In recent decisions the Austrian Supreme Court has established an economic approach to the qualification of shareholders as consumers or entrepreneurs for the purposes of Section 1 of the Consumer Protection Act. This economic view has now been consolidated by a new Supreme Court decision (OGH, 24 June 2010, docket no 6 Ob 105/10z). Impor-tantly, the economic approach is also determinative for an interpretation of Section 617 of the Code of Civil Procedure, and thus for the term “consumer” as applicable in Austrian arbitration law. Part 1 appeared last week. This is Part 2.
Author’s comment on the Supreme Court’s decision
It is commonly held that Section 617 of the code, which severely restricts the possibility of entering into arbitration agreements with consumers, refers to the definition of the term “consumer” as set out in Section 1 of the act.1 Supreme Court decisions rendered on the scope of Section 1 - such as the present judgment - are thus of material importance to Austrian arbitration practitioners.
In its recent case law, mainly concerned with the conclusion of suretyship agreements between a company's shareholder and a third party, the Supreme Court has developed an economic approach (“substance over form”) to the interpretation of the term “consumer” - an approach which was further consolidated in the present judgment.
According to this case law, mere financial investors which do not exert relevant influence on the management of a company qualify as consumers and thus enjoy the protection of Section 617. This, however, does not apply to shareholders which, due to their legal standing as sole shareholders or else factually (eg, as 50% co-shareholders), enjoy entrepreneurial decision-making power. It remains to be seen whether in subsequent decisions the Supreme Court will further extend this notion of “entrepreneur”, also including - under certain circumstances - managing directors who hold less than 50% of the shares.
Indeed, in various constellations a qualification of minority shareholders as entrepreneurs may well be justified (eg, where a minority shareholder acts as managing director while enjoying certain veto rights). Also, under certain circumstances the mere shareholding without a formal position as managing director together with effective influence on the management of the company might suffice for such a shareholder to qualify as an entrepreneur. Those cases, however, remain to be decided.
In its present judgment the Supreme Court stressed the consistency of the consumer term underlying Section 1 of the act, which, according to the court, does not vary depending on whether a certain provision is based on European law or not. Still, it remains to be seen, irrespective of the ever stronger economic approach generally taken, whether the court might interpret the term “consumer” even more restrictively when it comes to the conclusion of arbitration agreements (ie, “consumer” for the purposes of Section 617 of the code) regarding shareholders' internal corporate relationship.2 This would, for example, concern shareholders' agreements, rather than the conclusion of suretyship contracts with external third parties. The very existence of a shareholders' agreement may often carry with it the implication that the shareholder is actively involved in the management of the company.
It has now become increasingly difficult for shareholders who have entered into arbitration clauses to challenge the jurisdiction of arbitral tribunals by invoking consumer protection law, again adding to Austria's appeal as a place of international arbitration.