International Jurisdiction for Investor Claims Based on Prospectus Liability following CJEU 12.9.2018, C-304/17, Löber/Barclays

Lately, the value of many products on foreign financial markets has dropped considerably. As a result, affected investors regularly strive to hold the issuers of these products liable before domestic courts. In the following, the relevant European rules of international civil procedural law and the related case law of the Court of Justice of the European Union will be examined. Thereafter, a fresh methodological approach to the questions at hand will be presented.

Part III Prospectus Liability and Litigation, 23 Spain

This chapter considers the prospectus in Spain. Historically, and unlike other European Union jurisdictions, before the enactment of Directive 2003/71/EC of the European Parliament and of the Council of 4 November 2003 on the prospectus to be published when securities are offered to the public or admitted to trading and amending Directive 2001/34/EC (the ‘Prospectus Directive’), Spain lacked any explicit regulation on the civil liability arising from the defective content of prospectuses for securities offerings and listings in regulated markets. Nevertheless, legal authors having researched on the matter had expressed the view that liability attached to prospectuses on the basis of the general principles of tort liability. The legal regime of prospectus liability enshrined by the Securities Market Act and Royal Decree 1310/2005 is not fully comprehensive, however. In addition, it is completed with the general principles of civil liability contained in the Spanish Civil Code as construed by case law stemming from the Spanish Supreme Court.

Part III Prospectus Liability and Litigation, 22 Italy

This chapter focuses on Italian law. Italian securities law refers to ‘prospectus’ as the document that has to be published when there is an offer to the public of transferable securities and units issued by collective investment undertakings of the closed-end type, an offer of any other type of financial product or, finally, a request for admission to trading on a regulated market. The prospectus is the document that is drafted in accordance with the EU Prospectus Regulation. The scope of Italian prospectus regulation is moreover wider than the scope of the EU Prospectus Regulation. Prospectus liability in Italy is today governed by specific rules that incorporate many of the issues that were debated by scholars and courts before the enactment of those specific statutory rules. Currently, the main issue seems to be whether those statutory rules express principles to be applied to all forms of material misstatements or omissions to the market, or are just a part of the general framework concerning liability to the market.

Part II The New EU Prospectus Rules, 9 The Contents of the Prospectus: Non-Financial Information and Materiality

This chapter addresses the non-financial information to be included in a prospectus, alongside an analysis of the fundamental concept of materiality. It examines some issues relating to non-financial information to be included in a prospectus under the new EU prospectus regime. A level playing field in terms of uniform investor protection within the EU accordingly has regrettably not been achieved. This chapter argues that the Prospectus Regulation could have achieved more by requiring Member States to impose certain uniform tort law requirements in their national prospectus liability regimes. Another topic addressed in this chapter relates to the possibility for offerors of securities to obtain liability protection by including exoneration clauses in prospectuses. The Prospectus Regulation does not regulate this topic, but the analysis in this chapter shows that the possibilities appear to be severely limited; practice in any event shows that exoneration is seldom (if ever) stipulated. The chapter concludes that all this appears to be relatively good news in terms of investor protection generally, but the lack of harmonisation stands in the way of a unified EU capital markets union.

Prospectus Regulation and Prospectus Liability

This book provides integrated analysis of and guidance on the Prospectus Regulation 2017, civil liability for a misleading prospectus, and securities litigation in a European context. The prospectus rules are one of the cornerstones of the EU Capital Markets Union and analysis of this aspect of harmonisation, the areas not covered by the rules, and the impact of Brexit, provides valuable reference for all advising and researching this field. The book discusses the subjects of Prospectus Regulation from both a legal and economic perspective. It focuses on key subjects of the new Prospectus Regulation, providing an in-depth analysis of each issue. The book then moves on to explain the domestic law on liability for a misleading prospectus, this issue being omitted from the Regulation. The law and practice in each of the key capital markets centres in Europe is analysed and compared, with the UK chapter covering the issues and possible solutions under Brexit. A chapter on securities litigation gives full consideration of conflicts of laws issues with reference to the Brussels I regulation, and the Rome I and II Regulations. The book concludes by looking to the future of disclosure practices in connection with securities offerings in the EU.

Part III Prospectus Liability and Litigation, 24 The Netherlands

This chapter discusses Dutch law. The history of the present statutory rules on prospectus liability in the Netherlands dates back to 1928, the year in which Dutch corporate law was codified. Like the annual report which companies had to publish on a yearly basis, the Dutch legislator considered the prospectus as a corporate document and therefore was of the opinion that a statutory rule on prospectus liability should be issued together with the Companies Act. Codification of prospectus liability was effectuated by formulating it as a special category of tort in the Dutch Civil Code (DCC). The act of 1928 provided that managing and supervisory directors of the issuer would be jointly and severally liable with the issuer itself for misleading statements in the prospectus. This had to do with the view of the legislator — that the decision of investors to invest in a company was to a large extent based on the reputation of management. As a result of this joint and several liability of directors, the first Dutch legislation on prospectus liability can be considered as being particularly investor friendly.

Part III Prospectus Liability and Litigation, 21 France

This chapter sets out the French law. Financial operations triggering the obligation to draw up a prospectus are common in France. By contrast, the chapter shows that there is no judicial decision holding people accountable for infringing the prospectus legislation. However, this does not mean that there are no decisions concerning prospectuses or, more generally, financial information. The chapter asserts that these decisions to in fact exist. However, in these decisions, either provisions other than provisions of the prospectus legislation are applied to prospectuses, or the document of information is other than the prospectus. More often than not, the decisions are about people who are accused of having spread false or misleading information. From this point of view, these decisions are relevant regardless of the context and the document used in order to disseminate such information. The solutions resulting from these decisions are applicable to difficulties concerning information included in a prospectus.

Part III Prospectus Liability and Litigation, 19 Prospectus Liability: Competent Courts of Jurisdiction and Applicable Law

This chapter addresses the European legal framework for cross-border disputes arising from alleged violations of prospectus rules. It deals with the identification of both jurisdiction and applicable law in cases where litigation involves transnational elements, so that a conflict may occur about who is the judge having jurisdiction and what law is this judge bound to apply. Crucial in both respects are, in the first place, the connecting factors to which EU law refers to and, in the second place, the rules concerning issuers' and investors' ability to deviate from such rules. The chapter asserts that the importance of these rules can hardly be overestimated. However, not all courts are equal, and neither are national laws, and the chapter shows these differences affect the topic at hand.