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Innovations introduced by the 4. COVID-19 Act

In the COVID-19 crisis, the Austrian Parliament is also going through a period of rapid changes of laws. After the adoption of the COVID-19 Act on Sunday, 15 March 2020 and the 2. COVID-19 Act on 20/21 March 2020, three comprehensive compilations of new laws (3. COVID-19 Act, 4. COVID-19 Act, 5. COVID-19 Act) have been passed on 3/4 April 2020. The new laws (mainly) entered into force on 5 April 2020.

The 4. COVID-19 Act is a detailed legislative piece with 36 amendments and 3 new federal laws.

In the following, we will briefly summarize the main legal innovations introduced with the 4. COVID-19 Act for you (the masculine form is used for better readability):

Residential leases in times of crisis

Under the new law, landlords may not claim rent arrears for residential leases for the period 1 April 2020 to 30 June 2020 in court or cover them from a deposit until 31 December 2020 if the tenant's economic capacity is significantly impaired as a result of the COVID-19 pandemic. Furthermore, landlords are not entitled to terminate residential leases because of such rent arrears until 30 June 2022. Limited residential rental agreements expiring between 1 April 2020 and 30 June 2020 can be extended at short notice until 31 December 2020. Eviction executions must generally be postponed if the apartment is indispensable to satisfy urgent housing needs.

Further details can be found here.

Moratorium for consumers and microenterprises

Austria is following the example of other countries by providing relief for borrowers who suffer loss of income as a result of COVID-19.

Loan agreements with

  • consumers and
  • microenterprises,

which were entered into prior to 15 March 2020, benefit from the moratorium. Microenterprises are defined as enterprises which employ fewer than 10 persons and whose annual turnover or annual balance sheet total does not exceed EUR 2 million (see Art 2 (3) of the Annex to European Commission Recommendation 2003/361/EC). The moratorium only covers loan agreements and not other forms of financing (e.g. payment extension of purchase price).

For loan agreements benefiting from the moratorium (i.e. loan agreements with consumers and with microentrepreneurs entered into prior to 15 March 2020) the following applies:

  • the lender's claims for repayment of capital or payment of interest due between 1 April 2020 and 30 June 2020 shall be deferred for a period of three months from the original due date.
  • this deferral is subject to the condition that the respective borrower (consumer or microentrepreneur) has suffered a loss of income due to the exceptional circumstances caused by the COVID-19 pandemic, which makes it unreasonable for the borrower to continue his/her debt service.
  • it is in particular unreasonable for the borrower to continue his/her debt service, if his or her reasonable maintenance or the reasonable maintenance of his or her dependants is at risk.

The provisions for deferring the due date of payments under consumer loans and loans to microenterprises largely follow those of German law. This currently results in the same ambiguities with regard to the start of the deferral and the borrower's obligation to provide evidence of income losses due to COVID-19.

Insolvency Law

Following the insolvency law amendments by the Second COVID-19 Act (which in particular doubled the period to file for insolvency to 120 days; see), it quickly and not unexpectedly turned out that further measures are necessary.

For now, companies no longer have to file for insolvency due to over-indebtedness (Überschuldung), provided over-indebtedness occurred

  • between 1 March 2020
  •  and 30 June 2020.

Correspondingly, during this period, the opening of insolvency proceedings due to over-indebtedness at the request of a creditor is also excluded. The new provision is intended to prevent companies from filing for insolvency, which have a negative balance sheet due to the current crisis and are at the same time not in a position to provide for a valid forecast on their continued existence (Fortbestehensprognose) due to the current uncertainties.

This exemption does not apply in case if illiquidity (Zahlungsunfähigkeit). Therefore, if companies run out of liquidity, there will still in many cases be a duty to file for insolvency – despite the changes made so far. It is therefore even more important that the financial support promised reaches the companies very quickly!

Until 30 June 2020, also a possible directors’ liability linked to over-indebtedness arising from the prohibition of payment (Zahlungsverbot) is excluded (law only mentions the provision for Austrian stock corporations; it must in our view also apply for limited liability companies, which are much more relevant in practice).

In addition, avoidance law shall be limited in the case of bridge loans granted in the period up to 30 June 2020 to finance COVID 19 short term work assistance. This only applies if (i) no collateral from the borrower's assets was provided for the loan and (ii) the lender was not aware of a possible illiquidity of the borrower at the time the loan was granted.

If companies are granted short-term (up to 120 days) loans from their shareholder in the period until 30 June 2020, such loans are not reclassified as equity, as may otherwise be the case with shareholder loans during a crisis. By doing so, the legislator wants to make it easier for shareholders to provide companies with short-term liquidity.

The further measures are to be welcomed. It remains to be seen, however, whether they will be sufficient and reach the real economy. In particular, directors continue to be under pressure because the suspension of the duty to file for insolvency only applies if over-indebtedness has occurred since 1 March 2020, which may create legal uncertainty. Further, even after this suspension, other duties related to illiquidity (in particular equal treatment of creditors and prohibition of payment) must still be taken into account.

Further details can be found here.

Corporate Law

The amendment establishes the legal requirements for drawing up notarial deeds in times of crisis even without the establishment of a limited liability company, using electronic means of communication.

At the same time, meetings of shareholders / board members of legal entities and the passing of resolutions with legal effect shall be possible in times of crisis, even without the physical presence of participants. An ordinance is to provide more detailed regulations in this respect. In addition, deadlines or dates within which meetings or assemblies must be held in accordance with the articles of association or legal provisions will be relaxed.

Finally, the legal representatives will be given more time to prepare the annual accounts in times of crisis.

Special funds for broadcasting and daily press

The fund for the promotion of private non-commercial broadcasting (television, radio) amounts to EUR 3 million annually. In 2020, this fund will be increased by EUR 2 million.

The fund for the promotion of private broadcasting is endowed with EUR 20 million annually. In 2020 this fund will be increased by EUR 15 million.

Print media have also suffered considerable revenue losses as a result of the COVID-19 crisis. The legislator supports media owners of daily newspapers with a lump sum of EUR 3.25  per copy of the "average print run" calculated on the basis of the year 2019 without any further funding criteria. It remains to be seen whether Sunday editions are also to be included; the wording would provide for such an inclusion, but the Austrian Circulation Control (Österreichische Auflagenkontrolle, ÖAK) calculates differently.  

Facilitation measures for companies in the transport, waste and green electricity sectors

1.
In the transport sector, there are numerous deadlines – and the COVID-19 crisis makes compliance with these deadlines more difficult.  Consequently, the legislator extends the deadlines that would end after 13 March 2020 until 31 May 2020 (further extension is possible until 31 December 2020 at the latest by ordinance). This concerns the following legislation:

  • Motor Vehicles Act (e.g. recurrent assessment in accordance with Sec 57a, regular checks of tachographs, proof of driving school training, expiry of desired number plates, ...),
  • Driving Licence Act (e.g. extension of the right to drive, the 18-month validity of the theoretical driving test or of driving school training courses completed in whole or in part).

But watch out. The privilege applies only to the Austrian legal territory and genuine Austrian legislation.

2.
A statutory weekend driving ban applies to trucks in Austria (with some exceptions).  Relaxation may be necessary in times of crisis. In order to avoid that the Austrian Parliament has to be involved in each case of temporary exemption, the competent Federal Ministry is given the authority to suspend the weekend driving ban for a maximum of 6 months in times of crisis.

3.
Taking a walk in the fresh air is increasingly becoming a political issue in conurbations. The one-metre safety distance must be maintained. What works without problems in rural areas can become a logistical challenge in a large city. Therefore, the opening of green areas / parks is being discussed.

Pedestrian zones may eventually be expanded to roads with driving bans. To this end, the legislator authorises the competent authorities to establish such pedestrian zones.

4.
Short-term relief is also available for cableway operators (e.g. with regard to recurring cableway inspections and the continuation of expiring concessions), operators of waste treatment plants (with regard to the extension of storage areas) and installers of green electricity facilities (maximum start-up period is extended).

Adjustment of deadlines in public law proceedings

The 2. COVID-19 Act already provided for an interruption of the deadlines in pending administrative proceedings of the administrative authorities (according to the General Administrative Procedural Act - AVG) in the period from 22 March to 30 April 2020. The current amendment specifies the new start of the deadlines. 1 May 2020 (national holiday) is not to be taken into account for deadlines determined by days, but 1 May 2020 must be taken into account for deadlines determined by weeks or months.

The deadline for the payment of small fines (anonymous orders, organ penalty orders) is also extended to six and four weeks respectively. So good news for "crisis-ridden" speed-drivers.

COVID-19 also reaches public procurement law

Deadlines are particularly relevant in public procurement procedures. This applies to both contracting authorities and bidders who wish to appeal against decisions. Here too, the legislator introduces simplifications and clarifications going beyond the AVG-rules described above:

  • For review proceedings pending before administrative courts (incl. interim injunctions), the interruption of all deadlines ends on 6 April 2020 and the deadlines start anew on 7 April 2020.
  • For the submission of an application initiating proceedings, the extension of the deadlines ends on the date of entry into force of the amendment.

The COVID-19 Accompanying Act on Public Procurement enables administrative courts (public procurement senates) to render its decisions by using suitable technical means of communication or by way of a circular resolution.

In parallel, the right of access to files may be granted using suitable technical means of communication.

Applications for interim injunctions regarding review procedures shall not (as an exception) have suspensive effect if it is clear from the arguments put forward or if the contracting authority provides credible evidence that a procurement procedure serves the urgent prevention and combating of the dissemination of COVID-19 or the maintenance of public order in this context. The award procedure can then be continued or completed.

New amendment to the Federal Constitution

Times of crisis do not stop at “gates” of the B-VG either. Only a week ago, the Federal Government was allowed to pass resolutions by circular resolutions (Beschlussfassung im Umlaufweg). Now also municipal councils may pass resolutions by circular resolution or in a video conference (usually by simple majority) for the duration of the crisis.

Clarification of the procedural rules for the Constitutional Court in times of crisis

The Constitutional Court has power to declare a statutory act unconstitutional. If so, the Constitutional Court often grants a “repair period” for the legislator to pass a successor legislation but may not go beyond the statutory maximum period.

In times of crisis, the Constitutional Court is empowered to extend the “repair period” - upon request - if the legislator concerned cannot issue a successor regulation in time due to extraordinary circumstances such as epidemics. With the new law, an obligation to publish this statement in the Federal Law Gazette is introduced.

Inauguration of judges of the Supreme Administrative Court

It must be possible to replace members of the Supreme Administrative Court (Verwaltungsgerichtshof – VwGH) even in times of crisis. The 2.  COVID-19 Act has already made certain arrangements (a circular resolution may replace the deliberations and resolutions of the plenary session).

With the new law, newly appointed (simple) members may, if necessary, be inaugurated before the President of the VwGH instead of the plenary.

Governance of the Judicial System and Procedural Deadlines in times of COVID-19

The law provides for a clarification for deadlines which are calculated based on days. The 01 May 2020 is considered the day that triggers the initiation of the deadline (Sec 125 Austrian Civil Procedure Code, ZPO).

Thus, a deadline of 14 days expires on 15 May 2020 and a deadline of 28 days on 29 May 2020.

However, the court can still provide that the deadlines for an individual case are not interrupted and set an alternative, adequate deadline. Such an order cannot be challenged.

Contrary to the explanatory remarks of the budget committee for the 1. COVID-19-Judicial Act, Sec 1 of the 1. COVID-19-Judicial Act is not (or more precisely, no longer) applicable in insolvency proceedings. Sec 7 of the 2. COVID-19-Judicial Act now provides for specific rules addressing deadlines in insolvency proceedings.

Restrictions for service (Zustellungen) in court proceedings (Sec 3 of the 1. COVID-19-Judicial Act) are lifted. Instead, the Ministry of Justice was granted the possibility to issue an ordinance.

Further provisions provide for relief for tenants affected by COVID-19 (not applicable to business space rentals, Sec 1, 5 and 6), for consumer credits (Sec 2) for default interest (Sec 3) and provide for limitations on contractual penalties (Sec 4), in each case applicable for the period from 01 April 2020 to 30 June 2020.

 

Please note: This newsletter merely provides general information and does not constitute legal advice of any kind from Binder Grösswang Rechtsanwälte GmbH. The newsletter cannot replace individual legal consultation. Binder Grösswang Rechtsanwälte GmbH assumes no liability whatsoever for the content and correctness of the newsletter.



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