An extract from The Dispute Resolution Review, 12th Edition

Alternatives to litigation

i Overview of alternatives to litigation

While arbitration is seen as the main alternative dispute resolution mechanism to ordinary state court litigation, mediation proceedings have less practical importance.

ii Arbitration

Liechtenstein passed new legislation regarding arbitration proceedings with effect from 1 November 2010. The new arbitration legislation generally follows the Austrian model, which again is based on the Model Law on International Arbitration (UNCITRAL Model Law). However, Liechtenstein arbitration law departs in certain aspects from its model to make it more attractive and effective.

The new arbitration law practically permits the submission of all types of disputes in relation to trusts, foundations or companies to arbitration, including, in particular:

  1. the removal of trustees (or foundation council members);
  2. the challenging of resolutions of trustees (or the foundation council); and
  3. the appointment of extraordinary auditors.

The advantages of arbitration are the following:

  1. the composition of the arbitration tribunal and the appointment of its members may be freely determined;
  2. the seat of the arbitration tribunal and the language of the arbitration proceedings may be freely determined;
  3. speedy proceedings, as there is only one instance and the arbitral award may only be challenged before the OG on very limited formal grounds;
  4. arbitration proceedings are confidential; and
  5. special provisions have been enacted to provide for extra confidentiality of the proceedings before the OG in case the arbitral award is challenged.
iii Mediation

The rules governing mediation in Liechtenstein are contained in the ZMG. The commencement and proper continuation of mediation suspends the statute of limitations in relation to the rights and claims subject to mediation (Article 18(1) ZMG). The suspension of the statute of limitations is effective if one of the parties files a legal action with the LG within 14 days from the termination of the mediation (Article 18(3) ZMG). A settlement reached in the mediation is not binding on the parties and cannot be enforced. Mediation is available for all types of civil law matters. Mediation procedures are of minor importance in Liechtenstein, since Liechtenstein lawyers usually attempt to bilaterally settle a case (without the involvement of a mediator), before formal proceedings are initiated.

iv Other forms of alternative dispute resolution

Another form of alternative dispute resolution available in Liechtenstein is the Conciliation Board, with one mediator. It has been created to deal with conflicts between clients and various financial service providers such as asset management companies, banks, professional trustees and others. The Conciliation Board is regulated in the Ordinance Regarding the Extrajudicial Conciliation Board in the Financial Services Sector (FSV). It is up to the parties to refuse the conciliation proceedings or to abandon them at any time (Article 13 FSV). The conciliation proceedings come to an end if the motion is repealed, the parties reach an agreement, the Conciliation Board makes a proposal for a settlement, the rejection of the motion is obviously abusive or if a court or arbitration tribunal is seized of the matter. If no agreement is reached between the parties, they have to be referred to ordinary legal proceedings (Article 19(2) FSV). In practice, such conciliation proceedings do not play an important role. This is, among other reasons, probably due to the fact that parties may practically decide to abandon the proceedings at any time.

Furthermore, Liechtenstein implemented the EU Directive on Consumer ADR (Directive 2013/11/EU) in the Act on Alternative Dispute Resolution in Consumer Matters (AStG). According to that, participation in such proceedings is voluntary. However, companies domiciled in Lichtenstein are obliged to inform consumers about the opportunity of ADR proceedings if they cannot reach an agreement in case of a dispute.