Liability in capital investments — the court case as a reflection of disappointed expectations

Making correct decis­i­ons on the basis of complete and correct infor­ma­tion is a chall­enge that every inves­tor, inclu­ding capi­tal inves­tors, has to face. In the case of a failed invest­ment, the incen­tive is great to mini­mize one’s own respon­si­bi­lity in court. The start­ing points are mani­fold in today’s world.

By means of Inter­net rese­arch, infor­ma­tion that is alle­gedly rele­vant to the decis­ion but not provi­ded by the bank to the decis­ion-maker, namely the inves­tor, is subse­quently brought to light. The respon­si­ble citi­zen pres­ents hims­elf as a victim of the persua­si­ons of profes­sio­nal advi­sors. Facts that are clearly docu­men­ted in writing are suddenly denied. — The case law of the XI Civil Senate of the German Fede­ral Court of Justice in parti­cu­lar plays its part in inca­pa­ci­ta­ting inves­tors when even profes­sio­nal market parti­ci­pants are denied the ability to reco­gnize risks and make decis­i­ons accor­din­gly, as was recently the case in Ille Wasch­raum­hy­giene v. Deut­sche Bank on the CMS spread ladder swap (Case No. XI ZR 33/10).

In the case of highly specu­la­tive invest­ments, we very often expe­ri­ence that it was the first successful invest­ments that arou­sed the investor’s inte­rest in further, more volu­mi­nous invest­ments. Here, too, the basic rule applies that a tran­sac­tion that was successfully concluded with a considera­ble profit within a short period of time could just as well have gone in a comple­tely diffe­rent direc­tion with a simi­lar result. — Nevert­hel­ess, many courts allow nega­tive initial tran­sac­tions to suffice as a warning to the inves­tor, but not posi­tive invest­ment expe­ri­en­ces. All the worse in this context: In court, there must be a fierce fight to ensure that the inves­tor at least has those earnings credi­ted to his loss which he has alre­ady earned from simi­lar tran­sac­tions in the past. This in itself is a dictate of common sense and fair­ness; howe­ver, these dicta­tes have no place in many legal disputes. 

No other issue has taken on a simi­lar dimen­sion in liabi­lity juris­pru­dence in recent years as that of bank compen­sa­tion. At the same time, no one can close their eyes to the fact that banks do not operate free of charge. Thus, if the custo­mer does not pay a fee directly to the advi­sing bank for a finan­cial service, it is a matter of course that the bank is remu­ne­ra­ted by a third party, as is the case in parti­cu­lar with the distri­bu­tion of closed-end investments.

Nevert­hel­ess, seve­ral civil divi­si­ons of the Fede­ral Court of Justice consider banks to be obli­ged to provide infor­ma­tion in this regard. At least the Fede­ral Court of Justice recently stated with all the clarity that can be desi­red that — as with any busi­ness enter­prise — the calcu­la­tion of inter­nal profit margins is a matter for the banks and they ther­e­fore do not have to disc­lose margins from the sale of products that are priced into the investor’s invest­ment amount. — As far as the remu­ne­ra­tion of the indi­vi­dual banker is concer­ned: The amount of this remu­ne­ra­tion is neither a basis for liabi­lity nor does it have to be disc­lo­sed. Nevert­hel­ess, any social imba­lance between inves­tor and advi­sor in the decis­ion-making process reso­na­tes here in the sense of a “gut feeling”.