Supreme Court Confirms That Protected Third Parties Are Bound By Arbitration Clauses

The Austrian Supreme Court (Oberster Gerichtshof, OGH) recently considered the subjective scope of arbitration clauses contained in contracts with protective effect for third parties (Vertrag mit Schutzwirkung zugunsten Dritter). In two decisions rendered on 20 April 2021,¹ the Court ruled that an arbitration clause contained in a contract with protective effect for third parties also binds a third party that intends to assert contractual (damage) claims, arising from the contract's scope of protection, against one of the contracting parties.

Contracts with Protective Effect Towards Third Parties

The international reader may be unfamiliar with the legal construction of a contract with protective effect for third parties as it exists in Austrian, German, and (arguably) Swiss law. It is important to differentiate contracts with protective effect for third parties from contracts for the benefit of third parties. Before delving into the two decisions at hand – which