Important lessons to be learnt from 'Daimler'

In this editorial, professor Erik Werlauff argues that some impoprtant lessons can be learnt from the ECJ’s judgment in Daimler, C-19/11. First, it may be an item of good news for investors in a quoted company that its CEO resigns, or considers to resign. When, after having contemplated and discussed internally from 6 April to 28 July, Daimler’s CEO actually resigned and was replaced, the stock price rose sharply. Second, when assessing when a future event is so probable to occur that disclosure should take place, it is not correct to describe this as a demand for “sufficient probability” (hinreichende Wahrscheinlichkeit). Disclosure should take place when there is a “realistic prospect” (tatsächlich erwartet werden kann) that the future event will occur. Intermediate steps (Zwischenschritte) can in themselves be stock relevant. Third, under German law, as well as under US law, it is natural to be able to sue the quoted company itself on grounds of misleading or delayed stock announcements. Other countries, including Denmark, are gradually coming to a similar state of law, however without statutory law to guide investors. The lesson for the EU should be that common rules are needed in this field. The lesson for quoted companies should be that when insuring ‘board liability’, liability of the quoted company itself should always be included in the insurance. Fourth, legislators, advisors and scholars should remember to compare different linguistic versions of a directive or a regulation. When Germany implemented the market abuse directive, it must have trusted the German version of it (like countries often do). However, this version demanded too high a probability that a stock relevant event would occur, and German legislation was based on the German version of the directive. The Court compared, and concluded that the German version was out of step with the mainstream of linguistic versions. Fifth, after Daimler it has become even more important to remember the exception: Quoted companies must as soon as possible disclose inside information; that is the main rule, and after Daimler it is stronger than ever. The exception consists of the company’s option to delay disclosure under certain (restrictive) circumstances, thereby protecting legitimate interests of the company. All quoted companies are after Daimler more than ever dependent on solid advice in handling this exception.