Mar 2020 Interview with Mr. Michael Lagler, Managing Partner, Schönherr, Austria
Prisma Reports (PR): What are the advantages of investing in Austria from a legal perspective? What kind of securities and protections do investors benefit from?
Michael Lagler (ML):Austria is a very stable democracy, with good checks and balances, with a very mature legal system, and a very developed court system. The country is host to a traditional production industry but also a strong and innovative technology industry, especially in Upper Austria where there are a lot of developments. Austria counts a number of hidden champions such as Delfort and world giants such as Swarovski. Vienna offers a very modern and innovative environment with a lot of people coming from all of Europe. Vienna will soon have two million citizens and will become the second biggest German city. Our new government is planning reforms, starting with the healthcare sector, and soon a tax reform will be implemented. Austria is a hub, the centre of Eastern Europe, and so a number of companies like Henkel have their CEE hub in Austria. Austria is becoming attractive again, and one of the reasons for that is for example, the taxes. E.U. states still have freedom to decide on their tax framework and currently Austria is pushing for reforms to decrease corporate income tax to reduce the tax burden on wages, so that employers and employees have more money in their pockets at the end of the day. Next the Government will also introduce a digital tax for companies like Facebook, Google, etc so that that whoever is making business in the digital world has to pay tax somewhere.
(PR): As a law firm you have a privileged opportunity to witness the region’s development and its opportunities. Which sectors or which areas do you see the most traction at the moment in Austria?
(ML): The M&A boom is not that high anymore, but there are a lot of technology players that Asians and Chinese in particular are interested in. China is looking at technology and still find such companies here. We are witnessing a real estate boom in Austria: we are talking about billions of investment. Schönherr had around 1.8 billion last year in real estate transaction volume, for the most part in the residential sector. There are not so many possibilities to invest in offices anymore, there are not so many opportunities in the market, and therefore the tendency now is residential investment. This has also something to do with the fact that Vienna is growing. We did quite a lot for German funds last year but not only. Recently we just did two high-volume transactions, including for Asian investments from Korea. So you find a lot of international investors in that segment. The tourism sector is also booming in Austria maybe this is also something to do with the summers being hotter now than in the past. More Austrians are staying in Austria and more people are visiting Austria. Of course, this has a positive impact on the tourism sector. Big hotel developments are being built, not only in the cities like Vienna, Salzburg, Innsbruck but we also see investments into smaller hotels.
(PR): One of the strengths of Austria as a business location is its skilled and highly motivated employees. Unemployment stands at a low 5% in Austria, which is one of the lowest in EU. How would you qualify Austria’s labour market, what are the main benefits and drawbacks for employers in Austria? How is Austria working to cut the red tape, and gain in flexibility and efficiency ?
(ML): The Austrian labour market hasn’t changed much, we have a strong trade union and the Chambers of Commerce do their best to keep negotiations between employees and employers balanced. One of our success factors over the last decades has been the quasi absence of strikes in Austria. Costs are quite high both from an employee and employer side, but this is something that the government is trying to reduce at the moment. When it comes to termination, we have a protection system, yet in comparison with other EU restrictions we are still quite liberal. The new government also introduced a reform to increase working hours to up to 12 hours per day with a maximum of 60 hours per week.
(PR): According to IMAA institute analysis, more than 200 deals were made with a total value of 10 billion euros taken place in Austria. One of the legal services provided by Schönherr is focused on M&A activities. You have been advising on numerous transactions, and were recognized as “Austria’s M&A law firm of the year” by Chambers and Partners.
(ML):Schönherr is the M&A powerhouse of Austria. We have the leading M&A team with quite a number of outstanding people, and when you look at the track record it’s absolutely justified that we won one award after the other, like the recent “Austria’s M&A law firm of the year” by the renowned legal publisher Chambers and Partners. We represented Buwog with respect to the public takeover bid of Vonovia. We represented Starwood in the acquisition of 26% stake in CA Immo, and we represented UniCredit Group on a strategic partnership with Allianz and Generali. We have quite a number of outstanding real estate transactions that pointed out. This is just Vienna – we also have a group of partners dealing with CEE. We see ourselves not so much as a Vienna firm only but as a regional firm, even if it’s one of our strategies and most important tasks to remain the leading law firm in Austria, from a marketing perspective.
(PR): The success of a company springs from its ideas that can be protected by a range of property rights. The Austrian Patent Office is the national Centre of Excellence which provides the protection for inventions needed for safeguarding the interests. How does Austria protect intellectual and industrial property rights ?
(ML):On a global basis there is an ongoing fight between the US and China. China and Asia are always trying to get intellectual property rights. Austria was always quite a mature jurisdiction in regards to IP, even though now the intellectual property area for trademarks and signed copyright, for commercial practice and enforcement is governed by a EU directive. The commercial code in Vienna is the competence to decide on these matters so this is in a way centralised. Austria tends to be at the forefront of IP protection within Europe, the so-called Unified Patent Court Agreement has been in place since 2013. Now a very hot topic here is the protection of trade secret. There is also a directive from the European Union which was implemented and transferred into national law. I believe one of those jurisdictions is to really take care of the protection of intellectual property rights.
(PR): You’ve been advising international companies like Starwood, Buwog, Advent. When it comes to marketing, how are you working to promote your services, enhance your reputation and attract international clients or partners?
(ML): Around 16-17 years ago we started building up our regional firm and we have now a very strong footprint from Poland to Turkey. We are especially strong in South Eastern Europe and Central Eastern Europe. When the crisis hit we saw that maybe Austria was affected a bit but the fact that we were so much into the region helped us to keep our revenues and profits stable. When the crisis came we actually made a big jump with respect to revenues. It’s always like that, firms increase their revenues in a crisis. That’s just a fact. At that time we were very much involved in the reform of the banking structure in Austria. We are a top firm in Vienna with outstanding individuals. We have a strong group of people, a strong CEE footprint and we are a high-quality firm, which is our biggest asset. We are a market leader, providing quality. One of the key ideas of our founder, Professor Fritz Schönherr was “Quality, quality, quality”. This is part of our DNA so we want to provide our clients with highest quality services. And of course, our environment is changing quite a lot, innovation is key, and an important topic for our firm. We launched our own innovation hub at Schönherr, where we come up with, develop and implement new technologies.. We are also looking at what is going on in the market: We are part of the Legal Tech Hub Vienna, where seven law firms including Schönherr got together, with respect to legal innovation. This started in 2018 and now we are seeing the first start-ups and products, and there’s a lot of spotlight on that because other jurisdictions are following us. This innovation hub at Schönherr is very much internal thinking combined with the legal tech hub Vienna, where we get ideas.And of course, technology and digitalisation are also growing markets where we provide advice. That’s why we established a group within Schönherr, which focuses on advice with respect to technology.
We are in contact with all the big players, mostly on a best-friends basis. We offer a one-stop shop in the whole region and a multi-jurisdiction expertise, where we are the contact point for a number of jurisdictions. This is still something our competitors are looking for, and we have here quite nice high volume of mandates. On the other hand we see ourselves as a regional firm. We are permanently improving our position in the CEE, we are one of the leading firms in Serbia, one of the leading firms in Romania, all our other offices are growing, and we are also recognised as national player in these countries. This is key. We only get stronger if we improve on a permanent basis our standing in the jurisdictions where we operate. And if we do that we are quite an attractive partner for other firms as well.
(PR): What would be your final message for our readers?
(ML): If you want do business in the region, Austria is one of the hubs to go into, there’s a lot of knowledge and a kind of professional distance, which helps a lot. Austria is a very stable and interesting market, with a number of technology companies, and there is a reason why Mercer chose Vienna as the best place to live.