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Rules and industry standards

Describe any industry-standard form contracts used in the energy sector in your jurisdiction.

Most energy traders active in Austria are members of the European Federation of Energy Traders, which provides for standard forms for wholesale trading that reflect industry practice. Standard forms must, however, comply with strict legal requirements for standard terms and conditions.

The energy sector provides for special ex ante control mechanism for standard terms and conditions performed by the Regulatory Authority (E-Control): electricity and gas suppliers are obliged to submit their standard terms and conditions for sales to private end consumers and small businesses to E-Control. E-Control examines ex ante whether these standard terms and conditions violate Austrian law and prohibits non-compliant standard terms and conditions from being applied to end consumers. Any change in standard terms and conditions must also be submitted to E-Control.

What rules govern contractual interpretation in (non-consumer) contracts in general? Do these rules apply to energy contracts?

The Austrian Civil Code (section 914,915) provides for basic interpretation guidelines for contacts, which also apply to the energy sector. Accordingly, the interpretation starts from the wording of the contract. In case of indistinct wording, the parties’ will is to be determined by the literal sense of the parties’ declaration. If no clear result is provided by such literal interpretation, in a second step, business custom and general practice are taken into consideration. As a rule, if no interpretation yields a clear result, the Austrian Civil Code states that indistinct statements are to be interpreted to the detriment of the party who declared them.

In the absence of clauses covering specific circumstances arising from a contractual relationship, it is presumed that the parties have agreed on what is reasonable.

Describe any commonly recognised industry standards for establishing liability.

Unless specifically provided otherwise in lex spezialia, liability is fault-based, meaning that (at least) negligent behaviour is required on the part of the defendant. Austrian law knows different forms of negligence corresponding to the degree of recklessness, namely slight and gross negligence. Slight negligence requires a party to exercise great care that an extraordinarily attentive person would have exercised, whereas gross negligence requires a party to exercise care only to the extent that a reasonably attentive person would have exercised. Subject to certain limitations, parties may agree on different liability standards in contracts or in standard terms and conditions.

As a rule, liability for slight negligence can be excluded. Any other limitation of liability is prohibited in the B2C sector. In contracts between companies (B2B), liability for gross negligence can only be excluded to the extent of ‘simple gross’ negligence, according to recent case law. Likewise, liability cannot be excluded for cases of ‘blatant’ gross negligence. It is common practice for energy companies to exclude liability for slight negligence in the B2B sector.

On the other hand, some laws provide for liability regardless of fault (strict liability). Such provisions can be found in product liability law, nuclear liability law or liability for owners of energy plants (according to the Imperial Act on Liability); see in more detail the answer to question 9.

Performance mitigation

Are concepts of force majeure, commercial impracticability or frustration, or other concepts that would excuse performance during periods of commodity price or supply volatility, recognised in your jurisdiction?

As a general rule, parties to a contract have the obligation to perform (pactum sunt servanda). In rare circumstances, however, Austrian law does recognise certain concepts that might excuse performance.

First and foremost, if the parties’ agreement is in contradiction to applicable law or its fulfilment is deemed impossible from an ex ante perspective, the contract is void (section 878 Austrian Civil Code). The same applies if the fulfilment of a contractual obligation becomes subsequently impossible (section 1447 Austrian Civil Code, including the concept of force majeure). In such cases, no party must perform.

Furthermore, Austrian scholars and jurisprudence have developed a concept that might excuse performance, if ‘the basis of a contract ceases to exist’. Accordingly, if a misconception about typical business circumstances has caused the fulfilment of the contract to become completely unreasonable, a party might be entitled to contest or amend the contract, however only as the last resort. Contractual and statutory provisions as well as the supplementary interpretation of the contract shall take precedence. In addition, the concept only applies if the fulfilment of the contract is still possible. If not, it is a case of subsequent impossibility according to Austrian legal understanding. In Austria, there is no uniform provision that solves this issue. The gap in the law must be closed with the help of a legal analogy to various individual provisions. There are at least four prerequisites to this concept: the misconception of the contractual partner must relate to typical business circumstances. Furthermore, the misconception must not originate from the sphere of the party wishing to invoke it. In addition, the change in the factual situation must not have been foreseeable at the time the contract was concluded and must have led to a material change in the equilibrium agreed in the contract.

Nuisance

What are the rules on claims of nuisance to obstruct energy development? May operators be subject to nuisance and negligence claims from third parties?

According to section 339 of the Austrian Civil Code, the owner is entitled to file a claim for injunction against any third party who interferes with its ownership. The claim seeks the restoration of the prior situation or omission of future interferences. Accordingly, operators may be subject to such claims.

Liability and limitations

How may parties limit remedies by agreement?

Parties may agree that simple negligence will not give an entitler compensation. On the other hand, liability for wilful conduct cannot be ex ante excluded or limited.

It is possible to agree on a lump-sum contractual penalty owing to inadequate performance, non-performance or delay according to section 1336 of the Austrian Civil Code. It is due in any case when the agreed event or conduct of the party occurs. Unlike a default contractual liability, the compensation is not linked to the actual damage caused. In consumer contracts, lump-sum compensations must be negotiated on an individual basis and may not be included in standard contractual clauses. Nonetheless, in any case, damages beyond the contractual lump sum can still be claimed.

Contractual penalties might be subject to judicial mitigation if they are considered to be excessively high. The court takes into consideration the degree of fault (including potential contributory negligence) and the actual amount of damage incurred. It is at the discretion of the judge to determine whether and by how much the penalty will be reduced. The right of mitigation by courts cannot be excluded.

Is strict liability applicable for damage resulting from any activities in the energy sector?

For damages resulting from activities in the energy sector, the following Acts stipulate strict liability: the Nuclear Liability Act, the Imperial Act on Liability and the Mineral Resources Act.

The Nuclear Liability Act regulates liability for property damages and injuries on persons caused by nuclear material. Under this law, power plant operators, owners as well as transporters are liable for any damage while using, transporting or disposing of nuclear material. All of them must enter into liability insurance. The liability cannot be limited or excluded. However, the obligation to compensate does not exist if requisite diligence has been applied to prevent the damage and the damage was not caused by failure of material.

Under the Imperial Act on Liability, owners of a power plant are liable for death, accident, injuries on persons as well as property damages caused by electricity or gas. Owners are not responsible if the energy device is defective or if damage is caused by force majeure.

The Mineral Resources Act is only applicable for exploration of mineral resources such as oil or gas or during extraction, treatment and storage. For mining, the licensee is responsible for any mining damage such as personal injury, damage to health or property. Liability is excluded if damage is caused by an inevitable event.