Worldwide: DRInsider - April 2018

Welcome to the 10th edition of the DRInsider, the quarterly Newsletter of the Wolf Theiss Dispute Resolution Group. We provide an overview of recent developments in CEE/SEE and some very interesting case law.

The recent period has been marked with different procedural changes. Not only has the Polish Civil Procedure Code undergone amendments in almost all stages of proceedings, there have also been major revisions to the Arbitration Rules of the Vienna international Arbitral Centre (VIAC), the German Institute of Arbitration (DIS) and the Court of International Commercial Arbitration in Romania (CCIR).

With regard to EU law, we remind readers of the advantages of the European Account Preservation Order (EAPO), designed for creditors who hold money claims against a debtor in another member state, and which is done without the knowledge of the debtor.

The Croatian Constitutional Court went one step forward in its competences in accessing evidence and determining facts and ruled that it can do so in exceptional circumstances and in order to provide protection from arbitrary court decisions.

Last but certainly not least, find out more about the active repentance provision, which the Austrian Criminal Code offers as a second chance in certain cases of offences against property.

Read inside to find out more.

ARBITRATION

New Institutional Arbitration Rules In Austria And Germany

By Venus Valentina Wong and Alexander Zollner

While the Vienna International Arbitral Centre (VIAC) has only made selective changes to its arbitration and mediation rules, the German Institute of Arbitration (Deutsche Institution für Schiedsgerichtsbarkeit – DIS) has, in fact, adopted a new set of rules with several key changes.

Vienna Rules 2018

A major revision to the Vienna Rules is the competence of VIAC to administer domestic cases even if all parties have their seat or domicile in Austria. The competence to administer international cases remains unchanged.

A new provision now allows the respondent to request the arbitral tribunal to order the claimant to provide security for costs if the respondent can demonstrate that the recoverability of a possible cost claim is at risk. In the event the claimant fails to comply with the tribunal's order for the security for costs, the tribunal may suspend or even terminate the arbitration. The provision might become relevant in particular where third party funders are involved.

As to costs of the proceedings, the administrative fees of the institution and the arbitrators' fees have been decreased for lower amounts in dispute and increased at the higher end of the spectrum. As to the allocation and/or determination of costs, both the tribunal and VIAC should pay particular attention to whether the proceedings were conducted in an efficient manner or not.

In conclusion: The Vienna Rules keep their essential character for which they are known and appreciated in the CEE/SEE Region: a clear and slim set of arbitration rules and a reasonable cost regime that meets the needs of arbitration users.

DIS Arbitration Rules 2018

The DIS Arbitration Rules 2018 strengthen the involvement and the powers of the institution and establish a new body, namely the Arbitration Council. The Arbitration Council decides inter alia on the number of arbitrators (if there is no agreement in this respect), any challenge of arbitrators and the fixing and possible reduction of the arbitrators' fees, if the arbitration has been terminated prior to the rendering of a final award or by an award by consent.

The revision introduces a general principle pursuant to which the arbitral tribunal and the parties shall conduct the proceedings in a time and cost-efficient manner, taking into account the complexity and economic importance of the dispute. Such efficient conduct should, inter alia, be enhanced by

  • shortening the deadlines for respondent to nominate its co-arbitrator and the deadline for the co-arbitrators to agree on a president;
  • commencing of the deadline to file an answer to the request for arbitration already with receipt of the request for arbitration;
  • holding a case management conference as soon as possible (in principle within 21 days) after the constitution of the arbitral tribunal, in which measures concerning the acceleration of the proceedings must be discussed;
  • the possibility to reduce the fees of one or more arbitrators in case of late submission of the award (which should in principle be rendered within three months after the last hearing or the last authorized submission).

There are also new provisions regarding multi-contract and multi-party arbitrations as well as for joinders of additional parties and consolidation of arbitrations.

As to interim measures, the new provision allows the arbitral tribunal to refrain from hearing the other party if this would risk frustrating the purpose of the measure. In such a case, the arbitral tribunal shall notify the other party of the request no later than when ordering the measure and shall promptly grant the other party a right to be heard. Thereafter, the arbitral tribunal has to confirm, amend, suspend or revoke the measure.

In conclusion: The revision of the DIS Arbitration Rules 2018 reconciles the good tradition of German commercial arbitration with today's need for modern and efficient conduct of international arbitration proceedings.

New Arbitration Rules Enter Into Force In Romania

By Andreea Zvac and Andreea Anton

On 1 January 2018, New Rules of Arbitration entered into force for commercial arbitration proceedings before the Court of International Commercial Arbitration attached to the Chamber of Commerce and Industry of Romania (CCIR), the main arbitral institution in Romania The aim of the New Rules is to improve the functioning of commercial arbitration proceedings.

The New Rules comply with the applicable legal provisions of the new Romanian Civil and Civil Procedure Codes, and are aligned with the arbitration rules of the main arbitral institutions in the European Union and of the United Nations Commission on International Trade Law (UNCITRAL).

Unless stated otherwise in an arbitration clause, the New Rules apply to all disputes submitted to CCIR as of 1 January 2018.

The New Rules provide for a more modern approach; allowing the arbitrators and the parties to take certain measures that were not sufficiently determined by the previous arbitration rules. For example:

  1. the parties and the arbitrators have the possibility to modify the general court and arbitration procedural rules, by shortening or increasing the time limits set out in the rules, based on the complexity of the claim implementation (the principle of procedural autonomy);
  2. the parties have the right to opt for an expedited procedure;
  3. the parties have the right to request interim or conservatory measures from an emergency arbitrator;
  4. the arbitrators have the possibility to issue partial arbitral awards or to accept a request for joinder of additional parties or to decide the case solely on the documents submitted by the parties unless any of the parties request a hearing;
  5. the arbitrators can reduce the time allocated to the analysis of the evidence or to apply the Rules on Taking Evidence in International Arbitration, issued by the International Bar Association;
  6. the parties are allowed to present written witness testimonies, authenticated by a notary or certified by an attorney;
  7. the arbitrators are explicitly allowed to conduct the hearings by means of distance communication.

The New Rules aim to speed up arbitration proceedings, to increase the flexibility and effectiveness of CCIR's activity and to optimise the quality of arbitration proceedings. The New Rules also align the practice of CCIR to other international arbitral institutions.

It is still too early to see how efficient the New Rules will prove to be. We estimate that many issues will definitely arise during the application of the new procedures. These will have to be settled by case-law and taking into account the more general procedural rules, such as the Romanian Civil Procedure Code which is applicable for all arbitration proceedings with seat in Romania.

HIGHLIGHTS FROM THE AUSTRIAN SUPREME COURT

Gold diggers

By Agnes Steinberger

It's well known that money does not automatically bring happiness; but one man's wealth caused him particular unease.

Endowed with an apparent mistrust of banks he was obviously of the opinion that his gold and silver - to the value of around EUR 2.6 million - was best protected when poured into concrete and buried. He therefore hired two men to do this for him and they hid the treasure - gold and silver coins weighing more than 130 kg - in the grounds of a castle.  Unfortunately, this attempt to give fast access to his fortune in case of an economic crisis turned out to be an unsuitable one from a safety precaution point of view; the two men dug up the treasure again, broke open the concrete case and left with the loot. The perpetrators divided the assets and sensibly preferred to store the coins in safe deposit boxes at banks rather than underground.

Following these events the wealthy man, who now presumably distrusts banks and people, filed a criminal complaint. The two men were convicted of burglary for breaking open a container (§ 129 (1) 2 Austrian Criminal Code) and were also convicted for money self-laundering because they themselves hid the treasure. Upon appeal, the Supreme Court examined the case and concluded that the lower instance had correctly legally assessed the facts of the case. Unfortunately it is not known to whom the man then entrusted his fortune but it may be hoped he has found a more reliable storage place in the meantime. (11Os138/17d)

EU-LAW

The European Account Preservation Order

By Claudia Brewi

EU Regulation No 655/2014 of the European Parliament and of the Council to facilitate cross-border debt recovery in civil and commercial matters, in force since 18 January 2017.

It has been over a year now since the European Account Preservation Order (EAPO) came into force. However, a great number of people are still not aware of its purpose and benefits. Thus, this article shall serve as a short reminder.

Applicability

An EAPO prevents the transfer and/or withdrawal of funds - up to the amount specified in the order - which are held by the debtor or on his/her behalf in a bank account maintained in a Member State of the European Union (except the UK and Denmark).

It is designed for creditors, but also for companies or consumers, domiciled in a Member State, and who hold money claims against a debtor in another Member State.

Granting of an EAPO

To ensure the intended protection, the EAPO can be filed at any procedural stage, even before the initiation of proceedings. The debtor is not included in the proceedings to guarantee the surprise effect (ex parte procedure).

The application has to be filed at the court that would be competent for the proceedings on the substance of the matter (main proceedings). If a title has already been obtained in one Member State, then it has to be filed at the respective court in this Member State.

In case the creditor has not yet obtained a judgment in the main proceedings, the court shall issue its decision on the EAPO within 10 working days, otherwise within 5. If the creditor has not initiated the main proceedings when applying for an EAPO, he/she has to do so and provide proof of this to the court within 30 days of the application or 14 days of the issuance of the EAPO, whichever date is later.

The obtained EAPO can serve for further account preservations in other Member States. Thus, the creditor only has to prove once that the requirements for an order are met.

Last but not least, another feature of the EAPO is that it assists creditors in tracing bank accounts. In case a creditor has reason to believe that the debtor holds accounts with a bank in a specific Member State, but without having any further details, he/she may file a request to obtain the account information. This application can be filed if the creditor already has an enforceable title against the debtor. However, if the creditor holds a title that is not yet enforceable, he/she may still file a request in case of an urgent need for the account information, i.e. there is a risk that the enforcement would be jeopardised otherwise.

CIVIL PROCEDURE

A Crucial Change In Polish Civil Procedure

By Ewa Parczewska and Damian Majda

Work has resumed on a draft amendment to the Code of Civil Procedure presented by the Ministry of Justice.

The proposed changes in civil procedure relate to almost all stages of proceedings and introduce new solutions and procedural institutions as yet unimplemented in Polish legislation. Recognition of cases in civil courts in the first instance takes approximately 15 months on average, however, proceedings in cases with more legal difficulty or factual complexity may be pending for much longer.

The fundamental objective of the planned amendment is to further improve and expedite the functioning and completion of civil proceedings.

Why do disputes take so long to resolve?

Apart from many formal aspects, the parties themselves often undertake actions that affect the duration of proceedings. For example, calling too many witnesses, whose testimony or statements do not provide merit to the proceedings, or filing pleadings just before or at the hearing, which makes it necessary to postpone the hearing. In proceedings in which an expert opinion is required, issuance of a decision can be postponed for months, and in the worst cases, years.

Hearing timetable

The draft amendment to the Code of Civil Procedure introduces a new, additional phase of preparatory proceedings, with the goal of decreasing unnecessarily lengthy proceedings. In this phase of the proceedings a "Hearing timetable" is prepared, in which the parties must precisely specify and clarify their demands and accurately determine allegations. It is up to the judge to determine which facts remain disputable between the parties and to draw up a protocol for discrepancies.

During the preparatory proceedings the parties are obliged to submit all evidence. Evidence not submitted at this time will be omitted. The court must then decide whether or not to accept the evidence indicated by the parties in the "Hearing timetable".

Additionally in this stage, the schedule of proceedings, including the dates for the hearing and the date for announcement of the verdict, will be set. If the evidence is so extensive that it will not be possible to close the hearing on the first date, the next term will be set, if possible, in the following days.

The parties shall actively participate in the scheduling, and will have an influence on the development of the proceedings. This also means that the parties will share responsibility for the course of the proceedings.

INSURANCE

Change: Austrian Supreme Court Grants Direct Claims Against The Liability Insurer Of A Hospital Owner

By Valerie Hohenberg and Christina Barzal

A recent Supreme Court decision ruled that a patient may sue not only the hospital operator for medical malpractice, but also its liability insurer directly. This also applies if the liability insurance was taken out by the hospital operator voluntarily; without any legal obligation to do so.

In the case at hand, a claimant had brought a civil action against a hospital operator as first-defendant as well as its liability insurer, as second-defendant, for an error in the medical treatment of the claimant's hand. The first and second court instances dismissed the claim against the liability insurer arguing that the injured party does not have a direct claim against the hospital's liability insurer. The appellate court added that other than medical doctors, who are legally obliged to conclude professional liability insurance before practicing, the hospital operator could not be directly sued for lack of a liability insurance required by law.

The Supreme Court dismissed the 2nd instance decision by referring to the Federal Law to Strengthen Ambulant Public Healthcare (2010) which incorporated the obligation to include professional liability insurance in several healthcare laws. These provisions concerning mandatory liability insurance and the possibility to directly claim against the insurer are based on motor vehicle liability insurance. In the automotive sector, public vehicles are exempt from mandatory insurance, but if liability insurance is taken out voluntarily for such a vehicle, the injured party has a direct claim against the liability insurer. In view of this role model function in the motor insurance liability sector, it may be assumed that the legislator wanted to ensure that direct legal action against a liability insurer is possible not only in connection with medical doctors and "private" hospitals with mandatory liability insurance, but also as regards public hospitals with voluntary liability insurance (7 Ob 177/17 f).

Note: A patient who has a damage claim against a medical doctor does indeed have the possibility to bring an action against both, the medical doctor and the insurer, because the medical doctor has its one mandatory professional liability insurance. The insurer and the insured person are then jointly liable. In fact, this possibility for a direct claim makes it far easier for a patient to successfully push for compensation for damages suffered.

CRIMINAL LAW

Active Repentance – A Second Chance In Austrian Criminal Law

By Nikolaus Loudon

Unlike many other legal systems, Austrian criminal law contains provisions which allow the perpetrators of certain offences against property to receive exemption from punishment in case they commit to fully compensate any damages caused by the offence. Active repentance therefore offers a second chance for the perpetrator. In practice this can be very useful – for both the victim and the perpetrator.

General rule of active repentance

According to Art 167 Austrian Criminal Code (ACC) active repentance supersedes any liability for certain property crimes such as embezzlement, fraud, offences of dishonesty or misuse of funds. A perpetrator may benefit from active repentance if he (i) fully rectifies any damage caused by the offence or (ii) enters into a contractual obligation to fully compensate the victim within a set period. Furthermore the law contains a timeliness requirement as it clearly defines that this must be done before the authorities become aware of the person's culpability. The victim, however, may be aware of the offence and may also urge the perpetrator to commit to active repentance. Still, the perpetrator must commit to active repentance voluntarily and may not be forced to do so.

If the perpetrator is not able to compensate the victim – e.g. because he does not know the victim's identity or is not able to get in touch with the victim – he may still benefit from active repentance if he fully rectifies any damage caused by the offence after reporting his culpability to the authorities and deposits the relevant compensation with the authorities. A perpetrator who genuinely seeks to rectify the damage is also not liable if a third person in his name fully rectifies any damage or fully compensates the victim.

As mentioned, it is also sufficient to enter into a contractual obligation with the victim to compensate him or her within a certain period of time. In criminal cases with high damages this is often very useful. The perpetrator can commit to compensating the victim for all damages within a feasible timeframe; while the victim will be fully reimbursed and can close the unpleasant case. In this regard it is important to consider the following requirements:

  1. The contractual obligation must cover any damages caused by the offence. Even in cases in which victims would be willing to agree on a lower amount the perpetrator only benefits from active repentance if the contractual obligation covers the full amount.
  2. It is necessary that given the term of the instalments it is realistic and expectable that all instalments will be paid. In a recent case the Austrian Supreme Court decided that if the respective term exceeds the average life span (in this particular case 240 years) this requirement is not met (cf RS0131082).

Exceptions from the general rule

The ACC contains specific offences that allow active repentance but don't follow the general rule described above and defines a specific regime for these. One of these offences is money laundering (Art 165 ACC). According to Art 165a ACC active repentance is possible in case the perpetrator "secures essential parts" of the assets that are subject to the money laundering for the Austrian authorities. Such securing must also be voluntary and timely, meaning that the perpetrator must secure the assets of their own free will prior to the Austrian authorities becoming aware of the offence. The law does not explicitly say how the assets need to be secured.

The main difference is that the provision explicitly refers to securing the assets towards the Austrian authorities. Therefore, from the wording of the provision, compensation to the benefit of the victim of the predicate offence is not sufficient for active repentance. Based on this, in case the perpetrator of money laundering fully compensates the victim of the predicate offence – timely and voluntarily – active repentance is only possible by way of analogy. This question will ultimately need to be answered by the Austrian Supreme Court.

Conclusion

Active repentance can be a very useful tool – not only for the perpetrator. In case the victim is a company which has no benefit from triggering criminal proceedings as the sole focus is to retrieve lost funds it might be very practical to approach the perpetrator and discuss entering into a contractual obligation. It is not harmful if the initiative for this comes from the victim as long as the perpetrator is not forced to do something and agrees voluntarily.

HIGHLIGHTS FROM THE AUSTRIAN SUPREME COURT

A poodle in distress

By Patrick Winter

A woman was confronted with damage claims resulting from injuries suffered by a man who fell due to the defendant's dog. In a recent decision the accused dog owner was acquitted by the Austrian Supreme Court who denied a general obligation for dog owners to leash their dogs

The incident took place on a meadow between two neighbouring villages in Upper Austria where a woman took her French shepherd – in concreto a Briard – for a stroll. At that time the hairy fellow was only 10 months old and therefore still rather playful, so the owner let him run around freely and didn't use the leash. As fate would have it, the claimant took his own dog – in concreto a poodle – for a walk at the same time and the same place. When the defendant's young dog approached the claimant, he didn't hesitate as a precaution to lift his loyal poodle up in order to protect him from the potential French threat. Gripped by the protective instinct that every dog owner knows, he tried to shoo the furry attacker away. However his act of bravery failed tragically as the claimant stumbled, fell on the ground and injured himself. For the poodle-enthusiast it was clear who was at fault and he therefore demanded EUR 12.500 in damage claims. He argued that the other dog owner clearly disregarded her obligations by letting her impetuous 25 kg dog run around without a leash.

The Austrian Supreme Court has now ruled that there is no such thing as a 'general leash-obligation' for dog owners. How a pet is to be kept depends on the individual circumstances and therefore each case has to be considered independently. Rather, it's decisive if it's likely and possible that the pet will cause harm to others. Or in other words predictable damage has to be prevented. Taking this into consideration the court decided in favour of the defendant as her dog was a certificed 'puppy school graduate', hadn't shown any behavioural disorder before and therefore no danger could be expected. (4 Ob 20/18x)

CARTEL LITIGATION

The Last Resort Against Arbitrary Court Decisions

By Lucia Močibob And Mario Vrdoljak

According to Croatian law, it is within the competence of regular courts to assess evidence, determine whether facts have been proven and, ultimately, render a conclusion on the basis of such facts. The Constitutional Court of Croatia in its recent ruling No. U-III-2791/2016 from 1 February 2018 stated that, in exceptional circumstances, it is also within its authority to engage in the examination of evidence and facts of the case, but only to the extent necessary to provide protection from arbitrary court decisions.

Back in March 2015, the Croatian Competition Agency passed a decision in which it established that there was a prohibited cartel agreement between seven of the largest personal and asset security providers in Croatia. The decision was challenged by its addressees all the way to the High Administrative Court of Croatia, which upheld the Agency's decision. The Court's ruling was then ultimately challenged before the Constitutional Court for alleged infringement of, among others, the right to a fair trial. 

In order to establish whether the Court and the Agency acted arbitrarily and consequently violated the right to a fair trial, the Constitutional Court deemed it necessary to (i) make an assessment of the evidence and the established facts, and (ii) determine if the established facts were sufficient to justify the underlying decision.

In its Ruling the Constitutional Court stresses that "it is not its task to take over the role of courts or administrative bodies", but that its role is "limited to examining if interpretations of the court are consistent with the Constitution from the aspect of protection of human rights and fundamental freedoms". The Constitutional Court took this further and went on to examine the underlying facts and finally concluded that the Court and the Agency had failed to objectively consider all the factual and legal elements relevant for rendering a decision. The Constitutional Court found this to be arbitrary and an infringement of the right to a fair trial.

Accordingly, even though the Constitutional Court is not a part of the regular trial judiciary, in certain situations it may assess the evidence itself and review conclusions of the trial courts. This could be considered, in certain cases, as the final move a legal counsel can make in order to win a case that has already gone downhill.

LIFE SCIENCES

The Last Testicle: Liability For Wrong Medical Information

By Christina Barzal

After a man lost his second and last remaining testicle, the Austrian Supreme Court clarified the possible scenarios about which doctors need to inform their patients.

Ten years ago the plaintiff's first testicle was removed due to chronic testicular inflammation. The man visited the hospital because of a suspected carcinoma on his remaining testicle.

The doctors told him that the testicle would first be scrutinized during the intraoperative examination and that a quick-cut procedure called "frozen section process" as well as a biopsy would be performed. He was further informed that if the tumor proved to be malignant, the testicle would be removed during the process. However, nobody told the patient that the first result of this frozen section process is often wrong and not 100% safe.

In this case, the tumor was classified as malignant on the basis of the initial findings (and the testicle was removed), but after the end result, it turned out that the tumor was benign and that the patient's last testicle was removed unnecessarily. From a medical point of view, this method is currently the best procedure available, despite its potential inaccuracy. If the testicle would not have been removed immediately, there is a potential risk of the cancer spreading.

The Court of Appeal dismissed the action on the grounds that the patient's well-being has priority vis-à-vis the patient's right of self-determination. This is why the procedure is currently the only adequate alternative. The Court of Appeal did not find the medical doctors at fault.

The Supreme Court disagreed and granted the patient's claim. The Supreme Court ruled that, with regard to the question of the scope of a doctor's duty to inform the patient, the patient's right of self-determination is not subordinate to the patient's well-being.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions