1. General description
Due to the lack of a formal collective redress mechanism, legal practice in Austria developed a special form of group litigation that may be used in addition to the traditional devices described in chapter II. above.. This form of group litigation is based on a combination of joinder of claims and litigation finance and is referred to as the 'Austrian model of group litigation' (Österreichisches Modell der Sammelklage). Here, potential claimants assign their claims to an association (typically a consumer association). In a second step, the association brings action on its own behalf. Under this scheme, it is possible to assemble large numbers of claimants, thereby allowing the association to use commercial litigation finance. This is advantageous for the claimant because the claim can be pursued without any cost risks.
In practice, the 'Austrian model of group litigation' is of particular relevance and has been successfully used in several mass cases (e.g. against banks for charging excessive interest rates on loans). The largest mass litigation in Austria (concerning a securities case involving more than 3,000 claimants) also used this scheme. In recent years, the 'Austrian model of group litigation' was predominantly used in damages actions for unsuitable investment advice. As of 2012, approximately 20,000 claims were pending before the Vienna Commercial Court and the Vienna District Commercial Court; half of them have been brought by way of the 'Austrian model of group litigation'.
The potential scope of the 'Austrian model of group litigation' is not limited to any specific area of the law. It has to be noted, however, that this device is usually limited to money claims, since, under Austrian case law, claims for declaratory judgments ordinarily cannot be assigned (which would be possible for the application of the 'Austrian model of group litigation').
3. Procedural Framework
The 'Austrian model of group litigation' fits into the traditional practice of Austrian civil procedure. The association to which the claims have been assigned to appears in the proceeding as a single claimant. Therefore, ordinary rules of civil procedure apply.
In such cases, courts regularly decide on one or a few claims by way of a partial judgment. This allows the appellate courts to review the relevant questions of fact and law. After a respective judgment issued by the appellate court, the remaining claims are typically settled out of court by the parties. In case there is no such settlement, a decision of these claims would be relatively easy for the courts, as the relevant questions have already been settled by the appellate decision.
Austrian civil procedure strictly follows the opt-in model (see also chapter III. 7. below). Therefore, the scope of res judicata is limited to the parties who actually participated. The outcome of the proceedings is consequently not binding for other members of the respective group. There are also no specific measures relating to the fact that affected persons may be not identifiable.
4. Competent Court
With regard to the above-mentioned procedural devices, no special rules on jurisdictions exist. Therefore, general rules apply. As a consequence, this type of proceeding could in general be brought before any Austrian court. Given the nature of most claims, most of the respective proceedings are pending before the Vienna Commercial District Court (in case the highest single claim brought does not exceed EUR 15,000) or the Vienna Commercial Court for all other claims.
The 'Austrian model of group litigation' is characterized by a 'collectivization' of claims by way of assignment to an association or other institution. Practically, only the Consumer Information Association (Verein für Konsumenteninformation) and the Employees' Chambers (Arbeiterkammern) bring forth such actions. However, also other institutions, such as the Chamber of Commerce, would be entitled to do so as well. In case the aforementioned organisations appear as claimants, special rules have to be observed for the appellate proceedings. In general, all restrictions of remedies based on the amount in controversy (which, in other cases, potentially restrict the grounds that can be raised on appeal to the Court of Appeals and which could bar access to the Austrian Supreme Court altogether), do not apply if these organisations appear as claimants.
Other than that, there are no special provisions (restrictions) on standing. Therefore, any other association is entitled to pursue claims that have been assigned to it. In scholarly literature, it has been suggested that a special limited liability company could be set up to serve as a vehicle for the 'Austrian model of group litigation'. It seems, however, that this approach has not been used in practice so far. Recently, an association ('COBIN -COnsumers-Business-Investors') was founded, aimed at supporting collective redress litigations, particularly by raising respective funds and organizing and carrying out mass litigations under the 'Austrian model of group litigation'. COBIN plans to organize and finance first mass litigations as of fall 2017.
In the latter cases, the special rules for appellate proceedings mentioned above do not apply. Thus, a mass case brought by a 'normal' association or other body is simply governed by ordinary rules of civil procedure.
There are no restrictions as to the persons entitled to assign their claims to an institution. As a practical matter, however, participation in such a proceeding requires that an association is willing to take up one's claim, though it seems that sofar this has not created any particular difficulties.
6. Availability of Cross-Border collective redress
The procedure is not restricted to Austrian claimants. Foreign claimants are free to participate. There are no procedural peculiarities if this mechanism is used in cross-border cases. Since the procedure requires that all claimants actively take part and assign their claims to an association, jurisdiction over the members of the group (which may be problematic in an opt-out type procedure) is not an issue.
However, it should be noted that the CJEU has held that the rules on jurisdiction for consumer cases under the Brussels I Regulation do not apply any more if a consumer assigns his claim to an association. In 1993, the Court held that a plaintiff (now claimant) acting in pursuance of his trade or professional activity, and who is not, therefore, himself a consumer party to one of the contracts listed in Article 15 Brussels I Regulation, may not enjoy the benefit of the rules of special jurisdiction laid down by the Convention (now Regulation) concerning consumer contracts. The rationale for this decision is that a consumer association is less worthy of special protection than an individual consumer.
In 2016, the Austrian Supreme Court requested a preliminary ruling from the Court of Justice of the European Union concerning the question whether a claimant to whom other consumers assigned their claims can invoke the jurisdiction under Article 15 Brussels I Regulation 2001 (which is available only to consumers), if he - in connection with the enforcement of his alleged claims against Facebook - publishes books, gives paid lectures, operates webpages, raises donations and organizes an action under the 'Austrian model of class action'. For further details, please refer to the case summary in chapter VI. below.
7. Opt In/Opt Out
Austrian civil procedure strictly follows the opt-in approach. The same applies to the 'Austrian model of group litigation'. The claimant has to assign his claim to an association or other institution. Therefore, the procedure only applies if an active step was taken in order to join the proceedings. Also with regard to the Austrian model of group litigation, there are no specific measures relating to the fact that affected persons are not identifiable.
8. Main procedural rules
a. Admissibility and certification criteria
The 'Austrian model of group litigation' is not subject to any certification process in the technical sense of the term. The first actions that were filed under this scheme were vigorously challenged by the defendants. For example, in some investor claims cases, it took three years until the Austrian Supreme Court decided that the procedure was admissible and that the defendant did not have standing to challenge a claimant's use of commercial litigation finance.
The Austrian Supreme Court, however, imposed a requirement that raising several claims in one action is only permissible if the claims are based on substantially the same cause of action and concerned substantially similar questions of law and fact. In practice, this requirement does not constitute any significant restrictions, due to the fact that no reasonable claimant would bring totally unrelated claims in one proceeding.
A common defence strategy of defendants in unsuitable investment advice cases is to argue that the claims should not be joined in a group action since the advice given to the various members of the group has to be assessed on an individual basis, therefore not being suitable to disposition in a group proceeding. In the most prominent case, claimants successfully overcame this objection by arguing that the defendant had employed a systematic, general scheme of unsuitable advice in order to promote a specific product.
b. Single or Multi-stage process
The procedure is a single-stage process. Since the Austrian model of group litigation is characterized by all claims being assigned to a single association which then appears in the proceeding as a single claimant, ordinary rules of civil procedure apply. The real challenge is finding and categorizing possible claimants and dividing them into manageable 'portions' for a group proceeding. This type of work is carried out by the association which appears on behalf of the claimants and not by the court.
c. Case-management and deadlines
There are special rules on case management or deadlines.
Since the Austrian model of group litigation utilizes the same procedural framework as individual lawsuits, the time frame is roughly the same is in individual litigation (see, in this regard, chapter II. 8. d. above). Obviously, since group actions typically involve complex questions of law and fact (such as investor suits for damages), the duration of these cases will typically be on the higher end of the spectrum.
While, in the early years of group action proceedings, the composition of the group, the jurisdiction of the court and the propriety of the funding (in light of the contingency fee involved) were vigorously challenged, often resulting in protracted litigation, it seems that these issues now seldom lead to significant delays any more.
e. Evidence/discovery rules
There are no special rules on evidence or discovery for this type of proceeding. Occasionally criminal proceedings are used in mass damages cases as avehicle to bring civil claims. Austrian criminal law allows the victim of a crime to pursue his or her claims in the criminal proceeding. The court can award damages or grant other remedies if the defendant is convicted. In case of an acquittal, damages can only be obtained by way of a separate civil proceeding. This procedure of 'annex proceedings' (Adhäsionsverfahren) is available regardless of the number of claimants and is cheaper than initiating a separate civil litigation. While criminal courts in the past may have been reluctant to decide on civil claims (referring the victims to civil proceedings instead), this seems to have changed in recent years. Obviously, this avenue is available only if the damages claimed are the result of the criminal conduct of the defendant.
In 2015, the Austrian Supreme Court (1 Ob 39/15i) has ruled that claimants may also present indirect evidence (practically most relevant are files and records from administrative proceedings against the defendant) to the court. For further information, please refer to chapter II. 8. e. above.
A 2017 reform, implementing the cartel damages directive, introduced a limited form of discovery for cartel damages cases.
f. Interim measures
As far as it is necessary to secure the assigned claim, injunctions according to general rules may be issued. Given the nature of most claims (usually compensation for monetary damages), injunctions are rather the exception than the norm.
g. Court-directed settlements and out of court settlements
With regard to the 'Austrian model of group litigation', the same rules on settlements generally apply as already discussed above (chapter II. 8. g.). Further, as also already mentioned (chapter III. 3. above), it is common practice of Austrian courts to decide on one or a few claims by way of a partial judgment in order to permit the appellate courts to review the relevant questions of fact and law. Once these questions are answered, the remaining claims typically are settled by the parties.
9. Available remedies
a. Types of damages
The procedure is almost exclusively available for monetary damages. The reason for this is that the procedure is based on claims assigned to an association or other institution. Under Austrian case law, claims for a declaratory judgment normally cannot be assigned.
b. Allocation of damages/distribution methods
There are no statutory rules regarding the allocation of damages and/or specific distribution methods. The association to which the claims have been assigned usually first pays the litigation financer, covers its own expanses (if any) and then passes on the remains of the recovered amount proportionally to the damaged parties. Details of the distribution are usually governed in further detail by respective agreements between the association, the process financing company and the damaged parties.
c. Availability of punitive/extra-compensatory damages
Also with regard to the 'Austrian model of group litigation', there is no reward of punitive or extra-compensatory damages.
d. Skimming-off/restitution of profits
Please refer to the comments above (chapter II. 9. d.). No special rules apply to the 'Austrian model of group litigation'.
Please refer to the comments above (chapter II. 9. e.). No special rules apply to the 'Austrian model of group litigation'. Injunctions are, however, relatively seldom in respective cases.
f. Limitation periods
There are no special rules regarding limitation periods under the 'Austrian model of group litigation'. General rules apply, please also refer to chapter II. 9. f.
Please refer to the comments above (chapter II. 10.). No special rules apply to the 'Austrian model of group litigation'.
11. Lawyers' Fees
Please refer to the comments above (chapter II. 11.). No special rules apply to the 'Austrian model of group litigation'.
The 'Austrian model of group litigation' has the advantage of yielding a sufficiently high amount in dispute which enables the claimants to use commercial litigation finance. This enables the claimant to pursue his or her claim without any risk. On the other hand, the fee for the litigation finance will generally be between 25 and 40 percent of the overall amount recovered. The Austrian Supreme Court has held that a defendant has no standing to challenge such a fee arrangement. Commercial litigation finance is used quite often in this type of proceeding. Initially, the possibility of using litigation finance was one of the major driving factors in inventing this procedure. Since litigation-funding agreements are not normally divulged, no exact figures as to the frequency of the use of litigation finance are available. It is a safe assumption that all the 'big proceedings' described above with more than 50 claims brought in one proceeding use litigation finance. Coordination of contributions to the costs of such a large number of claimants would be difficult in practice. Some proceedings for unsuitable investment advice are brought without litigation finance, but this seems to be the exception rather than the norm.
As already mentioned, currently there are plans for a private association that is intended to raise the required capital for consumer mass litigation, in particular by means of crowd funding (COBIN, see III. 3. a. above).
13. Enforcement of collective actions and settlements
No specific rules regarding enforcement of collective actions and settlements exist. They are subject to ordinary enforcement via execution proceedings
14. Number and types of cases brought/pending
The procedure is extremely important in practice. Whilst initially itwas used mainly in proceedings with a few dozen claims, it is now the vehicle to bring large numbers of claims in one proceeding. Today, the area where this type of proceeding is used most prominently is investor suits for damages for unsuitable investment advice. In 2013, there were about 22,000 investor claims pending before the Vienna Commercial Court and the Vienna Commercial District Court. Of these, about 12,700 claims were brought by way of 22 group proceedings which combined more than 50 claims per proceeding. The average number in this category was 580 claims per proceeding. In addition, there were 72 smaller group proceedings with less than 50 claims per proceeding. 1,400 claims were brought in this way, resulting in an average of 20 claims per proceeding. In recent years, the number of group proceedings has declined. Thus, it seems that in 2013 no such proceeding was brought, in 2014 and 2016 only one each and in 2015 two. This is probably due to the fact that most cases arose in the aftermath of the financial crisis of 2007/2008. Since under Austrian law claims for damages are time-barred after three years, such claims will not be brought any more.
15. Impact of the collective mechanism on stakeholders
The emergence of the Austrian model of group litigation has certainly led to an increased supply of commercial litigation funding. Austria is, however, far away from "US conditions" or a "claims industry", as sometimes envisioned by opponents of mass litigation procedures. Often, associations have to resort to German litigation financers. Further, (consumer) associations regularly scan potential mass litigation cases and offer support to potential claimants.
16. Problems, critiques and calls for reform
The current system generally works quite well in practice. There are, however, certain critiques of the current system that have been identified in the literature. Traditional procedural institutes like joinder or consolidation of cases are suitable for some cases, but certainly not for all. In particular in cases with a large number of parties, the coordination of the proceedings poses severe problems to the court. Test cases are a cost-saving possibility to settle controversial factual and legal matters, but they require the consent of the defendant party, which is unsatisfactory from the perspective of access of law.
The 'Austrian model of group litigation' is suited to solve some of the problems arising from traditional multi-party practice, but not all of them. First, from the perspective of access to justice, it is questionable that the assignment of one's claim to an association is, in many cases, the only practical way of pursuing one's claim. Further, due to the required amounts in order to get litigation funding, it is currently the case that disputes with rather low amounts in dispute (e.g. mass and dispersed damages) are less likely to cause respective actions. In addition, the financial and personnel resources available to associations organizing mass litigations may further limit the number of claims that can be brought in this way.
In light of an increase in mass litigation and the abovementioned problems, a draft for a group procedure has been promulgated by the Austrian Ministry of Justice in 2007, which was not to replace, but to supplement the procedure currently used. Under this draft, a new group proceeding will be introduced for cases involving three or more claimants, and a large number of (probably more than 50) claims and similar questions of law and fact. However, a claimant is always free to pursue his claims as an individual action instead of participating in the group proceeding. The court decides on all common questions of fact and law by judgment. Any questions not resolved in the group proceeding have to be determined in individual lawsuits. The draft was met with severe resistance by the Chamber of Commerce and, consequently, the Conservative Party. Given the present political situation (end of coalition government and early elections to be held in October 2017)), implementation of the reform is unlikely in the near future.
In 2015, collective redress and its potential reform was discussed at the 19th Austrian Juristentag, but did eventually not lead to respective legislative action. Recently, the president of the Viennese bar association publicly and firmly called for legislative action.
17. Incompatibilities with the Recommendation's principles
Despite the absence of a statutory collective redress procedure, the current Austrian framework, including traditional means of multi-party proceedings and the 'Austrian model of group litigation', is in large measure in line with the Recommendation's principles. Austrian law does not, for instance, provide for any punitive damages (Recommendations para 31), jury awards or pre-trial discovery procedures (Recommendations recital 15). Further, the current Austrian framework is consistently based on the opt-in model (Recommendations paras 21 et seq). Austrian courts are also able to dismiss manifestly unfounded cases (Recommendations para 13) and may even impose financial sanctions on the claimant in such cases (§ 408 Austrian Code of Civil Procedure). There are several ADR-mechanisms (Recommendations para 26) in place that, within certain limits, are also able to handle collective claims. In addition, as to the costs, Austria has a 'loser pays' rule (Recommendations para 13); pacta de quota litis (Recommendations para 30: contingency fees) are not permissible under Austrian civil law (§ 879 para 2 number 2 Austrian Civil Code).
Some of the recommendations are quite difficult to assess due to their general character, e.g. whether the collective redress procedures are "fair, equitable, timely and not prohibitively expensive" (Recommendations para 2). In general, this is certainly the case with regard to the Austrian framework. However, due to a lack of specification of the relevant evaluation criteria, precise assessments are difficult.
There are also certain parts of the Austrian framework that are not in line with the Recommendation's principles, the most important being the standing to bring a representative action (Recommendation paras 4 et seq) and the control of litigation funding by the court where the financed proceeding is pending (Recommendation paras 14 et seq).
Currently, there are no special restrictions on standing. Therefore, any association is generally entitled to pursue claims that have been assigned to it (and claimants are free to assign their claims to whatever association they deem appropriate). The Recommendation's restrictions (non-profit making character, direct relationship between the main objectives of the entity and the rights granted under Union law, sufficient capacities) are, therefore, currently not met. Further, as any association is entitled to pursue claims, there is also no procedure to ensure that entities lose their status (Recommendation para 5) once the requirements are not any longer met. This, however, hardly leads to any negative consequences in practice, as most of the associations that organize representative actions nevertheless fulfil the requirements of the Recommendation, even if they are not statutorily required to do so.
Further, there is currently also no judicial control of litigation funding, as provided by the Recommendation (paras 14 et seq). Quite to the contrary, the Austrian Supreme court has ruled in 6 Ob 224/12b that the defendant does not have standing to dispute a contingency fee arrangement between a claimant and a litigation finance company. Claimants are, therefore, neither required to declare to the court the origins of their funds (para 14), nor is there a specific rule that would allow the court to stay the proceedings (para 15) in case the criteria stated in the Recommendations are not met.
Given the fact that there is currently no formalized collective redress procedure, there is also neither an official channel for the distribution of information on collective redress actions nor a national registry of respective actions (Recommendation paras 10 et seq, 35 et seq). In practice, associations assisting claimants under the 'Austrian model of class action', however, regularly publish information on currently pending mass litigations (e.g. on their homepage, via newspapers, etc), which usually ensures that potential claimants are informed about pending actions. There are currently also no special rules on the question whether representative entities from other Member States are permitted to seize Austrian courts (Recommendation para 18). This question is governed by general principles of Austrian civil procedure which determine whether an association has standing before Austrian courts.
With regard to the recommendation that an individual member of the claimant party should be free to leave the claimant party any time before the final judgement is given or the case is otherwise validly settled, being subject to the same conditions that apply to withdrawal in individual actions (para 22), it has to be noted that the 'Austrian model of group litigation' involves a generally binding assignment of claims to an association. According to general rules, this assignment of claims cannot be unilaterally revoked by the assigning party, unless otherwise stipulated in the respective agreement.
18. Problems relating to access of justice/fairness of proceedings
In general, the Austrian framework ensures satisfactory outcomes regarding access to justice and the fairness of proceedings. Problems arise in particular with regard to disputes with rather low amounts in dispute (e.g. mass and dispersed damages). Here, there are usually not sufficient incentives to bring respective suits before the courts. Individual claimants refrain from actions due to the (comparably) high costs and the risk of a potential loss. The 'Austrian model of group litigation' is usually also not available in these cases, as no litigation funding will be available. Further, it is not guaranteed that individual claimants find an association that is willing to organize and perform respective mass litigation. Here, respective legislative measures would be necessary in order to ensure consistent access to justice.
The current Austrian framework generally prevents abusive litigation. Due to the presence of a 'loser pay' rule, claimants refrain from bringing suits without any legal cause. With regard to the 'Austrian model of group litigation', the prospects of success of a respective litigation are being examined by both the association organizing the suit as well as the litigation financer (and their respective attorneys). Therefore, it is rather unrealistic that abusive litigation will be brought before the courts. In case of a manifestly unfounded action, Austrian courts are able to dismiss respective cases and impose financial sanctions on the claimant.
1. Klauser 2002 805; Kodek 2004 615.
3. ECJ, Judgment 1 October 2002. - Verein für Konsumenteninformation v Karl Heinz Henkel,- Case C-167/00; Austrian Supreme Court 4 march 2005, 9 Nc 4/05w.
4. ECJ, Judgment of 19 January 1993, Shearson Lehmann Hutton Inc. v TVB Treuhandgesellschaft für Vermögensverwaltung und Beteiligungen mbH.
5. Austrian Supreme Court, 12 July 2005, 4 Ob 116/05w.
6. Austrian Supreme Court, 27 February 2013, 6 Ob 224/12b.
7. The figures given here are as of 31 December 2012. They are taken from an unpublished lecture by Judge Parzmayr, judge of the Commercial Court, on 25 April 2013.
8. It should be noted that there is no official statistics for group proceedings. Therefore, the numbers provided above are based on information provided by individual judges of the Vienna Commercial Court.
9. Kodek 2015 137 et seq.
10. Oberhammer 2015 73 et seq.
11. Newspaper "Die Presse", 25.4.2017.
BIICL has recently worked with the German public body, the Gesellschaft fur internationale Zusammenarbeit (GIZ) on a collective redress project....