Setting Aside Arbitral Awards In Austria: Dismissal For Failure To State A Valid Ground For Challenge

• Published date: 21 June 2023
• Subject Matter: Litigation, Mediation & Arbitration, Arbitration & Dispute Resolution, Trials & Appeals & Compensation
• Law Firm: OBLIN Attorneys at Law LLP
• Author: Mr Per Neuburger and Klaus Oblin

Introduction

On 11 January 2023, the Austrian Supreme Court (Oberster Gerichtshof, OGH) handed down an order¹ in which it dealt with the procedural aspects of challenging arbitral awards. The OGH clarified that whether the challenge states a valid claim is to be assessed at every stage of the proceedings. If the challenge does not state a valid claim, it is to be rejected by the court, even if the appellee has already filed an answer to the challenge.

Facts

The underlying dispute concerned the purchase and sale of face masks. The appellee (Claimant in the arbitration), a company located in England, had purchased one million face masks from an intermediary in the United States. The intermediary, in turn, purchased the masks from the appellant (Respondent in the arbitration), an Austrian company. The contract between the appellant and the American intermediary contained an arbitration agreement.

When the wrong masks were delivered, the appellee commenced VIAC arbitration against the appellant, based on the arbitration agreement in the contract between the appellant and the American intermediary. The appellee argued that it was bound by this arbitration agreement as a non-signatory because it had assumed the debt of the American intermediary vis-à-vis the appellant. The VIAC arbitral tribunal followed this argumentation and affirmed its jurisdiction in a separate award.

The appellant brought an action to set aside this separate award on jurisdiction before the OGH.

Decision

Pursuant to Section 538 of the Austrian Code of Civil Procedure (ACCP), in domestic litigation, courts must examine whether an action for annulment is based on a statutory ground for challenge before scheduling a hearing. In other words, the action for annulment must state a valid claim (in German: Schlüssigkeit). If this requirement is not met, courts must dismiss the action as unsuitable for a hearing. The test for whether a valid claim is stated must be conducted at every stage of the proceedings.

The OGH repeated its long-standing case law that Section 538 ACCP also applies by analogy to actions for setting aside an arbitral award. Again with analogy to the rules of domestic litigation, the OGH then clarified that the test for whether a valid claim is stated must be conducted at every stage of the set-aside proceedings. The fact that an appellee has been ordered by the OGH to submit a reply to the action, and has already done so, does not stand...