Austrian Supreme Court On Third-Party Funding And The Right To Be Heard

• Published date: 06 June 2022
• Subject Matter: Litigation, Mediation & Arbitration, Court Procedure, Trials & Appeals & Compensation, Civil Law
• Law Firm: OBLIN Attorneys at Law LLP
• Author: Ms Anna Weinzierl, Per Neuburger and Klaus Oblin

In a recent decision rendered on 15 December 2021,¹ the Austrian Supreme Court (Oberster Gerichtshof, OGH) examined different grounds for setting aside an arbitral award. The OGH reiterated its almost 70-year-old jurisprudence on the right to be heard as a ground for setting aside an arbitral award and made a surprising statement that third-party funding is generally admissible in Austria. This is the OGH's first definite statement on the admissibility of third-party funding despite an existing ban on contingency fee arrangements (quota litis arrangements) in section 879(2)(2) of the Austrian Civil Code (Allgemeines bürgerliches Gesetzbuch, ABGB).

Facts of the Dispute

The setting aside proceedings before the OGH arose out of an arbitration administered by the Vienna International Arbitral Centre. The arbitral tribunal had decided on damage claims arising out of a share purchase transaction between a Chinese and a Croatian party as claimants and two Croatian parties as respondents. In its final award, the arbitral tribunal dismissed the first claimant's claim and awarded the second claimant partial reimbursement for its damages as well as compensation for the procedural costs.

Subsequently to a denied application for the tribunal to correct, clarify, and supplement the arbitral award, both claimants requested the OGH to set aside parts of the award, including the decision on costs. They based their request mainly on allegations of an infringement of their right to be heard, that the arbitral tribunal exceeded its mandate, as well as on violations of Austrian public policy (ordre public).

The OGH dismissed the claimants' request. In the following, two of the arguments advanced by Claimants in their attempt to set aside parts of the award will be examined.

Issue 1: Inability to Comment on the Opposing Party's Cost Submission

The claimants asserted a violation of their right to be heard under section 611(2)(2) of the Austrian Code of Civil Procedure (Zivilprozessordnung, ZPO) by arguing that they were not granted the possibility to comment on the opposing party's cost submission, which formed the basis for the court's decision on costs. They supported their argument by citing inter alia Austrian legal scholarship that stated that the right to be heard includes the parties' right to comment on the opposing party's cost submission.²

Decision

The OGH unsurprisingly reiterated its restrictive jurisprudence concerning a party's right to be heard in arbitral...