An attractive proposition

 MARKET VIEW – ARBITRATION 

Manfred Heider, secretary general of VIAC, talks to Zeiler. Partners’ Gerold Zeiler about how recent changes to the institution’s rules will maintain its position as a key location for European disputes

Gerold Zeiler, zeiler.partners: With a growing number of arbitral institutions, why should a party use your institution?

Manfred Heider, Vienna International Arbitral Centre (VIAC): The VIAC is one of Europe’s leading arbitral institutions and serves as a focal point for the settlement of commercial disputes in the regional and international community. VIAC was founded in 1975 as a permanent arbitral institution of the Austrian federal economic chamber and has since then enjoyed a steadily increasing caseload from a diverse range of parties spanning Europe, the Americas and Asia. Situated in a neutral country in the heart of Europe, VIAC offers its services for the settlement of international disputes. The arbitral proceedings are individually designed according to the parties’ requirements and meet the highest quality criteria.

VIAC has administered over 1,500 proceedings since its foundation and is thus one of the most experienced arbitration centres in the region. It benefits from a robust global network of leading arbitrators experienced in international arbitration under the Vienna rules. Austria adopted the UNCITRAL model law as its law of arbitration in 2006 with minor changes, thus ensuring that the lex arbitri is in conformity with international standards. Moreover, the Austrian supreme court is the first and only instance in setting aside proceedings for arbitral awards.

More arguments for choosing VIAC may be downloaded from its website: www.viac.eu/en/viac/seven-best-reasons-for-choosing-viac

Gerold Zeiler: What have you done within the last 12 months to quicken arbitration, which parties complain has become increasingly long, while maintaining quality?

Manfred Heider: VIAC closely monitors all pending proceedings and is in permanent contact with the arbitral tribunals. The average duration of proceedings currently is 11.5 months from receipt of the statement of claim by the secretariat to the service of the award on the parties.

The new Vienna rules 2013 also provide an expedited procedure with reduced time limits. If the parties have chosen this provision, the arbitral tribunal has to render the final award within six months of transmission of the file.

When proceedings are closed, the Vienna rules 2013 require arbitrators to inform the secretary general and the parties of the anticipated date by which the final award will be rendered.

VIAC also has been the driving force for the most important amendments to the Austrian arbitration acts of 2006 and 2013, in particular that as of 1 January 2014, the Austrian supreme court is the first and only instance in setting aside proceedings for arbitral awards.

‘The new Vienna Rules for the first time introduce a procedure for the confirmation of party-nominated arbitrators by the board.’ Gerold Zeiler, Zeiler.partners

Gerold Zeiler: What is the average administration time – from registration to the first hearing – on a case at your institution?

Manfred Heider: VIAC does not gather statistics regarding this aspect, but if no particular difficulties arise, this is done within 2.5 months.

Gerold Zeiler: Challenges of awards are on the rise. What have you done in the last 12 months to manage the challenges or restrict them?

Manfred Heider: VIAC monitors all pending proceedings from the request for arbitration until the service of the award. VIAC staff are at the arbitrators’ disposal to consult on sensitive issues, in particular if the arbitrators are not familiar with the (Austrian) lex arbitri. Although VIAC does not undertake a formal scrutiny of awards, it reviews the draft award before being served on the parties and comments on it vis-á-vis the arbitrators.

As mentioned above, VIAC has successfully promoted the amendment of the Austrian Arbitration Act 2013 to make the Austrian supreme court the first and only instance in setting aside proceedings for arbitral awards.

Gerold Zeiler: What does your board provide that others’ don’t and what has it achieved over the last 12 months?

Manfred Heider: VIAC’s board takes a more active role than similar bodies at other arbitral institutions. Its jurisdiction not only includes decisions on challenges of arbitrators and default appointments of arbitrators but also to decide on the joinder and consolidation of arbitral proceedings. Its ten members are not only distinguished Austrian and international arbitration practitioners but also academics and one supreme court judge. It has promoted and advocated the most recent amendments to the Austrian arbitration law.

Gerold Zeiler: What factors does the VIAC take into account in appointing arbitrators? The new Vienna rules (2013) for the first time introduce a procedure for the confirmation of party-nominated arbitrators by the board. What are the reasons for introducing such procedure and what will the board take into account in the confirmation process?

Manfred Heider: Basically it is the secretary general who confirms arbitrators nominated by the parties, if no doubts exist as to their impartiality and independence or their ability to carry out their mandate. Only if the secretary general deems it necessary will the decision be delegated to the board.

Under the Vienna rules 2006 neither the secretary general nor the board had the power to make a prima facie screening of the arbitrators appointed by the parties. The secretary general has now been granted the authority to examine whether there are doubts regarding the arbitrator’s impartiality and independence and whether they will be able to carry out their mandate properly. The purpose of the new provision is to prevent challenges before an arbitrator is appointed, thereby ensuring smoother and faster proceedings.

Concerning its impartiality and independence, the arbitrator has to disclose all circumstances that may give rise to doubts. The requirement of ‘the ability to carry out his mandate properly’ includes the criterion of availability of the arbitrator which must also be confirmed in their declaration of acceptance, as well as the qualifications agreed upon by the parties. It may also be seen as a ‘catch-all term’: the secretary general might also consider other relevant aspects such as appropriate language skills.

The board will scan the arbitrator by applying the same criteria as the secretary general. As mentioned above, the board consists of ten members who all know the arbitral community profoundly and may therefore have more background information than the secretary general alone.

This profound knowledge of the arbitration industry is also a decisive factor when it comes to the appointment of arbitrators. Other factors are the nationality, language proficiency and special qualifications of the respective candidates, such as being familiar with the applicable substantial law.

Gerold Zeiler: The new Vienna rules (2013) did not introduce an emergency arbitrator. What are the reasons for not offering an emergency arbitrator to VIAC’s clients? Is there a specific policy behind this decision?

Manfred Heider: The experience of other arbitral institutions with emergency arbitrators has raised serious doubts about whether such an arbitrator makes sense for the parties because of the lack of enforceability of the emergency arbitrator’s decisions. If the place of arbitration is Austria, the parties are much better off applying for interim measures of protection at Austrian state courts which are expeditious, efficient and arbitration friendly.

Gerold Zeiler: International arbitration is sometimes perceived as being dominated by English and US law firms. Do you agree with that? Is that specifically true in CEE? And if so, does it matter? What impact does this have on international arbitration-given conflict issues?

Manfred Heider: Of course, English and US global law firms play an important role also in CEE. However, they do not really ‘dominate’ the industry. During the last 20 years, a large number of local medium and small-sized law firms have emerged with highly qualified and skilled partners and perfect knowledge on how arbitral proceedings are to be conducted. It should also be considered that continental Europe is a civil law environment and thus a different approach is required as in common law jurisdictions.

‘VIAC is the only non-German international arbitral institution which administers proceedings also in the German language.’

Gerold Zeiler: Does the fact that Vienna plays an important role as a place of arbitration lead to many CEE-related cases at VIAC? Do Austrian or German law firms play an important role in such disputes?

Manfred Heider: In the mid-1970s Vienna and Stockholm emerged as the preferred seats of arbitration for disputes between western companies and those from the former Eastern Bloc. After the collapse of the latter, this tradition has survived. At present, about 26% of the parties and 16% of the arbitrators in VIAC cases come from CEE states and a lesser portion from other former East Bloc countries such as the CIS.

A little less than 25% of the parties are Austrian and about 10% German. It should also be emphasised that VIAC is the only non-German international arbitral institution which administers proceedings also in the German language. Thus Austrian and German law firms play a major role in VIAC arbitrations.

Gerold Zeiler: What can VIAC do to promote international arbitration in developing countries or in CEE? Or what are your expansion plans?

Manfred Heider: Ever since its foundation the VIAC has conducted road shows in CEE countries on a regular basis. In the last six years such presentations have also been made in east Asia and in Germany. The VIAC arbitration rules are available not only in most of the languages spoken in CEE, but also in English, Spanish, Russian, Chinese (Mandarin) and Portuguese. VIAC has also concluded co-operation agreements with arbitral institutions and other professional organisations not only in CEE but also worldwide.

Gerold Zeiler: What do you do to ensure quality of arbitral awards? How could this improve?

Manfred Heider: Awards rendered by arbitrators in VIAC proceedings already meet the highest quality standards. Awards are reviewed by the secretariat on an informal basis before being served on the parties.

Gerold Zeiler: Does the VIAC ever ‘black list’ arbitrators?

Manfred Heider: No.

Gerold Zeiler: Corruption is a deep-seated issue in international arbitration, which has seemed unable to deal with this issue in awards. Does this need to change, and, if so, how and what should institutions be doing to ensure contracts and treaties with such clauses are handled effectively in international arbitration?

Manfred Heider: Under VIAC arbitration rules arbitrators may also take evidence ex officio. In the few cases where arbitrators have entertained suspicions that corruption may have occurred they had taken evidence against the will of the parties and had decided that the transaction was void. All further actions should be reserved to state authorities in countries where the awards shall be enforced or where the arbitration is seated.

Gerold Zeiler: What is your fee structure? By value of the claim or by per hour worked? What changes have to be made to arbitrator and institution costs over the 12 months?

Manfred Heider: The VIAC fee schedule (registration fee, administrative fees and arbitrators’ fees), depends – except the registration fee – on the amount in dispute. In case of particular complexity of the case the arbitrators’ fees may be raised up to 30% of the ‘normal’ rate. When drafting the Vienna rules 2013 the fee schedule was recalculated. The fees for smaller claims have been reduced and at the other end of the spectrum the fees were capped (for disputes exceeding €200m).