Category: Austria

An approaching milestone after decades – Part 1: Overview and jurisdiction

The Justice Committee sets the reform of the enforcement law in motion. Assuming there are no obstacles, the reform will enter into force on 1 July 2021. As recently as 14 April 2021, the government bill was submitted to the Justice Committee for review and just passed the National Council on 22 April 2021. It is now on the agenda of the Second Chamber of the Austrian Parliament for 4 May 2021. While some provisions have merely been under review to facilitate their application due to editorial changes, especially of a systematic and linguistic nature, there are also some considerable amendments, including the jurisdictions, which we present as the first part of a series of publications dealing with the GREx. 

1. Overview

Considering when the enforcement law came into force, the current enforcement law presumably suffers from several significant deficiencies. Most importantly, at the time of the application for enforcement, the creditor usually does not know the debtor’s entire financial situation, in particular the extent of realisable assets. The creditor only becomes aware of them in the course of the proceedings, usually through the submission of a list of assets, which may ultimately turn out to be incomplete. However, seized claims are often settled by the time of the seizure, which only takes place at the request of the creditor and after the seizure has been granted, making execution a road to nowhere.

One of the main goals of the GREx bill is therefore to increase the efficiency of the enforcement procedure for the collection of claims. Another is to prevent enforcements against obviously insolvent debtors. As a result, a powerful enforcement procedure may boost the payment morale of debtors, because the presence of a bailiff or the seizure of receivables is bad for business. Creditors should also have to file fewer applications in the future. If nothing else, this should lessen the cost burden for creditors.

The reform consists mainly of the following measures:

• To facilitate the collection of claims by creditors, so-called “enforcement packages” are created. The “simple” package covers enforcement on movable property, claims arising from employment and a record of a list of assets. The “extended” package additionally covers trade receivables, going hand in hand with a mandatory appointment of an administrator. Their task is to locate assets, seize them and subsequently realise them.

• Proceedings for the recovery of monetary claims (movable property) should be consolidated at the general place of jurisdiction of the debtor (see Point 2).

• The consolidation of the proceedings makes it possible to ascertain whether the debtor is manifestly insolvent in order to obtain the collection of claims against insolvent debtors in accordance with the principles of insolvency law.

2. Concentration of jurisdiction

Pursuant to Section 3 GREx, subject matter jurisdiction is still vested in the civil district courts as enforcement courts.

2.1 Enforcement of the collection of a monetary claim on movable property

Proceedings for the recovery of monetary claims will be consolidated at the general place of jurisdiction of the debtor. If the debtor has no general place of jurisdiction in Austria, the court where the movable property is located will have jurisdiction (Section 4 (1) GREx). The location of monetary claims is determined by the general place of jurisdiction of the third-party debtor, e.g. employer or bank branch (Section 4 GREx). If the jurisdiction results in several general places of jurisdiction, it is up to the creditor which to choose. However, if there are several proceedings at different courts, the proceedings will be transferred to the court that initiated the first proceeding (Section 5 GREx).

The same applies to the transfer of the general place of jurisdiction. However, this is only possible under the aspect of simplification and cost efficiency (Section 5a GREx).  

2.2 Enforcement of the collection of a monetary claim on immovable property

There are no big surprises in connection with enforcement on immovable property. The court that keeps the public record or the court where the superseded property (Superädifikat) is located has local jurisdiction.

2.3 Enforcement to obtain acts, tolerations or injunctions

Compared to the above provisions, Section 5c (3) GREx stands out. According to this newly introduced provision, an application for enforcement of an injunction may also be filed with the court in whose jurisdiction the act violating the enforcement title has been committed or its “success” (Erfolg) has occurred.

This new provision was triggered by the fact that it is extremely difficult to enforce injunctions against a foreign website operator. Even after a successful judgment, the chances of success are very slim. As until now it was not possible to establish competence to initiate an injunction enforcement without a domestic service location (see Section 18 (4) Execution Act, Section 2 (4) Service of Documents Act). In these cases, the focus was always on the first act of enforcement – the service of the execution permit, which was ultimately not possible without a service location. Looking at the newly proposed provision, it might seem like this kind of obstacle has now been abolished (of course, whether it is more advantageous or more disadvantageous all depends on the point of view).  

Assuming that an act performed in Austria violates the execution title, an Austrian district court could be regarded as competent even without a service point within the meaning of Section 2 (4) of the Service of Documents Act. The same applies to the “success” which has occurred in the territory.

But does this mean the reform is dragging foreigners under Austria’s enforcement regime? That remains to be seen. For now, it can be said that such a presumption is at least likely due to a comparable phrasing of Article 7 (2) Brussel-I Regulation (EC/44/2001) and its consequences under the law of jurisdiction. It regulates both international and local jurisdiction without requiring a service location in Austria.

To sum up, the consolidation of all proceedings in the general jurisdiction of the debtor makes it possible to determine at an early stage whether the enforcement is going to be promising or not. If the GREx turns out as expected, this could be one of the biggest milestones. Since the GREx does not have retrospective application, it will massively increase efficiency while also reducing the costs of future enforcement requests.

To be continued…

By Eva Wirleitner, Associate, and Sarah Rosenthaler, Associate, Schoenherr

CMS has advised German investment company Finexx on its acquisition of Volpini Verpackungen GmbH Austria. The financial details of the transaction were not disclosed.

According to CMS, “while Finexx (founded in 2013) was able to increase its fund volume significantly by this acquisition of 100% of the shares in Volpini, the succession of the successful Austrian family business with more than 200 years’ of tradition (since 1811) has now been secured.”

CMS Vienna’s team was led by Partner Clemens Grossmayer and Associate David Kohl and included former Partner Johannes Trenkwalder, Partner Sibylle Novak, Senior Associate Marie-Christine Lidl, and Associates Thomas Liegl and Alexander Hiermann.

A year has passed since the outbreak of COVID-19 in Austria and many legal problems remain unresolved. The problem seems new, but the legal provisions of the Austrian Civil Code em-ployed to deal with thae consequences of the pandemic are more than 200 years old, and were drafted in order to deal with quite different pandemic effects. The law refers to “extraordinary events” such as “fire, war or pandemic, major floods, weather events.” There is agreement that COVID-19 is a pandemic and therefore an extraordinary event in the meaning of the law.

The consequences for a lessee’s obligation to pay rent depend on whether the lease agreement qualifies as “Miete” or “Pacht.” The Austrian Civil Code distinguishes between simple lease agreements for a leased space (an apartment, business premises, plot of land, etc.) which are called “Miete,” and lease agreements for a company or business opportunity, which are called “Pacht.” In practice, it is often difficult to determine whether a lease agreement is “Miete” or “Pacht,” especially for lease agreements in shopping centers.

According to Art. 1104 of the Austrian Civil Code, in the case of an extraordinary event, the rent is reduced for “Miete” if the leased space is unfit for use. If the leased space is still partially fit for use, the rent is reduced proportionately. The extent of the reduction is determined by the extent and duration of the un-usability, depending on the agreed-upon purpose of the use of the leased object. There are no clear guidelines as to how to calculate the rent reduction. The only decision from the Austrian Supreme Court dealing with a rent reduction based on an extraordinary event dates from 1915, when the lessee of an apartment fled from enemy troops during World War I and left his apartment and belongings behind. The Austrian Supreme Court stated that the leased apartment was still partially fit for use because the lessee could leave his furniture in the deserted apartment and did not need to rent an additional storage room.

In the case of a “Pacht,” under Art. 1105 of the Austrian Civil Code, if the lease agreement was concluded for a longer term than six months, the rent is only reduced if the leased object is completely unfit for use. As long as the leased object remains slightly fit for use, the lessee has to pay the full rent. When Art. 1105 of the Austrian Civil Code was drafted in 1811, the members of the legislative committee were thinking of lease agreements for country estates and farms. When a case for rent reduction of a business lease was brought before the Austrian Supreme Court in 1965, the court did not see any problem in treating a business lease in the same way as an agricultural lease in 1811. However, the Austrian Constitutional Court might have a different view. It is currently being debated if, in cases where a lease agreement that is considered “Pacht” is close to “Miete,” Art. 1105 of the Austrian Civil Code could be unconstitutional because it treats similar situations very differently. The Austrian Constitutional Court has not yet decided on such a case.

There is also an ongoing debate as to whether only direct effects of COVID-19 on a leased object, such as legal restrictions imposing a lockdown or opening restrictions, can lead to a rent reduction, or whether the overall impact of COVID-19, including a general economic decline, can be considered. Most likely it will take a year or two more before this question is brought before and decided by the Austrian Supreme Court.

By Wilfried Seist, Head of Real Estate, and Theresia Grahammer, Attorney at Law, DSC Doralt Seist Csoklich Rechtsanwalte

This Article was originally published in Issue 8.2 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 Energie Graz, Energie Steiermark, EVN, Illwerke VKW, Innsbrucker Kommunalbetriebe AG, Kelag, and Linz AG on the foundation of a joint venture in the e-mobility sector. 

According to Schoenherr, the seven shareholders of the newly founded E-VO eMobility GmbH are part of the Austrian Federal Association for Electric Mobility and are among the developers and initiators of the BEO charging network — the largest public charging system in Austria, with around 5,000 charging points. The joint venture aims to make the charging network more efficient, stable and secure.

Schoenherr’s team was led by Partners Roman Perner and Hanno Wollmann and included Attorneys Michael Marschall and Marco Thorbauer and Associates Tobias Hayden and Gabriel Ebner.

On 21 April 2021, the European Commission (ECOM) published measures aimed at fostering sustainable investment and steering finance towards the European Green Deal.

As the ECOM noted in its communication of 21 April 2021, on the path of economic recovery from the COVID-19 pandemic and towards the European Green Deal, a sustainable financial ecosystem in Europe requires not only a clear transition and comprehensive framework for companies to follow, but also the promotion of transparency, reliability and comparability for investors and market participants, all while preventing greenwashing. Such conditions will allow green finance to work as a driving force towards the longer-term sustainable and inclusive economic development of Europe. 

The first steppingstones have already been laid: the EU Taxonomy Regulation, the Sustainable Finance Disclosure Regulation and the Benchmark Regulation are all already in force, and form the foundation to increasing transparency. As the pivotal aspect, EU Taxonomy translates contribution to the EU’s Green Deal objectives into (corporate) key figures on which investors can base their investment decisions.

As the next step in Europe’s path towards the Green Deal, the Commission has published (see the ECOM’s communication) a package consisting of:

• the EU Taxonomy Climate Delegated Act, which supplements the EU Taxonomy Regulation and sets out technical screening criteria for the sustainability of economic activities. This is designed to increase transparency for investors and to guide issuing/borrowing companies;

• a proposal for a Corporate Sustainability Reporting Directive (CSRD) that revises the Non-Financial Reporting Directive (NFRD) and extends the scope of companies required to disclose relevant data and of the information to be reported. Such uniform reporting standards (as envisaged under the CSRD) should also facilitate reporting by the respective company; and

• related amendments to delegated acts to reflect sustainability preferences or considerations in insurance and investment advice, product governance and fiduciary duties.

1. The EU Taxonomy Climate Delegated Act

The EU Taxonomy Regulation, which entered into force on 12 July 2020, established a classification system for environmentally sustainable economic activities (Taxonomy framework). The EU Taxonomy translates contributions to the EU’s Green Deal objectives into (corporate) key figures. It recognises activities that make a substantial contribution to reaching EU environmental objectives and that do not cause significant harm, as being sustainable.

On 21 April 2021, the College of Commissioners agreed on the text of the EU Taxonomy Climate Delegated Act (the “Delegated Act”), which supplements the EU Taxonomy Regulation. It provides technical screening criteria for determining whether an economic activity in a given sector can be considered as contributing substantially to climate change mitigation and climate change adaptation (which are two of the six environmental objectives set out in the EU Taxonomy Regulation). The Delegated Act will formally be adopted at the end of May and enter into force after the scrutiny period by the European co-legislators has ended. It is set to apply as of 1 January 2022. The Delegated Act covers the economic activities of roughly 40 % of EU-domiciled listed companies with more than 500 employees active in economic sectors responsible for nearly 80 % of direct greenhouse gas emissions in Europe (Taxonomy relevant sectors) (sources: Bloomberg, Eurostat; see the ECOM’s communication, page 2). The Delegated Act notably covers the bioenergy, forestry, hydrogen and hydropower sectors. The EU Taxonomy includes more economic activities and more environmental objectives than have been used so far in market-based green financing frameworks.

To foster transparency, respective disclosure obligations are to be introduced for financial market participants. Disclosure will allow comparison and serve as a reliable guide for investment decisions, but also for companies to reliably plan (and raise financing) for their environmental transition. The Taxonomy framework will broaden the scope of currently existing green financing tools and, among other things, play a role in green bond standards and green financial retail products, as it enables market participants to design credible green financial products.

The criteria set out in the Delegated Act will also be subject to regular review, open to stakeholder input (via a web portal) and will be dynamically extended to new sectors and activities.

As the next step, the ECOM plans to adopt a complementary Delegated Act of the EU Taxonomy Regulation. This will apply to activities not yet subject to the present Delegated Act, such as certain manufacturing activities and energy sectors (e.g. nuclear energy and, to the extent aligned with the Taxonomy Regulation, natural gas and related technologies) as well as agriculture. The other four environmental objectives set out in the EU Taxonomy Regulation, i.e. the sustainable use and protection of water and marine resources, the transition to a circular economy, pollution prevention and control, and the protection and restoration of biodiversity and ecosystems, will also be covered by a separate delegated act.

2. The new Corporate Sustainability Reporting Directive (CSRD)

As an ancillary step, the ECOM proposes to revise the Non-Financial Reporting Directive (NFRD) and introduces the proposed Corporate Sustainability Reporting Directive (CSRD). As a result, enhanced sustainability information may be used in financial analysis (whether by financial institutions or end-investors). Company reporting on their business models and strategies will be tailored to the financial markets participants and subject to disclosure by the Sustainable Finance Disclosure Regulation. Additional guidance will be provided by an ECOM proposal for a Sustainable Corporate Governance Initiative to follow later this year.

The CSRD is designed to include all large companies and all companies listed on EU regulated markets, except listed micro-enterprises. It will apply to approximately 49,000 companies in Europe, compared to approximately 11,000 companies to which the existing NFRD applies. By providing uniform (and mandatory) EU sustainability reporting standards, it may also reduce current expenses for companies confronted with a variety of different (non-harmonised) information requests for sustainability information. Information to be reported will include risks to the company arising from sustainability issues, the company’s own impact on people and the environment (as is already the case pursuant to the NFRD), but also on global supply chains (e.g. compliance with international principles such as the Labour Organisation Declaration on Fundamental Principles and Rights at Work, no child labour, etc.). In accordance with the Capital Markets Union Action Plan, after being audited, such information would be fed into the European Single Access Point. Additionally, the ECOM builds on convergence initiatives on a global level, such as the Task Force on Climate-related Financial Disclosures (TCFD).

Specifically, the CSRD requires companies to disclose certain indicators, in particular the proportion of their turnover, capital expenditure (Capex) and operating expenditures (Opex) that are derived or associated with economic activities that qualify as environmentally sustainable. These indicators will, however, be further specified via a separate delegated act (to apply as of 2022). Other information, such as indicators aligned with the Sustainable Finance Disclosure Regulation, will have to be reported as well. Besides current Taxonomy alignment, reporting standards will also reflect forward looking business plans to enable both capital market-based and bank-based financing.

Reporting on climate change mitigation and climate change adaptation will apply as of January 2022. Reporting for the other four objectives is set to apply as of January 2023.

3. Going full circle

To ensure that sustainability considerations are taken into account on a systematic basis when offering financial instruments and products, the ECOM introduces obligations for insurance and investment advisors under delegated acts. These delegated acts supplement the Markets in the Financial Instruments Directive (MiFID II) and the Insurance Distribution Directive (IDD). They will require financial intermediaries to obtain information from clients about their sustainability preferences. This will be in addition to the already existing suitability assessment (e.g. clients’ investment knowledge and experience, risk tolerance, financial situation, etc.).

By amending duties in delegated acts for asset management, insurance, reinsurance and investment sectors, the ECOM extends the current obligations of (re)insurance companies, MiFID firms, Alternative Investment Fund Managers and others to include sustainability risks in the value of investments (e.g. impact of floods). The changes also affect financial product oversight and governance. Sustainability factors will have to be considered when designing investment and insurance products.

Conclusion

The “April package” is an important step towards the European Green Deal. The decision to invest in sustainable products or for companies to be Taxonomy-aligned is not legally mandated. However, setting sustainable standards on a global and unprecedented scale will likely cause green financial products to become compelling for investors.

In time, this legislative package will be supplemented accordingly and followed by further legal acts. The ECOM’s take on transitional activities and sources of energy, which are not (yet) covered by EU Taxonomy but still reduce greenhouse gas emissions, is to be closely observed.

By Laurenz Schwitzer, Partner, Martin Ebner, Partner, and Henri Bellando, Associate, Schoenherr

Former PWC Legal Partner Stefanie Werinos-Sydow has brought her team to PHH Rechtsanwalte in Vienna.

At PwC Legal Werinos-Sydow headed the firm’s Public & Regulatory Law practice group. At PHH, Werinos-Sydow, who the firm describes as a “distinguished expert in public commercial law,” will “develop the areas of procurement, environmental, and planning law as well as public life science and health care.” 

Werinos-Sydow is joined at PHH by former PWC Legal lawyer Sandra Kasper and trainee Theresa Karall.

“With Stefanie Werinos-Sydow we were not only able to win a first-class lawyer and committed partner,” said PHH Managing Partner Rainer Kaspa, “but also a new department. With public commercial law, we complement and expand our existing offer.”

“PHH Rechtsanwalte is a dynamic and modern commercial law firm in which I can set up my own area and use synergies with existing teams,” Werinos-Sydow said.

Schoenherr has advised Raiffeisen Bank International as arranger on a true sale securitization of a EUR 538 million portfolio of vehicle leasing receivables by Raiffeisen Leasing Group. Clifford Chance advised RBI on German law aspects of the transaction, and anchor investors, which include the European Investment Bank and the European Investment Fund, were advised by Linklaters and Binder Groesswang.

The securitization, which is known as “ROOF 2021,” is designed as a follow-up transaction to the “ROOF Leasing Austria” securitization, which was successfully signed in 2016 (also with Schoenherr’s assistance). The ROOF 2021 transaction is larger than its 2016 predecessor, and is intended to initiate new financings for small and medium-sized enterprises and mid-cap companies in Austria in an amount of up to EUR 560 million. According to Schoenherr, “in this context, the transaction serves in particular as Covid-19 emergency aid and serves to further combat climate change also in the field of mobility.”

In addition, Schoenherr reports, “the transaction was structured to comply with the rules of the new EU framework for simple, transparent and standardized securitizations. It is rated by two independent rating agencies. This transaction particularly stands out as it is one of the first STS-compliant securitization transactions in the Austrian market.”

Schoenherr’s consisted of Partner Martin Ebner, Counsel Matthias Pressler, Attorneys at Law Philipp Wetter and Marco Thorbauer, and Associate Michael Schmiedinger.

Over the last couple of years, more and more countries have deployed technologies that allow them to match digital images of a person (e.g. from a surveillance camera) against a database of pictures.

While these technologies tend to facilitate certain tasks, be they identification of criminal suspects, ID verification for various computing platforms or other electronic devices, or deployment on CCTV surveillance, they are prone to misuse and to data and privacy infringement. For example, the government of Hong Kong used real-time facial recognition technology to identify protestors at the 2019 demonstrations against the Extradition Law Amendment Bill, causing them to destroy cameras and “smart” lampposts used for CCTV surveillance. But as these technologies are increasingly adopted in Europe and in Austria, it is important to learn more about the domestic use, regulations and plans for the future.

Also, have coronavirus mask-wearing mandates set back the use or reliability of facial recognition software?

General

Biometric data, meaning “personal data resulting from specific technical processing relating to the physical, physiological or behavioural characteristics of a natural person, which allow or confirm the unique identification of that natural person, such as facial images or dactyloscopic data”, is a special category of personal data and therefore is subject to increased requirements for protection according to Art 9 of the General Data Protection Regulation. The use of facial recognition software by Austrian/European law enforcement authorities is subject to the “Regulation on the protection of natural persons with regard to the processing of personal data by competent authorities for the purposes of the prevention, investigation, detection or prosecution of criminal offences.”

Guidelines of the Council of Europe on facial recognition

At the end of January 2021, the Council of Europe (“COE”) issued guidelines on how to develop and use facial recognition without infringing rights to privacy and data protection. The COE has identified the following topics that need to be taken into account to ensure the rights and liberties of data subjects:

• Lawfulness

The processing of biometric data must rely on an appropriate legal basis that assesses the necessity and proportionality of facial recognition and addresses the explanation of the specific use and purpose, the accuracy of the algorithm, the retention period of used pictures, the possibility of auditing these criteria, the traceability of the process and the enshrined safeguards.

In light of the above, the COE states that certain uses will be limited by law, e.g. the use of facial recognition for the purpose of determining a person’s skin colour, health condition or religious belief is strictly limited, and affect recognition is prohibited altogether.

The legal basis will consider and address the different types of intrusiveness (e.g. real-time / not-real-time, sectors where it is used, etc.). It must also be ensured that images that are available in a digital format cannot be processed to extract biometric data when these images where initially captured for other purposes (e.g. social media).

Law enforcement authorities must distinguish between the use of facial recognition for verification or identification, strictly observing the necessity for and proportionality of the latter. The law should provide rules and criteria for the creation of databases. These prerequisites will be even stricter when it comes to real-time facial recognition.

In the private sector, the free, informed, explicit and specific consent as stipulated in the GDPR will be a prerequisite for use. Private entities will not be allowed to deploy facial recognition in an uncontrolled environment (e.g. a shopping mall) for marketing or private security purposes.

• Involvement of the supervisory authorities

Authorities will be systematically involved in legislative and administrative matters prior to and during envisaged projects.

• Certification

Lawmakers must guarantee the accountability of developers, manufacturers, service providers or entities using these technologies and set up qualified certification mechanisms.

• General principles for entities

Entities using facial recognition must comply with data protection principles and guarantee the transparency and fairness of the processing, adhere to the principles of the GDPR (such as purpose limitation, data minimisation and limited duration of storage), meet the highest standards when it comes to data security, as breaches have particularly severe consequences for data subjects, and implement technical and organisational measures to ensure their accountability. Furthermore, entities must carry out impact assessments, as the processing of biometric data presents high risks to the fundamental rights of data subjects.

• Rights of data subjects

Rights of data subjects, such as the right of information and access, the right to rectification and to obtain knowledge of the reasoning, and the right to object will be granted and will only be restricted where this is provided for by law, absolutely necessary and proportionate.

Austria – Regulations and use

With the issuance of the Safety Bundle (Sicherheitspaket) 2018, which amended the Security Police Act (Sicherheitspolizeigesetz, “SPG”), the Criminal Procedure Law (Strafprozessordnung) and the Federal Telecommunications Act (Telekommunikationsgesetz), the Austrian legislator enabled law enforcement authorities to access and process the data of public surveillance cameras (i.e. cameras in train and metro stations, public places, airports, schools, hospitals, etc.) in real-time to “fulfil their tasks” in the case of ongoing or imminent danger. This right can be exercised without judicial/court permission. While this provision enables the authorities to access surveillance data, it does not expressly permit the use of facial recognition technology. According to the Austrian Ministry of the Interior (Innenministerium, “BMI”), however, other regulations (Section 64 (2) in conjunction with Section 75 SPG) provide for the use of facial recognition. Critics note that the open wording of these provisions cannot be used as a valid legal basis for implementing random technologies for forensic purposes such as facial recognition. Nevertheless, the BMI confirmed that it already bought facial recognition software in 2019 and used it in a test run in 581 cases between December 2019 and June 2020. During this test, the programme successfully identified only 83 unknown criminal suspects by matching digital images against a database for forensic evidence containing roughly 10 million pictures, which is a success quota of only slightly more than 14 %. The Austrian Minister of the Interior, Karl Nehammer, emphasised that the technology is only intended to be used to identify unknown perpetrators suspected of intentionally committing a criminal offence. It is not used for real-time surveillance, because the Austrian legal system does not provide for such use. After the test run, the facial recognition technology was incorporated in the normal course of business in the Federal Criminal Police Office (Bundeskriminalamt) and was used 931 times until 1 October 2020. Following criticism from various data protection entities, the BMI renamed the technology to “digital picture matching” (Digitaler Bildabgleich), but continues to use it without explicit legal provision.

While Austria currently uses only its own forensic databases for matching against digital images of suspects, it is leading the negotiations for an amendment of the Prüm Convention. This treaty allows signatory EU Member States to access the databases of DNA profiles, fingerprints and other biometric personal data (as well as vehicle registration databases) for law enforcement purposes. Austria and the other members of the working party wish to extend the convention to merge the databases into a single database that also includes digital pictures linked to the biometric data. Such a vast database of EU citizens is currently unheard of.

Conclusion

• Austria

While Austria does comply with many points laid out in the COE’s guidelines, an explicit legal basis needs to be set. There is also room for improvement concerning the rights of data subjects. In addition, there are no suitable domestic safeguards and certifications guaranteeing the transparency and fairness of the processing when it comes to facial recognition. Austrian privacy experts worry that the use of facial recognition software may lead to the gradual extension of powers, such as the use of real-time surveillance and processing without a valid legal basis.

• General conclusion

While the use of facial recognition to identify criminal suspects is to be welcomed, there are various problems that come with the use of this technology:

1. Facial recognition technology is far from perfect. Studies show high failure rates, especially when it comes to the identification of people of colour or ethnic minorities, hence amplifying discrimination. Additionally, facial recognition software still can be fooled by facial expressions (e.g. disgust), leading to false positives or negatives.

2. The underlying algorithms of facial recognition software are often business secrets, meaning the involved logic cannot be understood by the authorities using the software. Furthermore, human operators tend to accept computer decisions without (re-)checking them.

3. Facial recognition could be used inappropriately (e.g. to identify climate change protesters, human rights activists, etc).

4. The “chilling effect”, meaning the inhibition, deterrence or discouragement of the legitimate exercise of fundamental natural and legal rights (e.g. free speech) by real-time surveillance and facial recognition (hence the limitation of free will), could be amplified.

5. The creation of databases with biometric data is problematic, as these databases could be hacked and the biometric data used for criminal means.

Facial recognition has many sensible applications, but undoubtedly also poses risks. In light of the COVID-19 pandemic, tracking and surveillance software was often hastily implemented in countries all over the world. Therefore, increased attention to fundamental civil and privacy rights and liberties seems to be required and facial recognition should only be implemented in compliance with the COE’s guidelines.

Oh, and while at the beginning of the COVID-19 pandemic, face masks confused facial recognition technologies (causing failure rates of up to 50 %), the latest studies show that algorithms have learned and cut the failure rate down to only 5 %.

By Florian Terharen, Associate, Schoenherr

Herbst Kinsky has advised the Biogena Group Invest AG on its capital increase to approximately four million shares. 

Herbst Kinsky previously advised the group on the initial public offering of its shares and their listing on the Vienna Stock Exchange (as reported by CEE Legal Matters on December 15, 2020).

According to the firm, “the subscription period for the total of 1,995,000 new shares started on April 12, 2021 and ends on April 26, 2021, [and] both existing shareholders and new interested investors can already place orders for subscription.” 

The Biogena Group is an Austrian developer and distributor of health and nutrition products. The company currently employs over 360 people and supplies to over 40 countries worldwide. 

Herbst Kinsky’s team was led by Attorney-at-Law Johannes Frank with the support of Associates Carmen Walser and Georg Durstberger.

In December 2020 the Higher Administrative Court issued an interesting ruling regarding the party status of environmental organisations (EOs). Until now, the scope of EOs’ participation rights in Austrian nature conservation proceedings was unclear. The court’s ruling clarifies that EOs’ party status is to be interpreted broadly.

EOs and their role under nature conservation law

The Aarhus Convention provides for public participation in environmental proceedings and access to justice in order to review environmental procedures. In Austria, the right to participate in proceedings and to appeal is in principle available only to those who have party status, which is determined by national law. A strict distinction must be made between participating and legal parties. ‘Participating’ parties have limited procedural rights, such as participation in a hearing. In contrast, ‘legal’ parties have the right to file an application and to appeal. Therefore, the extent to which EOs are entitled to participate in proceedings is based on the definition of party status in each national regulation.

Previously, the prevailing view was that (under the Aarhus Convention) EOs were only participants in procedures. However, this view was ultimately rejected by the European Court of Justice and the scope of EOs’ permitted actions was expanded.

In light of the above, the Environmental Impact Assessment Act provides far-reaching rights for EOs. They can participate in procedures (ie, inspect files, submit statements and file complaints against permits) in order to ensure compliance with environmental protection regulations.

However, under nature conservation law, EOs’ rights were traditionally limited. Originally, procedures under the nine provincial nature conservation laws were classic single-party procedures. This means that, in principle, only the applicant was a party. Within the framework of the Aarhus Convention, this restriction led to several infringement proceedings by the European Commission. Therefore, EOs were gradually granted access to and participation rights in proceedings (first through the judiciary and later through legislation) in the various nature conservation laws.

However, EOs’ right to appeal has been limited to the provisions that derive directly from EU law (eg, the EU Habitats and Birds Directives). It has been ruled that for purely national environmental regulations and the procedures carried out based on these (eg, nature conservation procedures which make no reference to an EU environmental regulation), EOs have no party status. This is because the Aarhus Convention is not directly applicable in national law and therefore no subjective rights can be deduced from the convention in purely national law.

Higher Administrative Court decision

The case in question concerned the approval under nature conservation law for the redesign of the riverbanks in a park in Graz, Styria. Two EOs filed complaints against the permit granted by the authority, arguing that the project would endanger animals protected under the EU Habitats Directive.5

The Styrian administrative court rejected the appeals on the grounds that the permit had been issued according to national provisions on the protection of water bodies and their banks, which do not directly serve the implementation of EU law. Therefore, the court held that the EOs could not derive party status from the law and thus were not entitled to file a complaint.

On the EOs’ appeal, the Higher Administrative Court found as follows:

• It was correct that the EOs could not derive party status from the Styrian nature conservation provisions in question. Therefore, according to national law, the EOs had no right to appeal.
• With regard to the legal framework (ie, Article 9(3) of the Aarhus Convention and Article 47 of the Charter of Fundamental Rights of the European Union (CFR)), EU member states must ensure effective judicial protection for members of the public (including EOs) of the rights guaranteed by EU (environmental) law. In this context, EOs’ legal options are limited to the right to a review of whether the legal provisions arising from EU environmental law have been duly observed in the proceedings.
• However, in the present case, the nature conservation permit also included a species protection assessment. This assessment is conducted pursuant to provisions of the Styrian nature conservation law that have been transposed directly from EU law – namely, the EU Habitats and Birds Directives. The first-instance authority had even endorsed three positive statements by the Styrian provincial government, according to which a “significant impact on the populations of these species” could be ruled out for the project.
• Referring to, among other things, the European Court of Justice’s decision in Protect,6 the Higher Administrative Court concluded that EU law (indirectly) applied after all and formed the basis of the permit. Therefore, the EOs had party status according to the Aarhus Convention and the CFR and had the right to file a complaint and have the compliance with these provisions reviewed.

Even though the permit was not directly based on EU law, the EOs were entitled to have the permit and the compliance with EU law reviewed by the administrative courts.

Comment

Although the Higher Administrative Court did not depart from the principle that EOs have party status or the right of judicial review (if there are no significant effects on the environment) only when EU law is involved, the court has significantly broadened EOs’ participation rights.

The protection of flora and fauna in compliance with the EU Habitats and Birds Directives will almost always play a role in nature conservation procedures in all nine Austrian provinces. This creates an inevitable link to EU law and would bestow on EOs the right to have compliance with environmental law reviewed in almost every case.

For companies which plan on implementing projects, this could create significant legal uncertainty. Following the legal opinion of the court, extensive circumstances must be considered in procedures that are initially based only on national regulations.

This interpretation means that there is a possible deviation from the classic one-party procedure in future Austrian nature conservation proceedings, even for projects that:

• are approved according to laws that do not provide party status to EOs; and
• do not appear at first glance to be related to EU law.

This article was first published on International Law Office.

By Christoph Jirak, Associate, and Sarah Wolf, Associate, Schoenherr