As more countries allow the use of third-party funding, more courts are tasked with clarifying how the practice should work with existing law. In Austria, questions regarding ‘pacta de quo-ta litis’ arose with regard to Austrian Civil Code section 879, and section 16 of the Austrian Attorney’s Code.
An LFJ Conversation with Michael Kelley, Partner, Parker Poe
As more countries allow the use of third-party funding, more courts are tasked with clarifying how the practice should work with existing law. In Austria, questions regarding ‘pacta de quo-ta litis’ arose with regard to Austrian Civil Code section 879, and section 16 of the Austrian Attorney’s Code.
Lexology explains that these laws exist to maintain the independence of counsel, and protect clients from potentially unscrupulous legal counsel. Generally speaking, an agreement to share a portion of a recovered debt with the specialist tasked with its recovery is frowned upon in Austria. But this ‘pacta de quo-ta litis’ is not technically illegal.
Recently, the Austrian Supreme Court ruled that ‘pacta de quo-ta litis’ does not apply to litigation funders in the following circumstances:
- Funders do not provide legal advice to counsel or clients.
- Clients remain in charge of decision-making at all times.
- Litigation funders follow normally expected business procedures.
- Client’s free choice of an attorney is implied—but not specifically affirmed in the ruling.
The court further found that so long as these provisions are followed, there is no unfair competitive advantage.
