AUSTRIA Law and Practice Contributed by: Bettina Knoetzl, Katrin Hanschitz, Kirstin McGoldrick and Natascha Tunkel, KNOETZL
the protection of the collective interests of consumers in July 2024. This new regime on collective redress explicitly permits third-party funding, albeit with cer- tain restrictions – eg, the third-party funder must not be a competitor of the defendant nor be economically or legally dependent upon the defendant (as for the newly implemented regime on collective redress in Austria 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 to litigation funding. However, generally, funding will only be available to plaintiffs or defendants in lawsuits in cash-value civil claims. 2.3 Third-Party Funding for Plaintiff and Defendant In most cases, funders provide their financial support to plaintiffs, but it is also permitted for defendants. 2.4 Minimum and Maximum Amounts of Third-Party Funding Litigation funders often provide funds to prosecute cases with significant financial impact, as they tend to be compensated for their services with a proportion of the proceeds (approximately one-third). This propor- tion must cover the risk undertaken by the funder, the costs of their own lawyers, overheads, including due diligence costs, and investor profit. Therefore, cases with low financial impact tend to attract funders only if there are multiple, similar cases that can aggregated through collective action. 2.5 Types of Costs Considered Under Third- Party Funding Litigation funding agreements generally cover all legal fees and court costs incurred by the party being fund- ed 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 provisionally covered to provide for a scenario in which the funded party loses the case and is required to reimburse the opponent for its legal fees or costs. The litigation funder will usually reserve the right to terminate the agreement at any time to
avoid having to cover further costs while bearing the existing costs. 2.6 Contingency Fees Members of the legal profession are prohibited from entering a pactum de quota litis (contingency fee arrangement) with their clients, but this rule does not apply to those outside of the legal profession. Accord- ingly, a third-party funder’s compensation is generally determined by a percentage of the amount recovered. Other fee structures may also be permissible if they are not excessive, contrary to good morals or violate consumer protection laws. A success fee arrange- ment is possible, if it constitutes 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 or during ongoing proceedings (eg, for appeals). It should be remembered that creating an operational litigation funding agreement often takes several weeks, while procedural deadlines and limita- tion periods nevertheless continue to run. There is no prerequisite to filing a lawsuit. Neverthe- less, it may be advisable to notify a potential defend- ant, demanding satisfaction of 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, requiring the “successful” plaintiff to bear the costs for the (unnecessary) proceedings. The defendant is under no enforceable obligation to respond to such a letter. Exceptions 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, archi- 3. Initiating a Lawsuit 3.1 Rules on Pre-Action Conduct General Rule
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