Protection awarded by interim injunctions strengthened by recent Supreme Court decision
Interim injunctions difficult to obtain, but immediately enforceable
The threshold for obtaining Interim injunctions is higher in Austria than in many other EU jurisdictions such as France or the Netherlands.
However, once obtained, the Austrian interim injunction is highly effective: It becomes immediately enforceable, so that any violation of an interim inunction order can trigger significant fines – up to EUR 100,000 per day and, potentially, even imprisonment – once the order has been served on the respondent.
Remedies open to respondent
What can the respondent do if it has been served with an interim injunction it does not, for whatever reason, wish to comply with? There are three remedies available in such cases:
- The respondent can challenge the interim injunction on factual grounds (Widerspruch), e.g. by presenting arguments and substantiating evidence demonstrating that, at the time of the court’s decision on the interim injunction, there was no risk that could justify the injunction, that the applicant’s claim did not exist, etc.;
- The respondent can appeal the interim injunction on legal grounds (Rekurs); or
- The respondent can file an application to lift the interim injunction on the grounds, inter alia, that circumstances have changed since the interim injunction was issued (Aufhebungsantrag).
Indeed, the respondent can file all three remedies. The first 2 remedies are subject to a 2-week deadline. The application to lift the interim injunction can be filed at any time. If all three remedies are filed, the respondent can decide on the order in which these remedies are adjudicated by the court.
What strategic considerations apply?
The general rule is that none of the above remedies have suspensive effect, i.e. the interim injunction becomes effective as soon as it has been served on the respondent and is immediately enforceable.
- However, an appeal – and only an appeal – can be combined with an application to grant suspensive effect. For this reason, respondents may decide to request the appeal be dealt with first, in order to benefit from such suspensive effect until a binding decision on the appeal is rendered.
The downside of this strategy: Only points of law may be raised in the appeal, so that there is no opportunity to present an alternative view of the facts, i.e. to present the court with any facts that were not already included in the applicant’s interim injunction application.
- The respondent can present its version of the facts and substantiating evidence in challenge proceedings. However, suspensive effect cannot be granted in the challenge proceedings, i.e. the interim injunction remains in place until a final and binding decision has been issued, potentially in all three instances. Moreover, circumstances that occurred after the interim injunction was issued must be disregarded by the court.
- The application to lift provides an opportunity to present legal and factual arguments predicated on any occurrences since the interim injunction was rendered. However, suspensive effect is not obtainable.
Recent Austrian Supreme Court ruling on suspensive effect
In a case recently decided by the Austrian Supreme Court (6 Ob 222/20w), the applicant had obtained an interim injunction ex parte in first instance. The respondents had initially filed an appeal combined with an application to grant suspensive effect, which they lost, resulting in an (enforceable) interim injunction in the applicant’s favor (see https://knoetzl.com/corporate-disputes/).
The respondents subsequently filed an application to lift the injunction, which the court of first instance granted.
The issue arose whether the decision of the lower court to lift the interim application takes effect immediately – thus immediately obviating the interim protection – or only after the decision to lift has become final and binding.
This was critical for the applicant in the case at hand. The parties were embroiled in an M&A dispute that was pending with an ICC arbitral tribunal in Brazil. The applicant, the buyer of the company, had not yet obtained control of the company and was concerned that the seller would issue bonds worth hundreds of millions of US dollars via its Austrian subsidiaries, and use the proceeds to the detriment of the company’s value.
Where the enjoined action is in essence a one-time action – as here, the issuance of bonds – the consequences could be disastrous if the first instance judgment is held to immediately remove the interim protection. Because the first instance courts dealing with such applications are often local district courts unaccustomed to dealing with complex, high-value, commercial disputes, the risk of an incorrect first-instance decision can be significant.
This risk materialized in the case at hand. Not only did the first instance court decide incorrectly on the application to lift – its decision was subsequently reversed – it also held that the decision to lift the interim injunction was a constitutive decision with immediate effect and that suspensive effect was not available. If that were to stand, this would have meant the immediate and complete loss of the interim protection.
However, the Supreme Court clarified that the protection granted by the interim injunction remains in place until the decision lifting the interim injunction has become final and binding. In this case, it meant that the protection granted by the interim injunction against a potentially massively damaging bond issuance remained in place throughout.
Under Austrian law, the substantive and procedural provisions on interim injunction are found in the Enforcement Act, which has often led to thorny procedural and substantive issues, where the Supreme Court’s view is often difficult to anticipate. This decision is all the more welcome, not only for the necessary clarification it provides, but also because the decision significantly strengthens the power of Austrian interim injunctions.
For more information on corporate disputes, please contact Katrin Hanschitz or your customary relationship professional at KNOETZL.