The New Liechtenstein Arbitration Law

Liechtensteiner arbitration law can be traced back to the year 1895, the year the Austrian arbitration law under which Liechtenstein has been operating since 1912 was first promulgated. Since 1912, Liechtenstein’s arbitration law was modified exactly once, in 2003, to reflect the introduction of electronic mail and electronic documents). Needless to say, Liechtenstein was due for an update.

On 1 November 2010, with the goal of making Liechtenstein into “an attractive seat for arbitration,” Liechtenstein’s new, “totally revised,” arbitral law came into effect and brought the Principality into the modern era (at least, in terms of arbitration). If the law, which can be found at § 594 of the Liechtensteiner Code of Civil Procedure (LZPO), looks familiar, it is because it’s based on the UNCITRAL Model Rules and modeled after the Austrian arbitral law (Schiedsrechtänderungsgesetz). In addition to adopting these rules, the Liechtensteiner law, like the Austrian, unifies both domestic and international arbitration procedures into a single body.

The arbitration law is divided into ten titles, the first eight of which – “General Provisions”, “Arbitration Agreement”, “Composition of Arbitral Tribunal”, “Jurisdiction of Arbitral Tribunal”, “Conduct of Arbitral Proceedings”, “Making of Award and Termination of Proceedings”, “Recourse Against Award “, and “Recognition and Enforcement of Award” – follow the structure of the UN Model Law. The remaining two are “Court Proceedings” and “Special Provisions for Consumers” and are required to allow the new law to fit the desired framework covering domestic arbitrations in addition to the international type the UNCITRAL rule was drafted for. This article shall examine the new law in the same order.

Title 1: General Provisions
The new Liechtensteiner arbitration law is applicable to any arbitration that has its seat in Liechtenstein as well as arbitrations whose seat has not yet been determined but involve a party having residence in the Principality. A party loses the right to object to a violation of the arbitral law by the tribunal unless it brings such violation to the tribunal’s attention immediately.

Title 2: Arbitration Agreement
The scope of claims over which arbitral institutions now have jurisdiction has been completely revised. Under the new law, any proprietary claim that can be heard by a regular court of law can also be adjudicated via arbitration as can any non-proprietary claim capable of settlement by the parties. Explicitly excluded from arbitral jurisdiction are issues of family and residence law. As with any arbitration, the arbitrator must derive jurisdiction before he can adjudicate. Of course, in addition to subject matter jurisdiction, the arbitral tribunal will need personal jurisdiction. Under the new law, the tribunal is itself in charge of this determination. Jurisdiction can be found via the usual mutually-signed agreement to arbitrate as well as “writings, faxes, emails and other forms of communication” which evidence such an agreement.
If a tribunal finds that it does not have jurisdiction over a dispute, the court of law must accept jurisdiction thereover (i.e., it cannot deny jurisdiction over the matter on the basis of the existence of an arbitration agreement). However, if a court of law finds that a claim has been brought before it over which an arbitration agreement exists, it must dismiss the claim unless the court of law determines that the arbitration agreement is invalid or inapplicable. An arbitration may nonetheless be instituted or continued in the latter situation.

Title 3: Composition of Arbitral Tribunal
An arbitral tribunal must always consist of an odd number of arbitrators – if the parties have selected an even number, then the arbitrators must select an additional one. If there is no agreement on the matter, then a tribunal is to consist of three arbitrators. A person wishing to serve as an arbitrator is to disclose all circumstances which raise question as to the individual’s impartiality or independence or which might contradict the agreement of the parties. However, an arbitrator can only be rejected if the disclosed circumstances present “justifiable doubt” that any of these criteria are not satisfied. If an arbitrator who has been rejected by a party fails to resign his office or if the other party disagrees with the rejection, then the tribunal (including the rejected arbitrator) may decide over the validity of the rejection. Sitting judges are precluded from serving as arbitrators.

Title 4: Jurisdiction of Arbitral Tribunal
Questions of an arbitral tribunal’s jurisdiction are to be resolved by the tribunal itself. Any challenges to its jurisdiction are to be raised, at the latest, with the first submissions of fact.

Title 5: Conduct of Arbitral Proceedings
Parties are free to agree on the conduct of the proceedings except where the Liechtensteiner law itself sets down a binding rule. If the parties fail to choose a seat of arbitration then the tribunal shall make such decision; the same goes for the language of the arbitration. If the tribunal chooses a seat outside of Liechtenstein, these rules become inapplicable.
The parties or tribunal are to select deadlines for submissions – if the claimant fails to file this claim before the proper deadline, the dispute is terminated. If the respondent fails to file his response on time, then the arbitration is continued.
An arbitrator who accepts his office but fails to fulfill his obligations or is late in doing so shall be liable to the parties for damages inflicted.

Title 6: Making of Award and Termination of Proceedings
The parties have free choice over the substantive law of the arbitration. However, a choice of law clause will be deemed to cover only substantive law and not choice-of-law unless it specifically states otherwise. Decisions by the tribunal require a majority of the panel except procedural issues, which can be decided by the chairman acting alone. Arbitral decisions carry the wait of a court decision although a Party can request modification within four weeks of its official pronouncement.

Title 7: Recourse Against Award
Arbitral decisions can only be appealed to a court of law and must be brought within four weeks of when the appealing party received the decision. LZPO § 628 lists eight grounds for which an arbitral decision may be vacated which are practically identical to those listed in Article V of the New York Convention.

Title 8: Recognition and Enforcement of Foreign Awards
Recognition and enforceability of foreign awards is dictated by the Liechtenstein Distraint Order, unless regulated otherwise.

Title 9: Court Proceedings
In one of the few deviations from Austrian arbitral law, the Liechtensteiner Code follows the Swiss model in permitting appeal only to one instance – the Obergericht (except appeals under Title 3, which go to the Landgericht). This may reflect Deputy Arthur Brunhart’s urging at the first reading of the new law in 2008, “for a positive difference and deviation from Austrian law.” Appeals proceedings can, on appropriate demand by a party, by closed from the public.

Title 10: Special Provisions for Consumers
The final section deals with consumer and labor law issues and is inapplicable to international arbitration

Conclusion:
It is evident that the Principality has created an arbitration law with a very limited number of binding regulations which allow the parties a great deal of freedom to decide how their disputes are to be settled, while at the same time creating a body of law that, by offering a fast, cost-efficient, and private dispute resolution mechanism, satisfies the original goal of making Liechtenstein an attractive seat of arbitration.