her practice on international commercial arbitration and litigation.


Brian Gabriel-Oiwoh is associate in Baker McKenzie's Vienna office. Brian's fields of expertise comprise international commercial arbitration, investment arbitration and mediation.