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03 August 2006
An Austrian limited liability company sued a Spanish stock corporation for breach of a licence agreement before an International Chamber of Commerce (ICC) arbitral tribunal pursuant to the ICC Arbitration Rules 1998. Although the claim was rejected by the three-member arbitral tribunal, the tribunal did, however, award counterclaims for the reimbursement of certain sums along with interest and the costs of the arbitration to the Spanish company. This ruling was framed in an award rendered by a majority decision in Paris in July 2003.
Subsequently, the Spanish company sought to enforce the arbitral award in Austria and, accordingly, applied for a declaration of enforceability and authorization of distraint of chattel at the competent district court. As Austria and Spain are both parties to the New York Convention 1958, the application for enforcement was brought under the convention. A copy of the licence agreement (including the arbitration clause), the terms of reference and the Spanish national bank's confirmation concerning the interest rate applied, along with the respective corresponding certified translations, were attached to the application for enforcement. The Spanish company also forwarded a certified copy of the arbitral award in English, accompanied by a certified translation of extracts into German. Only the record of the proceedings before the judgment and the dispositive section of the English language award had been translated.
The Austrian district court granted the declaration and authorization sought by the Spanish company. The Austrian company objected to the court's decision, alleging that:
In his dissenting opinion, the co-arbitrator had criticized the way in which discussions and deliberations between the arbitrators had taken place and complained about the lack of consultation. According to the Austrian company's allegations, in order to establish their opinions, the chairman of the arbitral tribunal had dispatched a questionnaire to be completed by the co-arbitrators. This questionnaire, together with telephone conferences of the chairman with either the co-arbitrator nominated by the Austrian company or the co-arbitrator nominated by the Spanish company, formed the basis for the draft award. The chairman had indeed requested the co-arbitrators' comments on the draft award. However, no direct debate between the co-arbitrators had taken place regarding the (allegedly crucial) question of the effects of the avoidance of the licence agreement. In addition, the chairman refused to argue the substance of the matter at a certain instance and did not examine the arguments of the Austrian co-arbitrator. A joint session in which all members of the arbitral tribunal would have been able to deliberate and decide on the draft award had not taken place. The Austrian company claimed that the ICC rules call for an oral debate and decision, and that the mere written method of deliberation is inappropriate in such proceedings. It claimed that careful consideration of the issues at hand may not take place under such circumstances, and some points had been left open and had never been discussed jointly in the presence of all three arbitrators.
The higher regional court overruled these objections and, to a large extent, confirmed the first instance decision. The Supreme Court also held these objections to be unjustified.
The Austrian Supreme Court found that the enforcement of the ICC award was a matter to be decided by applying the New York Convention. German is the official language used by the Austrian courts. Thus, regarding the objection that the Spanish company had failed to provide a complete translation, the Supreme Court held that, in principle, a complete German translation of an English-language arbitral award would have had to have been requested by an amendment order of the district court upon receipt of the respective application for enforcement. A full translation accompanied by a full version of the title must be produced by the applicant since the use of the term 'award' in Article IV(1)(a) of the New York Convention does not only refer to the award (ie, the dispositive section of the ruling), but also indicates that the entire ruling (eg, the record of proceedings before judgment, the dispositive section of the award and the reasons given for the ruling) must be produced. Incompleteness of title must be taken up by the courts, at least in cases where this issue can be identified - even potentially without command of the respective foreign language because of the ruling's structure. The fact that the parties had agreed on English as the language of the arbitration and had a good command of this language as invoked by the Spanish company did not alter this situation. These arguments did not apply to the court that allowed the enforcement of the award, whose official language was German.
As a general matter of Austrian enforcement law, the Supreme Court confirmed that in cases where a title is divided into a dispositive section and its reasoning, as in the present case, only the dispositive section of the award is decisive for enforcement. However, if the dispositive section is unclear and requires interpretation, and the interpretation of the dispositive section on its own does not lead to a reasonable result, the ruling's reasoning may be taken into account for clarification purposes. The fact that only a partial translation of the award had been presented by the Spanish company should not lead to the immediate rejection of the application for enforcement. Referring the case back to the district court, the Supreme Court directed the district court to request a complete German translation of the arbitral award by way of amendment order.
To the extent that the production of the co-arbitrator's (English-language) dissenting opinion was concerned, the Supreme Court came to the conclusion that the applicant for enforcement was not obliged submit such an opinion. The ICC rules do not explicitly deal with dissenting opinions. In cases where the dissenting opinion - as in the case at hand - is a separate document and has not been approved as an award by the ICC International Court of Arbitration (Article 27, ICC rules), the party applying for enforcement is not obliged to furnish the court with the dissenting opinion as it is not to be held a part of the arbitral award.
The Supreme Court rejected the Austrian company's argument that the arbitration was not carried out according to the procedures agreed by the parties and thus that enforcement should be refused based on Article V(1)(d) of the New York Convention. The Supreme Court held that the fact that the chairman did not organize the direct deliberation of all three members of the arbitral tribunal and denied further discussions did not result in the proceedings infringing the agreement of the parties or the law of the country where the arbitration took place (France). The ICC rules provide only that "the arbitral tribunal may deliberate at any location it considers appropriate" (Article 14(3)), but do not stipulate in what form such deliberation must take place and whether it should be held in person. Although discussions in person may be desirable, pursuant to the understanding of the Supreme Court ICC arbitral tribunals may also confer exclusively by correspondence, telephone or videoconference, provided that the selected form of deliberation is in accordance with the law at the place of arbitration. As the Austrian company did not rely on French law, the Supreme Court held that the ICC rules did not call for deliberations in the personal presence of all members of the arbitral tribunal; thus, the chairman's deliberations by telephone with the co-arbitrators were held to be proper.
However, the Supreme Court did emphasize that the Austrian company had not alleged that the Austrian co-arbitrator was prevented from discussing the case with the Spanish co-arbitrator or that he was unable to influence the tribunal's decision-making. As regards the examination of the award under French law, the Supreme Court found that due to the scrutiny of awards pursuant to Article 27 of the ICC rules, an award scrutinized by the ICC International Court of Arbitration is considered of increased value since such scrutiny is designed to ensure that an ICC award does not bear grave formal failures (eg, infringes mandatory legal standards of the place of arbitration which would not have been taken into account by the arbitral tribunal).
The Austrian company's final objection (that the proceedings as conducted infringed Austrian public policy) was held to be invalid as, according to the Supreme Court, Article V(2)(b) of the New York Convention does not cover the alleged default of personal deliberation by all members of the arbitral tribunal. It held that spare use should be made of Article V(2)(b) of the New York Convention, which refers to public policy. Giving further weight to the scrutiny of awards by the ICC International Court of Arbitration, the conduct of the proceedings at hand did not suggest that Austrian public policy had been infringed in the eyes of the Supreme Court.
In this judgment (Supreme Court, April 26 2006, No 3 Ob 211/05h) the Supreme Court did not arrive at any conclusions that had not previously been reached by courts in other member states of the New York Convention. Nevertheless, the judgment provides clarity in respect of the practical issues which may arise in the course of enforcement.
Given that dissenting opinions appear more and more common in ICC - and other institutional - arbitration cases, the Supreme Court's perception that such opinions do not pertain to the enforceable arbitral award (provided they are not incorporated into the award) and thus, do not need to be presented, or even argued against, is reassuring.
Contrary to the courts of other member states, the Supreme Court has reaffirmed that Austrian enforcement courts (ie, district courts) should issue amendment orders if the required documents or translations are not produced by the applicant, rather than rejecting the enforcement application outright. This should save time and costs. By contrast, the Supreme Court's respective definition seems to mirror the rather restrictive international interpretation and use of public policy as a tool against enforcement.
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 (email@example.com or firstname.lastname@example.org).
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