LIECHTENSTEIN: An Introduction to Dispute Resolution

Overview Dispute Resolution: Liechtenstein in Chambers Global 2022

While the term dispute resolution in the broadest sense includes all kinds of peaceful and non-peaceful means, this article is intended to provide an overview of those methods used internationally in the context of private law.

After a brief introduction to Liechtenstein's legal system, an insight into the locally relevant practice areas of litigation, arbitration and mediation will be provided.

Introduction to Liechtenstein’s legal system 

Liechtenstein codifies its legal system in acts and ordinances, on the basis of which Liechtenstein courts form their decisions. In contrast to common law, court decisions theoretically possess rather subordinate significance. Practically, however, one can assume, in the interest of legal certainty, that decisions in recurring cases should be the same.

Due to the size of the country, with only 38,000 residents, most of Liechtenstein's law has been adopted from its historically and geographically connected neighbours, Austria and Switzerland. Thus, the Liechtenstein codes of civil and criminal procedure largely correspond with their Austrian models carrying the same names, which is why Austrian literature and jurisprudence must generally also be consulted for the interpretation of these provisions.

1. Litigation 

The court system 

The Liechtenstein civil court system has three standard levels: the High Court, the Court of Appeal and the Supreme Court. The Constitutional Court can be appealed as an extraordinary remedy, but only if constitutional rights are concerned. At the High Court a single judge will sit on the case, while at the higher levels the panel is made up of five persons.

Liechtenstein has a tradition of appointing Swiss or Austrian judges to the Liechtenstein bench, which enhances the independence of the judiciary and adds expertise. Liechtenstein procedural law is based on the Austrian model, and the lawyers traditionally draw on Austrian legal literature and court practice in questions of civil procedure law. The substantive laws are often based on the Austrian or the Swiss example.

Proceedings at the High Court  

Contentious proceedings 

Proceedings are initiated by the filing of a written statement of claim with the court. The claimant must state the facts that give rise to his claim and indicate the evidence he wishes to rely on. As long as the case is at the High Court level, new evidence may be brought at any time. However, the court may refuse to consider it, if it is of the opinion that it is only tendered by the party with the intention of prolonging the proceedings.

The court may review ex parte whether the matter falls under in its jurisdiction or not and thereafter serve the statement of claim on the defendant and set a date for a first hearing. Non-Liechtenstein residents will usually be served through diplomatic channels. If service in non-German speaking countries is required, the court will request a translation or a cost deposit for a court-appointed translator.

The first hearing is primarily a chance for the defendant to raise formal objections and to request a security deposit for costs and fees (see below). Thereafter the court will invite the defendant to file a reply to the statement of claim. Where the claimant is not obliged to file a security deposit for costs and fees (see below), the court sometimes orders the respondent to file his response without a first hearing.

The court usually holds a special hearing to hear parties' submissions concerning evidence. This will be followed by as many more hearings as necessary to actually consider the evidence. In particular, this will involve the examination of witnesses and experts. If a witness is not resident in Liechtenstein, the court will send a letter rogatory (judicial assistance request, i.e. request to a foreign authority to take deposition from the witness) to the competent court or authority at the witness' place of residence. Experts are appointed by the court; however, the parties may obtain their own expert opinions and submit them. Witnesses must be heard orally before the court. Nevertheless, affidavits are frequently essential in order to successfully apply for an injunction. When the court considers the factual situation has been adequately considered, it will terminate the evidence stage and close the proceedings. The judgment will be issued to the parties in writing.

First instance proceedings typically last 9 to 12 months, but can take much longer depending on the nature of the evidence required.

Non-contentious proceedings 

The term “non-contentious” has historical roots and is rather misleading: it does not preclude the parties from holding different views and contesting their opponents’ pleadings and applications. These procedural rules are applied by the court in most family law matters, certain matters dealing with estates and other particular areas of law. An important example that is relevant for international clients is court supervision of trustees and foundations.

The procedure grosso modo follows the above description, but the court has more flexibility to act ex officio without a party’s application. If appropriate, it can decide solely based on the written submissions.

Court orders can be appealed in the same manner as procedural orders (see below), but the appeal has only suspensive effect if specifically granted.

Court of Appeal 

All High Court judgments may be appealed to the Court of Appeal within a time limit of four weeks. The parties may make new factual submissions in the appeal pleadings, offer new evidence (as long as the claim remains identical) or contest procedural errors or the High Court's factual and legal findings.

After submission of the written appeal or the respondent's reply, no new evidence may be offered or new pleadings submitted. Following this, the Court of Appeal takes over proceedings. As part of this procedure, it will hold a hearing in which it may consider any new evidence put forward, but it has discretion whether it admits new evidence or not and the court is often reluctant to do so. The Court of Appeal hands down a written appeal judgment.

Most procedural decisions of the High Court, such as the order to lodge a security deposit for costs and fees or a dismissal of a claim on account of lack of jurisdiction, may be appealed to the Court of Appeal within a time limit of two weeks. Decisions of the Court of Appeal may be appealed further to the Supreme Court. Procedural decisions from the High Court confirmed by the Court of Appeal may not be appealed further. However, in a few specific cases it is possible to invoke the Constitutional Court (see below).

Supreme Court 

Judgments of the Court of Appeal, or those procedural appeal decisions which do not confirm the High Court's, may be appealed to the Supreme Court. The parties may only raise points of law on material or procedural issues, but no new evidence or pleadings are allowed. There are no hearings. The appeal procedure is in writing only.

Constitutional Court 

With a few exceptions, any court decision that is not subject to further appeal may be disputed before the Constitutional Court. However, only the violation of rights enshrined in the Liechtenstein constitution, the European Convention on Human Rights or the European Economic Area Treaty may be raised. The application does not have the effect of staying the judgment, unless such stay is specifically granted by the Constitutional Court. The court usually does so if the appellant can show that he would suffer a severe detriment unless suspensive effect is granted.

Enforcement of foreign judgments or arbitration awards

State court judgments 

Liechtenstein is a member of the Hague Convention on child support and will recognise and enforce decisions of other member states in child support matters. As regards to other civil claims, enforcement agreements exist with Switzerland and Austria only. Judgments and arbitration awards from countries other than Austria and Switzerland are not enforced.

Arbitration awards 

Liechtenstein is a member of the New York Convention on the Recognition and Enforcement of Arbitration Awards. Within this Convention Liechtenstein will enforce a foreign award. The Court will require the applicant to file a copy of the award bearing the original signatures of all arbitrators and a certified translation into German.

Costs  

As a general rule, Liechtenstein courts award costs to the winner of proceedings or interim decisions based on a fixed tariff that categorizes the various procedural steps into standardized costs depending on the value in dispute. The costs are not individually taxed, as in proceedings which follow the English model.

The value of the claim in dispute (Streitwert) is the key factor for the Liechtenstein courts' cost awards. If the claimant is seeking payment of a certain sum, that will be the value of the claim. For non-pecuniary claims the claimant may put a value to his claim. If opposed by the defendant, the court may set a different value. However, if the claimant's set value is reasonable, the courts are reluctant to challenge the valuation.

A high value will trigger high cost awards, which will benefit the winner of the case. In addition, it will result in a high deposit for costs and fees. A low value may result in a lower costs award, one that may potentially fail to cover the party’s legal fees. In such a case it is perfectly possible that the winning party might still have to make an extra payment to its own lawyer. On the other hand, in the event of losing the case a low value means lower court fees and a reduced payment obligation towards the opponent.

Court Charges 

Court costs are set by the court according to the Court and Register Charges Act (Gebührengesetz). The charges depend on the value of the claim in dispute. A final decision in the High Court costs between CHF 120.00 and a maximum of CHF 19,000.00, which is reached when the value of the dispute is CHF 10,000,000.00 or more. Procedural appeals are charged in the same way as High Court decisions, but appeals on judgments are charged at double the rate.

Court charges are shared between the parties but may be recovered by the winner from the losing party.

Lawyer's Fees 

A party and its lawyer may enter into a fee agreement, which will govern any obligations between them. In the absence of a fee agreement, the lawyer's fees are calculated according to tariffs set by government regulation. The amount payable by the losing party is also determined in accordance with this regulation. As mentioned above, the lawyer's work is categorised according to the average difficulty and the amount payable under each category, as well as being dependent on the value in dispute.

The winner of court proceedings may normally recover his costs and fees, calculated according to this model. The reason for winning the case is rarely relevant, but the court may disregard unnecessary submissions. In the case of a partial victory the recoverable costs will be reduced accordingly.

The claimant is considered to have totally won if his claim is fully granted, the defendant if it is fully dismissed. In case of 50% success by both parties, no costs may be recovered by either side.

Security Deposit for Costs and Fees 

The defendant (or respondent to an appeal) may demand that the claimant (or appellant) lodges a security deposit for costs and fees. The claimant must do so if he resides in a jurisdiction where the cost award cannot be enforced. If the claimant is a legal entity, a deposit can be demanded if it cannot show sufficient assets in such a jurisdiction.

The deposit serves as security for the cost claim of the defendant against the claimant, if the former wins. The application must be made during the first hearing, before the case is heard on the merits. If during the proceedings the amount proves insufficient, the court can order an additional deposit. In appeal proceedings, the application must be filed before or jointly with the reply to the appeal. The deposit must be made in cash or securities. With the consent of the court, a claimant may submit a bank guarantee or real estate titles.

If the deposit is not lodged in time, the court will declare the claim or appeal as withdrawn without prejudice.

The amount of the deposit will be determined according to the estimated costs and fees. As a rule of thumb, one should expect approximately 10% of the value in dispute as deposit.

Lasting impact of COVID-19 

In the context of the COVID-19 pandemic, a number of "COVID-19 measure acts" were passed which, among other things, also led to the suspension of various periods of limitation. This suspension continues to have an effect today, after the repeal of said act, in so far as limitation periods have been extended for its validity period (around two months).

2. Arbitration  

Fundamentals 

Liechtenstein arbitration is covered by the CCP and this generally applies to all arbitral proceedings involving arbitral tribunals located in Liechtenstein. No distinctions between international and domestic arbitration proceedings are made in this regard. However, some provisions of Liechtenstein's Arbitration Law apply even if the arbitral tribunal's seat is not located in Liechtenstein or has not yet been determined.

Arbitrability of disputes 

Any pecuniary claim to be decided by ordinary courts can be subject to an arbitration agreement. However, an arbitration agreement on non-pecuniary claims has legal effect insofar as the parties are able to reach a settlement on the subject matter of the dispute.

Primacy of mutual agreements between the parties

The determination of the applicable legal provisions is left to the disposition of the parties, as is the determination of the principles governing the conduct of the arbitral proceedings. In this context, the parties are free to agree on the application of rules of procedure, for example the Liechtenstein Rules of Arbitration.

End of the arbitration proceedings 

The arbitral proceedings end with the issuance of an arbitral award, with an arbitral settlement or with a resolution of the arbitral tribunal, in all of which cases the arbitral tribunal must make a decision regarding the reimbursement of costs. Within a period of four weeks either party may request the arbitral tribunal to make corrections, clarifications or additions to the arbitral award, unless a different period has been agreed.

Liechtenstein rules 

The LIHK Arbitration Rules are based on the proven and internationally well-known UNCITRAL Arbitration Rules. In addition, individual further developments by the Swiss Rules have been taken into account, in particular with regard to institutional administration, which is naturally lacking in the UNCITRAL Arbitration Rules. Finally, the Arbitration Rules also take into account best practice in international private arbitration.

Focus on confidentiality 

Various rules are intended to ensure that the procedure itself, and a fortiori the documents and information introduced into the procedure, remain confidential. In general, all parties to the proceedings are subject to strict confidentiality obligations. This obligation is even secured by a penalty clause, since in practice a breach can often not be sanctioned due to the difficulty of proving damages. Unless otherwise agreed by the parties, only arbitrators who are subject to a statutory duty of confidentiality are eligible.

Furthermore, the possibility of unification of proceedings or the involvement of third parties by the institution, as provided for e.g. in the Swiss Rules or, to a limited extent, in the Rules of Arbitration of the International Chamber of Commerce, is waived in order to prevent third parties from gaining insight into the relationship between the original parties to the proceedings. Last but not least, the redaction of documents is significantly limited compared to the increasingly common, Anglo-Saxon-inspired measure. There is practically no "document discovery." In addition, a party that can credibly demonstrate a special interest in confidentiality can demand that its evidentiary documents be made available for inspection by the other party only at the seat of the arbitral tribunal or another suitable location, but not handed over.

Fixed fee for arbitrators 

In principle, the costs of the arbitration are to be borne by the losing party in proportion to its loss. They are up to 15% lower than the tariffs of the Swiss Rules, which makes the arbitration location Liechtenstein appear more favourable from a material point of view. The flat rate to be paid covers all procedural steps up to and including the issuance of the arbitral award. Usually, the arbitral tribunal will immediately request both parties to deposit an advance on costs. If the defendant fails to do so and the claimant does not deposit instead, the arbitral tribunal may terminate the proceedings prematurely.

3. Mediation 

Overview 

Mediation is particularly suitable for conflict cases involving long-term relationships or strong emotional ties. It is a conflict resolution model that is becoming increasingly popular in Liechtenstein - especially in family law.

The mediator helps by moderating the discussion and using various intervention techniques, e.g. if difficulties in the communication behaviour of the conflict parties stand in the way of a constructive solution, but also by pointing out possible solutions which the parties have not yet recognised themselves.

Alternative Dispute Resolution Act 

The Alternative Dispute Resolution Act (Alternative-Streitbeilegung-Gesetz) regulates the procedure for the alternative resolution of disputes concerning obligations arising from fee-based contracts between Liechtenstein entrepreneurs and EEA consumers.

For this purpose, a total of four conciliation boards were established in the electricity sector, the communications sector, the financial services sector as well as in consumer protection.

The proceedings are initiated by means of a complaint by the consumer, whereby the competent conciliation body will make a comprehensive assessment on the basis of the facts described and submit a settlement proposal within 90 days, whereby this period may also be extended in the case of complex facts.

Participation in the conciliation procedure is voluntary and can be terminated unilaterally at any time. There is no commitment to the settlement proposal and both parties are free to take further legal action.