Category: Austria

Technology and innovation are key drivers of advancement in a variety of industries, and certainly in healthcare. The level of patient care can be improved considerably with the right mix of traditional and innovative treatments and solutions. Nevertheless, there are regulatory challenges to overcome.

Teleradiology is one area where technological advancements allow for big steps forward. What is it?

Isn’t radiology where the x-ray is?

Traditionally, in case of an x-ray, MRT or CT scan, the radiologist analyses the scan at the location where the scan is taken. From a purely technological perspective, this clearly does not have to be the case. A radiologist at a remote location far away from the patient and the scanning device can instantly transmit instructions, analysis and a diagnosis using modern means of communication.

In essence, teleradiology is the ability to obtain an x-ray, MRT or CT scan in one location and to transmit it over a distance for diagnostic or consultative purposes to a radiologist who is not in the same location as the patient.

Futuristic and unnecessary? Quite the contrary. Think about remote geographical locations, such as small hospitals or outpatient clinics in rural areas, urgent treatment situations with no radiologist available or scans required during off-peak hours (e.g. during night-time or on weekends).

… or where the radiologist is?

Teleradiology allows health institutions to provide better patient care. It addresses the lack of qualified radiological staff, especially where a specialist radiologist is needed, such as a paediatric radiologist or a neuro-radiologist.

When considering how to implement teleradiology, healthcare institutions will look at the services of outsourcing companies or radiology groups. This will mean establishing a new contractual framework, which requires careful preparation and implementation to ensure it is designed and works in a compliant, efficient and satisfactory manner.

Key legal issues

• Is it permissible for a radiologist to not be physically present at the patient’s location or does this violate Section 49/2 of the Austrian Act on the Medical Profession (ÄrzteG), which states that a physician must exercise his profession in person and directly?
• If teleradiology is permitted, who needs to be physically present at the patient’s location to take the scan and what does their (minimum) level of qualification have to be?
• Is teleradiology permissible in all instances or only under limited circumstances, e.g. in case of emergencies?
• If teleradiology is permitted, must the radiologist be in Austria or may he also be located abroad? Do foreign radiologists have to be admitted to practice in Austria?
• What are the key contractual provisions of the underlying outsourcing agreement and how can the regulatory requirements be adequately translated into a working contractual setup?
• How to secure and manage the transfer of data in the context of teleradiology in compliance with the law?

In Austria, the Regulation on Medical Radiation Protection (Medizinische Strahlenschutzverordnung (MedStrSchV) defines teleradiology and provides further guidance on certain of the above issues. In addition, the Law on Security Measures when Processing Medical or Genetic Data (Gesundheitstelematikgesetz 2012) contains further applicable provisions.

While regulatory challenges remain, and need to be carefully considered, measured against the core criteria of whether a new solution improves patient care, teleradiology offers a number of benefits. Ultimately, teleradiology is a way of providing high quality care that otherwise may be unavailable.

By Florian Kusznier, Partner and Andreas Natterer, Partner Schoenherr

In the past, interest escalation clauses in loan agreements in Austria commonly had variable interest rates, based on a reference interest rate such as EURIBOR or LIBOR and an appropriate interest mark-up. When reference interest rates started to fall below zero, the question whether banks had to pass on negative interest rates to their borrowers in case of loan agreements where no floor had been set became the subject of great discussion. In addition, loan agreements in which a “zero floor” for reference interest rates had been implemented were contested as well.

Decisions on Consumer Loan Agreements

The fundamental question of whether negative reference interest rates which consume the agreed margin may lead to the bank’s obligation to pay interest to the borrower was decided first. The Austrian Supreme Court concluded that it is the common understanding of parties to consumer loan agreements that it is the borrower’s – and not the lender’s – obligation to pay interest on a loan. This applies all the more to B2B transactions, where it is generally assumed that a reasonable remuneration is owed by the receiving party (i.e., the borrower), if not explicitly agreed otherwise. A borrower therefore cannot expect the bank to pay interest on a loan where the margin is consumed by a negative reference interest rate.

The uncertainty with respect to negative interest rates on consumer loans appears to be resolved. The Austrian Supreme Court dismissed the argument of a “contractual gap” and confirmed the application of negative reference interest rates in consumer loan agreements without a “zero floor” for reference interest rates. Against that background, banks have argued they are entitled to increase their margin (inversely proportional to the negative reference rate) in accordance with (general) interest rate adjustment clauses. Based on the so-called “adaptation balance” (Anpassungssymmetrie), a principle embedded in the Austrian Consumer Protection Act, the Austrian Supreme Court concluded that the subsequent introduction of a “zero floor” for reference interest rates is not permissible, where an upward trend in the reference interest rates has not been capped. The same principle applies in case of an initially agreed “zero floor” for reference interest rates. Even where such a cap applies (either from the outset or based on a subsequent amendment), it will be subject to review as regards its appropriateness relative to the “zero floor” in order to be effective. 

Uncertainty for Corporate Loan Agreements

As the conclusions of the Austrian Supreme Court with respect to consumer loans cannot be directly applied to B2B transactions, the legal situation remains unclear for the corporate lending business. The Austrian Supreme Court has contributed to this uncertainty by confirming the application of the “adaptation balance” in (isolated) corporate lending cases. Until a recent (contested) decision of the Vienna Commercial Court, neither the ongoing discussion nor existing case law provided a systematic analysis of the problem, but instead both acted on a case-by-case basis. Despite the overall uncertainty, it seems clear that no “contractual gap” can exist where no specific “zero floor” provision was agreed on. Taking into account a general statutory safeguard against improper advantages for a party to a contract (also applicable to B2B transactions), general interest rate adjustment clauses are only valid if they also oblige the lender to decrease the interest rate under certain circumstances. Even where a general interest rate adjustment clause exists, lenders will not necessarily be entitled to adapt their margins (as a function of the development of interest rates) but will have to provide evidence that the understanding of the parties was that the general clause would apply in times of negative reference interest rates. Even then lenders will presumably not be entitled to adapt their margin on a regular basis based on the current development of negative reference interest rates. Finally, the Vienna Commercial Court concluded in its controversial decision concerning an initially agreed-upon “zero floor” that the implementation of a “zero floor” without a cap could also be grossly disadvantageous and therefore void. 

Based on recent court decisions it seems that corporate lenders will be treated similarly – but not identically – to consumers. While the subsequent introduction or initial implementation of a “zero floor” without a respective cap may well be considered void for both, deviating results may be expected where the contractual arrangement is considered inadequate for consumers based on the “adaptation balance,” but not grossly disadvantageous from a corporate perspective.

By Philip Hoflehner, Partner, and Allan Hahn, Senior Associate, Taylor Wessing Austria

This Article was originally published in Issue 5.8 of the CEE Legal Matters Magazine. If you would like to receive a hard copy of the magazine, you can subscribe here.

The Austrian Insolvency Code provides for the possibility to challenge certain disadvantageous transactions carried out by the debtor after material insolvency has occurred, especially if the creditor knew or should have known of its debtor’s material insolvency. This risk of legal actions being contested is of particularly high relevance for shareholders who are also creditors of the debtor company, as the Austrian Supreme Court recently decided that shareholders’ information rights would result in an increased level of due diligence. The decision also imposes an additional risk for start-up equity incentive programmes.

1. Avoidance Claims under the Austrian Insolvency Code

Material insolvency has occurred when an entity is illiquid (zahlungsunfähig) or over-indebted (insolvenzrechtlich überschuldet) in terms of Austrian insolvency law. According to the Austrian Insolvency Code, disadvantageous transactions carried out by the debtor after becoming materially insolvent can be challenged under certain conditions. In particular, the insolvency administrator is entitled to challenge such adverse transactions if the counterpart knew or should have known of the debtor’s material insolvency.

This leads to the obligation of the creditor to perform investigations on its debtor’s financial soundness if there are indications of poor financial health. In which situations a creditor is obliged to perform such investigations on the debtor’s material insolvency and to what extent is to be assessed on a case-by-case basis. However, already slight negligence relating to this duty of care leads to a risk of contestation.

The level of duty of care regarding such investigations highly depends on the creditor’s actual ability to retrieve information on the financial status of its debtor. Thus, investigation obligations of certain major creditors, like the debtor’s main bank or the social insurance agency, are generally higher compared to other creditors according to present case law as such creditors usually have access to detailed information on the debtor’s financial situation and adequate resources to monitor its creditworthiness.

2. Extension of investigation obligations?

Against this background, the Austrian Supreme Court recently had to decide on the level of duty of care and investigation obligations of a minority shareholder of an Austrian limited liability company (GmbH) who received payments under a (terminated) employment contract at a time when the company was already materially insolvent.

In a nutshell, the minority shareholder was de facto an employee and received the share as a mere bonus for good work (a typical scenario in the start-up world). Further, there were indications of the company being in a poor financial situation when the employee received said payments. Thus, one of the legal questions at hand was whether negligent ignorance regarding material insolvency of the company can be attributed to the employee.

The Austrian Supreme Court ruled that whether a creditor acted negligently or not, is to be assessed by considering (i) the means of information available, (ii) the degree to which it may reasonably be expected to make use of them and (iii) the adequacy of their evaluation. Although recognising that the employee is not a major creditor, the court ruled that the possibility to demand information from the company according to the employee’s existing shareholder rights and the omission to make use of this rights is to be regarded as negligent ignorance. The payments where thus successfully contested.

3. When rights become burdens

This decision shows that the extent of the creditors’ investigation obligations in case of indications of the debtor’s poor financial health highly depend on the actual (legal) possibilities to gather information. Thus, also non-institutional creditors are well advised to observe their debtors’ financial soundness carefully and to perform comprehensive investigations to gather information in case of indications of the debtor’s poor financial health.

In particular, existing contractual or statutory information rights need to be assessed and exercised in due time and manner. By not exercising such information rights in a situation with indications of material insolvency of a debtor, creditors expose themselves to contestation risks. Therefore, when entering into agreements granting comprehensive information rights, creditors should also bear in mind that these rights may increase their level of duty of care regarding their investigation obligations.

4. Start-ups: Be aware

Start-ups should be aware that the decision imposes an (additional) risk on equity incentive programmes (often referred to as “ESOP”): the risk exists whenever a start-up grants share participation to its founders and other (key) employees as an incentive. The risk could be avoided (while maintaining the same positive aspects of a share-based incentive programme) by using an equity incentive programme that is based on equity participation rights (Substanzgenussrechte) rather than shares. Schoenherr has been a pioneer in that respect by developing such a programme for a leading VC fund in Austria – we are happy to tell you more about this.

By Thomas Kulnigg, Partner Schoenherr