Pending Lawsuits
Liability for Information in Prospectuses
In a ruling of June 28 2002 the Danish Supreme Court acquitted Danske Bank (the lead bank on the subscription in question), an accountant, an insolvent estate and two members of the board of the former Hafnia Bank for liability towards private investors.
In demanding damages, the investors argued that the defendants knew that Hafnia Bank was on the verge of bankruptcy and that, therefore, the prospectus issued in relation to a capital increase in Hafnia Bank in July 1992 was misleading.
The Supreme Court ruled that there were insufficient grounds for establishing that (i) the defendants should have foreseen a collapse in share prices before and during the July 1992 subscription period, or (ii) the attempt to secure Hafnia Bank's future through subscription should have been regarded as unrealistic. Accordingly, the defendants were acquitted.
The judgment overturns a prior ruling by the Maritime and Commercial Court of Copenhagen, which ruled that Danske Bank, the accountants and the insolvent estate were liable and should pay damages to the private investors.
For the first time in Denmark, new bonds have been issued on the basis of the development of shares in a listed company. In one instance, LB Kiel has issued bonds based on the development of the Vesta (windmill producer) share. Meanwhile, Dexia Bank and Danske Andelskassers Bank recently issued two bonds indexed to the development of share prices in an AP Møller company. AP Møller has since initiated a lawsuit stating that the bonds are illegal, since they violate banking and securities trading practices.
In response, the banks argue that the bonds have been approved by the Copenhagen Stock Exchange. To date, they continue to offer the bonds.
The lawsuit is expected to turn on the question of whether the Danish Marketing Practices Act has been violated. The outcome will have significant ramifications for the domestic financial sector and the development of new financial instruments.
For further information on this topic please contact Anders M Hansen at Osborne Clarke by telephone (+45 33 12 95 12) or by fax (+45 33 12 95 15) or by email ([email protected]).