Category: Austria

Herbst Kinsky has advised the shareholders of Austrian mobility start-up Carployee on the sale of their company to California-based RideAmigos.

Financial details were not disclosed.

According to Herbst Kinsky, the transaction will serve the companies’ common goal to optimize commuter flows through artificial intelligence and behavioral research and marks RideAmigos’ entry into the European market. According to a company press release, Carployee will continue operating from its Linz headquarters as its team is integrated into Santa Monica-based RideAmigos.

Founded in 2018, Carployee develops carpooling app software for companies, business parks, and universities. Its customers include Rosenbauer, LKW Walter, Stihl, Mercedes Benz Poland, and the Swiss AMAG.

According to the company, RideAmigos provides mobile and web-based commuter engagement solutions, with its clients consisting of businesses such as LinkedIn, Patagonia, Rivian, as well as states and regions like the San Francisco Bay and Denver-Boulder.

“While carpooling is a good start, we are all committed to empowering people to make better commute decisions across all modes. The opportunity to do that on a global scale with a like-minded and experienced team made this a perfect match and an easy decision,” commented Carployee CEO Albert Vogl-Bader.

The Herbst Kinsky team was led by Partner Philipp Kinsky and Attorney at Law Carl Walderdorff and included Associate Carmen Walser.

The firm did not respond to our inquiry on the matter.

In summer 2021 the European Banking Authority (EBA) published Draft Guidelines on the limited network exemption (LNE) under the Payment Service Directive 2 (PSD2) for consultation. The Draft Guidelines are meant to foster supervisory convergence amongst the EU’s national competent regulators (NCAs).

The consultation is open for comments until 15 October 2021. The EBA plans that the Draft Guidelines will apply from 1 October 2022.

The provision of payment services and e-money services is subject to a prior licence of the relevant EU Member State’s NCA (in Austria, the Financial Market Authority (FMA)) unless entities can rely on an available exemption. Many companies rely or intend to rely on the limited network exemption (LNE) under the Payment Service Directive 2 (PSD2). For those it is highly recommended to review the EBA’s Draft Guidelines in detail, as they propose significant changes (including more restrictive views) to the current interpretation of the scope of the LNE.

In addition, the Draft Guidelines may impact the scope of the LNE available for e-money services (because e-money regulations refer to the PSD2 exemptions). Companies should be aware that the issuing of electronic customer voucher cards (including personalised or anonymous gift cards) with a payment function can qualify as the licensable issuing of electronic money.

Background of the EBA Draft Guidelines

The so-called “limited network exemption” in fact consists of three different sub-exemptions from the licence requirements and scope of PSD2, i.e.:

1. instruments allowing the holder to acquire goods or services (i) within the premises of the issuer or (ii) within a limited network of service providers under a direct commercial agreement with a professional issuer (limited network exemption in the narrower sense);
2. instruments which can be used only to acquire a very limited range of goods or services (very limited product range exemption);
3. instruments for the acquisition of specific goods or services for specific social or tax purposes (social and tax exemption).

The EBA concluded that the implementation and application of the scope of these (sub-)exemptions diverges significantly across EU Member States, which creates opportunities for regulatory arbitrage and thus impedes the single market for payment services. The Draft Guidelines should help create a more uniform approach of the NCAs as regards the interpretation of the PSD2’s limited network exemption.

It is the first time that the EBA published specific criteria that NCAs should consider when assessing the scope of the limited network exemption (however, many NCAs, including the Austrian FMA, have published national guidance before).

Summary of the EBA’s key proposals

While the EBA Draft Guidelines contain many aspects, the following will likely have the most significant impact on the current and future scope of application of the LNE:

• Common brand: The EBA clarifies that in the case of a group comprising several retail chains where each chain uses a separate brand, the use of a payment instrument of one of the retail chains in the other retail chains would not fall under the scope of the LNE. The use of a common payment brand (as opposed to a common general retail brand) would alone not be sufficient in the EBA’s view. Groups of retail chains offering combined payment voucher cards across their various brands should therefore (re)assess whether changes to the current structure would need to be made.
• Available also for authorised entities: The EBA clarifies that not only corporate entities can make use of the LNE, but also already licensed market participants (such as banks, payment institutions, etc). This means that regulated entities do not necessarily need to only offer payment instruments falling within the scope of PSD2 but – if all requirements are met – are also entitled to offer unregulated payment instruments within the scope of LNE.
• Location of establishment of issuer / cross-border provision: The EBA clarifies that the issuer of the payment instrument can be established in an EU Member State different from the Member State where the excluded payment instrument should be used. The EBA further notes that there is no general geographical limitation of the LNE and that the cross-border provision of services under the LNE should be permitted. It remains to be seen whether certain NCA will reconsider their rather restrictive approach to certain sub-exemptions of the LNE (e.g. the German BaFin currently takes the view that the sub-exemption under Art. 3 (k) (i) PSD2 (limited network of service providers under direct commercial agreement with a professional issuer) shall not be applied on a cross-border basis). Still, because the services are exempt from PSD2, service providers relying on the LNE cannot benefit from passporting rights and subsequently are dependent on an assessment by the NCA of every EU Member State where they would like to make use of the LNE.
• Notification requirements / thresholds: If the combined transaction values carried out under a certain payment instrument of an issuer exceed EUR 1m within 12 months, the issuer needs to submit a detailed LNE notification (including an explanation why the LNE is applicable) to the NCA of the EU Member State where the services are provided. However, the EBA clarifies that the threshold is to be calculated (i) at the level of each service provider (i.e. all payment transactions under all offerings of a single issuer need to be added up) but (ii) in respect of each EU Member State separately. It follows that an issuer could offer payment instruments under the scope of the LNE exceeding an overall transaction value of EUR 1m without submitting an LNE notification, if the transaction value in each relevant EU Member State is below the EUR 1m
• In-premises exemption not available for online-business: The EBA is of the view that the reference to “premises” in Art. 3 (k) (i) PSD2 clearly sets out a geographical restriction to physical location(s). This means that according to the EBA, payment instruments benefitting from this particular exclusion can only be used for purchases within physical locations and not for purchases in online stores. Of course, payment instruments designed for use in online stores can resort to other sub-exemptions if all requirements are met, e.g. under a contractual agreement with a professional issuer.
• Restriction only in T&Cs is not sufficient: The EBA clarifies that both technical and contractual restrictions in the use of the payment instrument need to apply to be able to rely on the LNE. This means that the use of the payment instrument needs to be technically restricted to the scope of providers/stores or the very limited range of goods, e.g. by technically restricting the possibility to use a payment instrument for certain excluded goods as opposed to a mere legal exclusion in the T&Cs.

Outlook

It remains to be seen whether the consultation process will result in relevant changes to the now proposed Draft Guidelines. Entities that currently rely on the LNE or are planning to rely on it in the future are strongly recommended to review whether their scope of services will likely (continue to) fall within the scope of the PSD2’s LNE in the future.

The final guidelines on the limited network exemption under PSD2 are expected to be published in 2022.

By Matthias Pressler, Counsel, Schoenherr

Schoenherr has advised P&I Personal & Informatik on its acquisition of Austria-based VRZ Informatik Gesellschaft and its Switzerland-based sister company ThinkCreateAct.

The transaction remains contingent on regulatory approval. Financial details were not disclosed. 

P&I is an international HR cloud company, offering products and services since 1968. According to Schoenherr, “through consistent innovations and further developments in the product and service area, P&I offers the most technologically advanced HR software with the HR cloud solution P&I LOGA3 and the knowledge pool P&I HR-BIGDATA with the most comprehensive HR tasks.”

Dornbirn-based VRZ Informatik is an IT system house with three business divisions: basic infrastructure, software development, and payroll accounting. The company has been developing its own software for more than two decades.

The Schoenherr team was led by Partners Christian Herbst and Maximilian Lang and included Partners Volker Weiss and Michael Woller, Counsel Teresa Waidmann, Attorneys at Law Alfred Amann and Marco Thorbauer, and Associates Nina Zafoschnig and Daniel Neuwirth-Riedl.

Brandl Talos has advised Austrian health technology start-up Contextflow on the second closing of its EUR 6.7 million Series A financing round.

The Series A first closed in June (as reported by CEE Legal Matters on June 23, 2021).

In the course of the second closing Peak Pride joined as a new investor, while existing investor Apex Ventures raised fresh capital through its “Apex Best in Class” fund.

Founded in 2016 as a spinoff of the Medical University of Vienna, Contextflow develops deep learning-based software to improve radiology workflows. Its core technology detects disease patterns in 3D medical images like CTs and MRs. The technology is utilized by radiologists on lung CTs, including on those related to COVID-19.

According to Brandl Talos, “the investment will be used for market entry in Europe and the US, obtaining FDA clearance, as well as extending the company’s offerings to include new products and features.”

The Brandl Talos team consisted of Partner Markus Arzt, Associate Elena Ciresa, and Trainee Christina Bernhart.

The firm did not respond to our inquiry on the matter.

Brandl Talos, working with Lupp + Partner, has advised German private equity firm Capiton on its acquisition of a majority stake in the Kutterer Mauer Group. 

Financial details were not disclosed.

Kutterer Mauer is a manufacturer of packaging caps and closures. According to the firm, “it designs and produces high-quality innovative products and is active in various end-segments including cosmetics, pharma (cleanroom products) and food, which allows for a strong pipeline of new lightweight and easily recyclable products.”

According to Brandl Talos, Capiton invests in small and medium-sized enterprises located mainly in Austria, Germany, and Switzerland. “They focus primarily on profitable companies with a turnover of between EUR 50 and 300 million, and also partner with co-investors to realize much larger investments. In acquiring Kutterer Mauer AG, Capiton reinforced its commitment to continue their growth strategy.”

The Brandl Talos team was led by Partners Markus Arzt and Roman Rericha and included Attorney at Law Adrian Zuschmann.

The firm did not respond to our inquiry on the matter.

Allen & Overy has advised Oesterreichische Kontrollbank on its USD 1.75 billion issuance of 0.5% guaranteed global notes due 2024.

The notes are guaranteed by the Republic of Austria and are listed on the regulated market of the Luxembourg Stock Exchange. 

Oesterreichische Kontrollbank Aktiengesellschaft is Austria’s central financial and information services provider for export and capital markets. Its main functions include the administration of export guarantees, as an agent of the Republic of Austria, and the financing of Austrian exports.

Allen & Overy advised Oesterreichische Kontrollbank on multiple previous issuances recently, including this year (as reported by CEE Legal matters on February 10, 2021), last year (as reported on February 24, 2020), in 2019 (as reported on February 4, 2019), in 2018 (as reported on September 20, 2018), in 2017 (as reported on February 1, 2017), and in 2016 (as reported on November 16, 2016).

Allen & Overy’s team included Partner Marc Plepelits and Senior Associates Martin Schmidt and Rita Nicole Thomas.

The NFT market is still relatively new and volatile, but its potential is huge. Christie’s managed to auction an NFT linked to an artwork for over USD 69 million this March, proving that NFTs are a new asset class that can carry significant value. A value, that needs protection just like any other asset class.

Accordingly, the question arises as to whether NFTs are insurable. What is the legal situation in Austria?

Are NFTs insurable according to Austrian insurance law?

The first question that has to be answered is: When does Austrian insurance law apply? For insurance contract law, the applicability may initially result from a choice of law. Where no choice of law exists, or where an area of law is involved that is not accessible to a choice of law, such as insurance supervisory law, the law applicable is more challenging to determine: The pivotal factor of conflict-of-laws regulations – the “insured risk” – is difficult to define for NFTs, as NFTs do not have a traditional “location”.

It is however questionable whether the unspecific location of NFTs alone leads to a conflict of laws, in particular where an Austrian policyholder wishes to have its NFT insured with an insurer domiciled in Austria, as:

• international and European conflict-of-laws regulations (such as Art 7 Rome I Regulation¹) require a connection to the law of different states; and
• such clear connection cannot be identified in an insurance contract on NFTs concluded between an Austrian policyholder and an insurer domiciled in Austria.

Therefore, it could be argued that an insurance contract on NFTs concluded between an Austrian insurer and an Austrian policyholder is a purely domestic matter, to which Austrian insurance law is applicable.

But even under the assumption of a conflict-of-laws, Austrian insurance law would be applicable if the insurer and the policyholder have their registered office/habitual residence in Austria because:

• in EU law, the determination of the insured risk is, in case of doubt, based on the habitual residence of the policyholder (Art 7(6) Rome I in conjunction with Art 2(2) of the Second Directive 88/357/EEC); and
• outside the scope of the Rome I Regulation, Sec 35 Austrian International Private Law (“IPRG”) stipulates the applicability of the jurisdiction, in which the contractual party who provides the service characteristic for the contract has its habitual residence. In the case of insurance contracts, this is the registered office of the insurer.

So, as an interim result, we can say that Austrian law is applicable to insurance contracts on NFTs if:

• it is lawfully chosen by the parties; or
• the insurance contract is concluded between an Austrian insurer and an Austrian policyholder.

In a next step, it must be examined whether NFT insurance is allowed according to Austrian insurance law. Austrian statutory law does not define “insurance”. Based on case law, an insurance contract requires the follows:

• a risk;
• a transfer of that risk to an insurance undertaking; and
• remuneration, ie a premium.

To determine whether NFTs are insurable, the element of “risk” is essential. An insurance contract is intended to protect the policyholder against the consequences of the realisation of a risk. In other words: Without a risk, there is no insurance.

Where do the risks lie in NFTs? And can they be measured?

NFTs are one-of-a-kind digital assets. As with cryptocurrencies, NFTs are stored in a blockchain. While anyone can explore the blockchain record to view the underlying asset only the holder of the NFT has the “private key” that verifies ownership. Therefore the holder of the NFT is recorded as the owner of the underlying asset unless the NFT is transferred to another person’s digital wallet. Once an NFT transaction is made and assigned to a different private key, there is no way anyone can reverse the transaction: “Not your private keys, not your NFTs”.

Therein lies one of the main risks of NFTs. Owning an NFT requires a digital wallet that contains “private keys” to transact on the blockchain. If you lose access to the digital wallet by forgetting passwords, damaging devices or due to getting hacked NFTs from your digital wallet can be lost. Just recently users of the NFT marketplace “Nifty Gateway” claimed that their entire NFT collection was “stolen“.

Another risk of NFTs is that they usually contain a link to the storage location of the underlying asset. If that link is broken or the company storing the asset goes out of business the owner of the NFT could be left with links to assets or files that no longer exist. Similar risks arise if a digital marketplace, storage wallet provider or a server farm involved in a NFT transaction suffer bankrupty or service interruptions that damage the digital files.

Further risks associated with NFTs include whether the seller had the necessary intellectual property rights associated with the digital asset. What happens if the creator or seller of the underlying asset fails to secure or verify necessary trademark or copyrights?

These are all risks to which investors are potentially exposed in NFT transactions and for which protection may be considered. The question of whether NFTs entail insurable risks can therefore be answered with a resounding yes.

The following types of NFT insurance coverages are conceivable:

• Crime Coverage; and
• Coverage against loss or damage.

A crime coverage could be provided for theft or fraud related to hacker attacks and be structured similarly to cyber-crime insurance policies that some Austrian insurance undertakings are offering.

The coverage against damage or loss could provide cover for broken links, software errors or financial issues of the various entities involved in the NFT transaction that lead to damaged or a loss of NFTs. 

In conclusion, NFTs principally are insurable. However, Austrian insurance supervisory law imposes a further requirement for insurances and this requirement is the reason that the insurance market has been very hesitant to provide cover for digital assets and NFTs in particular, which no insurance undertaking in Austria is currently providing cover for:

We are talking here about a calculation based on the law of large numbers in the underwriting of risk. The law of large numbers is a probabilistic prediction about the future course of damage: the greater the number of persons, goods and material assets covered that are threatened by the same risk, the less influence there is from coincidence. The objective is a risk equalisation in the collective. This presupposes the calculability of the risk.

Since the NFT market is still in its infancy, it is hardly surprising that this requirement is difficult to meet. The market is also volatile, creating another problem: In a regular fine art insurance policy, the sales figure or purchase price are options to value the work. But with NFTs and cryptocurrencies, that value is fluctuating and without a trading history there will be issues over its valuation.

However, for insurers looking for new business opportunities, getting in early to this market might give them big advantages to exploit it’s huge potential.  We are keeping a keen eye on how the insurance market adapts and will update you on its development.

Conclusion

NFTs are insurable according to Austrian Insurance Law. However, digital assets in general and NFTs in particular raise a number of insurance-related questions, especially with regard to their valuation, which is why there is no insurance offer for NFTs as yet. Due to the large market potential of NFTs, however, we assume that it is only a matter of time before first insurance undertakings take on a pioneering role and provide cover for NFTs.

By Peter Konwitschka, Partner, and Daniel Hohnl, Attorney at Law, Schoenherr

Natalie Hahn will join the Employment practice of Eisenberger + Herzog as a Partner starting October 1, 2021.

Hahn is currently Partner and Head of Employment with DSC Doralt Seist Csoklich. Together with her team, she will be joining the E+H practice led by Jana Eichmeyer. Hahn and Eichmeyer worked together for over seven years at Kunz Schima Wallentin. 

Hahn started her career with Taylor Wessing legacy firm Eiselsberg Natlacen Walderdorff Cancola in 2003. She spent 12 years with KSW, having joined in 2004 as an Associate and being promoted to Attorney at Law in 2007. She spent one year with Schoenherr (2016-17) before rejoining KSW, now Schima Mayer Starlinger, as a Partner for three years. She moved to DSC in 2020. 

According to E+H, “Natalie Hahn has dedicated herself to employment law since the beginning of her professional career and is one of the most eminent employment law specialists in the country.” Her addition will create “the largest employment law practice in Austria, together with the other two partners.” 

“Together we can expand the range of services for our clients and combine the existing know-how with many years of practical experience,” Hahn commented. “We don’t just talk the talk of diversity; our team is walking the walk with the highest percentage of women in all of Austria. I am looking forward to working together again with Jana Eichmeyer and her team, and to the challenge of building up the largest practice group in Austria.”

“Our goal is to build the largest employment law practice group in Austria,” adds E+H Partner Jana Eichmeyer. “Natalie and I have already proven separately that we are successful. Being able to achieve more for our clients and our two teams combined – this is exactly the motivation that brought us together again! With Natalie Hahn, we now have a total of eight female lawyers, including three female partners, with incredible prestige. Following the recent partner appointment of Karolin Andreewitch-Wallner, Natalie is the perfect addition to our team and another powerhouse for the practice group. She is not only a top lawyer but also an excellent team player.”

The Austrian Cartel and Competition Law Amendment Act 2021 (KaWeRÄG 2021) will introduce – in part substantial – amendments to the Austrian merger control regime as of 1 January 2022. The amendment originated in the context of the implementation of the ECN+ Directive. However, the Austrian legislator seized the opportunity to, among other things, refine the Austrian merger control regime by introducing a second domestic turnover threshold and implementing the SIEC test, as well as to strengthen the FDI screening mechanism.

1. Introduction of a second domestic turnover threshold

While the proposed amendment leaves the transaction value test untouched, the KaWeRÄG introduces a second domestic turnover threshold for the primary thresholds. According to the new provision, the turnover of at least two undertakings needs to exceed EUR 1m in Austria to trigger a filing obligation.

This filter is to be seen against the fact that the number of mergers notified to the Austrian Federal Competition Authority (FCA) has been rising steadily throughout the past years, peaking in 2019 at almost 500 notifications, with a significant number of filings concerning target companies generating only trivial domestic turnover of a few thousand euros (or no Austrian turnover at all). The FCA expects that the second turnover threshold will result in a reduction in the number of annual filings by more than 40 %. At the same time, the filing fee for merger control notifications will be raised from EUR 3,500 to EUR 6,000.

2. Implementation of the SIEC test

Furthermore, the KaWeRÄG foresees the implementation of the significant impediment of effective competition (SIEC) test in Austria. The long-awaited alignment with the European standard is an important step in the modernisation of the Austrian merger control regime. By having one benchmark for merger control assessments throughout the EU, legal certainty is achieved and the potential of diverging decisions minimised.

Alas, the amendment grants the pre-existing market dominance test a somewhat special position in the Austrian merger control review, as it places the market dominance test not as a subcategory of the SIEC, but as a test in its own right that is to be applied in parallel to the SIEC. Practice will show whether the amendment, due to this duality, will have any impact on the results of the merger control assessment in Austria.

3. Further strengthening of FDI screening

The amendment further foresees an obligation of the FCA to forward merger notifications to the Federal Minister for Digital and Economic Affairs (BMDEA). This will reinforce FDI screening under the Austrian Investment Control Act (InvKG). Companies are advised to check whether a transaction needs to be notified to the FCA but is also subject to a notification obligation under the ICA.

By Christoph Haid, Franz Urlesberger, Volker Weiss, and Hanno Wollmann, Partners, Schoenherr

Schoenherr has successfully represented Adler Real Estate AG in proceedings before the European Court of Justice in a matter relating to the Austrian Takeover Commission.

The ECJ has ruled that, according to Schoenherr, “the Austrian Takeover Commission in its current structure is not independent and does not act in accordance with European law due to the lack of legal protection and appeal possibilities for market participants. As a result, the decisions of the ATC issued against Adler and contested by Schoenherr as Adler’s legal advisor have no binding effect in civil and administrative proceedings and are therefore irrelevant. The Republic of Austria is now expected to amend the Austrian Takeover Act.”

According to the firm, “in March of 2016, the ATC accused Adler, together with other parties to the proceedings, of acting as joint legal entities in the course of a planned takeover of Conwert Immobilien Invest SE and of ‘acting in concert’. According to the ATC, Adler, together with other shareholders, acquired a controlling interest in Conwert on September 29, 2015, and subsequently wrongfully failed to submit a mandatory tender offer. Although the ATC acted as ‘investigator’, ‘prosecutor’ and ‘judge’ vis-a-vis Adler, Adler has been excluded from challenging this ruling of the ATC in front of an independent court under the current appeal regime of the Takeover Act.”

According to Schoenherr, “in subsequent proceedings, the Federal Administrative Court followed the suggestion of Schoenherr as Adler’s legal representative and requested clarification from the ECJ as to whether this limited appeal regime infringes European law. The ECJ confirmed that the current structure of the ATC is not in line with European law, in particular Article 47 of the European Charter of Fundamental Rights. Since the ATC is structured as a court of [inquest] and is therefore not independent in the sense of European law, market participants should be able to have decisions of the ATC fully reviewed by an independent court. This is currently not the case. As a consequence, the rulings issued by the ATC against Adler cannot ultimately have any binding effect and are therefore irrelevant.”

Schoenherr’s team included Partners Andreas Natterer, Christian Schmelz, and Sacha Hodl, Counsel Sacha Schulz, and Attorneys Sarah Khalil and Christian Holzer.