Chambers International Follow Information 2021 – Litigation 2021 – Litigation, Mediation and Arbitration

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1. General

1.1 General characteristics of the legal system

Austrian civil law system

The Austrian legal system is based on civil law. Laws are based on codes and statutes. The civil trial offers a controversial process with inquisitorial elements: the trial and the judge are limited to the actual allegations of the parties. The judge is not a mere “arbitrator” (e.g., in the inquisitorial role of the judge, he will be the main hearing of parties and witnesses).

Mandatory public hearings

A public hearing is mandatory. The judge will determine all relevant facts of the case in the oral hearing, hear parties and witnesses, discuss the content of the documents and – if necessary – appoint and hear experts. Parties and lawyers are entitled to question witnesses and experts. The underlying principle is that the judge (as the finder of the facts) gets an immediate and personal impression of the parties, the witnesses and the case.

1.2 Court system

Court hierarchy

Austrian courts are organized on four levels: district courts, regional courts, higher regional courts and the Supreme Court. District courts are the courts of first instance for cases with a maximum amount in dispute of up to EUR 15,000 and regardless of the amount in dispute on certain topics (mainly family and tenancy law). The regional courts are responsible for first instance decisions in all legal matters that are not assigned to the district courts. They are also empowered to rule on appeals against decisions of the district court. Higher regional courts are appeals courts for decisions of regional courts.

Specialized commercial courts

Commercial matters are decided by commercial courts. A separate commercial and regional court will be set up in the capital Vienna. In other provinces, the regional (district) courts also function as commercial courts.

The Supreme Court

The Supreme Court is the court with the highest review. No further (domestic) legal remedy is possible via his decisions. It is your task to maintain the uniform application of the law throughout Austria. Although the lower courts are not legally bound by their decisions, the case law of the Supreme Court has an effective primacy character.

1.3 Judicial Records and Proceedings

Court records are not public. However, the hearings are public. Public access may only be restricted if this is necessary, for example, to maintain public order, to protect certain categories of information (e.g. banking secrecy, business or state secrets) or if the hearing deals with personal family matters.

1.4 Legal representation in court

In the case of certain legal disputes, the parties must be represented by a lawyer approved by the Austrian Bar Association and cannot represent themselves. A foreign lawyer may not represent any party in these cases

This restriction applies to:

• first instance disputes before regional courts;
• Disputes in district courts if the amount in dispute exceeds EUR 5,000; and
• all complaint procedures.

In all other proceedings, the parties can (with a few exceptions) be represented by anyone, including a foreign lawyer.

2. Litigation funding

2.1 Third Party Litigation Funding

The admissibility of third party funding of litigation was the subject of heated debates in the early 2000s. The financing of legal disputes by third parties is currently a recognized instrument in Austria and is recognized without particular restrictions. The political reason for this is the limited possibility of a class action lawsuit in Austria, which is compensated by third-party funds and “Austrian mass claims” (cf. 3.7 Representative or collective actions).

The state provides mutual legal assistance to parties, including legal persons, who cannot afford legal disputes.

2.2 Third-party funding: lawsuits

There are no formal restrictions on funding litigation, but in general funding is only available to plaintiffs or defendants in litigation relating to civil claims with cash value.

2.3 Third-party funding for claimants and defendants

In most cases, the donors provide their financial support to the plaintiff, but defendants can do so as well.

2.4 Minimum and maximum amounts of third party funding

It is common practice for litigation finance firms to fund cases with significant financial implications, as they are typically compensated for their services with a significant portion of the proceeds (around a third of them). This part must cover both the funder’s risk and the costs of his own lawyers. As a result, cases with low financial impact will only attract donors when there is a likelihood of multiple similar cases and collective action being taken.

2.5 Types of Costs Considered in Third Party Financing

Generally, litigation funding agreements cover any legal costs or costs incurred in the process (i.e. court fees, legal fees, expert and / or translator fees, and witness travel expenses). The opponent’s legal fees are usually also covered to take into account the scenario in which the funded party loses the case and is therefore required to reimburse the opponent for his legal fees or expenses. The litigation financier normally reserves the right to terminate the contract at any time in order to prevent further costs being covered while at the same time bearing the costs already incurred.

2.6 Contingent Fees

Legal professionals are prohibited from entering into a pactum de quota litis (agreement on contingent fees) with their clients. However, this rule does not apply outside the legal profession. Therefore, a third party financier’s compensation is generally based on a percentage of the amount collected. Other fee structures may also be permitted, provided they are not excessive, contrary to common decency, or in conflict with consumer protection law. A success fee is possible if it only affects a specific part of the fee agreement.

2.7 Deadline for receiving third-party funding

Litigation funding is available at the beginning of a litigation as well as during ongoing proceedings (e.g. for complaints procedures). It is worth remembering that litigation funding agreement often takes several weeks to conclude, while procedural and statute of limitations remain in place.

3. Bringing a lawsuit

3.1 Rules for behavior before the action

General rule

There is no requirement to file a lawsuit. However, it may be advisable to send the prospective defendant a letter asking them to comply with the dispute, as this may, for example, result in a cost decision if, for example, the prospective defendant files a lawsuit or claims immediately after the dispute has been initiated does not deny the successful plaintiff to bear the costs of the (unnecessary) proceedings. The defendant is under no obligation to reply to such a letter.

Exceptions

In a limited number of cases in relation to:

• neighborly disputes;
• Rent disputes; and
• Disputes between members of certain professional groups that are subject to a code of conduct (e.g. architects, lawyers, doctors),

Alternative dispute resolution mechanisms are provided as a prerequisite for filing a lawsuit. If the applicant does not meet this requirement, the application can be rejected.

3.2 Limitation periods

Limitation periods

Limitation periods for civil actions are laid down in substantive law. The limitation periods usually begin with the first exercise of a right and are usually 30 years. Due to numerous specified exceptions, most claims, including claims for damages, are subject to a shorter limitation period of three years. In the case of claims for damages, the three-year period begins with the knowledge of the damage and the identity of the party who caused the damage. In the case of contractual claims, the limitation period generally begins when the claim is due.

Specific rules

There are a number of shorter or longer limitation periods. For example, a claim for negligence against a board member can be asserted within five years.

Interruption and suspension

There are various reasons for the interruption and suspension of the limitation period. A confirmation interrupts, for example, the limitation period and settlement negotiations suspend the process; The lawsuit must be filed within a reasonable time after the failure of the negotiations.

Procedural aspects

The fact that a claim is statute-barred must be asserted by the defendant. It is not imposed so spontaneously by the court.

3.3 Jurisdiction Requirements for a Defendant

Relevant rules

In domestic cases, the jurisdiction of Austrian courts is based on the jurisdiction norm. In most international cases, the jurisdiction of Austrian courts is determined by Regulation (EC) No. 1215/2012 (the new version of the Brussels Regulation).

These provisions give jurisdiction to all types of courts. Whether a particular court has jurisdiction to rule on a case may also depend on other factors such as the nature of the dispute (e.g., to determine which commercial courts have jurisdiction to rule on a case).

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The content of this article is intended to provide general guidance on the subject. A professional should be obtained about your particular circumstances.