Vienna International Arbitral Centre launches new investment arbitration and mediation rules
06 July 2021
With effect from 1 July 2021, the Vienna International Arbitral Centre (the VIAC) has new specialised VIAC Rules of Investment Arbitration (Vienna Investment Arbitration Rules) and the VIAC Rules of Investment Mediation. The Vienna Investment Arbitration Rules seek to plug a gap in the market by providing an affordable and efficient alternative for resolving investor-State disputes of lower value. The VIAC has also taken the opportunity to update the VIAC Rules of Arbitration (Vienna Rules) and the VIAC Rules of Mediation. This article highlights the key features of the Vienna Investment Arbitration Rules and comments on the revisions to the Vienna Rules.
Vienna Investment Arbitration Rules
The Vienna Investment Arbitration Rules are broadly based on the Vienna Rules, with deviations designed to address the unique features of investment arbitration proceedings. There are no objective jurisdictional requirements as to the parties or the nature of the dispute. It is thus up to the parties to decide whether their dispute is suitable for resolution under these rules, which should mean less time and cost spent on jurisdictional battles. The agreement (or the offer to arbitrate) can be contained in a contract, treaty, statute or other instrument (Article 1(1)) and involve a State, a State-controlled entity or an intergovernmental organisation. Other notable provisions of the Vienna Investment Arbitration Rules are:
- Early dismissal of claims and defences (Article 24a). A party may apply to the arbitral tribunal for early dismissal on the basis that a claim, counterclaim or a defence is manifestly: (1) outside the jurisdiction of the tribunal; (2) inadmissible; or (3) without legal merit. The procedure is comparable to a summary judgment procedure or motion to dismiss in common law courts, and should ensure that frivolous claims can be dismissed swiftly and without unnecessary cost being incurred.
- Third-party funding (Article 13a). Primarily for the purposes of establishing if conflict of interest exists on the part of the tribunal, the Vienna Investment Arbitration Rules require a party to disclose the existence of any third-party funding and the identity of the third‐party funder in its statement of claim or its answer to the statement of claim, or immediately upon concluding a third-party funding arrangement. Whether any further details concerning the third-party funding arrangement need to be disclosed is left to the discretion of the tribunal. The definition of third-party funding (Article 6(1)) is sufficiently broad to cover any type of third-party funding or material support that is dependent on the outcome of the proceedings, including portfolio funding, donations or grants. Contingency fee arrangements with party representatives, intra-group financing at arm’s length or commercial loans are not covered.
- Amicus curiae submissions (Article 14a). In disputes arising out of a treaty or statute, the tribunal may allow a non-disputing party to make submissions on a factual or legal issue within the scope of the dispute submitted to arbitration “after considering all relevant circumstances”. A non-disputing treaty party may make written submissions on questions of interpretation of the treaty at issue.
- Time for rendering the award (Article 32). The Vienna Investment Arbitration Rules prescribe that the award shall be rendered no later than six months after the last hearing or the filing of the last authorised submission in respect of the matters to be decided in the award, whichever occurs later. While the Secretary General has the power to extend the time limit, this is a more ambitious goal than the eight months envisaged in the draft amendments to the Arbitration Rules of the International Centre for Settlement of Investment Disputes.
- Waiver of State immunity (Article 4). By submitting to the Vienna Investment Arbitration Rules, a State-related party is deemed to have waived any right of immunity from jurisdiction in respect of proceedings relating to the arbitration to which such party might otherwise be entitled. However, reflecting the position in most jurisdictions, a waiver of immunity relating to the enforcement of an arbitral award must be expressed separately.
The Vienna Investment Arbitration Rules differ from the Vienna Rules also in the following respects: (1) unless otherwise agreed, all arbitrators must have nationalities different from those of the parties and a party may request that the VIAC Board (rather than the co-arbitrators) select the chairperson (Article 17); (2) jurisdictional objections must be raised no later than in the first pleading on the merits after the constitution of the arbitral tribunal (rather than in the first pleading on the merits) (Article 24); (3) the timeline for submitting an answer to the statement of claim is 60 rather than 30 days (Article 8); (4) there is no default seat of arbitration, which can be decided by the parties or the tribunal (Article 25); and (5) in addition to anonymised summaries or extracts of decisions and awards, the VIAC can also publish the nationality of the parties, the identity and nationality of the arbitrators, the date of commencement of the arbitration, the instrument under which the arbitration has been commenced and whether the proceedings are pending or have been terminated (Article 41). The parties are, of course, free to agree on greater transparency, including by the application of UNCITRAL Rules on Transparency in Treaty-based investor-State Arbitration.
Vienna Rules 2021
The revisions to the Vienna Rules can be divided into four categories:
- Revisions mirroring some of the features of the new Vienna Investment Arbitration Rules: In particular, the provisions on waiver of State immunity (Article 46), third-party funding (Article 13a), time frame for rendering an award (three instead of six months) (Article 32) have all been adopted also in the Vienna Rules. Although only the first limb of the third-party funding provision has been adopted (i.e. the disclosure of the existence of third-party funding and the identity of the funder), the tribunal’s discretion under the Vienna Rules is sufficiently broad to allow it to order the disclosure of further information where this is warranted (Article 28(1)).
- Clarifying the Vienna Rules or reflect the existing practice of the VIAC: In particular, the Vienna Rules (and the Vienna Investment Arbitration Rules) now spell out that the tribunal is entitled to facilitate the parties’ endeavours to reach a settlement, although the revision is not meant to turn arbitrators into mediators (Article 28(3)), or make interim decisions on costs and order payment anytime during the proceedings (Article 38). Reflecting the VIAC’s practice in allocating advances on costs depending on the circumstances of each case, the Vienna Rules now provide that separate advances on costs may be fixed for claims, counterclaims, claims raised by way of set-off (provided the latter necessitates additional work from the tribunal) or indeed requests for joinder, and the VIAC may decide that the parties pay advances commensurate to their claims (Article 42). Further, separate supplementary annexes now ‘codify’ the procedure when the VIAC is acting as appointing authority (Annex 4) or administering authority (Annex 5) under the Vienna Rules or the VIAC Rules of Mediation.
- Revisions reflecting the prevalence of virtual hearings and use of electronic communications: Article 30(1) now provides that, having due regard to the views of the parties and the specific circumstances of the case, the arbitral tribunal may decide to hold an oral hearing in person or “by other means”. This also reflects the latest case law of the Austrian Supreme Court (Case No. 18 ONc 3/20s), which endorsed the use of virtual hearings even over one party’s objections. Acknowledging the reality that most communications (including of the award) are conducted electronically, several provisions now also refer to electronic mail or electronic transmission (e.g. Article 7(2), 8(2), 36(5) etc).
- Extending the scope of the Vienna Rules to succession disputes: A new Annex 6 sets out the supplementary rules for disputes relating to succession, which apply when the parties have so agreed, or the application of the rules has been foreseen in a deposition of property upon death, an agreement as to succession or other legal acts not based on agreements of the parties. Arbitration of succession disputes is made possible by Article 581(2) of the Austrian Code of Civil Procedure.
The VIAC has also adjusted its schedule of fees in Annex 3, slightly increasing the VIAC administrative costs and arbitrators’ fees.
The VIAC follows in the footsteps of other arbitral institutions in adopting a specialised set of arbitration rules for investment disputes. This may seem an audacious step in a post-Achmea landscape but the Vienna Rules, on which the new Vienna Investment Arbitration Rules are modelled, are a popular choice particularly in Central and Eastern Europe, Russia and the CIS. They may well be adopted in investment treaties or statutes of non-EU Member States as well as contracts between investors and States, State-owned entities or intergovernmental organisations (particularly where one or both parties are from outside the EU). According to its cost calculator, VIAC would charge a maximum of EUR109,340 for a EUR5million dispute resolved by a sole arbitrator, making the Vienna Investment Arbitration Rules accessible also for lower-value disputes. Meanwhile, the revisions to the Vienna Rules ensure that the rules keep up with the latest trends.