Liechtenstein: Mediate first

Author: | Published: 1 Apr 2009
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In the Liechtenstein legal system in civil and criminal matters, judicial powers are vested in and exercised by the courts in Vaduz. Questions of fact and law are generally decided by a judge.

Voluntary arbitral proceedings as a method of alternative dispute resolution are becoming more and more popular, specifically in family law cases but also in business law disputes.

Court litigation

Actions

Actions will only be successful as long as the claim has not become statute barred. The time limits vary from one year up to 40 years, though the most frequent time limits are three and five years.

The following courts exercise jurisdiction in civil matters:

  • First instance, District Court (Landgericht).
  • Second instance, Superior Court (Obergericht).
  • Final instance, Supreme Court (Oberster Gerichtshof).

A single judge conducts proceedings before the district court. Superior Court and Supreme Court sit as a panel of five judges.

Additionally, Liechtenstein law offers access to the Constitutional Court (Staatsgerichtshof) for cases when court orders or judgments are in breach of a party's constitutionally guaranteed rights. The Constitutional Court also sits as a five-judge panel.

Liechtenstein is a member state of the European Economic Area (EEA) and a signatory to the Convention for the Protection of Human Rights and Fundamental Freedoms 1950 (European Convention on Human Rights). Therefore, having passed all instances in Liechtenstein, a litigant can also seek justice before the European Free Trade Area (EFTA) Court or the European Court of Human Rights.

This article relates to procedures applying in one of the three instances of the Liechtenstein Court.

Lawyers

Apart from certain criminal proceedings, there is no obligation for a party to be represented by a lawyer. A party can be represented by any other individual, who does not necessarily have to be a legal professional, but needs to prove such power of attorney by a written document.

In certain circumstances, foreign lawyers may also be entitled to represent a party to a dispute before a Liechtenstein court. For EC lawyers the requirements are less formal. However, foreign lawyers representing a party can claim legal fees only if they have been officially granted the right of legal representation.

Fees and funding

Lawyers' fees are subject to the statutory attorney's tariff or the autonomous fee guidelines of the Liechtenstein Bar. Generally, lawyers are free to reach an agreement on fees individually with each client. Cases that are tried before court are customarily billed by the tariff's flat-rate system. Lawyers cannot assert contingency fees. Nevertheless, a surcharge to the fees if the litigation is successful can be agreed on. Equally, a lawyer cannot purchase the client's claim if it is the object of current proceedings. The lawyer and their client can also agree on time-based or task-based fees.

The so-called quota litis prohibition (that is, the prohibition of a party to litigation proceedings agreeing with a third party that the third party will receive a share in any amount recovered if it funds those proceedings) is a provision of the Liechtenstein Law on Lawyers, so only applies to members of that profession. Litigation parties are therefore free to finance their litigation by whatever means are available to them, including third party funding.

Court proceedings

Confidentiality versus publicity

First and second instance proceedings are usually held in public. The proceedings of the Supreme Court are regularly decided in non-public sessions.

However, also in District Court and Superior Court proceedings, the public may be excluded (completely or partly) if the judge regards it as necessary to protect morality or public order. Also, on the application of a party, the public can be excluded if family life matters have to be discussed. In the case of unreasoned non-publicity a hearing is void.

Court documents are not generally accessible to the public. Participants of the proceeding and non-participants proving sufficient legal interest however can review (and copy) the court files on application. Final decisions (specifically judgments) are generally available to the public after having been made anonymous.

Pre-trial mediation

Liechtenstein law provides, with exceptions, for inexpensive but compulsory pre-trial mediation. However, as the mediators usually are layman, mediation may be of no use where complex commercial cases are heard. In practice, the claimant-to-be requests the mediator to schedule a hearing, at which the he asks to issue a certificate that no settlement was reached (Leitschein). In many cases, the defendant-to-be does not even attend the mediation hearing, not triggering any default consequences. The Leitschein has to be attached to the statement of claim, failing which the court will dismiss the lawsuit immediately.

Starting proceedings

Court proceedings are started by serving the statement of claim on the court – a brief that needs to contain a short statement of:

  • facts of the case;
  • means of evidence;
  • grounds on which the court has jurisdiction; and
  • specified prayer for relief.

The claimant cannot leave it to the court as to what kind of judicial relief it may adjudge; the statement of claim needs to state precisely what the claimant requests.

Notice to the defendant and defence

Once the statement of claim is served on the court, it is forwarded to the defendant. The judge schedules a so-called first hearing (Erste Tagsatzung) which in some cases serves the argument concerning admissibility of evidence.

If the claimant is a domiciliary company (companies domiciled in Liechtenstein but not doing business in the country) it is likely that the adverse party will apply for an interim injunction to enjoin the other party to provide a certain amount of money as security for the costs of the trial hearing (Sicherungsbot).

Further the judge will order a first hearing which gives an opportunity for:

  • basic movements of the defendant to be decided on;
  • a judgment to be rendered (by default or because of acknowledgment); and
  • dismissal of a claim (because of inadmissibility and the like).

If a first hearing is held, the defendant is entitled to answer the statement of claim in writing within four weeks.

Subsequent stages

Evidence is heard only with regard to disputed facts that have a bearing on a possible cause of action on which the claimant's request for relief may be founded. The court does not collect facts on own motion, but confines itself to appraising the facts pleaded by the parties.

Usually the court issues an order detailing all the points in dispute for which it intends to hear evidence (an order for evidence or Beweisbeschluss) which cannot be contested, but can be amended or changed by the court at any time during the proceedings. The parties can submit evidence in the form of:

  • Documents
  • Hearing witnesses
  • Evidence of experts
  • Inspection of the court
  • Party interrogation

None of these means of evidence has greater weight than the others. After the evidence-taking procedure is completed, lawyers render an account of their fees, and after that the proceedings are formally closed. Henceforth (until the appellate proceedings start), the parties cannot put forward any more allegations of law or fact. Further, the action cannot be withdrawn or amended and (court) settlements cannot be agreed on.

In civil proceedings a decision is then made in the form of a judgment which is mostly rendered in writing. The judgment enters into effect when it is served on the parties. From this moment on the period for appeal starts.

Interim remedies

An action will be dismissed at any time (also in appellate proceedings) if:

  • The court has no jurisdiction in the case (because the criminal court or administrative authorities have exclusive jurisdiction or because, for example, the claimant has:
  • (wrongly) chosen ordinary proceedings instead of extra-judicial ones;
  • failed to request pre-trial payment in a public liability case (Amtshaftung); or
  • failed to request compulsory mediation and to attach the Leitschein to the statement of complaint.)
  • The court does not have domestic or international jurisdiction;
  • The parties are not capable of being a party in a lawsuit. Natural persons

(including unborn persons) always can be party to a lawsuit. However, with regard to (foreign) corporate bodies, it depends on statutory (foreign) law;

  • The parties are not legally capable of conducting proceedings (equivalent to the legal incapacity to close a contract);
  • The claimant has no legal interest in the lawsuit;
  • The claimant's claim is not actionable; or
  • A second identical action has been brought in another court (ne bis in idem) or such action has been adjudicated (res judicata).

Security for costs

The adverse party may be enjoined to provide a certain amount of money covering the costs to be expected. This especially applies for domiciliary companies (companies domiciled in Liechtenstein but not doing business in the country). Appellants can also be affected by interim injunctions securing costs.

It is important to notice that interim injunctions in cost matters have a very short legal tradition and are effective only, if the adverse party has assets within the jurisdiction of Liechtenstein, Switzerland or Austria, as only with the latter two corresponding conventions exist.

The calculation of the costs to be secured is based on the pleadings of the parties and the evidence presented. The decision of the court can be contested.

Interim injuctions

The temporary injunction is an order obtained from a court, exclusively on application of a party, for the short-term purpose of preventing irreparable injury to the petitioner. It can be issued to prevent a threatening change of existing conditions that may render impossible or substantially more difficult the realisation of one of the parties' right, to prevent substantial damage or for other reasons.

Before the start of a lawsuit and during litigation, interlocutory injunctions can be issued and obtained without prior notice to the defendant. The applicant must provide prima facie evidence for the claim and the risk that might hinder the future execution. The injunctions are usually granted within two days.

Further, in very urgent cases, an applicant can preliminarily request the competent authorities to render a provisional order, such as the:

  • security of tangible movable property;
  • collection of money; or
  • the maintenance of a provisional situation.

In practice, these may even be orally expressed to the debtor or to banks or trustees who dispose of assets of which the debtor is deemed the beneficial owner. However, the applicant must file a written application with the court within two days. Otherwise, the preliminary court order loses any effect.

Interim attachment orders

For the short-term purpose of preventing irreparable injury to the petitioner, as well as interim injunctions, the court can grant interim attachment orders. They are available on the same grounds as interim injunctions and without prior notice of the defendant. The term for obtaining an interim attachment order is the same as for interim injunctions, and the same provisional orders are available for urgent cases.

As Liechtenstein has not signed any international conventions on the enforcement of foreign court decisions (apart from conventions with Austria and Switzerland), the recognition and enforcement of foreign decisions in civil matters in Liechtenstein is governed by the Law on Execution (Exekutionsordnung or EO). The EO is the legal basis also for the granting of interim attachment orders.

Under the EO, it is possible to enforce foreign judgments and arbitral awards subject to several conditions. For example, it must have been possible in the respective case to institute the legal proceedings in the foreign state as well under its domestic provisions on jurisdiction or the action must be enforceable under the domestic law of Liechtenstein.

Before an interim attachment order can be granted, it will be decided by the court if execution on the basis of the foreign title of execution will be granted or not. Therefore, obtaining a grant of execution based on a foreign title of execution is far more complicated and potentially more drawn-out than obtaining a grant of execution based on a domestic title of execution.

If the court decides that the prima facie evidence is not sufficient to grant an attachment order and if the threatened disadvantages for the opposing party arising from such an order can be compensated with cash indemnity, it may order the applicant to deposit money in court as security for possible damages.

Final remedies

Generally, the claimant can file an action to enforce a right or claim, a prohibitive action, or a declaratory action. However, the claimant cannot always be in the position to request a judgment of payments or other claims or to state the exact amount. In such situations, an action by stages can be filed. This consists of two prayers for relief: a sworn notification of the assets or the request for rendering an account and, subsequently, the prayer for positive relief, however non-enumerated.

Evidence

In general, parties have no obligation to produce documents or any other evidence that may be adverse to their interests. In particular, there is no such thing as a 'fishing expedition', whereby a party can look at the evidence the other party must produce in the course of pre-trial discovery proceedings and find in it the evidence required to make his or her case conclusive.

However, under legally defined circumstances the opposing party cannot refuse to submit a document. If a party refuses to comply with these obligations, this can only be considered accordingly by the court within its free evaluation of evidence when rendering the final judgment.

If a third party denies possession of a document, the party seeking to present evidence in support of its arguments needs to certify that possession. If that party is not successful or the right to obtain the document is controversial, the party can file an action (Editionsklage) to obtain the document.

Rules of privilege do not apply in Liechtenstein because parties can only be required to produce certain documents.

Although lawyers can refuse to answer questions relating to information received from a client when testifying as witnesses, there is no comparable provision in Liechtenstein procedural law stating a specific 'attorney-client-privilege' for documents. However, such documents may be subject to the general 'professional secrecy' privilege.

Witnesses

In general, every person summoned before a Liechtenstein court is on pain of penalties obliged to appear before the court to testify orally. The parties to a case are excluded from testifying as witnesses as they can give privileged party statements to the court. If necessary, the court may take witnesses under oath. Cross-examination of the witness is inadmissible. Leading questions and any other undertaking to influence the witness will be rejected. The parties have the right to pose questions to the witnesses.

Specialist witnesses

The court nominates experts if the judges themselves do not have sufficient expertise to decide factual matters in question. The court decides which questions the appointed expert should answer. The parties can submit supplementary questions to the court, which may be included in the questionnaire. Experts usually file a written expertise, and afterwards may be invited to answer questions from the court and the parties at a hearing. They are subject to the same duty to tell the truth and the same sanctions for violations of that duty as witnesses.

Regularly, the expert presents their statement of costs and the judge will decide if the amount is appropriate. This decision can be appealed. If one of the parties doubts qualification or impartiality of the expert nominated by the court, that party has the right to refuse the nomination and, in case of affirmation, the right to file an appeal against the court order.

Appeals

The Superior Court decides all appeals, recourses, and nullity appeals against decisions of the District Court. The Supreme Court decides all such appeals against a Superior Court decisions.

An appeal suspends previous decisions, which means that the appealed decision has no res judicata effect and cannot be enforced. Recourse against a court order, however, does not have suspend previous decisions.

Appeals are based on nullities, material mistakes, incorrect fact-finding or errors in judgment.

Decisions by the Superior Court may not be contested by appeal to the Supreme Court because of incorrect fact-finding. In certain circumstances exhaustively described by the law, court orders can be contested by recourse.

While the average duration from the start of a lawsuit to judgment is 12 months, it may take longer if the case is complex and international, if foreign law has to be applied or if witnesses domiciled abroad are to be heard. However, even if all channels and sequences of courts are gone through, a final and binding decision usually can be obtained within two to three years.

Costs and enforcement

Court costs and legal fees are imposed proportionally on the unsuccessful party

Once a binding judgment is available, the claim can, in a case of default on behalf of the debtor, be enforced under the provisions of the Law on Execution. This provides for various measures, such as seizure of movables or real estate property, or asset freezing. Equally, compulsory administration of assets can be granted.

Cross-border litigation

In civil matters the choice of foreign law can only be agreed on if the clause is officially certified. For certain insurance matters, it is not possible to choose another law than the law of Liechtenstein.

Liechtenstein has enacted the Legal Assistance Act, which enables foreign authorities to request a Liechtenstein judge to perform judicial actions required for procedures abroad. In general, such actions are performed if they correspond with the legal system in Liechtenstein, are not in breach of public policy and the requesting state would grant identical actions reciprocally. Therefore, normally the documents to be served will be sent by the foreign court to the Liechtenstein court. The Liechtenstein court then takes care of proper service to the respective party. Special rules for service that have to be applied under foreign law are only fulfilled if this procedure is especially requested by the foreign court and does not contravene Liechtenstein law.

Foreign judgements

As Liechtenstein did not join the Lugano Convention on Jurisdiction and Enforcement of Judgments in Civil and Commercial Matters 1988, the enforcement of foreign judgments is subject exclusively to Liechtenstein Law and mainly the Law on Execution. The enforcement of foreign judgments or titles will be refused if the status of reciprocity between Liechtenstein and the foreign nation that issued the judgment is not provided. Equally, enforcement of the claim must be possible as well as admissible under Liechtenstein law. International agreements granting enforceability to civil judgments only exist with Switzerland and Austria.

Author biography

Johannes Gasser

Dr Dr Batliner & Dr Gasser

Dr Johannes Gasser LLM is a partner of the law offices of Dr Dr Batliner & Dr Gasser, the largest law firm in Liechtenstein exclusively providing forensic services to international clients before courts of law and authorities. The law office celebrated its 50th anniversary in 2004 and comprises of 11 lawyers.

His firm's expertise extends to litigation in all areas, focusing on dispute resolution involving trusts and foundations, and also representing defendants suspected of business crimes, fraud victims and defrauded corporations. The firm advises banks, offshore services companies and financial investors in protecting themselves from money-laundering and other violations of the law. The firm has been very successful in the defence of unfounded legal assistance requests in criminal matters involving banking assets in Liechtenstein.

Dr Gasser is admitted both in Liechtenstein and Austria. He specialises in freezing assets in Liechtenstein banks, including proceeds of crime, and piercing the veil of Liechtenstein corporations.

Dr Gasser is the author of Criminal Responsibility of Managers for Employees Laundering Money, Ascertaining Beneficiary Rights in a Liechtenstein Family Foundation, Liechtenstein International Insolvency Law, Choice of Law Clauses in International Contracts, New Developments on Liechtenstein Trusts and Asset Protection trough Liechtenstein Annuities and Life Insurance. He also contributed chapters to the firm's book on Litigation and Arbitration in Liechtenstein.

Dr Gasser is appointed a member of the new Judiciary Election Commission of Liechtenstein by the prince and head of state in 2004 and since 2005.