OGH: Deposit Insurance and Privileged Deposits

Nov 18, 2022 Benn-Ibler Rechtsanwälte 18.11.2022

The Austrian Supreme Court (OGH) has taken a fundamental look at extended coverage under the Deposit Insurance Scheme (Section 12 of the Deposit Insurance and Investor Compensation Act, hereinafter ESAEG).

In the original case, the plaintiff was holding three accounts with the now insolvent Commerzialbank Mattersburg, which stood as follows at the time of the opening of insolvency proceedings:

• Current account 1: negative balance: EUR - 99.60
• Current account 2: balance: EUR 130,286.66
• Time deposit account: Balance: EUR 433,048.08

On an ongoing basis, the depositor transferred funds from account 1 to account 2 and vice versa. In 2019, he received a severance payment (a deposit related to the investor’s termination within the scope of section 12(1)(b) ESAEG) in the amount of approximately EUR 102,000, plus an additional EUR 13,000 of outstanding salary claims, all of which was credited to account 1. He transferred EUR 110,000 to account 2. Also, he sold the house he inherited from his parents for monthly instalments of EUR 1,000 (a total of EUR 12,000 had been received by the time the insolvency proceedings were opened).

The plaintiff had already been reimbursed EUR 100,000 by the defendant, the deposit protection scheme provider, Einlagensicherung AUSTRIA (hereinafter ESA), under the general deposit guarantee. However, he now demanded an additional EUR 114,000 (his severance payment plus sales proceeds) pursuant to Section 12 ESAEG, as the severance payment and the sales proceeds were privileged funds legally secured up to EUR 500,000.

ESA refused to issue a payment. By transferring the severance payment funds to another current account, the plaintiff had disposed of the funds by choosing a different form of investment, ESA argued. Also, the property sold had not served the plaintiff's private residential purposes.

The Austrian Supreme Court ruled as follows:

If a depositor holds multiple accounts at the same financial institution, transferring funds between these accounts (which are often only maintained to keep a clearer financial overview) does not lead to the loss of the deposit guarantee claim, provided that the privileged funds are still present in the accounts when viewed as a whole and taking the transfers of all funds into consideration.

The funds from ‘real estate transactions for privately used residential real estate’ (Section 12 no. 1 lit a ESAEG) do not need to have been used by the depositor for his personal residential purposes. Rather, this stipulation applies even if the depositor’s parents had used the real estate for residential purposes.

OGH 1 Ob 241/21d (6 October 2022)