Litigation funding in Austria – an overview

It enables a party to litigate or arbitrate without having to pay for it (i.e in case the client does not have the funds to pursue a case). Instead of the client, a third-party capital provider can overtake some or all of the costs/expenses and risks of the proceedings.

The process itself is led by the litigation party and their legal representative. In case of success or comparison, the litigation financier receives a contractually agreed sum from the income earned. If not, the funder bears the costs it has agreed to fund. In principle, all processes are eligible for financing, for example: commercial and corporate law claims, claims for damages, etc.

In 2013 the Austrian Supreme Court approved litigation funding by a third-party (OGH, 6 Ob 224/12b). Especially since this decision the third-party litigation funding became rising trend in Austria, being also endorsed by Austrian courts. Nevertheless, the Austrian market still holds a much greater potential.

The Austrian legal system foresees no specific rules for third-party litigation funding or restrictions on fundings fees. But there are important aspects to keep in mind:

• In general, it is not allowed that agreements/contracts under Austrian law constitute profiteering (i.e. exploitation of a person in need; article 1 of the Act against Profiteering). Such an agreement is void.
  
  
• Austrian lawyers are not allowed to be paid on the basis of contingency fees only; the Austrian Lawyers Ordinance (§ 16 RAO) and the Austrian Civil Code (§ 879 ABGB), foresees strict regulations in case lawyers are involved. The violation of the “quota-litis ban“ leads to fines and other punishments.
  
  
• During the whole process of litigation funding Austrian lawyer’s always have to keep their independence (provided by the RAO).

Summing up, litigation financing is on the verge of quota-litis ban, but with appropriate contracting, the overall approach is acceptable.

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