Austrian Law Blog:


Is it possible for an insolvent legal entity to be granted legal aid in order to be able to pursue a claim?

An insolvent debtor can apply for the grant of legal aid under Austrian law. The first prerequisite for the granting of legal aid is that the bankrupt’s estate is not in a position to raise the necessary funds for legal proceedings. The primary factor to be taken into account here is the cash assets present in the bankrupt’s estate. If these assets are not sufficient to satisfy all claims of the bankrupt’s estate, the first criteria is usually fulfilled.

In spite of insufficient funds, however, the grant of legal aid is to be refused, if the costs of the proceedings should be funded by the “economic parties involved in the conduct of the proceedings”. According to recent case law creditors of the debtor are considered as such economic parties if they could derive a significant advantage from a successful claim of the debtor. Creditors whose satisfaction does not depend on the conduct of the litigation, e.g. if even in the case of success they would receive nothing or would be fully satisfied even in the event of dismissal of the debtor’s claim, are not to be considered for such evaluation.

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