Category: Austria

Austrian law firm Vavrovsky Heine Marth has opened a new office in Linz, in addition to the firm’s operations in Vienna and Salzburg.

Vavrovsky Heine Marth is a dispute resolution and real estate-focused law firm. The new Linz office will be led by Partner and real estate expert Lisa Haslinger. Herself a Linz native, Haslinger has been with the firm since 2015 and made Partner in early 2023 (as reported by CEE Legal Matters on January 18, 2023). 

“I am very happy about the new challenge and the opportunity to support clients directly on-site in the successful implementation of their projects,” Haslinger commented.

“The entrepreneurial approach and personal support have always been the focus since the firm was founded ten years ago,” Partner Christian Marth added. “The expansion of our legal focus to another region in Austria offers our clients more efficient and sustainable advice and support on-site.”

Securing e-evidence and establishing efficient procedures is key.

The E-Evidence Regulation (Council document 5448/23) will enable relevant authorities to address judicial orders for electronic evidence directly to service providers in other member states. Those who fail to respond to these orders within 10 days, or even within 8 hours in urgent cases, will face fines of up to 2% of the service provider’s global turnover.

Summary of key points:

• The aim of the envisaged E-Evidence Regulation, which will be directly applicable in EU member states, is to preserve e-evidence and establish a quick and easy procedure for sharing said evidence among member states.
• Law enforcement will be able to access data directly from service providers offering their services in the EU, regardless of where the data is stored.
• Service providers must respond within 10 days and within 8 hours in emergency cases, or risk financial penalties.

Easier access to e-evidence for law enforcement

In recent years, life has increasingly moved into the digital space and crime is no exception. Law enforcement has become more and more dependent on electronic evidence (‘e-evidence’) to investigate and prosecute criminal offences. However, getting access to e-evidence can be a lengthy and complicated process for authorities as online service providers often store data on servers located in several countries, both in and outside the EU. Thus, the E-Evidence Regulation aims to facilitate access to e-evidence from a service provider, (e.g. online platform or mobile phone provider), that offers its services within the EU and established or represented in another member state.

The E-Evidence Regulation introduces an alternative mechanism to existing international cooperation and mutual legal assistance tools. The goal is to preserve important evidence and make the cooperation process more efficient overall. The Regulation creates two instruments, the European Production Order and the European Preservation Order. The Preservation Order will prevent e-evidence from being deleted by a service provider while the Production Order is still being processed.

National law enforcement authorities can issue these orders to obtain or preserve e-evidence regardless of the location of the data. E-evidence is a very broad term and covers any category of digital data, including subscriber data, content data (text, voice, videos, images or sound), and traffic data (e.g. source and destination of a message or the location of a device). While subscriber data and data needed to identify a perpetrator can be requested for any criminal offence, the disclosure of other traffic data and content data requires that the offences in question be of a certain severity. These data can only be requested for crimes punishable in the issuing country by a maximum custodial sentence of at least three years, or for specific offences relating to cybercrime, child pornography, counterfeiting of non-cash means of payment or terrorism.

The competent authorities will be able to address the orders directly to any service provider offering their services in the EU. Those providers that do not have a registered office in the EU must appoint a legal representative pursuant to the Directive on legal representatives, which is still pending publication (see below). The designated establishment and legal representative at issue should serve as an addressee for decisions and orders for the purpose of gathering electronic evidence. Where the data is located does not matter. However, the authorities will only be able to obtain stored data. Real-time interception of telecommunications is not covered by the proposed new rules.

The E-Evidence Regulation provides that the service providers concerned must respond within a mandatory deadline of 10 days from receipt of the request for electronic evidence, in emergency cases, the mandatory response timeframe is reduced to within 8 hours. Emergency cases are defined as situations where there is an imminent threat to life, physical integrity or the safety of a person or to critical infrastructure that would result in a threat to people’s lives, physical integrity or safety. These tight deadlines are meant to significantly speed up investigation procedures.

According to the proposed wording, service providers shall have the right to inform the issuing authority if an order is incomplete, contains manifest errors, does not contain sufficient information for its proper execution, or if the service provider cannot comply with its obligations due to de facto impossibility.

However, refusal to comply is a major risk for service providers. The E-Evidence Regulation provides for pecuniary sanctions applicable to infringements of up to 2% of the total worldwide annual turnover of the service provider’s preceding financial year.

Directive on legal representatives to supplement new rules
In addition to the E-Evidence-Regulation, the Directive on legal representatives (Council document 5449/23) lays down harmonised rules on the appointment of legal representatives for the purposes of gathering evidence in criminal proceedings. The Directive will compel all service providers not established, but offering services in the EU, to appoint a legal representative. There is currently no legal requirement for non-EU service providers to be physically present in the EU.

The representative can be a natural or legal person and will be responsible for receiving, complying with and enforcing decisions and orders. Service providers shall provide them with the necessary powers and resources to comply with decisions and orders received from any member state, so that they may fully cooperate with the competent authorities when receiving said decisions and orders. Member states shall ensure that each service provider established, or offering services within their territory, provides written notification of where their designated establishment is located, or where their legal representative resides and provide the respective contact details.

In cases of non-compliance with obligations stipulated by the E-Evidence Regulation, both the designated establishment or the legal representative and the service provider shall be held jointly and severally liable, with the effect that both the designated establishment or the legal representative and the service provider may be sanctioned for non-compliance.

In sum, the E-Evidence Regulation entails new challenges and compliance risks for service providers. Its publication is expected within a few months and it will enter into force three years later.

By Georg Kresbach, Partner, Angelika Zotter, Associate, Wolf Theiss

Cerha Hempel has advised Raiffeisen Property Holding International on the sale of an office building in the Neu Marx area in the third district of Vienna to the European Handball Federation via a forward purchase. Reportedly, Joklik, Katary, Richter advised the buyers on the deal.

Raiffeisen Property Holding International is a wholly-owned subsidiary of Raiffeisen Bank International AG. RPHI develops, manages, operates, and sells real estate in Austria and the CEE region. 

According to Cerha Hempel, “the European Handball House will be the new headquarters of the European Handball Federation, boasting a total floor space of 5,600 square meters, with offices, a lecture hall, and its own TV studio. A 240-square-meter PV system is going to be installed on the roof. It is expected to be completed in autumn 2024. In the future, the European Handball House will host draws for top competitions such as the European Championships and the EHF Champions League, as well as international conferences and conventions aimed at further developing European handball with its more than 350 clubs.”

The Cerha Hempel team included Partners Mark Krenn and Heinrich Foglar-Deinhardstein, Attorney at Law Marko Vladic, and Associate Johanna Kaschubek.

 

Regulation (EU) 2022/2560 on Foreign Subsidies (the “FSR”) aims to address distortions caused by foreign subsidies in the single market. In this part of our FSR Insight Series, we explain the fundamental notion of what constitutes a “foreign subsidy” within the meaning of the FSR. You will find a basic definition in Article 3 FSR, with some further considerations in recitals 11 to 16 of the Regulation.

What does “foreign” mean?
Only interventions by third countries fall under the FSR. In this context, all countries that are not members of the European Union are considered “foreign”. This includes members of the European Economic Area (i.e. Iceland, Liechtenstein and Norway) as well as the countries with which the EU has entered into specific trade agreements, such as Switzerland, the United Kingdom, the Balkan countries or Turkey. EU Member States are exempt from the FSR because state aid attributable to them is subject to the stricter rules under Articles 107 et seq. TFEU.

Interventions by a “third country” include more than just contributions by the central government of a foreign state or of public authorities at other levels. As set forth in Article 3(2)(2) FSR, interventions by public entities (particularly by state-owned companies) are also relevant, provided the actions of that entity are imputable to the third country, taking into account the characteristics of the entity and the legal and economic environment in which it operates. The European Commission (the “EC”) will likely use the Stardustdoctrine developed under Article 107(1) TFEU as a starting point in this assessment. By the same token, interventions by private entities are relevant under the FSR if the actions may be attributed to the third country (for instance, where a state has entrusted a private entity with specific regulatory tasks). Financial instruments provided by international organisations such as the World Bank are not attributable to any third country and are therefore not regarded as a foreign subsidy.

Criteria for a “subsidy”
To qualify as a “subsidy”, an intervention must meet three cumulative conditions. First, the third country must provide, directly or indirectly, a financial contribution to the beneficiary. Second, the intervention must confer a benefit to an undertaking engaging in an economic activity in the EU internal market. Third, the benefit must be selective, i.e. it must be limited, in law or in fact, to one or more undertakings or industries (see Article 3(1) FSR). This definition is not modelled on Article 107(1) TFEU – the definition of “State aid” under EU Competition Law – but rather on Article 1 of the WTO Agreement on Subsidies and Countervailing Measures. While the differences are not large, this might bring about discrepancies in specific situations.

From a practical perspective it is important that when calculating notification thresholds under the FSR usually only the first of these three criteria, the existence of a financial contribution, is relevant. Even financial contributions that do not confer a benefit on the recipient may need to be considered. This concept broadens the scope of the notification requirements under the FSR.

What is a “financial contribution”?
A “financial contribution” is deemed to exist where a state intervention results in a charge on the public account. This concept excludes preferential legislation of a non-financial nature, such as local content requirements. Article 3(2)(1) FSR contains a non-exhaustive list of examples for financial contributions. This includes the direct transfer of funds (such as capital injections, loans or loan guarantees), fiscal incentives, the setting-off of operating losses, the compensation of financial burdens imposed by public authorities, debt forgiveness, debt-to-equity swaps or rescheduling of debt. Also, a financial contribution exists if the third country foregoes revenues that would otherwise be due, e.g. by means of tax exemptions or the granting of special or exclusive rights without adequate remuneration.

Last but certainly not least, the provision of goods or services by a third country to an undertaking, as well as the sale of goods or services to a third country, fall under this heading. This means that any company or institution that is engaged in business with foreign countries (including state-owned companies, as explained above) necessarily receives financial contributions within the meaning of the FSR, even if that business is strictly conducted on market terms.

Discussions around this topic are likely to arise where a foreign state assists undertakings free of charge. For example, would it amount to a “financial contribution” if the embassies of a third country assist their undertakings by bringing home employees in a crisis, such as during the coronavirus pandemic? In this context, Article 1 of the WTO Agreement on Subsidies and Countervailing Measures specifies that the provision of general infrastructure does not qualify as a “financial contribution”. In our opinion, this concept is also inherent to the FSR. While EU State Aid Law deals with this issue as a matter of selectivity, in the FSR context this may already be discussed when analysing the existence of a financial contribution.

What makes up for a “benefit”?
A “benefit” arises if the recipient could not have obtained the financial contribution under normal market conditions. Here, the EC will likely apply the well-known market economy operator principle developed in the case law under Article 107(1) TFEU. This is specifically relevant in situations where undertakings are engaged in the purchase of goods or services from third countries or in sales to foreign entities.

The contribution needs to be granted to an “undertaking”. The notion of undertaking will likely be interpreted in line with the ECJ’s decisions under Article 107(1) TFEU. This means that the FSR does not look at legal entities but at single economic entities. Several legal entities may form one and the same undertaking. Conversely, one legal entity may be composed of several undertakings (i.e. where the institution in question operates in a number of distinct fields of business). Cross-subsidisation issues are likely to arise, similar to the intensive discussions under EU State Aid Law, in cases where an institution is engaged in both economic and non-economic activities, such as public research institutions that also offer services to the private market.

Note that the seat of the beneficiary is irrelevant. The FSR is not a regulation specifically aimed at Chinese or US firms, for example. Even companies that are headquartered in an EU Member State may be caught. To take an example, the fact that ArcelorMittal was founded and is headquartered in Luxembourg does not mean that the group may not be the beneficiary of FSR-relevant foreign subsidies. The FSR needs to be respected by any undertaking engaged in economic activities both inside and outside the EU internal market. On the other hand, there is no FSR scrutiny where the beneficiary has no economic activity in the internal market. The EC would not be entitled to intervene if, for example, China supports exports by its companies into the US, provided the beneficiaries are not also engaged in the EU.

Selectivity
Finally, to find for the existence of a foreign subsidy, the intervention must be “selective”. Under the WTO rules or under Article 107(1) TFEU, selectivity may arise because the intervention is enterprise-specific, industry–specific or characterised by regional specificity.

Conclusion
The notion of a “foreign subsidy” under Article 3 FSR is similar to that of “State aid” under Article 107(1) TFEU. However, there are certain differences of detail. For practical purposes, it is important to remember that the notification obligations under the FSR (which we will examine later in our Legal Insight series) only apply to the existence of a third-country financial contribution. Even if the other criteria for a subsidy are obviously not met (mainly because the undertaking in question sells its goods or services at market prices to a foreign state), the respective amounts will have to be factored in when computing the notification thresholds.

Not least in this respect, the EC has encouraged pre-notification talks in advance of the FSR’s entry into force on 12 July and 12 October 2023 respectively. Early consultation may help to ensure that undertakings are not caught off-guard by the broadness of the FSR concepts.

By Hanno Wollmann, Partner,  Schoenherr

CEELM: First, congratulations on winning the Deal of the Year award in Austria!

Moser & Fischer: Thank you very much! We are extremely pleased to be recognized for the deal of the year. It shows the importance of the debt capital markets for Austria and appreciation for the collaboration between the issuer, the dealers, the issuer’s counsel, and us as dealers’ counsel for the transaction. 

CEELM: Please introduce yourselves and tell us a little bit about your professional history and your firm’s history to date. 

Moser: My passion for complex capital markets and finance matters can be seen in how I lead teams in numerous ECM transactions, including initial public offerings, rights issues, secondary placements, and debt capital market matters. After being an equity partner at a renowned Austrian capital markets and corporate finance boutique law firm from 2014 to 2020, I joined Schoenherr in 2021, where, on top of capital market deals, complex restructurings, refinancings, and boardroom advice also play an important role in my business and shape it accordingly.

Fischer: After receiving my law degree in 2017 and gaining work experience at a national capital markets and corporate finance law firm, as well as in the debt and equity capital markets department of one of Austria’s largest banks, I joined Schoenherr in January 2021 and have been expanding my skills in those fields ever since.

Our capital markets department is a recognized top-tier practice for Austria. Schoenherr’s fully integrated capital markets practice co-headed by Ursula Rath and Christoph spans a range of capital markets products covering equity, equity-linked, debt, regulatory capital, sovereign and high-yield transactions, as well as boardroom and capital market compliance advice. It is known for its broad expertise and interdisciplinary approach. The deal count, volume, and high-profile nature of these engagements showcase the team’s strong ties to both the Austrian and international banking community, as well as the trust that high-profile Austrian clients, such as Austrian blue-chip issuers and the Austrian government, place in us. This is also recognized by Refinitiv, one of the world’s largest providers of financial markets data and infrastructure, who have ranked Schoenherr as the only Austria-headquartered CEE law firm in its Global Capital Markets Top 25. Attesting the team’s proven capabilities in structuring and executing complex transactions, the team has advised on more than 55 capital markets headline transactions since January 2021. Product and transaction specialties include equity and equity-linked transactions, regulatory capital including covered/mortgage bond and MREL transactions, green bonds and sustainability-linked bonds, sovereign debt issuances, derivatives, securitization and structured finance, as well as capital markets compliance and boardroom matters.

CEELM: Can you describe the deal for us and Schoenherr’s role in making it happen? 

Moser: Schoenherr advised the managers on the successful issuance of EUR 750 million in 0.01% covered bonds (Pfandbriefe) due in 2028 (AT0000A2UXM1) and EUR 750 million in 0.50% covered bonds due in 2037 (AT0000A2UXN9) by Erste Group Bank AG. The banking consortium comprised Commerzbank Aktiengesellschaft, Credit Agricole Corporate and Investment Bank, Danske Bank, DekaBank Deutsche Girozentrale, DZ BANK AG Deutsche Zentral-Genossenschaftsbank Frankfurt am Main, Erste Group Bank AG, ING Bank NV, Landesbank Baden-Wuerttemberg, Landesbank Hessen-Thueringen Girozentrale, and UniCredit acting as the joint lead managers in connection with the placement of the notes as well as HYPO NOE Landesbank fuer Niederoesterreich und Wien AG as co-lead manager.

CEELM: How did you land the mandate, and what do you believe it was about the team that got it for you? 

Fischer: Our capital markets practice regularly advises dealers on benchmark and sub-benchmark issuances by Austrian credit institutions, including covered bonds (Pfandbriefe). In addition, we are program counsel to the arranger for the Erste Group Covered Bonds Program, which we assume was also a decisive factor.

CEELM: What were the most complex aspects of the deal from a legal perspective? And what were some of the biggest difficulties faced in the process? 

Moser: Obviously, the deal volume is outstanding. Even though covered bond (Pfandbriefe) issuances follow the same concept, each issue program and transaction is different. Our teams are used to working under high pressure and tight deadlines and with a greater number of parties involved, like in this very special deal.

CEELM: In contrast, what, in your opinion, went particularly smoothly, and what do you believe contributed to it? 

Fischer: Teamwork, definitely. The seamless collaboration between the issuer, the dealers, the issuer’s counsel, and us as dealers’ counsel worked well and led to a successful execution. For DCM issuances, the legal transaction setup needs to work, irrespective of any challenges on the legal end. If the bonds are placed among investors, they need to be settled. No exception. So, teamwork with all parties is the key to success.

CEELM: Why do you believe the judges voted for this deal over the others? 

Moser: It is an exceptional deal in terms of issue size and marks a highlight in the capital markets area.

CEELM: In your view, what is the significance of this deal for the Austrian market? 

Fischer: The deal is a recognition of the liquid and active Austrian debt capital market and all the issuers and dealers involved.

CEELM: Do you believe we can expect other similar deals in the near future? Why/Why not? 

Moser: Covered bond issuances are still an active part of the debt capital market. Since January 2023, even more covered bond issuances hit the markets. There may be more to come later in 2023, but probably at a reduced speed. 

This article was originally published in Issue 10.5 of the CEE Legal Matters Magazine. If you would like to receive a hard copy of the magazine, you can subscribe here. 

Herbst Kinsky has advised Lifetree Asset Management – Froots – on its second financing round which saw Gregor Schlierenzauer and Ronald Holzmann join existing investors Georg Kapsch, Andreas Treichl, Gina Goess, and Reinhold Baudisch, with the company raising over one million euros. 

According to Herbst Kinsky, Froots was founded in Vienna in 2021 and makes “customized investing accessible to everyone. It enables clients to invest professionally in the capital markets at a fraction of the usual cost.”

According to the firm, “after the first financing round last year (EUR 2.5 million), the up-and-coming fintech now received over EUR 1 million in the second round. The fresh capital is intended to contribute to the continuation of the successful growth course and enable investments in the company’s own platform.”

The Herbst Kinsky team included Partner Philipp Kinsky and Attorney at Law Christina Bernhart.

Herbst Kinsky did not respond to our inquiry on the matter.

On May 22, 2023, CEE Legal Matters reported that Wolf Theiss, working with Milbank, had advised the initial purchasers and lenders on Salzburg-based Benteler Group’s capital market debut issuance and loans amounting to over EUR 2 billion. CEELM reached out to Wolf Theiss Partner Matthias Schimka to learn more about the matter.

CEELM: At what stage did your team become involved in the issuance and how did you win the mandate?

Schimka: My team was involved from the beginning, starting with the drafting phase through to the closing of the deal, and played a crucial role throughout the entire process. I believe that some of the key factors that contributed to our winning were the strength and depth of my team, which comprised highly skilled professionals in their field, and our top-notch expertise in handling complex financial transactions. I have successfully navigated numerous similar mandates in the past, and this expertise played a pivotal role in securing the trust and confidence of our clients in this mandate, which represents the largest post-restructuring financing deal to date in 2023.

CEELM: What do you believe it was about your team that won you the assignment?

Schimka: This goes hand in hand with my answer to the previous question. Having exceptional expertise in our respective fields and a proven track record of success is what I believe helped us to be selected to handle this mandate. My team showed a high degree of professionalism and seniority, even among the more junior positions, towards the investors and our clients in this deal and generally displayed a strategic approach to contract preparation and legal settlements, which enabled our clients to significantly strengthen their negotiation position. Finally, our excellent relationship with Milbank certainly helped us to be brought on board to help with this transaction.

CEELM: What was the mandate specifically and how was the work split between Wolf Theiss and Milbank? 

Schimka: While Milbank was the lead counsel in the matter, we acted as Austrian local counsel and basically advised on all financing, tax, and regulatory matters from an Austrian perspective. Since the issuer and borrower were based in Austria, this meant that we were in intense exchanges as regards the structuring of the transaction and drafting of the required documentation, always hand in hand with Milbank. 

CEELM: What about within your team specifically – who led what aspects of the work?

Schimka: I am grateful to have led such a great team of Wolf Theiss lawyers in Austria. Under my aegis, our Banking & Finance Senior Associate Markus Aigner was responsible for the financial aspects, ensuring that all financial considerations were thoroughly analyzed and addressed. Counsel Eva Stadler focused on certain tax aspects of the deal, ensuring compliance with the relevant tax regulations and optimizing the tax implications, while our Counsel Christine Siegl took charge of handling certain regulatory issues.

CEELM: What can we expect next from the Benteler Group, now that the project has concluded?

Schimka: We cannot speak on behalf of the Benteler Group. The outcome of the project, however, was the type of stable group financing that should provide them with a solid financial foundation for their future growth and development. From Benteler, we learned that they will use the proceeds to repay their existing restructuring indebtedness and thus close their restructuring. Moving forward, Benteler’s CFO said: “Our long-term financing strategy will provide a solid basis for the future development of the Benteler Group aimed at achieving sustainable, profitable growth.”

E+H has advised EcoWind on the sale of the Steinberger Alpe wind farm and the Soboth wind turbine to Kelag in an international bidding process.

EcoWind is an Austrian general contractor for wind and solar projects. A subsidiary of German BayWa r.e., it has been developing, planning, and constructing renewable energy projects in the fields of wind power and photovoltaics in Austria and CEE since 1995.

Kelag is an Austrian energy company.

According to a BayWa announcement, the Steinberger Alpe and Soboth wind farm has an installed capacity of 26 megawatts. “The eight wind turbines were commissioned in summer, 2022, and generate around 60 gigawatts of green electricity annually, at a height of 1,400 to 1,600 meters. This corresponds to the average annual consumption of about 13,000 Austrian households.”

In 2022, E+H advised EcoWind on its joint venture with EVN Naturkraft for the construction of a floating photovoltaic plant (as reported by CEE Legal Matters on November 22, 2022).

The E+H team included Partners Tatjana Katalan, Clemens Lanschuetzer, and Judith Feldner, Attorney at Law Marie Sophie Reitinger, and Associate Alexander Moser.

E+H did not respond to our inquiry on the matter.

Taylor Wessing has advised wind energy technology company SkySpecs on the acquisition of i4SEE.

i4SEE is a fully automated wind turbine data analytics and fleet optimization company. The transaction closed in May 2023, while financial details were not disclosed.

Taylor Wessing’s team included Partners Philip Hoflehner, Michaela Petritz-Klar, and Walter Poeschl, Senior Associate Silvia Schenner, and Associate Cezary Dominik Kinski.

Taylor Wessing was unable to disclose additional information on the matter.

Cerha Hempel has advised OMV on the sale of its Avanti-branded service stations in Germany to PKN Orlen Group’s Orlen Deutschland.

According to Cerha Hempel, “OMV Downstream, a wholly-owned Austrian subsidiary of publicly listed OMV, has sold 100% of its shares in Avanti Deutschland, which operates Avanti service stations in Southern Germany, to Orlen Deutschland.”

“Last year, OMV sold the service station network it had previously operated in Germany under its OMV core brand to the British EG Group. Following the divestment of the OMV network in Germany, the sale of its Avanti service stations in Germany now completes OMV’s exit from the German retail fuel market,” the firm announced.

The Cerha Hempel team included Partners Clemens Hasenauer, Harald Stingl, and Lorenz Pracht, Senior Associate Alexander Reich-Rohrwig, and Associate Svitlana Kuzmenko.

OMV’s in-house team was led by Bernhard Moerth.

Editor’s Note: After this article was published, Cerha Hempel informed CEE Legal Matters that the Hamburg office of SKW Schwarz advised the PKN Orlen Group.