Third Award Set Aside: When the Arbitration Clause Loses Its Effect

Section 611(5) ZPO initially leaves the arbitration agreement in force after an award is set aside. A special consequence arises only where two awards concerning the same subject have already been set aside with final effect and a further award concerning that subject must also be set aside.

A party may then request the court to declare the arbitration agreement ineffective in relation to that subject at the same time. The declaration therefore does not arise automatically from a third setting-aside decision and does not necessarily cover every later dispute between the same parties.

This article explains the special consequence under section 611(5) ZPO. It distinguishes that rule from an ordinary setting-aside action, a general disagreement with an award and the review of an unclear arbitration clause.

What section 611(5) ZPO actually provides

Section 611(5) ZPO contains two connected statements. Setting aside an arbitral award does not generally affect the validity of the underlying arbitration agreement. A successful setting-aside action therefore does not end the agreement for future proceedings by itself.

The second sentence creates a narrowly defined consequence. If two awards concerning the same subject have already been set aside with final effect and a further award concerning that subject must also be set aside, the court may declare the arbitration agreement ineffective for that subject.

The provision therefore connects review of the third award with a decision about the future basis for further arbitration concerning precisely that subject. The two questions must be kept separate in the proceedings.

Which history is required for a third setting aside

The shorthand “third award set aside” describes the statutory situation only approximately. Section 611(5) ZPO requires two earlier final setting-aside decisions concerning the same subject. Two awards set aside at some point between the same parties are therefore not enough by themselves.

The concrete subject of each decision, the final setting aside and the further award must be compared. Changes to the claim, the contractual relationship or the scope of an award may raise the question whether the same subject is still involved.

The further award must also be open to setting aside. Only that further setting aside creates the possibility of deciding at the same time whether the arbitration agreement is ineffective for the subject concerned.

Why the request matters for ineffectiveness

The statutory wording provides that the court declares the arbitration agreement ineffective on a party’s request. The consequence therefore does not arise merely because the court sets aside the further award.

The request should show the special history. It should identify the two final setting-aside decisions, the connection with the same subject and the reasons why the further award must also be set aside.

The declaration is to be made at the same time as the setting aside of the further award. The procedural strategy should therefore establish early which relief is sought alongside the setting-aside action and which subject the declaration is meant to cover.

How far the declaration of ineffectiveness reaches

Section 611(5) ZPO expressly refers to the arbitration agreement “in relation to that subject”. The declaration therefore concerns the subject underlying the repeatedly set-aside awards. It does not create a blanket ineffectiveness for every legal relationship between the parties.

A general conclusion about every clause in the same contract would also go too far. The court must identify the subject covered by its declaration. Other claims or later disputes require their own assessment.

This limitation matters for future contract and procedure planning. The review of an unclear arbitration clause addresses a different question. The present issue is the statutory consequence of repeated final setting-aside decisions concerning the same subject.

How setting aside and the declaration fit together

The starting point remains the setting-aside action under section 611(1) ZPO. It challenges the further award and requires a statutory setting-aside ground. The special consequence in paragraph 5 adds to that relief, but it does not replace the setting aside of the specific award.

The reasoning is easier to organise in sequence. First, connect the further award with the particular setting-aside ground. Then prove the two earlier final setting-aside decisions and the identity of the subject. Finally, request the declaration that the arbitration agreement is ineffective for that subject.

A general dissatisfaction with the outcome is insufficient at each level. The article on the composition of a VIAC tribunal addresses the constitution of the tribunal. Section 611(5) instead focuses on the documented chain of setting-aside decisions.

Which documents belong in the request file

The three awards and the related court decisions should be available in full. For the two earlier proceedings, it is especially important to prove that the setting aside is final and to identify the subject decided in each case.

The file should also contain the arbitration agreement, main contract and amendments, service of the further award and the submissions in the new setting-aside proceedings. A table listing subject, parties, award date and setting-aside decision helps compare the cases.

The documents should show the relief sought. Setting aside the further award and declaring the arbitration agreement ineffective under section 611(5) are separate consequences, even though the statute provides for them to be decided together.

Where the special rule in section 611(5) ends

The special rule addresses a narrowly defined repeated-setting-aside situation. A first setting aside generally leaves the arbitration agreement untouched. Two setting-aside decisions alone do not yet produce the declaration if there is no further award concerning the same subject that must also be set aside.

Section 611(5) also does not replace the review of the individual setting-aside grounds, finality or the precise subject matter. A reliable classification requires the complete procedural chain.

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Frequently asked questions on section 611(5) ZPO

Does the arbitration agreement become ineffective automatically after the third setting aside?

No. Section 611(5) ZPO requires a party’s request. Two earlier final setting-aside decisions concerning the same subject must also exist, and the further award must be set aside.

Must all three awards concern the same subject?

The special rule is based on two final setting-aside decisions concerning the same subject and a further award concerning that subject. The subject of each decision must therefore be compared from the awards and procedural files.

Does the declaration cover the entire contract?

Section 611(5) ZPO refers to the arbitration agreement in relation to that subject. The effect is therefore generally tied to the subject identified by the court. Other claims and disputes require a separate review.

Can the request be made together with the setting-aside action against the third award?

Yes. The statute provides that the court makes the declaration on a party’s request at the same time as setting aside the further award. The setting-aside relief and the request should be stated separately.

Which documents matter for the first review?

The key documents are the three awards, the two final setting-aside decisions, proof of finality, the arbitration agreement, the contract and the documents from the further setting-aside proceedings. A chronology makes the comparison easier.

Next step

Contract, arbitration clause, correspondence and deadlines should be collected. It can then be assessed whether negotiation, preservation or arbitration is central.