Capital Market Law and Private International Law Kapitalmarktrecht und Internationales Privatrecht

Claims for damages in the case of capital market offences not only grant compensation to market participants but also play an important role in the enforcement of market regulations. Hence, the question of which law is applicable to capital market offences becomes relevant. In this regard, one must make the following differentiation: If a (pre-)contractual relationship between the injuring party and the damaged person already exists at the time of the infringement, claims for damages are covered by the Rome I Regulation. Otherwise, the applicable law is determined by the Rome II Regulation. This means that the place of injury, which usually coincides with the place of habitual residence of the injured party, is, in principle, the decisive connecting factor (Art. 4(1)). However, this connecting factor, by focusing on the individual injured party, does not correspond with the character of capital market law as market organisation law. With regard to competition law, another set of rules regulating the organisation of markets, Art. 6 of the Rome II Regulation provides for the application of the law of the affected market. Since Recital 23 of the Rome II Regulation qualifies Art. 6 as a mere clarification of the general rule of Art. 4(1), the place of injury may be clarified accordingly for capital market offences and be interpreted as the law of the affected market. Capital market rules of conduct, however, are mostly overriding mandatory rules. Therefore, they are not covered by the general conflict-of-law rule for torts but are governed by special provisions, especially Art. 17 of the Rome II Regulation. The rationale of Art. 17 is to protect the legitimate expectations of the injuring party that the rules of conduct he had to comply with at the time the harmful act was committed will also be relevant to whether he has to pay damages. Therefore, the rules of conduct of the country in which the harmful act was committed, while often coinciding with the law of the affected market, may be taken into account when applying the substantive law. The rationale of Art. 17 even allows for primarily the rules of the affected market to be taken into account when market participants could expect this law and not the rules of the country where the harmful act was committed to be relevant for damage claims. Ultimately, this means that the rules of conduct of the affected market will usually be relevant, albeit not automatically but rather taking into account their nature as overriding mandatory rules. The differentiation between the applicable tort law and the relevant rules of conduct is already necessary for those rules that follow the country-of-origin principle. By contrast, it would not be consistent with the principles of the Rome I and Rome II Regulations to apply the tort law of the violated rule of conduct, as this would mean that overriding mandatory rules would determine the applicable tort law.