Place of jurisdiction in cases of financial loss by investors
The German Federal Supreme Court of Justice (BGH) has ruled that German investors can file a claim before a domestic court even if the bank account from which the money was transferred is located in a foreign country.
A British brokerage enterprise was held liable for opening a bank account for an investor even though it knew that the particular business model of the German broker would cause a financial loss for the investor. The key legal issue in this case was to determine whether a British enterprise could be sued in Germany by a German investor.
Pursuant to Art. 5 No. 3 of the European Council Regulation on jurisdiction and the recognition and enforcement of judgments (EC No 44/2001), the place of jurisdiction in matters relating to tort is the place where the tortious event occurred or may occur. This means that the injured party can decide whether he or she wants to file a claim in the country where the tort action took place or in the country where the actual damage occurred. In cases of financial loss, this is not an easy decision to make. A survey of decisions of the European Court of Justice suggests that the place of jurisdiction will generally be the location of the particular asset or account of the investor (not his/her domicile). By way of differentiation, the German Federal Court of Justice has now established a domestic place of jurisdiction by ruling that the bank transfer from the German bank account of the investor was the decisive factor in the case in question.
This decision makes it easier for investors to file a claim before a domestic court even though the money transfers were carried out from a foreign bank account. Furthermore, this case law will also have an impact on the question of the applicable law in tort cases involving a financial loss.
Federal Court of Justice, decision dated 13 July 2010 (XI ZR 28/09)