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Arbitration
The Vienna International Arbitral Centre recently initiated a comprehensive review process aimed at modernising, overhauling and streamlining its rules. The process included a widely distributed user survey, a number of discussion rounds and a roadshow. The process is finally nearing completion and the centre is preparing to release the revisions publicly.
The Supreme Court recently clarified the relationship between state immunity and enforcement of an arbitral award in a case concerning art loaned by the Czech Republic to a Vienna museum for an exhibition. The Czech Republic argued that the works of art under dispute were cultural objects serving the country's sovereign aims, and thus exempt from enforcement proceedings. The Supreme Court rejected this defence.
The Supreme Court was recently faced with an inexecutable arbitration clause and clarified the interpretation of arbitration agreements and their boundaries. The court held that arbitration agreements must be interpreted primarily under procedural law; if an agreement refers to an arbitral institution which no longer exists, the agreement becomes inoperative only if it is impossible to reconstruct a comparable arbitration court.
The Vienna Commercial Court recently refused to set aside an arbitral award issued by a United Nations Commission on International Trade Law tribunal seated in Vienna that had awarded Danish-Polish Telecommunications Group €400 million against Telekomunikacja Polska. The court's decision is in line with the trend of Austrian case law to uphold arbitral awards.
The Supreme Court recently handed down a decision relating to the arbitrability of shareholder disputes in which it generally confirmed their arbitrability, but declared them to be subject to certain criteria. The decision is in line with the general approach to uphold arbitral awards taken by the Supreme Court since the introduction of the arbitration law. In fact, only in rare cases has the court set aside arbitral awards.
Asset Finance
Overview
Including: Background; Rolling Stock; Facilities
Bone Fide Acquisition of Title
The Supreme Court has ruled that once full ownership rights have been acquired in good faith, the innocent purchaser may transfer these ownership rights to any other person. The latter will acquire full unencumbered title, even if it knows that the original title was defective.
A new Supreme Court ruling has ended the controversial discussion on whether the limitation period for recovery of a warranty guarantee sum is three years or 30 years. It provides that the 30-year period shall apply.
United We Stand?
In a recent case a firm appointed a trustee to act on behalf of a group of convertible bond holders when the company ran into economic difficulties. However, individual bondholders filed separate appeals against the actions of the trustee, who was acting for the common good of the group.
Validity of Upstream Security
Any payments to shareholders other than dividends are forbidden and void, as they constitute repayment of share capital. The Supreme Court recently stated that a company may use the defence that such a transaction is equally unenforceable against most creditors who have been granted security rights.
Unlimited Mortgages
The Supreme Court now allows the registration of mortgages for a maximum amount to be used as security for all claims, not only those which are defined in the Land Register Act.
Banking
Overview
Including: Market Structure and Trends; Regulatory Bodies; Banking Act; Credit and Financial Institutions; Establishing Operations; Online Financial Services; Buying Financial Institutions; Supervision; Disclosure Requirements; Insolvency; Financial Collateral Directive; Capital Requirements; Confidentiality; Outlook.
The EU Markets in Financial Instruments Directive, which was recently transposed into Austrian law, requires all banks to establish, implement and maintain an effective conflicts of interest policy. The policy must be appropriate to the size and organisation of the bank and the nature, scale and complexity of its business. In response to concerns over the legality of the new laws, the Constitutional Court has reviewed their provisions.
In a recent judgment the Supreme Court dealt with interest rate adjustment clauses and interest rate calculation methods under business loan agreements. The court acknowledged that banks have a legitimate interest in providing for the adjustment of interest rates in accordance with changes in refinancing conditions and the relevant markets. This judgment provides important guidance for banks and their advisers.
In the case of a bank guarantee drawn without legal cause, the Supreme Court granted the party on whose account the guarantee had been issued parallel recourse claims against both the beneficiary of the guarantee and the debtor whose payment obligation was meant to be discharged by the payment under the guarantee. This authoritative opinion decides a long-lasting dispute that followed from contradictory case law.
Under Austrian law, the term 'letter of comfort' is a collective description for instruments predominantly issued by parent companies to banks that secure the payment obligations of a third party, usually a subsidiary company, under its financing arrangements with the beneficiary bank. They come in a variety of forms within two 'pure' types - the unrestricted comfort letter and the restricted comfort letter.
The EU Consumer Credit Agreement Directive was implemented in Austria through the enactment of a new federal Consumer Credit Act. Under the directive, banks must provide extensive information on credit offers in order to enable consumers to compare offers. While banks appreciate the importance of early repayments, they risk being at a disadvantage if a fixed interest rate is in place.
In the context of secured financings, lending banks often require a pledgor to issue a sale power of attorney for the asset pledged, to facilitate realisation of the pledged asset in the event of default. However, in recent decisions, the Austrian Supreme Court held that such a sale power of attorney may be considered an illegal circumvention or breach of Section 1371 of the Civil Code.
Capital Markets
Overview
Including: Legal Framework; The Vienna Stock Exchange; Admission of Securities and Listing Requirements; Investment Funds; Securities Transactions outside the Vienna Stock Exchange; Supervision, Rules of Conduct and Insider Trading; Market Participants.
In light of its findings during on-site audits of issuers' compliance organisations, the Austrian Financial Market Authority has amended the 2007 Compliance Regulation for Issuers and published a circular providing practical guidelines for issuers on the implementation of efficient compliance organisations.
When insolvency proceedings were opened against A-TEC Industries AG, claims were made for around €300 million of bond debt issued by the company. The insolvency court appointed three trustees to represent the bondholders and their collective interests against the company. This restraint of bondholders' rights caused uproar among the mainly international institutional investor base.
In the event of a public offer of securities, in order for the securities to be offered legally to investors, a prospectus must be prepared, approved by the competent authority and published. However, pursuant to Article 4 of the EU Prospectus Directive, the obligation to publish a prospectus does not apply if securities are offered, allotted or to be allotted in connection with a merger, provided that equivalent documents are available.
Only a few months after the Supreme Court issued a landmark ruling concerning the invalidity of prevalent and customary clauses included in terms and conditions of Austrian law-governed bond issues regarding consumer bondholders, a new Supreme Court ruling has extended some of the court's legal views to the terms and conditions of profit participation certificates.
Many treasury departments of Austrian companies trade in securities or other financial instruments for their own account to raise income from financial assets. However, in light of a recent landmark ruling of the Austrian Administrative Supreme Court, such conduct is critical and may require companies to obtain a banking licence in Austria.
In a recent landmark ruling the Austrian Supreme Court of Justice held that some prevalent and customary clauses included in terms and conditions of Austrian law-governed bond issues are illicit with regard to consumer bondholders. The decision ended a lawsuit for injunctive relief between the Consumer Protection Association and the issuer of a corporate bond initiated in 2007.
Commercial Property
Overview
Including: Real Property Law; Tenancy Law; Real Estate Investment Funds Act.
Parliament recently introduced the Act on Late Payment, implementing the new EU directive on the same topic. The act aims to improve payment behaviour by introducing new due dates and increased interest rates. The act introduces new payment dates for rent agreements, depending on the type of property and parties involved, while taking into account the needs of tenants.
In light of a Constitutional Court decision, Parliament recently passed a bill amending the provisions on the Land Register registration fee. As of January 1 2013, the fee for all types of property acquisition is generally calculated on the basis of the fair market value of the real estate. The amendments have a considerable impact on ancillary costs of such acquisitions.
The Act on the Presentation of Energy Performance Certificates 2012 implements the EU Energy Performance Directive, which replaced EU Directive 2002/91/EC. The act introduces disclosure requirements for advertisements in commercial media, more stringent sellers' and landlords' obligations in relation to energy performance certificates and an effective regime of administrative penalties.
Parliament recently passed the Fiscal Stability Act 2012, introducing a number of measures intended to consolidate the budget. As these measures, among other things, introduce new taxes or increase existing taxes on real estate transactions, the act has sparked a huge outcry by the industry and will have a significant impact on the Austrian real estate market.
Real estate investors are increasingly renting out fully furnished apartments to tourists or business travellers for short periods. While short-term leases are highly attractive to respective lessors, owners of neighbouring apartments within a complex are usually not fond of such agreements, due to the high turnover of guests. The Supreme Court recently dealt with cease and desist proceedings instituted by apartment owners.
The Constitutional Court recently declared unconstitutional an article of the Court Fee Act, under which the fee for the registration of a new owner in the Land Register by reason of a deed of gift is taxed on the basis of the tax value. Although this judgment concerns court fees only, it calls into question all occasions where property transactions are taxed on the basis of the tax value rather than the market value.
Company & Commercial
The Supreme Court recently considered how a minority shareholder should react if the majority shareholder overrules it on a capital increase resolution that subsequently leads to the dilution of its holding. Under Supreme Court case law, (minority) shareholders are protected against a dilution of their participation following a capital increase if their statutory subscription rights are excluded.
A draft of the new act amending the company laws was recently revealed. The act aims to facilitate the establishment of an Austrian limited liability company by making the process easier and cheaper. Among other things, the minimum share capital, and consequently the minimum corporate income tax and the attendant attorney and notary fees, will be reduced.
When a capital company is in financial crisis, its shareholders often do not agree on the measures, if any, that should be taken to remedy the company's financial situation. The Supreme Court recently examined the question of whether, and to what extent, a shareholder may be obliged to contribute additional capital to a company in order to support the company's financial recovery.
The shift of liability from the officers and directors entitled to represent a company to so-called 'responsible representatives' aims to protect senior executives from liability for breaches of public law provisions at their company. However, if such representatives are not appointed in compliance with the law, supposedly protected senior executives may be shocked to find that they remain liable.
Shareholders of Austrian limited liability companies are subject to general fiduciary duties with respect to the company and their co-shareholders. Considering the consequences of passing shareholders' resolutions in violation of general shareholder duties, the Supreme Court recently confirmed that the arrangements for a general meeting must be determined with due regard to the other shareholders.
Members of the management board of an Austrian stock corporation are appointed for a definite period and may be recalled before the expiration of their tenure only for cause. The Supreme Court recently took the opportunity to confirm and outline a number of criteria in connection with the recall for cause of a board member. The court held that behaviour constituting grave misconduct must be verified on a case-by-case basis.
Competition
Overview
Including: Reform; General Procedure; Cartels; Vertical Restrictions of Distribution; Merger Control; Dominant Market Position.
The long-discussed changes to the Austrian competition laws have finally become effective. These concern, among other things, the leniency programme implemented in Austria in 2006. The amended Competition Act now makes it possible for undertakings to qualify for full immunity from fines on a leniency request even after the Federal Competition Authority has gained knowledge of the reported infringement.
The Higher Cartel Court recently ruled on the obligation of dominant undertakings to contract with other market participants, including competitors, under specific circumstances. It held that they must be very careful to avoid discriminating against other undertakings by refusing to contract with them. The decision provides interesting clarifications on the applicability of the 'essential facilities' doctrine in such cases.
The Cartel Court recently rejected a Federal Cartel Authority action to fine approximately 50 Austrian plumbers for alleged collusion in a tender procedure initiated by the City of Vienna housing agency in 2007. The court ruled that all activities of the defendants - regardless of whether they had actually infringed cartel law - were exempt from the cartel ban under the Austrian de minimis regime.
Two recent Supreme Court decisions have triggered significant debate in the competition field, both in Austria and at a European level. Both cases questioned whether a justified error in law could exclude the imposition of a fine for alleged anti-competitive behaviour. One case has been referred to the European Court of Justice, as the Supreme Court considered that EU law did not provide a clear answer.
After a lengthy internal discussion process, the Ministry of Justice and the Ministry for Economic Affairs recently presented a draft bill for changes to the competition law in Austria. While fundamental changes to this draft bill are unlikely to occur, it remains to be seen how these amendments - if enacted - will affect administration, jurisdiction and advocacy for competition law in Austria.
For some time, the official guidelines of the tax authorities on income tax have included the way in which competition fines should be treated under income tax law. With the recent entry into force of the Act Changing Tax Law 2011, the deduction of competition fines as a whole is now explicitly excluded. Under the new law, undertakings hit by fines for infringing competition law may feel a double impact.
Corporate Finance/M&A
Personal differences between shareholders in a limited liability company forced one shareholder to buy out another. However, it later turned out that a mistake by the accountant had led to a retrospective tax payment which had an impact on the company's profits for the financial year in which the sale took place, and thereby on calculation of the purchase price. The court assessed whether the purchaser could reclaim the loss.
Consumer protection in M&A deals
Shareholders and directors of limited liability companies are regarded as consumers unless they can exercise a dominant influence on the company, the Supreme Court recently confirmed. As a consequence, they will benefit from the relevant consumer protection rules. Practitioners should therefore be aware of the consequences which could result from natural persons being a party to transaction agreements.
Asset deals involving Austrian entities must generally be registered with the Commercial Court. However, the exact documents that must be attached to such filings in order to prove the asset transfers in reasonable detail to the court are not specified. The responsibility for defining these standards is allocated to the courts. Two recently published Higher Regional Court of Vienna decisions clarified the documents required.
The Supreme Court has clarified a number of questions regarding Article 38 of the Commercial Code, one of the central provisions on asset deals. Should the parties contractually agree on an exclusion of the purchaser's liabilities in relation to certain of the seller's contracts, and decide to notify the exclusion with the Commercial Register, the court stated that there would be good reasons for registration by both parties.
New trends in M&A due diligence process
The only way to uncover structural problems and reveal organisational weaknesses (in particular, in contract management) is by evaluating a company's internal compliance system. In order to serve clients' needs in a timely and cost-efficient manner, M&A lawyers must therefore shift their attention to compliance matters while due diligence is being conducted.
An unexpected fundamental change to the Foreign Trade Act was recently announced by the National Assembly. Once the changes to the act enter into force, acquiring Austrian undertakings, acquiring shares therein or acquiring a dominant influence in such undertakings will require the prior authorisation of the minister for economy, family and youth, if the target company is active in a field relating to public security and order.
Corporate Immigration
Austrian law generally requires applicants for a Vander-Elst visa to apply from outside the country, as applications submitted from within Austria are automatically denied. However, the European Court of Justice has now ruled that such automatic refusal is disproportionate and is thus in violation of EU law.
Corporate Tax
Overview
Including: Corporate Income Taxation; Anti-avoidance Regulations; Reorganization of Enterprises; Capital Transfer Tax.
The Ministry of Finance has published a draft of the Tax Reform Act which outlines significant changes to the domestic corporate tax law system. The new group taxation rules may yet be subject to some amendments. In any case, the new rules will give rise to substantial tax-planning opportunities and existing groups will have to adapt to the new requirements in order to take advantage of the regime.
The Tax Amending Law 2003 integrates the EU Interest and Royalties Directive into national law. By implementing the directive, Austria follows Luxembourg, the Netherlands and Denmark, all of which have amended their respective income tax laws in compliance with the directive.
The Ministry of Finance recently published the new Investment Fund Guidelines 2003. The guidelines represent an interpretation manual that shall be used by tax authorities and taxpayers, and already apply to tax assessments for 2003. In the ministry’s opinion, the guidelines may also be relevant in pending tax cases unless they contradict earlier statements published by it.
The National Council of the Austrian Parliament has adopted a draft law that provides for significant changes to the international participation exemption. The law is likely to enter into force this year and should therefore be considered within the framework of possible (re)structuring.
A draft law extends the international participation exemption to indirect participations. In addition, foreign legal entities that are comparable to an Austrian limited liability company or stock company and have their seat in Austria are granted the exemption in respect of their shareholdings.
The Ministry of Finance recently issued draft guidelines on the Reorganization Tax Act. If implemented, Austrian and foreign investors considering a debt-financed share deal would no longer be able to deduct interest related to the acquisition of shares through post-acquisition restructuring mechanisms.
Derivatives
The Stock Exchange Act has recently been amended to extend significantly disclosure obligations for shareholdings in listed companies. The main objective is to capture arrangements, in particular derivatives, which previously escaped major shareholding disclosure rules, even though they could be (and were) used for stake-building purposes in Austrian listed companies.
Under the Stock Exchange Act, persons that directly or indirectly acquire or sell shares of an issuer whose shares are admitted to trading on a regulated European Economic Area market must declare when the proportion of voting rights changes in accordance with stipulated thresholds. Failure to comply with the share disclosure regime is an administrative offence and may result in a fine of up to €30,000.
E-commerce
Overview
Including: Consumer Protection Act; Spamming; Digital Signatures Act.
In a conflict between a domain name and another person's trademark the content of the domain is key. In a recent decision the Supreme Court had to decide whether to apply the same principle if the conflict is between a domain name and another person's name.
Is Austria Losing its Domain Identity?
The Hamburg Landgericht has issued a surprising ruling that the country-code top-level domain (ccTLD) '.at' has no direct reference to Austria. The court reached a general conclusion that ccTLDs do not possess sufficient distinction to impose residency requirements on the registrant of such a domain name.
Supreme Court Rules on WIPO Procedure Costs
For the first time, the Supreme Court has ruled on the issue of whether the costs of a World Intellectual Property Organization (WIPO) procedure for a domain name dispute can be claimed as damages from the defeated party.
The Supreme Court has clarified two aspects of the E-commerce Act, defining the main features of the term 'information services' and specifying contact details that ought to appear on websites. The defendant in question advertised websites where the price of goods and services was not displayed, as well as free access to live webcam transmissions when in fact access was not free.
The Austrian Data Protection Commission recently decided that an internet service provider which offers website hosting services is a data processor under the EU Data Protection Act. The commission ruled that a person who processes personal data merely by storing it is considered to be a processor if he acts in accordance with the instructions of the controller.
The Supreme Court has ruled that if a website merely advertises a product or service and no contract can be concluded through it, then the service provider need not make contractual terms and conditions available in accordance with Section 11 of the E-commerce Act.
Employment & Labour
The Supreme Court recently clarified a conceptual question concerning age discrimination. The case was unique in that the plaintiff was the only contender for the job and the vacancy was never filled. The court had to decide whether discrimination could occur even in the absence of a person with whom the applicant's situation could be compared.
Employers must respond quickly when defending employees against mobbing attacks and harassment by their peers, a recent Supreme Court decision has confirmed. The court made clear that although an employer is free to choose any means necessary to protect its employees against such behaviour in the workplace, measures must be taken without delay.
Although Austria has had a statutory framework in place since 1988 regulating the relationship between temporary workers, their employers and the entity to which they are assigned, the legislature was slow to implement the regulations set forth in the EU Directive on Temporary Agency Work. In order to adopt the directive's provisions, the Temporary Employment Act will shortly be amended accordingly and signed into law.
Confidence in occupational retirement schemes has been lost over the years due to financial crises current and past, incorrect investment decisions and lax oversight. Many employees transferred their pension rights to defined contribution models hoping for higher returns, but instead suffered losses. The recent amendment of the Pension Fund Act aims to mitigate potential negative effects on occupational pensions.
Austrian law requires companies to be members of the Chamber of Commerce. In general, the applicability of a collective bargaining agreement is determined through mandatory membership of the relevant division of the Chamber of Commerce; the division to which a company belongs depends on the employer's trade/business and corresponding business licence.
In two recent decisions the Supreme Court clarified employer liability for harassment perpetrated by employees. The decision demonstrates that sexual harassment by the employer can also be perpetrated by the victim's superior. In such case the employer will be (vicariously) liable even where the harassment was the first such conduct of its kind.
Environment
In 2004 the European Commission adopted the EU Environmental Liability Directive, which promoted the establishment within the European Union of a uniform legal liability system for environmental damage. As a result, environmental liability issues should attract greater significance, and thus a broader environmental due diligence process with respect to acquisition targets.
When industrial property is sold and transferred, the parties usually agree on what environmental liabilities are assumed by which party. However, under mandatory public laws the seller remains liable for certain environmental obligations and the buyer becomes liable for other environmental obligations, irrespective of contractual provisions to the contrary.
Healthcare & Life Sciences
In recent years the average annual growth of public expenditure for healthcare was consistently higher than the nominal growth of gross domestic product. The Ministry of Health has produced a draft bill that aims to bring the two growth rates into line with each other. In theory, the draft bill is well suited to achieve the aim of cost containment, but in practice its results are likely to be limited.
The Federal Office for Safety in Healthcare has issued new information on compassionate use programmes, which provides manufacturers of medicinal products with a useful guideline for gathering the necessary documentation for a successful application for such programmes in Austria. It also demarcates the borderline between compassionate use programmes and clinical trials.
The Austrian legislature recently amended the rules on advertising of medicinal products to professionals to bring them in line with the jurisdiction of the European Court of Justice. However, contrary to the explanatory materials mentioned in the bill, the limitation in relation to advertising to laypersons remains. The legislation as it stands is therefore not in compliance with EU law.
A recent advertisement placed by a Hungarian dentist in several Austrian newspapers, under the heading "Spring Promotion", was found by the Austrian Supreme Court to be illegal and to be in danger of bringing the dental profession into disrepute. The decision demonstrates that the Supreme Court will maintain its strict approach on advertising limits for medical professionals in Austria.
Information Technology
Mobile applications are convenient, entertaining, easy to handle, cheap and versatile. However, the processing of other people's personal data through an app triggers full responsibility under data protection laws. Users would thus be well advised to consider whether they would wish to have their own data processed in the same way before processing other people's data through an app.
The European Court of Justice (ECJ) recently ruled that the Austrian Data Protection Authority is not a sufficiently independent regulatory body and therefore is not in line with the respective requirements of the EU Data Protection Directive. In particular, the ECJ took offence at the fact that the day-to-day business of the authority is managed by a federal official.
Following European Commission proceedings against Austria for breaching EU law by failing to implement the EU Data Retention Directive, and a related European Court of Justice ruling against Austria, the government has now decided to implement the directive. The draft legislation implements the minimum requirements set out by the directive by providing for a retention period of only six months.
New amendments to data protection law
In early 2010 substantial revisions to the Data Protection Act entered into force. Among other things, the revised act introduced to the data protection regime a notification duty requiring every data controller in Austria to inform data subjects accordingly should they become aware of systematic and seriously unlawful misuses of personal data.
Insolvency & Restructuring
For a successful rescue to take place, the business premises must remain available for the continued operation of the company. Consequently, Section 12c of the Insolvency Code protects the debtor from eviction in rescue proceedings. However, the Supreme Court recently confirmed that a landlord may proceed with eviction proceedings if the tenant fails to meet certain obligations.
A recent judgment of the Supreme Court made clear that future damage of an unknown amount arising from an event that occurred before the opening of insolvency proceedings may be asserted only as a bankruptcy claim in the insolvency proceedings. The estimated amount of damage must be disclosed when the claim is asserted against the bankrupt company.
A new real estate income tax was recently introduced in Austria. When land encumbered by liens is now sold in the course of insolvencies, the question arises as to whether this new tax qualifies as special estate costs. The Supreme Court is yet to clarify the matter; therefore, until this happens, creditors should note that reduced amounts will be attributed to them from the proceeds from the sale of collateral.
In 2009 the Austrian legislature abolished free legal aid for legal entities, and thus also for insolvency estates without assets, although free legal aid had previously been granted only under very restricted conditions. However, a recent ruling of the Constitutional Court held that the abolition of the entitlement to free legal aid for legal entities (ie, also for insolvency estates) was incompatible with constitutional law.
The Supreme Court recently clarified its position on whether injured persons could also join criminal proceedings as private parties if the offender has filed for insolvency. It ruled that creditors may join criminal proceedings as private parties in such cases only if the claims result from the prosecuted criminal action, arose after insolvency proceedings were opened and are not affected by the effects of the insolvency proceedings.
Company pension commitments to employees should be secured in case of the employer's insolvency. If (contrary to legal requirements) such pension securities are not held separately from the employer's other securities, the statutory pledge for securing company pensions cannot fulfil the hedging purpose prescribed by law. Therefore, if the employer acts unlawfully, the security mechanism prescribed by law is to no avail.
Insurance & Reinsurance
In a recent decision the Supreme Court found that an insurer's awareness of a substantial risk - and its omission to enlighten the insured about this issue - might be taken into account not only in the context of damages claims, but also when interpreting the contractual provision in question. The court ruled that all knowledge of an insurance agent must be directly attributed to the insurer.
The good conduct rules that apply to investment advisers in Austria also apply to brokers selling insurance policies which are similar to investment products. A recent Supreme Court decision dealt with the brokerage of second-hand life insurance policies – the investors had complained that the insurance broker had failed to notify them adequately of all the risks involved.
Following the recent economic crisis, the need arose to make it easier for insolvent companies to continue their business through restructuring. This objective was achieved through a reform to the Insolvency Law 2010. It has been market standard to include 'insolvency clauses' in financial lines insurance policies in particular. From the point of view of the act, such insolvency clauses are now ineffective.
Intellectual Property
Overview
Including: Patents; Registered designs; Semiconductor protection; Trademarks; Design protection; Copyright.
In a recent decision the Supreme Court upheld the position of a collecting society claiming copyright infringement, ruling that the interests of an author to receive remuneration for the use of its work have greater weight than the interests of practising a trade. The court's decision is in accordance with the prevalent German doctrine on the subject concerning the monopolistic position and the obligation to contract.
In a recent decision the Austrian Supreme Court thoroughly examined the legal effects of a supplementary protection certificate for medicinal products and its interrelation with patent rights. The decision is complex, but provides valuable information on related proceedings for injunctive relief. Additionally, the detailed examination of legal aspects of supplementary protection certificates is welcome.
The Supreme Court recently clarified the applicability of Article 12(c) of the Community Trademark Regulation in the context of comparative advertising, ruling that it should be interpreted narrowly and must be employed only in cases where such usage is the only possibility for providing the public with comprehensive information on the marketed goods.
In a recent decision the Supreme Court evaluated the scope of patent protection of so-called 'Swiss-type claims' and infringements constituted by dietary supplements, thereby interpreting the European Patent Convention on a national level. A Swiss-type claim is intended to cover subsequent medical use (or indication of efficacy) of a known substance or composition.
The latest amendment to the Trademark Act grants trademark proprietors the right to submit a notice of opposition against registered trademarks. Previously, a proprietor had to wait for a trademark to be registered before it could challenge the lawfulness of the registration. By implementing opposition proceedings, the legislature also introduced a legal remedy to cancel a trademark registration retroactively.
The Patent Act provides for regulations with respect to employee inventions. Thus, employees (if they are not specifically employed for the purpose of making inventions) are entitled to adequate compensation if the invention or any right to use the invention is transferred to the employer. In a recent case the Supreme Court confirmed its view on the validity of flat-rate compensation agreements for employee inventions.
Litigation
The Supreme Court recently updated existing case law, stating that an action for a preventive injunction regularly requires that the infringement of rights have already begun. The more valuable the potentially threatened right, the more likely it is that the potential tortfeasor must refrain from activities that would lead to the possibility of damage. However, the applicant must provide proof of a serious and imminent threat.
The Supreme Court recently dealt with the requirements for the suspension of enforcement proceedings under Austrian and European law. Under the Enforcement Act, enforcement can be postponed only if its beginning or continuation is related to the risk of an irreplaceable property loss, or one that would be difficult for the applicant to replace.
The Supreme Court has recently had to deal with questions regarding declaratory judgments. In a recent decision, the court issued an interim judgment on the (negated) statute of limitations. Such interim judgment does not exclude the claim being later rejected due to a lack of evidence. The court also examined the requirements of legal interest in a declaratory judgment, in connection with conditional rights.
The Supreme Court recently confirmed that the universal successor of a party to proceedings is regarded as 'the same party'. Where proceedings involving the same cause of action and between the same parties are brought before the courts of different member states, any court other than the court first seized shall, of its own motion, stay its proceedings until such time as the jurisdiction of the court first seized is established.
The Supreme Court recently handed down two decisions dealing with the timeliness of submissions made by fax or email. The court ruled that the sender of a brief will always bear the risk if a fax or email does not arrive, even if the reason for late receipt lies with the court. Emergency submissions (eg, where a fax does not go through) should be filed by email in the assumption that there will be no server problems.
An examination of restitution claims
Under the Civil Code, in order for a restitution claim due to failure of consideration to arise, the service recipient must be aware that the service was performed in expectation of later receipt of consideration. 'Consideration' includes the usual remuneration, as well as other ordinary and extraordinary benefits (eg, commission) which are based on the result of the work provided.
Media & Entertainment
An amendment to the Media Act was recently introduced that extended the duties of disclosure for website and newsletter providers. The extended duties will apply to all media belonging to owners based in Austria. The amendment aims to ensure "complete transparency", but it is more likely to have the opposite effect, with information overload causing issues for affected media owners.
Offshore Services
Private Foundations Built on Solid Ground
Private foundations in Austria enjoy numerous tax advantages and are most often used to prevent family property from being split up. The greatest benefits are obtained when the assets of a private foundation are not entirely distributed to the beneficiaries for a number of years; this can lead to an almost tax-free accumulation of profits.
Product Liability
In a recent case the Supreme Court confirmed that questions of individual responsibility and contributory negligence must be decided on a case-by-case basis and therefore cannot constitute a material point of law. As a result, any product liability-related appeal to the Supreme Court which deals only with individual responsibility and contributory negligence should be dismissed as inadmissible.
Sometimes even small things can have a big impact. In a recent case a screw on a circuit breaker that was not tightened properly (costing approximately €550) led to a chain reaction of failures, resulting in damages of €27,116.50 (partly for damaged equipment and partly for loss of income) and a groundbreaking Supreme Court decision.
Projects & Procurement
Overview
Including: legislation; application of law to entities and contracts; procedures; exclusions and exemptions; remedies and enforcement; changes during and after a procedure.
The 2012 amendment to the administrative procedural laws, which will soon enter into force, provides for a comprehensive legislative reorganisation, including the establishment of new types of administrative court at the provincial and federal level. In connection with the introduction of these new courts, the existing public procurement review bodies will be dissolved with effect from the same date.
During the course of an award procedure, it is not unlikely that the contracting authority will be requested to amend the tender documents during the participation or tender period. This can happen for various reasons, but in a large number of cases bidders request amendments because they feel discriminated against by strict requirements set out in the tender documents.
For the first time an Austrian public procurement authority has clarified what enterprises must do in order to be allowed to participate in tender proceedings despite previous misconduct. The regulatory authority's decree shows that absolution from unreliability requires sustainable personnel consequences, and it is not enough simply to take any organisational or technical steps.
New public procurement regime introduced
A new law was recently published in the Federal Law Gazette, comprising the Defence Procurement Act and the 2012 Amendment to the Federal Public Procurement Act. The Defence Procurement Act includes the introduction of a relaxed regime for the award of contracts below certain thresholds. The amendment includes a new direct award procedure and greater transparency for award decisions.
In a recent landmark decision the Federal Public Procurement Office held that award decisions with respect to non-priority services must now contain the same information as all other such communications. Hence, even in the case of non-priority services, the contracting authority must inform unsuccessful bidders of the characteristics of the winning tender, the name of the successful tenderer and the award sum.
A new regulation was recently introduced on eligibility to participate in public procurements. Previously, candidates or tenderers that were interested in public tenders had to prove through various documents that they were suitable. Now, in many cases, a so-called 'self-declaration' should be enough to qualify for the assignment. However, the crux is that this kind of declaration is only enough 'fundamentally'.
Securitisation & Structured Finance
A recent seminal ruling of the Supreme Court has clarified that banking secrecy rules substantially limit the ability of a credit institution to transfer its loan receivables. These limitations are particularly relevant in relation to securitisation transactions and loan portfolio sales, by which credit institutions may improve their regulatory capital and liquidity structure. Particular care must be taken when structuring such transactions.
Side-Effects of Basel II Implementation
Some recent legal developments have affected the Austrian securitization and structured finance markets. Amendments to statutory law have created some undesired side-effects of Basel II implementation, not only in the regulatory field, but also potentially in the area of tax.
In a recent ruling dealing with jouissance rights the Supreme Court has set out certain limitations on the perpetual nature of jouissance rights that also affect certain hybrid capital instruments. These limitations are particularly relevant in relation to issuances by unregulated corporations where no legal provisions are available to support the perpetual nature of the instruments.
Securitization has not yet been widely accepted by Austrian corporations and credit institutions as a tool for funding or for freeing regulatory capital. To resolve the legal challenges raised by true sale securitization transactions, the legislature has passed several laws to help banks issue asset-backed securities.
New Legislation for Covered Bonds
A draft bill being considered by the Austrian Parliament is designed to improve the quality and rating of mortgage and covered bonds. The existing legal framework contains legal uncertainties regarding the inclusion of certain assets in the asset cover pool and the provision of excess collateral to meet lenders' demands.
