4.9 Concluding remarks

Concluding, the French legal system provides investors the possibility to claim damages from issuers who included false or misleading information in their prospectus in civil and criminal court proceedings. In administrative proceedings, the AMF is the competent authority to uphold the public law rules with respect to the content requirements of a prospectus. The issuer and/or its directors are held responsible by the AMF on the basis of a strict liability test: these persons are responsible for any false or misleading information issued by them without any requirement of consciousness on their part. The AMF's powers to investigate any infraction of its General Regulation requirements with respect to the contents of the prospectus and the prohibition to disseminate false and misleading information to the investment community are important. An AMF decision and the confirmation thereof by the administrative court could be of assistance to investors that need to prove that the issuer and/or the lead manager acted tortiously by disseminating false and misleading information in the prospectus.

Criminal proceedings are initiated by the public prosecutor against the issuer for breaches of the criminal law provisions in the French Monetary and Financial Code. In this case the public prosecutor bears the burden of proof that the defendant violated the offence of disseminating false and misleading information. Private parties as well as the AMF can join the prosecutor 's case and claim for damages. In that case, the private parties and the AMF claim compensation for their individual losses incurred and the losses incurred by the entire investment community respectively. The investors have to claim and, upon challenge, prove the causation between the losses incurred and the dissemination of the false and misleading information. The private law rules with respect to the burden of proof equally apply to the private party claims in criminal proceedings.

In French private law there is no special prospectus liability regime. Investors have to claim compensation on the basis of the general tort law provision laid down in section 1382 of the French Civil Code. On this basis, the issuing company and its directors can be held jointly and severally (in solidum) liable for the publication of misinformation in the prospectus. In the past, investors did not frequently rely on private law claims for damages against the issuer and/or lead manager in civil court proceedings because of the many impediments for damage claims.1 One of the impediments was the fact that the French Supreme Court made a strict distinction between cases in which the investor based his decision to acquire securities on the basis of the misleading information and cases in which the investor decided to keep his securities acquired before the publication of the misleading information. In prospectus liability claims, i.e. an example of the former if the investor bought his securities in the primary market, investors are awarded the difference between the price at which the securities were acquired and the lower actual value of the securities as reflected in the lower sales price.

Secondly, the claimant's burden of proof is substantial and no legal presumptions can be applied. Particularly the requirement of causation between the losses incurred and the dissemination of false and misleading information is a serious obstacle to compensation. Furthermore, note that French courts have a discretionary power to decide on the amount of compensation. The consequence of this discretion is a wide range of methods used to calculate compensation. Recently, French courts have ruled in favour of investors claiming damages for losses incurred as a result of misinformation.

French courts, including the Supreme Court adopted the notion of loss of chance as the proper loss category that can be compensated in (corporate) misinformation cases. This notion is based on the premise that the investor was denied the opportunity to invest in more profitable securities by the publication of the false and misleading information. Therefore the issuer and/or the lead manager is liable to compensate the investor for the loss of a chance of having invested more profitably. In prospectus liability cases, this notion is used to claim for the losses incurred as a result of false or misleading information in the prospectus. Even though French private law allows for damage claims by private investors, civil court proceedings are not frequently used due to the costs and risks of private litigation and the Jack of a proper collective action based on an opt-out model.

The French collective action provision (action en représentation conjointe) in section L. 452-2 of the French Monetary and Financial Code provides that shareholders associations may bring a collective claim against the issuer and/or the lead manager if at least 2 investors have given this association a mandate. This provision has the features of an opt-in collective action model: private parties need to give a mandate in order to be bound by the judgment in the collective action.

The proposal by the Coulon Committee on the reform of French business law is similar to the Dutch collective action procedure laid down in section 305a DCC. The collective action proposed by this Committee consists of two stages. In the first stage, the court rules upon whether the defendant's behaviour was tortious towards the typical investor belonging to that class. If the court rules affirmatively and no settlement is reached between the shareholders association and the defendant, investors need to file individual claims for compensation of their losses. Furthermore, the proposed collective action is not based on an opt-out model in which investors are bound by the court judgment unless they use their right to opt-out from the settlement.