Investors bring banking licence claims against foreign banks
23 March 2016
Federal Court of Justice (BGH), judgment dated 7 July 2015, file no. VI ZR 372/14:
German clients of foreign banks have increasingly been trying to shift their losses by claiming damages for the banks failing to have a German banking licence. A BGH decision has confirmed that such claims will only succeed if the loss claimed is the same type of loss that the licencing requirement aims to protect against. If the claimant would have suffered loss even if the bank was properly licenced there can be no recovery. Left open is the controversial issue of when a foreign bank needs a banking licence.
The BGH confirmed that German courts had jurisdiction, as the defendant bank had entered an appearance and thereby accepted jurisdiction. The court also confirmed that German law applied regardless of the choice of Swiss law in the agreements between the claimant and the bank, as the claimant had relied on a claim in tort. For such a tortious claim the alleged wrongful act (providing banking services with no licence in Germany) meant that German law applied to the claim.
In many cases of this kind, questions of jurisdiction and applicable law arise. It is not usual, as in this case, for a defendant bank to enter an appearance and thereby to submit to jurisdiction. Often the agreements between bank and customer contain foreign (eg Swiss) jurisdiction clauses. These often do not apply if the investor is an individual.1 The law often regards individual claimants in these cases as consumers, even if banks had considered them to be sophisticated investors. Then special jurisdiction rules apply, particularly if the defendant bank has “directed” its activities to the claimant’s home state. It is worth looking into this in each individual case.
However, German law may still apply if the courts find a manifestly closer connection to Germany. For any contractual claims other rules apply.4
3 Regulation (EC) 864/2007, see article 4.
4 See Regulation (EC) 593/2008 – Rome I.