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Nature of claims
Common causes of action
What are the most common causes of action brought against banks and other financial services providers by their customers?
The most recent cases include:
- claims with respect to misstatements in prospectuses and related marketing materials;
- investment advice in relation to interest rate swaps;
- break cost clauses in credit agreements; and
- various payment means (cheques, electronic transfers, etc).
These claims are mainly based on breaches of contract or on breaches of statute, including the Markets in Financial Instruments Directive (MiFID) implementation legislation.
An interesting barometer in this area is the annual report of Ombudsfin, the Belgian mediation centre for the financial sector. In 2016, the main areas of claims by consumers included payments (37.61 per cent), credits (31.19 per cent) and investment services (19.27 per cent). The overall number of claims is on the increase but is not yet back to the peak levels of 2008 to 2009 (for companies, Ombudsfin’s role is limited to disputes on credit agreements and cross-border payments up to €50,000).
In claims for the misselling of financial products, what types of non-contractual duties have been recognised by the court? In particular is there scope to plead that duties owed by financial institutions to the relevant regulator in your jurisdiction are also owed directly by a financial institution to its customers?
Financial institutions have a general duty of good faith and must, in accordance with the applicable MiFID legislation (article 27 of the Law of 2 August 2002), act honestly, fairly and professionally in accordance with the best interests of their clients (see question 4).
In accordance with common law liability principles, any breach of the law - including the breach of regulatory duties owed by financial institutions to their regulators, such as the applicable MiFID legislation - is considered a negligence of the financial institution and may therefore render the financial institution liable to its customers, if they have suffered a loss as a result of the breach.
It is debatable whether a breach of regulatory duties to regulators could also lead to the nullity of a transaction carried out by the defaulting financial institution.
A specific cause of nullity, however, is the common law concept of error. For instance, if a bank does not comply with its suitability or appropriateness duties, the customer may claim the nullity of the transaction on the basis of an error on its side. For such a claim to succeed, the customer’s error:
- must be excusable;
- must be the determining reason for the customer’s consent; and
- the financial institution must have known, or should have known, that the subject of error was material for the customer.
Statutory liability regime
In claims for untrue or misleading statements or omissions in prospectuses, listing particulars and periodic financial disclosures, is there a statutory liability regime?
Yes. In accordance with the Belgian prospectus regulation (article 61 of the Law of 16 August 2013 - based on Directive 2003/71/EC (Prospectus Directive)), the prospectus must mention the following:
- the person responsible for the information given (which may be the issuer);
- its administrative, management or supervisory bodies;
- the offeror;
- the person asking for the admission to trading; or
- the guarantor.
As long as at least one person is responsible for the entire prospectus, various additional persons can be responsible for different parts.
It is sufficient for the missing or erroneous information to be of such nature to create a favourable climate on the market, or to positively influence the purchase price of the financial instrument, for the responsible person or persons to be jointly liable to repair the damages. The claimant must not show reliance on the prospectus.
This statutory regime does not rule out any common-law liability for members of the bank syndicate leading the public offer and the listing of the financial instruments. It has been held that such banks are assumed to consider the financial instruments as an opportunity for investors. The information provided by the lead banks must be complete, suited to the purpose of the transaction and reliable. Any breach of this duty may lead to damages.
Duty of good faith
Is there an implied duty of good faith in contracts concluded between financial institutions and their customers? What is the effect of this duty on financial services litigation?
In accordance with the general principles of Belgian law, financial institutions have the obligation to act as a normal, careful professional financial institution would act under the same circumstances. Under the applicable MiFID legislation (article 27 of the Law of 2 August 2002), this general duty has been particularised for financial institutions, which must act honestly, fairly and professionally in accordance with the best interests of their clients.
Therefore, financial institutions may be liable towards their customers if they act negligently, and this negligence results in losses for their clients. Further, as the Belgian Financial Services and Markets Authority (FSMA) is responsible for compliance with the MiFID legislation, it may impose administrative sanctions on financial institutions acting negligently, without them having caused any losses or made any unjust gains.
In what circumstances will a financial institution owe fiduciary duties to its customers? What is the effect of such duties on financial services litigation?
The concept of ‘fiduciary duties’ does not exist under Belgian law.
How are standard form master agreements for particular financial transactions treated?
No Belgian law standard form master agreements have been developed or are frequently used for particular financial transactions.
The International Swaps and Derivatives Association Master Agreement is commonly used in Belgium for derivative transactions. In some cases, Belgian law may be made applicable and Belgian courts may be given jurisdiction. Alternatively, Belgian banks use their own standard agreements. We are not aware of any litigation with respect to the interpretation of such agreements. However, there have been a large number of cases in the past few years where clients have sued banks for damages based on a breach of general MiFID rules with respect to the investment advice given in connection with interest rate swaps, in the context of low interest rates where such swaps and their termination have become very expensive for clients.
Can a financial institution limit or exclude its liability? What statutory protections exist to protect the interests of consumers and private parties?
Belgian law does not contain specific rules on the liability of financial institutions. Therefore, the general rules of contractual (contract claims) and extra-contractual liability (tort claims) apply to financial institutions.
In accordance with such rules, financial institutions may restrict or exclude their liability (contractual and extra-contractual) for their actions or omission, including for gross negligence if this is expressly specified. However, liability for the financial institution’s own fraudulent or wilful misconduct may never be limited or excluded.
When contracting with Belgian consumers, regardless of the law applicable to the contract, financial institutions may not restrict or exclude their liability for gross negligence for breaching a material obligation of the contract.
Freedom to contact
What other restrictions apply to the freedom of financial institutions to contract?
Contractual penalties for breaches of contractual obligations can be validly provided for in contracts with financial institutions, to the extent that the penalties can be regarded as having a compensatory nature. If a court considers that the amount of the contractual penalty exceeds the amount that the parties could have foreseen to compensate for damages at the time of entry into the contract, it may reduce the amount of the contractual penalty.
When contracting with Belgian consumers, regardless of the law applicable to the contract, a number of provisions are considered unlawful by Belgian consumer protection laws and can therefore not be enforced. The most relevant prohibited provisions for financial institutions include provisions allowing financial institutions to unilaterally increase prices. Nevertheless, an exemption exists, permitting financial institutions to unilaterally change interest rates as long as the consumer has the right to terminate the agreement.
What remedies are available in financial services litigation?
In accordance with the general principles of Belgian law, any breach of contract, any breach of statute and any breach of a financial institution’s duty of good faith may give rise to damages in order to remedy the financial institution’s misconduct.
Another remedy may be the nullity of the transaction, pursuant to the common law concept of error (see question 2).
Finally, a financial institution’s breach of contract may be remedied by the nullity of the agreement.
Have any particular issues arisen in financial services cases in your jurisdiction in relation to limitation defences?
Not that we are aware of.
Do you have a specialist court or other arrangements for the hearing of financial services disputes in your jurisdiction? Are there specialist judges for financial cases?
There are no courts in Belgium that have exclusive jurisdiction over financial services disputes.
Most of these types of disputes fall under the competence of the commercial courts, which are the competent courts to hear all disputes between or involving one or more enterprises.
The Law of 2 August 2002 on the supervision of the financial sector and on financial services allows for a special cease-and-desist procedure that particularly aims to protect consumers. This procedure must be brought before the President of the Commercial Court and applies inter alia to unauthorised activities of financial service providers, breaches of the Code of Conduct rules, breaches of the rules on information and advertising, etc.
An application for a cease-and-desist order is heard and treated in the same manner as an application for summary proceedings. It can generally be lodged by a party that is suffering damage, being a consumer or a competitor, as a consequence of the illegal conduct. It can even, or also, be lodged by the competent government body (the Federal Public Service for Economy), a professional authority or association or a consumer organisation. In most cases, the FSMA can also apply for a cease-and-desist order.
This procedure can be launched even if parallel criminal proceedings concerning the same facts are taking place. However, no decision in the criminal proceedings may be rendered until a final decision has been made on the injunction procedure regarding the same case.
At any stage of this procedure, the President of the Commercial Court may seek the opinion of the FSMA unless the FSMA itself is the applicant or claimant in the case. The opinion of the National Bank of Belgium (NBB) may be sought as well, but only if the cease-and-desist order application was lodged against financial institutions (including credit institutions, payment institutions and electronic money institutions) by the FSMA or if the FSMA’s advice is also being sought.
The President of the Commercial Court may only adjudicate on the existence of the violation of the law and issue a cease-and-desist order. In addition, he or she can, upon the claimant’s request, also order the publication of the judgment or a summary thereof if it can contribute to the cessation of the violation or of its effects. Such decisions are immediately enforceable. When ruling on a case seeking a cease-and-desist order, the President of the Commercial Court may not award damages.
Before ruling, the above-mentioned President may grant the defendant an extension of time to end the violation if the nature thereof justifies an extension. Furthermore, certain claims can be brought for violations that have not actually taken place but are about to be committed.
Any judgment rendered under this particular cease-and-desist application must be communicated to the FSMA within eight days by the clerk of the court. In addition, the clerk of the court is obliged to inform the FSMA forthwith of any appeal lodged against that judgment.
Finally, supervisory decisions rendered by the FSMA and the NBB (see question 21) may, depending on the matter, be subject to appeal before the Brussels Court of Appeal or before the Council of State. Those cases are handled using a somewhat accelerated procedure. Given the centralisation of cases in a specific section of the Brussels Court of Appeal, the judges sitting in this section have a good knowledge of the legal rules applicable to financial litigation and of the issues involved.
Do any specific procedural rules apply to financial services litigation?
No specific rules apply to financial services litigation.
Cease-and-desist procedures are processed in the same swift manner as in summary proceedings (see question 11). Decisions under these proceedings are made in a matter of days or weeks.
The appeal procedures before the Brussels Court of Appeal and the Council of State are subject to specific legal provisions aimed at speeding up proceedings (see question 11).
May parties agree to submit financial services disputes to arbitration?
Financial services disputes between the service provider and the client may be made subject to arbitration agreements.
Out of court settlements
Must parties initially seek to settle out of court or refer financial services disputes for alternative dispute resolution?
As a rule, parties are not required to seek an out-of-court settlement prior to launching court proceedings.
However, parties can of course, in their contractual relationship, agree to alternative dispute resolution (ADR), and the court will give effect to their agreement: at the request of either party, the court will stay the proceedings until the ADR method is exhausted. The request for this must be raised before any other plea or defence.
Even in the absence of an ADR clause in an agreement, the courts often suggest that the parties try to settle their dispute through mediation.
In addition, parties may address any general complaints regarding their financial institution to Ombudsfin (see question 1) and the FSMA, but this is not obligatory. Specific complaints on consumer or mortgage credits can be submitted to the Federal Public Service for Economy, SMEs and Energy.
Are there any pre-action considerations specific to financial services litigation that the parties should take into account in your jurisdiction?
There are no specific pre-action considerations to be taken into account.
Unilateral jurisdiction clauses
Does your jurisdiction recognise unilateral jurisdiction clauses?
The position of Belgian courts regarding the validity of unilateral jurisdiction clauses is unclear as no case law currently exists on this issue. Case law of foreign courts, according to which unilateral clauses were held invalid, has been criticised by Belgian legal scholars.
In any event, these types of clauses should be drafted with particular care.
What are the general disclosure obligations for litigants in your jurisdiction? Are banking secrecy, blocking statute or similar regimes applied in your jurisdiction? How does this affect financial services litigation?
No actual discovery processes exist in Belgium. The parties must disclose the evidence that they will rely on in court and have a general duty to cooperate in search of the truth.
Where there are serious, certain and unequivocal presumptions that a litigant or third party holds a document that is relevant to the dispute, the court can order the disclosure of such document and its addition to the file.
Depending on the particular circumstances, the court may infer from a litigant’s refusal that the disputed fact is proven. Moreover, if a party fails to comply with the court’s order, that party might be ordered to pay compensation to the party to whom his or her conduct has caused damage.
Similar rules apply to testimonies and witness statements. A refusal to testify can also result in criminal sanctions in addition to being ordered to pay compensation to the injured party.
Also, in criminal proceedings, the court can order a party to disclose documents or testify.
The financial institution’s duty of confidentiality (or ‘duty of discretion’ as referred to by the Belgian Court of Cassation) is a long-established concept under Belgian law, even though its principle has never been embodied in any statutory provision. Case law on this is rare. The main decision on this subject was rendered on 25 October 1978 by the Court of Cassation, which held that a breach of a financial institution’s duty of confidentiality is not a criminal offence.
The duty of confidentiality applies to various types of information, including:
- facts about the client, for instance, his or her financial situation, commercial practices, etc;
- types of banking operations, for instance, the opening of an account or line of credit, transfer of funds, receipt of funds, etc; and
- the sums of money involved, account balances, etc.
The duty of confidentiality extends to all facts that a financial institution comes across in the course of its business relationship with its client. This includes information released directly by the client itself, as well as information that is made known by the financial institution by any other source (for instance, the financial institution’s own investigation, the client’s blacklists, etc). Mere hints or facts suspected by the financial institution are also considered as such information.
The financial institution’s duty of confidentiality is not generally regarded as a duty of professional secrecy. In specific circumstances, however, such duty of confidentiality can constitute a legitimate reason for not testifying or for not producing documents. Therefore, the judge would have to take the financial institution’s request to not testify or disclose into consideration and balance the financial institution’s duty of confidentiality with the requirements of the search for the truth. Belgian doctrine agrees, however, that a request by the financial institution to not disclose or testify is not likely to succeed.
In criminal proceedings, a financial institution can be compelled to disclose information about its client’s operations during the investigation stage and during the trial. In these scenarios, the financial institution’s duty of confidentiality is irrelevant. The financial institution must testify through its representatives or accept a search, just like any other person.
As a rule, if the financial institution’s own material interest is at stake, it is allowed to disclose information about clients including confidential documents. Whether or not such disclosure is limited to court proceedings to which the financial institution is a party remains a subject of controversy in Belgian legal doctrine.
No blocking statute is in force in Belgium.
Must financial institutions disclose confidential client documents during court proceedings? What procedural devices can be used to protect such documents?
As described above (see question 17), the duty of confidentiality does not prevent the court from ordering the disclosure of confidential client documents.
Courts can, at the client’s request, order financial institutions to redact a confidential document and therefore omit details included therein that are not relevant to the dispute. The financial institution could also merely show the judge the confidential document at the oral hearing without actually submitting it. The consent of the judge thereto is required. Further, the confidential document can also be included in a data room to which only the lawyers of the parties have access, and users of the data room are forbidden to take notes or copy the documents. Finally, the parties may assign a third person to view the document under the strict obligation of keeping the contents confidential except for the elements that are relevant to the dispute.
Disclosure of personal data
May private parties request disclosure of personal data held by financial services institutions?
If the client personally requests the disclosure of his or her own personal data, which are held by the financial institution, the latter is obliged to provide access to this client in accordance with the Belgian Privacy Act of 8 December 1992.
The client can relieve the financial institution from its duty of confidentiality, either expressly or implicitly.
Moreover, certain private parties having a special relationship with the client can require information from financial institutions. These private parties include:
- persons representing the client, including legal representatives of legally incapacitated persons, the trustee of a bankrupt enterprise or person, or the enterprise’s liquidator;
- persons continuing the client’s legal status after the client’s death; and
- persons having the same right as the client to the assets that are in the financial institution’s possession.
Other private parties may not request another client’s personal data. The financial institution is bound by its duty of confidentiality and may not therefore proceed to such disclosure.
What data governance issues are of particular importance to financial disputes in your jurisdiction? What case management techniques have evolved to deal with data issues?
As there is no discovery process available in Belgium, we are not aware of any specific data governance issues.
Interaction with regulatory regime
What powers do regulatory authorities have to bring court proceedings in your jurisdiction? In particular, what remedies may they seek?
Following the ‘twin peaks’ structure, the task of supervising financial institutions is divided between two authorities: the FSMA and the NBB.
The FSMA and the NBB are allowed to take legal action. In this regard, reference can be made to the cease-and-desist procedure (see question 11). Following this procedure, either the FSMA or the NBB (whichever is the claimant party to the procedure) can be granted an enforceable court order to stop the financial institution’s illegal actions.
If a violation of financial regulations is involved, the regulatory authorities can also impose a broad range of sanctions out of court including public warnings, injunctions, administrative fines, penalties, bans on the provision of the financial products or services at hand, or termination or suspension of the financial institution’s licence to operate (which is granted by the FSMA).
The FSMA and the NBB have a special procedure in place for imposing administrative fines, especially when there is serious evidence of violation of one or more financial regulations. When this occurs, the Management Committee instructs an investigations officer to conduct an investigation. The investigation results in a report indicating whether the ascertained facts may constitute a violation that is subject to or can be sanctioned by an administrative fine. The Management Committee decides how to proceed with the case. The case can be closed, settled or transferred to the Sanctions Committee. In the latter case, after hearing the parties concerned, the Sanctions Committee issues a decision regarding the imposition of an administrative fine. The amount of this fine is determined in accordance with the severity of the violation or violations and must be proportionate to any advantage or profit that might have been gained from those violations. If the violation constitutes a criminal offence, the file is transferred to the public prosecutor.
Disclosure restrictions on communications
Are communications between financial institutions and regulators and other regulatory materials subject to any disclosure restrictions or claims of privilege?
Neither the NBB nor the FSMA (or the accredited statutory auditors through which the FSMA may exercise its supervisory powers) may reveal any information it comes across in the course of its supervisory activities. Any violation of this rule results in criminal sanctions.
There are certain exceptions, however, including criminal proceedings and the filing of a complaint with the public prosecutor’s office with regard to discovered offences.
May private parties bring court proceedings against financial institutions directly for breaches of regulations?
Yes. See question 2.
In a claim by a private party against a financial institution, must the institution disclose complaints made against it by other private parties?
There is no obligation for a financial institution to disclose complaints made against it by other private parties.
Under article 877 of the Judicial Code, a private party in a dispute against a financial institution could seek the court to order the disclosure of information on such complaints, but the court can do so only if the private party’s request is sufficiently specific (eg, ‘all complaints received by the financial institution’ would be considered too vague or broad). The court must be convinced that the collateral facts are really relevant to the specific dispute that is pending between the private party and the financial institution.
Where a financial institution has agreed with a regulator to conduct a business review or redress exercise, may private parties directly enforce the terms of that review or exercise?
Private parties may not directly enforce the terms of a business review or redress exercise that has been agreed between the financial institution and the regulator.
However, if documents on such business review or redress exercise are known to the parties and if they indicate a flaw in the organisation or in the behaviour of the financial institution (for instance, proving the breach of a rule of conduct), they would certainly help the client to prove the financial institution’s liability for the damage that it has allegedly suffered.
Losses suffered because of transactions carried out by investors following a breach of a rule of conduct are presumed to result from that breach unless evidence to the contrary exists. Causation between the breach and the investment decision is presumed. The financial institution may rebut the presumption by, for instance, demonstrating that the client would not have acted differently if the financial institution had complied with its obligations.
Changes to the landscape
Have changes to the regulatory landscape following the financial crisis impacted financial services litigation?
The number of claims filed by consumers with Ombudsfin (see question 1) has clearly increased since 2008 to 2009.
The number of court litigations has also increased since the financial crisis. This has been caused by a combination of various factors, including:
- new pieces of legislation (MiFID in particular) that define the financial institutions’ duties more clearly; and
- specific market circumstances (such as low interest rates leading to disputes on interest rate swaps or break-cost clauses for borrowers wishing to repay credits early).
Is there an independent complaints procedure that customers can use to complain about financial services firms without bringing court claims?
Complaints about financial services can be lodged with Ombudsfin, the Belgian mediation centre for the financial sector (see question 1). Ombudsfin is responsible for managing the complaints filed by consumers and companies (for companies, only in relation to disputes on credit agreements and cross-border payments up to €50,000). The financial institutions against which the complaint is filed must be registered with the Belgian Bankers’ and Stockbrokers’ Association, the Belgian Credit Association, the Belgian Association of Stock Exchange Members or the Belgian Asset Managers Association.
Complainants or companies must address their complaint first to the financial institution concerned. If the financial institution fails to answer adequately within one month after it has received the complaint, the complainant must consult Ombudsfin.
A complaint filed with Ombudsfin can be done by post, fax, email or by completing the standard form that is available on Ombudsfin’s website. After an admissibility check of the complaint, Ombudsfin contacts the financial institution, asks the parties for any further information (if required) and brings them together to negotiate about the issue concerned. If the complaint is a matter on the principle or about more complex file, a board of experts will be in charge. Ombudsfin then moreover renders a non-binding opinion (except if it concerns basic banking services) on the complaint.
During the complaints process, financial institutions tend to cooperate constructively, especially for consumer complaints. Around 91.84 per cent of the consumer complaints lodged in 2016 were solved during the time that the complaints procedure was taking place. If an attempt to mediate fails, either party can bring a claim before the competent court (see question 11).
The complaints procedure is not mandatory. However, once a claim is pending before the court, the parties may no longer refer the case to Ombudsfin.
Recovery of assets
Is there an extrajudicial process for private individuals to recover lost assets from insolvent financial services firms? What is the limit of compensation that can be awarded without bringing court claims?
Under Belgian law, all sums held in bank accounts (current accounts, term deposits and savings deposits) and saving certification (subject to certain conditions) are covered by a deposit protection scheme. This coverage is up to €100,000 per depositor (individuals and legal entities, with the exception of certain specified categories of depositors, such as credit institutions, financial institutions, insurance companies). This maximum €100,000 coverage applies to all deposits in all of the accounts held per bank.
Under certain conditions, deposits exceeding the maximum €100,000 can be protected. These conditions are, for example, when the deposits result from real estate transactions concerning private homes, deposits relating to specific events in the life of the depositor that comply with certain social objectives, and deposits resulting from the payment of insurance or compensation indemnities attributed to victims of criminal violations or judicial errors.
Financial instruments (other than savings certificates) are covered by a separate protection scheme. This coverage is for a maximum of €20,000 (regardless of the currency of the financial instruments). This protection applies to instruments held by both natural persons and legal entities, with a few exceptions (which include large companies and investors that perform banking or financial activities). However, this protection system can only be used as a fallback. Despite being deposited, the financial instruments remain the customers’ property and will never constitute the property of the financial institution holding them.
Finally, guaranteed return life insurance products belonging to branch 21 and governed by Belgian law are also protected up to a total maximum of €100,000 for all protected contracts that a single policyholder has taken out with an insurance company. The protection applies to natural persons as well as to legal entities, with the exception of certain categories of entities that are also excluded from the deposit protection scheme (eg, Belgian or foreign credit institutions acting in their own name and on their own behalf and investment firms established under Belgian or foreign law).
The deposit protection scheme, life insurance and financial instruments protection take effect on the date a credit institution or insurance company goes bankrupt, or when the National Bank of Belgium determines that the credit institution is unable to return the customers’ assets for reasons directly related to its financial position and will possibly also not be able to do so in the near future.
The Belgian Financial Transactions Guarantee Fund can provide the protection described above. This Fund reimburses deposits within 20 working days (which will progressively decrease to seven working days in 2024) and life insurances within three months (subject to an extension that cannot exceed 12 months).