Sustainability-related disputes, cyber security issues, and corporate restructurings are shaping Austria’s legal dispute landscape, with courts and arbitration increasingly tackling ESG issues and greenwashing claims, according to Taylor Wessing Partner Ivo Deskovic who highlights a surge in insolvencies as well as the long-anticipated implementation of the EU Class Action Directive.
"One of the most interesting trends we observe is the increasing relevance of sustainability-related disputes," Deskovic begins. Whether in courts or arbitration, sustainability and ESG issues are becoming a key topic. "With the EU Green Deal and stricter regulations, we are seeing a rise in cases related to greenwashing – an issue that was barely on the radar a few years ago but is now emerging as a serious legal battleground."Another hot topic is that of cybersecurity-related disputes. “After a cyber-attack, when systems are back under control, the question always arises as to who has to pay for the damages caused, not only to the attacked company but also to its customers and suppliers.”
Additionally, Deskovic reports that crisis-driven disputes remain a significant factor. "A prime example is a long-running case involving a bank’s supervisory board, which was finally decided recently in favor of our clients – the dispute revolved around whether board members violated their duty of care in overseeing the bank’s operations, and the ruling confirmed they did not. This decision is important because it clarifies the level of duty of care required from executives during times of financial crisis – a crucial precedent given the current wave of corporate challenges," he explains.
Continuing, Deskovic says that there has been a surge in "major restructurings and insolvencies, which naturally lead to a high volume of disputes." Pointing to the examples of Signa and other high-profile cases like KTM, Deskovic stresses that the "big question now is how will these restructurings play out in terms of disputes." Looking back, the first COVID-19 lockdowns triggered widespread expectations of mass bankruptcies, however, "due to government interventions, businesses were kept afloat longer than anticipated. Now that these support measures have ended, we are finally seeing a delayed wave of restructurings," Deskovic explains. Whether this will result in a market clean-up or prolonged uncertainty remains to be seen. "For investors, it’s a period of risk assessment, but for the labor market, the restructuring process seems to be having a relatively mild impact for now." Additionally, Deskovic indicates that with Austria’s new government in place, "we’ll need to see how policy shifts might influence economic recovery and insolvency proceedings in the coming years."
Finally, Deskovic reports that Austria implemented the EU Class Action Directive last year. "This is another area with a lot of potential for change. The Class Action Directive was introduced at the European level, but Austria delayed its implementation." According to him, now that the framework is in place, it is to be expected that first-class actions under the new law will soon take place. "Austrian class actions won’t operate exactly like American-style lawsuits. Instead, they’ll function more as mass actions, consolidating multiple claims into a single procedure when overarching legal questions need to be resolved," Deskovic explains. Previously, under what is known as “Class Actions Austrian Style” claimants had to assign individual claims to a single plaintiff, but under the new system, there will be a more unified approach. "What’s particularly interesting is that the first two or three legal entities have already registered as qualified entities. While the system is still untested, it could mark the beginning of a new era of collective litigation in Austria and we anticipate significant developments in this space in the near future," he concludes.
