NJW Publishes Druckenbrodt Article on German Securities Trading Act

The leading German law journal Neue Juristische Wochenschrift (NJW) published Frankfurt-based Commercial Litigation counsel Alexander Druckenbrodt’s article on the effects of changes to the limitation period for claims arising from the omission or publication of false inside information according to Sec. 37b and 37c of the German Securities Trading Act (Wertpapierhandelsgesetz–WpHG). The article appeared in the December 24, 2015 issue (p. 3749-3752) as “Die Streichung der Sonderverjährungsvorschriften im WpHG – wirklich ein Schutz von Kleinanlegern?” (The deletion of the special rules on limitation in the German Securities Trading Act—really a protection for retail investors?).

Since July 2015, the general rules for limitation set out in sec. 195, 199 of the German Civil Code (Bürgerliches Gesetzbuch–BGB) are applicable to these claims. The limitation period of three years pursuant to sec. 195 BGB commences at the end of the year in which (i) the claim arises and (ii) the claimant becomes aware of the facts on which the claim is based as well the person of the debtor or failed to do so because of gross negligence. Irrespective of knowledge, claims for reimbursement of economic damages become time-barred 10 years after the damage occurred or 30 years after the obligation was breached pursuant to sec 199 para 3 BGB.

Previously, the WpHG provided for two different periods, a one-year period that commenced once the claimant had knowledge of both (i) the inside information as well as (ii) the omission of its (timely) publication, and a three-year period which commenced once a publication of inside information was required to be made in accordance with sec. 15 WpHG but was omitted by the issuer. The problem is that no transitional rules have been introduced along with the change of the limitation period. Therefore, it is unclear when claims that arose under the old WpHG but have not become time barred under its limitation period will now become time barred after the new limitation period has been introduced.