In an “ordinary” commercial matter, an Austrian commercial agent filed a claim for payment of compensation before the Austrian courts against a principal having its seat in the USA.
The claims were based on provisions of the Austrian Law on Commercial Agents. The respondent objected to the jurisdiction of the courts arguing that their contractual relationship was subject to an arbitration clause and that arbitration had already been initiated before a tribunal seated in New York, USA. As a partial award had already been rendered in that arbitration, the matter had, according to the respondent, also become a res iudicata as the claimant in the court proceedings raised the allegedly same claims as set-off claims in the arbitration in New York.
The court of first instance rejected the claim for lack of jurisdiction which was upheld by the court of second instance. The Supreme Court, however, overturned these decisions for the following reasons:
First, the Supreme Court had to decide which substantive law was applicable to the contract in general and to the issue of set-off in particular. It concluded that according to the parties’ contractual choice of law, it was the law of the state of New York. Second, with reference to Article II (3) of the New York Convention, a court must refer the parties to arbitration if the subjectmatter is governed by an arbitration agreement unless the arbitration agreement is null and void, inoperative or incapable of being performed. According to the Supreme Court, the court may fully review the validity and effectiveness of the arbitration agreement and is not limited to a prima facie review. The corresponding provision in the Austrian arbitration law is Section 584(1) second sentence and orders that a claim may not be rejected if the court finds that the alleged arbitration agreement is inexistent or inoperable. An arbitration agreement may be considered ineffective if the parties’ intention was to exclude the application of mandatory procedural or substantive provisions.
The Supreme Court then further referred to European Union (EU) law and the case law of the European Court of Justice according to which apparent violations against fundamental provisions of EU law constitute a violation of the public order. Such public order may also be considered to limit the arbitrability ratione materiae. The Austrian Law on Commercial Agents is an implementation of the corresponding EU Directive. In the “Ingmar” decision of the European Court of Justice, the Court ruled that this Directive is applicable irrespective of the parties’ choice of law if the underlying facts have a strong connection to the EU. According to general understanding, the European Court of Justice has thereby held that claims of a commercial agent have an internationally mandatory character (“Eingriffsnorm”). Such provisions cannot be ruled out by party agreement and are applicable even if the conflict rules refer to some other national law. The German Federal Court has also held that the provisions on the compensation for commercial agents under the EU Directive cannot be overruled by an agreement of parties on a jurisdiction the courts of which do not respect these provisions.
Finally, the Supreme Court concluded that the claimant has a mandatory claim for compensation which would not be recognised under the parties’ agreement on arbitration in New York and on the application of the substantive law of New York. The Supreme Court thus held that the arbitral clause in the contract was not effective and the claim filed by the claimant was to be admitted before Austrian courts.
It is arguable whether the arbitration agreement is really ineffective or inoperable (under Article II(3) NYC or section 584 ACCP respectively) just because it provides for arbitration in New York and New York law as applicable substantive law. A prudent arbitral tribunal seated in New York may very well be able to decide a matter in compliance with (mandatory) EU or national law on commercial agents, in particular if the future award will have to be enforced in a EU member state.