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AUSTRIA: An Introduction to Dispute Resolution: Litigation

Contributors:
Roxanne De Jesus
Anna Katharina Radschek
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Austria Practice Overview Litigation
by Pitkowitz & Partners

AUSTRIA: An Introduction to Litigation 

Contributed by Nikolaus Pitkowitz (Head of Litigation), Roxanne de Jesus (Litigation partner) and Anna Katharina Radschek (Litigation partner) of Pitkowitz & Partners.

Court System and Costs 

Austria is one of the leading European countries in providing fast and efficient court proceedings. In international comparison, Austria’s civil procedure system has many similarities with most major continental European systems. The federal civil court system covers altogether three instances with evidentiary proceedings primarily focusing on the first instance (district courts, regional courts, specialised courts). The appellate courts of second instance (nine regional courts and four province courts) and the Austrian Supreme Court generally only review. Access to the Supreme Court is furthermore limited to matters of significant importance.

Court proceedings trigger total court fees of approximately 5.4% of the value in dispute (1.2% first instance, 1.8% second instance and 2.4% third instance). Legal fees for attorneys can be based on the Attorney’s Tariff but also on individual agreements, which commonly apply hourly rates. Costs are generally allocated to the losing party in relation to the outcome, whereby the reimbursement of legal fees is based on the Attorney’s Tariff, irrespective of the individual agreement.

Legal Resources 

The Legal Information System of the Republic of Austria is a platform and database providing information on Austrian law, including case law, as well as a selection of Austrian laws translated into English. Specific courts also provide online access to case law, such as the Austrian Supreme Court. The two major on-line databases relied on for research are the Rechtsdatenbank and LexisNexis. In addition, Austrian law is documented, commented and analysed by a richness of commentaries, handbooks, textbooks, journals, blogs and newsletters.

Class Actions 

Austria is on the forefront of collective redress. Since 2005, Austrian case law recognises the so-called “Austrian-style collective claim”, permitting the assignment of claims for collection to one single claimant. These claims are then being dealt with (procedurally joined but in substance individually) in one single proceeding. Prerequisites of the collective claim are the concurrence of (i) jurisdiction, (ii) type of proceedings, (iii) cause of action, and (iv) factual or legal issues. The Austrian collective claims model has meanwhile gained significant practical relevance, among others for the Dieselgate claims.

With the European Class Action on the horizon, Austrian courts are well prepared for the next level of collective redress. Particularly, the broad and vague rules of the EU Directive on Collective Redress of 25 November 2020 (to be implemented within two years) should permit Austria to model the EU rules into its current system. Among others, the safeguard to prevent misuse by permitting only qualified entities, that are non-profit organisations, to file representative actions should be achievable by existing bodies currently pursuing collective claims.

Third Party Funding 

Traditionally only used in small claims, third party funding has evolved in the last few years and becomes more and more popular also in larger proceedings and portfolios, especially in the just addressed Austrian-style collective claims. While not yet all legal issues surrounding third-party funding have been clarified by case law, the concept is nevertheless accepted and generally recognised. Most third-party funders active in Austria are headquartered outside Austria.

COVID-19 Related Insolvency Reliefs 

Recent COVID-19 driven legislation sought to prevent a dramatic increase of bankruptcy cases. Among others, debtors have been released of the immediate duty to file an application for insolvency in case of over-indebtedness until 30 June 2021. Furthermore, courts were granted the power to extend several procedural deadlines, if beneficial to the creditor. If an application for insolvency is filed before 31 December 2021, the debtor can offer the creditors a financial recovery plan for the period of three years, instead of two.

As a result, although, the impact of COVID-19 lockdowns on Austrian businesses was severe, the number of insolvencies in the year of 2020 was the lowest since 1990. This was also backed by the COVID-19 Assistance Fund, securing liquidity by issuing government guarantees for loans and non-repayable grants. However, the ongoing economic challenges for businesses led to easing amendments of insolvency law to enable companies to continue operating.

Experts are concerned that these reliefs conceal a tsunami of insolvencies. Therefore, the government is currently contemplating other measures to prevent the flood, including the possibility of privileged restructuring upon provision of security and upon approval of the majority of creditors and the court.

Remote Hearings in Times of COVID-19 

Despite its efficiency, the Austrian court system is struggling to uphold in times of social-distancing. New laws were passed to maintain the access to justice and the operability of the judicial system, including a framework for the conduct of remote oral hearings by video conference tools. However, contrary to arbitration, remote court hearings generally require the consent of all parties.