In 1935 he developed the Vienna System, also known as the Austrian System. This was the first highly artificial bidding system to achieve international success. Strong hands (equivalent to 18 or more high-card points using the standard Milton Work count) were opened with One No-Trump, whilst hands with 11 to 17 points that lacked a five card spade, heart or diamond suit were mostly opened with One Club.

He was a member of the Austrian teams which, in 1932 and 1933, won the first two European Open Teams events, held in Scheveningen, Holland and London respectively. He was also the non-playing captain of the Austrian team which won the first World Championship in Budapest, 1937. In the final, the Austrians defeated Ely Culbertson's team representing the United States by 4,740 points over 96 boards, the Austrian players using Stern's Vienna System. The result of this match caused a sensation, as did all the previous Culbertson matches. Stern's book on the championships does not mention that there were other teams in the event! The Austrian team was headed by Karl Schneider and Hans Jellinek, probably the world's leading pair at the time, with Karl von Blöhdorn, Dr Edward Frischauer, Walter Herbert and Udo von Meissl. The American second pair was Helen Sobel and Charles Vogelhofer, and it was widely thought at the time that this four was not America's best. In addition, the Culbertsons were on the verge of divorce, which cannot be good for a bridge partnership. The Austrians also won the Ladies' team championship, in which Stern's protégée Rixi Markus figured in her first world title.

According to an article on Rixi Markus published in the Contract Bridge Journal in September 1948, Stern was "perhaps the greatest coach who ever lived". A dictatorial leader, Stern insisted that his players adhered with rigidity to his system, but his over-emphatic statements and instructions were tempered by an underlying warmth of personality.

When Germany annexed Austria in 1938 (Anschluss), he returned his Iron Cross, awarded in World War I, to the Nazi authorities and included an insulting letter. As a result he was placed at number eleven on their death list. He went into hiding and escaped to England in 1938. He was a major bridge figure in London for the next decade, founding a school of bridge which taught his bidding system, running a weekly duplicate in Hampstead during World War II and playing rubber bridge regularly at the Hamilton Club and Lederer’s. Stern became a naturalised British citizen.

Although he had been a career diplomat, he did not tolerate fools gladly at the bridge table. When accused of having on one occasion thrown a cup of coffee at his partner, he said: "It was nothing serious. There was no sugar in it".

He wrote or co-authored the following books:

• Wij Bieden: De Biedtechniek Der Weensche Wereldkampioenen, 1937.
• The Stern Austrian System, with Margery Belsey, 1938.
• The Two-Club System of Bidding, with Geoffrey L Butler, 1945.
• Sorry, Partner (120 everyday hands that have been mis-bid, mis-played or mis-defended), with AJ Smith, 1945.
• Right through the Pack. A bridge fantasy ... Compèred by Dr. Paul Stern, with Robert Darvas and Norman de Villiers Hart, 1947.