OGH: Are Contingency Fees Allowed in Austria?

Oct 18, 2024 Benn-Ibler Rechtsanwälte

According to Section 879(2)(2) of the Austrian Civil Code (Allgemeines bürgerliches Gesetzbuch, ABGB), a contract is null and void if a legal advisor accepts a certain share of the amount awarded to the other party. This provision does not only apply to lawyers, but also to notaries public as well as tax consultants.

In the case at hand, in 2010, the plaintiff, a telecommunications company, had engaged the defendant (who holds a business licence for business consulting), to advise the company on determining the prerequisites for and applying for a research grant. The parties’ agreement was for an annual lump sum fee as well as a contingency fee.

The plaintiff has now sought a refund of the fees paid to the defendant. The claim was upheld as valid by the first instance court. However, the appellate court granted the defendant’s appeal and dismissed the claim entirely.

The Austrian quota-litis prohibition does not apply to contingency fee agreements per se, but to the act of sharing contingency fees. Although this rule only applies to members of professions who legally represent their clients, yet it also pertains to those who, for example, falsely represent themselves as lawyers. The reason for this is that unauthorised service providers should not be treated more favourably than authorised ones.

The quota-litis prohibition also applies to the B2B sector. Although the defendant in the case at hand was not a tax adviser, they advised and assisted their client in the field of tax law, thereby fundamentally encroaching on an area reserved for tax consultants.

According to established OGH case law, in the case of a partial prohibition of an agreement, it must be determined in accordance with the purpose of the prohibition whether the agreement is valid in part or invalid in its entirety. For an agreement such as the one at issue in this case, this means that, pursuant to Section 879(2)(2) of the ABGB, only the contingency fee agreement is void, while the rest of the agreement remains valid.

Consequently, the defendant must return the contingency fee which they collected. The defendant does, however, have a claim to an appropriate remuneration.

OGH 8 Ob 40/24a (26 August 2024)