Regulation

Overview

Is third-party litigation funding permitted? Is it commonly used?

The Austrian Supreme Court approved litigation funding by a third-party in a 2013 decision (OGH, 6 Ob 224/12b). In addition, in 2004 and 2012, the Vienna Commercial Court denied the defendants’ objections to third-party funding of the respective claims.

Thus, today, litigation funding in Austria is accepted practice and has been judicially endorsed by the Austrian courts in recent years. Although the courts did not comprehensively cover all aspects involved, they established in Austria an unquestioned and favourable environment for third-party litigation funding.

Compared to other jurisdictions, third-party litigation funding has had a late start in Austria. Recently, it has started to become an established, albeit selective, litigation tool, but with regard to the potential market size, it might still be an exaggeration to declare third-party litigation funding to be of common use in Austria.

Restrictions on funding fees

Are there limits on the fees and interest funders can charge?

There is no explicit limit on what is an acceptable compensation for the funder’s services. However, as a general rule, a third-party funding agreement - as any other agreement under Austrian law - must not constitute profiteering (ie, exploitation of a person in need; article 1 of the Act against Profiteering).

Specific rules for litigation funding

Are there any specific legislative or regulatory provisions applicable to third-party litigation funding?

There are no specific provisions in Austrian legislation.

Lawyers’ professional conduct in Austria does not allow for lawyers to be paid on the basis of contingency fees only (section 16 of the Lawyer’s Ordinance (RAO) and section 879 II of the Austrian Civil Code (ABGB)), so any funding agreement that directly or indirectly results in such a contingency fee model for the involved lawyer violates these provisions.

Legal advice

Do specific professional or ethical rules apply to lawyers advising clients in relation to third-party litigation funding?

Lawyers’ professional conduct in Austria is provided by the RAO. In light of the RAO, the lawyer’s independence in acting on behalf of the litigant is crucial, and this also applies to cases involving a third-party funder. However, by a clear separation of the roles between the lawyer and the funder, a lawyer who advises his or her clients in relation to a funder has no conflict of interest in principle.

Regulators

Do any public bodies have any particular interest in or oversight over third-party litigation funding?

As at the time of writing, neither the Austrian financial regulator nor any other governmental body has any known interest in overseeing reported litigation funding.