For more than 15 years, Dr. Manfred Heider has been the Secretary General of the Vienna International Arbitral Centre (VIAC), one of the most reputable and popular arbitral institutions in the world.
Partner of litigation and international arbitration practice of KIAP Anna Grishchenkova discussed with the Secretary General of VIAC the way to success in arbitration, ideal arbitrator and counsel, arbitration in VIAC and more.
First of all, thank you so much for agreeing to give this interview. It is very interesting for our readers to know more about VIAC and its history. Could you please tell us a little bit more. How VIAC was established?
The VIAC was founded in 1975, 41 years ago. The reason for founding the VIAC was to offer a neutral venue for dispute resolution between companies located in former communist countries on one side and so-called “western” companies on the other side. The first step was made by Stockholm Chamber of Commerce which had entered in so-called trilateral agreement with the Foreign Trade Chamber of the Soviet Union on one side and American Arbitration Association on the other side. The negotiators were Judge Howard Holtzmann for the Americans and Professor Sergey Lebedev on the side of the Soviet Foreign Trade Chamber. Similar negotiations were also conducted with the Austrian Federal Economic Chamber, the bearer organization of the VIAC. The chief negotiator for the other communist countries was the leading Hungarian professor, Ivan Szász.
Austria initiated some reforms of its arbitration law in order to make it state of the art and later on, similar trilateral agreements had been signed.
From that time on, Vienna and the VIAC were really the preferred venue for resolution of disputes between Eastern and Western parties. Though communism no longer exists and the division between the East and the West is history, VIAC is still active and focused in Central and Eastern Europe. However, one should also bear in mind that investments from other countries are very significant in Central and Eastern Europe; this refers to investments made in former communist countries and also investments made in Austria itself, as well as Germany, France, Italy and so on. The investors now come from Far East: from South Korea, China and Japan.
This is interesting. Do they usually specify VIAC as the forum for dispute resolution?
Not in the number as we would like. We have already done five road-shows in the Far East, because we consider ourselves as the logical partner for dispute resolution between Far Eastern companies and companies from this area of Europe.
Currently we have a lot of discussions, whether Russian companies will have more projects with Far East companies or not. There are discussions, such as what will in such case be a choice of forum for resolving disputes? May VIAC be considered such a forum, as an alternative to Singapore, CIETAC and so on?
Russians like to go to London (laughs). That reminds me of a saying of Samuel Johnson, who was a poet and author who lived in London in the 16th century. He stated that “when a man is tired of London, he is tired of life”; probably this applies to Russian oligarchs as well (laughs).
We are also a suitable forum for dispute resolution between Russian and Ukrainian companies. Previously they used their own arbitral institutions. Let’s see whether this will continue. At the moment our friends in Minsk are very active in trying to attract these disputes and to be included into arbitration agreements between Russian and Ukrainian companies. They have an advantage, because they speak the same language.
Though, parties always have a choice as to which language to use in their proceedings. They can choose Russian in arbitration in the VIAC as well. As far as I can see from the VIAC website, disputes with participation of parties from Russia are quite common; Russia is on the third place in the number of arbitrations at the VIAC, after Austria and Germany.
Yes, this is correct. In absolute figures Austrians dominate, but they are still less than 25% of all parties, so it is can not be said that VIAC is an Austrian institution.
I can see from your website that you have information for interested parties in several languages, including Russian. Isn’t this rare?
We have at the moment three proceedings pending; in each Russian is the language of the proceedings. Our policy would be to attract more Russian parties as well as Ukrainian and Belarussian. When I speak about Central and Eastern Europe, it reaches far beyond and also to the former Soviet Republics in Central Asia. We have had disputes from parties from Kazakhstan, which is the most important country in this area, but also from Uzbekistan and Azerbaijan. Our goal is to attract more energy disputes. This is why I mentioned Azerbaijan, which is an important supplier of natural gas.
So based on the above, what do you consider as the competitive advantages of the VIAC?
First, it offers “state of the art” case administration.
There is a free choice of arbitrators. “Big names” in accordance with international standards serve as arbitrators or party counsels at the VIAC.
And the cost is more attractive than under ICC or Swiss arbitration rules: 25-33% cheaper, while getting the same quality.
Austria is an arbitration friendly forum. Judges assist arbitration, if necessary, but do not get too involved into the arbitration. The Austrian Supreme Court is the court of the first and the last instance for claims challenging any arbitral award.
Vienna lies in the heart or Europe, so it is equal distance to travel to Vienna from East and West. Vienna is a very attractive touristical venue. It offers hotels and restaurants at reasonable prices; having been to Moscow, I know what “really expensive” means (laughs).
The VIAC also offers additional support and services, such as hearing and breakout rooms, audio and video equipment and catering.
The are many more reasons to choose the VIAC, you can find them here.
I also really like that you have a team of very experienced case managers, who, as I saw myself, are really dedicated to their cases, and at the same time are very helpful to the parties.
Yes. I think here you can have more support, especially at the first stages of arbitration, than the parties have in other similar institutions. The parties also can communicate directly with me, so it is the “kitchen chef” personally who takes care of the guests.
This is really helpful! So please let us know more about yourself.
I studied law and economics and passed the bar exam in 1980. This is incredible for me, because this is now 36 years ago. I got an offer from the Vienna Stock and Commodity Exchange to become a Secretary of the Arbitration Committees. Stock and Commodity Exchange arbitration is a different animal and different from the arbitration proceedings we administer here in the VIAC, because the arbitrators in most cases are not lawyers. They are securities traders or they are commodities merchants. A minority of them studied law, but never practiced. Therefore, the Secretary performs all tasks which the Chairman of the arbitral tribunal in the VIAC arbitration does. So I participated in more than 300 proceedings there and drafted many arbitral awards submitted to arbitrators for decision. So the arbitrators in these kinds of arbitration proceedings are in a role of experts and not so much in a role of arbitrators. I did this for 9 years. Next I became the Deputy Secretary General of the Stock Exchange and was responsible for the listing of companies, supervision of securities trading. I ended up as a chief executive officer in the late 1990s. Then the Stock Exchange was privatized. I was in charge of the privatization on behalf of the Austrian government. Later on I went into private practice. Before that time, I had written only one arbitration clause, I was mainly active in M&A and then much to my surprise I got this offer to become Secretary General in late 2000. I thought about the decision for two weeks, and then I accepted it. Why did it take two weeks? The criteria was that I established myself as a business lawyer, but on the other side my partner intended to merge with two other law firms. We were more or less subcontractors for them. And I had my doubts, whether this would work. I was really skeptical. This merger took place, but after three years they split again, so I was right to be skeptical. That is why I accepted this position to be Secretary General of the VIAC.
Was it challenging at the beginning?
It was a challenge, because I was more or less alone with only two case-managers.
And how many cases do you have per year?
We have had more than 70 cases per year but last year we had fewer cases. I don’t know exactly why. A possible explanation is that after the economic crisis, in particular in Eastern Europe, the number of foreign investments decreased. And when there are no new additional investments, there is less opportunity for disputes to arise. But I am optimistic that this will change, because potential disputants react with at least three years’ delay to crises and to prosperities. Usually from the signature of the contract to the submission of the claim, it is a period of 3 to 5 years, in some cases this period is even longer.
Please excuse me, I’ve interrupted you, we were talking about your first years in the VIAC.
I think in 2002 we had only 30 cases and then it went up to 85 and then went down a little. So it goes in cycles. Like the economy, like the oil price (laughs).
It was challenging during my first years, but I am now quite content with the quality of the people who work here, with how things are managed. Back then we were only three and we did not have capacity for editing books and undertaking road-shows.
Yes, and now the VIAC is active in publishing books, making joint events, road-shows and similar activities. I also saw that you created new mediation rules and plan to publish a handbook for practitioners about mediation in the VIAC. I am really impressed by these new mediation rules; they combine well-known concepts with new developments.
When I think of mediation, I don’t know whether there is a real need for that. But today it is a must to have such proceedings at hand. When I started here 15 years ago, there was a saying that “mediation is like sex in a high-school, everybody talks about it, but hardly anyone does it” (laughs). This is a joke, of course. I believe that the use of mediation is on the rise, because it is cheaper than arbitration and more and more in-house counsels give mediation a try. If it fails, either disputant may switch to arbitration. So it is becoming more popular. Of course, we had a similar offer to the public before – the Conciliation Rules – but there were only two applications per year and most of them failed, because the other party declined to participate in the conciliation proceedings.
What is the most remarkable case or situation that occurred during your work in the VIAC?
I think there have been 5-6 so-called landmark cases, 4 of them with parties from the former Soviet Union. They created much public attention in all the economic journals all over the world. On the other side, they were skillfully handled by the arbitrators. So, apart from public awareness and amount in dispute, they were just normal cases. You do not receive every day a case where the amount in dispute is US dollars 3-4 billions. What makes me happy also is that during this period, in these 15 years, in Austria a real arbitration community has grown, the members of which of course compete with each other, but also support each other.
Thanks for mentioning this. How did it happen?
It happened by giving incentives to the lawyers to support the VIAC in its promotion efforts, by giving to the lawyers a feeling that arbitration is not a closed shop, where some grey-haired elderly gentlemen distribute arbitrators’ mandates to each other, by fostering young Austrian practitioners, because they are the customers of tomorrow. This concept was also successful. We were also the founders of the Austrian Arbitration Association; that was an initiative of the VIAC. I think now is the time to harvest what we have seeded in the last 15 years. And for me this is the most remarkable case.
I had a question for you and now you have almost answered it. My question was, do you think that young practitioners will be able one day to replace these as you call them “grey-haired gentlemen”?
Arbitration lawyers have not only become younger in this period, but also more and more females are now involved in arbitration proceedings. This is also a new development, very positive; and when we organize conferences, we always intend to have one-third of the speakers being female.
As far as I understand, you have a policy that if the claim is not too large, you appoint young arbitrators Is this correct?
Yes, we appoint young arbitrators to enable them to write in their CVs that they have already been arbitrators in the VIAC. But other arbitral institutions do the same, so we do not have monopoly on this practice (smiles).
What in your opinion are the three most important skills for an arbitrator?
To be an excellent lawyer, to speak foreign languages, at least English, with the highest degree of proficiency. I have another joke in this context. Do you know, what is the most frequently used language in international arbitration? It is “bad English” (smiles). That is a secondary skill – language proficiency. The third one is organizational skill. If you have panels consisting of three law school professors, that sometimes can turn out to be a disaster on the organizational side.
Another important skill, I think, is the ability to calculate. Lawyers and arbitrators are often lousy mathematicians, but when calculating claims, this is of fundamental importance.
Do you think this will change in the next 10 years?
Professors also will learn how to organize things (laughs).
I think all mentioned above will apply for the next 10-20 years. These are the three most important skills for arbitrators. Though, internalization is becoming more and more important. I see that with my children. All three of them went to school abroad, or have studied at least some time abroad. My daughter went as far away as Japan, for instance. I am now 65 years old. When I was a student, these opportunities did not exist.
I had the luck to attend a high-school in Vienna in the 1960s; one of the three schools, where Russian language was taught.
Do you speak Russian?
No. For the girls it was a mandatory to have a minimal frequency of Russian language courses and for the boys it was optional. We could choose between Russian and English as the first foreign language. I opted for English; I still regret it (laughs). I was 10 years old at the time. As time went by, I became older and my interest in girls became more intense, so I learned a little with them. For now I am able to know what a contract in Russian is about, the basic features and also to identify, whether there is a valid arbitration clause in it, but nothing more. And I can prevent myself from starvation, when I am in Russia and I can find also my targets when I use public transportation (laughs).
Other than that I don’t know Russian and have a very limited capacity to understand, when a Russian person addresses me in Russian.
However, my three children all attended private high school, which is state-owned, but subject to a private tuition fees. At these schools, students had to study the Russian language for at least three years. This has been part of the curriculum for almost 180 years. My youngest son is not bad in Russian. My eldest son said “the teacher pretended to teach us Russian and we pretended to learn (laughs).
You summarized the skills to make a good arbitrator but what in your opinion makes a good arbitrator a great arbitrator?
Most important is the way he or she communicates with people. I think you can learn that only to a certain degree. You need to be a listener. I am sure you have met law school professors or lawyers, who are awful listeners or mainly listen to themselves.
Great arbitrators also stick to the procedural timetable.
Another important thing is to have a mental capacity to divide important issues from unimportant ones. Much from what is submitted to the arbitral tribunals is unimportant and not decisive and some of these issues are presented only as we call then “smoke balls” – to hide things you do not want to be considered by the arbitrators. Great arbitrators are pro-active in identifying the crucial issues of each case. For example, arbitrators preparing for the evidentiary hearing can make a draft of the award, based on submitted pleadings, for the purpose of identifying the most important issues and of handling the evidentiary hearing in a more efficient way.
Thank you. As far as we started to discuss tactics of arbitration lawyers, what in your opinion are three most important skills of successful arbitration lawyers representing clients? Your experience is really valuable, because you are not only a Secretary General of the VIAC, but also a former Secretary of arbitral tribunals at the Stock Exchange who saw a lot of lawyers in more than 300 proceedings.
Yes, and many of these lawyers are now customers of the VIAC. There are no special skills, apart from language skills, and the ability to achieve good advocacy in state court litigation and in arbitral proceedings. If one is a good advocate, one will also be a good arbitration lawyer.
And what in your opinion are characteristics of a good advocate?
I think - to mirror the skills of an arbitrator. A good arbitration lawyer comes to the point. He does not use “smoke balls” – this is not the mark of a good lawyer. A good advocate is able to reduce even complex cases to, let’s say, two or three pages, because the clearer the submission is, the more likely that it will be considered by the arbitrators who are the main readers. I once listened to a panel discussion in one of our conferences about what makes a good arbitration lawyer. The moderator was Professor Martin Hunter and the two young lawyers at that time, 10 or 12 years ago, were on the one side Toby Landau from London and the other was Torsten Lörcher from Germany. Toby Landau was assigned a role as he said himself of “Victorian gentleman” without knowledge of new technology, writing with a pen; the other role of contemporaneous lawyer was occupied by Torsten Lörcher. I was impressed of much what Toby Landau said – it is a bad habit of arbitration lawyers to submit exhibits by truck loads. We have such cases, but many arbitrators have no time to read these exhibits. The ideal would be to bring all the decisive items on one page, in the worst case on three pages. To be short, this is what makes a good arbitration lawyer. There is also saying attributed to Winston Churchill, who said that “to talk about a subject for two hours every idiot can do, but a genius is required to do that in ten minutes’ time” (laughs).
And what do you say are three don’ts for any arbitration lawyer?
To be too long, orally or on writing; to be unable to come to the point, to express oneself ambiguously, to not listen to what the arbitrators wish to hear or to be delivered, to not comply with time limits.
And the last question for you is what would you recommend for young lawyers who want to make a career in international arbitration, even though international arbitration practice is becoming more and more competitive each year?
As elderly grey-haired lawyer myself (laughs) and looking back at my career, I find that it is almost impossible to reach a goal such as “in 10 years I will be one of the leading arbitrators or arbitration lawyers”. Many things come as they come. And I think there are only about 20 arbitration lawyers who can make a decent living out of acting as arbitrators alone. I think it is important to focus on business cases, many of today’s leading arbitration lawyers started their careers as business lawyers, drafting M&A contracts and being involved in economic and financial matters. Of course, there are some young, successful arbitration lawyers who only supported their mentors in arbitral proceedings, but this is a very risky undertaking, because what happens, if the mentor dies or if the mentor does not hire you anymore? By mentor I mean a famous arbitrator who employs young lawyers as his secretaries or his supporters to look through all the exhibits and to make extracts from the exhibits, even to act as ghost-writers for them, which of course is strictly prohibited. Some of them made their career this way, but this is risky. My personal recommendation would be try to become a good business lawyer, attend courses, conferences, then if it happens, it happens. You will become a successful arbitration lawyer yourself. I have no patent recipe (laughs). As you see from my career, I have had my ups and downs, but looking back it was not such a bad life.
Dear Dr. Heider, thank you so much for your openness, insights and valuable advice! I am sure our readers will enjoy reading your interview and will understand that the VIAC is really friendly, open, convenient and a non-mysterious forum for dispute resolution.
The interview was taken on March 14, 2016 in Vienna