Executory contracts in insolvency: The Austrian perspective

Abstract

This chapter focuses on insolvent businesses and introduces their possibilities to reorganize or to orderly liquidate in an Austrian insolvency proceeding. After providing the legal framework of Austrian insolvency law, the chapter puts its main emphasis on the treatment of executory contracts in insolvency. The major reform of Austrian corporate insolvency law in 2010 altered the approach towards executory contracts in a quite spectacular fashion: in light of the worldwide economic crisis, the Austrian legislature made an attempt to aid businesses in their efforts to reorganize after they have filed for insolvency. In order to achieve this goal, the legislature enacted the Austrian Insolvency Code (Insolvenzordnung - IO) and put an automatic stay of executory contracts and a prohibition of ipso facto clauses in place. In 2021, the Austrian legislature had to implement the EU Directive on Restructuring and Insolvency and therefore enacted the Austrian Restructuring Code (Restrukturierungsordnung - ReO), which contains similar provisions to safeguard the debtor’s existing contracts. However, the effectiveness of the provisions in both the Austrian Insolvency Code and the Austrian Restructuring Code could be improved.