The treatment of foreign parties in Austrian Civil Procedure - Litigation Committee newsletter article, April 2020

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Security for procedural costs

Rouzbeh Moradi

Oblin Rechtsanwälte, Vienna

rouzbeh.moradi@oblin.at

The Austrian Code of Civil Procedure (Zivilprozessordnung, or ZPO) regulates the costs of civil proceedings in Austria. As a general rule, the parties to a dispute pay the costs they incur for their involvement in proceedings, and in principle the prevailing party is eventually awarded their costs.

The prevailing party seeking to enforce a decision on costs against a foreign party, ie,a party without Austrian citizenship or with its place of habitual residence outside of Austria, may find it difficult to do so if the foreign party does not own any assets in Austria against which the decision on costs could be enforced.[1] The prevailing party would therefore be required to seek enforcement of an Austrian court’s decision abroad which could lead to further difficulties.

Section 57(1) ZPO ensures that the costs of proceedings can be claimed by the prevailing party. It stipulates that if a foreign party to a dispute appears as a plaintiff before an Austrian court with a claim arising out of or in connection with the provisions of the ZPO, then at the defendant’s request, the foreign plaintiff is required to provide the defendant with security for the costs of proceedings. The purpose of this provision is to ensure enforceability of any potential claim concerning costs.

In this regard, section 60(2) ZPO determines the amount of the security to be provided on the basis of the costs which the defendant is reasonably expected to incur during the course of the proceedings. The onus is on the defendant to justify their costs. Such costs could include lawyer and court fees, experts’ fees and any other costs arising during the course of the proceedings. It is important to note however, that costs arising out of possible counterclaims are not considered in the determination of the amount of security for costs.

Comment

In theory, the above provisions serve to provide a certain degree of stability and accountability for the costs of court proceedings in Austria. In practice, and depending on the nature of a dispute, the security could constitute a heavy burden for the foreign plaintiff to overcome and may therefore effectively act as a barrier to accessing justice in Austria, thus disadvantaging a foreign plaintiff in front of Austrian courts.

To remedy this eventuality, section 57(2) ZPO provides for certain concessions that would exempt a foreign plaintiff of any requirement to provide security for costs. In short, there is no requirement for a foreign plaintiff to provide security for costs if:

• the plaintiff has its habitual place of residence in Austria (section 57(2)(1) ZPO);
• the Austrian court’s decision on costs is subject to enforcement in the foreign plaintiff’s state of residence (section 57(2)(1a) ZPO);
• the foreign plaintiff disposes of sufficient immovable assets in Austria (section 57(2)(2) ZPO); and
• the subject matter of the claim is of marital nature (section 57(2)(3) ZPO).

The exception to the provision of security for procedural costs enshrined under section 57(2)(1a) ensures that foreign plaintiffs are placed on an equal footing to their Austrian counterparts with respect to the matter of procedural costs within Austria’s court system.

In this regard, an Austrian court holding an application by a foreign plaintiff pursuant to section 57(2)(1a) ZPO must assess the enforceability of a costs decision in accordance with the state law of the foreign plaintiff’s place of habitual residence.

The Austrian Supreme Court in its decision in 2001 (OGH Rkv 1/01), relying on an earlier decision in 1997 (1 Ob 63/97i), outlined the general considerations that should be assessed in determining the applicability of section 57(2)(1a) ZPO. The Court held that the national enforcement law and corresponding provisions of international treaties, including the enforcement behaviour of the state (Verhalten des anderen Staats) in which the foreign plaintiff has their habitual place of residence are decisive in the consideration of section 57(2)(1a) ZPO’s applicability.[2] In total, the foreign plaintiff applying for an exemption pursuant of section 57(2)(1a) must be able to demonstrate that a decision by an Austrian court would be enforceable in their place of habitual residence.

Conclusion

The Austrian Code of Civil Procedure provides for a framework for handling procedural costs within Austria’s court system. As a general rule, the prevailing party is awarded the costs of the proceedings. In response to a claim by a foreign plaintiff, the defendant may request that the foreign plaintiff deposit security for the procedural costs that would reflect the defendant’s costs of proceedings. A broad exception to this rule is found under section 57(2)(1a) ZPO for decisions on costs which would be enforceable in the foreign plaintiff’s place of habitual residence. In this regard the onus lies with the foreign plaintiff to apply for the exception by demonstrating that the decision by the Austrian courts is enforceable in their habitual place of residence. This provision, among others, provides for a certain degree of fairness and equality in the treatment of foreign parties in Austria’s courts.

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