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Country update – Austria – March 2020

Construction Law International homepage  »  March 2020

Dispute resolution boards under Austrian law

Thomas Frad
Karasek Wietrzyk Rechtsanwälte, Vienna

 

In Austria, disputes arising out of construction agreements are most commonly dealt with by ordinary courts. If both parties agree to an arbitration or mediation agreement, their dispute can be solved by an arbitral tribunal or through mediation. However, if one party does not agree with the outcome, this party can still challenge it before a court. Recently, the question of if and how dispute adjudication boards (DABs) might be used in Austria arose. As in most civil law jurisdictions, the implication of mechanisms, developed under common law, can be quite challenging.

As mentioned, there are existing alternative dispute resolution methods in Austria, such as arbitration, meditation and expert determination (Schiedsgutachten). Although parties commonly use standardised contracts, such as the ÖNORM B 2110, those do not provide a means of alternative dispute resolution. Should the parties desire alternative means of dispute resolution, they might use FIDIC contracts as standardised contracts.

Dispute adjudication is a means of dispute resolution, which has no legal background in Austria. In contrast to Germany’s Streitschlichtungsordnung Bauwesen (SL Bau), there are no similar proceedings in place.

The purpose of the DAB is to settle disputes through a ruling, which is, at least preliminarily, binding but not enforceable. The parties are free to decide whether this procedure is obligatory or not. The DAB is no arbitral tribunal, at least according to FIDIC Contracts. Furthermore, it cannot be classified as mediation since it can render a decision. The DAB’s task is to ascertain disputed facts, to subsume them under the applicable law and to reach a decision.

Contrary to the prevalent view in Germany, in Austria it cannot be qualified as an expert’s determination as well. An expert might determine facts, supplement, amend or replace the will of the parties or clarify the contents of the contract. According to Götz-Sebastian Hök, the German assumption of the DAB’s nature can only be explained through the reasoning that it is, in fact, no arbitration. In the absence of alternatives, there is no other reasonable way than to qualify it as an expert determination.

From an Austrian perspective, the DAB is a contractual instrument to resolve disputes, which is, in accordance with the principle of private autonomy, admissible. Similar to the Engineer’s Determination under FIDIC contracts, the DAB acts as a third party, which is entitled to determine the contractual rights of the parties. Following the prevailing view, these rights are qualified as ‘Bestimmung vertraglicher Leistungen durch einen Dritten’ (‘Determination of contractual rights through a third party’) pursuant to section 1056 of the Austrian Civil Code. Under Austrian law, the DAB’s decision is therefore binding but non-enforceable without a further decision of a court or an arbitral tribunal, depending on the contract. This result is in line with the FIDIC rules or other contractual rules for dispute adjudication.

At present there are no ambitions to implement further alternative dispute resolutions methods in Austria. Due to the complexity of bigger construction projects and the duration and costs of court proceedings, alternative forms of dispute resolution are desperately demanded.

The development and implementation of alternative dispute resolutions – as in Germany through the SL Bau – should therefore be discussed in Austria as well. In contrast to the traditional means of dispute resolution, such as mediation and arbitration, the means of the FIDIC terms or the SL Bau provide different ways to resolve disputes.

It remains questionable if dispute adjudication can be implemented as a special procedural model and if disputes in construction cases may be legally shifted to DABs. Dispute adjudication, however, provides means that are not achievable through state courts and, to some extent, arbitration.

 

Thomas Frad is a partner at Karasek Wietrzyk Rechtsanwälte in Vienna. He can be contacted at Thomas.Frad@kwr.at.