STATUTORY FRAMEWORK FOR PROSPECTUS LIABILITY (II)
The Netherlands, Curaçao, St. Maarten and the BES-islands compared
The Netherlands
In the Netherlands there is a two-track law concerning prospectus liability as professor L. Timmerman calls it. There are two sets of rules supplementing the general doctrine of the wrongful act (Section 6:162 of the Dutch Civil Code (‘BW-NL‘):
- the rules with regard to misleading and comparative advertising (Sections 6:194 – 6:196 BW-NL) and
- the rules with regard to unfair commercial practices (wet oneerlijke handelspraktijken) (Sections 6:193a – 6:193j BW-NL)
1. Misleading and comparative advertising (B2B)
Section 6:194 subsection 1 BW-NL:
“A person who with regard to goods or services, which are offered by him or the person on whose behalf he acts in the course of a profession or business, makes or has a statement made publicly known, acts wrongfully towards another acting in the course of his business if this statement is misleading in one or more respects (…)”
The rules with regard to misleading and comparative advertising are insofar as it is relevant to the present subject, aimed at a prospectus issued for instance by an issuing company (the issuer) and/or a bank acting as the lead manager of an issue. The statement that has been made publicly known (the prospectus) must be aimed at a person acting in the course of his profession (B2B). So this means someone who acts professionally (that is to say in the course of his business operations) but this does not mean to say that it involves a professional investor!
Section 6:195 subsection 1 BW-NL provides for a reversal of the burden of proof with regard to the accuracy of the prospectus and the accountability. So the person who alleges that he has been misled does not have to prove the misleading. I will return to this briefly in connection with the legal rules of Curaçao and St. Maarten.
2. Unfair commercial practices (consumers)
The rules with regard to unfair commercial practices – which only came into existence on 15 October 2008 – aim at a prospectus distributed for instance by an issuing company or lead manager (the law calls this a trader) amongst consumers. A consumer is a natural person not acting in the course of a profession or business (Section 6:193a subsection 1 under a BW-NL).
A trader acts wrongfully towards a consumer if he carries out commercial practices which are unfair. Commercial practice is particularly unfair if a trader is guilty of a misleading commercial practice consisting of providing information which is actually inaccurate or which misleads or can mislead the average consumer, whether or not by the general presentation of the information (Sections 6:193b – 6:193c BW-NL).
In addition, a commercial practice is misleading if there is a misleading omission. A misleading omission is any commercial practice whereby essential information which the average consumer needs to take an informed decision about a transaction, has been omitted so that the average consumer takes or can take a decision about an agreement which he would not have taken otherwise (Section 6:193d BW-NL).
The information referred to in Section 5:13 Wft (Dutch Financial Supervision Act), which Section aims at information to be included in a prospectus, is in any event essential within the sense meant herein (Section 6:193f BW-NL). Therefore, if information is absent from the prospectus that should be included in it by law, this constitutes a misleading omission.
Section 6:193j BW-NL provides for a reversal of the burden of proof “if this appears to be suitable, considering the circumstances of the case and with due observance of the legitimate interests of the trader and of any other party in the procedure”. This will be decided by the court.
In the event of the consumer alleging and being able to make somewhat plausible that a prospectus is misleading and why, the reversal would then come down to the burden of proof of the material accuracy and completeness of the prospectus resting on the issuing company (or the bank), whereby the blame of the issuing company (or bank) is assumed subject to evidence to the contrary. Should the issuing company (or bank) be unsuccessful in furnishing that evidence, it will be an established fact that the prospectus is misleading. The consumer must then prove the causal link between this misleading prospectus and his loss. I again refer to the WOL ruling in which the Dutch Supreme Court gives a helping hand to the consumer.
Curaçao and St. Maarten
In Curaçao (and St. Maarten) the prospectus liability is covered by the doctrine of misleading advertising and can be found in Sections 6:194 et seq. BW (not limited to B2B situations). It is a species of the wrongful act. And although according to local law the prospectus requirement is limited, there can also be reasons to issue a prospectus in other cases for instance when it is distributed in one or more jurisdictions where there is indeed a prospectus requirement (in this connection for instance the Netherlands and the BES Islands come to mind).
If the misleading nature of the statement is an established fact, this will automatically constitute a wrongful act. An assessment of whether the investor had indeed been misled is – contrary to what would normally be the case – unnecessary in order to reach the opinion that this is a wrongful act. The task of the court is limited here with regard to establishing the facts and assessing the consequences of the wrongful act.
Apart from the prospectus other statements can also lead to liability, for instance statements in adverts, brochures, interviews or statements made during a road show. The person who makes the statements as meant in this Section publicly known has the obligation to examine the accuracy and completeness of the information made publicly known (due diligence). Without such an examination any invocation of exculpation appears almost impossible.
For the benefit of the injured parties Section 6:195 BW includes two evidentiary rules. If the claim is brought pursuant to Section 6:194 BW against someone who determined in whole or in part the content and the manner of presenting the statement (the prospectus) or has this determined, the burden of proof will rest on him with regard to the accuracy or completeness of the facts included in the statement or which are suggested by it and on which the alleged misleading nature of the statement is based, except insofar as this allocation of the burden of proof is unreasonable.
This presumed burden of proof is only aimed at the material accuracy and completeness of the prospectus (and the other information that is provided) and with regard to the accountability of the wrongful act. This should not be confused with the reversal of the burden of proof where it is about the condicio sine qua non connection, which we have already discussed on in connection with the WOL case (that case was about an investor basing his claim for compensation on the fact that if he would have been informed accurately and completely, he would have refrained from the transaction).
BES (Bonaire, St. Eustatius and Saba)
In the BES Islands, as in Curaçao and St. Maarten, the prospectus liability is covered by the doctrine of misleading advertising and can be found in Sections 6:194 et seq. BW-BES. These Sections apply to both business investors and to consumers.
Karel Frielink
Attorney (Lawyer) / Partner
(30 March 2014)
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