As in all countries in 2020, the dominating factor for the Austrian market was the Covid-19 pandemic. The start to the new decade was initially marked by soaring transaction numbers across all sectors, until lockdown restrictions in March and April brought this boom to an abrupt end. Many pending transactions were put on hold for several weeks, included severe restructuring aspects, or were cancelled altogether. While some M&A activity picked up again as usual in summer, in particular in the thriving tech space, firms also reported the beginning of a slight increase in distressed M&A work. The aforementioned corporate trends also affected tax practices, which were now called upon to support numerous restructurings and optimize tax structures in Austria and beyond. At the same time, the corporate field reported higher demand for assistance with joint ventures as well as the interpretation of long-forgotten contractual clauses such as force majeure, and resulting corporate disputes were more likely to end up in court than in normal times. Private equity investors continued their shopping spree, with peak interest in the healthcare industry. While Austria's ECM (equity capital market) remains largely quiet, firms report an uptick in DCM (debt capital markets) work, which is fuelled in part by the current Covid-19 crisis. Many corporates made use of the debt capital market to increase liquidity.
Due to the pandemic and the temporary slowdown in transactions, firms consequently noted a general downturn in acquisition finance, except in real estate, which remains a key target for investors with a focus on the residential sector. Developments in other asset classes such as offices and hotels stalled to some extent but are expected to bounce back as soon as restrictions are lifted. In other finance work, firms remained busy advising on corporate finance and noted a surge in restructuring-related finance. Thanks to state funding, more specifically financial aid granted by COFAG (COVID-19 Finanzierungsagentur des Bundes GmbH), a special purpose vehicle to grant liquidity assistance measures, insolvencies were kept at a minimum but, as firms would argue, have not been averted all together. Many insolvency and restructuring practices expect a significant increase in bankruptcy work in 2021 and 2022.
Project finance is another trend that has been ongoing for a number of years, and it is set to continue as more and more funds and other investors increase their focus on green finance. While fewer foreign investors look to Austria to finance projects, public entities quickly kick-started themselves after a brief shock-induced paralysis. Renewable energy remains a buzz topic, especially in light of the EU's clean energy package, but other infrastructure projects such as the extension of the fibre-optic network or road infrastructure are largely unaffected as well. This is reflected by a constant flow of work in public procurement, although some procedures were briefly put on hold and more award decisions are being disputed.
Like many other parts of the economy, the onset of the pandemic paralysed the construction sector; construction sites had to be closed and supply chains halted. This, however, was only temporary, with many major projects resuming work within weeks. The demand for housing remains high while firms also remain busy advising on major infrastructure projects across the country, including associated disputes.
Many construction as well as energy sector disputes are settled before an arbitral tribunal rather than before state courts; mediation as a form of dispute resolution has not fully taken root in Austria yet. In both arbitration and litigation, firms had to adapt to virtual hearings which, in order for them to take place, require the agreement of both parties. Some firms expressed concern that this could lead to tactical manoeuvres, though others have not witnessed such behaviour. However, there is agreement that a return to in-person court hearings is preferred, particularly with regard to examining witnesses.
Yet another practice area turned upside-down by Covid-19 is labour and employment. Firms were kept very busy by clients as the global health crisis triggered a plethora of unprecedented issues. In reaction to national lockdown measures, the Austrian government introduced a short-time work scheme to keep businesses afloat. These and other newly introduced regulations were uncharted territory for government authorities, law firms and affected companies alike, also in the sphere of administrative and public law. Once these imminent problems were resolved, practitioners were asked to dive straight into wide-ranging company reorganisations and staff terminations, particularly in sectors like hospitality and tourism that found themselves on the brink of ruin.
In this pandemic environment, the number of people working from home sky-rocketed, which unsurprisingly brought new challenges in the field of data protection and data security. Legal teams that had previously advised clients on GDPR compliance now turned to the mushrooming amount of cybersecurity work. Meanwhile, there was continued demand for other technology-related work such as international data transfers, the cloud, cookies, blockchain and artificial intelligence.
The sudden acceleration of the digital revolution also continues to splash over into competition law, where the technology sector is under increased scrutiny for alleged misuse of market dominance. While ongoing cartel cases continued, Austrian competition authorities were of course unable to conduct new internal investigations and dawn raids due to the health crisis. Hand in hand with the downturn in corporate transactional work, firms also had less merger control work in spring 2020. Apart from delays in ongoing proceedings, this area of law was not too affected by the pandemic.
The same can be said for intellectual property. Besides delays from authorities and the extension of a variety of registration periods, it was business as usual for IP lawyers. Only small clients thought twice about whether intellectual property protection was at the top of their priority list in 2020.
All in all, the Austrian economy seems to have got away with a black eye for now, as most business activity resumed after the first lockdown and was less affected by second-wave restrictions in autumn 2020. Nevertheless, it remains to be seen what long-term effects this year will have.