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Financial Support of Businesses (Part 2)
Insolvency Measures (Part 4)
Arbitration (Part 5)
Author: Mr. Rouzbeh Moradi, Associate, OBLIN Rechtanwälte GmbH
Interventions and Restrictions (Part 1)
Support of the Jobmarket (Part 3)
Overview of legal measures implemented in Austria as of 1 May 2020, 00:00 CET as response to the COVID-19 global pandemic.
Please note: due to the extraordinary situation, the legislation is in continuous evolution and may change very fast.
The REPUBLIC OF AUSTRIA is comprised of nine independent federated states (Bundesländer). Laws are passed by the national and provincial parliaments.
In response to the developing global COVID-19 crisis, the Austrian Federal Government implemented strict precautionary measures for the containment of the virus. Since then the rate of infection and the number of active cases in Austria has gradually decreased which in turn has led to a step-by-step loosening of the said restrictions. The following provides a general overview of the relevant COVID-19 legal measures put in place in Austria.
Please note: that English is not the official language of Austria and therefore any translation of Austrian law to English has neither legal effect nor legal force.
1. INTERVENTIONS AND RESTRICTIONS
1.1 Legal basis
The COVID-19 Act
On 15 March 2020 the Austrian government adopted the COVID-19 Act implementing certain protective measures to contain the spread of the COVID-19 virus. The COVID-19 Act amends existing laws and regulations and more generally includes measures to:
establish a crisis management fund to support businesses;
support employers and employees affected by COVID-19;
prohibit gatherings in public places; and
introduce border controls and travel restrictions from certain countries to Austria.
The COVID-19 Act may be found online at: https://www.ris.bka.gv.at/Dokumente/BgblAuth/BGBLA_2020_I_12/BGBLA_2020_I_12.pdfsig (German)
Since then additional rules and regulations have been put in place amending existing laws and/or introducing new laws in response to the global COVID-19 pandemic. A detailed list of all relevant laws may be found under the following link:
Entry into Austria from outside the Schengen area by air is generally prohibited.
Exceptions apply to and include diplomats on official mission to Austria, family members living in the same household, humanitarian workers, nursing and healthcare personnel, seasonal workers in the “Agriculture and Forestry” sector, transit passengers and individuals that work in freight transport.
Travelling to Austria from direct neighbouring countries is permitted under certain circumstances. Upon entry into Austria, travellers are required to produce a medical certificate proving a negative COVID-19 test result. The medical certificate has to be recent (not older than four days) and entry into Austria is denied without the medical certificate.
However, do note that Austrian citizens or people with primary, secondary or habitual residence in Austria do not have to produce such a certificate if they commit to a 14-day quarantine in their place of residence.
Visa applications are suspended until further notice. Exceptions apply to relatives of Austrian or EU citizens who live in the same household as well as diplomats on official mission to Austria.
1.4 Prohibition of Crowds and Events
All events are cancelled and prohibited until the end of June 2020. More generally no more than ten people should gather in one place at the same time (see Section 1.5 for more detailed information on public gatherings and movement restrictions)
1.5 Lock-down, Movement Restrictions and Businesses
In accordance with the provisions of the COVID-19 Act, the Austrian Federal Government issued a nationwide lock-down prohibiting entry into public places. The exceptions to the prohibition of entering public places include:
to avert an immediate danger to life or property;
to cover basic necessities of daily life (i.e. grocery shopping, visiting a doctor, caring for animals etc.);
to provide care and assistance for people in need of support; and
to exercise or go for a walk alone, with pets or with members of the same household.
A safe distance of at least on meter must be kept to other persons at all times.
The lock-down provisions are set to expire on 30 April 2020. However basic measures on hygiene and social distancing such as wearing masks in shops and keeping a safe distance while travelling will continue to remain in force.
Schools and Universities
Schools have been closed since 16 March 2020, and universities and colleges have switched to distance learning arrangements.
A plan to gradually re-open schools was published by the Austrian Federal Government on 24 April 2020 (available in German). The plan envisions that schools resume for students of all ages by 18 May 2020.
As of 14 April 2020, small businesses and shops were re-opened assuming they fulfilled certain conditions, including:
a maximum sales area of 400m²;
only one customer per 20 m²;
regulating the number of customers through admission control;
customers and employees must cover their mouth-and-nose with protective gear; and
regular disinfection of the premises.
Hardware stores and “Do-It-Yourself” (DIY) shops were re-opened regardless of the size of sale area but also required to keep the general safety and hygiene requirements above.
It is planned that as of 2 May 2020 all shops (regardless of their surface area) including barbershops, hairdressers and beauty salons may re-open assuming the general safety and hygiene requirements are kept.
Restaurants and bars remain closed but may re-open on May 15, 2020. In this regard operating hours will be limited from 06:00 to 23:00 and no more than four guests may be seating at one table at any time.
1.6 Persons with a higher risk
Persons with higher risk for the COVID-19 virus are entitled to further special protective measures. Employers must consider additional protective measures and enable telecommuting and work-from-home arrangements wherever possible.
On 22 April 2020 the Minister of Health announced that approximately 90,000 employees in Austria were classified by the government as belonging to a higher risk group. The identified persons will receive a letter outlining their rights and entitlements for further protections once the general measures are lifted.
An administrative fine of up to EUR 3600 is reserved for individuals that contravene the requirements of the COVID-19 Act (Art. 8 § 3 COVID-19 Act).
2. FINANCIAL SUPPORT OF BUSINESSES
2.1 Legal Basis
Over the course of the past weeks, the Austrian Federal Government has enacted a number of financial support programmes. The "COVID-19-Krisenbewältigungsfonds" (COVID-19 Crisis Management Fund) was established under the Federal Minister of Finance within the framework of the Fund Act COVID-19. A current version can be accessed via the following link:
2.2 Support measures
The incremental rise and global reach of COVID-19 infections has indisputably transformed life as we know it, leaving no industry, economy or personal interaction untouched. As numerous business relationships can no longer uphold their service obligations, uncertainty remains over whether and to what extent contractual claims are enforceable and over who is to bear the economic consequences absent clearly assignable blame. In trying to find solutions to and calming fears over perpetual delays, the Austrian Federal Government has increased its measures to maintain the solvency of companies affected by the pandemic.
COVID-19 Crisis Management Fund (‘Krisenbewältigungsfonds’)
The Austrian government has enacted the COVID-19 Fund Act to support companies faced with liquidity shortages and a decrease in the number of sales due to the pandemic outbreak. Its framework establishes a COVID-19 Crisis Management Fund (‘Krisenbewältigungsfonds’), whose support programme is administered by the Austrian Chamber of Commerce. Endowed with a total sum of up to EUR 4 billion, it provides ministerial departments with the necessary flexibility to adopt targeted measures for the distribution of finance assistance to vulnerable businesses affected by the pandemic’s detrimental economic impact.
Hardship Fund (‘Härtefallfonds’)
Part of CMF, is allocated to a Hardship Fund (‘Härtefallfonds’), which centres on the support of one-person businesses, small and medium-sized enterprises, micro-enterprises, freelancers and non-profit organizations. With an endowment of up to EUR 1 billion, it intends to provide financial stimulus to entrepreneurs reliant on direct cash payments. These final grants are not subject to repayment at a later stage.
Federal Liquidity Management Company (‘Abbaubeteiligungsaktiengesellschaft des Bundes’)
Pertinent has also been the change of corporate purpose of the Federal Liquidity Management Company (‘Abbaubeteiligungsaktiengesellschaft des Bundes’), which seeks to provide financial measures such as through the grant of temporary credits, to maintain solvency and bridge liquidity problems in order to cover the incrementally rising costs accruing throughout this period of restrained commercial activity. Such assistance will be available to all companies with a registered office or permanent place of business in Austria.
3. SUPPORT OF THE JOBMARKET
3.1 Legal basis
The COVID-19 Act underpins the amendments made to existing laws aimed at providing employment related financial grants and general support for the job market. The most noteworthy amendments sought to increase the available budget for measures aimed at preserving jobs (i.e. through the COVID-19 Crisis Management Fund, see Part 2.1) and thus increase the availability and accessibility of such measures.
Most notably the budget for financial aid with regards to the "Corona-short-time work" was amended three times increasing the available budget from the initial EUR 3 Billion to EUR 7 Billion.
Amendment 1: https://www.ris.bka.gv.at/Dokumente/BgblAuth/BGBLA_2020_II_132/BGBLA_2020_II_132.pdfsig (German)
Amendment 2: https://www.ris.bka.gv.at/Dokumente/BgblAuth/BGBLA_2020_II_155/BGBLA_2020_II_155.pdfsig (German)
Amendment 3: https://www.ris.bka.gv.at/Dokumente/BgblAuth/BGBLA_2020_II_168/BGBLA_2020_II_168.pdfsig (German)
3.2 Support measures
The Austrian Federal Government implemented a number of support measures to secure jobs and ensure the care of children and individuals with disabilities during the COVID-19 crisis.
Corona-short-time work ("Corona-Kurzarbeit")
The “Corona-short-time work” measure provides financial support to employers and employees to secure jobs and minimise layoffs. In this regard, short-time work subsidies can be applied for at the Labour Market Authority ("Arbeitsmarktservice"). The measure includes:
A reduction of total working time (down to 10%) for the period of the short-time work arrangement.
A short-time work subsidy of up to 90% of the employee’s net salary may be provided (including the employer’s social security contributions;
Employment contracts may not be terminated during short-time work and enjoy an additional one-month grace period following the end of the short-time work arrangement.
Special Care Leave ("Sonderbetreuungszeit")
The special care leave measure is part of the Austrian Federal Government’s package of measures on the COVID-19 crisis and is intended to ensure that parents are granted time to take care of their children due to the closure of schools and kindergartens. The measure includes:
Special leave of up to three weeks starting from the date the school or kindergarten has been required to close as part of the COVID-19 lock-down restrictions.
This measure applies to children of up to the age of 14.
Children with disabilities are not age-capped.
The employer is entitled to compensation for one-third of the salary paid to the employee for the duration of the special leave.
4.1 Legal Basis
Due to the current COVID 19 crisis, Austria has adopted a number legal measures that foresee changes with regard to deadlines in judicial and administrative proceedings. The most relevant in relation to insolvency law include The Federal Act on Accompanying Measures for COVID-19 of 21 March 2020 (Second COVID-Act), which centres inter alia on the extension of the insolvency application period. With the adoption of The Federal Act on Accompanying Measures for COVID-19 of 4 April 2020 (Fourth COVID-Act), the obligation of an over-indebted debtor to file for insolvency has been suspended until 30 June 2020. A current version of the Second and Fourth COVID-Acts can be accessed via the following links:
Second COVID-Act: https://www.ris.bka.gv.at/Dokumente/BgblAuth/BGBLA_2020_I_16/BGBLA_2020_I_16.pdfsig (German)
Extension of Application Period
In light of the effects of the COVID-19 crisis, an extended period to file for insolvency has been agreed upon. According to section 69 of the Austrian Insolvency Act (Insolvenzordnung - IO), directors of the affected company are obliged to file for insolvency without undue delay, but no later than 60 days after the occurrence of insolvency, i.e. the grounds for insolvency (illiquidity and/or over-indebtedness) have been established.
In the event of insolvency due to natural disaster, Austrian law provides for an extended filing period of 120-days. Through the enactment of the Austrian Second COVID-19 Act, the Austrian legislator has legally clarified that epidemics and pandemics meet the currently existing rules that lead to an extended application period from 60 to 120 days.
The obligation to file for insolvency due to over-indebtedness will be suspended until 30 June 2020. A debtor is not obliged and a creditor is prohibited from opening insolvency proceedings on grounds of over-indebtedness if the company in question became over-indebted between 1 March 2020 and 30 June 2020. If the debtor is over-indebted by the end of this period, i.e. 30 June 2020, filing must occur either within 60 days after 30 June 2020 or no later than 120 days upon the onset of over-indebtedness, whichever is later.
Clients are advised to take note of the fact that despite the extension of the deadline for insolvency applications, any delay in filing for insolvency in the knowledge that illiquidity or over-indebtedness will persist ever following the end of the extension period. Since managing directors will remain liable if failing to pay any due obligations that have accrued, they are urged to prepare forecasts on the premise of no further extensions and a resumption of economic activity.
Postponement of Execution
Pursuant to section 200b of the Austrian Enforcement Act (Exekutionsordnung - EO), an execution postponement in context of natural disasters that is applied for by the obligated party will also find application in cases of an epidemic or pandemic.
5.1 Legal basis
In trying to find solutions to and calming fears over the perpetual delays resulting from these unprecedented circumstances, leading arbitral institutions have signalled the continuation of their work. They have also offered extensive guidance on possible measures aimed at mitigating the adverse effects of the pandemic to minimise disruptions and ensure the continuation of arbitral proceedings without compromising or infringing upon the safety concerns and public health restrictions imposed to limit the spread of the virus.
Operation of Arbitral Institutions
Vienna International Arbitral Centre (VIAC)
The VIAC is working remotely;
Case managers are available to answer questions via telephone;
The electronic case management system remains fully operational;
Until further notice, parties are asked to submit any submissions or supporting documents, e.g. expert statements, exhibits, witness statements, electronically.
With the numbers infected continuing to rise, in-person oral hearings conducted in Austria are expected to be adjourned, at least insofar as state-level ordinances deny parties to participate in public or non-public meetings. In relation to all other matters arbitral tribunals are granted discretionary powers to make determinative decisions on the organisation, adequacy and feasibility of continuing the respective proceedings.
20 March 2020: The independent arbitral institution, DELOS, has published a checklist on holding arbitration and mediation hearings in times of COVID 19 (https://delosdr.org/index.php/2020/03/12/checklist-on-holding-hearings-in-times-of-covid-19/);
9 April 2020: The ICC International Court of Arbitration has also issued a useful Guidance Note for arbitral proceedings (https://www.icc-austria.org/downloads/guidance-note-possible-measures-mitigating-effects-covid-19-english.pdf). It covers matters including mitigating COVID-19 related delays and offering guidance on the organisation of virtual hearings. It further includes a checklist for a protocol on virtual hearings, and a section on suggested clauses for cyber-protocols and procedural orders dealing with the organisation of virtual hearings.
Options to Consider
Taking into account the current state of affairs and the continued restrictions concerning the organisation of in-person hearings, the following methods are immediately actionable and thus worth further consideration:
Adjourning in-person hearings until such proceedings are cleared as safe again
While this option allows parties to prevent having to put in place the necessary arrangement for a remote hearing, it remains unclear how long the current restrictions will last. With many businesses, already being put under severe strain due to uncertain or stagnant cash flows, this may not be a viable option.
Allowing the dispute to be resolved “on the papers”
This method may prove to be useful in relation to issues that are less dependent on factual evidence and cross-examination. Yet even then, using this method only in part would reduce delays to final and interim awards and may induce parties to settle more rapidly.
Divide claims only leaving some to be resolved by arbitration
This approach lends itself to cases with distinct heads of claim.
Conducting a remote hearing
Given the logistical coordination required in planning for remote hearings, parties need to ensure the availability of a secure internet connection as well as accessibility to necessary documents and requisite soft-/hardware. Additionally, they should take account of sitting hours, time zones and the duration of proceedings as well as the potential to create distinct virtual spaces allowing for communication of arbitrators and legal teams. Useful reference can hereby be drawn from the recommendations set out in the Seoul Protocol on Video Conferencing In International Arbitration, covering a wide range of practical aspects to ensure procedural fairness.
With videoconferencing technology already being used, party deliberations are not likely to be affected. Civil law jurisdictions may be more at ease with resorting to these online measures given that cross-examinations are not conducted as frequently as in common law jurisdictions. Hearing bundles can be made available electronically and will facilitate the work of practitioners due to hyper-linked cross-references and the fact that new documents can be made immediately available. Similarly, arbitral awards can be delivered via email, although the transmission of original and certified copies to the parties may occur at a later stage. Nevertheless, electronic signatures have become a daily occurrence in business transactions and thus do not demonstrate a cause of concern. What remains unclear is whether the respective arbitration locale will allow for a departure from the formalities of in-person hearings and traditional document issuance processes. It is here that parties are advised to confirm with counsel on how to best proceed before engaging in remote arbitration. Lastly, given the increased reliance on online communication tools in times of Covid-19, particularly in the context of remote hearings, parties should refer to the precautionary guidelines set out in the 2020 Cybersecurity Protocol for International Arbitration.