Euro zone crisis leaves CEE ripe for investment


With more than 700 million people, a third of the worldwide GDP, and assets under management exceeding US$30 trillion, Europe is undoubtedly one of the places to be for doing business. Its traditions of innovation and technology, its rich culture and long history all add to Europes appeal. Even more tempting for entrepreneurs is central and eastern Europe (CEE), the bigger and more complex half of Europe.

Christian Mikosch
Christian Mikosch

Western European markets are rather mature, growth forecasts are low and public households tend to be heavily indebted. By contrast, public and private debt levels across CEE are generally low and GDP growth is forecast to be at least twice as high as the euro zone in the years to come.

However, the euro zone crisis has also left its mark on the region: asset prices have come down significantly and a general shortage of traditional financing adds to the pressure on companies to look beyond their traditional business models. These circumstances create highly attractive opportunities for Chinese investors to enter high-end markets outside of Asia and also gain access to natural resources, innovative technology, European management culture and renowned European brands. By way of example, last month an Austrian engine producer, Steyr Motors, was acquired by a Chinese investor with the aim of leveraging the benefits of European innovation, research and development competencies and access to Western markets, and adding Chinese advantages such as high market potential and low production costs.

From a legal perspective, CEE jurisdictions may appear to be rather fragmented. But a comparative analysis shows that, despite the language barriers between the jurisdictions, the various legal systems are surprisingly similar and generally closely follow German and Austrian civil law. When the Iron Curtain fell, at the beginning of the 1990s, the countries in the western Balkan and CEE region basically adopted the German and Austrian civil law regimes.

EU status has helped the Czech Republic harmonise its legal system.
EU status has helped the Czech Republic harmonise its legal system.

This development is explained not only by the geographic proximity of Germany and Austria to the region, but also by the fact that many CEE countries were part of the Austro-Hungarian Empire until 1918, and have strong historical links that are still widely relevant in terms of cultural understanding. Even today, Austria has a distinct advantage as a business hub and regional headquarters for the entire CEE.

Certain areas, such as real estate law, the land register and the system for the conveyance of real property share especially strong Austro-Hungarian roots. The integrative effects of the EU, to which CEE countries either have acceded or aspire to accede in the future, have helped to further harmonise the various legal systems, in particular with regard to regulations that are relevant for doing business, such as domiciliation, rendering services, cross-border trade and competition.

A thorough understanding of these common legal features can significantly reduce the complexity of entering these supposedly segregated jurisdictions, which in fact resemble a single large market for many purposes. Traditionally, the legal communities in cities such as Vienna, Munich, Paris or London drove legal developments far beyond their respective home countries.

Christian Oehner
Christian Oehner

In addition to large English law firms – many of which have in the meantime withdrawn from the CEE market – it was especially the Austrian law firms which were key facilitators of legal developments throughout the region, and which worked on many innovative projects, for example by introducing internationally funded or public-private partnership (PPP) infrastructure projects, transforming socially owned enterprises into private companies, executing up-to-date merger and acquisition transactions, and breaking new ground with cutting-edge capital markets transactions – all of which were, at that time, neither known nor governed by any legal framework under the former legal regimes.

From the early 1990s until today, CEE governments and legislators have made remarkable efforts to transform their countries and economies into highly attractive places to do business. Former deficiencies were largely remedied or overcome. Today, the region features highly attractive corporate and income tax regimes, with corporate income tax rates often as low as 10%, and generally highly flexible labour laws.

cee%ef%b9%a3bar_chart_1The rule of law is generally well established, there is an increasing volume of legal precedent furthering predictability, and the court systems mostly work properly and in a timely fashion. By way of an anecdote, one of the authors advised on a case where a national judge passed an interim injunction against the national football association in a particular country – to the benefit of a multinational enterprise that had entered into a joint venture with the football association.

This illustrates that the level of professionalism with regard to business and the economy throughout CEE countries is quite remarkable for an emerging market region with rather young legal systems and court and administrative regimes. In addition, a comprehensive regime of investment protection legislation was implemented throughout the region.

After a slowdown of western European and US investments into the region, CEE governments are very open to Chinese investment and are actively soliciting it.

Christian Mikosch is a CEE expert and a partner at Wolf Theiss in Vienna. He can be contacted at +43 1 515 10 – 5310 or by email at

Christian Oehner is an M&A lawyer and a partner at Wolf Theiss in Vienna. He can be contacted at +43 1 515 10 – 5105 or by email at