AUSTRIA Law and Practice Contributed by: Bettina Knoetzl, Katrin Hanschitz, Dr Kirstin McGoldrick and Natascha Tunkel, KNOETZL HAUGENEDER NETAL GmbH
2.4 Minimum and Maximum Amounts of Third-Party Funding Litigation funders often provide funds to pros- ecute cases with significant financial impact, as they tend to be compensated for their services with a proportion of the proceeds (approximately one-third). This proportion 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 funded that arise in the proceedings (ie, court fees, lawyer’s fees, fees for expert witness- es and/or translators, and travel expenses for witnesses). The opponent’s legal fees are usually also provisionally covered to provide for a sce- nario in which the funded party loses the case and must reimburse the opponent for its legal fees or costs. The litigation funder will usually reserve the right to terminate the agreement at any time in order 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 into a pactum de quota litis (con- tingency fee arrangement) with their clients, but this rule does not apply to those outside of the legal profession. Accordingly, a third-party funder’s compensation is generally determined by a percentage of the amount recovered. Other fee structures may also be permissible as long as they are not excessive, contrary to good mor- als or violate consumer protection laws. A suc-
In all other proceedings, the parties may (with a few exceptions) be represented by any person, including by foreign counsel. 2. Litigation Funding 2.1 Third-Party Litigation Funding The permissibility of third-party litigation fund- ing was the subject of fierce debate in the early 2000s. Yet third-party litigation funding is now an accepted tool in Austria and is generally recog- nised without any restrictions. The political rea- son for this was the limited possibility of a col- lective suit in Austria, which was compensated by third-party financing and “Austrian-type mass claims”. However, Austria recently implemented the EU Directive 2020/1828 on representative actions for the protection of the collective inter- ests of consumers. This new regime on collec- tive redress explicitly permits third-party funding, albeit with certain restrictions – eg, the third- party funder must not be a competitor of the defendant or economically or legally dependent on 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 fund- ing. 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 permitted for defendants.
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