Transparency of the Regulatory System
Austria’s legal, regulatory, and accounting systems are transparent and consistent with international norms. Ministries generally publish draft laws and regulations for public comment prior to their adoption by Austria’s cabinet (Ministerrat) and/or Parliament. In addition, relevant stakeholders such as the “Social Partners” (Economic Chamber, Agriculture Chamber, Labor Chamber, and Trade Union Association) and the Industrial Association are invited to provide comments and suggestions for improvement, which may be taken into account before adoption of laws. This mechanism encompasses investment laws, as well. The judicial system is independent from the executive branch, thus helping to ensure the government follows administrative processes.
The government has made progress in streamlining its complex and cumbersome requirements for issuing business licenses and permits. It claims to have reduced the processing time for permits to less than three months, except for large projects requiring an environmental impact assessment. The government’s “one-stop shop” for business permits does not include factory and building permits. All licensed businesses in Austria (including foreign-owned enterprises) must be members of Austria’s Economic Chamber and pay compulsory dues; the Chamber plays an administrative role in some areas (including retailing, tourism, and certification of skilled labor).
The government does not influence the allocation of investments among sectors. It uniformly applies tax and labor laws as well as health and safety standards. Austrian regulations governing accounting provide U.S. investors with internationally standardized financial information. In line with pertinent EU regulations, listed companies must prepare their consolidated financial statements according to the International Financial Reporting Standards (IAS/IFRS) system.
International Regulatory Considerations
Austria is a member of the EU and as such, its laws are compliant with EU directives. Austria is subject to the European Court of Justice’s (ECJ) jurisdiction. Austria is a member of the WTO and follows all WTO requirements.
Legal System and Judicial Independence
The Austrian legal system is based on Roman law. The constitution establishes a hierarchy, according to which each legislative act (law, regulation, decision, and fines) must have its legal basis in a higher instrument. The full text of each legislative act is available online. Commercial matters fall within the competence of ordinary regional courts, except in Vienna which has a specialized Commercial Court. The Commercial Court also has nationwide competence for trademark, design, model and patent matters. There is no special treatment of foreign investors and the executive does not interfere in judiciary matters.
The system provides an effective means for protecting property and contractual rights of both nationals and foreigners. Sensitive cases must be reported to the Minister of Justice who can issue instructions for addressing them. Austria’s civil courts enforce property and contractual rights and do not discriminate against foreign investors. Austria allows for court decisions to be appealed, first at a Regional Court and ultimately at the Supreme Court.
Laws and Regulations on Foreign Direct Investment
There is no discrimination against foreign investors, but businesses are required to follow numerous regulations. Although there is no requirement for participation by Austrian citizens in ownership or management, at least one manager must meet Austrian residency and other legal requirements. Non-residents must appoint a representative in Austria. Expatriates are allowed to deduct certain expenses (costs associated with moving, maintaining a double residence, education of children) from Austrian-earned income. Austrian immigration law requires those applying for residency permits to take German language courses/exams, but a university degree automatically fulfills this requirement.
Competition and Anti-Trust Laws
Austria’s Anti-Trust Act is in line with EU anti-trust regulations, which take precedence over national regulations in cases concerning Austria and other EU member states. The Austrian Anti-Trust Act prohibits cartels, anticompetitive practices, and the abuse of a dominant market position. The independent Federal Competition Authority (FCA) and the Federal Cartel Prosecutor (FCP) are responsible for administering anti-trust laws. The FCA can conduct investigations and request information from firms. Private parties are enabled to file damage claims based on an infringement of Austrian and European anti-trust rules.
Companies must inform the FCA of mergers and acquisitions (M&A). Special M&A regulations apply to media enterprises. A cartel court is competent to rule on M&A notifications from the FCA or the FCP. For violations of anti-trust regulations, the cartel court can impose fines of up to the equivalent of 10 percent of a company’s annual worldwide sales. An independent energy regulator separately examines antitrust concerns in the energy sector, but must also submit cases to the cartel court.
Austria’s Takeover Law applies to both friendly and hostile takeovers of corporations headquartered in Austria and listed on the Vienna Stock Exchange. The law protects investors against unfair practices, since any shareholder obtaining a controlling stake in a corporation (30 percent or more in direct or indirect control of a company’s voting shares) must offer to buy out smaller shareholders at a defined fair market price. The law also includes provisions for shareholders who passively obtain a controlling stake in a company. The law prohibits defensive action to frustrate bids. The Shareholder Exclusion Act allows a primary shareholder with at least 90 percent of capital stock to squeeze out minority shareholders. An independent takeover commission at the Vienna Stock Exchange oversees compliance with these laws.
Expropriation and Compensation
According to the European Convention of Human Rights (applicable in Austria) and the Austrian Civil Code, property is inviolable in Austria. Expropriation of private property in Austria is rare and may proceed only on the basis of special legal authorization for public purposes, primarily for infrastructure projects. The government can initiate it only in the absence of any other alternative to satisfy the public interest; when the action is exclusively in the public interest; and when the owner receives just compensation. The expropriation process is non-discriminatory toward foreigners, including U.S. firms. There is no indication that significant expropriations will take place in the foreseeable future.
ICSID Convention and New York Convention
Austria is a member of both the ICSID and the New York Convention on the Recognition and Enforcement of Foreign Arbitral Law, meaning local courts must enforce applicable foreign arbitration awards in Austria. There is no specific domestic legislation in this regard.
Investor-State Dispute Settlement
Austrian arbitration law largely conforms to the UNCITRAL model law. The main divergence is that an award may only be set aside if the arbitral procedure is not in accordance with Austrian public policy. Austria does not have a BIT or FTA with the United States. There is no special domestic arbitration body.
There has been no experience with investment disputes against Austria in the last several decades. In 2015, for the first time, the Austrian government was sued by the offshore parent company of the Austrian Meinl Bank, Far East, in New York before an ICSID tribunal because of alleged damages arising from domestic prosecution.
International Commercial Arbitration and Foreign Courts
The Vienna International Arbitral Centre of the Austrian Federal Economic Chamber acts as Austria’s main arbitration institution and legislation is modeled after the UNCITRAL model law (see above). The New York Convention overrides most of Austria’s domestic provisions, where applicable, and Austrian courts are consistent in applying it. There are no notable complaints about court proceedings.
The Austrian Insolvency Act contains provisions for business reorganization and bankruptcy proceedings. Reorganization requires a restructuring plan from the still solvent debtor. The plan must offer a quota of at least 20 percent of the debtor’s obligation and be adopted by a majority of all creditors, including those holding at least 50 percent of all claims. Bankruptcy proceedings take place in court and are opened upon application of the debtor or a creditor; the court appoints a receiver for winding down the business and distributes proceeds to the creditors. Bankruptcy is not criminalized, provided the affected person conducted all his documentation and reporting in accordance with the law.