Category: Austria

Since the beginning of the Second Republic, the Constitution has provided so-called ‘state targets’, which have guided the government to declare certain interests to be substantial. The targets are broadly diversified and include, for example, state targets on:

• wide-ranging state defence; 
• a nuclear-free Austria; 
• schools and education; 
• securing the independence of broadcasting; and 
• sustainability.

The approval procedure for the third runway at Vienna International Airport has now prompted the government to strengthen Austria as a business location. This should be achieved through an amendment to the Federal Constitutional Law on Sustainability(1) which, among other things, contains a state target on creating comprehensive environmental protection.

Vienna International Airport

In 2017 the Federal Administrative Court rejected Vienna International Airport’s application for approval to build a third runway in the first instance (for further details please see “Climate impact: game changer for third runway at Vienna International Airport”). The court based its decision on, among other things, the state target of environmental protection. The Constitutional Court reversed this decision. In the second instance, the Federal Administrative Court approved the third runway with further regulatory requirements (for further details please see “Constitutional Court raises hope for third runway at Vienna International Airport”).

What is planned?

The government now plans to integrate the state target of creating a competitive business location into the Federal Constitutional Law on Sustainability.(2) The aim of the new state target is to oblige the enforcement bodies to reconcile public interest in a competitive location policy with other public interests in each individual case. The goal should also be to ensure framework conditions to create and secure jobs.

To achieve these objectives, a Location Development Act (for further details please see “Automatic permits for certain energy infrastructure projects”) in connection with the state target is also being planned,(3) which aims to accelerate complex infrastructural environmental impact assessment approval procedures. Among other things, the federal government will be able to issue a confirmation for location-relevant projects, which will allow plant approval procedures to be accelerated. Such a confirmation would lead to an automatic approval if the competent authority or court does not decide on the approval within one year.

Both legislative proposals remain under evaluation.

Comment

The government’s reactions to strengthening Austria’s competitiveness are quite understandable from an economic policy prospective. However, from a legal standpoint, the attempt is only partially convincing, as the relevant laws generally already provide for public and economic interests that must be taken into account. Further, the state targets, in accordance with jurisprudence and their broad linguistic structure, have largely only a programmatic effect and fail to grant any subjective rights to individuals.(4) This substantially distinguishes them from fundamental constitutional rights.

It is therefore questionable as to what will change with the new regulations. The fact is that environmental protection interests have not been prioritised over other determinants binding the government to date. Thus, state targets per se are neither an obstacle nor an advantage to completing a pending approval procedure. Rather, this would require a final determination act (law or ordinance) which, due to its concrete effect, could be applied in identifiable cases.

The final determination of the state target (ie, the planned Location Development Act) is also controversial due to concerns based on constitutional and European law. For example, automatic approval after a certain period would clearly contradict the Environmental Impact Assessment Directive (85/337/EEC). In order to reach a satisfactory solution in the current legislative process, far-reaching revisions of the draft would be necessary.

By Christoph Jirak, Associate, Philipp Strondl, Associate Schoenherr

As of tomorrow, the traditional Austrian bakery Aida, which is known for its staff dressed in baby pink, will sell brownies containing CBD. The price will be EUR 4.20 – an inside joke, since “four-twenty” is code for the consumption of cannabis. The fact that an old-school, stuffy bakery like Aida is now jumping on the cannabis bandwagon is a clear sign that CBD products have arrived in the mainstream. In fact, there is a growing interest in CBD-containing products made from hemp throughout Europe.

But isn’t cannabis consumption forbidden in Austria? On closer inspection, the Austrian legal situation is quite complex and should be examined in detail.

Cannabis: science and law

For a better understanding of the topic, it must be explained that cannabis contains various so-called “cannabinoids”. The two best-known of these substances are Cannabidiol (“CBD”) and Tetrahydrocannabinol (“THC”). The latter is psychoactive and responsible for the “high” experienced when using conventional (illegal) cannabis. Pure CBD, on the other hand, does not cause a state of intoxication. What makes the substance interesting is its alleged analgesic, neuroprotective and anti-inflammatory effect. Yet, many of the effects attributed to Cannabidiol have not yet been scientifically confirmed, as the Austrian Agency for Health and Food Safety Ltd (“AGES”) points out. In short, the medical effect of CBD is not scientifically proven, but the substance is also unsuitable as a drug.

Its characteristics also explain why the Austrian legislator does not classify CBD, unlike THC, as an addictive drug or psychoactive substance. The Narcotic Substances Act (“SMG”) constitutes the main framework of Austria’s drug policy. It focuses on quantities on the one hand and a classification of substances on the other. However, the SMG refers to the Narcotic Drugs Ordinance (“SV”) with regard to the specific substances that are to be classified as narcotic drugs. Annex I I.1.a SV stipulates that the flowers and fruit stems of plants belonging to the species Cannabis, from which the resin has not been removed, are considered narcotics and are therefore prohibited. The prohibition therefore does not extend to the seeds and leaves of the cannabis plant, but only to its THC and CBD-containing flowers and fruit stems.

Rules are made to be broken

The fact that CBD-containing products may nevertheless be sold in Austria is owing to an exceptional provision adopted in October 2017. The flowers and fruit stems of certain varieties of industrial hemp are exempted from the prohibition, provided that their THC content does not exceed 0.3 %. In comparison, cannabis acquired on the Austrian black market contains 15.1 % THC, as a study by the Austrian Federal Ministry of Health has shown.

It is thus established that CBD in pure substance is not qualified as a drug and, secondly, that certain cannabis extracts with a very low THC content are also permitted by law.

Medicinal?

In connection with the legal qualification, the question also arises as to whether CBD products might possibly be medicinal products. After all, many consumers of CBD oils, ointments and teas are people suffering from pain who seek relief. When classifying products as medicinal products, it must be borne in mind that there are not only functional medicinal products that actually influence physiological functions through their action. The competent authority responsible for pharmaceutical regulatory affairs, the Austrian Federal Office for Safety in Health Care (“BASG”), explicitly does not regard CBD products as functional drugs.

Beyond that, there are medicinal products by presentation. Relating to that category, the customer may assume that it is a medicinal product with regard to the name or declaration. It is irrelevant whether and if pharmacological effects are present. In other words, medicinal products by presentation are agents that generally look like and are presented as medicinal products. Consequently, there is a risk that those CBD products which give the impression of being a medicinal product will be classified as such and thus subject to authorisation. Nevertheless, CBD is generally not a medicinal product.

What to expect

It is unclear how long the legal situation will remain as it is. According to the “Regierungsprogramm”, the Austrian government’s plan is to ban the sale of hemp seeds and plants. Such a ban would primarily have consequences for farmers who grow hemp and for owners of “grow shops” who resell liners and plugs of the cannabis plant. The Austrian market leader in the sale of hemp plants, a multimillion Euro business by the name of Flowery Field, has already abandoned the sinking ship and relocated its operations to Italy.

Most recently, a number of young Austrian entrepreneurs have entered the European CBD market with their start-ups. Worth mentioning in this context is CBDoken, which uses blockchain technology to trade CBD bottles. It would undeniably be a heavy blow if a CBD ban were implemented in Austria, since substantial revenues are being generated worldwide by the trade of this substance. In the US, CBD trading is already a one-billion-dollar industry and there is immense growth potential. In view of this, it is possible to imagine the impact that a ban on CBDs could have. At present, however, such a ban is fortunately not being openly discussed. There is nothing else but to trust that the Austrian government will recognise the potential of this substance, if not for the human body, then at least for the economy.

By Andreas Natterer, Partner, Michaela Pohl, Associate, Thomas Kulnigg, Partner Schoenherr

A new buzzword has reached the Real Estate world and its service providers, including the legal community: “PropTech.” PropTech – or “Property Technology” – is simply shorthand for various IT applications that are specifically designed to address the needs of the real estate industry.

One of the earliest true PropTech applications was Building Information Modeling (BIM) – defined by the US National BIM Standard Project Committee as “a digital representation of physical and functional characteristics of a facility.” The first BIM software programs were developed around 1980. Since that time, most IT applications for real estate have been fairly basic (such as, for instance, programs for property management). Recently, however, a flurry of innovative tools and applications have appeared for the real estate industry, such as virtual reality tools enabling potential purchasers to look at properties without leaving their homes or offices, Internet platforms facilitating P2P or B2B rentals, cloud-based appraisal tools, cloud property management software solutions, and, last but not least, the application of Blockchain in the real estate world.

PropTech currently seems to be for the real estate universe of the late 2010s what the Dotcom-Economy was at the end of the last millennium: a source of an innumerable amount of startups, investors with deep pockets trying to separate the wheat from the chaff, and traditional brick-and-mortar-economy players desperately attempting to rejuvenate themselves by creating innovation or “disruption” departments and hanging around at a multitude of PropTech events.

The PropTech wave has now also reached the shores of Central and Eastern Europe. On June 5, 2018, Poland’s first PropTech conference took place. PropTech events in Berlin, London, and Vienna are emerging as platforms for the presentation of PropTech pioneers from Central and Eastern Europe. There will be much more to come, because CEE economies will turn out to be – on grounds of favorable tax and employment law systems, and a relatively easy-to-handle corporate environment – a fertile ground for startups.

As this is a promising new field of work for lawyers as well, what is there to know about PropTech for law firms and lawyers working in the CEE region?

From a legal viewpoint, PropTech is not, nor will it be, a new legal field. There is unlikely to be specific legislation or legal rules applicable to Property Technology. For a lawyer to work in the field of PropTech requires a combination of skills and knowledge of various legal disciplines. As always with legal matters involving real estate – as with other business fields and industries – a high degree of understanding of the practical and economic aspects of the field is indispensable. The individual legal specialties of relevance to PropTech are Corporate law, Tax law, Employment law, IP/IT law, and – last but not least – Data Protection law, owing to the fact that the most valuable resource that PropTech has at its core is not real estate, but data. It is surprising to learn that so many PropTech startups are so completely unaware of the data protection considerations relevant to their work and work product, which are even more relevant in light of the recent changes in EU Data Protection law.

The broad combination of legal disciplines involved makes it unlikely that smaller firms or solo practitioners will ever play a significant role in dealing with the legal aspects of PropTech. Instead, PropTech will be in the hands of larger firms that have the necessary experience in setting up investor-friendly legal structures, with the ability to protect the intellectual achievements and work products of their clients against the attacks of suitors and competitors, with knowledge in Corporate Finance, and – very importantly – with the legal skills necessary to set up compensation systems for employees that are not exclusively based on cash compensation, but rather on awarding stock options or “phantom shares,” which are among the most favored means of compensation for startups.

What remains to be seen is whether the law firms that are particularly active in this new field of legal advice will seek to have startups that they are advising compensate them with stock or stock options, as happened at the peak of the Dotcom-frenzy of the late 1990s/early 2000s. As this turned out to be a lottery with a substantial number of blanks last time, there is the question whether people have become any wiser since, or whether greed will again prevail. Because one thing that can be seen at all investor presentations and pitches that the PropTech industry is good at organizing seems pretty clear: most of the startups that sound interesting at first will unfortunately fail, and only a few will survive to be successful.

By Peter Oberlechner, Partner, Wolf Theiss

This Article was originally published in Issue 5.6 of the CEE Legal Matters Magazine. If you would like to receive a hard copy of the magazine, you can subscribe here.

End of July, the Austrian Data Protection Authority (‘DPA’) published its first decision on retention periods applying the General Data Protection Regulation (‘GDPR’; DSB-D216.471/0001-DSB/2018). The decision is final. The DPA had to decide for which period a provider of telecommunications services (hereinafter: the ‘controller’) may (respectively must) retain so called master data, required for the controller’s legal relationship with the user of its services (hereinafter: the ‘applicant’).

The controller retained the applicant’s master data for ten years. The controller claimed it is lawful to retain such data based on section 207 (2) of the Austrian Federal Fiscal Code (BAO).

The second sentence of section 207 (2) BAO is a provision containing a period of limitation. In cases of tax evasion, the tax authority may determine the amount to levy taxes within ten years from the end of the calendar year. According to the DPA, retaining data on the basis of the limitation period in that provision, was not in compliance with the GDPR, considering that limitation periods do not contain legal obligations to retain records. Whereas, retaining master data for seven years was considered lawful, because section 132 BAO obliges the controller to retain certain books and records for seven years.

In this particular case, it has to be considered that the DPA’s decision was driven by a specific telecommunications provision, namely section 97 (2) TKG 2003. This provision explicitly allows data storage only for certain purposes such as compliance with a legal obligation. Driven by that provision, the DPA refused to accept a provision about a period of limitation (such as section 207 (2) BAO) to achieve the quality of a “legal obligation”. However, it becomes obvious that the regulator is hesitant to accept periods of limitation to allow for data storage in all cases. It remains to be seen how this case law will evolve insofar as periods of limitation are concerned.

By Gunther Leissler, Counsel, János Böszörményi, Associate Schoenherr

Following up on Efficient Arbitration – Part 2: Launching an Efficient Arbitration, where we addressed efficiency tools available at the early stages, we now provide an overview of options to save time and costs up until the award. As we continue our efficiency series, we will zone in on a selection of efficiency tools and discuss our experience using them.

5. Focusing the Evidence

Gathering and presenting the right evidence is key.

This often requires close cooperation between counsel and the parties who have the best access to documentation and fact witnesses. Where documentation is kept by the opposing party, agreeing on a document production phase might be advisable. However, document production should be a focused exercise. To avoid fishing expeditions, discovery requests are best addressed at the CMC. This permits the tribunal to direct the parties to the evidence required to determine the case.

Expert witnesses play an important role. They should be carefully selected and thoroughly briefed. While in-house experts might be cheaper, parties should be mindful of their potential (at least perceived) partiality (IBA Compendium of Arbitration Practice 2017).

Preparing fact and expert witnesses for the hearing is a costly exercise; in particular, if mock hearings are held for counsel and the witnesses. However, witness and expert testimonies are valuable. The costs of preparing the witnesses will often prove worth it.

Other relevant tools may include expert conferencing, electronic filings (see also Leon Kopecký’s A Case for Paperless Arbitration), splitting exhibits into “core” and “supplementary” categories (i.e. exhibits likely and unlikely to be referred to at the hearing), and pleading the applicable law rather than relying on legal experts.

6. Streamlining the Hearing

Hearing practicalities have the potential to save (or waste) significant resources. Efficiency considerations will include: selection of venue, adoption of a tight hearing schedule (chess-clock process), decisions on which witnesses to call (and cross-examine), agreement on paperless hearings (see also Leon Kopecký’s A Case for Paperless Arbitration), and the use of video conferencing (ICC Guide on Effective Management of Arbitration).

Transcript services should also be borne in mind. Less complex, low value disputes may not justify the expense of live daily transcripts. Similarly, consecutive interpretation may be more accurate, but will certainly prolong the duration of the hearing (ICC Guide on Effective Management of Arbitration).

Finally, where issues have been fully covered in submissions, counsel should consider whether opening statements are really necessary, and if so, whether they could at least focus only on the key issues. Naturally, this will depend on the tribunal’s familiarity with the submissions and supporting documentation.

7. Post-Hearing

Post-hearing briefs are popular among parties who wish to seize this last opportunity to (re-)present their case. In reality, however, the time to present evidence has passed. This limits the benefit of post-hearing submissions. At the same time, these submissions are costly, as preparing them requires a thorough review of the previous submissions, the evidence submitted and the hearing transcripts.

If at all necessary, post-hearing briefs should be limited in scope, length and timing (see ICC Guide on Effective Management of Arbitration). They should be drafted to assist the tribunal, and not restate the parties’ submissions and closing statements.

While parties might be tempted to re-plead their strongest arguments, or to sneak in new ones, the cost/benefit analysis will often speak against post-hearing submissions.

In conclusion…

Designing an efficient arbitration is an important and daunting responsibility. Counsel has to determine in every case and at every stage whether resources are being invested or wasted. While utilizing the right efficiency tools will save time and costs, selecting the wrong ones might jeopardize the party’s chances of success in the arbitration.

The quest for efficiency therefore remains a balancing act. But the goal is not more than just saving: it is achieving the best possible outcome with the least amount of resources. After all, there is one thing that is more important than saving.

Winning.

By Victoria Pernt, Associate, Marina Stanisavljevic, Associate Schoenherr