AUSTRIA Law and Practice Contributed by: Farid Sigari-Majd and Mathias Lehner, Freshfields
3.1.10 Transfer/Assignment of Debts Under Foreign Laws An Austrian court would look to the law applicable to the loan to determine whether the contractual rights thereunder can be assigned and if the consent of the debtor is required for a transfer of the contractual position (see 2.1.2 Application of Foreign Laws for details and limitations). If an assignment or transfer is permissible under applicable law, it would normally be recognised by an Austrian court. 3.1.11 Usury/Interest Limitation Laws An agreement that “must appear manifestly imbal - anced to every reasonable and just person” would be contrary to public policy ( sittenwidrig ) under Austrian law and is, therefore, void. This concept puts an upper limit on interest that can be claimed. Compounded interest is generally permitted under Austrian law, subject to an express agreement between the parties. 3.2 Security 3.2.1 Typical Forms of Security and Recourse Due to the (strict) perfection requirements in respect of Austrian pledges over tangible assets, parties often aim for structures where the finance provider remains the owner of the aircraft and leases it to the operator. If, however, the aircraft is already owned by the bor - rower at the time of the loan, any transfer of title to the finance provider may be subject to a re-charac - terisation risk (see 2.2.5 Recognition of the Concepts of Trust/Trustee ). If the owner and operator are different persons, a pledge could be perfected by instructing the operator to hold possession of the aircraft to the instruction of the pledgee. This structure is also used in the market. Further, a typical security package in an Austrian air - craft finance transaction would include a share pledge agreement, receivables pledges (over lease receiva - bles, insurance receivables, etc), account pledges, guarantees, airframe warranties agreement, engine warranties agreement, a security deposit and a dereg - istration power of attorney.
pledges commonly permit the pledgee to exercise voting rights on behalf of the pledgor following an event of default under the loan, which increases the lender’s control in a default scenario. 3.1.6 Negative Pledges Share pledges or pledges over partnership interests are recognised under Austrian law and frequently requested by lenders. In addition, Austrian law share pledges commonly permit the pledgee to exercise voting rights on behalf of the pledgor following an event of default under the loan, which increases the The authors are not aware of any material restrictions or requirements imposed on intercreditor arrange - ments under Austrian law or involving Austrian parties. 3.1.8 Syndicated Loans The concept of agency and the role of an agent under syndicated loan transactions are recognised and fre - quently used in the Austrian market. 3.1.9 Debt Subordination Parties are generally free to agree on a contractual subordination of a claim. In practice, a distinction is sometimes made between “normal” and ”deep” sub - ordination, with the latter term referring to a waiver of the relevant creditor to consider the deeply subordi - nated debt for the purposes of determining whether a company is over-indebted. Further, a deeply subor - dinated creditor undertakes not to file for insolvency in the case of a default under such debt. lender’s control in a default scenario. 3.1.7 Intercreditor Arrangements In addition to contractual subordination, structural subordination is sometimes used in financing trans - actions. Austrian law also recognises a concept of equitable subordination with respect to certain loans provided by or on behalf of a qualifying shareholder during a time of economic “crisis” ( Krise ) in accordance with the Austrian Equity Substitution Act (EKEG).
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