Posts Tagged Prospectus
Jurisdiction re prospectus liability. CJEU reiterates Universal Music in Löber v Barclays. Unfortunately fails to identify the exact locus damni and leaves locus delicti commissi unaddressed.
I reviewed Advocate-General Bobek’s Opinion in C-304/17 Löber v Barclays here. The following issues in particular were of note (I simply list them here; see the post for full detail): First, the AG’s view, coinciding with mine, that the CJEU’s finding in CDC that locus damni for a pure economic loss, in the case of a corporation, is the place of its registered office, is at odds with precedent (he made the same remark in flyLAL). Next, on locus delicti commissi, the AG suggests that despite Article 7(2)’s instruction, a single ldc within the Member State in the case at hand cannot be determined. Further, for locus damni, I disagree for reasons explained in the post with the AG’s suggestions.
The Court held on Wednesday. At 26 it immediately cuts short any expectation of clarification on locus delicti commissi: ‘In the present case, the case in the main proceedings concerns the identification of the place where the damage occurred.’
The referring court’s questions were much wider, asking for clarification on ‘jurisdiction’ full stop. Yet the Court must have derived from the file that only locus damni was in dispute. A missed opportunity for as I noted, Bobek AG’s views on that locus delicti commissi are not obvious.
On locus damni then, I may be missing a trick here but the Court simply does not answer the referring court’s question. As the AG notes, Ms Löber in order to acquire the certificates, transferred the corresponding amounts from her current (personal) bank account located in Vienna, to two securities ‘clearing’ accounts in Graz and Salzburg. Payment was then made from those securities accounts for the certificates at issue. The Court refers to Kolassa and to Universal Music, to reiterate that the simple presence of a bank account does not suffice to establish jurisdiction: other factors are required, such as here, at 33,
‘besides the fact that Ms Löber, in connection with that transaction, had dealings only with Austrian banks, it is furthermore apparent from the order for reference that she acquired the certificates on the Austrian secondary market, that the information supplied to her concerning those certificates is that in the prospectus which relates to them as notified to the Österreichische Kontrollbank (Austrian supervisory bank) and that, on the basis of that information, she signed in Austria the contract obliging her to make the investment, which has resulted in a definitive reduction in her assets.’
The Court concludes that ‘taken as a whole, the specific circumstances of the present case contribute to attributing jurisdiction to the Austrian courts.’
That however was not seriously in doubt: the more specific question is which one: Vienna? (which had rejected jurisdiction) Graz and /or Salzburg? Article 7(2) requires identification of a specific court (which the AG had identified in his opinion: I may not follow his argumentation, but it did lead to a specific court): not merely a Member State, and the Oberster Gerichtsthof had specifically enquired about the need for centralisation of the claim in one place.
All in all a disappointing judgment which will not halt further questions on jurisdiction for prospectus liability.
(Handbook of) EU Private International Law, 2nd ed. 2016, Chapter 2, Heading 220.127.116.11.7
Jurisdiction re prospectus liability (misrepresentation) before the CJEU again. Bobek AG in Löber v Barclays.
Even Advocate-General Bobek has not managed to turn jurisdictional issues re prospectus liability into the prosaic type of analysis which many of us have become fond of. His Opinion in C-307/17 Löber v Barclays is a lucid, systematic and pedagogic review of the CJEU’s case-law on (now) Article 7(2)’s jurisdiction for tort in the context of ‘prospectus liability’ aka investment misrepresentation. Starting with the direct /indirect damage distinction; and focusing of course on the determination of pure economic loss.
Ms Helga Löber invested in certificates in the form of bearer bonds issued by Barclays Bank Plc. In order to acquire those certificates, the corresponding amounts were transferred from her current (personal) bank account located in Vienna, Austria to two securities accounts in Graz and Salzburg. Payment was then made from those securities accounts for the certificates at issue.
Note immediately that the jurisdictional discussion is a result of Article 7(2) not just identifying a Member State: it identifies specific courts within that Member State. Here: claimant brought her claim before a court in Vienna, the place of her domicile. This is also where her current bank account is located, from which she made the first transfer in order to make the investment. The first- and second-instance courts in Vienna however decided that they did not have jurisdiction to hear the case. The case is now pending before the Oberster Gerichtshof (Supreme Court, Austria). That court is asking, in essence, which of the bank accounts used, if any, is relevant to determine which court has jurisdiction to hear the claim at issue.
Close reference is made to Kolassa. In my posting on that case at the time, I noted that the many factual references which the Court built in in its decision, gave it dubious precedent value. Bobek AG in Löber necessarily therefore distinguishes many factual situations. The almost sole focus lies on 7(2): unlike in Kolassa, contracts neither consumer contracts are an issue.
Here are a few things of note:
First, in his review of the existing case-law the AG at 38 points out like I did at the time of the judgment, that the CJEU’s finding in CDC that locus damni for a pure economic loss, in the case of a corporation, is the place of its registered office, is at odds with precedent (he made the same remark in flyLAL).
Next, on locus delicti commissi, the AG suggests that despite Article 7(2)’s instruction, a single ldc within the Member State cannot be determined. The relevant point in his view is the moment from which the prospectus can, by operation of law, start influencing the investment behaviour of the relevant group of investors. In the present case, and considering the national segmentation of the capital market regulation at issue, that relevant group is made up of investors on secondary markets in Austria. At 65: once it became possible to offer the certificates on the Austrian secondary market, that possibility was immediately available for the whole territory of Austria. ‘The nature of the tort of misrepresentation at issue does not allow for the identification of a location within the national territory because once the author of the tort is allowed to influence the given national territory, that influence immediately covers the whole territory, irrespective of the actual means used for the publication of a specific prospectus.’ As we know from CDC, the Court does not readily accept that a single ldc cannot be determined.
Further, for locus damni, the AG suggests (at 78) ‘The place where…a legally binding investment obligation is factually assumed… The exact location of such a place is a matter for the national law considered in the light of available factual evidence. It is likely to be the premises of a branch of the bank where the respective investment contract was signed, which may correspond, as in the Kolassa case, to the place where the bank account is held.‘ That in my view first of all is not a warranted outcome. The investor in Löber is not a consumer within the protected categories of the Regulation. Suggesting the place of conclusion of the obligation leaves room for the claimant to manipulate the forum of any future suit in tort. This is exactly what the Court objected to in Universal Music. Moreover, note the reference to ‘the national law’. It is quite unusual to suggest such a role for lex fori in light of the principle of autonomous interpretation. Unless the AG in fact means the ‘lex contractus’, presumably to be determined applying Rome I.
In summary there are quite a few open questions here – not something of course which I would necessarily object to.
(Handbook of) EU Private International Law, 2nd ed. 2016, Chapter 2, Heading 18.104.22.168.7
Mr Kolassa, as a consumer, through the Austrian bank direktanlage.at AG, invested just under Euro 70,000.00 in X1 Global EUR Index Certificates. The certificates were issued by Barclays Bank, registered in the UK, with a branch in Frankfurt. At the time of the issue of the certificates, Barclays distributed a base prospectus, ia in Austria. The portfolio was to be established and administered by X1 Fund Allocation GmbH, to which Barclays Bank had entrusted the investment of the money raised from the issue of the certificates. Most of that money has been lost.
The certificates were sold to institutional investors who sold them on, in particular, to consumers. In the present case, direktanlage.at ordered the certificates to which Mr Kolassa wished to subscribe from its German parent company, DAB Bank AG, with its seat in Munich (Germany), which in turn acquired the certificates from Barclays Bank. In each case, the orders were placed and carried out in the name of the respective bank. Direktanlage.at fulfilled Mr Kolassa’s order in accordance with its general terms and conditions ‘in securities account’, meaning that direktanlage.at holds the certificates as covering assets in its own name at Munich, on behalf of its clients.
Mr Kolassa sues Barclays in Vienna, on the basis of contractual, precontractual, tortious or delictual liability. Jurisdiction in Vienna in his view is present on the basis of Article 15 JR (consumer contracts), 5(1) (contract) or 5(3) (tort). Application of Article 15 JR is dismissed by the ECJ on the basis of there being no contract whatsoever between Barclays and Mr Kolassa. (Judgment in Maletic distinguished given that the consumer in that case was from the outset contractually linked, inseparably, to two contracting partners). Application of Article 5(1) is in some ways more flexible because there need not be proof of a contract between the two parties: what is required, though, is proof of a legal obligation freely consented to by one person towards another and on which the claimant’s action is based. (For otherwise there is no ‘obligation’ which constitutes the connecting factor under Article 5). No such legal obligation ‘freely consented’ was apparent from the case hence Article 5(1) was dismissed, too.
That left Article 5(3). Per Kronhofer (also referred to in the Hoge Raad’s referral in Universal), the mere fact that the applicant has suffered financial consequences does not justify the attribution of jurisdiction to the courts of the applicant’s domicile if, per Kronhofer, both the events causing loss and the loss itself occurred in the territory of another Member State. On the basis of the facts of the case, the ECJ dismisses Austria as the locus delicti commissi: the decisions regarding the arrangements for the investments proposed by Barclays Bank and the contents of the relevant prospectuses, were taken in the Member State of Barclays’ seat, i.e. the UK.
The locus damni, the place where the loss occurred, is the place where the investor suffered it (at 54). ‘The loss occurred where the investor suffered it’ sounds like an abstract definition however the ECJ emphasises that that conclusion is fact-related, that is to say: it is a result of the that, first, the certificates’ loss of value was due, not to the vagaries of the market, but to the management of the funds in which the money from the issue of those certificates had been invested. Second, the actions or omissions alleged against Barclays with respect to its legal information obligations took place before the investment made by Mr Kolassa and were, in his view, decisive for that investment (at 51). If ‘the loss occurred where the investor suffered it’ is not an abstract but a fact related criterion, that puzzlingly may mean that there must be an alternative general criterion for purely financial loss if these are due to the ‘vagaries of the market’.
The Court further invites distinguishing by holding at 55 that ‘The courts where the applicant is domiciled have jurisdiction, on the basis of the place where the loss occurred, to hear and determine such an action, in particular when that loss occurred itself directly in the applicant’s bank account held with a bank established within the area of jurisdiction of those courts’. (Emphasis added).
Finally, the ECJ clarifies as much at it could, the balance between plaintiff’s allegations, and defendant’s rebuttal, at the jurisdictional level: what extent of evidence does the seized court need to review with a view to establishing its jurisdiction? The court holds ‘the national court seised is not, therefore, obliged, if the defendant contests the applicant’s allegations, to conduct a comprehensive taking of evidence at the stage of determining jurisdiction, it must be pointed out that both the objective of the sound administration of justice, which underlies Regulation No 44/2001, and respect for the independence of the national court in the exercise of its functions require the national court seised to be able to examine its international jurisdiction in the light of all the information available to it, including, where appropriate, the defendant’s allegations. (at 64). That of course is a thin line however I do not see how the ECJ can instruct otherwise.
In my view Kolassa invites further specification especially on the exact relevance of banks and bank accounts in cases of purely economic loss: Universal provides one such immediate opportunity.