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13 September 2007
Austrian legal literature and jurisprudence provide few opinions on the relationship between the parties and the arbitrator. Old scholarly writing considered this relationship, and therefore also the arbitrator's duties and liabilities, to be a matter of public law. These sources did not accept a contractual relationship between the parties and the arbitrator. At first glance, this approach may seem to accord with the wording of the latest Arbitration Act, which does not mention a contractual relationship but uses the term 'Schiedsrichteramt' (arbitrator in office), which could indicate that the relationship between the parties and the arbitrator is governed by public law. However, a closer look reveals that while the function of an arbitrator may include aspects of public law, according to current perceptions this does not prevent the relationship between the arbitrator and the parties from being a contractual one.
Austrian jurisprudence distinguishes between the appointment of an arbitrator as an act governed by public law, and the contractual relationship between the arbitrator and the parties, from which their mutual rights and duties derive. This contractual relationship is considered to be a contract for services entered into between the parties on one side and the arbitrator on the other.
Two recent decisions of the Austrian Supreme Court confirm and clarify the understanding of the relationship between the arbitrator and the parties as contractual.
Arbitrator's entitlement to fees
In its judgment of November 30 2006 (6 Ob 207/06v) the Supreme Court ruled on whether an arbitrator whose appointment had successfully been challenged during the arbitral proceedings could claim fees. The issue had arisen in an arbitration before the Vienna International Arbitral Centre (VIAC) of the Austrian Federal Economic Chamber as the institution administering the arbitration proceedings. Since under both the applicable Rules of Arbitration and Conciliation of 2001 and Austrian arbitration law the arbitrator was obliged to disclose any facts which could give rise to doubts as to his independence early in the proceedings, the VIAC, acting as the trustee to which the parties had paid the deposit, refused to pay the arbitrator for his services rendered in the arbitration as he had neglected this duty. The arbitrator subsequently filed a claim against the Austrian Federal Economic Chamber (ie, the institution to which the VIAC is attached) for payment of his fees. Within this litigation, the Supreme Court analyzed the relationship between the parties and the arbitrator. In this respect it held that the relationship was a contractual relationship which was governed by the Civil Code and its provisions on contracts for services to the extent that neither Sections 577 and following of the Code of Civil Procedure (ie, the Austrian law on arbitration) nor the characteristics of the contractual relationship provided otherwise. The court applied the regulations on contracts for services in order to determine the mutual rights and duties arising out of the contractual relationship. Therefore, the court assumed that a contractual relationship existed between the parties and the arbitrator. Considering that the arbitrator had neglected his contractual duty of disclosure at an early stage of the arbitration, the court held that the arbitrator was not entitled to his fees.
A second relevant case in this context was decided by the Supreme Court on June 6 2005. It dealt with the alleged liability of arbitrators for various claimed deficiencies of the arbitration. The arbitrators had rendered an award that was not set aside and was not subject to setting-aside proceedings. The unsuccessful party argued that any application to set aside the award would be futile due to the limited grounds on which such applications may generally be based. It claimed that the arbitrators were liable for their alleged violations of their contractual relationship with the parties. In return, the arbitrators argued that if they were contractually liable at all under Austrian law, it was a precondition for such liability that their award had been set aside (ie, limited contractual liability). Further, they argued that an arbitrator's liability cannot be broader than the liability of state court judges, which requires gross negligence, and this was not present in the case at hand. This argument assumed the public law status of the arbitrator. Basing its findings solely on the contractual concept, the court determined that the (limited) contractual liability of arbitrators required the award to have been set aside. In justifying this approach, the court observed that the Austrian concept of the (limited) contractual liability of arbitrators, although rather restrictive, is still broader than the concept of arbitrators' liability in other jurisdictions (eg, Germany), which further limits an arbitrator's liability for breach of his or her duties to failures that are penalized by public law.
Austrian law considers the appointment of arbitrators to be an act of public
law. By contrast, the mutual rights and obligations of the arbitrator and
the parties regulating certain aspects of an arbitrator's entitlement to remuneration
and his or her liability are governed by the contractual relationship between
For further information on this topic please contact Gerold Zeiler or Barbara Steindl at Schönherr Rechtsanwälte by telephone (+43 1 53 43 70) or by fax (+43 1 53 43 76100) or by email (firstname.lastname@example.org or email@example.com).
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