Contractual Liability

Abstract

This chapter deals with contractual liability. The chapter analyses the indirect effect which the MiFID and MiFID II conduct of business rules can have on a firm’s liability to pay damages in contract. Discussion of case law in Germany, the Netherlands and England & Wales shows that civil courts are adopting the complementarity approach to the interaction between the conduct of business rules and contractual liability. These courts generally dismiss the idea that financial conduct regulation of EU origin is exhaustive of the private law standard of care of firms. Breach of the conduct of business rules is not by itself regarded as giving rise to liability. As such, investors still largely depend on private law categories to provide the basis for redress and on private law norms to facilitate the effect of MiFID and MiFID II conduct of business rules on liability. At the same time, case law shows that civil courts recognise the indirect effect of the conduct of business rules by acknowledging that these rules influence the normative content of a firm’s duty of care in private law. The chapter analyses how this effect can allow investors to benefit from the detailed prescription by the conduct of business rules as to what behaviour is required from firms when providing investment advice. The way courts enforce the conduct of business rules through contractual liability, however, varies across the jurisdictions at issue. The differences in the extent to which courts allow the conduct of business rules to influence the standard of care in contract are analysed in detail. The chapter also discusses the obstacles to obtaining compensation on the basis of contractual liability, as well as ways for retail investors to clear these obstacles by making use of the MiFID and MiFID II conduct of business rules.