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Ruling on the GCC of a Hungarian Airline

The Austrian Supreme Court recently issued a new ruling (4 Ob 222/22h) on the General Conditions of Carriage (GCC) of a Hungarian airline, declaring numerous clauses therein as unlawful. This decision is the latest in a series of judgments against air carriers and their GCC.

The proceedings were initiated by the “Bundeskammer für Arbeiter und Angestellte”, an association authorized to litigate under the Austrian Consumer Protection Act and aimed to prohibit the airline from using certain clauses in their GCC. In its decision, spanning over 100 pages, the Austrian Supreme Court addressed numerous clauses, providing significant guidance for all air carriers operating in Austria.

Since authorized associations, especially the “Verein für Konsumenteninformation” (VKI) and the Bundeskammer für Arbeiter und Angestellte, can (and regularly do) file such lawsuits against airlines operating in Austria, it is advisable for air carriers to use this new ruling on GCC as an opportunity to review their own GCC. More detailed information on the standard procedures of associations authorized to file such lawsuits, the system of reviewing GCC in Austria, and the criteria applied can be found in our article “General Conditions of Carriage in Austria“.

The clauses whose use has now been prohibited by the Austrian Supreme Court include:

  • Liability exclusion for fragile luggage
  • Choice of law clause in favor of Hungarian law
  • The possibility of rebooking to an alternative means of transportation
  • Restriction of rights under Regulation (EC) 261/2004 (“Air Passenger Rights Regulation”)
  • Submission of compensation claims exclusively via the airline’s website

Our experienced Aviation Team is happy to answer your questions about the use of General Conditions of Carriage in Austria, review your GCC to reduce the risk of legal proceedings, and represent you in court.

The Employment of Staff of Foreign Airlines in Austria

The Employment of Staff of Foreign Airlines in Austria

For most airlines it is natural to operate internationally. In Europe, international air traffic is particularly dense due to the manifold economic interdependencies between its countries, the personal, cross-border connections within its populace as well as the extensive liberalisation of air traffic, including the granting of freedoms of the air in recent decades.

To ensure that operations run as smoothly as possible, staff are needed not only at the airline’s headquarters, but also at the individual destinations flown by the airline. Airlines often outsource numerous tasks to external companies, while employing own station managers to organise and coordinate the work done by third-party providers and the airline’s employees. However, the airline’s commitment to the particular market or base can also be more intensive and range from employing the foreign airline’s own staff in Austria, to establishing a branch office or even setting up an Austrian subsidiary entity of its own.

In the following we would like to give an overview of what needs to be considered by foreign airlines when employing staff other than crew members (e.g., ground staff) in Austria. There are certain special rules applicable to the employment of crew members in Austria, which will not be covered in this article. Although the following overview has the “standard case” of a foreign airline as its point of departure, it will prove relevant also for other foreign aviation businesses – especially so in the area of business aviation.

Work and residence permit

When employing staff from non-EU countries in Austria, a residence and work permit issued in accordance with the Settlement and Residence Act (“NAG”) and the Employment of Foreign Nationals Act (“AuslBG”) is generally required. Residence and work permits are usually issued by the administrative authorities having jurisdiction over the future Austrian residence of the foreign employee following a positive assessment of the employee’s qualifications and their employment conditions by the Austrian Public Employment Service (“AMS”).

The most common form of a residence and work permit is the so-called “Red-White-Red Card”. The decision as to whether a worker may be employed in Austria depends initially on the authority’s assessment of the employee on the basis of a predefined, qualification-based points system. The Red-White-Red Card is available in several variants, with the “Red-White-Red Card for Other Key Personnel” offering most flexibility with regard to its requirements and possible employment options and is generally suitable for employees with a university degree as well as for employees without proof of higher education who acquired their knowledge and skills “on the job” in the course of their professional experience. The Red-White-Red Card is conditional upon the employee having adequate professional experience, qualifications, and sufficient language skills in German or English as well as receiving a sufficient salary (2023: EUR 2,925 gross per month) from the (future) employer in Austria.

In the case of temporary intra-corporate transfers of employees (i.e. intra-corporate transferees, ICTs), special, more favourable provisions (based on the EU Directive 2014/66/EU) apply. ICTs are employees with the nationality of a non-EU state who are temporarily transferred by their employer with its registered office in a non-EU state in the course of their employment relationship as managers, specialists or as trainees to one or more branches of their employer in the EU (or those of an EU company being part of the same group of undertakings as the employer). An ICT residence title for “managers” will be suitable for employees holding a senior position, who primarily direct the management of the host entity or of one of its departments or subdivisions. The ICT card for “specialists” is particularly suitable for persons who have specialised knowledge relevant to the fields of activity, procedures or administration of the receiving entity and a high level of qualification for certain tasks or activities requiring specific technical knowledge. The ICT card for “trainee employees”, on the other hand, requires that the employee have a university degree and be transferred to the Austrian branch for the purpose of their career development or further (sector-specific, technical or methodological) training. Thus, when choosing the residence title, the employer has to consider not only the employee’s personal, educational, and professional background, but also the needs of the Austrian host entity. These must be presented and argued accordingly in the application for the ICT title, which often causes difficulties in practice.

Citizens from EU member states, EEA states and Switzerland have free access to the Austrian labour market and therefore do not need any authorisation from the labour market authorities to take up employment in Austria. In this respect, they are on an equal footing with Austrian citizens.

When employing a foreign employee (whether on the basis of a work permit or not), the employer must comply with Austrian wage and working conditions as well as the applicable social security regulations. Failure to do so may result in the authorities prohibiting the employment and revoking the residence permit and work permit issued to the foreign employee (if one was required).

Applicable law

According to the EU Rome I Regulation (593/2008/EC), which is applicable in Austria, individual employment contracts are governed by the law of the state in which or from which the employee habitually carries out their work in performance of the employment contract. The temporary performance of work in another state does not change this. For crew members, the usual place of work will usually be their home base.

However, the parties are also free to agree on the applicability of another law to the employment relationship. Here, however, a qualification must be observed whereby this choice of law must not result in the employee being deprived of the protection that would have been granted to them by the mandatory law applicable in the absence of a choice of law.

This means, in short, that although it is possible to stipulate in the employment contract of an employee who habitually performs their work in or from Austria that their employment relationship should be governed by foreign law (for example, the law of the country in which the airline is based), the mandatory Austrian provisions of labour law must nonetheless be observed.

The provisions of (mandatory) collective labour law, such as those regulating the possibility of electing a works council, concluding works agreements and challenging dismissals, will apply as soon as the foreign airline establishes an operational unit (“Betrieb”) in Austria. A choice of law is not possible here.

Which issues require particular attention in terms of labour law?

Austrian labour law is relatively complex and characterised by the existence of various legal sources organised in a hierarchy of norms. Employers have to observe not only statutes and the individual employment contracts, but also the so-called collective agreements (contracts concluded between the collective representatives of employers’ and those of the employees) and as well as so-called works agreements (if a works council exists).

Of particular relevance in everyday working life are the provisions on working time (especially maximum working hours and overtime pay), the regulations on periods in which employees are unfit for work, paid and unpaid leave, as well as the regulations on minimum wages. Although there is virtually no statutory minimum wage in Austria, there exists a plethora of collective agreements covering a fairly wide spectrum of businesses, including foreign airlines, which in turn stipulate minimum wages. These minimum wages must also be observed by employers not based in Austria (and falling outside of the scope of the collective agreements) due to the mandatory provisions of the Wage and Social Dumping Prevention Act (“LSD-BG“).

Furthermore, the (foreign) employee must also comply with the provisions of Austrian social and (income) tax law, which are both fairly complex and mandatory.

The Collective Agreement for Foreign Airlines in Austria

For foreign airlines, the Collective agreement for white-collar employees and other staff of foreign airlines in Austria is of particular day-to-day relevance.

Although this collective agreement was primarily negotiated for sales and station staff, it now applies to all employees of foreign airlines working in Austria (including crew members). The only exceptions are those employees who have been transferred to Austria and whose contracts of employment are subject to foreign employment law, as well as executive employees.

This collective agreement contains various regulations that must be observed by foreign airlines. These include, in particular, provisions on overtime pay, normal working hours and, importantly, minimum wages. Accordingly, employers have to classify their employees according to a scheme laid down in the collective agreement and pay them at least the minimum wage set out in the remuneration scheme set therein – a task which is not always easy (not least due to the genesis of the collective agreement and its wide scope of application). Underpayment can not only lead to civil law claims by employees under their employment contracts, but also to draconian administrative fines of up to EUR 400,000 under the Austrian Wage and Social Dumping Prevention Act.

Furthermore, the collective agreement also stipulates that employees are entitled to a holiday allowance in the amount of one month’s basic salary as well as a Christmas bonus in the amount of the November salary in addition to their regular monthly salary. Such special payments are customarily stipulated in  Austrian collective agreements, which is why in Austria it is generally said that employees receive 14 salaries per year.

Posting Employees to Austria

In some cases, foreign airlines prefer to send to Austria staff already employed by them at their headquarters in managerial positions or as specialists in a particular field. In this case, the Collective Agreement for Employees and Other Workers of Foreign Airlines will not apply if the employment contract is still subject to foreign employment law. This does not mean, however, that Austrian labour law is entirely inapplicable or that there are no mandatory regulations with regard to minimum wage. Indeed, the provisions of the Austrian Wage and Social Dumping Combating Act (“LSD-BG“) must still be observed.

Accordingly, there are strict reporting and documentation obligations for all postings to Austria. The reporting and residence law obligations vary depending on whether the posting employers and the posted employees are citizens of the EU, EEA, Switzerland or of other third countries.

Posting companies based in the EU, the EEA or Switzerland must report postings of third-country nationals to the Central Co-Ordinating Agency (ZKO) of the Anti-Fraud Office before the planned commencement of work by the posted employee. Subsequently, the Central Co-Ordinating Agency forwards such notifications to the Austrian Public Employment Service (AMS), which must issue, within two weeks of receipt of the notification, an “EU posting confirmation” if the prerequisites for the posting are met or, if the prerequisites are not met, prohibit the posting. In addition to the EU posting confirmation, the third-country national employee must also have a valid visa or (in the case of postings for more than 6 months) a suitable residence permit, which must be applied for separately with the competent authority.

If the posting company (employer) is based in a third country, the posting of third-country nationals requires a posting permit or an employment permit (depending on the duration of the posting), which must be applied for directly with the AMS. A posting permit can be issued to posted third-country nationals for a maximum duration of 4 months provided that the work for which they are deployed does not last longer than six months.  If the work lasts longer than six months or the employment of the posted employee lasts longer than four months, an employment permit must be applied for instead of a posting permit. In these cases, too, the third-country national must have a valid visa or a suitable residence title in Austria, which, again, must be applied for separately.

Furthermore, the foreign employer must also comply with the provisions of Austrian social law, according to which, depending on the circumstances of the posting, either proof of existing insurance in the employee’s country of habitual employment or registration with the Austrian social insurance system is required. This issue often leads to problems in practice and the solution to it will depend above all on whether there are social law agreements concluded between Austria and the country of habitual employment of the posted employee. In the case of a posting within the EU, a confirmation (“A1 certificate”) must be applied for from the competent social security institution of the posting country. The A1 certificate is a document which states in a binding manner that only the social security laws of the posting country (and not Austrian social security law) are applicable to the posted employee (for the duration of the posting). The A1 certificate is therefore an important instrument for the foreign employer-company which it can employ to mitigate its social security liabilities in a relatively uncomplicated manner.

However, it must be pointed out that during their posting to Austria, the posted will enjoy certain rights under Austrian labour law. For example, they are entitled to at least the same remuneration as is stipulated (by statute or collective agreements) for comparable work done for comparable employers in Austria (including the holiday allowance and the Christmas bonus). Thus, the minimum wages laid down in the collective agreements are also applicable to posted workers by operation of the Austrian Wage and Social Dumping Combating Act (LSD-BG). The working time limits and minimum rest periods applicable in Austria must also be observed and the paid leave provided for under Austrian law must be granted.

In case of more detailed questions that can easily arise in connection with the complex issues related to the employment of staff of foreign airlines in Austria, our Aviation Team is happy to assist and offer further advice.

 

Click here for the pdf version of our article on the employment of staff of foreign airlines in Austria.

General Conditions of Carriage in Austria

General Conditions of Carriage in Austria

Besides the handling of Passenger Claims and the challenges related thereto, airlines are often confronted with complaints from consumer protection organizations regarding their General Conditions of Carriage (GCC). In Austria, especially the Verein für Konsumenteninformation (“VKI”), is very active in this regard and routinousely examines General Terms and Conditions of several companies, including GCC used by airlines that are active in Austria.

If an airline´s GCC contains clauses that the VKI deems to be unlawful, it will request the airline to sign a cease and desist declaration preventing it from using these specific clauses and to pay a contractual penalty to the VKI for every breach.

If the airline refuses to sign such declarations, the VKI files a lawsuit demanding the stop of the use of certain clauses and the publishing of the ruling against the airline in Austria´s most read newspaper at the airline´s expense.

During its proceedings, the competent court assesses every clause of the challenged GCC based on the following criteria:

Unusual clauses that are surprising and disadvantageous

§ 864a of the Austrian Civil Code states that in General Terms and Conditions (like GCC) clauses of an unusual content that are surprising and disadvantageous for the other party are not regarded to be part of contracts based on these GTC.

However, such clauses can be valid if the party using them in its General Terms and Conditions has specifically notified the other party of their use.

Grossly disadvantageous clauses

§ 879 (3) of the Austrian Civil Code states that clauses contained in General Terms and Conditions which do not specify one of the main services to be provided by either party shall be void if they are grossly disadvantageous for one party.

Austrian courts interpret the exception set forth regarding main services very narrowly, which leads to the provision being applicable to basically all clauses that do not concern the individual description of the type, scope and quality of the main services. The assessment whether a clause is grossly disadvantageous is, in general, being made by comparison with the codified provisions of Austrian civil law together with a balancing of the parties´ interests.

Intransparent clauses

The Austrian Consumer Protection Act sets forth several types of clauses that are not binding for consumers. § 6 (3) of this Act additionally stipulates that clauses contained in General Terms and Conditions shall be invalid if they are intransparent. This is, in particular, the case if the wording of such clauses is unclear, if their content is not easily comprehensible to the consumer or if they incorrectly present the average consumer´s legal position.

Collection of clauses that were deemed to be violating Austrian law

Since there have already been numerous court proceedings regarding GCC in Austria, we have an extensive collection of clauses that Austrian courts deemed to be violating Austrian law. This includes especially the following clauses:

  • No-Show Clauses[1] that are not limited to passengers intentionally circumventing the ticketing system[2],[3],[4]
  • Complaints from passengers are only accepted if the are made via e-mail, an online form or fax[5]
  • Scheduled departure times may change after the booking (without precising under which circumstances)[6]
  • Ticket refunds shall only be paid to the person or travel agency that booked the flight or only to the bank or credit card account that was used to pay the ticket fare[7]
  • Transport is denied if the flight coupon is severely damaged or altered[8]
  • Complaints must be made by the passenger himself and he must wait at lest 28 days for a response before instructing third parties to assert his claims on his behalf[9]
  • Passengers must pay an additional fee in cases of an offline check-in at the airport[10]
  • Deadline of two years for compensation claims regarding damages of any kind[11]
  • Claims must only be assigned to other passengers of the same booking or travel group[12]
  • Clauses that incompletely inform a passenger about his rights under the Montreal Convention or Regulation 261/2004[13],[14]

The consequences of a clause being deemed to be in violation of Austrian law are, on the one hand, that the airline loses the proceedings and is, therefore, obliged to stop using this clause, to reimburse the other party´s legal fees and to pay for a publication of the ruling in an Austrian newspaper. On the other hand, the clause is regarded to be null and void, which means that passengers are not bound by it.

Airlines must stay vigilant

Due to the routinely reviews of General Conditions of Carriage by consumer protection agencies, airlines have to pay specific attention to the content of their GCC when they are active in Austria in order to avoid court proceedings, costs and negative publicity.

Our Aviation Team at Weisenheimer is experienced in handling such cases and happy to answer your questions related to the use of General Conditions of Carriage in Austria, to review your GCC to mitigate the risk of legal proceedings and to represent you in court proceedings.

Click here for the pdf version of our article on General Conditions of Carriage in Austria.

 

[1] You can find our more detailed analysis of No-Show Clauses in Austria based on court proceedings our Aviation Team was involved in by clicking here.

[2] Brussels Airlines, Higher Regional Court Vienna, 10.07.2019, 129 R 56/19g.

[3] KLM, Higher regional Court Vienna, 11.06.2019, 1 R 73/19s.

[4] Lufthansa, Austrian Supreme Court, 20.04.2021, 4 Ob 63/21z.

[5] Laudamotion, Higher Regional Court Vienna, 23.2.2021, 2 R 48/20y.

[6] Laudamotion, Austrian Supreme Court, 18.03.2022, 6 Ob 127/21a.

[7] SWISS, Higher Regional Court Vienna, 04.11.2022, 2 R 106/22f.

[8] Lufthansa, Austrian Supreme Court, 20.04.2021, 4 Ob 63/21z.

[9] Laudamotion, Higher Regional Court Vienna, 23.2.2021, 2 R 48/20y.

[10] Laudamotion, Austrian Supreme Court, 27.02.2020, 8 Ob 107/19x.

[11] Lufthansa, Austrian Supreme Court, 20.04.2021, 4 Ob 63/21z.

[12] Laudamotion, Higher Regional Court Vienna, 23.2.2021, 2 R 48/20y.

[13] Lufthansa, Austrian Supreme Court, 20.04.2021, 4 Ob 63/21z.

[14] Laudamotion, Austrian Supreme Court, 18.03.2022, 6 Ob 127/21a.

Aircraft Registration Q&A

Aircraft Registration in Austria: Q&A

The Austrian Aircraft Registry has enjoyed popularity with both aircraft operators and aircraft owners for quite some time now. In total, more than 1,800 aircraft and helicopters are already registered in Austria. Judging by the number of inquiries on aircraft registration in Austria we are currently receiving at Weisenheimer Legal, the number of registrations is very likely to increase in the coming months.

In order to assist with your considerations and evaluations, we have briefly summarized the most frequently asked questions regarding aircraft registration in Austria in this Q&A:

  • Who is responsible for the registration of an aircraft in Austria? The aircraft owner or the aircraft operator*?

In principle, only the operator (as holder of the aircraft) can procure the registration. This requires – where the operator is not also the legal owner – the consent of the owner. The consent is given by transferring the holdership of the aircraft to the operator. In practice, a form provided by Austro Control must be used for this purpose.

  • What are the nationality requirements for the operator and the owner?

In short (simplified): The operator must be established under the laws of a member state of the EU and have its registered office in a member state of the EU. If the operator does not have an address for service of process in Austria, they must appoint an Austrian agent for this purpose. We at Weisenheimer Legal have long experience acting as process agent for our international clients and can therefore offer you competent and reliable handling of your registration process in Austria.

The aircraft owner need not meet any particular nationality requirements, provided that they transfer the holdership of the aircraft to an operator (holder) who meets the previously described requirements.

  • In what form must the documents be presented for registration?

Normally, copies of documents that can be sent to Austro Control by e-mail are sufficient. In some cases, certified translations of original documents are required. Documents in English are mostly accepted.

  • Can pledges on aircraft be registered in Austria?

No, this is not possible. This being said, we will be happy to advise you on the best practice of creating pledges on aircraft.

  • Do contracts between the operator and the owner need to be disclosed?

No. The agreement between the operator and the owner need not be disclosed; it is sufficient to submit a signed form confirming the transfer of holdership, as provided by Austro Control.

It is not necessary to enter into a lease agreement or a holdership agreement. However, in some cases it is recommended to conclude a holdership agreement in order to facilitate the process.

  • Can the owner deregister the aircraft without the operator’s consent?

No. Only the operator can deregister the aircraft. Therefore, it is also recommended that the operator (acting as holder) issues a Power of Attorney for Deregistration in favor of the owner.

  • What proof does the owner have that he is known to Austro Control as the owner of the aircraft?

Only the operator is named on the Certificate of Registration. Unfortunately, the official translation of the “operator” (holder) on the Certificate of Registration as “Name of Owner” is somewhat misleading. At the request of the operator, Austro Control issues a confirmation to the owner stating that the owner of the aircraft is known to it as the legal owner and that the owner named on the Certificate of Registration is not to be regarded as the legal owner.

 

Click here for the pdf version of our Q&A on Aircraft Registration in Austria.

 

*In connection with aircraft registrations, the term “holder” and not “operator” is used in Austria. In this Q&A, the term “operator” is used for ease of reading, but it is to be understood in the sense of “aircraft holder” and not in the sense of Regulation (EU) 965/2012. In order to be able to act as “holder” of an aircraft, neither an operating license nor an AOC is required.

Lexology GTDT Air Transport Austria

Lexology GTDT: Air Transport in Austria

Our Aviation Team was chosen to author the chapter on Air Transport in Austria in Lexology´s Getting the Deal Through (GTDT).

The GTDT´s aim is to give readers quick access to country specific insights to a variety of topics. Thus, it is crucial for contributors to have a wide range of expertise while also being able to deliver relevant information in a compact, but still comprehensive way.

We invite you to check out the GTDT on Air Transport in Austria by clicking here (online) or here (pdf) and to reach out to us for further information.

Reproduced with permission from Law Business Research Ltd. This article was first published in Lexology GTDT – Air Transport 2023. For further information, please visit: https://www.lexology.com/gtdt

Aviation Fuel Tax in Austria

Aviation Fuel Tax in Austria

The Aviation Team of Weisenheimer Legal has recently secured a business jet operator’s right to tax-free use of aviation fuel in Austria.

According to Article 14 Energy Products Directive (2003/96/EC), energy products supplied for use as fuel for the purpose of commercial air navigation (“other than in private pleasure-flying”) are exempt from EU Energy Tax. In order to benefit from this tax exemption, an operator must obtain a refueling certificate. To obtain such a refueling certificate, an “exclusively commercial use of the aircraft by the operator” must be shown and supported by appropriate evidence.

For several years, it was unclear in Austria what constitutes an “exclusively commercial use of the aircraft” and what evidence the authorities may reasonably demand from the operator to prove it.

With the majority of business aviation flights booked with operators not by passengers but rather via charter brokers, the Austrian authorities insisting on the disclosure of “end-customer invoices” (i.e. invoices issued by brokers to passengers), many operators could not discharge the burden of proof and were thus denied refueling certificates necessary for tax-free use of aviation fuel in Austria. Furthermore, Austrian Customs (Zollamt Österreich) insisted that the sale of flights via charter brokers meant that it were the brokers and not the operator who exercised the effective control and enjoyed the use of the aircraft for the duration of the flight booked.

Following the intervention by Weisenheimer Legal and the support of Austrian Business Aviation Association (ABAA), the Federal Finance Court decided that the mere fact that flights are sold via charter brokers does not effect a transfer of control and use of the aircraft to third parties (brokers). Therefore, it was decided that invoices issued to brokers by an operator with a valid Air Operator Certificate (AOC) were sufficient evidence of “exclusively commercial use of the aircraft by the operator”.

The decision is available here (in German).

This decision is the next positive development in a chain of court decisions issued after the Austrian Supreme Administrative Court decided in September 2022 that flights operated by business jet operators for the aircraft owners satisfied the requirement of commercial operation and thus qualified for tax-free use of Aviation fuel as long as they were operated “for a fee”, which could also take the form of a (monthly) management fee (case number Ra 2019/16/0104).