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Repeal of Obligation for Foreign Litigants to Pay Security Deposits - International Law Office

International Law Office

Litigation - Liechtenstein

Repeal of Obligation for Foreign Litigants to Pay Security Deposits

August 05 2008

Background
Decision
Comment


Background

Until recently, Liechtenstein civil procedure law provided for the possibility to request a security deposit from foreign plaintiffs in order to secure the defendant's right to the reimbursement of legal fees if he or she prevailed. Section 57 of the Civil Procedure Order stated that the rules for security deposits applied to those persons not domiciled in Liechtenstein.

Requesting a security deposit was a good tactical move for defendants, especially where the value at stake in the case was substantial. If the plaintiff was ordered to pay a security deposit but could not do so within four weeks, the defendant was entitled to request the court to reject the plaintiff's complaint.

Any final decision of a Liechtenstein court or administrative authority can be appealed to the Liechtenstein Constitutional Court. An appeal can be filed only on the grounds of the violation of rights deriving from the Liechtenstein Constitution and/or the European Convention of Human Rights.

Decision

The situation changed following a Constitutional Court decision in a case where the appellant had invoked an infringement of European law. Liechtenstein is party to the European Economic Area (EEA) Agreement. Specifically, the appellants claimed that Section 57 constituted an indirect discriminatory provision in light of the jurisprudence of the European Court of Justice and the European Free Trade Agreement Court of Justice, and therefore violated EEA law.

The Constitutional Court held that EEA law generally supersedes the Liechtenstein Constitution, so that in cases where Liechtenstein law contravenes EEA law, the Constitutional Court is competent.

The Constitutional Court observed that in previous decisions (1997/31, 2002/37 and 2002/52) the court had held that the civil procedure law provisions providing for the possibilty to reqest a security deposit conformed with EEA law.

However, some legal commentators and the Court of Second Instance criticized the Constitutional Court's opinion, stating that Sections 57 and following of the Civil Procedure Order clearly infringe EEA law. The Court of Second Instance based this argument on an opinion issued by the European Commission before the European Free Trade Agreement Court in Piazza v Schurte AG (E-10/04)). In that case the commisson qualified the referenced sections of the order as indirect discrimination violating EEA law. Based on these arguments, the Constitutional Court decided to review its opinion.

In light of the commission's legal opinion, it is unsurprising that the court changed its opinion and came to the conclusion that Sections 57 and following are not tenable as they discriminate against foreign plaintiffs.

As a consquence, the referenced provisions were entirely repealed by the Constitutional Court. However, the Liechtenstein legal community was surprised that the the court repealed all the provisions as only EU and EEA citizens or entities can claim an infringement of EU or EEA law. At the same time, the government was ordered to publish the repeal immediately in the Law Gazette - this took place on July 10 2008. It remains to be seen whether the government will propose a new law regarding security deposits, at least in regard to non-EU or EEA plaintiffs.

Comment

For the time being, foreign plaintiffs cannot be required to pay a security deposit in connection with a lawsuit in Liechtenstein. This is favourable for persons or entities intending to file a claim with the Liechtenstein Princely Court. Previously, payment of the deposit often constituted a major impediment to bringing a claim. As a result, it has become easier to file a lawsuit in Liechtenstein.

However, foreign defendants and defendants domiciled in Liechtenstein will now find it difficult to enforce an award for costs if the claim is denied because judgments issued by Liechtenstein courts are enforceable only in Austria and Switzerland. Liechtenstein is not party to any multilateral conventions such as the Lugano Convention. If the jurisdiction where the costs award is to be enforced does not recognize Liechtenstein costs awards, it may be that such an award is worthless.

For further information on this topic please contact Christoph Bruckschweiger at Ritter & Wohlwend by telephone (+423 236 55 33) or by fax (+423 236 56 11) or by email (christoph.bruckschweiger@lawfirm.li).


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