Category: Austria

E+H has advised the joint venture of STC Development and RoomBuus Baudienstleistungs on the development and sale of the Linz High Five lighthouse project to the Zentral Boden Immobilien Group. EY Law’s Pelzmann Gall Groess Rechtsanwalte advised ZBI.

According to E+H, “with its prominent location on the Bulgariplatz, the real estate project in the Upper Austrian capital has convenient access to routes both in and out of the city center. More than 300 apartments, two commercial units, and 150 parking spaces will be completed there by the end of 2024.”

Vienna-headquartered STC specializes in real estate and urban project development, planning, local construction supervision, and asset management. RoomBuus operates in Austria and covers a spectrum of services including land acquisition, project development and management, planning, local construction supervision, and asset management.

ZBI is a German company specializing in the residential real estate market.

“With High Five, we are creating an absolutely unique project in Linz, which we were able to sell to a very long-term oriented, distinguished investment house,” STC Managing Director Matthias Waibel commented.

The E+H team was led by Attorney-at-Law Johannes Feilmair and included Associates Fabian Larcher, Matthias Pallisch, and Titus Kahr.

The EY Law team consisted of Partner Stephan Groess, Attorneys-at-Law Roman Jatzko and Elisabeth Peck, and Associate Tobias Scheufler.

On 29 June 2022, the Council and the European Parliament reached a provisional agreement on the text regarding the European Commission’s proposal for a recast of Regulation (EU) 2015/847 (also referred to as the Transfer of Funds Regulation (“TFR“)).

The proposal is part of a larger package of four legislative proposals to achieve a more coherent anti-money laundering regulatory and institutional framework within the EU. The proposal extends the so-called “travel rule” to transfers of crypto-assets following the recommendation of the Financial Action Task Force (“FATF“). The travel rule refers to information-sharing duties in the context of crypto-asset transfers. Once the amendments to the TFR are in force and the information-sharing duties are applicable, crypto-asset service providers (CASPs) must accompany transfers of crypto-assets with information on their originators and beneficiaries, which they must obtain, hold, share with the counterpart on the recipient’s side of the crypto-assets transfer and make available on request to appropriate authorities.

The purpose of the proposal is to expand the traceability requirements previously only applied to fiat money and electronic money also to crypto-assets. The proposal sets forth that traceability is necessary and important for the prevention, detection and investigation of money laundering and terrorist financing. The FATF sees similar risks in crypto-asset transfers and fiat money transfers, hence the same rules ought to be applied according to the FATF recommendations which are now followed by the EU Commission. In order to ensure the transmission of information throughout the transfers of crypto-assets chain, the EU Commission deems it appropriate to provide for a system imposing the obligation on CASPs to accompany transfers of crypto-assets with information on the originator and the beneficiary.

Although the Commission’s proposal has not yet passed through the EU legislative processes and will likely be published together with the other legislative proposals in this area of AML rules (including the directly applicable Anti-Money Laundering Regulation) as well as the MiCAR, certain EU regulators (including the Austrian FMA) require CASPs to comply with the FATF travel rule to a certain extent already today.

What does the amended Regulation 2015/748 hold for CASPs?

A necessary requirement for the information-sharing duties and other stipulated obligations to apply is that at least one of the CASPs involved is established in the EU and that the transfer of crypto-assets is being sent or received by a provider (and that no exception is applicable). With regards to the crypto-assets and crypto-asset service providers, the proposal references the coming Markets in Crypto-Assets regulation (“MiCAR“), which corresponds to the definitions used by the FATF. A transfer of crypto-assets is defined as any transaction at least partially carried out by electronic means on behalf of an originator through a CASP, with a view to making crypto-assets available to a beneficiary through a CASP. The regulation, however, exempts certain transfers of crypto-assets, such as person-to-person transfers (P2P transfers) or transfers by the CASP acting on its own behalf. Under certain conditions, a Member State may exempt transfers of crypto-assets within its territory if the amount of the transfer does not exceed EUR 1,000.

If the regulation applies, it stipulates different obligations depending on whether the crypto-asset service provider acts on behalf of the originator, who is the sender, or the beneficiary, who is the recipient of the crypto transfer. When a transfer is being processed, then the CASP of the originator must ensure that it is accompanied by the name, account number (if an account is being used to process the transaction) and address, official personal document number, customer identification number or the date and place of birth of the originator as well as the name and account number (if such an account exists and is being used for the transaction) of the beneficiary. If the transfer or the batch of transfers does not exceed EUR 1,000 in total, it is sufficient to include the names of the originator and the beneficiary and the account number. If no account is being used, the CASP of the originator needs to ensure that the transfer can be individually identified and the record originator and beneficiary address identifiers on the distributed ledger. Before the transfer is processed, the service provider of the originator must verify the information sent on the basis of documents, data and information obtained from a reliable and independent source (which is assumed if the originator was verified in accordance with the proposed Anti-Money Laundering Regulation). Without the CASP being in full compliance, the transfer shall not be executed.

The CASP of the beneficiary has to detect whether the necessary information for the transfer is missing or incomplete. To achieve this, the service provider must implement effective procedures and monitoring after or during transfers where appropriate. The degree of verification that the beneficiary’s CASP must take depends on the amount transferred. If the transfer exceeds EUR 1,000, then the beneficiary’s service provider must verify the information on the basis of documents, data or information obtained from a reliable and independent source. If the transfer does not exceed EUR 1,000, the accuracy of the information shall only be verified if the beneficiary effects a pay-out in cash or anonymous electronic money or where reasonable grounds for money laundering exist. The verification process in all instances is nevertheless assumed to have taken place when the identity of the beneficiary has been verified in accordance with the proposed Anti-Money Laundering Regulation.

A specific discussion point in the political trilogue was the issue how unhosted wallets should be treated under the new TFR regime (and whether CASPs would be required to obtain and verify encompassing information about the originator and beneficiary also in such cases).

The regulation prescribes that CASPs of the beneficiary have to implement effective risk-based procedures to determine whether to execute or reject a transfer and ask for the required information before or after making the transfer available on a risk-sensitive basis. If a crypto-asset service provider repeatedly fails to provide complete information, the beneficiary’s provider may issue warnings and set deadlines or transfer the crypto-assets back or withhold them from the beneficiary pending a review by the relevant authority monitoring compliance. When assessing whether a transfer of crypto-assets is suspicious and whether it is to be reported to the Financial Intelligence Unit (FIU) in accordance with the proposed Anti-Money Laundering Regulation, the CASP shall take the missing or incomplete information into account.

The TFR only permits the collected information to be processed for the purposes of preventing money laundering and terrorist financing. It obliges CASPs to retain the records of the information that accompanied the transfers for five years and ensure the confidentiality of the data and their subsequent deletion.

The regulation requires Member States to provide for and impose administrative or criminal sanctions and measures applicable for breaches. Member States ensure that legal and natural persons as well as management boards are held liable for breaches. The competent authority will also be permitted to publish any breach of the provisions if necessary and proportionate.

The problems and challenges of compliance going forward

A range of issues were raised during the consultation phase of the proposal. Most pressing is the absence of a standardised global open source and free technical solution to manage compliance with the travel rule for transfers of crypto-assets. Currently only the private cryptographic key and the wallet address of the recipient are needed to transfer crypto-assets. Hence the current information available to CASPs is insufficient to comply with the amended TFR and travel rule. The required information must be transmitted immediately and securely according to recital 31 of the amended TFR. Immediate transfer means the information needs to be transmitted either prior to, simultaneously or concurrently with the transfer. The TFR or the FATF do not mandate a system or software given their technology-neutral approach to compliance. The blockchain itself does not provide an information sharing protocol and the required information cannot be retrieved from it. A solution for obtaining, holding and transmitting the required information could be code that is built into the crypto-asset transfer’s underlying distributed ledger technology (DLT) transaction protocol or that runs on top of the DLT platform (e.g. using a smart contract) or an independent messaging platform. This poses a significant barrier to entry for small players or start-ups due to the significant costs involved. A historically similar initiative by financial institutions to create a system for financial messaging took years to develop and required agreeing on a common language of communication. In the end this led to the SWIFT system or, in Europe, the SEPA system.

Another concern that was raised during the consultation phase was about divergent jurisdictional rules leading to significant compliance costs for CASPs operating cross-border, as FATF recommendations have been transposed differently around the world.

One more issue raised among CASPs regarding compliance lies in the unique nature of the DLT. The TFR requires CASPs to potentially hold the transfer of crypto-assets pending a review by the competent authority or even reject the transfer, similar to wire transfers. However, it is hardly possible to reject transfers in DLT, let alone hold them. The FATF provides as examples of possible methods to either putting a wallet on hold until the screening is completed or arranging to receive the crypto-asset transfer with a provider’s wallet that links to a wallet and transferring the crypto-assets after screening is completed. Both methods require compliance with the regulation at the expense of the immutability of transfers, which is among the inherent advantages of DLT.

Conclusion

In conclusion, the amendments to the TFR introduce the travel rule and stipulate that the CASP of the originator must submit and verify a range of information of the originator and the beneficiary to the CASP of the beneficiary, which needs to monitor and detect any missing or incomplete information. Despite CASPs welcoming initiatives to fight money laundering and terrorism financing and hoping to further improve the industry’s public image with regards to money laundering, the current proposal stipulates requirements that are hard to fulfil in the short term. It poses a wide range of issues around the nature of DLT and the lack of a data submission system. Regardless of the path chosen to comply with the travel rule, it will mean a significant burden for a highly agile sector working on solutions for the future of finance and will potentially eliminate several positive features of DLT.

By Matthias Pressler, Counsel, Maximilian Nusser, Associate, Schoenherr

Philipp Zumbo has joined Taylor Wessing’s corporate team in Vienna as a Partner.

According to Taylor Wessing, “in addition to profound know-how in Austrian and European corporate law, he has made a name for himself in the area of procedural enforcement of shareholder rights against the company as well as against other shareholders.”

Before joining Taylor Wessing, Zumbo spent two years with Fellner Wratzfeld & Partner. Earlier, he spent over five years with E+H, from 2014 to 2019, joining as an Associate and being promoted to an Attorney at Law in 2017.

“I am being given a great opportunity for further development and evolvement in my new role as a Partner in an international law firm,” commented Zumbo. “I am very much looking forward to this challenge.”

“Philipp Zumbo is an experienced lawyer who perfectly complements our team with his special knowledge in contentious corporate law,” Taylor Wessing CEE Managing Partner and CEE Head of Corporate and M&A Raimund Cancola added. “We will be able to optimally use the synergies thus gained for the benefit of our clients.”

Wolf Theiss, working with Ropes & Gray, has advised Bain Capital Tech Opportunities on its USD 150 million investment in Ataccama, a unified data management platform provider. Deloitte Legal reportedly advised Ataccama.

The transaction closed on June 16, 2022.

According to Wolf Theiss, Bain Capital Tech Opportunities “invests with the aim to help growing technology companies reach their full potential. It is a business unit of Bain Capital, one of the world’s leading private investment firms.”

Ataccama provides a unified data management platform for global enterprises. The company’s platform unifies data governance, data catalogs, data quality, and master data management functions across hybrid and cloud environments.

The Wolf Theiss team included Vienna-based Partner Hartwig Kienast and Prague-based Counsel Tereza Naucova, Senior Associate Michal Matous, and Associate Dominik Havlis.

Public infrastructure projects in Austria and in particular PPPs are undergoing several changes. In the last few years, the focus of PPPs was on social infrastructure like schools, hospitals, and other clinics. Many of them have been structured as so-called Betreibermodelle, i.e., a form of build, finance, and operate models. However, the focus is clearly shifting towards infrastructure for digitalization and climate change.

The federal government in Austria is hardly using project models like PPP or other forms of co-operative implementation (like alliancing contracts) but has rather returned to traditional general contractor contracts. However, apart from such projects and providing the legal framework, the federal government is increasingly using subsidy schemes and tax advantages to support the needed infrastructure in Austria.

Digital Infrastructure

Broadband networks for high-speed internet access are supported via the BBA2030 scheme (Broad Band Austria 2030), providing in total EUR 1.4 billion of investment subsidies to cover all areas with fiber optic networks by 2030 which commercial investors would otherwise leave out. Four different subsidy schemes are available. The first call commenced in March 2022, after receiving Commission approval under the Recovery and Resilience Facility. The call will remain open until May 2022. Three of these schemes are available to public and private applicants but are, above all, indispensable components of public projects at the level of the provincial states and municipalities.

New project models have been developed for public broadband projects, namely the three-layer-open-access models, joint-venture, and joint operation models. In JV models, public and private entities jointly invest in infrastructure and operate it by a joint vehicle. In joint operation models, the public and the private sides invest separately, where the private partner invests in the commercially feasible parts of the infrastructure and the public partner finances the rest; however, the partners set up a joint vehicle to operate both parts of the network. The operation tasks can be structured as a lease or an operation and maintenance contract. Some broadband projects have been structured as concessions.

Most of those models are exempt from public procurement law due to an exemption for telecom projects under the EU procurement Directives. So, fair selection procedures and careful contract drafting are required. Contractual clauses on delay and cost increases because of epidemics, supply-chain disruptions, sanctions, and/or situations of war became a major issue. These include force majeure and hardship clauses or contract variations. Finally, other digital infrastructure, like data centers, is mainly deployed via private initiatives.

Energy and Climate Change

The infrastructure for energy transition or mitigating the effects of climate change will become even more important. The federal government is, again, tackling these issues with subsidy programs. In June 2021, the law on deployment of electricity generation from renewable sources entered into force. It foresees both investment grants and capacity auctions. Investors looking for photovoltaic, wind, small hydropower, hydrogen, biomass, etc. projects should get advice on the available investment grants. In January and March 2022, the federal government initiated two further subsidy schemes for investment grants aiming at fostering the shift from oil and gas to climate-friendly technologies for industrial plants and households. However, the law favors existing commercial premises and households in their switch from gas heating to electricity, biomass, and heat pumps.

There is political resistance against photovoltaic and wind energy, as well as the strengthening of the electricity grid, because such infrastructure is considered to disfigure the landscape. Even if the federal government grants subsidies and the required permits could be obtained, investors struggle to find the required land for their projects, because the zoning plans do not contain sufficient space for wind or PV parks.

Honoring ESG in Infrastructure Tenders

However, the public procurement law does offer efficient tools to authorities awarding contracts for public infrastructure to honor ESG aspects. These tools are increasingly being used. So, suppliers and construction contractors would be well advised to inform public authorities, before a tender is commenced, which technical solutions they can offer and what is available on the market.

Aspects of environmentally friendly supplies, works, and services must be considered, mainly when determining the object of the tender, the contractual conditions, and the selection and award criteria. Moreover, ecological (energy efficiency; production, installation, and operation aspects of materials; life-cycle costs; recycling of waste; protection of green soil) and social criteria (gender equality; protections for the young, elderly, or disabled in the workforce) should be used. For awarding concessions there is even more flexibility.

By Thomas Hamerl, Partner, CMS

This Article was originally published in Issue 9.4 of the CEE Legal Matters Magazine. If you would like to receive a hard copy of the magazine, you can subscribe here.

Schoenherr has advised Caverion Oesterreich on the acquisition of Porreal and its subsidiary Alea. Beira Rechtsanwaelte reportedly advised Porr AG on the sale.

Porreal is a full subsidiary of listed company Porr AG. Porreal is a facility management company that has been operating for over ten years.

Caverion Oesterreich is part of the international Caverion Group. It has 11 locations and over 850 employees throughout Austria. Caverion’s range of products and services includes solutions for building technology and industrial plants with service and operational management.

According to Schoenherr, “by acquiring the Porreal Group, Caverion strengthens its position in the Austrian facility services market. The transaction is expected to close in August 2022.”

Schoenherr’s team included Partners Thomas Kulnigg and Christoph Haid, Counsels Clemens Rainer and Teresa Waidmann, Attorneys Lisa Todeschini, Andreas Lengger, Birgit Hirsch, and Nina Zafoschnig, and Associates Niklas Kerschbaumer, Clemens Pretscher, Maximilian Czernin, Yvonne Kraudinger, Michael Kern, Sebastian Mueller, Tullia Veronesi, and Valentin Demschik.

Mueller Partner Rechtsanwalte has announced the departure of the Heads of its Real Estate practice, Partners Manuela Maurer-Kollenz and Simone Maier-Huelle, to join PwC Legal together with their team on July 1, 2022.

Maurer-Kollenz has spent six years as a Partner with Mueller Partner. Prior to that, she spent three years as a Partner with Willheim Mueller Rechtsanwalte and, earlier, over 20 years as a Partner with Fiebinger Polak Leon Rechtsanwalte, between 1992 and 2012.

Maier-Huelle has spent four and a half years as a Partner with Mueller Partner. Earlier, she spent time as a Partner with Legalhouse, between 2016 and 2017, and, earlier still, as a Partner with NMH2 Rechtsanwalte, between 2009 and 2015.

“We respect the decision of our long-standing Partners Manuela Maurer-Kollenz and Simone Maier-Huelle to join an international structure. Personally, we regret this decision, but we wish them both every success in the future,” Mueller Partner Rechtsanwalte Partner Katharina Mueller commented.

Cerha Hempel has advised Red-Stars.com Data AG company Freeeway on a financing round leading to the closure of its pre-series A round.

According to Cerha Hempel, “the seven-figure investment of two new international shareholders, injecting more than EUR 3 million, sets the post-money valuation watermark of the IoT company above EUR 45 million.”

“Our plans with the investment are set to accelerate our already global market penetration for the industrial and consumer IoT connectivity subscription business,” a Freeeway press release stated. “We will considerably strengthen all operational units, marketing & sales, customer support, and product management.”

Founded in 2014, Freeeway is an Austrian stock company, connecting more than 300 industrial and 32,000 retail customers with more than 650 mobile operators.

“This pre-series A investment is a significant milestone for Freeeway,” Freeeway CEO Harald Fuchs commented. “It gives us the funds to be the first company that enables an IoT subscription business for companies across industries, fully automated, and to scale our IoT connectivity business.”

In 2018, Cerha Hempel had also advised on Red-Stars.com Data’s acquisition of a 50% stake in Freeeway (as reported by CEE Legal Matters on January 2, 2018).

The Cerha Hempel team was led by Partner Nadine Leitner and Associate Liliana Niederhauser.

Cerha Hempel did not respond to our inquiry on the matter.

Brandl Talos has advised Austrian battery diagnostics start-up Aviloo on an equity investment by the European Innovation Council Fund and Raiffeisen’s Invest Unternehmensbeteiligungs AG. Binder Groesswang advised the EIC Fund and PHH advised Invest AG.

“With the equity investments in the mid-seven-digit range … Aviloo wants to become the market leader in Europe for battery tests and play a key role in establishing a used car market for electric vehicles,” PHH announced.

Founded in 2018, Aviloo is a developer of battery diagnostics for electric and plug-in hybrid cars. “Among other factors, the condition of electric batteries is decisive for the vehicle value of a used electric car,” Brandl Talos informed. “The technology developed by Aviloo thus plays a relevant role in the emerging shift to climate-friendly energy sources. With the investments of Invest AG and the EIC, the planned internationalization with a stronger partner network is to be implemented and the presence on the European market significantly expanded,” according to the firm. 

Launched in June 2020, the EIC Fund is, according to Binder Groesswang, a pioneering initiative by the European Commission, providing direct equity and quasi-equity investments (between EUR 500,000 and EUR 15 million) in European high-impact and deep-tech start-ups.

“We have been observing Aviloo’s successful course for some time and are impressed by the innovative strength of the developers. With our investment, we want to give the start-up the necessary impetus to carry out successful international expansion,” Invest AG CEO Christoph Hikes commented.

The Brandl Talos team included Partner Markus Arzt, Senior Associate Roman Schlemaier, and Associate Elena Ciresa.

The Binder Groesswang team included Partner Andreas Hable, Attorneys-at-Law Hermann Beurle and Moritz Salzgeber, and Associate Johanna Mueller.

The PHH team was led by Counsel Philip Rosenauer and included Partners Rainer Kaspar, Nicolaus Mels-Colloredo, and Julia Fritz, Senior Associate Wolfgang Guggenberger, and Associates Ramona Maurer and Dominic Zehetgruber.

Freshfields Bruckhaus Deringer has advised German state-owned bank KFW on a revolving credit line of up to EUR 9.8 billion for the former Gazprom Germania.

According to Freshfields, “the revolving credit facility is intended to secure gas supplies in Germany in the longer term. Gazprom Germania operates critical energy infrastructure in Germany and is particularly active in energy trading, gas transport, and the operation of gas storage facilities.”

Gazprom Germania (GPG), formerly part of the Russian Gazprom group, has been under the fiduciary management of the German Federal Network Agency since April 4, 2022. GPG will be operating under the name of Securing Energy for Europe in the future.

The KFW is a German state-owned investment and development bank, based in Frankfurt. Founded in 1948, the KFW Group has offices in Frankfurt, Berlin, Bonn, and Cologne, and its global network includes around 80 local and representative offices.

“With the loan from the KFW bank, the federal government will avert insolvency and prevent a cascade effect in the market,” the German Federal Government announced. “The money will serve to secure liquidity and procure replacement gas. The loan will be ring-fenced to ensure that it can only be used for the business operations of GPG and to maintain the gas supply and cannot flow to Russia. In the next step, the government will consider ways of converting the loan to equity in order to guarantee the security of supply for the long term.”

The Freshfields team was led by Frankfurt-based Partner Frank Laudenklos and included Vienna-based Partner Stephan Denk, Counsel Lukas Pomaroli, and Associate Florian Reiter-Werzin, as well as teams from the firm’s Frankfurt, Hamburg, Dusseldorf, London, Washington, and Brussels offices.