Originally published in German on the website of the Constitutional Court of Austria (VfGH; Verfassungsgerichtshof) on 04.01.2022:
Regulation and banking supervisions aims to protect the functioning of the financial market, not individual investors: no official liability
The provision, under which the Federal Government is not liable for losses sustained by customers of an insolvent bank, is constitutional. Around 30 customers of Commerzialbank Mattersburg petitioned the Regional Court for Civil Law issues in Vienna (Landesgericht für Zivilrechtssachen Wien) last year following the Bank’s insolvency, filing suits for official liability against the Federal Government, and during the course of these proceedings filed applications for the repealing of Article 3 para. 1 second sentence of the Financial Market Authority Act (FMABG; Finanzmarktaufsichtsbehördengesetz) on the grounds of it being unconstitutional. The VfGH rejected these applications in its decision dated 16 December 2021, which was legally delivered today.
The provision that was introduced in 2008 that was contested stipulates that the Federal Government shall only be liable for such damages that the FMA has inflicted unlawfully and culpably upon the undertakings that it supervises (i.e. for example credit institutions). If therefore follows that bank customers are unable to claim official liability on the basis of acts or omissions by the FMA.
According to the VfGH, the legislator has clarified with the contested provision the previously disputed issued of whether banking supervision law and other financial market supervision law also serves to protect individual creditors under official liability law, or merely pursues public interests. According to the contested provision supervisory law serves the purpose of protecting creditors (investors and depositors) in their collective entirety; investors and depositors should have confidence in the orderly functioning of the financial market (functional protection). However, the intention of financial market supervision law is not to protect individual investors and depositors by means of official liability under compensation law for errors made by the supervisor.
The decision of the legislator that was taken in light of the impact of the financial crisis in 2008 with regard to the provision that was contested, namely that the taxpayer should not be expected to pay for the economic fallout of the insolvency of a bank by way of official liability, does not contravene the principle of equality. It is therefore not unconstitutional that in the case of (alleged) unlawful performance of supervision that only banks or undertakings that are also subject to such supervision shall have a claim to official liability against the Federal Government.
(Case number G 224/2021 among other case numbers.)
The original publication in German may be consulted via the following link on the VfGH website.