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The Overall Reform of the Austrian Enforcement Law on the Government Agenda ("GREx")

The Overall Reform of the Austrian Enforcement Law on the Government Agenda ("GREx")

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An approaching milestone after decades – Part 1: Overview and jurisdiction

The Justice Committee sets the reform of the enforcement law in motion. Assuming there are no obstacles, the reform will enter into force on 1 July 2021. As recently as 14 April 2021, the government bill was submitted to the Justice Committee for review and just passed the National Council on 22 April 2021. It is now on the agenda of the Second Chamber of the Austrian Parliament for 4 May 2021. While some provisions have merely been under review to facilitate their application due to editorial changes, especially of a systematic and linguistic nature, there are also some considerable amendments, including the jurisdictions, which we present as the first part of a series of publications dealing with the GREx. 

1. Overview

Considering when the enforcement law came into force, the current enforcement law presumably suffers from several significant deficiencies. Most importantly, at the time of the application for enforcement, the creditor usually does not know the debtor's entire financial situation, in particular the extent of realisable assets. The creditor only becomes aware of them in the course of the proceedings, usually through the submission of a list of assets, which may ultimately turn out to be incomplete. However, seized claims are often settled by the time of the seizure, which only takes place at the request of the creditor and after the seizure has been granted, making execution a road to nowhere.

One of the main goals of the GREx bill is therefore to increase the efficiency of the enforcement procedure for the collection of claims. Another is to prevent enforcements against obviously insolvent debtors. As a result, a powerful enforcement procedure may boost the payment morale of debtors, because the presence of a bailiff or the seizure of receivables is bad for business. Creditors should also have to file fewer applications in the future. If nothing else, this should lessen the cost burden for creditors.

The reform consists mainly of the following measures:

  • To facilitate the collection of claims by creditors, so-called "enforcement packages" are created. The "simple" package covers enforcement on movable property, claims arising from employment and a record of a list of assets. The "extended" package additionally covers trade receivables, going hand in hand with a mandatory appointment of an administrator. Their task is to locate assets, seize them and subsequently realise them.

  • Proceedings for the recovery of monetary claims (movable property) should be consolidated at the general place of jurisdiction of the debtor (see Point 2).

  • The consolidation of the proceedings makes it possible to ascertain whether the debtor is manifestly insolvent in order to obtain the collection of claims against insolvent debtors in accordance with the principles of insolvency law.

2. Concentration of jurisdiction

Pursuant to Section 3 GREx, subject matter jurisdiction is still vested in the civil district courts as enforcement courts.

2.1 Enforcement of the collection of a monetary claim on movable property

Proceedings for the recovery of monetary claims will be consolidated at the general place of jurisdiction of the debtor. If the debtor has no general place of jurisdiction in Austria, the court where the movable property is located will have jurisdiction (Section 4 (1) GREx). The location of monetary claims is determined by the general place of jurisdiction of the third-party debtor, e.g. employer or bank branch (Section 4 GREx). If the jurisdiction results in several general places of jurisdiction, it is up to the creditor which to choose. However, if there are several proceedings at different courts, the proceedings will be transferred to the court that initiated the first proceeding (Section 5 GREx).

The same applies to the transfer of the general place of jurisdiction. However, this is only possible under the aspect of simplification and cost efficiency (Section 5a GREx).  

2.2 Enforcement of the collection of a monetary claim on immovable property

There are no big surprises in connection with enforcement on immovable property. The court that keeps the public record or the court where the superseded property (Superädifikat) is located has local jurisdiction.

2.3 Enforcement to obtain acts, tolerations or injunctions

Compared to the above provisions, Section 5c (3) GREx stands out. According to this newly introduced provision, an application for enforcement of an injunction may also be filed with the court in whose jurisdiction the act violating the enforcement title has been committed or its "success" (Erfolg) has occurred.

This new provision was triggered by the fact that it is extremely difficult to enforce injunctions against a foreign website operator. Even after a successful judgment, the chances of success are very slim. As until now it was not possible to establish competence to initiate an injunction enforcement without a domestic service location (see Section 18 (4) Execution Act, Section 2 (4) Service of Documents Act). In these cases, the focus was always on the first act of enforcement – the service of the execution permit, which was ultimately not possible without a service location. Looking at the newly proposed provision, it might seem like this kind of obstacle has now been abolished (of course, whether it is more advantageous or more disadvantageous all depends on the point of view).  

Assuming that an act performed in Austria violates the execution title, an Austrian district court could be regarded as competent even without a service point within the meaning of Section 2 (4) of the Service of Documents Act. The same applies to the "success" which has occurred in the territory.

But does this mean the reform is dragging foreigners under Austria's enforcement regime? That remains to be seen. For now, it can be said that such a presumption is at least likely due to a comparable phrasing of Article 7 (2) Brussel-I Regulation (EC/44/2001) and its consequences under the law of jurisdiction. It regulates both international and local jurisdiction without requiring a service location in Austria.

To sum up, the consolidation of all proceedings in the general jurisdiction of the debtor makes it possible to determine at an early stage whether the enforcement is going to be promising or not. If the GREx turns out as expected, this could be one of the biggest milestones. Since the GREx does not have retrospective application, it will massively increase efficiency while also reducing the costs of future enforcement requests.

To be continued…

By Eva Wirleitner, Associate, and Sarah Rosenthaler, Associate, Schoenherr

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