1.1 General Characteristics of the Legal System
Austrian Civil Law System
The Austrian legal system is a civil law one. Laws are based on codes and statutes. Civil procedure provides an adversarial process with inquisitorial elements: the proceedings and the judge are limited to the factual allegations of the parties. The judge is not a mere "referee" (eg, in the judge's inquisitorial role, he or she will be the primary interrogator of parties and witnesses).
Obligatory Public Hearings
A public hearing is obligatory. The judge will determine all relevant facts of the case in the hearing, hear parties and witnesses, discuss the content of documents and – if needed – appoint and hear expert witnesses. Parties and lawyers are entitled to interrogate witnesses and experts. The underlying principle is that the judge (as the finder of fact) should get an immediate and personal impression of the parties, the witnesses and the case.
1.2 Court System
Austrian courts are organised 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 EUR15,000 and, irrespective of the amount in dispute, on certain subject matters (mainly family and tenancy law). Regional Courts have jurisdiction over first instance rulings on all legal matters not assigned to District Courts. They are also competent to rule on appeals from District Court decisions. Higher Regional Courts are appellate courts for decisions of Regional Courts.
Specialised Commercial Courts
Commercial matters are decided by commercial courts. In the capital city, Vienna, a separate Commercial District Court and Commercial Regional Court are established. In other provinces, the Regional (District) Courts also function as commercial courts.
The Supreme Court
The Supreme Court is the court of highest review. No further (domestic) remedy is possible over its decisions. Its function is to preserve the uniform application of law throughout Austria. Although lower courts are not legally bound by its decisions, the case law of the Supreme Court has effective precedential character.
1.3 Court Filings and Proceedings
Court filings are not public. Hearings, however, are open to the public. Public access may only be restricted if, for example, this is necessary to maintain public order, protect certain categories of information (such as banking secrecy, business or state secrets), or if the hearing deals with personal family matters.
1.4 Legal Representation in Court
For certain legal disputes, the parties must be represented by a lawyer admitted to the Austrian Bar and cannot represent themselves. A foreign lawyer may not represent a party in these cases
This limitation applies to:
- disputes of first instance before Regional Courts;
- disputes before District Courts if the amount in dispute exceeds EUR5,000; and
- all appeal proceedings.
In all other proceedings, the parties may (with a few exceptions) be represented by any person, including by a foreign lawyer.
2. Litigation Funding
2.1 Third-Party Litigation Funding
The permissibility of third-party litigation funding was the subject of fierce debates in the early 2000s. At present, thirdparty litigation funding is an accepted tool in Austria and is recognised without any particular restrictions. The political reason for this is the limited possibility of collective suit in Austria, which is compensated by third-party financing and "Austrian-type mass claims" (see 3.7 Representative or Collective Actions).
The state provides legal aid for parties, including legal entities unable to afford litigation.
2.2 Third-Party Funding: Lawsuits
There are no formal restrictions of litigation funding, but, generally, funding will only be available to plaintiffs or defendants in lawsuits regarding cash-value civil claims.
2.3 Third-Party Funding for Plaintiff and Defendant
In most cases, funders provide their financial support to the plaintiff, but it is also allowed for defendants.
2.4 Minimum and Maximum Amounts of ThirdParty Funding
It is common practice that litigation funding companies fund cases with a significant financial impact, as they tend to be compensated for their services with a significant portion of the proceeds (approximately one third of them). This portion must cover both the risk undertaken by the funder and the costs of their own lawyers. Therefore, cases with low financial impact tend only to attract funders if multiple, similar cases are likely to emerge and collective action can be brought.
2.5 Types of Costs Considered under Third-Party Funding
Generally, litigation funding agreements cover all legal fees or costs that arise in the proceedings (ie, court fees, lawyer's fees, fees for expert witnesses and/or translators and travel expenses for witnesses). The opponent's legal fees are usually also covered to provide for the scenario in which the funded party loses the case and thus becomes required to reimburse its opponent for its legal fees or costs. The litigation funder will usually reserve the right to terminate the agreement at any time to prevent covering further costs while bearing the costs already incurred.
2.6 Contingency Fees
It is prohibited for members of the legal profession to enter into a pactum de quota litis (contingency fees arrangement) with their clients, but this rule does not apply outside the legal profession. Thus, a third-party funder's remuneration is generally based on a percentage of the amount recovered. Other fee structures may also be permissible as long as they are not excessive, against good morals or contradictory to consumer protection legislation. A success fee arrangement is possible, if it concerns only a certain portion of the fee agreement.
2.7 Time Limit for Obtaining Third-Party Funding
Litigation funding is available at the commencement of litigation as well as in ongoing proceedings (eg, for appeal procedures). It should be remembered that entering into a litigation funding agreement often takes several weeks, while procedural deadlines and limitation periods continue to run.
3. Initiating a Lawsuit
3.1 Rules on Pre-action Conduct
There is no prerequisite to filing a lawsuit. Nevertheless, it may be advisable to send a letter to the potential defendant requesting compliance regarding the dispute, because, for example, if the potential defendant immediately performs upon initiation of the lawsuit or does not dispute the claim, this can lead to a cost decision ordering the successful plaintiff to bear the costs for the (unnecessary) proceedings. The defendant is not obliged to respond to such a letter.
In a limited number of cases relating to:
- neighbourly disputes;
- tenancy disputes; and
- disputes between members of certain professional groups subject to a code of conduct (eg, architects, lawyers, medical doctors),
alternative dispute resolution mechanisms are foreseen as a prerequisite to filing a lawsuit. If the claimant does not comply with this prerequisite, the claim may be rejected.
3.2 Statutes of Limitations
Statutes of limitations applied to civil suits are fixed by substantive law. The limitation periods generally commence when a right could have been first exercised and, as a rule, are 30 years. However, due to numerous, specified exceptions, most claims, including damage claims, are subject to a shorter limitation period of three years. In the case of damage claims the threeyear period starts with knowledge of the damage and the identity of the party that caused the damages. For contractual claims, the statute of limitations generally begins when the claim is due.
There are a number of shorter or longer limitation periods. For example, a negligence claim against a managing board member can be brought within five years.
Interruption and Suspension
There are different reasons for interruption and suspension of the limitation period. An acknowledgement, for example, interrupts the limitation period, and settlement negotiations suspend the expiry; the claim must be filed within a reasonable period after the negotiations have failed.
The fact that a claim is time barred must be raised by the defendant. It will not be imposed by the court sua sponte.
3.3 Jurisdictional Requirements for a Defendant
In domestic cases, the jurisdiction of Austrian courts is determined by the Law on Jurisdiction (Jurisdiktionsnorm). In most international cases, the jurisdiction of Austrian courts is determined by Regulation (EC) 1215/2012 (the recast Brussels Regulation).
These provisions establish the jurisdiction of all types of courts. Whether a specific court is competent to hear a case may also depend on other factors such as the type of dispute (eg, to establish the competence of the commercial courts to hear a case).
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.