Inaccurate capital markets information: obstacles for damage claims in Germany

In its judgment dated 12 January 2016 (file no. 7 U 59/14) the Braunschweig Higher Regional Court had to rule on claims for damages due to allegedly incorrect capital market information (denial of allegedly intended takeover).

In the present case, the foundation of claims set forth in Sections 37b, 37c Securities Trading Act (Wertpapierhandelsgesetz, WpHG) considered at first were ruled out. Both of these provisions take up the ad-hoc notification duties of an issuer and constitute claims for damages by persons having invested in the financial instruments of that respective issuer. Section 37b WpHG provides for the liability of an issuer of financial instruments due to its failure to publish inside information without undue delay, while Section 37c WpHG stipulates the liability of an issuer due to publishing untrue inside information. However, in the case at hand, while also being an issuer the defendant was not the issuer of the ordinary stocks in dispute. Therefore, Sections 37b, 37c WpHG do not apply. In the absence of the required loopholes in the regulations the provisions cannot be applied analogously, either.

The plaintiff’s claim did also not result from Section 826 BGB. The Higher Regional Court reviewed this provision in a lot of detail and pointed out its last-resort character. The Higher Regional Court stated that the provision set forth in Section 826 BGB on the liability for damages due to immoral intentional damage essentially played the role of a catchall clause for elements not or not fully covered by other foundations for claims in tort law. In using the term morality the provision allowed and required for an adaptation to prevailing moral concepts. The reason for this is that the scale is set by the prevailing social morality among the respective peers at the point in time of the action, in this case among the participants in stock trading. Thus, the action complained about in this scope must be objectively considered immoral in circles of investors, listed companies and stock traders, and the behaviour must be regarded as especially reprehensible in these circles considering the general business ethics and everything that is considered respectable there. Furthermore, as elsewhere, neither the alleged infringement nor the actual occurrence of damage is sufficient for expressing condemnation of the violation of bonos mores. Instead, the special reprehensibility of behaviour must result from the envisaged goal, the means applied, the attitude rising to the surface or the consequences, whereas all circumstances must be considered in synopsis.

Relating to these requirements, literature and jurisdiction have formed case groups which shall facilitate dealing with the elements of Section 826 BGB. Only the liability of the board of directors of a stock corporation for intentionally manipulating prospective investors by disclosing grossly incorrect information was taken into consideration; this means not only a repetitive distribution of grossly untrue ad hoc communications to market participants influencing their purchase and sales behaviour, but also the distribution of other grossly untrue information leading to an investment decision. However, the plaintiff was unable to overcome these strong obstacles.