The Banking Litigation Law Review: Austria
In terms of sheer numbers of cases, litigation proceedings in Austria have decreased over recent years. Banking litigation was no exception in this regard. While there is no unanimous perception as to what reasons lie behind this development, it is fair to say that the complexity of the pending cases has increased and has made court proceedings more expensive and time-consuming. At the same time, the continued activities of the Austrian legislature impose more extensive and detailed duties on financial institutions in particular. In this chapter, some of the significant recent developments in case law and legislation will be summarised and show that banking disputes will likely remain a key driver of the case law development in Austria, in the fields of both civil procedure and substantive law.
One of the most prominent cases, which has triggered substantial and still pending litigation in Austria (including criminal prosecution), was last year's bankruptcy of Commerzialbank Mattersburg, a medium-sized Austrian regional bank. The case triggered temporary turmoil in the region, after hundreds of customers were suddenly unable to withdraw their funds. The case shifted the focus of public interest to the Austrian regulator because creditors are claiming that the Austrian Financial Market Authority did not react in a timely manner to earlier indications of embezzlement within the bank. This entailed a major lawsuit against the Republic of Austria filed in February 2021. Furthermore, damage claims against the bank's auditors are currently pending. In contrast, a lawsuit filed against the regional government based on alleged failures of supervision was rejected by the court.
Significant recent cases
The three following noteworthy cases have recently been dealt with by the Court of Justice of the European Union and the Austrian courts.
i International jurisdiction for investor claims
On 12 May 2021, the Court of Justice of the European Union (CJEU) rendered a decision2 on international jurisdiction for investor claims according to Article 7 No. 2 Brussels Ia regulation (EU Regulation No. 1215/2012). The decision relates to the place where the damage occurred for damages that resulted from globally accessible but incorrect ad hoc notices. The facts of the case are as follows: the claimant, VEB, is an association with full legal capacity under Dutch law to represent the interests of shareholders. It has capacity, inter alia, to bring collective actions. The defendant, BP, is an oil and gas company that operates on a worldwide scale. Its ordinary shares are listed on the London and Frankfurt (Germany) stock exchanges. On 20 April 2010, an explosion occurred on the oil-drilling platform, Deepwater Horizon, leased by BP and located in the Gulf of Mexico, causing deaths, injuries and environmental damage. In 2015, VEB initiated proceedings against BP before the Rechtbank Amsterdam (District Court, Amsterdam, Netherlands), by way of a collective action on behalf of all persons who had bought, held or sold ordinary shares in BP through an investment account in the Netherlands. VEB claimed, inter alia, that BP provided its shareholders with inaccurate, incomplete and misleading information concerning the security and the extent of the oil spill on the oil-drilling platform Deepwater Horizon. Both the Court of First Instance and the Court of Appeal declared that they lacked (international) jurisdiction. They argued that the damage having been suffered to assets held in a Dutch bank account was not in itself a sufficient connecting factor to establish the jurisdiction of the Dutch courts. For this to be the case, further circumstances would have to be present. The Hoge Raad der Nederlanden (Supreme Court of the Netherlands) then stayed the proceedings and referred to the CJEU for a preliminary ruling.
The CJEU commented on the case against the background of the criterion of foreseeability (see recital 15 of the Brussels Ia regulation).3 It held that an issuer of a certificate who does not comply with the legal obligations in respect of a prospectus must, when it decides to notify the prospectus relating to that certificate in other Member States, anticipate that inadequately informed investors who are domiciled in those Member States, might invest in that certificate and suffer damage.4 The objective of foreseeability is, however, not ensured in the same way where, in the Member State in which the investment account used for the purchase of securities listed on the stock exchange of another state is situated, the issuer of those securities is not subject to statutory reporting obligations.5
Ultimately, with the decision in the Effectenbezitters case, the CJEU confirms the path it has already taken of determining the place of performance jurisdiction based on an overall consideration of the facts of the case.6 For listed securities, the place (or market) where the security is listed seems to be a decisive criterion in the assessment of international jurisdiction. Cases involving damages that result from the acquisition of non-listed financial instruments do not seem to be solvable with the CJEU's approach.7 The CJEU did not address the issue of territorial jurisdiction, as this was not relevant to the decision. To determine the competent court, however, further connecting factors are required. Here, it is possible to fall back on the previous case law. How to proceed in cases where a security is listed in several Member States remains an open question.8
ii On the defence of contributory negligence in the case of incorrect investment advice
In its decision of 23 October 2020,9 the Austrian Supreme Court held that, with regard to incorrect investment advice, contributory negligence may be considered according to the circumstances of the individual case, if the client ought to have been aware of the incorrectness of the advice. This applies, for example, if – as in the case at hand – lawyers experienced in commercial and business law refrain from accepting further investment advice in view of their professional expertise and do not read the documents and information on risks provided.
In the present case, the plaintiffs, both attorneys focusing on commercial and business law, subscribed to fund shares following investment advice by the defendant, a financial institution. The claimants sought the reversal of the investment under the law on damages based on alleged incorrect investment advice. They argued that they would not have subscribed to the investment if, inter alia, they had known about the high debt-financing portion of the investment or that the projected or ongoing distributions were not balance sheet profits but capital repayments. The plaintiffs had not read the documents handed out (declaration of accession, investor profile and information brochure). The Supreme Court amended the decisions of the lower courts in favour of the respondent by dividing the damages based on contributory negligence.
iii No negative interest
In its decision of 26 February 2020,10 the Austrian Supreme Court upheld its opinion on negative interest in credit agreements.
In past decisions, the Supreme Court decided on several occasions on the question of whether a lender may be obliged to also pay interest to the borrower depending on the development of a reference interest rate.11 In each of these decisions, the court assumed that the parties typically agree that the borrower has to pay interest in return for the provision of the loan value. The Supreme Court held that, when concluding the credit agreement, the borrower does not regularly expect to receive payments from the lender at any time during the term of the agreement, so that the lender may receive less in total – or in individual interest periods – than it has provided.
In the present case, the Supreme Court had to decide on the interpretation of interest escalation clauses and found that in the absence of special circumstances, an interest escalation clause must be interpreted in such a way that it does not lead to 'negative interest'. The Supreme Court also stated that if a borrower had in fact understood the interest rate agreements in the credit agreement to the effect that the lender might be obliged to pay interest to the borrower in certain circumstances, a bona fide contracting party would have been expected to disclose such an understanding, as such understanding would be contrary to a typical loan agreement.
Recent legislative developments
The new 'Capital Market Act 2019'
In July 2019, the Austrian legislator decided to renew the Austrian Capital Market Act. The amended act, the Capital Market Act 201912 (KMG 2019), entered into force on 21 July 2019. This legislative measure is directly related to the entry into force of Regulation (EU) 2017/112913 (the Prospectus Regulation) on 21 July 2019.
The most important change concerns provisions on the offering of securities. Corresponding provisions are now included in the Prospectus Regulation, and therefore have been deleted in the national act. Other than that, the KMG 2019 has not brought major changes.14 Nonetheless, the following amendments are worth mentioning.
The exemptions from the obligation to publish a prospectus for investments have been reduced. No prospectus has to be issued pursuant to Section 3, Paragraph 1 of the KMG 2019 in the following cases, among others:
- an offer of investments aimed at investors who acquire investments with a minimum amount of €100,000 per investor in each separate offer, as well as an offer of investments with a minimum denomination of €100,000;
- an offer of investments with a total equivalent value in the European Economic Area (EEA) of less than €2 million; this upper limit shall include any income from offers of investments of the last 12 months that are exempt from the prospectus pursuant to this section;
- an offer of investments that is directed exclusively at qualified investors; and
- offers of investments addressed to fewer than 150 natural or legal persons per EEA Member State who are not qualified investors.
Section 8, Paragraph 3 of the KMG 2019 now stipulates that prospectuses must remain available for 10 years after publication. Availability must be provided on:
- a homepage of the issuer or a homepage of the financial intermediaries placing or selling the investments, including any paying agents existing in Austria; or
- on a homepage of the Financial Market Authority (FMA) or on the homepage of a body commissioned by the FMA for this purpose.
Pursuant to Section 21 of the Austrian Capital Market Act, the right of consumers to cancel the purchase of securities or investments only comes into play in the event of a failure to publish a prospectus in cases where the offer is subject to an obligation to publish a prospectus. There no longer exists a cancellation right for a failure to publish supplements to the prospectus.
According to Section 15, Paragraph 1 of the KMG 2019, penalties may be imposed for violations of the provisions of the Prospectus Regulation. The possible penalties to be imposed by the FMA may sum up to twice the amount of the profits made or losses avoided as a result of the violations, if these figures can be quantified. If such quantification is not possible, a fine of up to €700,000 may be imposed.
Furthermore, the FMA may impose fines on legal persons if (natural) persons, who have acted either alone or as part of a representative body of the legal person and hold a management position, violate obligations set forth in the KMG 2019 (the respective obligations are set forth in Article 15, Paragraph 1). Pursuant to Section 15, Paragraph 2 of the KMG 2019, the maximum fine to be imposed amounts to €5 million or 3 per cent of the total annual turnover.
Asset tracing and claims enforcement procedures often involve banks as third-party debtors holding customer assets. Under the rules further explained below, creditors regularly seek to freeze bank accounts to protect the enforcement of their claims by way of interim relief. Furthermore, the drawdown of bank guarantees provided in the context of large commercial projects frequently leads to interim injunction proceedings and follow-up litigation before the Austrian courts.
In Austria, it is possible to request a preliminary injunction to secure a monetary claim in cases of subjective endangerment in the course of pending civil proceedings or before filing a claim. The relevant provisions are regulated within the Austrian Enforcement Act (AEA).15 The precondition for such a preliminary injunction is the existence of subjective endangerment respective to the recovery of the claim. A case of subjective endangerment may be argued successfully if it is obvious that without a preliminary injunction the opposing (and likely to be liable) party will make it difficult for the other party to pursue its claim, for example, by damaging, destroying, hiding or removing assets16 (see Section 379, Paragraph 2, No. 1 of the AEA).
With regard to banking litigation, the abusive drawing of bank guarantees is a very common ground to file a request for a preliminary injunction. In such cases, the bank that issued the guarantee is prohibited from paying a debt to the opposing party by court order. For example, in a recent decision, the Austrian Supreme Court held that a drawdown of a bank guarantee by the beneficiary was abusive, where the beneficiary had called the bond on the very last day of the validity of the guarantee. In addition, the beneficiary knew that the underlying claim was not yet due and payable, and would not become due before expiry of the guarantee.17
If a bank violates the court order prohibiting the paying out of the guarantee, it becomes liable for damages.18 To secure monetary claims, the court is limited to specific measures depending on the respective object. The following measures are regulated in the AEA (Section 379, Paragraph 3):
- a prohibition addressed to third-party debtors not to pay a debt to the opposing party: this is a frequently used method to secure funds. For example, the bank holding an account for the opposing party is prohibited by way of court order to make any payment upon the opposing party's instruction or to make payments owing to an abusive demand of a bank guarantee;
- movable objects including money: if it is possible to put the object into judicial custody, or administration or management, the court may further render an order to the opposing party to refrain from giving away, selling or pawning the movable object; and
- immovable objects: if it is possible to put the object into judicial custody, or administration or management, the court may further render an order to the opposing party to refrain from giving away, selling, hypothecating or registering any encumbrances in the Land Register.
ii Cross-border interim measures
It is also possible to enforce an external freezing order or an injunction in Austria. The enforceability and recognition of an external freezing order depends on whether the court decision was rendered in an EU Member State or in a non-EU country.
EU Member States
In general, the regime of the Brussels Ia Regulation19 is also applicable to freezing orders and requests for interim measures, such as injunctive relief. As a result, freezing orders and injunctive relief by another Member State's court are automatically recognised and enforceable in Austria without any further procedure on recognition required.20 However, since recognition and enforcement can be rejected by other EU Member States if the opponent was not granted a hearing (or the injunction was not at least served on the opponent before) – ex parte injunctions are frequently not recognised and enforced – only those freezing orders and injunctions where the defendant has been granted a hearing in the Member State of origin can subsequently be recognised and enforced in another Member State.
With regard to bank accounts within the European Union (except Denmark and the United Kingdom), Regulation (EU) No. 655/201421 establishes a European Account Preservation Order procedure to facilitate cross-border debt recovery in civil and commercial matters.
Foreign and non-EU countries
Freezing orders and interim injunctions that have been rendered in a foreign country outside the EEA are enforceable in case bilateral or international treaties are in place, which foresee mutual recognition and enforcement. In principle, freezing orders or interim injunctions must be formally declared enforceable, before enforcement may be sought. The following general requirements for the issuance of a declaration of enforceability are set forth in Section 406 of the AEA:
- a foreign judgment is enforceable in the state in which it was rendered; and
- reciprocity with the state of origin is established by way of bilateral treaties or other instruments (actual reciprocity by way of judicial 'practice' does not suffice).22
The party seeking to receive the declaration of enforceability needs to file such request to the competent Austrian court. According to the AEA, the district court of the opposing party's domicile has jurisdiction. In addition, the party is required to enclose certified copies of all relevant documents with the request. The application for enforcement may be combined with the request.
According to Section 408 of the AEA, the declaration of enforceability may be refused if:
- pursuant to Austrian rules on jurisdiction, the foreign court could not, under any circumstances, have jurisdiction over the legal matter;
- the opposing party was not properly served with the document that initiated the foreign proceeding;
- the opposing party could not properly participate in the foreign proceeding owing to irregularities in the proceeding; or
- the judgment violates basic principles of Austrian public policy.
In practice, interim relief is typically sought before the Austrian courts if Austrian assets are to be secured. This is because most of the creditors want to make use of the surprise effect of ex parte injunctions, which can normally be obtained faster in the country where they are to be enforced (and for the limitations of recognition of foreign injunctions). Applications for enforcement of injunctions from non-EEA countries in Austria are extremely rare.
iii Procedure in Austria
With the request for a preliminary injunction, the applicant must provide available evidence, such as documentary evidence and affidavits that can be immediately examined by the court. Foreign-language documents should be presented with German translations. Generally, a decision on a request for a preliminary injunction is rendered within several days or weeks. Regarding appellate proceedings, a time frame of one to three months for the second instance proceeding and a further two to four months in third instance proceedings should be expected.
Privilege and professional secrecy
No specifics are in place for banking disputes and therefore, the general rules apply. Section 9, Paragraph 2 of the Austrian Lawyers Act (ALA) sets forth the lawyer's duty of confidentiality regarding all matters that were disclosed to him or her in his or her function as counsel whose non-disclosure is in the interest of the client. Therefore, a lawyer has the right to deny testifying in court or before any other authority according to the respective procedural provisions. Section 9, Paragraph 3 of the ALA prohibits circumventing this principle by, for example, interrogating employees of the lawyer or seizing their communications. The procedural implementation of these principles has led to several not entirely identical provisions in the various codes of procedure.23
Regarding criminal proceedings, the attorney's right to deny testifying as a witness is stated in Section 157 of the Austrian Code of Criminal Proceedings (ACCP).24 As mentioned above, owing to the prohibition on circumvention, seizing communications between attorneys and defendants is also prohibited. This is also applicable in cases where these communications are located outside the attorney's office (e.g., at the defendant's apartment). However, there is a requirement that all documents and data must have been created by either the attorney or the defendant. Documents that have been created by another person (e.g., a legal expert) and later handed to the defendant or the attorney do not fall within the provision.
In addition to those already mentioned, similar provisions can be found in Section 321 of the Code of Civil Procedure (ZPO), Sections 89 and 104 of the Finance Criminal Code (FinStrG), Section 49 of the Code of Administrative Procedure (AVG) and Sections 171 and 143 of the Austrian Fiscal Code (BAO).
Jurisdiction and conflicts of law
There are, generally speaking, no specific rules on jurisdiction and conflicts of law regarding banking institutions, and therefore the general rules set forth below apply.
i Domestic rules on jurisdiction
The Austrian judicial system differentiates between local jurisdiction and competence of the courts. The competence of a court mainly depends on the amount in dispute. District courts are the first instance to decide in civil law cases with a maximum amount in dispute of €15,000. In addition, the district courts have competence, irrespective of the amount in dispute, in certain types of cases, such as family and lease cases. Regional courts have jurisdiction in all matters not explicitly assigned to district courts.
In the Austrian Court Jurisdiction Act,25 several provisions govern jurisdiction. As a basic principle, the court at the defendant's place of residence has jurisdiction. For consumer-based claims, the Austrian Consumer Protection Act (ACPA)26 also stipulates that, according to the basic principle on jurisdiction, the court at the defendant's place of residence has jurisdiction. Consumer-based claims are matters relating to a contract concluded by a person for a purpose that can be regarded as being outside his or her trade or profession.
According to Section 104 of the Austrian Court Jurisdiction Act, in non-consumer-based claims, the parties may agree on a forum clause. The forum clause has to be in writing and to be valid it must specify a specific litigation or any legal dispute that may arise from a specific contractual relationship. Choices of forum clauses for consumer-based claims that violate the special jurisdiction for consumer-based claims are null and void.
ii International jurisdiction
International jurisdiction in civil and commercial matters – except where the defendant is not domiciled within the European Union (see Article 6 of the Brussels Ia Regulation) – is governed by the Brussels Ia Regulation. According to the Regulation, in principle, the court of the Member State of the defendant has jurisdiction.
Article 7 of the Brussels Ia Regulation constitutes a supplement to the general principle of jurisdiction. In matters relating to a contract, a person domiciled in a Member State can be sued in the courts of the place of performance of the obligation in question (Article 7, Paragraph 1a). In matters relating to tort, delict or quasi-delict, a person domiciled in a Member State can be sued in the courts for the place where the harmful event occurred or may occur (Article 7, Paragraph 2). This is deemed to also include the place where the damage occurred. In other words, a forum can be established both in the place where the event triggering the damage took place and the place where the damage actually occurred. The provision plays a crucial role with regard to cross-border banking disputes as it enables claimants to sue a bank in the claimants' home jurisdiction, provided that the place of performance or the place of the damaging event is there. However, the provision regularly gives rise to interpretation issues, which lead to disputes on jurisdiction and may prolong the dispute.
According to Article 25 of the Brussels Ia Regulation, the parties of a contract may agree on the jurisdiction of a court of a Member State. There does not have to be a connection between the parties and the forum. Unless agreed otherwise, the chosen forum has exclusive jurisdiction. A choice of forum clause must fulfil one of the following conditions to be valid:
- the forum clause must be in writing or evidenced in writing;
- the choice of forum is according to practices that the parties have established between themselves; or
- the choice of forum is according to international commercial customs.
Notably, the rules on consumer jurisdiction pursuant to Articles 17 and 18 of the Brussels Ia Regulation must be borne in mind, in particular in respect of banking disputes. Generally, these provisions allow consumers to sue their counterparty at the place of their domicile or at the defendant's domicile. However, lawsuits filed by the consumer's counterparty may only be filed at the consumer's domicile. These rules cannot be deviated from by way of a forum clause.
iii Conflicts of law
In Austria, conflicts of law are generally governed by the International Private Law Act (IPRG) 27 and EU law, such as the Rome I Regulation28 and the Rome II Regulation.29 Contractual obligations fall within the scope of the Rome I Regulation, while the Rome II Regulation regulates non-contractual obligations (including obligations derived from culpa in contrahendo). As a general rule, national legislation, such as the International Private Law Act, is not applicable within the scope of either of the Rome Regulations.
In principle, the parties, both in business-to-business and business-to-consumer contracts, are free to choose the applicable law. Absent a choice of law, the Rome I Regulation provides that depending on the circumstances, either the law of the place where the service provider is resident applies or the law of the party that performs the characteristic obligation applies (Article 4 of the Rome I Regulation). More complex rules apply to international consumer contracts. Pursuant to Section 13a of the ACPA, certain sets of rules cannot be altered by way of a choice of law, if the choice of law leads to the application of the law of a non-EEA Member State (Paragraph 1). In addition, the Austrian law provisions governing the application and validity of general terms and conditions of a consumer contract are mandatory in all cases where the consumer contract was concluded because the counterparty expanded its commercial activity to Austria, and the consumer contract was concluded as a result of such activity (Paragraph 2). This means that the general terms and conditions of any foreign bank directing its retail business to Austria must comply with the mandatory Austrian rules governing application and validity of such general terms and conditions.
The Rome I Regulation also allows the courts of the Member States to apply 'its overriding mandatory' rules, irrespective of which law applies to the contract (Article 9 of the Rome I Regulation).
If foreign law is to be applied by domestic courts, the latter will establish the respective applicable rules ex officio. In such cases, the court will consult with the Austrian Ministry of Justice and has to rely on expert opinions. If foreign law cannot be established within a stipulated time frame despite considerable efforts, Austrian law will be applied.
Sources of litigation
In recent years, banking litigation has revealed that banks are more likely to be defendants in lawsuits than plaintiffs. Nevertheless, a few cases with high amounts in dispute were initiated by banks, for example, a case filed by a well-established Austrian bank against an Austrian community seeking redress for the closing costs of derivative instruments with negative market value, which had been purchased by the public administration in order to improve its debt management.
With regard to banks as defendants, numerous cases were triggered following the start of the financial crisis in 2008, which concerned alleged breaches of advisory duties in the context of the marketing and sale of certificates. These included claims based on prospectus liability if the bank was involved in the issuance or control of prospectus information. These cases reached substantial aggregate amounts at various Austrian courts and were responsible for a significant statistical increase in lawyers' caseloads.
Such cases are now in decline as they are being resolved by way of final judgment or settlement. However, nowadays banks seem to be increasingly exposed to representative actions filed by consumer protection associations, primarily the Austrian Consumer Association (VKI), seeking the removal of terms and conditions used by banks for alleged non-compliance with transparency and contra bonos mores rules, as provided for in Austrian consumer law. The most recent example is the issue of negative interest loan agreements (including FX loans), which focuses on the extent to which banks are obliged to pass on the economic benefit of negative interest in loan arrangements to the customer.
Exclusion of liability
According to Austrian law, a total exclusion of liability is prohibited. Provisions to that effect are therefore null and void. Consequently, exclusion of liability for intentional or conscious violations is not possible. Whether this also applies to cases of gross negligence is often discussed by scholars. Generally, exclusion of liability for gross negligence is – even though there are some exceptions – not permissible. Exclusion of liability for slight negligence is largely permissible,30 but not for personal injury.31
The ACPA provides for certain provisions limiting the entrepreneurs' right to exclude or limit their liability for damages. For other damages (e.g., financial loss), exclusion of liability is not possible for gross negligence and intentional damages according to the ACPA.32 Moreover, any contractual provision included in general terms and conditions or contractual forms shall be ineffective if it is unclear or unintelligible.
Regarding gross negligence, the Supreme Court distinguishes between gross negligence and blatantly gross negligence, which implies a level of fault that must not occur to an averagely careful person under any circumstances. According to the Supreme Court, exclusion of liability for blatantly gross negligence contradicts good faith and is therefore considered equal to intentional damaging conduct. Thus, the exclusion of liability for gross negligence is impermissible in consumer contracts (see foregoing paragraph) and excluding liability for blatantly gross negligence is prohibited in any event. Agreements that exclude liability for blatantly gross negligence are therefore null and void. The circumstances in which conduct can be considered grossly negligent or blatantly grossly negligent constitute a difficult normative question that, to a great extent, depends on the facts of each case.33
i Credit reports
Regarding credit reports, the Supreme Court ruled (7 Ob 666/84)34 that exclusion of liability for gross negligence – but not for blatantly gross negligence – was justified and valid owing to the fact that companies could otherwise largely pass on their general business risks (i.e., their relevant credit risk (owing to the insolvency of their customers), onto the financial or credit institutions).35 In the Supreme Court's view, providing credit reports is a business that bears high risks, as the conditions subject to the assessment are, in some cases, very complex. The Supreme Court argued that credit and financial institutions generally have little self-interest in this regard as they do not usually receive any compensation for providing such credit reports. Therefore, financial institutions have a legitimate interest in restricting their liability. For this reason, it seems possible to limit liability to blatantly grossly negligent and intentional conduct.
ii Consulting on funding opportunities
The Supreme Court's jurisprudence on exclusion of liability concerning credit reports is, however, not applicable with regard to consulting on funding opportunities in connection with the financing of a company. In the underlying decision ultimately decided by the Supreme Court (6 Ob 541/92),36 the plaintiff – the customer of the defending bank – filed a lawsuit against the bank for wrongful advice. The plaintiff had negotiated a loan agreement with the bank. The bank furnished wrong information on available subsidies to the plaintiff, and thereby induced the plaintiff into refraining from applying for these subsidies, which would have reduced his financial burden. The courts had to decide whether the case was comparable with the case law on credit reports (mentioned above). The Supreme Court ruled that this case is different because the bank had a genuine interest in procuring the loan agreement with the plaintiff.37 Therefore, a legitimate interest to restrict one's liability was not predominant in this case. For this reason, the exclusion of liability for grossly negligent conduct was considered null and void.
Generally, the increasing pressure applied to banks by the regulator makes financial institutions cautious as to whether they are ready to introduce new products of higher complexity. This conduct reduces the risk of exposure to litigation.
We expect recent regulatory developments, such as the Markets in Financial Instruments Directive (MiFID II), to continue influencing the case law of the civil law courts. More so than before, breaches of the regulatory rules will be construed as breaches of contractual or pre-contractual duties, enabling the customer to adapt or rescind a contract or seek damage compensation. Banks are therefore likely to continue focusing primarily on their internal processes, implementing the increased regulatory duties of care not only to avoid administrative sanctions but also to reduce the risk of exposure in civil litigation.
Outlook and conclusions
At present, the covid-19 pandemic and its aftermath do not seem to have had a major impact on banking litigation in Austria. While it was expected that the pandemic would trigger more business insolvencies, which regularly involve banks significantly mainly as creditors, the number of insolvencies is still at a very low level. The reason for this development is the widespread provision of national subsidies to affected companies that help businesses maintain liquidity. However, in the near future, a significant increase of bankruptcies is expected to follow, which all major Austrian banks will have to deal with. Consequently, it is likely that banks will have to concentrate on the restructuring of financing arrangements with their customers in the near future.
1 Holger Bielesz is a partner and Paul Krepil is an associate at Cerha Hempel Rechtsanwälte GmbH.
2 CJEU12 May 2021, C-709/19 (Vereniging van Effectenbezitters) = LMK 2021, 808834 (Mankowski) = IWRZ 2021, 185 (Deshayes/Weber) = NZG 2021, 823 (Gehann).
3 For the exact wording of the questions to the Court of Justice for a preliminary ruling see CJEU 12 May 2021, C-709/19, margin number 21.
4 CJEU 12 May 2021, C-709/19, margin number 33.
5 CJEU 12 May 2021, C-709/19, margin number 34.
6 See also Deshayes/Weber on CJEU C-709/19, IWRZ 2021, 185 p. 186; Gehann on CJEU C-709/19, NZG 2021, 823, p. 827.
7 Mankowski on CJEU C-709/19, LMK 2021, 808834; Lehmann, CJEU in Effectenbezitters v. BP: Jurisdiction for Collective Actions Based on Incorrect Investor Information – EAPIL Blog 21 May 2021.
8 Lehmann, CJEU in Effectenbezitters v. BP: Jurisdiction for Collective Actions Based on Incorrect Investor Information – EAPIL Blog 21 May 2021.
9 OGH 23 October 2020, 8 Ob 19/20g = ÖBA 2021, 278 = ecolex 2021/158, 210.
10 OGH 26 February 2020, 1 Ob 16/20i = ÖBA 2020, 650.
11 OGH 21 March 2017, 10 Ob 13/17k = ÖBA 2017, 338; OGH 29 August 2017, 6 Ob 51/17v = ÖBA 2017, 867; OGH 26 April 2017, 1 Ob 4/17w = ÖBA 2017, 510; OGH 28 June 2017, 9 Ob 35/17p; OGH 30 May 2017, 8 Ob 101/16k = ÖBA 2017, 856 (Foglar-Deinhardstein); OGH 30 May 2017, 8 Ob 107/16t.
12 BGBl. I Nr. 62/2019.
13 Regulation (EU) 2017/1129 of the European Parliament and of the Council of 14 June 2017 on the prospectus to be published when securities are offered to the public or admitted to trading on a regulated market, and repealing Directive 2003/71/EC.
14 Thomas Zivny, ZFR 2019/548.
15 RGBl 1896/79, in its applicable version.
16 Kodek in Angst/Oberhammer, EO3, Section 379, AEA, Paragraph 7ff.
17 OGH 24 April 2020, 7 Ob 216/19v = ÖBA 2020, 819.
18 Kodek in Angst/Oberhammer, EO3, Section 379, AEA, Paragraph 34.
19 Regulation (EU) No. 1215/2012 of the European Parliament and of the Council of 12 December 2012.
20 Thomas Garber in Angst/Oberhammer, EO3, Section 79, AEA, Paragraph 11.
21 Regulation (EU) No. 655/2014 of the European Parliament and of the Council of 15 May 2014.
22 Before 1 December 2016, the respective provisions were included in Section 79, AEA.
23 Prunbauer-Glaser, 'Legal Professional Privilege' v. Schutz der anwaltlichen Verschwiegenheit', AnwBl 2013, p. 56.
24 Owing to the implementation of Directive 2013/48/EU, an amendment of Section 157 of the ACCP entered into force on 1 November 2016.
25 RGBl, No. 111/1895, in its applicable version.
26 BGBl, No. 140/1979, in its applicable version.
27 BGBl No. 304/1978, in its applicable version.
28 Regulation (EC) No. 593/2008 of the European Parliament and of the Council of 17 June 2008 on the law applicable to contractual obligations (Rome I), OJ 2008, L 177, p. 6.
29 Regulation (EC) No. 864/2007 of the European Parliament and of the Council of 11 July 2007 on the law applicable to non-contractual obligations (Rome II), OJ 2007, L 199, p. 40.
30 Krejci in Rummel/Lukas, ABGB4 Section 879, Civil Code, Paragraphs 122–130.
31 Reischauer in Rummel, ABGB3 Section 1298, Civil Code, Paragraph 10a.
32 Reischauer, 'Contractual exclusion of liability for culpable conduct, in particular gross negligence', ÖJZ 2009/114.
33 Krejci in Rummel/Lukas, ABGB4, Civil Code, Section 879, Paragraphs 122–130.
34 OGH 22 November 1984, 7 Ob 666/84; SZ 57/184; EvBl 1985/98 p. 495; RdW 1985, p. 73; JBl 1986, p. 168.
35 Reischauer, 'Contractual exclusion of liability for culpable conduct, in particular gross negligence', ÖJZ 2009/114.
36 OGH 11 June 1992, 6 Ob 541/92; ÖBA 1993, p. 325 (Jabornegg); JBl 1993, p. 397; RdW 1992, p. 399.
37 Reischauer, 'Contractual exclusion of liability for culpable conduct, in particular gross negligence', ÖJZ 2009/114.