Issue 2020 2 // LGP news

THE INFO MAGAZINE BY FOCUS ON LANSKY, GANZGER + PARTNER ATTORNEYS-AT-LAW REGULATION

TELECOMMUNICATIONS LAW BLOCKCHAIN TECHNOLOGY IoT regulation as a challenge Tokenization as a form of financing

DIGITAL SOCIETY STATE AID Telemedicine on a delicate legal footing Prohibition under Union law under the microscope CONTENT

Editorial 3 ISSUE 2 // 2020

UP-TO-DATE 4 IoT services as a challenge for telecommunications law 4

The prohibition of state aid – a reminder and an all-clear 8

Digital contract management in practice 10 Is the existing legal framework still able to cope with the increased Telemedicine on a delicate legal footing 12 use of IoT applications in public Employment law and restructuring 14 networks?

The coronavirus crisis – prelude to a lived practice of restructuring? 18

Common agricultural policy with ‘green architecture’ 20 12

INTERNATIONAL Tax liability to consider when moving to Austria 22 How safe are telemedical treatments for doctors and Current developments on bilateral investment protection agreements in the EU 24 patients – both in use and in law? From Minister to a successful international lawyer 26

Cross-border enforcement of judgments post-Brexit 28

LGP & Gerstbauer Strategic: dual advisory services with added value 29 32

Nagorno-Karabakh: consequences of a frozen conflict 30

FUTURE TOPICS Especially in times of crisis, it is worthwhile to Tokenisation as a form of financing 32 finance cost-intensive projects by issuing tokens

INSIDE Legal updates by LGP Bratislava 34 37 Privy councillors, whisperers and spin doctors 37

ACTIVE In his new book, LGP Senior Expert Illustrious alumni meet at lofty heights 39 Counsel Manfred Matzka describes more than 300 years of éminences Digital finance and alternative investments-Roadshow 39 grises at the Ballhausplatz

LANSKY, GANZGER IMPRINT partner Publisher/Media Owner: Lansky, Ganzger & Partner Rechtsanwälte GmbH, Biberstraße 5, A-1010 Wien // Editorial staff: + Dr. Gerald Ganzger, Mag. Tony Bayer, Anna Baskakova, PhD, Mag. Sarah Binder, Svetlana Chistyakova, MA, Kerstin Pfeisinger, BA, Helen Steinpaß // Editing & Layout: VGN Medien Holding GmbH // Photos: Amio Cajander, Andreas Tischler, APA/Martin Hörmandinger, Arnold Pöschl, BEX-Media/Curt Themessl, freepik.com, LGP, pixabay.com, unsplash.com, Verlag Brandstätter,

LGP RECHTSANWÄLTE / ATTORNEYS wikimedia.org (Mister No, Sivizius) // Cover: iStock // Printing house: Donau Forum Druck Ges.m.b.H., Walter-Jurmann-

Gasse 9, 1230 Wien // Place of publication: 1020 Wien, P. b. b. // Mailing-list: [email protected] Brandstätter Verlag Photos: unsplash.com; pixabay.com;

2 LGP news 2 | 2020 EDITORIAL

Dear readers, dear clients, dear friends!

The pandemic is leading to a reassessment of the need for regula- Did you know that the margin of discretion of an EU member state tion worldwide. Old neoliberal concepts that rejected regulation to in designing and enforcing its regulatory systems is not unlimited? help the market break through failed in both health and economic Mara Okmažić and Michael Komuczky provide information on the policy. Sacrosanct temples of European law, such as European state legal implications of the “Achmea ruling”, current developments aid law, must be reassessed. At the same time, joint procurement on Intra-EU BITs and the currently unclear legal situation regarding processes for vaccines are beginning at EU level in an unprecedent- bilateral investment treaties between Austria and Croatia. Howev- ed way. We will deal with this paradigm shift in detail in this and the er, many people are also unaware that moving to Austria can very next issues of our magazine. quickly lead to unwanted tax consequences. Daniel Kocab knows how to avoid unpleasant surprises by providing profound tax law Starting on page 14, LGP Managing Partner Julia Andras provides advice. examples of the restructuring measures required under labor law to save domestic companies from the threat of insolvency without The reform package for the Common Agricultural Policy (CAP) having to sacrifice a large part of their workforce to unemployment. after 2020, recently adopted by the 27 EU Agriculture Ministers, In contrast, Klaus M. Steinmaurer, Managing Director for Telecom- is progressive and particularly environmentally friendly. This is- munications and Mail at RTR GmbH, reports on new challenges in sue also explains why EU farmers will benefit more than ever from telecommunications law and current regulatory practices in connec- greater commitment to climate protection and biodiversity in the tion with IoT in a detailed guest article. coming years.

We wish you exciting and informative reading

Gabriel Lansky Gerald Ganzger Ronald Frankl Julia Andras Valentin Neuser Katharina Raabe-Stuppnig Arlind Zeqiri Martin Jacko Anna Zeitlinger Photo: Arnold Pöschl

2 | 2020 LGP news 3 UP-TO-DATE Photo: unsplash.com IoT-Services as a challenge for telecommunications law

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One of the aims of the European Electronic Communications Code (EECC) is to promote the expansion of 5G networks. Does the existing legal framework still do justice to future, in- creased use of IoT (Internet of Things) applications in public networks? A guest contribution by RTR Mana- ging Director Klaus M. Steinmaurer.

n addition to the networking of things in the industry sector, networking is also taking place today in many of the processes in our daily lives and, as a result, the continuous improvement of Iavailable communication infrastructures has become crucially important. This is because IoT applications come in many different forms depending on the purpose they are intended to serve. They can be completely static, mobile or a combination of both. The EU and its Member States cur- rently have no codified IoT law and there are no plans for such a system at present. The European Commission (EC) has, how- ever, announced that it will examine the “legal framework for autonomous systems and IoT applications” in order to evaluate ing from the 1990s is sufficient as a basis facilities and services and certain aspects and promote the possibilities of IoT. The for national legislation, and to what extent of terminal equipment. IoT is a cross-sec- EC considers IoT – along with 5G commu- it has succeeded in providing sufficient tional matter, however it affects telecom- nications, cloud computing, data technolo- remedies with the new European Electron- munications law in particular, with the gies (also for big data) and cyber security ic Communications Code (EECC). issue of spectrum use as well as the op- – to be one of the five priority areas that eration of IoT transmission services as constitute the basic technological building IoT and telecommunications law communication services, the connectivity blocks of the digital single market. of IoT applications, and also the number- The EECC provides a cohesive framework ing and security of networks and services It is, however, still up for debate as to for the regulation of electronic communi- being particularly pertinent. The same ap-

Photo: APA-Fotoservice/Martin Hörmandinger Photo: APA-Fotoservice/Martin whether the current regulatory toolbox dat- cations networks and services, associated plies to M2M – an electronic communica-

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tions service – as for telecommunications GHz frequency range (millimetre waves) for it to be possible to have a network of law roaming in particular is still signifi- will also play a role in the future for specif- up to one million objects per square kilo- cant, as well as many other areas. ic local applications with only very short metre with 5G in the future, it risks a bot- ranges but very large bandwidths. Accord- tleneck situation as a result of the expected 5G C-Band Spectrum ing to EU guidelines, at least 1 GHz of this number shortage. Number administration band must be ready for allocation by the is also a fundamentally national task and However, in the vast majority of cases, in end of 2020. As the availability of these therefore only becomes effective within addition to alternative technical solutions, frequencies is comparatively unlimited, the borders of a nation state. This, in turn, it can be assumed that meaningful and, the allocation format to be chosen by law can lead to legal problems for IoT servic- above all, widespread service provision is still to be discussed. Austria is therefore es that are cross-border in nature. In any requires the flexibility and mobility of a still waiting for an allocation – in part due case, the implementation of the EECC in wireless public communications network. to a lack of identified current needs. all European Member States should facil- In particular, the 5G C(ore) band is char- itate access to the relevant numbering re- acterised by a relatively high bandwidth Addressing for sources for IoT providers. combined with good propagation charac- IoT applications teristics and is therefore very well suited Art. 93 to 97 EECC embed four funda- for IoT networks that do not want to be Every IoT-capable device must be techni- mental principles that are essential for just selectively available. The 5G technol- cally “addressable”, i.e. identifiable, in the IoT. They explicitly state that ‘access to ogy was developed primarily for IoT. The electronic communications network (fixed numbering resources on the basis of trans- allocation of these frequencies is subject and mobile) in order to route the transmis- parent, objective and non-discriminatory to national regulatory authorities. The 26 sion signals to the correct device. In order criteria is essential for undertakings to compete in the electronic communications sector. […]’. In any event, numbering re- sources must be managed efficiently be- cause of technical constraints. Although this principle is not new, it is helpful, as it is explicitly addressed in Articles 93(4), 94(1) and 94(5). In the future, Member States must also ensure the over-the-air provision of SIM card profiles in order to facilitate the change of provider (Art. 93 (6) EECC).

In addition, according to Art. 93 (4) 1 EECC Member States must establish a regulatory framework for national author- ities to make available a range of non-ge- ographic numbers that can be used for the provision of electronic communications services other than interpersonal ones throughout the EU. This closes a legal gap for M2M applications and so, in principle, the EECC has succeeded in finding a fu- ture-proof solution for number resources in connection with future IoT services. Unfortunately, national implementation

will have to wait a little longer. Hörmandinger Photo: APA-Fotoservice/Martin

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Security of networks and M2M is thus subject to a concrete regu- is needed to specifically promote new in- services in IoT lation expressis verbis in the EECC. The novative applications. (technical) transmission of signals has In connection with IoT applications, ad- already been regarded as a constitutive The topics discussed here clearly only rep- ditional threat scenarios arise which must criterion for qualification as an electronic resent a small part of the many legal issues be taken into account as part of the archi- communications service. Recital 15 EECC which have to be faced by telecommunica- tecture and operation of such networks. also makes this clear and is very helpful for tions law. It will have to be checked again Security is extremely important for the a legal assessment. In turn, remuneration and again in each individual case whether acceptance and marketability of IoT ap- can be quickly affirmed where a fee is pay- an IoT-specific regulation is necessary or plications. The Network and Information able for IoT services within the framework whether the existing legal framework is Security Directive of 2016 was a first step of a contractual relationship. However, the sufficient. Experience to date shows that towards general regulation. Currently, the remuneration of the exchange of services the second assumption is largely correct. 5G Network Security Toolbox published is not lost even if the service is provided The EECC 2018 and related EU legal acts on 29.01.2020, which has already been free of charge to the user or where the (e.g. the 2017 Roaming Regulation) have partially implemented in Austria by the exchange of services is carried out either already brought about noticeable develop- Network Security Ordinance of June 2020, differently or by others (e.g. through ad- ments. must be taken into account. vertising financing). Also “payment” with personal (person-related) data can be de- However, it remains to be seen how the M2M as an electronic scribed as remuneration. For example, the relevant provisions of the EECC will be communications service recitals of the EECC clearly state that “the implemented in practice within the new concept of remuneration should therefore TKG 2021. It would certainly be desir- M2M services are already widespread ap- encompass situations where the provid- able to have legal clarification beyond plication examples for IoT services and er of a service requests and the end-user the provisions in the EECC that connects come in various forms. The answer to knowingly provides personal data within with specific issues. From a regulatory the question of which relevant legal pro- the meaning of Regulation (EU) 2016/679 perspective, IoT is in any case a central visions under electronic communications or other data directly or indirectly to the topic that we will deal with in detail in law apply to IoT depends crucially on provider.” the future. n whether parts of an IoT service are legal- ly regarded as “communications services” Roaming and IoT within the meaning of the EECC. If a com- munications service exists, it is subject ex Many business models based on IoT ap- lege to special regulations which do not plications are mobility applications that apply to other services. often have to function not only within national borders but also globally. Roam- For example, if special security regulations ing is therefore an essential part of the for services have to be observed, special business model for cross-border IoT ser- Dr. KLAUS. M. STEINMAURER, MBA data protection regulations or specific con- vices. The regulation under Art. 6a of the holds a doctorate in law from the University of sumer protection regulations apply. Art. 2 Roaming Regulation, which has been in Vienna and an MBA in IT and Business Process no. 4 lit. c) EECC defines “electronic com- effect since 15 June 2017, has created a Management from the Vienna University of Economics and Business Administration. He has munications services” as “a service normal- legal basis (“roam like at home”) in at worked in the telecommunications sector for ly provided for remuneration via electronic least one major area – this also makes almost 25 years, including from 1996 to the end communications networks, which – with a international IoT services possible. By of 2015 as Head of Legal and Regulatory Affairs at T-Mobile Austria GmbH and from April 2016 to few exceptions – encompasses services con- enabling the extraterritorial use of num- June 2018 as Vice President of International Reg- sisting wholly or mainly in the conveyance bers with the EECC, the development ulatory Affairs Europe for Deutsche Telekom AG in of signals such as transmission services of pan-European services will be accel- Bonn. Since July 2019, he has been responsible for telecommunications and postal regulation in used for the provision of machine-to-ma- erated at the same time as the Roaming Austria as Managing Director Telecommunications chine services and for broadcasting.” Regulation, however, further clarification and Post at RTR GmbH.

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The prohibition of state aid – a reminder and an all-clear

OVID-19 has given rise to this on several occasions, with the EU Not surprisingly, questions about the prohibition responding, in particular, through of state aid under EU law usually arise when there a temporary framework for state aid to support the economy. On is vociferous public support and politicians are Cthis basis, it has so far approved more than 200 measures of aid, including some from discussing appropriate measures. Austria. These measures include aid for fixed costs and support for Austrian Airlines. However, when considering financial aid, it is often overlooked that not every instance of monetary aid provided by public authorities Only measures which encompass all the el- sidered to be aid at all. In many cases, the falls under the prohibition of state aid. In- ements constituting the concept of state aid intended beneficiaries are not enterprises. deed, this rule only covers measures that are are considered to be aid. In addition to be- considered to be aid in the first place. If this ing granted through state resources, this in- Even if this is understood independently is not the case, there is no need to notify the cludes, inter alia, a favourable impact and of their legal form and the way in which European Commission of it and, a fortiori, no a selective effect on certain companies or their activity is financed, and even if it need to discuss the facts on which the aid or sectors. Often, this condition alone means includes bodies which do not carry out

the aid regime is to be based. that planned financial support is not con- purely commercial activities, in practice Photo: Amio Cajander

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(at least, within the analysis provided) there are always cases where the support does not benefit an undertaking, or, strict- ly speaking, is not intended to support the commercial activities of the beneficiary. In order to avoid treating financial resources as aid, it is necessary to separate the two areas and thereby permit a clear allocation to costs and financing. This is intended to prevent cross-subsidisation.

In certain areas, it is nigh on essential to examine the activities in more detail. This applies to the health and education sectors, in particular, as well as to the fields of culture and sport, i.e. services of general interest. Therefore, before referring to the set of rules for ‘Services of General Eco- fee, so too are private educational insti- events or amateur sports facilities, cannot nomic Interest’ (SGEI), a collection of in- tutions not to be regarded as enterprises be regarded as aid for good reasons, given dividual acts, it is recommended to under- simply because of the requirement for at- their regional catchment area and the lack take a closer examination of whether the tendees to pay (low) contributions. In the of demand from other Member States (no financing at hand constitutes aid. After all, health sector, it is possible to be guided incoming tourism). n even the European Commission, some- by whether the service is provided under times erroneously known for its rigour, as a (national) social security system based well as the courts of the European Union, on the principle of solidarity, especially have repeatedly concluded that there is no if it is free of charge. It should be noted economic activity at play. Now, an almost that the same entity may not be econom- unmanageable practice of making deci- ically active in respect of some services, sions on a case-by-case basis, above all, but may be economically active in respect has developed. Under this, for example, of others. In other words, the concept of museums and (music) theatres are classed enterprise is relative. as companies – but not without exception. However, even in cases where the benefi- A somewhat clearer picture is to be found ciary’s status as undertaking is undisputed, in the education sector. There is a minimal financial support to that body does not nec- amount of systematics at hand here, with essarily need to constitute aid. This would the level of education, its integration into be the case (and this is also the practice Attorney-at-law the state system (supervision) and its pre- by which decisions are made) if the meas- Univ.-Doz. Dr. Dr. ALEXANDER EGGER dominant financing by the state playing a ure does not affect trade between Member is head of EU, Regulatory, Public Procurement & State Aids at LGP. He specialises in European role. The entity funding the educational States and therefore lacked the essential law, public procurement law, state aid law and establishment in question does not make elements of aid. Although there is no fixed antitrust law as well as constitutional law. Egger a difference: just as public institutions can set of criteria, it can be concluded from was one of the authors of the largest commentary on Austrian public procurement law and one of also be economically active, e.g. by offer- the cases to date that support for services the leading commentaries on constitutional law.

Photos: unsplash.com; LGP ing continuing professional training for a of a purely local nature, such as cultural He also advises in French and Italian.

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Digital contract management in practice

ost companies and private Due to the current pandemic, which has been individuals still associate the preparation and con- waging since spring 2020, and the restrictions on clusion of contracts of any kind with a physical docu- contact associated with this, many companies have M ment, with the original copy signed by become aware of the practical relevance of digital all the parties involved. However, there have been different providers of e-signa- or contactless contracts. As a result, it is no wonder ture procedures up to the conclusion of contracts via blockchain for quite some that the demand for software in this area is time. Indeed, contract management does growing rapidly. not stop even after the contract has been drawn up and signed. In most cases, the contract needs to be managed continu- and comprehensive contract management are just a few of the many other advan- ously throughout its term, for example, to systems. tages. In summary, it allows every single manage ongoing payments and benefits. business process to be automated to an As a result, the digitisation of contracts The creation of a central contract database, even greater extent than has been the case does not end with the digital signature on which enables all of a company’s contracts in most companies to date. However, the the contract document. In addition, entre- to be accessed with a single click, as well digitisation of contracts also brings an ar- preneurs, in particular, can gain a number as automation-supported analysis for the ray of benefits for private individuals. For

of advantages by using digital contracts improvement of future contract processes, example, the smartphone app ‘pia – Prove Photo: unsplash.org

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It All’ enables every private individual to create and conclude contracts and minutes on their smartphone in a simple, legally compliant manner, using blockchain time certification. In any case, it is to be expect- ed that the current COVID-19 pandemic and constantly advancing technology will lead to a larger and more comprehensive range of digital contract management soft- ware being available in the future.

Data protection

However, as soon as contract documents contain personal data and are stored in digital form (and are, by extension, also processed automatically), they are gen- erally subject to the application of the GDPR, unlike physical, paper-based con- tract documents. In this context, the rules and regulations of the GDPR must there- fore be observed in each instance. This includes, inter alia, the mandatory re- quirement of a processing base according to art. 6 GDPR. In particular, the trans- parency and information obligations un- der art. 12 and 13 GDPR and the general principles under art. 5 GDPR should also and Trust Services Act (Signatur- und Ver- A qualified electronic signature has, in be mentioned. However, these are merely trauensdienstegesetz, SVG). This law reg- principle, the same effect as a handwrit- some of the legal provisions of the GDPR ulates all the provisions concerning elec- ten signature. Consequently, it is therefore and do not represent an exhaustive list by tronic signatures and electronic seals. In also suitable for replacing signatures that any means. practice, the qualified electronic signature would normally be given in the course of according to section 4 para. 1 SVG, which signing a contract. Exceptions to this rule Austrian legislators have already reacted fulfils the legal requirements pertaining include testamentary dispositions and no- to this trend, too, enacting the Signature to written form, is particularly important. tarial certifications or notarial acts. n

Explanations on the GDPR

Art. 5 GDPR lays down the principles gov- cessing, failing which the data processing is erning the processing of personal data. They unlawful. A total of six different reasons are include, inter alia, data processing in good given for this: the consent of the data subject, faith, the limitation of the purpose of data pro- necessity of the performance of the contract, cessing and data minimisation. The controller necessity of the performance of legal obliga- is responsible for compliance with these prin- tions, protection of vital interests, protection ciples, and must be able to prove that they have of the public interest or in the exercise of of- been observed (known as ‘accountability’). ficial authority and in the legitimate interests of the controller. Art. 6 GDPR largely brings provides that grounds for pro- an end to boundless, precautionary data pro- Mag. DANIEL SÖLLNER Art. 6 GDPR is an associate and specialized in trademark and cessing must exist for each type of data pro- cessing. media law. He also advises in the fields of civil law

Photos: unsplash.org; LGP and litigation.

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Telemedicine on a delicate legal footing

In our digitalised society, there is a great need for telemedical services. In order to create more security, both in terms of application and legality, for all the parties involved, the following uniform guidelines and recommendations for correct implementation would be desirable.

elemedicine refers to any provi- sion or support of healthcare ser- vices using information and com- munication technologies where the patient and the healthcare Tprovider (HCP) are not physically present in the same location. In concrete terms, this includes any form of remote treatment, whether by telephone, by video conference or in the transmission of findings via an online platform. It can be used in a wide array of applications, which extend from telemonitoring (medical monitoring of a person’s state of health from a distance) to teletherapy, in which a HCP actively inter- venes in the treatment of patients from a distance, as well as teleconsultations and

teleconferences. Photo: pixabay.com

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During the coronavirus pandemic in par- ticular, these telemedical forms of treat- ment are becoming more and more ap- pealing. As hardly anyone is keen to sit in the packed waiting room of their doctor’s surgery, many patients prefer to clarify with their doctor in advance whether they can receive treatment remotely. More and more doctors have been offering this kind of remote treatment since the ‘shutdown’ in March, if not before. However, in or- der to create legal certainty for all those involved, there is a need for appropriate technical preparation and compliance with numerous legal provisions. Unfortunately, there is no ‘telemedicine law’ listing all the specifications: instead, a multitude of laws must be observed, depending on the area of application at hand. They include, for example, the Doctors’ Act, the Hospi- tals and Health Resorts Act, the General Data Protection Regulation and, also, the Health Telematics Act, which must always ty. In this context, it should be emphasised tation. In particular, a pan-European cer- be taken into account when health data is that there is currently (also) a lack of ex- tificate for providers, platforms and other processed electronically on a regular ba- perience or guidelines as to when telemed- applications would facilitate the process of sis. When selecting platforms or provid- ical treatment is to be considered ‘lege selection. In addition, uniform education- ers, it is particularly important to ensure artis’ in the sense of maintaining quality. al materials, for both doctors and patients, that encrypted data transmission is guar- This assessment must be made by the at- could help ensure consistent standards and anteed. Under no circumstances should tending physician, without this physician provide more legal certainty. n correspondence containing confidential being able to refer to corresponding stud- health data be sent by ‘normal’ email. ies or other specifications.

With regard to the Doctors’ Act, special A further advantage of telemedicine can be attention must be paid to the principle the comprehensive data obtained through of immediacy pursuant to section 49 (2) it. This can be made available for medical when assessing the admissibility of tele- research, provided that there is a legal ba- medical treatment. Although more modern sis for this and/or anonymisation is availa- doctrines hold the view that telemedicine ble. Here, countries such as Denmark, Es- is compatible with the principle of imme- tonia or Sweden are already much further diacy, I do not believe that it should go so along than Austria, which is probably also far as to consider purely remote treatments due to their more moderate understanding as being permissible, in principle. Rather, of data protection. it is recommended that a minimum of ‘per- sonal’ contact takes place, with the result In summary, it can be said that telemed- Attorney-at-law and Managing Partner that a certain immediacy of the doctor-pa- icine is an important building block for Mag. KATHARINA RAABE-STUPPNIG tient relationship remains guaranteed. This future medical care across the nation. In heads the Telecommunications, Media and Technology (TMT) practice group. She special- means that the doctor has ‘physically’ ex- order to create certainty in terms of ap- ises in media law, copyright and telecommuni- amined the patient in their practice at least plication and legality, it would be desir- cations law, as well as in proceedings for unfair once and subsequent (further) treatments able to provide the protagonists involved competition (under the Act against Unfair Com- petition). Additional areas she focuses on in- are carried out remotely, provided that this in this field with uniform guidelines and clude data protection law and the protection

Photo: unsplash.org; LGP does not have a negative impact on quali- recommendations for correct implemen- of personal rights.

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Employment law and restructuring

The country is firmly in the grip of the coronavirus pandemic. After a tightening of measures in November, the second „hard“ lockdown to contain the further spread espite helpful changes related to short-time working, it is like- of the virus began on November 17. What options are there ly that unemployment in this under employment law to prevent a worst-case scenario country will once again rise massively and that the number for employees and the economy? D of companies affected by insolvency will also increase. This article therefore deals with restructuring measures in which em- ployment law and related possibilities for shaping the restructuring process play the greatest role. Measures relating to a Although a company’s workforce is un- a number of considerations have to be tak- reduction in personnel or the closure of doubtedly one of its greatest assets, it is en into account in order to ensure that this social compensation plans are intended often the first area in which savings are to is carried out in a legally sound manner to illustrate the options available within be made in the event of financial difficul- and that the company is not subsequent- employment law for local companies to ties and the threat of insolvency. Staff re- ly confronted with negative legal conse- avoid insolvency without having to sacri- duction is thus one of the most frequently quences (e.g. legal action by former em- fice a large part of their workforce. Lastly, taken measures in the course of employ- ployees). Therefore, the following factors alternatives to staff cuts should then be a ment-related restructuring. If the business must be taken into account in the course of

further signpost for domestic companies. decision is made to reduce the workforce, a successful staff reduction operation. Photo: freepik.com

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Staff reduction and terminations by mutual agreement between employee and employer. The guidelines when assessing whether the termination best known compulsory payment related thresholds set out in Section 45a(1) of the to employment contract termination is If a large number of employees are to AMFG are reached within the 30-day pe- probably the statutory severance payment. be laid off, timely engagement with the riod. The number of terminations depend However, this only affects employees “early warning system” standardised in on how many notices of termination are whose contract pre-dates 1 January 2003 Section 45a AMFG (Labour Market Pro- actually given in the 30-day period. A no- and who have not already changed to the motion Act) is advisable. According to the tice of termination is deemed to have been “new” severance pay system under the provisions of the Act, employers must no- given at the point it is received by the em- BMSVG through written agreement with tify the relevant AMS regional office ac- ployee. the employer. Other payments include cording to the location of the business in holiday compensation for holiday entitle- writing if they intend to terminate a large In the case of termination by mutual con- ments which employees were unable to number of employment contracts. Specifi- sent, however, the Supreme Court bases use before the end of their employment, cally, the AMS must be notified in writing its decision on how many employees were aliquot special payments (holiday and if the company plans to end the employ- actually offered a termination agreement Christmas bonuses), bonuses, premiums ment of in the 30-day period. The notification must and similar benefits, and termination pay, be made at least 30 days before the first i.e. the remuneration paid during the no- n At least 5 employees in companies with declaration of termination of an employ- tice period. more than 20 and less than 100 employees ment contract, i.e. at least 30 days before or the first notice of termination or the first In the event of termination of employ- conclusion of an agreement to terminate ment, whether by notice or by mutual n At least 5% of the employees in compa- the employment relationship by mutual agreement, the employee and employer nies with 100 to 600 employees or consent. It should be noted that notices of may also agree to make voluntary pay- termination are legally ineffective if they ments. For tax reasons, these payments are n At least 30 employees in companies with are given before notification is received by usually made as “voluntary redundancy more than 600 employees, or the AMS regional office or within a period payments”. The amount of a voluntary re- of 30 days after receipt of the notification dundancy payment is not regulated by law, n At least 5 employees aged 50 and over by the AMS (“blocking period”) without and in practice is determined on the one the prior consent of the regional office. hand by the company’s interest in termi- Here, the reference is to a specific com- This shall apply mutatis mutandis to ter- nating the employment relationship, and pany, namely the company in which the mination of employment relationships by on the other hand by the company’s risk of employees whose employment contracts mutual consent. a possible legal challenge to termination. are to be terminated are employed. If an In general, the higher the risk of a judicial employer has several businesses, the em- It is important to note that the AMS has challenge to dismissal appears to be, the ployees in each individual company must no legal means to prevent or delay the im- higher the level of voluntary redundancy be considered separately for the purpose plementation of staff reductions. However, that should be agreed. of checking whether the above criteria redundancies in a company that trigger the are met. The employees of multiple com- “early warning system” are usually dis- In summary, the following steps should panies should not to be counted together. cussed in the media, which is not exactly therefore be followed in the event of a mass The wording “as a rule” in the law refers an advantage for a company in crisis. It reduction in personnel: to the average employment level over the may therefore be important to make staff last three months prior to the filing of the reductions through an appropriate design n The number of employees to be laid off report. without triggering the early warning sys- and those who enjoy special protection tem (staggered reduction). against dismissal must be identified It is worth mentioning in this context that not only employer-instigated termina- The costs that (might) be associated with n The applicable notice periods and notice tions are covered by the “early warning a reduction in personnel are also worth dates must then be determined system”, but also terminations by mutual mentioning in this context. A distinction agreement. According to the judgement must be made here between payments n The works council must be informed of of the Supreme Court, a distinction must that are mandatory and those that are paid the intended mass redundancies and the be drawn between terminations by notice voluntarily on the basis of an agreement business owner must consult with it

2 | 2020 LGP news 15 UP-TO-DATE

n In the case of employees with special pro- tection against dismissal, the consent of the court or the Federal Social Office must be obtained n Timely notification must be given to the AMS according to Section 45a of the AMFG n The works council is to be informed of in- dividual terminations in the sense of Sec- tion 105 ArbVG n Finally, the notices of termination are to be given and termination agreements con- cluded

Social plan as protection

Often, in the course of a staff reduction, social compensation plans are concluded in addition to the announcement of dis- missals or the conclusion of consensual termination agreements. These are com- pany agreements which are concluded between the works council and the em- ployer if a works council exists, otherwise between the employer and the individual employees concerned. In principle, social plans serve to protect the economically weak and pursue the goal of preserving legal positions previously granted to the Symbol photo employee as long as possible or to com- pensate for their loss. The provisions of Sections 97 and 109 of n Significant disadvantages for the workers Although the purpose of a social compen- the ArbVG regulate the criteria, which concerned sation plan is to compensate employees must be cumulatively present in order for disadvantaged by changes in company op- a social compensation plan to be legally If even one of the aforementioned conditions erations, it is not unrestricted and, when concluded. Necessary criteria for the suc- is not met, a social compensation plan even being agreed, the interests of the company cessful conclusion of a social compensa- if concluded is completely null and void and of those employees who are not cov- tion plan are: from the point of view of industrial relations ered by the scope of the social compen- law. sation plan must be taken into account. A n A change of business in accordance with social compensation plan or the benefits Section 109 paragraph 1 lines 1-6 of the The existence of a change of business is to agreed in it should be agreed after weigh- ArbVG be confirmed in accordance with the provi- ing up the interests of the company and the sions of Section 109 paragraph 1 lines 1-6 of employees not disadvantaged by changes n A minimum size of at least 20 employees the ArbVG if in company operations on the one hand and the interests of the disadvantaged em- n A significant proportion of this workforce n The entire operation or parts thereof are

ployees on the other. is affected, and restricted or shut down Photo: freepik.com

16 LGP news 2 | 2020 UP-TO-DATE

n Employment relationships are terminated company agreements, the reduction of vol- ployers and employees the opportunity for which trigger an obligation to report under untary social benefits and the termination a fruitful economic activity. Section 45a paragraph 1 lines 1-3 AMFG of employment contracts. Relevant examples of this are the change n An entire company or parts of a company It is up to the contracting parties to deter- from full-time to part-time work, the in- are relocated mine the content of the social compensa- troduction of so-called “part-time work tion plan. The law does not provide any for older employees”, which is also finan- n A merger with other companies takes guidelines for specific social compensa- cially supported by the part-time allow- place tion plan benefits. ance paid by the AMS to the employer, the introduction of short-time work and/ n A change in the purpose of the company, Usually, a social compensation plan in- or flexitime, and the conclusion of agree- the operating facilities, the work and busi- cludes a voluntary severance payment, ments on educational leave or part-time ness organisation as well as branch organ- special severance pay for employees with work for training purposes. The reduction isation takes place special protection, bridging assistance for of holiday credits or the use of time cred- older employees who are soon to reach its is also recommended for periods of low n New working methods are introduced, and the statutory retirement age or educational workload. leave. When concluding a social compen- n Rationalisation and automation measures sation plan, it is advisable to agree that The exact form of the restructuring meas- with considerable impact are introduced only those employees whose employment ures or alternatives presented here as relationship is terminated by mutual con- examples should in any case only be de- A mere change in the legal form or own- sent are entitled to social compensation termined after thorough examination and ership of a company does not justify the plan benefits. This prevents the employer consultation with experienced legal ex- conclusion of a social plan. from having to provide social plan benefits perts in order to avert any possible dis- on the one hand and exposing itself to the advantages that they may entail for both Social compensation plans can only be risk of a dismissal challenge on the other. employers and employees. n agreed upon in companies that have at least 20 employees on a permanent basis. In most cases, the conclusion of a social Only those in accordance with Section 36 plan will be voluntary. Otherwise, it is paragraph 1 of the ArbVG are considered possible to submit this as an “enforceable” employees, executive employees are thus works agreement to the conciliation body excluded. Furthermore, the conclusion of for a decision and to force the conclusion the social compensation plan requires that of the social compensation plan in this a considerable part of the workforce be way. affected as a minimum. There is disagree- ment in jurisprudence and legal theory as What are the alternatives to what is meant by a considerable part. to staff reductions? However, the predominant theory is that this means at least one third of the work- Unless the company is in deep long-term force. crisis, from which it can only recover by the last resort of staff reductions, it may The conclusion of a social compensation make sense to give preference to certain plan is only permissible if the change in alternatives to such drastic measures. In operations entails “substantial disadvan- certain situations, it is advisable not to part tages” for all or substantial parts of the for good with existing qualified special- workforce. This covers both material and ists, especially as they could be urgently Attorney-at-law and Managing Partner immaterial disadvantages. Disadvantages needed in the event of a future econom- Dr. JULIA ANDRAS may include, for example, transfers, re- ic upturn of the company. Therefore, it is is Head of Litigation at LGP. She specialises ductions in pay, longer commuting times, necessary to find alternatives that relieve in employment law, medical liability, litigation and arbitration, inheritance law, gambling law changes in working hours, deterioration the company economically in the short and damages. She also advides clients

Photo: LGP due to changes in collective agreements or term and in the long term give both em- in Hungarian.

2 | 2020 LGP news 17 UP-TO-DATE

The coronavirus crisis – prelude to a lived practice of restructuring?

Even if there is not currently a significant increase in the number of registered insolvencies compared to previous years, the coronavirus crisis will not remain without consequences. It is likely that a number of companies suffering from economic woes will not be able to stop themselves from falling into insolvency.

t present, a realistic comparison is obscured by the aid measures adopted by the Austrian par- liament (deferrals, short-time working, loans, etc.), which Apartly alleviate the financial burden or spread it over a longer period of time. This does not, however, completely lift the bur- den of debt. This can be a heavy burden, and these measures merely prevent insol- vency, at best. A company is obliged to file for insolvency if they are unable to make payments or are over-indebted. In this case, a request to open insolvency proceedings should be filed without delay, at the latest within 60 days after the insolvency has occurred. These maximum periods were

extended to 120 days, if the insolvency or Photo: unsplash.com

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over-indebtedness was due to the corona- ures to be taken, is time-critical, especially which has to be transposed into national virus crisis. In the event of over-indebted- with regard to the application deadlines at law by July 2021, essentially, may well ness, the obligation to file an application hand. In order to convince investors of the see Austrian legislators succeed in cre- was suspended for over-indebtedness oc- usefulness of the restructuring proposal, ating an attractive legal situation which curring up to 31 January 2021, whereby a corresponding restructuring report (to might stem the threatening tide of in- the end of the period was determined as ei- be prepared first) is often useful – which solvencies through sensible restructur- ther 60 days after 31 January 2021 or 120 takes further time. With a reasonable ing. The directive is intended to apply to days after the over-indebtedness occurred, concept of the measures to be taken, it companies which are not yet insolvent whichever was later. is possible to right the ship under certain and which are normally continued under circumstances. In the short term, this will their own management, and with the as- Irrespective whether reason for insolven- depend on creating liquidity, for example sistance of an administrator, depending on cy arises, a managing director would do through the sale of company assets (sale & the restructuring plan that is to be drawn well to consider reorganizing or restruc- lease back, patents, etc.), but in the long up. In principle, a (temporary) ban on en- turing their company if there is a threat of term, too, this will depend on strategically forcement and insolvency is provided for, insolvency or over-indebtedness. Under restructuring the business model in such as is a ban on contractual terminations, certain circumstances, insolvency can still a way that more income can be generated which protects the company’s continued be avoided. Corporate restructuring is, ba- at lower costs, say, in the production area existence. Reorganisation via this formal sically, only possible if a company in diffi- by reducing unit costs. The acquisition of procedure, which reduces time pressure, culties can be returned to a position where investors or other outside capital can also could, if done well, create incentives to it could generate independent profits after represent a significant factor or the basis avert insolvency by means of a reasonable the planned measures have been imple- for a possible restructuring. restructuring. mented and if the restructuring appears to make more economic sense than the path In principle, these reorganisations and It is to be hoped that the transposition of to insolvency to the parties involved. To restructurings are not bound by a legal the Directive in Austria will be successful tackle a corporate restructuring or reor- corset, although a reorganisation often de- in such a way that it will be accepted in ganisation, it is first necessary to analyse pends on the participation (or standstill) of practice, in contrast to previous attempts and question the strategic parameters of creditors, which might be easier to achieve at regulation. n the company at hand. This is because the within a formal framework. Even though company’s lack of economic success and the Austrian Enterprise Reorganisation its resulting liquidity problems are inevita- Act (Unternehmensreorganisationsgesetz, bly the result of an incorrect strategic ori- URG) provides this kind of (out-of-court) entation. If it is possible in good time, for framework for restructuring, the procedure example to strengthen customer relations, under the URG has not become established exploit further potential, offer new prod- in practice. In particular, this is because the ucts, switch production cost-effectively or costs for the reorganisation auditor envis- optimise advertising, it may still be possi- aged in the context of these proceedings ble to set the course straight before earn- are very high and, as a rule, people fear that ings or liquidity problems occur. launching reorganisation proceedings will damage the company’s reputation. In Eu- If earnings decline and liquidity is prob- ropean culture, which – unlike American lematic, appropriate countermeasures culture – barely forgives entrepreneurs for must be taken quickly to safeguard li- insolvencies, the necessity of a reorganisa- quidity and enable a positive outlook for tion is already tainted with the aura of pro- the company’s continued existence. The fessional failure. It is possible that a shift earlier the response, the greater the chanc- in thinking could occur in connection with es of successful restructuring. A planned the the coronavirus crisis, with the chance

reorganisation or restructuring often fails of undertaking restructuring and reorgani- Attorney-at-law and Managing Partner due to the fact that one waited too long and sation without losing face. Mag. VALENTIN NEUSER the insolvency is supposed to be averted is Mediator and Attorney-at-law at LGP. He focu- ses on insolvency law, civil law and civil procedure only in the last second. The preparation The implementation of the restructuring law, as well as on alternative dispute resolution

Photo: LGP of a holistic concept, specifying the meas- directive (Directive (EU) 2019/1023), (ADR) and mediation.

2 | 2020 LGP news 19 Photo: unsplash.com Common agriculturalpolicy with whole ofEuropean agriculturalpolicy. agreement marks asignificantmilestoneforthe on 20October2020. Consequently, thepresent package fortheCommon Agricultural Policy (CAP) negotiating positiononthepost-2020 reform European Councilreachedanagreement onits After severalyearsofnegotiations, the ‘green architecture’ UP-TO-DATE

n line with the Commission’s original Focus & goals from 2020 regulations. Each country is required to proposal, ‘green architecture’ is the submit a national strategy plan, which is to basis of the new financial framework. In principle, the financial framework of the be approved by the EU Commission, along The resolutions of the EU Agricul- CAP is reformed and reorganised every with a catalogue of specific ecological reg- tural Council stipulate that environ- seven years. The last general regulations ulations. The essential progress offered by Imental services are to become mandatory in this respect were published in Decem- this regulation is that these eco-regulations for all Member States and that a greater ber 2013. With regard to the new CAP, the are mandatory. Other changes mainly affect commitment to climate protection and bi- European Commission set up the Working smaller farms. These enterprises will re- odiversity is to be rewarded accordingly. Group on Agricultural Markets as early as ceive increasing support over the course of While smaller farms will receive a higher 2016 to consider the EU’s future agricul- the new CAP, including in the form of the level of support, EU farmers have more tural policy. The EU Commission present- redistribution premium. The aim of the re- security in terms of planning and financial ed a first draft for the multi-year financial distribution premium is to ensure that part compensation for their additional expend- framework for the years 2021 to 2027 in of the direct payments is shifted away from iture, compared to competitors from third 2018 (COM 2018/322 of 2 May 2018). This large enterprises and towards small and me- countries. proposal included ‘green architecture’ as a dium-sized farms. As the arrangements out- central element, which involves ensuring lined above involve far-reaching changes to EU Common that the design and interaction of all regu- the current CAP, the Agriculture Council’s Agricultural Policy lations, requirements and support measures proposal provides for a transition period of contribute to agriculture offering higher en- two years for certain arrangements, mean- Negotiations on the EU’s Common Agri- vironmental and climate protection. This is- ing that the rules will not apply until 2023. cultural Policy (CAP) after 2020 had al- sue was also a hotly debated topic at Coun- ready started as far back as May 2016, at cil level. After several years of negotiations The decisions of the Agriculture Council an informal meeting under the Dutch pres- between the Member States, the 27 EU form the basis for the forthcoming nego- idency. The original idea behind the crea- agriculture ministers finally agreed on the tiations between the Council and the EU tion of a common CAP was to provide the reform of the CAP on 20 October 2020. In Commission and the European Parliament people of Europe with sufficient food at particular, this agreement revolved around in their ‘trialogue’. Only when these three reasonable prices by establishing uniform its future financial framework, largely tak- stakeholders have reached an agreement subsidies. Before the common market was ing into account the ‘green architecture’ will the European legal framework for the established by the Treaty of Rome in 1958, preferred by the Commission. new CAP be established. Therefore, it re- Member States were able to operate in the mains to be seen whether the decisions of agricultural sector through various national One important change is the introduction the Agriculture Council will be accepted in intervention mechanisms. They created the of climate protection requirements. These this form. Nevertheless, we already recom- CAP so they could abolish them and there- requirements will make certain climate and mend that our clients analyse the decisions by bring agricultural products into free cir- environmental protection standards man- of the Agricultural Council more closely culation. datory for agriculture in the future. The and proactively adapt their farms to align Agricultural Council’s decision that land with ‘green architecture’. n Since 1999, the CAP has been based on ownership alone no longer entitles farmers two pillars. The first pillar covers direct to direct payments also marks a significant payments to farmers, while the main el- change in the system. In the future, farmers ements of the second pillar encompass will always have to disclose their farming various support programmes for manage- practices to be allowed to receive direct ment and rural development. Instead of payments at all. Anyone who does not meet the initial price support policy, the current the prescribed criteria in this regard will see EU support model is primarily based on a their funds cancelled or not paid out at all. direct payment system. The strategic im- portance of the CAP is also reflected in the New ecological fact that almost forty percent of the EU’s standards budget (around 58 billion each year) is devoted to supporting agriculture. In addi- In addition, at least 20 % of the direct pay- Dr. LEVENTE NAGY tion, the CAP is enshrined in primary law ments (first pillar) will be linked to even is an associate at LGP and advises on civil law, at European level in Articles 38 to 44 of the higher climate protection requirements. To banking litigation, banking supervisory law, capital markets law and compliance. Levente Nagy is also Treaty on the Functioning of the European receive money from this pot, farmers will an agricultural technician. He also advises clients

Photos: LGP Union (TFEU). have to implement additional ecological in Hungarian and Russian.

2 | 2020 LGP news 21 INTERNATIONAL

Tax liability to consider when moving to Austria

person is subject to unlimited As a country, Austria enjoys an excellent tax liability in Austria if they have their residence or habitu- international reputation in terms of quality of life. al abode in Austria. Residence means having an apartment However, moving to the Alpine republic can also inA Austria that you can dispose of at any quickly lead to unwanted tax consequences. time. If it is impossible to clearly deter- mine whether someone has a residence in Why profound tax law advice in advance helps Austria, their habitual abode in Austria can to avoid unpleasant surprises. be viewed as a substitute. This is the place where the person indicates that they are not just staying on a temporary basis. A person with unlimited tax liability in Austria is, in under the Second Residence Ordinance Double domicile and principle, subject to Austrian taxes on their (Zweitwohnsitzverordnung, ZWVO). No double taxation agreements ‘global income’ (principle of universality). unlimited tax liability arises, despite resi- The tax requirements placed on everyone dence in Austria, if the person (i) has had If a person now has several residences, this else are limited to their Austrian income the centre of their vital interests abroad in generally results in the person being resi- (territoriality principle). As a result, under the last 5 calendar years prior to establish- dent in several states for tax purposes. This certain circumstances, even having a flat in ing their residence and (ii) does spend more could lead to the individual’s income being Austria could trigger unlimited tax liability than 70 days in a calendar year within Aus- subjected to double taxation, but this dou- in Austria, in principle. tria. However, there is a counter-exception ble taxation is generally undesirable. For to this exception: if a person uses the resi- this reason, Austria has concluded its own Exception under the dence of their (spousal) partner who is al- double taxation agreements (DTAs) with Second Residence Ordinance ready subject to unlimited taxation (in Aus- numerous countries. A DTA assigns the tria), and the person in question does not right of taxation for certain types of income However, for individuals who can prove permanently live separate from their part- to the contracting states in question. A dis- that they have only been in Austria for a ner, the use of this residence would trigger tinction is made between the ‘state of resi-

short period of time, there is an exception unlimited tax liability in Austria. dence’ and the ‘other state’. The respective Photo: unsplash.com

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DTA determines which state is to be con- withholding tax to the Austrian tax (credit n Depending on the type of income, the state sidered the state of residence. The process method). of residence or the ‘other state’ may tax the of examination usually takes place in stag- specific income. The DTA also regulates es, as the example of the Austria – Russia Obligation to register how the state of residence avoids double DTA shows: triggered by moving? taxation, namely by the exemption meth- od (the state of residence does not tax the n The person is resident in the state in Since July 2020, service providers such as actual income at all) or the credit method which they have their permanent resi- lawyers or tax consultants (intermediaries) (the state of residence credits the foreign dence. have been obliged to inform the domestic tax tax). In most cases, DTAs provide for both authorities of cross-border arrangements that methods. n If the person has a place of residence in may lead to tax avoidance. If the interme- both states, they are deemed to be resi- diaries are subject to a professional duty of n Moving to Austria may also give rise to dent in the state with which they have confidentiality, the taxpayer must report the reporting obligations. In Austria, the tax- closer personal and economic ties (centre cross-border arrangement to the tax authori- payer’s assets will be revalued at market of vital interests). ties, unless the taxpayer releases the interme- value (‘step-up in basis’), especially if the diaries from their duty of confidentiality. exit state does not have an exit tax. If this n If the centre of vital interests cannot be is the case, there is probably a notifiable determined or if the person does not have Moving to Austria can also be a cross-bor- cross-border arrangement. n a permanent home in any contracting der arrangement of this nature. From a tax state, they shall be considered a resident law perspective, this instance would involve This article is based on the status of of the state in which they have their habit- the assets of the recipient being revalued at the law as of 22 October 2020 and is only ual residence. the current market value (‘step-up in basis’). intended to provide a rough overview of In some circumstances, the individual could the possible tax issues associated with n If the person has their habitual residence then sell the assets at their current market moving to Austria. As not all tax law in both states or in neither state, they shall value in a tax-efficient manner because they topics related to moving to Austria are be deemed to be resident in the state of would not receive taxable income from the dealt with in this article, it does not claim which they are a national. sale (the step-up in basis means that the as- to be complete. The team of experts at sets are revalued at market value and no gain LGP would be happy to provide you n If the person is a national of both states is realised on a sale at market value). As a with an individual assessment of your or of neither state, the authorities of the result, this would mean that the person could specific case at any time. contracting states shall endeavour to set- ‘take’ the hidden reserves on their assets to tle the question by mutual agreement. Austria without paying any tax. Whether or not this option is available also depends on Once the ‘state of residence’ has been de- the tax law of the country of departure. The termined, it is then necessary to examine key question is whether this state is home to what specific income the person has earned an exit tax. If this kind of tax were applicable (e.g. dividends from foreign companies, in the event of departure, there would be no income from letting apartments, remuner- risk of tax avoidance. ation for various functions in governing bodies, etc.). The applicable DTA contains Conclusion concrete norms for allocating most types of income. n Even having a flat can lead to unlimited tax liability in Austria, in principle. An example: a natural person resident in Austria holds shares in a Polish joint stock n If the apartment is only used very infre- company and receives an annual dividend quently (< 70 days/year) and the taxpayer in return. Since the Austria – Poland DTA has been living abroad for at least 5 years, regulates the right of taxation of dividends they can only be subjected to limited tax in article 10, the following applies accord- liability due to the ZWVO, despite their Attorney-at-law ingly. Step one: in principle, Austria should Austrian residence. Mag. DANIEL KOCAB, LL.M. tax the dividend; step 2: however, Poland is a member of the LGP Corporate Team may tax 15% of the gross amount of the n If the taxpayer has a dual domicile, the and advises clients in the areas of corporate law, M&A, private equity and tax law. Daniel dividend; step 3: Austria does not lose the state of residence must be verified under Kocab also advises in Polish and

Photo: LGP right of taxation, but credits the Polish the applicable DTA. Russian.

2 | 2020 LGP news 23 INTERNATIONAL

Current developments on bilateral investment protection agreements in the EU

or all EU member states there are two separate legal regulations that Implementing a regulatory framework and limit their own regulatory scope: supervising the compliance with it is one of the On the one hand, current EU law prohibits discrimination against core competencies of any state. But the state‘s Fmarket participants from other EU mem- ber states. And on the other hand, there discretionary power in shaping and enforcing must not be any unfair treatment of inves- tors from one state on the territory of the its regulatory systems is not unlimited, as the other state, even within the framework of unclear legal situation in bilateral investment investment agreements concluded bilater- ally with other countries (BITs or intra-EU treaties between Austria and BITs). However, these two regulations often cause controversy and great legal Croatia proves. uncertainty, as the following example shows. In September 2015, Croatia passed controversial legislation which converted Swiss franc loans and mortgages to Eu- ros. This followed a sharp appreciation of arbitration against Croatia as a conse- In the meantime, the Court of Justice of the Swiss franc against the Euro, which quence of this legislation, based on BITs the European Union (CJEU) decided in caused high debts to Croatian Swiss franc concluded between Croatia and other EU the famous Achmea-judgment on 6 March borrowers that they were unable to repay. member states. Four of those banks base 2018, that intra-EU BITs were contrary The Croatian legislation obliged the banks their claims on the BIT between Austria to EU law. The CJEU reasoned that those to bear the cost of the conversion, which is and Croatia. Those four arbitral proceed- BITs provide investors from some member estimated at over US$ 1 billion. Six Euro- ings have been initiated between 2016 and states with more rights against a member

pean banks have instigated investor-state 2017. The cases are still pending. state than this state granted to investors Photos: freepik.com

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Austria is not yet amongst the contracting Due to the unclear legal situation created parties of the treaty. Hence, the BIT be- by the Achmea-judgment, resolving this tween Austria and Croatia remains in force legal entanglement without prejudicing for the time being, though the legal effect the interests of one stakeholder or anoth- of the Achmea-judgment on it is unclear. er seems hardly possible. Our arbitration While the Austrian government consid- experts at LGP will review this situation ered to also accede to the multilateral trea- carefully. n ty, it ultimately favored to terminate the intra-EU BITs by way of bilateral agree- ment. When and how Austria’s intra-EU BITs will be terminated and what effect this will have on pending arbitration cases is still unknown.

Just recently (June and September 2020), two of the arbitral tribunals in the cas- es against Croatia based on the BIT with Austria made rulings on their jurisdiction: Both rejected Croatia’s objection and ar- from other member states. Hence, accord- gued that at the time when Croatia con- ing to the CJEU, intra-EU BITs violate the sented to arbitration (which was done by EU law principles of non-discrimination concluding the intra-EU BIT) and when and equal treatment. Based on the Ach- the request for arbitration was registered, mea-judgment, Croatia objected to the the Achmea-judgment was not yet ren- jurisdiction of the arbitral tribunals in the dered. The tribunals reasoned that at that cases brought against it under the intra-EU point in time, the so-called acquis of EU BITs. The European Commission, who law – which includes not only legislation joined the proceedings as amicus curiae, adopted and international agreements in- took the position that the Achmea-judg- cluded by the EU institutions, but also the Senior Legal Counsel ment was also binding on the arbitral tri- case law of the CJEU – did not prevent MARA OKMAŽIĆ bunals. Croatia from agreeing to arbitration under heads the West Balkan & SEE Desk at LGP. a BIT. Therefore, the tribunals found Cro- The Croatian lawyer is a member of the Human Rights team with a focus on the Western Balkans. In January 2019, before any ruling in the atia’s consent to arbitrate to be valid. She specializes in EU law, law of the Republic of arbitration cases was made, all EU mem- Croatia, European integration, fundamental and ber states signed a political declaration to For Austria, this results in a rather difficult human rights, harmonization of the legal systems of the Western Balkans and arbitration law. She terminate all BITs between member states. situation: Naturally, Austria has to com- also advises in Croatian and Serbian. However, this declaration was of no le- ply with EU law, which includes the rul- Attorney-at-law gally binding effect, it still needed to be ing of the Achmea-judgment. A failure to Dr. MICHAEL KOMUCZKY implemented. 23 member states went on do so could lead to proceedings for treaty specializes in dispute resolution, in out of to conclude a multilateral treaty to termi- violations by the European Commission. court negotiations as well as before courts and domestic and international tribunals. He nate all BITs between them, the so-called However, Austria must not lightheartedly advises clients particularly in contract law, Agreement for the Termination of Bilater- deprive its own investors of the protection distribution law, corporate and foundation law, al Investment Treaties between the Mem- on which they relied when making invest- also in issues with international connections. Additionally, his practice comprises labour ber States of the European Union. The ments in other EU member states, such as law and consumer protection law. He also

Photo: LGP Treaty came into force on 29 August 2020. Croatia. advises clients in Spanish.

2 | 2020 LGP news 25 INTERNATIONAL From Minister to a successful inter- national lawyer

Arlind Zeqiri, managing partner at LGP Skopje, looks back in an interview with LGP News on his successful career taking him from a childhood in the predominantly Albanian north of his native North Macedonia to Austria and Switzerland and later on to becoming one of the youngest ministers in the country’s history.

Mr. Zeqiri, before teaming up led the Agency for Foreign Direct Invest- A second defining period was my time in with international business law ment and Export Promotion of the Republic Vienna as a young man, where I also first firm Lansky, Ganzger + partner, of North Macedonia – „Invest in Macedo- met Dr. Lansky. Looking for new challeng- you had an illustrious career in North nia“ in Bern, Switzerland, and then became es, I decided to follow the advice of friends Macedonian economic diplomacy the Minister for Foreign Investments in my who lived and studied in Vienna and told and politics. Could you give us a brief home country. me about its beauty and cultural diversity as overview of your most important well as the opportunities it offered. I came career steps and what impelled Asked to explain what impelled me on the here to continue my master studies in Di- you to pursue them? path that I am pursuing, I would say that plomacy and Strategic Studies. Living in the time I grew up in, my formative years, Vienna has taught me many things, among Arlind Zeqiri: Before joining forces with played an important part. I was born in Te- others about diverse cultural perspectives, LGP, I worked in both the private and tovo in North Macedonia during the early acceptance and social coherence, values public sector, but always with a focus on 1980s, a time when the former Yugosla- which shaped the person I am today. There- cross-border business and investment. You via went through a systemic transition to fore, Vienna will always have special place could say that my previous jobs prepared a market economy necessitated by a deep in my heart. me for my current work bridging Balkans economic crisis. The privatizations, the cap- and EU markets as a business lawyer and ital controls and currency devaluation were Did your work with the North-West consultant. badly planned and executed and left the Chamber of Commerce of the Republic country and the impoverished people with of North Macedonia set the course for Previously, I worked at the North-West very little. I believe this instilled in my gen- the rest of your career trajectory? How

Chamber of Commerce of North Macedonia, eration a will to work hard for success. did you happen upon this position? Photo: Arnold Pöschl

26 LGP news 2 | 2020 INTERNATIONAL

Zeqiri: After finishing my studies in Vi- could contact for all questions and issues It must be noted that the DACH countries enna, I returned to North Macedonia as a and which would assist them to gain neces- – Germany, Austria, and Switzerland – are teaching assistant at the University of Te- sary permits and contacts for their business still the most important investors in the Bal- tovo. Parallelly I started working at the ideas. kans as well as the top export locations for International Relations Department of the Balkans companies. Thus, the combination North-West Chamber of Commerce. After In addition, we worked hard – and frankly of LGP’s very strong position in these mar- a while, I was called by the then-Deputy quite successfully – to improve North Mac- kets, my own networks in Austria and Swit- Prime Minister for EU Affairs to devel- edonia’s ranking in the World Bank Ease zerland, and my detailed knowledge of the op an economic development plan for the of Doing Business index. This is of course local conditions in the Balkans make for a city of Tetovo. The Deputy Prime Minister not a goal in itself, but the index quite ac- perfect combination. wanted to run for the Mayor of Tetovo in curately represents how good or bad the the next elections; I accepted this challenge environment of investors is in terms of the It is notable that your cohort has yielded and became part of the successful campaign regulatory frameworks and other important an impressive number of highly success- team. Afterwards, I worked as the manag- aspects. It also ensures good PR, of course. ful entrepreneurs, businessmen, and ing director of the Center for Development politicians. Do you have any explanation of the Polog Region. After your term as minister ended, how why your generation from the region did you come to manage the Skopje around Tetovo is often so successful? What did your work at “Invest branch of one of Central Europe’s most in Macedonia” in Switzerland, renowned business law firms as an Zeqiri: Most of the young businessmen your home country’s investment international lawyer and business and entrepreneurs hailing from the north- promotion agency, entail? consultant? And how can you trans- ern part of North Macedonia come from late the skills and insights gained families which emigrated to the West. This Zeqiri: Invest in Macedonia was embedded in your previous positions to has given them the opportunity to carry the with the official diplomatic mission, giv- assist your clients at LGP? Western culture of doing business to our ing me the status of First Secretary at the country, resulting in extraordinary success Embassy in Bern. The job entailed the full Zeqiri: My time in Vienna has influenced in the business world. spectrum of economic diplomacy, includ- me strongly and I had the good fortune to ing regular contact with all relevant Swiss meet Dr. Lansky there. When I was looking You are working very hard, travelling and North Macedonian companies, market for new challenges after my time as minis- constantly between Skopje, the Balkan research, the identification of economic ter, there were some obvious synergies with countries, Austria, Switzerland and sectors of interest to potential investors, LGP, such as the firm’s focus on the SEE further abroad. What is your next goal, establishing regular communications with region and international business clients either professional or personal? economic bodies, chambers of commerce as well as its reputation for working at the and other business associations in the coun- intersection of law, business and politics. I Zeqiri: My current work engagement is try, providing assistance to the competent also appreciate that LGP takes pride in giv- very dynamic, therefore requesting much institutions in the Republic of North Mace- ing pragmatic, goal-oriented advice – get time, dedication and commitment, yet it is donia, organizing official visits and the like. the job done instead of producing academic very diverse with much opportunities for legal analyses is an approach that is lacking challenge and growth. Each day for me is an Concerning your position as Minister in may law firms. opportunity to learn from people and part- for Foreign Direct Investment, could ners I work with, which knowledge serves you briefly describe how you and your With our LGP Skopje office, we offer Eu- in benefit of my further career development cabinet worked on attracting foreign ropean companies a new bridgehead in the and in creating new business opportunities. investors to North Macedonia? Balkans, and Balkans companies an entry point into Austria and Central Europe. Of Besides my professional life, I am happily Zeqiri: What we did was quite straight-for- course, our EU clients benefit from my net- married with two children, a seven-year-old ward: creating the best possible environ- work and my knowledge of the local politi- daughter and a four-year-old son. Although ment for investors in North Macedonia, cal and business landscape, just as our Bal- having a very dynamic work situation with establishing a one-stop-shop within the kans clients benefit from the networks and much travelling, I try to spend as much qual- government structures which investors experience of our partners at LGP Vienna. ity time as possible with my family. n

2 | 2020 LGP news 27 INTERNATIONAL

Cross-border enforcement of judgments post-Brexit

n principle, a judgment is only valid In international business transactions as in other in the nation in which it was made. In- ternational agreements or other special areas, companies are often obliged to enforce their arrangements are required in order to claims in court. In cross-border disputes, the enforce- be able to enforce it in another nation. IFor EU Member States, the cross-border ment of a court decision abroad often leads to enforcement of court decisions is there- fore the subject of various regulations, in increased costs. particular of Regulation 1215/2012, which (also) regulates the recognition and en- forcement of decisions in civil and com- mercial matters. Within its remit, judicial decisions are enforceable without the need for further proceedings in another Member between the EU and the UK. However, the on the Recognition and Enforcement of State. Only in a few exceptional cases may Convention – unlike the Regulation – ap- Foreign Judgments in Civil and Commer- this be refused. plies only if the parties to the dispute have cial Matters published in July 2019. The concluded an exclusive choice of court EU is currently evaluating this, but so far Under the Regulation, which thus far has agreement. In addition, the UK continues no Member State has ratified the Conven- also applied to the United Kingdom, the to be governed by the New York Conven- tion. n question of jurisdiction can be settled by tion on Recognition and Enforcement of agreement between the parties, but even Foreign Arbitral Awards, which ensures without such an agreement the regulation the enforcement of decisions of com- is applicable, for example, to actions for mercial arbitration courts in the UK. The damages or infringements of intellectual enforcement in the UK of (arbitral) court property rights. The Regulation thus pro- decisions by Member States based on con- vides the basis for an uncomplicated en- tractual dispute settlement clauses is thus forcement of court decisions within the assured. Without underlying party agree- EU in many economically relevant legal ments, however, there will be no protec- areas. Although the British officially left tion under international law for enforce- the EU on 31.1.2020, the Union and the ment after 31.12.2020 for the time being. UK agreed on a transitional period in the so-called exit agreement, during which When concluding contracts with UK busi- EU law, including the Regulation, is still ness partners, an exclusive choice of court binding for the UK. This transitional pe- agreement or an arbitration clause should riod now ends on 31.12.2020. Thereafter, therefore be included to avoid unnecessary judgments from Member States can only difficulties in enforcing legitimate claims. Attorney-at-law be enforced in the UK according to the For old contracts, it is also advisable to Dr. MICHAEL KOMUCZKY specializes in dispute resolution, in out of court Regulation if the underlying judicial pro- subsequently include a corresponding negotiations as well as before courts and domestic ceedings were started before 31.12.2020. agreement between the parties. The use and international tribunals. He advises clients par- The same applies to the enforcement of of legal assistance is recommended, as ticularly in contract law, distribution law, corporate and foundation law, also in issues with international UK decisions in the Member States. the correct formulation of an appropriate connections. Additionally, his practice comprises clause is necessary to avoid problems and labour law and consumer protection law. He also From 1.1.2021 the Hague Convention on costs. advises clients in Spanish. Choice of Court Agreements between the Attorney-at-law and Managing Partner UK and EU Member States will apply. In the long term, it is hoped that the un- Mag. VALENTIN NEUSER This international treaty also governs the satisfactory legal situation will be cor- is Mediator and Attorney-at-law at LGP. He focu- ses on insolvency law, civil law and civil procedure recognition and enforcement of certain (!) rected under international law, for exam- law, as well as on alternative dispute resolution

judgments in civil and commercial matters ple by acceding to the Hague Convention (ADR) and mediation. Photo: LGP

28 LGP news 2 | 2020 INTERNATIONAL LGP & Gerstbauer Strategic: dual advisory services with added value

ince the beginning of this year, the Bringing together the resources and competencies coronavirus has been infesting al- most every country in the world, of LGP and Gerstbauer Strategic is a winning strategy leaving no stone unturned. In ad- in terms of the legal and business advice provided to dition to the health consequences international clients, right down to the last detail: local S for humans, the global economy has also suffered setbacks, some devastating. While and global expertise, competent multidisciplinary teams some innovative industries are benefiting from the change in human behavior, social and an excellent network of partners guarantee the and communication, in response to the pan- highest level of customer satisfaction. demic, a large proportion of more tradition- al industries are falling by the wayside. Nu- merous entry and exit restrictions as well as the limitations on the freedom of movement mean that the fields of tourism, gastronomy quickly establishing new perspectives in the With a growing network of partners in Aus- and transport companies, in particular, are present, as well as quickly optimising and tria, Azerbaijan, Uzbekistan, Kazakhstan suffering, as are all the companies in the art adapting processes to align with changing and Turkmenistan, Gerstbauer Strategic and entertainment sectors. Lockdowns and circumstances. In this context, it is essential assists global and European champions health-related stoppages have brought en- to address not only the business issues but with projects in CAC countries, Southeast tire deliveries of goods to a standstill in the also the legal requirements associated with Europe and Africa. Its North American or- automotive and textile industries, among them. This is because every company deci- ganisation is currently being established others. In addition, the different strategies sion is embedded in a corresponding legal and will be launched shortly. Gerstbauer pursued by individual countries in the fight structure of norms: only a dual approach can Strategic supports sales organisations as a against the corona pandemic also contribute guarantee that these norms are put into prac- strategic consultant at C-level and assists to growing levels of insecurity. tice in the best possible way. In contrast, le- customers with export guarantees, tenders gal problems must always be clarified in the and contract drafting. n In such challenging times, companies’ ex- light of the client’s economic interests and isting practices and methods are usually no objectives in order to find the best possible longer adequate for generating knowledge solution. growth and innovation within the company at hand. External consultants can assist with The existing cooperation between LGP and Gerstbauer Strategic embodies the synergy Gerald Gerstbauer of legal and business advice described above, right down to the smallest detail. Close co- is a graduate of California State operation and transparent communication University, IMADEC University and between these two areas are essential for a INSEAD Fontainebleau. He is Senior smooth process, from strategy development Vice President at Atos and responsib- and analysis to formulation and implemen- le for Public Affairs and Institutional tation. Gerstbauer Strategic provides exten- Relations. Since 2013 Gerald Gerst- sive knowledge, local and global expertise, bauer has been acting as President of technical support and project management Ataz (Austrian-Azerbaijani Chamber and sales support around the globe. Inter- of Commerce). national experts and consultants, alongside competent multidisciplinary teams, ensure In 2018, Gerstbauer Strategic a distinctive and highly effective approach was founded – a globally active Orkhan Ismayilov (LGP), Flavia Inzikuru (LGP), to solutions, which enables projects to be and well-connected consulting Gerald Gerstbauer (GS), Kristina Sprenger (GS), Daniel Neuwirth-Riedl (GS), Adela Nestorovic (GS), executed professionally, leaving customers company.

Photo: Andreas TischlerPhoto: Andreas Maximilian Kainz (GS) utterly satisfied.

2 | 2020 LGP news 29 INTERNATIONAL

Nagorno-Karabakh: consequences of a frozen conflict

RUSSIA

GEORGIA

Ganje AZERBAIJAN ARMENIA Mardakert Baku H Agadam TURKEY Yerevan H Stepanakert Martuni

Lachin Corridor

Shusha Lachin Nakhchivan Autonomous Republic (to Azerbaijan) IRAN

The Armenian-Azerbaijani conflict over the Nagorno-Karabakh region was considered frozen for many years. On 10 November 2020, after several weeks of fighting, the two states agreed on conditions pected that all countries in the region will for a peaceful settlement of the conflict which has benefit from the opening of the links. Al- though the short agreement covers several been going on for more than 30 years. areas, there are of course still a number of issues that need to be addressed. Only fur- ther agreements, if not a final peace treaty, he agreement signed by the heads is the only land connection between Na- will be able to answer these questions. of state or government of Arme- gorno-Karabakh and Armenia – for a period nia, Azerbaijan and Russia con- of 5 years. In this context, a peace-keeping OSCE peace process and tains the following provisions in centre will also be set up to ensure compli- reasons for its failure addition to the complete ceasefire: ance with the agreements. On T the one hand, the return of the remaining Negotiations for a peaceful solution to the three of the seven Armenian-occupied dis- Of fundamental importance from a human conflict have been under way for over 25 tricts surrounding Nagorno-Karabakh (Kal- rights perspective is the provision for the years in the framework of the OSCE medi- bajar, Aghdam and Lachin) to Azerbaijan by return of refugees and internally displaced ation process (“Minsk Group”). There are December, according to a precise timetable. persons (IDPs) to their homes under UN- certainly many reasons for the failure of the On the other hand, the Armenian forces will HCR supervision. From an economic point peace process. Azerbaijan can hardly be ac- have to withdraw from Nagorno-Karabakh of view, it is important to restore all eco- cused of a non-constructive position. For al- itself. Instead, Russian peacekeepers will be nomic and transport links in the region, ready at the 1996 OSCE Summit Meeting, a deployed there along the line of contact – including the transport link between Azer- declaration was included in the Lisbon Final

as well as along the Lachin corridor, which baijan and the Nakhchivan exclave. It is ex- Document which emphasised Azerbaijan’s Photo: Sivizius/wikimedia.org

30 LGP news 2 | 2020 INTERNATIONAL

territorial integrity and, within it, the great- almost exclusively inhabited by Azerbai- Resolutions nos. 822 (1993), 853 (1993), est possible degree of self-government for janis (in total, more than 700,000 people). 874 (1993) and 884 (1993), UN Gener- Nagorno-Karabakh as guiding principles of This ruling is a milestone in international al Assembly Resolutions nos. 60/285 and a conflict settlement. This was endorsed by humanitarian law: for the first time, the ex- 62/243, Resolutions of the Parliamentary all OSCE States except Armenia. tended time limits of the ECtHR case law Assembly of the Council of Europe nos. on disappeared persons (so-called “Varna- 1119, 1416, 2085 as well as the Europe- In 1997, the parties were particularly close va criteria”) were also applied to IDPs, thus an Parliament Resolutions 2009/2216 and to a solution: the proposed solution put for- enabling access to justice for hundreds of 2011/2315. The four UN Security Resolu- ward by the co-chair states of the OSCE thousands of people. tions already in 1993 called for the immedi- Minsk Group (USA, Russia, France) was ate and unconditional withdrawal of Arme- accepted by both sides. However, internal However, the Armenian side did not want nian troops from the occupied territories. political pressure forced the then President to address the issue of displaced persons The above-mentioned ECtHR judgement of Armenia, L.Ter-Petrosjan, to reject the before a final agreement on the status of in the Chiragov case also made it clear that proposal in the end. This led to a dramatic Nagorno-Karabakh. In recent months, Ar- the “Republic of Nagorno-Karabakh” can- failure of the peace plan. Subsequently, Ar- menia’s attitude has been destructive in not be held responsible for violations of menia showed little willingness to compro- general, from questioning the format of the the ECtHR on these territories because no mise on the “Basic Principles” or “Madrid peace negotiations, to the setting of numer- such state exists. Rather, Armenia exercises Principles”, which were first presented in ous conditions, such as the inclusion of the “effective control” over Nagorno-Karabakh 2007. These were unsatisfactory for the Ar- “Republic of Nagorno-Karabakh” as a ne- and the adjacent territories, and violations menian side because they contained guide- gotiating party, to statements such as “Na- of the ECtHR in these territories therefore lines such as “restitution of the territories gorno-Karabakh is part of Armenia” and fall under the jurisdiction of Armenia. around Nagorno-Karabakh under Azerbai- “new war, new territories”. Many experts jani control” and “the right of all displaced therefore believe that Armenia’s continuing In this context, the agreement of 10 No- persons to return to their original places of irreconcilable position has been one of the vember 2020 restores the territorial integ- residence”, while the legal status of Na- main obstacles to a peaceful solution of the rity and sovereignty of Azerbaijan. n gorno-Karabakh was to be determined at a conflict. later date. Foundations of international law In the context of the fundamental and hu- man rights of displaced persons, especially The definition of the borders of the succes- IDPs, reference should be made to the land- sor states of the Soviet Union (as well as mark judgment of the European Court of Yugoslavia) was based on the international Human Rights (ECtHR) in the case of Chi- law principle “uti-possidetis iuris”: the re- ragov and others v. Armenia (13216/05), publican borders of the federations became in which the LGP as legal representative international borders. Nagorno-Karabakh of the Azerbaijani Government was also as an autonomous region within the Azer- actively involved. The ECtHR noted inter baijani SSR was thus recognised as part alia that mere participation in the OSCE of the new independent state of Azerbai- peace process does not release states from jan. The same was true for the recognition the obligation to take alternative measures of Abkhazia and South Ossetia (Geor- Legal Consultant to respect the rights laid down in the Eu- gia), Transnistria (Moldova) or Crimea Mag. ORKHAN ISMAYILOV ropean Convention on Human Rights (EC- (Ukraine). joined LGP in 2012 as a Legal Consultant and tHR), in particular the right to property. Business Development Manager for Azerbaijan. He deals with cross-border projects related to Obviously, Azerbaijani displaced persons No state in the world, not even Armenia, Azerbaijan in the fields of international business are particularly affected: after the war in has recognised the independence of Na- law and infrastructure, as well as in the areas of the 1990s, they were forced to flee not only gorno-Karabakh. Numerous international fundamental rights and human rights, for instance being part of the LGP team that dealt with the from Nagorno-Karabakh, but also from documents raffirm the territorial integrity of aforementioned Chiragov case. He also advises

Photo: LGP the seven adjacent districts, which were Azerbaijan, including UN Security Council in Azerbaijani, French and Russian.

2 | 2020 LGP news 31 Photo: pixabay.com Tokenisation as a form of financing

In times of crisis, many companies reach their financial limits due to unforeseeable dips in sales and profits, which prevent planned projects or expansions from taking place. Alternatively, cost-intensive projects can also be financed by issuing tokens. FUTURE TOPICS

imply put, tokenisation is a tool public offering or to selected individuals and the easy transferability, the accounting that maps the value of an asset in a private placement. of the ‘collected’ capital can be another as digital units based on block- major advantage of tokenisation. Depend- chain technology. As a result, The opportunity this creates, enabling ing on the legal structure, this capital can each digital unit represents a people to participate in different asset also be shown as equity on a company’s S share of the underlying asset. These digi- classes with smaller investment sums, is balance sheet. In this way, companies tal units are called (security/asset) tokens. already creating a completely new market. could carry out credit financing with a The term ‘asset’ is to be understood very This has two positive effects for holders bank following the token financing, say, in broadly: it can be real estate, raw materi- of such assets. On the one hand, it permits order to achieve a leverage effect. als, works of art, machines, and company initially illiquid assets such as real estate shares, but also entire projects. Regardless to be made liquid through tokenisation, These two sketches only demonstrate a of the type of asset, there is a relatively meaning that a possible sale or exit can be fraction of the conceivable possibilities large scope for the design of the contract carried out more quickly due to a broad- and the advantages associated with them. on which the token is based. The major in- er group of buyers. On the other hand, Depending on the use at hand, there are novation, however, is not the contract on the increased demand generated by this is project-specific benefits both in a legal which the token is based, but the simple reflected in correspondingly higher sales and economic respect which we would be transferability of the legal position repre- proceeds. pleased to discuss with you. n sented by it. Just as the internet has sud- denly made it possible to send documents However, tokenisation is not only impor- digitally, tokenisation now allows assets to tant for real estate. It is also conceivable, be transferred to other people at the click for example, that you could set up a kind of a mouse. of fund for a company in any industry. Imagine that an entrepreneur wants to sell Imagine, for example, that an entrepreneur a new product due to a coronavirus-relat- wants to expand his existing hotel or build ed shift in demand, and a new addition- a completely new hotel. To put the project al production plant needs to be built for into practice, he needs capital totalling this. Let’s say that capital totalling EUR EUR 50 million. If this project were to 10 million is required to put the project be financed by issuing tokens, this would into action. One conceivable financing allow investors to participate with smaller option would, again, be for the produc- amounts than usual, such as hotels in this tion company to issue tokens that would case. This is because tokenisation allows grant the tokenholder in question a share assets to be divided into units of any size, in the company’s profits, for example. enabling the minimum investment sums to This would provide the company with Attorney-at-law and Managing Partner be determined as desired. additional capital through the issuance of Mag. RONALD FRANKL is head of the LGP “Corporate, M&A the tokens and the investors would be able and Capital Markets” and “Blockchain & In the course of tokenisation, the hotel to enjoy profits that were in proportion to Cryptocurrencies” teams. He specialises would be ‘broken down’ into digital units their token holdings. in commercial and corporate law, internati- onal transactions, M&A, private equity, as an asset. For example, a person could venture capital, banking and financial law, choose a denomination of 50,000 ‘hotel If a token owner wants to part with their capital market and stock exchange law, tokens’ at 1,000 euros each. Each token investment, they can simply transfer their as well as regulatory proceedings. He also advises clients in French. would then represent 0.002% of the hotel. tokens to another token owner or a third Depending on the design of the tokens, the party via the blockchain. This kind of Associate investors could, for example, be given a transfer may be made via a platform or Mag. PETER VIRTBAUER is a trainee lawyer and a member of share of the current profit or, in the case of directly between the buyer and the seller, LGP’s Corporate team. He advises clients in the tokenisation of a project development without the need for any intermediaries. all areas of corporate law, from the estab- company, a share of the one-off sales pro- As a result, leaving this kind of investment lishment of a company to complex corporate restructuring and M&A transactions. His fields ceeds from the hotel. Tokens could then could, therefore, be very straightforward. of expertise include corporate law, civil law,

Photo: LGP be issued either to the general public in a In addition to their arbitrary denomination M&A, compliance and capital markets.

2 | 2020 LGP news 33 INSIDE

Legal updates by LGP Bratislava

In today‘s disruptive and constantly changing business environment, clients expect not only reliable services but also higher efficiency, greater flexibility and, in addition to solutions tailored to their compa- ter that, the protected business entities will nies, the ability to anticipate new developments. be obliged again to file applications for the declaration of bankruptcy on their assets (in case of their indebtment), interrupted he current Covid-19-crisis has Companies in adverse enforcement proceedings will continue tested our readiness and adap- economic situations against them, and exercising pledges on tability to help our clients cope their assets will become possible again. with turbulent and unexpected The amendment to the so-called act “Lex Unfortunately, the temporary protection events. The situation is changing Corona”, effective from 12.05.2020 was did not help many business entities to get rapidly T and information on this topic is introduced in Slovakia as temporary pro- out of their adverse economic situation still evolving, since the spread of the virus tection for business entities. Its purpose is and ultimately has only delayed their pro- around the world has created several ethi- to create a time-limited framework with blems. We assume that the expiration of cal, legal and social problems. Here are tools to counter the damages that Co- temporary protection measures will most some examples of areas in which we can vid-19 has done to businesses. However, likely lead to insolvency in many cases.

help with our legal expertise: these measures expire on 31.12.2020. Af- Currently we already advise our clients Photo: Mister No/wikimedia.org

34 LGP news 2 | 2020 INSIDE

how to set up internal corporate, employ- ment and other processes, as well as their external relations towards third parties, by adjustment of existing relationships or reassessment of prospective expansion plans, to avoid adverse economic change.

Temporary protection of viable business entities is currently being negotiated at the Ministry of Justice of the Slovak Repub- lic. Its purpose should be to create a time- limited framework for protection against creditors equipped with tools to support of the Slovak Republic and on the Natio- strictions that are not covered by the EU‘s business entities in difficult financial situ- nal Integrated Reform Plan „Modern and public procurement directive, such as the ations, which should enable them to con- Successful Slovakia“. An important ob- rules for contracts below the threshold or tinue their business and thus prevent loss jective of the proposed amendment is to for low value contracts. The second area of jobs and valuable know-how and bring respond to the socio-economic situation concerns fundamental restrictions on the a higher level of satisfaction of creditors‘ caused by the pandemic and the ensuing Public Procurement Office’s competenci- claims. Unlike the temporary protection global economic recession. At the same es and the transfer of review procedures of business entities mentioned before, it time, this amendment is intended to funda- to specialized administrative courts. The should be a permanent institution in Slo- mentally simplify the public procurement third set concerns amendments of the ru- vak law. We follow the further develop- procedure (e.g. increase in the current li- les for determining the estimated value ment very closely in order to support our mits in the case of direct awards or simpler of a contract. As our office is very active customers in solving their economic dif- exclusion of dishonest bidders from public in this field, we follow the legal innova- ficulties in the best possible manner. contracts). The amendment also reflects tions concerning public procurement with the mentioned professionalization of pu- great interest. For the direct benefit of our Legislative change in blic procurement, which now also legally clients, we are also actively involved in public procurement enables the government to set up a separa- this legislative process, as evidenced by te central procurement office for strategic our participation in a professional debate Currently, a publicly much-discussed to- purchasing. on the amendment prepared by the Public pic is the amendment of the Public Pro- Procurement Office. curement Act. First, the Deputy Prime Mi- On the other hand, the proposal presented nister for Legislation presented his ideas by the Deputy Prime Minister for Legisla- Damage compensation on a public procurement reform, then the tion does not represent a reform but a re- within the context of the Public Procurement Office came up with volution which is based on three substanti- pandemic measures its own proposal for fundamental changes al changes. The first group of amendments in this area. The amendment is based on concerns the repeal of legal requirements In the Slovak Republic it is possible to

Photo: LGP the program statement of the Government for the award of contracts and certain re- seek for damage compensation towards

2 | 2020 LGP news 35 INSIDE

the state due to the unlawful decision or of the public bodies. On 23.10.2020, the The damaged entities are therefore at least wrong official procedure. Rightful reasons President of the Slovak Republic filed a theoretically able to seek compensation of to seek for compensation are: relevant complaint with the Constituti- a potential damage caused by an unlawful onal Court of the Slovak Republic about decision or a wrong official procedure. n Unlawful act (unlawful decision, or the suspension of the law‘s effectiveness wrong official procedure) due to the non-conformity of the adopted As the legal framework and the possible amendment to the Public Health Protec- consequences of this unique pandemic si- n Damage (real damage and loss of profit) tion Act. The Constitutional Court of the tuation are indeed very interesting we will Slovak Republic has by the means of the closely monitor the development of these n Causal Nexus between the unlawful act Resolution dated 04.11.2020 accepted the new legal provisions. This will enable us and the damage proposal for the further proceeding in the to ensure the maximum protection of our full extent, and at the same time has sus- clients‘ rights and, if necessary, to demand The National Council of the Slovak Repu- pended the effectivity of the challenged adequate compensation. n blic has by the amendment Art. 58 of the provision. Act on protection, support and develop- ment of public health, revoked the right The Constitutional Court within the extent for compensation of damage and loss of of preliminary legal assessment has decla- profit. After a detailed analysis, we con- red that the interpretation of the challen- clude that this amendment seems uncon- ged provision, which revokes the right for stitutional. None of the acts may entirely compensation of damage and loss of profit exclude the right for damage compensati- due to the performance of measures is in on. The exclusion of the right for damage direct contradiction with the constitutio- compensation would mean that the Natio- nal requirement to protect the nature and nal Council of the Slovak Republic could meaning of the fundamental rights and exclude any right provided for in the con- freedoms when adopting their limitations. stitution solely on the discretion of the le- This interpretation prima facie appears to gislative body. Such interpretation shall be be from a constitutional-law point of view considered constitutionally unacceptable unsustainable and providing for not only and not only contrary to the text of the ge- factual and immediate risk of infringement neral act but contrary to the goal and me- of fundamental right for damage compen- JUDr. MARTIN JACKO aning of the constitution. The exclusion of sation caused by the unlawful decisions Attorney at Law and has been a managing the right for damage compensation would and wrong official procedure in the res- partner of LGP Bratislava since 2015. He has an impressive track record in the areas of corporate thus mean the denial of the principle of pective area, but it evokes the assumption law, commercial law, contract law, transac- rule of law. of infringement or elimination of a consti- tion advisory services, M&A, construction law tutional right. (including FIDIC), real estate, administrative law, insolvency and restructuring law, compliance, In practice, that would then mean that pu- public procurement, state aid/investment aid, blic power bodies may perform measures To date, the Constitutional Court of the international and European law. He focuses on arbitrarily and without any consequences Slovak Republic has not yet decided on major construction and infrastructure projects, mergers and acquisitions and crisis management during the pandemic. The challenged pro- the issue, at least not by the editorial dead- at national and international level. He advises in vision therefore means the breach of the line. It appears that Art. 58 of Slovak Act Slovak, Czech and English. obligation of the state to adopt such legal on Protection of Public Health, which has acts which will allow the realization and excluded the right for compensation of da- Further authors: fulfillment of the general right for com- mage and loss of profit due to the pande- Mgr. Ľubomír CHRIPKO pensation of damage caused by unlawful mic measures, will be declared as contrary Mgr. Martin HOLÝ decisions and wrong official procedures to the Constitution of the Slovak Republic. JUDr. Mária PORUBSKÁ TÖKÖLYOVÁ Photo: LGP

36 LGP news 2 | 2020 INSIDE

Privy councillors, whisperers and spin doctors

In his new book, LGP Senior Expert Counsel Manfred Matzka writes about 300 years of éminences grises on Ballhausplatz. The former Director General of the Federal Chancellery presents the most important protagonists on two pages.

onsultant, special advisor, head of cabinet, secretary general, spin doctor, thinktank director: there are all kinds of names for those who influence the people in pow- C er behind the scenes. They themselves do not step into the public limelight and do not hold any responsibility towards that sphere. They are intelligent, educated, know a great deal or know about specific matters, are prepared to stand behind their boss and work with them. They are valued and supported by this boss, know the environment, its structures, the pro- three daughters to Spaniards, when one of different way: the son of a rabbi from the cesses and the people involved, right down them died. Impressive, like how he offered provinces, he skilfully proffered an essay to to the smallest detail. They never lose sight his resignation to Maria Theresa in such a Maria Theresa to mark her birthday before of the big picture and have staying power, way that she asked him to stay. He advised fighting a great battle against torture. In the they think strategically and act unwaveringly. her well, did not patronise the 23-year-old, decisive phase, he fell on his knees before They outlast the politicians and, as a result, did not flatter her, but strengthened her back the Empress, parried all the intrigues of the are important. For as long as there have been against Prussia – ultimately successfully. conservatives, used his Masonic contacts, states, administrations and ministers, they The finesse with which he made the weak formed networks and, finally, was success- have been dependent on such persons. Anton Corfiz Ulfeldt chancellor, because he ful. Without this veritable giant, torture and himself could not be, and then used him for the death penalty would not have been abol- 13 individuals and 3 groups are present- his own ends was masterly. ished. ed. The first is old Bartenstein. He was magnificent, like how he argued away the Sonnenfels’ brilliant spirit of progress ad- Even in his youth, Friedrich Gentz became

Photo: Verlag Brandstätter Photo: Verlag promise of Charles VI to marry two of his vised the Empress and Joseph II in a rather internationally known as a magnificent

2 | 2020 LGP news 37 INSIDE

wordsmith. Vainly, as a small civil servant, War Economic Empowerment Act, tinkered with a figure who outshone everything else. he lectured to the Prussian King, was bought with government by means of ordinances, The situation starts to decline in the 2000s: by Austria and held his great role as secre- prepared party bans, formulated the spin on content is becoming more and more mean- tary of the Congress of Vienna, where he put the ‘self-dissolution’ of parliament, and pro- ingless, sales are becoming more and more on paper what the potentates thought, with- cured the legality of the 1933 constitutional important. That is why we no longer need out being able to say it himself. This brilliant breach. A similar spirit is evident in the case political advisors anymore, that is what the strategist put the new concept of Europe on of Walther Kastner, who, as a previously consultants came for, a group which has paper here. Alongside this, he raked in mon- illegal Nazi, became chief aryaniser of in- trigged expenditure of a total of 2 billion eu- ey, took the very young Fanny Elssler as his dustry in 1938, but who came back immedi- ros over the last 20 years. girlfriend at the age of 65 – and died with an ately after 1945, rehabilitated by VP Minis- estate of 5 guilders. ter Krauland, who made him chief restitutor In the last chapter, which goes as far as of the companies he aryanised. And along- the ‘Covid-19 Future Operations Clearing Who advised Franz Joseph? This question side this, he built up a huge art collection. Board’, we read about the interplay between fills two chapters. After taking the throne at total ‘message control’ and official govern- the age of 18 and not the brightest of men, In the book, he is followed by Heinrich ment, the disastrous increase in the power he was not up to the task and was bullied by Wildner, who brought the Chancellor’s Of- of ministerial offices and the smashing and his mother Sophie. She made him emperor fice back into a functioning state in 1945 and ‘cleaning up’ of administrative structures and wrote on 2 December 1848 ‘We fought a exploited the tensions between the Chancel- that have grown into being, the failed exper- good fight, we weak women’, appointed his lors (Renner, Figl) and the Foreign Minister iment of secretaries-general, the dominance advisors and adored him ardently. He was (Gruber) with masterful bureaucratic in- of press conferences and media consultants only able to emancipate himself at the age trigue, both for himself and for the Office. over the law and the opaque influence of of 42. In his old age, Count Kielmannsegg He knew everything, even the truth about money-backed lobbies. n was his advisor. He was a great administrator Waldheim as early as 1946, and deliberate- and chancellor of a cabinet of civil servants, ly overlooked it. Eduard Chaloupka, who but the two old men only talked about uni- was Director General of the Federal Chan- form buttons, flagging, ennoblement and Otto cellery and head of the Cartellverband at the Wagner’s ugly buildings. The small-minded- same time, perfected the power of the CV in ness of the emperor became tangible. the administration, along with its incredible network and the methods and techniques of An exciting episode comes in the form of penetrating the state apparatus. And the story how Count Alexander Hoyos set up a of him having himself painted into the offi- no-nonsense clique in the Foreign Office be- cial picture of the State Treaty is truly some- fore 1914, how he warmongered the weak thing else. Minister Berchtold and how he led to the immediate start of the war in July 1914 in He stands in contrast to Hans Thalberg, the a disastrous double-cross between Berlin most silent of all advisors in the book. A Jew, and Vienna. The effect of the best lawyer of an exile, resistance fighter while he was emi- his time, Hans Kelsen, was quite different grated (while others hid within their country at the turn of 1918. The role he played for or became Nazi henchmen), he started off the Lammash government in the final days hostile, as a young diplomat in the midst of of the monarchy is hardly known. This book these two groups, but then became one of offers a detailed exploration of his contribu- Bruno Kreisky’s most important advisers, tions to the Austrian constitution: his ability especially in Middle Eastern politics. to combine the legal text with the political concepts of the rule of law, legality, popu- This is the end of the individual biographies. lar sovereignty and the balance of powers A chapter on the ‘Republic of Secretaries’ Manfred Matzka: seems more relevant today than ever before. describes the role of the cabinets of Klaus ‘Hofräte, Einflüsterer, Spin-Doktoren: (where it becomes clear that the young peo- 300 Jahre graue Eminenzen am

His sinister counterpart is section head ple from Mock to Klestil and Graff were Ballhausplatz’ Hecht, who shows how the interaction of reformers) and of Kreisky, where advice 256 pages. Verlag Christian political will and compliant jurisprudence from Lacina to Petritsch, from Jankowitsch Brandstätter, Vienna 2020 eliminated democracy. He unearthed the to Kirchschläger took on very specific forms Brandstätter Photo: Verlag

38 LGP news 2 | 2020 ACTIVE

ILLUSTRIOUS ALUMNI MEET AT LOFTY HEIGHTS

Prof. Dr. Martin Selmayr, Head of Authority began with a free lecture by the Representation of the European Professor Selmayr: topical issues such as COVID-19 measures taken by the Mem- Commission in Austria, met with ber States concerning medical devices and graduates of the Collège d’Europe safety equipment, the restriction of the legal at LGP at the end of June. competences of the EU and the European Commission and the related political con- text, which is strongly influenced by the Usually, Austria-based alumni of the Collège often very divergent positions of the Mem- d’Europe meet several times a year. Given ber States, were discussed in detail. The the pandemic-related circumstances of 2020, development package (Next Generation EU opportunities have been limited. Following – NGEU) was also discussed. “Visibility”, the relaxation of COVID-19 measures, how- amongst other topics, was a focus of the fol- ever, the opportunity arose to hold an event lowing discussion. at the end of June on the LGP roof terrace – not just for reasons of health protection. Specifically, it was felt that many EU and national measures did not have the same The event, comprising several dozen par- publicly perceived status as the sometimes Martin Selmayr, Head of the Representation of the European Commission in Austria, spoke ticipants from business, EU institutions, much less significant activities of major in- to graduates of the Collège d’Europe ministries and the Federal Competition ternational players. n

DIGITAL FINANCE AND ALTERNATIVE INVESTMENTS ROADSHOW

LGP Managing Partner Ronald This makes the concept of tokenisation very asset, on the other. In his presentation, Frankl attractive for entrepreneurs and investors, both explained how assets can be successfully to- Frankl held a lecture on “With as an investment, on the one hand, and to raise kenised, what types of token design are useful tokenisation of assets to the capital for the construction or purchase of an and the optimal legal structure. n leading edge” in the pavilion at the Strandbar Herrmann as part of the “Roadshow #65 Finance on the Beach” event organised by Börse Express.

Block chain technology offers entrepre- neurs and investors the opportunity to in- vest in assets in a new and revolutionary way. Previously illiquid assets such as real estate can thus be made liquid. Through tokenisation, the value of assets is mapped into digital units, so-called tokens, based on block chain technology. The legal structure and the denomination of the tokens is com- LGP Managing Partner Ronald Frankl explained the exciting concept of tokenisation

Photos: LGP; BEX-Media/Curt Themessl pletely flexible. in mid-September 2020 during the Börse Express roadshow

2 | 2020 LGP news 39 LANSKY, GANZGER + partner

LGP RECHTSANWÄLTE / ATTORNEYS