Locating pure economic loss: jurisdiction over prospectus liability under Article 7(2) of the Brussels I Regulation Recast

A post by guest blogger Michiel Poesen

In C‑304/17 Helga Löber v Barclays Bank plc, the CJEU had the opportunity to revisit its case law regarding jurisdiction over prospectus liability. The relevant ground for jurisdiction is Article 7(2) of the Brussels I Regulation Recast (previously Article 5(3) of the 2001 Brussels I Regulation): A person domiciled in a Member State may be sued in another Member State in matters relating to tort, delict or quasi-delict, in the courts for the place where the harmful event occurred or may occur. The ECJ confirmed that in the context of prospectus liability, the place where the harmful event occurred can be exceptionally located in the claimant’s domicile.

The facts underlying the litigation are the following. Helga Löber, domicile in Vienna, invested 28.000 euro in bearer bonds. The amounts were transferred from her (personal) bank account located in Vienna to two securities accounts in Graz and Salzburg. She bought the bonds from Fund Allocation GmbH, established in Germany. The bearer bonds were initially issued on the primary market by Barclays Bank London. At a certain moment Ms Löber suffered financial losses. She started proceedings against Barclays Bank in the commercial court in Vienna. One of her arguments was that the Barclays Bank misrepresented the investment in the prospectus.

Both the commercial court and the higher district court declined jurisdiction. Ms Löber then lodged an appeal before the Supreme Court of Austria. She argued that the Vienna courts should assert jurisdiction over her claim, since the place of her domicile should be considered ‘the place where the harmful event occurred’ within the meaning of Article 7(2). Confronted with Ms Löber’s claim for compensation for financial losses, the Supreme Court asked the CJEU where ‘the place where the damage occurred’ should be located.

The Supreme Court’s question comprises two sub issues. (1) Is Ms Löber’s prospectus liability claim a ‘matter relating to tort’? If yes, Article 7(2) is triggered. (2) Assuming that Article 7(2) applies, where should the place where the damage occurred be located?

The CJEU restated C‑375/13 Kolassa. When an investor acquired bonds on the secondary market, proceedings based on the prospectus liability of the issuer cannot be considered matters relating to a contract for want of a freely assumed obligation between claimant and defendant. The jurisdictional implication is that Ms Löber’s claim action against Barclays Bank is one in tort, which triggers Article 7(2).

Then, the CJEU reiterated that ‘the place where the harmful event occurred’ refers to two distinct connecting factors. Both ‘the place where the damage occurred’ (locus damni) and ‘the place of the event giving rise to it’ (locus delicti commissi) are covered by this ground for jurisdiction. Only the first connecting factor is relevant in the preliminary proceedings at stake.

The main question was where ‘the place where the damage occurred’ should be located when the damage consists of pure economic losses, such as Ms Löber’s financial losses. The CJEU stressed that in general Article 7(2) does not attribute jurisdiction over pure economic losses to the courts of the claimant’s domicile (C‑12/15, Universal Music International Holding). It only confers jurisdiction to the courts of the claimant’s domicile when the damage occurred directly in the applicant’s bank account held with a bank established within the area of jurisdiction of those courts. It is also required that specific circumstances justify attributing jurisdiction to the courts of the claimant’s domicile. It was held that the place of occurrence of the damage displays a connection with Austria, given the following specific circumstances:

  • All the payments relating to the acquisition of the bonds were made from Austrian bank accounts, namely the personal bank account of Ms Löber and the clearing accounts.
  • Ms Löber acquired the certificates on the Austrian secondary market.
  • The (allegedly inaccurate) information was supplied in the prospectus, which was notified to the Österreichische Kontrollbank.
  • On the basis of the information provided in the prospectus, Ms Löber signed the investment contract, which resulted in a definitive reduction in her assets, in Austria.

Unfortunately, the specific question as to whether the Vienna courts have jurisdiction (given that Ms Löber’s personal bank account is located in the place of her domicile in Vienna), is not answered.

Michiel Poesen

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