Overview Dispute Resolution
Austria remains highly attractive to business with its reputation as a “gateway to eastern Europe” and its private investor support for start-ups. The very high entry bar to practising law is a distinct peculiarity of Austria, requiring international firms and companies with disputes to turn to skilled and specialised Austrian legal counsel.
Litigation in Austria
Structure of Civil Proceedings
Austrian civil proceedings are designed as adversarial processes with inquisitorial elements. The judge is, to a large extent, bound by the arguments advanced by parties, but is not a passive “referee." The judge is the primary interrogator of parties and witnesses. Only after the judge has finished his examination can the parties directly examine the witnesses.
Pre-trial discovery only takes place to a very minimal extent and is limited to documents that are already known to the opposing party. The parties may submit arguments and proffer evidence to the court in written briefs before the first hearing.
After the first hearing, arguments must be made orally in court by a qualified Austrian counsel. The oral hearing is obligatory, accessible to the public and is the touchstone of proceedings. Written witness statements or affidavits are, with some exceptions, not permitted. The courts of first impression are generally not permitted to reach decisions based solely on written submissions.
In the hearing, the judge will determine all relevant facts, examine the parties and witnesses and, as necessary, appoint and hear expert witnesses.
Austrian civil courts are organised on three levels (District/Regional Courts, Higher Regional Courts and the Supreme Court), with some specialised courts e.g. for commercial matters. Judgments are generally appealable to at least one level, depending on the amount in dispute and whether the issues are of broader relevance. In certain cases a further appeal to the Austrian Supreme Court is possible.
Costs of Litigation
Legal costs are recoverable to a certain extent. Every party is required to pay its own costs, including court, lawyers’, experts’ and translators’ fees during proceedings. At the conclusion, the court will make a decision on costs, generally ordering the losing party to compensate the winner.
Reimbursable lawyers’ fees are established by tariff, depending on the amount in dispute and the procedural steps taken. The actual lawyers' fees charged often exceed the tariff. Consequently, a winning party may still end up having to pay more than the reimbursement awarded.
Arbitration in Austria
Austria and in particular its capital city Vienna, is long-established as one of the European hubs for regional international arbitration. The Vienna International Arbitral Centre of the Federal Economic Chamber (VIAC) provides excellent administration of international arbitrations.
Austria continues to build its reputation as an arbitration-friendly jurisdiction with the implementation of direct recourse to a specialised chamber of the Austrian Supreme Court as first and final instance regarding proceedings to set aside an arbitral award. Practice has shown that a well-reasoned decision will be rendered within six to eight months on average.
An arbitration with its seat in Austria will be governed by Austrian arbitration law which is contained in the Austrian Code of Civil Procedure. It is strongly based on the UNCITRAL Model Law with minor deviations.
The Arbitration Agreement
Austrian law requires that arbitration agreements must identify in writing the parties and the dispute which are subject to arbitration. The writing is either part of a document signed by the parties or an exchange of any means of recorded communication.
Overall, both Austrian legislation and courts are arbitration-friendly in enforcing arbitration agreements and will prime civil proceedings in doing so.
The Arbitral Proceedings and the Arbitral Award
Austrian arbitration law grants parties extensive autonomy with only few mandatory legal provisions that cannot be waived. Arbitrators must observe the parties' right to fair treatment and each party’s right to be heard. Arbitrators are independent and impartial.
Within three months after the receipt of the arbitral award, a party is entitled to file an action to set it aside on an enumerated list of grounds.
Austria has ratified the New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards without reservation, the 1961 European Convention on International Commercial Arbitration, the ICSID Convention and several Bilateral Investment Treaties.
Current Developments and Trends
Class Actions and Third Party Funding
A recent development is an increase in both governmental and (more so) new private enforcement and class actions, to counter harm to markets through illegal cartels.
In the past, 'Austrian-style' class actions have been facilitated by third-party litigation funders including investor claims, through filing mass actions at the Commercial Court of Vienna; for example, against AWD, AMIS, Meinl Bank, Immoeast-Immofinanz and, most recently, Volkswagen. Now, ongoing “Dieselgate” cases demonstrate the increasing self-sufficiency of consumers in collective lawsuits facilitated by cross-border dissemination of legal knowledge via internet platforms.
International Reputation and Influences
Austria continues to enjoy a respected profile on the international scene owing to its transparent, effective and reliable legal system, fair trials, efficiency and its enforcement of the rule of law. This exceptional reputation has been enhanced further through ongoing processes of streamlining court proceedings, promoting settlements, halved court fees and encouraging mediation. Austria is a country where enforcement is effective and speedy compared to other European jurisdictions, giving creditors ready access to the enforcement register to determine whether assets are available.
As a means of accelerating lengthy proceedings in white collar crime cases previously sparking public resentment, Austrian public prosecutors further enable the freezing of accounts and assets as well as information sharing in the context of cross-border assets and criminal activity.
Legal System Innovations
A trend increasing activity in Austrian courts was induced by the General Data Protection Regulation (GDPR). As of 25 May 2018, professionals with sensitive data are subject to stricter requirements when controlling, storing and processing it. As a result, a record fine of 18 million euros has been imposed on the Österreichische Post for alleged breaches of the regulation (proceedings under appeal).Austria has emerged as the first country in the world to implement Electronic Legal Communication (ELC) for the electronic transmission of documents to and from courts. Continuing along an expansionary path towards e-Justice, the Austrian judicial system invests a portion of its continuing revenues into this venture.
Updated VIAC Rules of Arbitration and Mediation
The latest amendment of the VIAC Arbitration and Mediation Rules in 2018 (“VIAC Rules”) was triggered by the change that extended VIAC jurisdiction to encompass domestic arbitration and mediation.
The VIAC Rules now envision that arbitrators and counsel conduct arbitration in an efficient manner. Arbitral tribunals may consider counsel's contribution to the conduct of an efficient proceeding in decisions on costs. Similarly, the VIAC rules provide that the General Secretary of VIAC may affect the arbitrator’s fees by 40% because of inefficient or “especially efficient” conduct of the arbitration.The VIAC Rules now provide that arbitral tribunals have the power to issue an order for security for costs if the respondent shows that recovering a potential claim for costs is at risk with a "sufficient degree of probability."
Construction arbitration continues to grow in Austria in view of the number of relevant international players. Technical complexities of infrastructure projects, and disputes arising from them have led to an increase in the number of Austrian-resolved disputes. The use of escalation clauses providing for negotiations, mediation and adjudication is standard.
The trend to involve international, experienced experts to prepare delay analysis and complex quantum calculations, is now standard in Austria.