II. The Arbitration Agreement

A prerequisite for the arbitrator’s jurisdiction is a valid arbitration agreement. This includes in particular (i) the ability of an individual to enter into a legally binding agreement to arbitrate; (ii) the arbitrability of the subject matter; (iii) the fulfilment of certain form requirements; and (iv) the requirement to identify the parties, the dispute(s) and the legal relationship(s) that are subject to arbitration.

The arbitration agreement provides for two different procedural effects: Firstly, it constitutes the foundation of the arbitrator’s jurisdiction – that is the positive procedural effect. Secondly, it excludes the state courts jurisdiction and serves as a procedural bar due to the parties’ agreement to arbitrate – that is the negative procedural effect.

2.1 Subjective Arbitrability

The subjective capacity of a person to validly conclude a binding arbitration agreement (and to be a party to arbitration proceedings) is regularly referred to as subjective arbitrability. If this subjective capacity of the person concluding the arbitration agreement is lacking, the award may be challenged before the Austrian Supreme Court (see infra VII.). Whether a person has subjective capacity follows from the law applicable to that particular person. Under Austrian law, the Private International Law Act (IPRG) usually determines the law applicable to a natural person by reference to his or her nationality. With respect to legal entities, it is the registered head office that is decisive. However, for EU companies, because of the foundation theory developed by the European Court of Justice (ECJ), the place of establishment is decisive. It is therefore recommended to clearly identify the parties in the contract by referring to registration numbers for companies or the like.

2.2 Objective Arbitrability

Objective arbitrability is the characteristic sine qua non for a legal matter to be the subject of an arbitration agreement. If the subject matter of the dispute is not arbitrable, the award may be set aside. According to Austrian law, any pecuniary claim that lies within the jurisdiction of the courts can be subject of an arbitration agreement. An arbitration agreement concerning non-pecuniary claims shall be legally effective insofar as the parties may conclude a settlement on the issue in dispute. Examples for matters which cannot be referred to arbitration are (i) family law matters such as divorce, patrimony or adoption, disputes concerning personal or marital status; and (ii) public law disputes such as criminal cases.

2.3 Form Requirements

When parties agree on arbitration clauses, the potential dispute is taken away from the state court’s jurisdiction. This can be considered to be in tension with constitutional rights to have one’s case heard before a state court – as a consequence most legal systems impose particular form requirements when entering into an arbitration agreement, notably the requirements that the arbitration agreement must be concluded “in writing”.

The arbitration agreement must be contained in either a written document signed (including every adequate form of electronic signature) by the parties or in an exchange letters, faxes, e-mails, or other forms of communication exchanged between them that provides proof of the existence of the agreement. In addition, when a contract which fulfils the form requirements set out above refers to a document which contains an arbitration agreement, it shall also constitute an arbitration agreement provided that the reference is such that it makes the arbitration agreement part of the contract. It has to be noted that a defect of form of the arbitration agreement shall be cured (or rather, waived) in the arbitration proceedings when the party (that may seek to object on the grounds of defect) addresses the substantive matters in dispute. This waiver will occur unless an objection is raised, at the latest, when the said party enters into argument on the substance of the dispute.

2.4 Minimum content of the arbitration agreement

As mentioned above, the arbitration agreement must identify the parties, the existing or future dispute(s) and the legal relationship (contractual or non-contractual) out of which the dispute(s) arose or might arise.

2.5 Special Requirements for Consumers

Arbitration agreements between an entrepreneur and a consumer may be validly concluded only for disputes that have already arisen. In addition, arbitration agreements with consumers must be contained in a document which has been personally signed by the consumer. This document may not contain any agreements other than those that refer to the arbitration proceedings. As a consequence, under Austrian law, it is practically almost impossible to conclude an arbitration agreement with a consumer.2

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2 See in detail F. Schwarz and C.W. Konrad, The Vienna Rules: A Commentary on International Arbitration in Austria (The Hague, Kluwer Law International, 2009), Article 1 at para. 1-037 et seq.