Interview with Dr. Alice Fremuth-Wolf, Secretary General of Vienna International Arbitral Centre (VIAC)
Since many years Vienna is a traditional place for resolving disputes between commercial parties in a private forum. What makes Vienna different from the other popular places of arbitration?
VIAC is active in this market with a focus on CEE/SEE and CIS countries for more than 40 years and have a perfect knowledge of the players, parties, potential arbitrators and their specific needs and expectations. Our experience in this region is unmatched. We are very often seen (and actually are) as a common denominator and neutral ground for East-West disputes in its widest sense (encompassing also disputes between parties from Asia and Europe).
Vienna is a popular place for arbitration because it is one of the most liveable and safe cities in the world. Another unmatched advantage is that it lies in the heart of Europe and thus offers excellent flight connections to all parts of the world and is the hub for CEE/SEE travels. In addition to its cultural sights which can be enjoyed when there is some free time during or after hearings, the hotel and restaurant prices are, on an average, substantially lower than in other major European capitals which is also critical if parties conduct a hearing lasting for several days or weeks.
And last but not least: Vienna is the capital of Austria which is a neutral country with a well-developed legal system. Its modern Law on International Commercial Arbitration is based on the UNCITRAL Model law. Also, Austrian courts are arbitration-friendly and provide judicial assistance to arbitrators when needed. Austrian courts are reluctant to intervene in arbitral proceedings. For challenges Austria has a one layer only court system. The Austrian Supreme Court is the court of first and last instance for claims challenging an arbitral award. Such claims are strictly limited to specific enumerated grounds comparable to those in the UNCITRAL Model Law. These are all important factors that need to be taken into account by parties and counsel when choosing a place of arbitration. And here, we clearly can score very high.
What makes VIAC different from the other arbitration centres, in particular from SIAC, SCC or ICC?
VIAC is a regional institution with a strong focus on and knowledge of East/West trade, on particular the CEE/SEE and CIS countries, and in that respect is different from ICC, which is a global player, or SIAC, an Asian institution. VIAC is therefore smaller in staff and administrative hurdles and is therefore able to immediately react to enquiries. In urgent matters, I am personally available for contact. Parties and arbitrators appreciate that our case-managers speak several languages including Russian, Polish, Czech, Slovak, Italian, Spanish, French and of course German and English. They are available to assist if need arises. Each case is assigned to a particular case manager who is then the first point of contact for any enquiries regarding the case. We keep a complete mirror file, which allows us to monitor the proceedings from the transfer of the file to the tribunal until the issuance of the award which is done by the Secretariat (this is a difference to SCC, for example). We collect advance on costs at the outset of the proceedings for the arbitrators’ and administrative fees, we take care of other issues such as VAT or assist in organizing hearings. Our Board consists of highly experienced and renowned national and international arbitration practitioners, academics, a Supreme Court Judge as well as a member of the Austrian Ministry of Justice in order to ensure integrity and high-quality decisions.
The Vienna Rules 2018 combine recent developments and well-tried provisions in order to create a modern set of rules providing a framework for the parties and the tribunal. The rules are lean and flexible and thus the conduct of proceedings may be determined by the parties and the tribunal, tailor-made to their dispute. There are no terms of reference and a “scrutiny light” at the end of the proceedings with respect to the award in order to ensure that all formalities are being met. In addition, our fast-track proceedings are opt-in only and there is no monetary threshold by which proceedings automatically fall under the rules of expedited proceedings.
Your Arbitration Institution has recently implemented new Arbitration and Mediation Rules. What are the most important novels?
The VIAC Rules of Arbitration and Mediation 2018 have three parts: Rules of Arbitration (part I), Rules of Mediation (part II) and Annexes (part III). Thus, arbitration and mediation now are on equal footing and we have foreseen incentives for parties to combine proceedings.
The new Rules introduced – inter alia – the following new features:
· VIAC now also administers purely domestic cases, implementing the amendment of Section 139 WKG (Austrian Federal Act on Economic Chambers) of 17 May 2017 (Federal Law Gazette I No. 73/2017 of 19 June 2017) (Article 1 VR and Article 1 VMR).
· In the interest of gender diversity, it is explicitly defined that, in practice, the terms in the Rules shall be used in a gender-specific manner (Article 6 VR and Article 2 VMR).
· Since 1 January 2018, all new proceedings are administered by VIAC through an electronic case management system ; provisions on submission of Statement of Claims and service have been adapted accordingly (Articles 7, 12 and 36 VR and Articles 1 and 3 VMR).
· The Vienna Rules now explicitly specify that arbitrators and parties as well as their representatives shall conduct the proceedings in an efficient and cost-effective manner; this may also be taken into account in determining the arbitrators‘ fees / costs (Article 16 paragraph 6, Article 28 paragraph 1, Article 38 paragraph 2 VR).
· For the first time, Respondents now have the possibility to request security for costs under certain circumstances (Article 33 paragraphs 6 and 7 VR).
· In determining arbitrators‘ fees, the VIAC Secretary General is more flexible to increase the fees on a case-by-case basis by a maximum total of 40% or, conversely, to decrease the fees where appropriate (Article 44 paragraphs 7 and 10 VR).
· The Model Arbitration Clause and the Model Mediation Clauses have been revised and adapted to new wording (Annex 1).The appointment of members of the Board has become more flexible (Annex 2; Article 2 VR).
· The Schedule of Fees has been revised. The Registration Fees and Administrative Fees for lower amounts in dispute are staggered and reduced. At the same time, Administrative Fees for very high amounts in dispute have been slightly increased, they remain very moderate in comparison to other institutions. The Registration Fees and Administrative Fees for proceedings pursuant to the Mediation Rules have been aligned with those of the Arbitration Rules (Annex 3; Articles 4 and 8 VR).
· Provisions introducing Emergency Arbitrators were deliberately forbidden.
Vienna is often described as a jurisdiction open and friendly to Russian business. Do you have Russian parties in VIAC? Is there an increase or fall in their numbers in recent years?
Indeed, Austria has an open and friendly attitude towards foreign parties, including those from Russia. In 2015 we had 7 (out of 65), in 2016 we had 9 (out of 124), in 2017 we had 6 (out of 84) and in 2018 we had 5 (out of 120) parties from Russia. In general, we have seen an upraise in the number of parties from CEE/SEE and CIS countries (in 2017 and 2018 a third of all parties came from that region). In detail, statistics since 2011 can be found on our website (“Statistics“).
Could VIAC become a hub for Russia-Western disputes or probably also Asia-Western disputes? Are there any such plans and, if yes, what VIAC does to make them a reality?
VIAC stands ready to become an even stronger hub for Russia-Western disputes. In terms of disputes from BRI („Belt and Road Initiative“), we will observe whether they are going to be arbitrated mainly by CIETAC or SIAC or elsewhere. VIAC is well-equipped and prepared to handle infrastructure disputes arising from BRI, in particular, those with a connection to CEE/SEE and CIS countries. We have conducted several road-shows in Asia and have concluded co-operation agreements with arbitral institutions from that region. We are planning a next round of road-shows in the CIS region to enhance our visibility. As a regional institution you have to make your choices also in terms of marketing. Most importantly, we will maintain the high quality of our administrative services, the essential prerequisite for being successful and the best way to promote VIAC.
Do you have Russian arbitrators on your list? How often are they appointed?
Currently our Listof Practitionersincludes twenty-three Russian practitioners (Russian nationals) and more than seventy arbitrators who speak the Russian language.
In terms of appointment we had one (out of sixty-seven) Russian arbitrator appointed in 2018, none in 2017, one (out of seventy) in 2016 and 3 (out of forty-five) in 2015. Again, if you also include arbitrators from the CIS region, the numbers are much higher (in 2018 it were eight: in 2017 it were five; in 2016 it were ten; in 2015 it were eleven.
VIAC offers arbitration practitioners the possibility to present themselves on its website but reserves the right to requests to be listed and to remove listings. Parties are free to nominate an arbitrator of their choice and so is the VIAC Board when appointing an arbitrator. The presentations do not constitute recommendations but may assist the parties in choosing an arbitrator willing to conduct proceedings according to the Vienna Rules. Thus, the list is more like a free “dating-platform” offering an interface between those offering their services as arbitrator and those who are looking for suitable candidates.
Do you follow the fate of the awards administered by VIAC and how they are enforced in other countries? Do you collect, probably, such statistics?
No, unfortunately not. Even if I would like to collect such statistics, we usually get to know on successful enforcement only by co-incidence (last time at a conference, I was approached by a Ukrainian lawyer who informed me of the successful enforcement of a VIAC award in the Ukraine). It is difficult to follow-up on this, as we would not know if awards are voluntarily complied with or whether enforcement is sought and if so, in which jurisdiction. We only get involved if the party seeking enforcement requires additional certifications from the arbitrator(s) and/or the Secretariat, such as the declaration that the award has become final and binding. We assist parties in all aspects of the proceedings and issue certificates necessary in particular jurisdictions such as proof of delivery of the statement of claim to respondents. In that respect we are aware of our important function and collect all records of delivery of the statement of claim and other important documents to the parties which is especially critical in case the respondent decides not to participate in the proceedings. My signature – which is added to the award in order to certify that the award was rendered by an arbitral tribunal under the auspices of VIAC – is notarized and an apostille is added if required.
What model of remuneration for arbitrators is chosen more often? Is it ad valorem or hourly based? What does it depend upon?
According to the Vienna Rules, there is no choice between ad valorem or hourly rate as we have a fixed fee schedule and the arbitrators are remunerated depending on the amount in dispute. The arbitrators cannot engage in a fee arrangement with the parties and modify their fees under the VIAC Rules. Therefore, costs of VIAC arbitration are calculated and transparent to the parties before starting an arbitration.
Transparency and confidentiality are the basic principles of arbitration. What measures is the VIAC taking in the interest of increasing transparency and securing confidentiality, but also providing the balance of both?
There is a natural and intrinsic tension between transparency and confidentiality. One of the main features of commercial arbitration has always been its confidential nature that allowed parties to have their disputes settled in a private arena, this is perfectly fine. Transparency is needed to prevent arbitration from being stigmatized as “jurisdiction behind closed-doors” where decisions are being rendered that impact the fate not only of the parties involved but of a larger group of people or even nations. This is especially the case in investment arbitration where this is a key issue. This is not necessarily so in commercial arbitration between two private parties (unless, perhaps public legal entities are involved). There is no subordinate public need that their private disputes be publicly debated or commented. Thus, there are strict confidentiality provisions in our rules for arbitrators, Board members and VIAC’s members of the Secretariat ensure that all information acquired in the course of their duties is kept confidential. For parties, it is recommended to conclude an explicit confidentiality agreement, be it in a separate document or as part of the arbitration agreement.
Following the call for more transparency in the appointment process of institutional arbitration, VIAC has decided to publish the names of arbitrators ("VIAC Arbitral Tribunals"). The list is updated regularly. It provides information on the appointment method, i.e. if the arbitrator has been appointed by the VIAC-Board or nominated by the parties/co-arbitrators and the date when the case file was handed over to the respective arbitrator. It also shows if the case is still pending or if an arbitrator’s office was prematurely terminated without stating the reasons. VIAC continues to be a strong supporter of the ERA-Pledge and supports women appointments in arbitration. The proportion of women acting as arbitrators in VIAC arbitration proceedings has increased steadily over the last several years. In tribunals of cases received in 2017, the women-ratio reached nearly 17%, which based on available information lies well above the average of other arbitral institutions. The percentage of women acting as co-arbitrator or chairperson increased in relation to 2016, the percentage of female sole arbitrators declined. And still, parties and co-arbitrators seem to be more reluctant to nominate women than VIAC’s Board – in 2018 only one out of 28 co-arbitrators nominated by the parties were female while 14 out of 32 appointments made by VIAC Board were female (sole, co-arbitrators and chairpersons). In 2017, two out of four co-arbitrators appointed by the Board were women, whereas when nominated by the parties only two out of 17 were female.
We see the publication of the arbitrators’ names and our statistics as an important step to show that diversity is applied on an institutional level when it comes to gender, age, nationality etc. in the selection process of arbitrators. We hope this serves as a benchmark also for parties and co-arbitrators when they have to choose their candidate as there is still room for improvement. It is a fact that diverse tribunal work better and come to a more balanced and better solution.
Another field of tension between transparency and confidentiality is the publication of decisions rendered by arbitral tribunals. In my opinion, the publication of awards in anonymized form strikes this balance as it allows the public to be informed on the outcome of a dispute providing a summary of legally relevant and interesting details to a greater audience, cutting out confidential data and information that are of no avail.
According to the Vienna Rules (Art. 41) anonymized summaries or extracts of awards may be published in legal journals or VIAC’s own publication unless a party has objected to the publication within 30 days upon service of the award. When VIAC for the first time published its “Selected Arbitral Awards, Vol. 1” in 2015, we prepared abstracts for each case reported. Still, as a matter of courtesy, we sought permission from the parties beforehand and were prepared to amend the drafts in accordance with the parties when they felt that the information disclosed could infringe their rights or lead to identify the parties. With this procedure, albeit cumbersome, we ensured that parties felt safe while at the same time nursing the appetite of practitioners to get insights into decided cases and their reasons. We are planning to publish a second volume in 2020.
And last but not least, our most recent publication, the “Handbook VIAC Rules - A Practitioner’s Guide” offers valuable insights and a helpful and easily comprehensible overview of proceedings administered by VIAC. It was written by practitioners for practitioners and reproduces each Article of the VIAC Rules with comments and background information on the practice of the Secretariat when administering VIAC proceedings as well as on the new amendments. It includes also important additional topics such as tribunal secretaries and third party funding. Thus, the guide is essential for those who conduct an arbitration or a mediation under the Vienna (Mediation) Rules for the first time as well as for those who have been operating in this area for a long time and who want to get acquainted with the modifications.
The Willem C. Vis International Commercial Arbitration Moot is a very important international event each year. This year the main annual moot arbitration battles will take place in April 12-18. What is the mission of this event in general, does it change from year to year and do you set any special goals every coming year for this event?
The goal of the Vis Arbitral Moot is to foster the study of international commercial law and arbitration for resolution of international business disputes through its application to a concrete problem of a client and to train law leaders of tomorrow in methods of alternative dispute resolution. Each year, a different set of arbitration rules is used providing the framework for the proceedings while the applicable substantive law is always the CISG.
In 2016, the Vienna Rules were used for the Vis Moot and it was a great test of our – then newly enacted – 2013 version which also gave VIAC great publicity. We tried to make the most out of it with a big reception in the famous SkyLounge of the Austrian Federal Economic Chamber. In “normal” years we host smaller events, such as last year with UNCITRAL or joint-events with other institutions such as RAA, KCAB, CIETAC and this year HKIAC.
For me, the Vis Moot is the perfect setting to mix and match experienced practitioners, new talents and rising stars providing students with a unique opportunity to get a glimpse of the international world of arbitration, meet with over a thousand famous arbitrators, make friends amongst their peers that often last forever and overcome prejudices that each one of us might have against other nationalities. It thus helps to create a deeper understanding of other nations and peaceful dispute resolution without weapons, ultimately making this world a better place for everyone.
In Russia, ad hoсarbitration is now nearly banned. What is the opinion on ad hoc arbitration in Austria? Is it a rival to the VIAC? Are there ad hoc cases administered by VIAC in recent years?
In Austria, ad hoc arbitration is (or was) quite popular for domestic disputes. One of the reasons was that VIAC was prevented from administering purely domestic disputes until last year and thus parties resorted to ad hoc arbitration. Frequently, domestic disputes in Austria that go ad hoc are shareholder disputes or related to family enterprises, which naturally seek utmost confidentiality, not even wanting to involve an institution. We do hope that this will change in the future with VIAC offering its services now also for domestic disputes. Ad hoc arbitration is no rival to institutions but just another method that is available to parties.
VIAC is ready to support ad hoc arbitrations. Taking into account that services to be provided by VIAC – also within the framework of ad hoc proceedings – must find their basis in our rules, such services can include a number of activities. In terms of time, VIAC's services can be divided into the following stages: (i) support of the parties until transmission of the file to arbitrators or all-party third parties, (ii) assistance during the proceedings, and (iii) assistance in the termination of the proceedings. From a legal point of view, VIAC's activities can be divided into the following categories: (i) function as appointing authority (covered by Annex 4), (ii) function as Secretariat for ancillary activities (including custody of procedural files), (iii) function as trustee for costs, (iv) function as neutral third party for fixing fees in the absence of agreement between the parties. In the future, it is planned to offer service packages according to these categories. Until these are finalized, interested parties are invited to contact the Secretariat directly.
What is the VIAC position with regard to anti-Russian sanctions? Have you faced these issues already when administering disputes with the Russian companies included into the sanction list?
VIAC currently performs a sanction check that involves checking individuals, countries but not the subject matters (goods). Whether a transaction is illegal or should not have been performed due to sanctions is for the arbitrators to decide. The institution may accept monies (advance on costs) from sanctioned parties/persons but may not be able to re-transfer monies once the proceedings are terminated due to the sanctions. This is why the sanctions check is carried out at the outset and parties are made aware of the consequences. Checks are documented in the case file. Up until now, we have not faced any issues in that respect.
If we try to imagine international commercial arbitration in ten or twenty years ahead, how do you think it will it be different from today, where do you see the greatest challenges for commercial arbitration in the future?
For international trade and trade in goods, arbitration will remain the important cornerstone to guarantee fair trial and equal treatment of the parties as well as enforceability of cross-border contracts through the New York Convention of 1958. It remains to be seen whether the new Singapore Convention on the Enforcement of Mediated Settlement Agreements to be adopted in August 2019 will be as successful as the New York Convention and what impact it will have on international commercial arbitration.
It is an incentive for commercial arbitration to take seriously the criticism regarding "time, cost, efficiency" of arbitration. Arbitral institutions are amending their rules to provide remedies against abusive and delaying behaviour of parties, counsel and arbitrators and create incentives for an efficient conduct of proceedings.
In our quest to monitor, control and develop we have reached a point where the once flexible instrument of arbitration has become a bit over-loaded by rules, guidelines, notes and codes of conduct. But I am still convinced that a greater choice for the parties does not automatically lead to a decrease in arbitration proceedings, but rather to a more conscious decision for or against a particular procedure that is to bring the conflict to an end.
I do not fear that artificial intelligence (AI) will replace arbitrators all-together as the human factor will always play a crucial role in decision-making of complex and multifaceted disputes. But AI may be a welcome tool to ease the work-load for arbitrators, to search documents, to identify legal precedents and other legal sources or together with new technologies organize the arbitral proceedings more efficiently and less costly with the use of communities and virtual hearing facilities. Here, the biggest challenge will be cyber security and the protection of sensitive data.
Interview conducted by Dr. Lilia Klochenko,
Attorney at Law, FCIArb, Member of the Board of RAA