Widely recognized as an entry point for investors seeking opportunities in Eastern Europe and as a hub for the region, Austria is home to a large number of regional General Counsel and Heads of Legal. We reached out to a number of them to get their perspectives on this critical gateway to CEE.
The Good Life
Austria’s proximity and historical ties both to the Vysehrad countries and to the countries of South Eastern Europe is hardly the only reason companies set up shop in the country. Austria is also, simply, among the beautiful countries in the world, and well-known for its Alpine beauty and remarkable views. And Vienna, the country’s capital, is widely acknowledged as being among the best cities in the world to live in, recently winning the top rank for Quality of Life in the Mercer Study for the ninth consecutive year.
More practically, the Austrian economy has long been among the strongest in CEE, with a 2016 GDP per capita of approximately USD 44,757 (See table). Indeed, even during the now-concluded global financial crisis of the past decade Austria did not suffer as severely as many others, with GDP in the country actually increasing in 2010 by two percent (according to the International Labour Office in Geneva).
Ingo Steinwender, Group Head of Legal at CA Immobilien Anlagen AG, for one, agrees that things have been good for a long time. “From my personal perspective it was true ten years ago too, because we have a very good social security system,” he says. “And of course the environment was great ten years ago and still is.” In recent years, he says, the growth of the Austrian economy can be tied to the country’s significant 2016 tax reform. (Taxes are still too high, he says, but he admits to hopes that the new government will decrease them).
Similarly, unemployment figures in the country (5.7% in 2017 according to the World Bank), while not ideal, are still better than in much of Europe. “Unemployment is quite high for Austria,” says Mirna Zwitter-Tehovnik, the Head of Group Legal at state-owned Heta Asset Resolution AG. “But in comparison to other European jurisdictions rather low.”
“There is a positive mood, and at the moment I am optimistic for the future,” says Steinwender. “In particular in our industry, the real estate industry. There is lots of money in the real estate market – demand is higher than the offer leading to really high prices.”
And Real Estate isn’t the only strong area, of course. Tourism – of particular importance for a mountainous country with the most extensive nature reserves in the region – remains a dependable source of business as well. And Steinwender believes the importance of the professional services sector, including banks and insurances companies, will increase in the near future too.
Although Germany, not surprisingly, has long been the largest single trading partner, Austria has capitalized on its historical and geographic ties to the just-emerging-from-communism economies of Eastern Europe. These days, Steinwender reports, “dependency on Germany is decreasing and our ties with Eastern Europe are increasing. This is reflected by the successful Austrian companies being main players in Eastern Europe.” (Indeed, CA Immo itself, though based in Austria, has branches in Germany, Czech Republic, Poland, Hungary, and Romania).
As a result, Steinwender says, many of the law firms with the most extensive footprints in the region are based in Vienna. “Austria has major law firms [that are] players in the international market – in particular CEE: Schoenherr, Wolf Theiss, CHSH, CMS, all of which grew after the fall of the communism. They were the first movers in Eastern Europe, invested in the region, and they had anenormous upside from this and they still have.” What’s more, says Zwitter-Tehovnik, “in comparison to many Western European countries, fees are still quite moderate. In English or Italian markets, fees in comparison to Austria are double.”
Many believe that Austrian law in general is favorable for business as well. “From a civil law perspective Austrian law […] is quite effective,” Roland Schreiner, General Counsel CEE at Atos, says. “It is not formal, and it is straightforward and easily adjustable and suitable for any business.”
This in contrast to the judicial systems of many of the country’s neighbors to the east and south, according to Zwitter-Tehovnik, which “seem to lack funding or resources and … work slowly.”
Keeping it Real
Nothing is perfect, of course. Christopher Fischer, EU Region VP and Associate General Counsel at Western Union, says that the current government “has not made the business climate worse – but they have not yet made it better.” Indeed, Fischer reports dissatisfaction with the government’s relatively conservative views on immigration. “The current government has expressed the desire to reduce the amount of immigration to Austria, which might have an impact on our business and our ability to attract the best possible talent,” he says.
Schreiner agrees. “The reduction of inflow of foreign workers is not making the market attractive,” although he notes that Atos may not be as affected as others, because, although the company employs people from abroad, the company has offshoring facilities allowing people to work remotely.
Immigration aside, the country’s labor laws “have been relaxed,” says Schreiner. “The previous and current governments have realized that Austrian labor laws generally have been too rigid,” he says, so “there has been improvement, making the law more operational and adjusted to the requirements of the market.”
Fischer, at Western Union, does not disagree. He defines Austrian employment law as “quite advantageous,” and relatively flexible for companies needing to hire or dismiss employees. “From that perspective, Austrian employment law is good for internationally active companies.” Still, he describes Austrian working hours as another area of concern, reporting that “the law reflects 20th century thinking and not 21st century reality,” since it does not consider the shift in work culture, in regard to the type of the work people do today, time flexibility, or the businesses operating globally. “The expectation that people will work ‘9 to 5’ is not realistic in today’s world,” he says.
And of course Austria shares the challenge of preparing for the General Data Protection Regulation’s May 25, 2018 effectiveness date – complicated, Schreiner says, by some conflicts with Austria’s own data protection law. “In Austria the law amending the Data Protection Act 2000 did not abolish the express protection of data of legal persons,” he says, explaining that this protection does not correspond to the GDPR’s focus on natural persons. “[That] has caused an unclear situation with regard to the applicability of the law. Everybody is now waiting for a clarification from the legislation.”
Steinwender rolls his eyes about the GDPR as well, even though his company is, for obvious reasons, less concerned than others about the GDPR. “Real estate companies in general do not have sensitive data, apart from certain personal data related to employees. Nevertheless, we need to comply with the legal procedures required, and it causes a lot of bureaucratic efforts and costs,” he continues, “the law does not focus on a company´s reasonable and justified business needs.”
Things could always, everywhere, be better. But none of the Chief Legal Counsel we spoke to suggested that, on balance, the outlook in Austria was anything but positive. “The Austrian market has picked up and improved considerably over the last few years,” says Roland Schreiner. “And it is stable now again.”
This Article was originally published in Issue 5.3 of the CEE Legal Matters Magazine. If you would like to receive a hard copy of the magazine, you can subscribe here.