International Trade and Business Law Review: Volume XII

Gabriel Moens, Roger Jones

• Publisher: Routledge-Cavendish
• Year: 2009
• Print ISBN: 9780415490283
• eBook ISBN: 9781134009206
• Topic: Law
• Subtopic: Commercial Law
• Index: Law

The International Trade and Business Law Review publishes leading articles, comments and case notes, as well as book reviews dealing with international trade and business law, arbitration law, foreign law and comparative law. It provides the legal and business communities with information, knowledge and understanding of recent developments in international trade, business and international commercial arbitration.

The Review contributes in a scholarly way to the discussion of these developments while being informative and having practical relevance to business people and lawyers. The Review also devotes a section to the Willem C. Vis International Commercial Arbitration Moot and publishes the memoranda prepared by teams coached by Professor Gabriël A. Moens.

The Review is edited at the Murdoch University School of Law in Perth, Australia. The Editors-in-Chief are Mr Roger Jones, Partner, Latham & Watkins LLP, Chicago and Gabriël A. Moens, Dean and Professor of Law, Murdoch Law School. It is an internationally-refereed journal. The Review is supervised by an international board of editors that consists of leading international trade law practitioners and academics from the European Union, the United States, Asia and Australia. The Student Editors for Volume XII are Sybil Almeida, Gianni Bei, Luke Rotondella, and Nicholas Summers from the Murdoch Law School.

Articles

Arbitration costs

Austrian and international perspectives

Marianne Roth

Abstract

This article examines the new Austrian arbitration law and its provisions concerning arbitration costs contained in Part Four of the Austrian Code of Civil Procedure. The article examines the provisions for their viability in practice, and is structured to follow the time flow of proceedings. The article discusses the advance on costs, which as a rule are demanded before the commencement of the proceedings. It continues to debate the security for costs that may be demanded before or during the proceedings. The article then discusses the final decision upon the payment of costs, which is not made before the termination of the proceedings.

Introduction

On 1 July 2006 a new Austrian arbitration law, contained in Part Four of the Austrian Code of Civil Procedure, entered into force.¹ This new law differs from the UNCITRAL Model Law on International Commercial Arbitration² as the Austrian law includes detailed regulations concerning arbitration costs.³

As the UNCITRAL Model Law evolved in the early 1980s, a provision concerning costs was considered; however, no such regulation was approved. It was reasoned that the parties usually agree to their own arrangements in relation to costs.⁴ Moreover, it was emphasised during discussions that a change of the recognised practice of arbitration, whereby the arbitral tribunal may withhold the delivery of the award until the costs and fees of the proceedings have been paid, is neither intended nor desired.⁵

Twenty-five years later, in view of the many different rules on costs in the various legal systems, the statutory adoption of provisions regarding the allocation of arbitration costs must be endorsed.⁶ In particular foreign parties should be able to ascertain if and according to what criteria arbitrators are authorised to decide upon the costs of the arbitral proceedings.⁷

The draft for the new Austrian arbitration law was prepared by a special working group of the Ludwig-Boltzmann-Institut für Rechtsvorsorge und Urkundenwesen, and it included express provisions on advance payments as to the arbitration costs.⁸ The present law in force omits these provisions⁹ and only regulates the reimbursement of costs after the termination of the arbitral proceedings.¹⁰ Despite this lack of express statutory regulation, advance payments on arbitration costs have always been common practice in Austria. Advance payments on costs are regularly ordered on the expected costs of the proceedings. Austrian case law and legal writing has also provided for a payment of security for costs by the claimant if the defendant satisfies the arbitral tribunal that the recovery of possible claims to reimbursement of costs is at risk.¹¹ Since the 2006 arbitration law reform, the new rules on interim and protective measures¹² may also be applied to the ordering of advance payments regarding arbitration costs due to their general wording.¹³

These rules on advance payments as well as the new provisions on the reimbursement of arbitration costs are examined below for their viability in practice. The thematic structure follows the time flow of proceedings. The advance on costs that, as a rule, is demanded before the commencement of the proceedings, will be discussed in Section 1.2 of this article. Section 1.3 debates the security for costs that may be demanded before or during the proceedings. This article will then turn to the final decision upon the payment of costs that is not made before the termination of the proceedings in Section 1.4.

Advance on costs

Under Austrian law, as under most other national laws, the arbitral tribunal may, based on the nature of its contractual agreement with the parties, demand the parties to pay an appropriate advance on costs that cover the expected costs of the proceedings and the remuneration of the arbitrators.¹⁴ The arbitrators have the right to make the commencement of the proceedings dependent on the payment of the advance on costs, as the arbitrators cannot create an enforceable title for their own fees and expenses.¹⁵

The previous draft of the new Austrian arbitration law adopted this principle in draft section 598 Number 2 Austrian Code of Civil Procedure. Clauses 2 and 3 of this draft went further in that if a party failed to pay the ordered advance on costs, the other party may pay the complete advance on costs. In such a case the performing party may apply to the arbitral tribunal that the opponent shall, with arbitral award, be obliged to pay its share to the performing party. This draft did not enter into force.

This power of the arbitral tribunal to decide on the quota of the advance on costs of the defaulting party has to be viewed in light of the prevailing opinion in Austria and Germany, which regards the entitlement to the payment or the reimbursement of the advance on costs as part of the claims arising out of the arbitration agreement. In contrast to the claims deriving from the underlying main contract, such claims are outside the arbitrator’s jurisdiction.¹⁶ Nevertheless, if the arbitration proceedings are terminated by arbitral award, the defaulting party’s share of the advance on costs is included in the cost decision of the final award as cash expenditure of the performing party. During pending arbitration proceedings, the enforcement of the claim to reimbursement is excluded, even in the national courts. The performing party may enforce its claim to reimbursement in a national court only if the arbitration proceedings are terminated other than by arbitral award.¹⁷ Draft section 598 Number 2 Austrian Code of Civil Procedure aimed to avoid the situation where a performing party was required to wait until the termination of the arbitration and resort to litigation to recover costs if the arbitration ended otherwise than by arbitral award.¹⁸

In this situation, draft section 598 Number 2 Austrian Code of Civil Procedure would have allowed the performing party to apply to the arbitral tribunal to decide upon the opponent’s obligation to pay its share to the performing party, regardless of when and how the arbitral proceedings were terminated. This application for reimbursement would also have been made before termination of the arbitration. Such a request would not entail a delay of the main proceedings,¹⁹ as long as the claim to reimbursement was fit for decision without further taking evidence. In such case the arbitral tribunal would have had to decide on the respective application in the form of a partial award.²⁰ In Germany, legal opinion is also 16 [hereinafter Stein/Jonas], who in any case assumes the arbitral tribunal’s competence to decide by (partial) award. See also Mangistraummaigraz Oil Prodution Ass. v. United World Trade Inc., United States District Court, District of Colorado, 17 June 1997, Civil Action No. 96-WY-1290-WD, XXIVa YCA (1999) 806 affirming the national courts’ jurisdiction similar to the prevailing opinion in Austria and Germany.

in favour of the admissibility of a partial award in this context.²¹ It is surprising that the provision on the advance payment of arbitration costs, draft section 598 Number 2 Austrian Code of Civil Procedure, has not been adopted in the new Austrian arbitration law.²²

In the absence of an express cost provision on advance payments, parties could consider applying the new rules on interim and protective measures in section 593 Austrian Code of Civil Procedure to the issue of advance payments. It is purported that when the defendant has failed to pay its share of the advance on costs, the claimant may apply for such an interim measure.²³ Section 593 para. 1 Austrian Code of Civil Procedure permits the arbitral tribunal to order the defaulting defendant to pay his or her share of the advance on costs or to reimburse the claimant for having paid its share. The section requires that the enforcement of the claim would otherwise be frustrated or significantly impeded, or there is a risk of irreparable injury. Such an interim or protective measure, however, is not an interim award, even though it may be enforced upon application by the competent Austrian District Court.²⁴

Security for costs

The Austrian draft arbitration law prepared by the working group of the Ludwig-Boltzmann-Institut für Rechtsvorsorge und Urkundenwesen provided that the arbitral tribunal may, upon application by the defendant, order the claimant to make advance payments as to costs if the defendant satisfies the arbitral tribunal that there exists a danger of recovery regarding possible claims to payment of costs.²⁵ This rule on security for costs in draft section 598 Number 1 Austrian Code of Civil Procedure corresponded with the previous legal status in Austria. Arbitrators have always been deemed to be authorised, within the scope of their general discretion as to the conduct of the proceedings,²⁶ to grant the defendant security for the costs of the proceedings when it is highly probable that a claim to reimbursement of costs cannot be enforced against the claimant.²⁷ Arbitrators have roughly followed the rules on security for costs applied in state court proceedings (sections 57 et seq. Austrian Code of Civil Procedure) except for their restriction to foreign claimants.²⁸

The draft arbitration law did not enter into force, and the new Austrian arbitration law omitted draft section 598 Number 1 Austrian Code of Civil Procedure—the express provision on security of costs. The new law does include detailed rules on the ordering of interim or protective measures in section 593 Austrian Code of Civil Procedure. At the request of a party, the arbitral tribunal may order such interim or protective measures as it deems necessary in respect of the matter in dispute after having heard the opposing party. Claims for costs or reimbursements form part of the matter in dispute. This provision may also be applied to the ordering of security for costs.²⁹ The only prerequisite for such an order is that, without the order, the enforcement of the claim would be frustrated or significantly impeded or that there is risk of irreparable injury.

The liberal handling of security for costs under Austrian law is rather unusual in international comparison. Of all prevalent arbitration laws only the English Arbitration Act 1996 provides a similar rule. Section 38 para. 3 of the English Arbitration Act al...

Table of contents

• Cover Page
• Title Page
• Copyright Page
• List of abbreviations
• Articles
• Comments
• Mooting
• Book reviews