The Austrian insolvency law was amended in June 2003 by the Federal Act on International Insolvency Law (Federal Law Gazette 2003/36). The Regulation (EC) Number 1346/2000 of May 29 2000 on insolvency proceedings (EU Insolvency Regulation) was incorporated into the Austrian insolvency law and was supplemented by further national provisions governing the effects of insolvency proceedings in Austria on assets situated abroad as well as the recognition of foreign insolvency proceedings in Austria. Finally, the Federal Act on International Insolvency Law implemented Directive 2001/17/EC on the reorganization and winding-up of insurance undertakings (Directive 2001/17/EC) and Directive 2001/24/EC on the reorganization and winding up of credit institutions (Directive 2001/24/EC). For this purpose, several special provisions were enacted which apply exclusively to insurance undertakings and credit institutions.
The Federal Act on International Insolvency Law in general entered into force on July 1 2003. All provisions concerning insolvency proceedings in respect of insurance undertakings, however, entered into force with retroactive effect as of April 19 2003. The special provisions governing insolvency proceedings of credit institutions will only enter into force once the period for the implementation of Directive 2001/24/EC has expired, thus on May 5 2004.
Incorporation and supplementation of the EU Insolvency Regulation
The legislator incorporated into national insolvency law the special conflict of law rules of the EU Insolvency Regulation in respect of third parties' rights in rem, set-off, reservation of title, contracts relating to immovable property, payment systems and financial markets, contracts of employment, effects on rights subject to registration, community patents and trade marks, detrimental acts, protection of third-party purchasers and pending lawsuits.
Regarding set-off the opening of insolvency proceedings shall not affect the right of creditors to demand set-off of their claims against the claims of the debtor where such set-off is permitted by the law applicable to the insolvent debtor's claim.
The Austrian legislator - ahead of time - adopted Article 25 of Directive 2001/24/EC concerning netting agreements. Since July 1 2003 netting agreements have been governed solely by the law of the contract that governs such agreements.
Effects of Austrian insolvency proceedings
The effects of insolvency proceedings in Austria since July 1 2003 also cover assets situated in non-EU member states and Denmark unless the debtor's main centre of interest is in another country, insolvency proceedings were opened in that country and these insolvency proceedings also include the assets situated abroad. To enforce this provision the debtor is obliged, in agreement with the receiver, to cooperate in the sale of foreign assets that are covered by the effects of the insolvency proceedings.
Recognition of foreign proceedings
Since July 1 2003, the effects of insolvency proceedings opened in a non EU member state or Denmark are recognized in Austria if the debtor's main centre of interest is in that other state, the insolvency proceedings are basically comparable to Austrian proceedings and if, in particular, Austrian creditors are treated the same as creditors from the state in which proceedings were opened.
Special provisions applicable to credit institutions and insurance companies.
From May 5 2004 onwards, Austrian courts will have jurisdiction regarding the opening of bankruptcy proceedings over the assets of credit institutions admitted in the European Economic Area (EEA) provided the credit institution is authorized to conduct banking business in Austria.
Austria will reciprocally recognize the decision of an EEA state to implement reorganization measures in a credit institution without further formalities.
The corresponding provisions in respect of insurance companies have been in effect since April 19 2003.
Amendment of the Banking Act
The provisions that implement Directive 2001/24/EC will enter into force as late as May 5 2004. Amendments concern special receivership proceedings, which are particular insolvency proceedings in respect of credit institutions.
From that date on special receivership proceedings opened in Austria will also cover the credit institution's assets situated throughout the EEA, and in particular its branch offices.
While Austrian law as in force does not expressly regulate whether or not close-out netting is recognized in special receivership proceedings the Federal Act on International Insolvency Law now expressly provides for a full recognition of close out-netting in special receivership proceedings as of May 5 2004.