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Litigation Funding in Austria: An Overview

By Raffaela Lödl-Klein and Eva Pany, KAPP & PARTNER Rechtsanwälte GmbH

Third-party litigation funding had a late start in Austria, but it has become an accepted practice. It enables a party to litigate or arbitrate without having to pay for it (e.g. in case the client does not have the funds to pursue a case). Instead of the client, a third-party capital provider can take over some or all the costs/expenses and risks of the proceedings.

The process itself is led by the litigation party and their legal representative. In case of success or comparison, the litigation financier receives a contractually agreed sum from the income earned. If not, the funder bears the costs it has agreed to fund. In principle, all processes are eligible for financing (e.g., commercial and corporate law claims, claims for damages, etc.).

In 2013, the Austrian Supreme Court approved litigation funding by a third party (OGH, 6 Ob 224/12b). Since this decision, third-party litigation funding has become a rising trend in Austria, and is also endorsed by Austrian courts. Nevertheless, the Austrian market still holds a much greater potential.

The Austrian legal system foresees no specific rules for third-party litigation funding or restrictions on funding fees. But there are important aspects to keep in mind:

  • In general, it is not allowed for agreements/contracts under Austrian law to constitute profiteering (e.g. exploitation of a person in need; Article 1 of the Act against Profiteering). Such an agreement is void.
  • Austrian lawyers are not allowed to be paid on the basis of contingency fees only; the Austrian Lawyer’s Ordinance (§ 16 RAO) and the Austrian Civil Code (§ 879 ABGB), foresee strict regulations in case lawyers are involved. Violation of the “quota-litis ban” leads to fines and other punishments.
  • During the whole process of litigation funding, Austrian lawyers must always keep their independence (provided by the RAO).

Summing up, litigation financing is on the verge of quota-litis ban, but with appropriate contracting, the overall approach is acceptable.


Raffaela Lödl-Klein

Raffaela Lödl-Klein

GGI member firm
GGI member firm KAPP & PARTNER Rechtsanwälte GmbH
Law Firm Services
Graz-Seiersberg, Austria
T: +43 316 22 59 55
E: This email address is being protected from spambots. You need JavaScript enabled to view it.
W: www.kapp.at

KAPP & PARTNER Rechtsanwälte GmbH has four partners and five associates and an outstanding reputation for bankruptcy and real estate law in Austria. The firm mainly focuses on bankruptcy law, reorganisation law, company restructuring, commercial law, banking law, real estate law, and international law. For further information, visit the homepage at www.kapp.at.

Raffaela Lödl-Klein is Managing Partner of KAPP & PARTNER Rechtsanwälte GmbH, and specialises in real estate and corporate and insolvency law. She joined the firm in 2013. Raffaela Lödl-Klein is Global Vice Chairman of the Real Estate Practice Group.
Eva Pany

Eva Pany

GGI member firm
KAPP & PARTNER Rechtsanwälte GmbH
Law Firm Services
Graz-Seiersberg, Austria
T: +43 316 22 59 55
E: This email address is being protected from spambots. You need JavaScript enabled to view it.
W: www.kapp.at

Eva Pany is also a Managing Partner of KAPP & PARTNER Rechtsanwälte GmbH. She joined the firm in 2014 and focuses particularly on litigation, civil, and family law.


Published: Litigation & Dispute Resolution Newsletter, No. 11, Autumn 2019 l Photo: Calin Stan - stock.adobe.com

 

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