i Sources of law
The Danish regulation of securities law is highly influenced by Denmark's membership of the European Union and is based on implementation and direct application of EU regulations such as the MiFID II Directive, the MiFIR Regulation and the Market Abuse Regulation (MAR).2 The primary source of securities law in Denmark is the Capital Markets Act, which came into force on 3 January 2018 and replaced the former Securities Trading Act enacted in 1995. The Capital Markets Act provides the overall framework for securities trading in Denmark, including rules on offering and admission to trading (prospectus rules), disclosure of inside information and takeover bids. The Capital Markets Act is supplemented by a number of executive orders and guidelines, providing a more detailed regulation of specific topics. Other potentially relevant statutes include the Companies Act and the Financial Business Act.
In addition, trading at the Danish stock exchange, Nasdaq Copenhagen A/S (Nasdaq Copenhagen), is governed by the Issuer Rules, the Member Rules and the Warrant Rulebook.
Litigation of securities claims in Danish courts is not governed by a special set of procedural rules but by the general rules of civil and criminal procedure in the Administration of Justice Act (AJA). In practice, many securities actions start out with the Danish Financial Supervisory Authority (the Danish FSA) or Nasdaq Copenhagen issuing criticism on the basis of inquiries into potential issues. Such administrative orders or reprimands influence the dynamics of court cases. See Section III.
ii Regulatory authorities
The Danish Financial Supervisory Authority
The Danish FSA exercises unitary supervision of the actors in the financial markets in Denmark and ensures observance of the Capital Markets Act and rules issued pursuant thereto.3 In addition to its supervisory activities, the Danish FSA assists in drafting financial legislation and issues executive orders about the financial markets.
Nasdaq Copenhagen A/S
The Copenhagen Securities Exchange began trading in 1808 as a non-profit organisation. Today, the stock exchange exists in the form of the regulated market Nasdaq Copenhagen, which is the predominant stock exchange in Denmark.
Nasdaq Copenhagen also operates First North, an alternative marketplace in Denmark primarily for small growth companies seeking to develop their businesses. First North is subject to a separate and less burdensome rule book.
As at April 2020, 130 companies were listed on the main market of Nasdaq Copenhagen, and 24 companies were listed on First North (154 companies in total).
There are no specialist courts in Denmark dealing only with securities litigation. On the contrary, the Danish courts have jurisdiction over both civil and criminal securities actions. The Danish courts include:
- 24 district courts;
- the Maritime and Commercial High Court (a specialist court within the field of maritime, commercial and business law);
- the Eastern High Court and the Western High Court; and
- the Supreme Court.
As a general rule, civil and criminal cases are tried before the district court in the first instance. Only if a case raises issues of a fundamental nature may it be referred from the district court to the High Court in the first instance.
Court decisions may always be tried in two instances (the two-tier principle).4
Bringing a case before the Danish Supreme Court in the third instance requires permission by the Appeals Permission Board (third-tier grant), which is only granted in cases that may have implications for rulings in other cases or cases of special interest to the public.
The Prosecution Service
The Prosecution Service is the prosecution authority with respect to criminal enforcement of securities law. There are 14 police districts in Denmark, including the Faroe Islands Police and the Greenland Police, where prosecutors appear before the district courts. Cases about serious economic crime are prosecuted in the High Court by the State Prosecutor for Serious Economic and International Crime.
iii Common securities claims
Private securities actions, as described in Section II.i, include actions in which investors are seeking damages for misleading or untrue statements in prospectuses or in other published information and actions about unjustified delay of disclosure of inside information. Such claims are typically directed at the issuer, the management or the board of directors; however, to some extent Danish case law also allows secondary liability as described further in Section II.i.
Within public enforcement and under the Danish FSA's supervision, criminal market misconduct offences include:
- insider trading;5
- unlawful disclosure of inside information;6
- market manipulation;7
- breach of disclosure rules;8
- violation of prospectus rules.9
Furthermore, the application of MAR has resulted in increased formal requirements on the keeping and maintenance of insider lists and on documentation of notification of insiders and related parties,10 which the Danish FSA also supervises.
II PRIVATE ENFORCEMENT
i Forms of action
Section 12(1) of the Capital Markets Act sets out the fundamental requirement that a prospectus must include the information necessary to enable investors to make an informed assessment of the issuer and the rights attached to the securities.
The cause of action available to an investor seeking damages for misleading or untrue statements in prospectuses has been established by the Danish courts on the basis of the general Danish rule of non-contractual liability (culpa liability).
According to Danish case law, in particular the Danish Supreme Court judgment in Hafnia11 and the Danish Supreme Court judgment in BankTrelleborg,12 persons responsible for a prospectus may incur liability for investor losses caused by defects in the prospectus that, overall, are of significant importance to an investor's assessment of the issuer. It is further required that the defects are attributable to those responsible for the prospectus, and that those responsible acted intentionally or negligently.
With regard to causal nexus between the material defects in the prospectus and the loss suffered, the Danish Supreme Court established in BankTrelleborg that when a prospectus suffers from material defects, there is a presumption that the share subscription process would not have taken place had the information in the prospectus been correct and adequate.13 BankTrelleborg thus places the burden of proof as to causal nexus in cases about prospectus liability on the defendant.
The group of persons responsible for a prospectus naturally includes the issuer and the persons listed in the prospectus as being responsible. In addition, it is recognised in Danish case law and legal literature that it is not in itself decisive who is formally held out to be responsible for the prospectus. The crucial question is whether that person has in fact taken part in the offering phase or in the drafting of the prospectus.14 Consequently, based on an assessment of the circumstances in each individual case, the person who takes part in the offering phase as a member of management, investment bank, accountant, lawyer, adviser, owner, etc. may incur liability.
Liability for other published information
MAR, which entered into force in Denmark on 3 July 2016, and the Capital Markets Act (formerly the Securities Trading Act) provide the causes of action for investors seeking recovery of losses suffered as a result of reliance on published information (other than a prospectus), or where published information has been delayed without justification.
Pursuant to MAR Article 17(1), an issuer of securities must inform the public as soon as possible of inside information that directly concerns that issuer. Article 7 defines inside information as information:
- of a precise nature;
- that has not been made public;
- that directly or indirectly concerns the issuer; and
- that if it were made public would be likely to have a significant effect on the prices of the financial instruments.
An intermediate step in a protracted process is deemed to be inside information; see MAR Article 7(3).
MAR Article 17(1) introduced a significant change in Danish law, as it replaced the 'reality principle' set out in the then applicable Section 27 of the Securities Trading Act, according to which an issuer was only required to disclose information upon the coming into existence of the relevant circumstance or the occurrence of the relevant event. Thus, under the former rule, inside information about, for example, ongoing negotiations in connection with an acquisition was only to be disclosed when the negotiations led to an actual result. Under MAR, an issuer may instead, in such cases, make use of the possibility of delaying disclosure in MAR Article 17(4).
Pursuant to MAR Article 17(4), an issuer may, on its own responsibility, delay disclosure of inside information, if:
- immediate disclosure is likely to prejudice the legitimate interests of the issuer or emission allowance market participant;
- delay of disclosure is not likely to mislead the public; and
- the issuer or emission allowance market participant is able to ensure the confidentiality of that information.
The Danish FSA must be informed immediately after the disclosure of inside information when the disclosure has been delayed, and the issuer must give the Danish FSA a written explanation of how the requirements of delay were met. The issuer should make sure it is able to document its fulfilment of the requirements during the entire period in which the disclosure was delayed.
In Denmark, the procedure in relation to securities actions is set out in the AJA, which governs all aspects of both civil (third book) and criminal (fourth book) proceedings.
Civil court proceedings in Denmark are divided into two stages: written pretrial preparation; and trial hearing in court.
Proceedings are commenced by the filing of a writ of summons.15 Since 2 February 2018, all civil cases, including Supreme Court cases, are instituted and processed using a digital portal16 made available by the courts.17
Subsequently, the defendant files a statement of defence before a date determined by the court. After having received the statement of defence, the court will arrange for a pretrial hearing, which will usually be held as a telephone conference.18 At this point, the parties will be expected to agree on a timeline for the remaining case preparation and, if possible, set a trial date. In complex cases, there will usually be a need for further exchange of pleadings and possibly expert reports before the trial hearing.
The pretrial process outlines the scope of the case. If a party wishes to expand the claim, to make new submissions or to produce new evidence after the pretrial process, this may only be done with the permission of the court.19 There is no general obligation of disclosure or discovery as known in common law jurisdictions. However, upon request from a party and in limited circumstances, the court may order a party or a third party to produce specific evidence, such as documents.20
The trial hearing is conducted orally. As a general rule, depositions are not used under Danish law. A party intending to rely on a witness statement must, therefore, call the witness before the court.
The costs connected with a civil action in Denmark are:
- court fees;
- litigation costs, including, inter alia, witness compensation and expenses for expert opinions and translations; and
- costs for legal counsel.
Pursuant to the general rule in AJA, Section 312, the unsuccessful party must compensate the prevailing party for the costs incurred as a result of the action. However, such reimbursement is determined by the court and generally only covers part of the actual costs incurred. Litigants must, therefore, typically be prepared to pay a significant part of their own legal costs, including when succeeding in their claim.
Since 2008, Danish procedural law has allowed group litigation, which is commonly used by investors seeking recovery of losses.21
As in other jurisdictions, parties to Danish court proceedings have a duty to examine the possibilities for a settlement.22 The parties can choose to settle at any point during the case proceedings by entering into a settlement agreement. The parties may decide to have the settlement confirmed by the court by way of a court settlement, which is entered in the court records and is enforceable without further formality.
iv Damages and remedies
Under the general law of damages in Denmark, an investor is entitled to be compensated in full so that the investor is restored to the position in which the investor would have been had the purchase of shares not taken place.
Damages are calculated based on the following three fundamental principles:
- a principle of restitution, meaning that the injured party is to be fully compensated for his or her loss;
- the injured party should obtain no enrichment from the damages; and
- the injured party has a duty to mitigate his or her loss.23
Danish law does not allow punitive damages or compensation without actual loss except for particular statutory provisions.
III PUBLIC ENFORCEMENT
i Forms of action
The Danish FSA has extensive supervisory powers, which include authorisation and supervision of financial companies, carrying out on-site inspections and overall monitoring of financial companies' compliance with the capital markets regulation.
An investigation by the Danish FSA often starts with the Danish FSA sending a consultation letter to the financial company with a view to uncovering relevant facts. Ultimately, an investigation by the Danish FSA may result in the Danish FSA issuing an order or reprimand, but the case may also be closed, either after consultation with the financial company or with some criticism of the company. At other times, the violation is so serious that the Danish FSA files a police report.
As a general rule, the Danish FSA is obligated to publish its decisions.24 Police reports are an exception as they are often confidential due to the ongoing investigation. Both private and public enforcement of securities claims will often be influenced by any initial inquiries, orders or reprimands of the Danish FSA.
The Danish FSA prepares statistics of market abuse cases. The Danish FSA statistics in the tables below outline, as examples, violation of prospectus regulation and unlawful disclosure of inside information.25
Violation of prospectus regulation
|Reprimands and orders||1||3||0||0||0|
|Police reports forwarded to the public prosecutor*||0||0||0||0||1|
* Several police reports may be included in one case
Unlawful disclosure of inside information
|Reprimands and orders||1||1||4||10||3|
|Police reports forwarded to the public prosecutor||0||0||1||1||0|
Nasdaq Copenhagen supervises and imposes sanctions for violations of its rule books.
When the police have completed an investigation, the Prosecution Service will decide whether or not to bring formal charges, which depends on whether there is sufficient evidence to convict the provisionally charged person. When formal charges are brought, the case is sent to the court along with an indictment listing the charges.
In Denmark, a case concerned with serious economic crime (e.g., proceedings regarding non-compliance with securities regulation), is, as a general rule, processed according to the same rules as any other criminal case. Therefore, the differences between Danish civil and criminal securities proceedings are worthy of notice.
In criminal proceedings, counsel for the defence may, before the trial hearing, request the police to conduct investigative actions that the defence finds relevant: for example, questioning of witnesses or technical analyses. However, if the police do not find such investigative actions relevant to the case, it will be for the court to decide whether or not to allow the request.
As a general rule, counsel for the defence has a right to receive all case material gathered by the police. The person charged is allowed to review the material, but may only receive a copy with the police's permission.
In criminal proceedings, there is no written pretrial preparation as in civil proceedings. Although it is allowed to do so, the defence is not expected to produce any written submissions.
For these reasons, the procedural features of criminal securities actions differ significantly from civil securities actions, which, inter alia, usually involve a long exchange of written pleadings. Critics suggest that Danish criminal procedure is, to some extent, inept in its processing of comprehensive cases against financial companies about non-compliance with securities law.
When initiating an investigation, the Danish FSA will typically enter into a dialogue with the financial company subject to investigation, and the company will be given the opportunity to disclose relevant information. Neither settlements in criminal proceedings nor settlements of administrative actions are possible under Danish law.
iv Sentencing and liability
Pursuant to Sections 247 and 249(1) of the Capital Markets Act, non-compliance with Section 12(1) of the Capital Markets Act (prospectus requirements) or MAR Articles 17 (disclosure rules) and 18 (insider lists) is punishable by fine. Non-compliance with MAR Articles 14 (prohibition of insider trading and of unlawful disclosure of inside information) and 15 (prohibition of market manipulation) is punishable by a fine or imprisonment for up to one year and six months; see Section 249(2) of the Capital Markets Act. The standard scale of fines is low compared to international standards.
IV CROSS-BORDER ISSUES
A defendant may be sued in Denmark if the AJA provides the Danish courts with jurisdiction. According to the main rule in AJA, Section 235, proceedings may be initiated in the defendant's home court. For companies, associations and private institutions, the home court is the court for the judicial district in which the main office is located.26 If a main office cannot be located, the home court is the judicial district in which one of the members of management or of the board of directors is resident. Legal proceedings involving a claim for non-contractual damages may be instituted in the court for the judicial district in which the legal wrong was committed.27
If the defendant is domiciled in an EU Member State, jurisdiction is determined in accordance with the Brussels I Regulation.28 With few exceptions, for example, consumer contract cases29 and the rules on exclusive jurisdiction,30 the courts of the Member State in which the defendant is domiciled will have jurisdiction according to the main rule in Article 4(1) of the Brussels I Regulation. Special rules of supplementary jurisdiction apply in matters relating to contractual relationships,31 tort32 or a branch, agency or other establishment.33
Finally, if the defendant is not domiciled in an EU Member State, exceptional jurisdictions may apply. Under AJA, Section 246(3), proceedings may be brought before the Danish courts if the defendant held assets in Denmark at the time when the proceedings were instituted. In principle, this includes any asset of financial value, for example, a negotiable document or a counterclaim, which can be established with some certainty.
V YEAR IN REVIEW
The entry into force of the Capital Markets Act on 3 January 2018 is the most significant statutory initiative within Danish securities law since the implementation of the 'Stock Market Reform II' in 1995. The actual consequences of this change of law as well as the changes described in Section II.i as a result of MAR, which entered into force on 3 July 2016, are only beginning to be tested, and Danish legal practitioners are observing developments closely.
As is also evident from the statistics mentioned in Section III.i, one report on violation of prospectus rules was forwarded to the Danish police in 2019. This was a police report of 16 August 2019 filed by the Danish FSA against a Danish big data software company of the Fastbase Group and two other companies of the same group. Without an approved prospectus, the Danish company had offered shares in the company Fastbase Inc. to investors on its website and by contacting potential investors directly by email. The Danish FSA estimated that the offering was in excess of €8 million and that, by announcing the offering on its website, the company had catered to an indefinite number of people (and thereby the offering had been available to more than 150 natural or legal persons). In consequence, the company was not exempted from the obligation to publish a prospectus, according to Section 10(2) of the Capital Markets Act, and this resulted in the police report.
In the field of sports, the Danish FSA issued a reprimand on 6 February 2020 to the Danish football club Aarhus Gymnastikforening A/S (AGF) for not having disclosed inside information, as required under MAR Article 17(1). At the end of June 2019, after various negotiations with F.C. København A/S (FCK) concerning the sale of a player from AGF, the parties had agreed on a transfer agreement, which was conditional on approval by AGF's board of directors. AGF's board of directors approved the sale on 1 July 2019, and AGF then disclosed the information to the market. Before the Danish FSA, AGF argued that the information did not constitute inside information until after approval by the board of directors, because the transfer agreement had depended on board approval and it was far from certain that the board would approve the sale. In its decision, the Danish FSA noted, as also explained in Section II.i, that a financial company is not only required to disclose information upon the occurrence of the relevant event, but the decisive factor is whether there is a real possibility of the event occurring. Placing emphasis on the successful sales negotiations and the fact that the parties had agreed on the terms for the transfer agreement, the Danish FSA found that, as of 27 June 2019, inside information had existed.
In another case of inside information, the Danish FSA reprimanded the Danish bank, Sydbank A/S, on 26 August 2019 for not having disclosed inside information as soon as possible, as required under MAR Article 17(1), in relation to a profits downgrade. The Danish FSA established that, on 21 October 2018, the bank's CFO had shared an interim report with the CEO and indicated the potential need for a downgrade with respect to the full year. According to the Danish FSA, internal discussions then followed, but Sydbank did not assess whether inside information existed until 29 October 2018. The profits downgrade was published by Sydbank on 31 October 2018, when the bank lowered its expectations of its profit after tax for the full year of 2018 from the range 1,340–1,540 million kroner to the range 1,250–1,325 million kroner, which led to a decline in the bank's share price of 12.7% on the day. With respect to the profits downgrade, Sydbank argued that the bank had not expected the downgrade to noticeably impact the share price, as the downgrade, based on the average of available market analyses, was in line with market expectations. It was only later that Sydbank had found that its estimates had been incorrect. Considering the information presented by the CFO on 21 October 2018, the Danish FSA found that the profits downgrade could have been reasonably expected at this time. Also taking into account that the case concerned a profits downgrade of 14%, the Danish FSA found Sydbank to be in breach of MAR Article 17(1). In its decision, the Danish FSA noted that, while it is not a requirement for inside information that the company's share price is noticeably affected by the information (in this case, the profits warning), an actual impact on the share performance may impact the assessment of whether inside information existed.
Within the private enforcement area, attention has remained, throughout 2019, on the number of actions involving the former Danish company OW Bunker A/S, which was once one of the world's largest traders of bunker oil. At the public offering in March 2014, OW Bunker earned a market capitalisation of approximately 5.3 billion kroner, but the company filed for bankruptcy in November the same year after suffering risk management losses (approximately US$150 million) and credit losses in a Singapore-based subsidiary (approximately US$125 million).
Currently, there is a bundle of pending private enforcement actions relating to OW Bunker that have been initiated by:
- a consortium of Danish institutional investors pursuing, in two separate actions, claims for prospectus liability (the Prospectus Liability case) and for violation of disclosure requirements;
- a consortium of Danish private investors (Foreningen OW Bunker-Investor) (in October 2018, the consortium was granted free legal aid under the rules in AJA, Part 31, meaning that the legal proceedings will be financed by the Danish government);
- a consortium of primarily foreign institutional investors led by the Deminor Group; and
- the bankruptcy estate itself.
According to media reports on 2 April 2020, another case has been added to the bundle, as the former owner of OW Bunker (the private equity fund Altor) and former members of OW Bunker's management have filed a lawsuit against Deloitte in Singapore, which was the accounting firm of OW Bunker's Singapore-based subsidiary.
In the Prospectus Liability case, institutional investors are claiming damages of 767 million kroner in compensation for losses suffered as a result of the investment in shares in OW Bunker in connection with the initial public offering (IPO). The plaintiffs mainly argue that the OW Bunker Offering Circular of 18 March 2014 suffered from material defects as it provided incorrect, incomplete and misleading information and omitted information, primarily about the company's speculation in oil price changes and the trading activity between OW Bunker's Singapore-based subsidiary and its customer. The 22 defendants in the Prospectus Liability case include the bankruptcy estate, the board of directors, the day-to-day management, the ultimate owner and private equity fund, and, as of November 2017, also two of the four investment banks organising the IPO. The parties to the case come from, inter alia, Denmark, Luxembourg, Sweden, Guernsey and England.
Owing to their fundamental nature, all of the pending OW Bunker cases, with the exception of the lawsuit against Deloitte in Singapore, have been referred from a district court to the Eastern High Court in the first instance. Interestingly, the Eastern High Court has directed, in accordance with AJA, Section 254, that all of the OW Bunker cases pending before the High Court are to be heard jointly. This is likely to impact the processing of the cases, as the cases will now be tried at one joint trial hearing. This naturally has certain advantages, but is also likely to result in a number of practical challenges considering the high number of plaintiffs, defendants and lawyers, as well as the differences in applicable areas of law.
Adding to the procedural complexity of the OW Bunker cases is a recent development with respect to the legal actions filed by the OW Bunker bankruptcy estate. In December 2016, the bankruptcy estate filed its first legal action claiming damages for 400 million kroner, which partly covered a claim for recovery of paid dividends and partly a claim for damages. In October 2017, the bankruptcy estate filed two additional legal actions concerning the same matters and against the same defendants whereby it raised its total claim by approximately 1.8 billion kroner (raising the total claim to approximately 2.2 billion kroner). The additional two legal actions were made possible by way of a litigation funding agreement between the bankruptcy estate and a hedge fund. This prompted the defendants to argue for a dismissal, as the new legal actions, according to the defendants, concerned identical proceedings. At a preliminary hearing in August 2019, the Eastern High Court, under AJA, Section 253(1), cf. (2), listed the issue with respect to the third legal action for a separate trial, and on 31 March 2020 the Eastern High Court ruled in favour of a dismissal by applying a strict lis pendens rule.
Moving on from the OW Bunker cases, there has also been a great deal of other activity before the Danish courts within the area of securities law in 2019.
Following the bankruptcy of Amagerbanken A/S in 2011, a former shareholder commenced proceedings against the bankruptcy estate, claiming that a prospectus in relation to an issue of shares in 2010 had suffered from material defects. The question in the case was whether information on an assessment made by Finansiel Stabilitet (an independent public company owned by the Danish state) as to the bank's impairment needs should have been included in the prospectus. The case had links to another lawsuit on the overall question of liability on behalf of the management for the bank's collapse (which was finally decided by the Eastern High Court in its judgment of 26 June 2019, according to which eight former members of management were ordered to pay 225.5 million kroner in damages). The prospectus case was first tried in the Maritime and Commercial High Court, which on 21 December 2016 had ruled in favour of the bankruptcy estate, and on 9 May 2019 the Eastern High Court upheld the judgment. In its judgment, the Eastern High Court placed emphasis on the division of competence between the Danish FSA and Finansiel Stabilitet. Taking into account that the Danish FSA was the competent authority in matters concerning solvency and impairment needs of banks, the High Court found that the information from Finansiel Stabilitet did not have such a nature that it should have been mentioned in the prospectus.
At the beginning of 2019, a number of Danish and international investors filed class actions against Danske Bank and certain individuals for the purpose of seeking damages for share price declines and violation of disclosure requirements following the money laundering case relating to the bank's Estonian branch. Four class actions have been initiated before the Danish courts, and one civil action has been commenced in the United States. These cases are still at a very preliminary stage.
Another case that has attracted considerable attention has been the civil litigation brought by the bankruptcy estate of the former Danish lighting company Hesalight A/S against the founder and CEO, three former members of the company's board of directors and the company's accountant. The bankruptcy estate claimed damages for a total of 200 million kroner, as it argued that the defendants had neglected their duties and responsibilities as members of management and as an accountant, respectively, inter alia, in relation to dissipation of a 562 million kroner investment in corporate bonds from six institutional investors and by presenting incorrect financial information in the company's annual accounts. In its judgment of 31 March 2020, the district court of Roskilde found the former CEO, two of the former members of the board of directors and the accountant jointly liable to pay damages in the amount of 200 million kroner. The court found that the fact that the investors had not performed their own due diligence before investing in Hesalight did not exclude civil liability, as the management had known that the institutional investors had relied upon the information in the company's annual accounts, including the information that the annual accounts were confirmed by a state-authorised public accountant. At the time of writing, the judgment was appealed to be tried in the High Court in the second instance.
Two days later, on 2 April 2020, the Eastern High Court upheld the seven-year prison sentence against the founder and CEO of Hesalight passed by the district court of Roskilde on 24 January 2019. The founder and former CEO had been charged with five counts under the Danish Criminal Code, including fraud of a particularly aggravating nature, according to Section 279, cf. Section 286(2), of the Danish Criminal Code, by having presented incorrect information about the company's past and future earnings, volume of orders, risk management and general financial position to the six institutional investors who had placed the 562 million kroner investment.
VI OUTLOOK AND CONCLUSIONS
The OW Bunker cases described in Section V are likely to be finally tried and decided by the Danish Supreme Court and will make for landmark decisions in that they deal with relatively untested areas of securities law and also raise significant procedural questions. The prospectus liability cases will test the requirements for and the balance between the business description and risk factors in a prospectus, together with the significance of the pre-IPO process. The outcome of the cases will also have an impact on future litigation about the potential liability of investment banks in connection with public offerings. Although the written pretrial preparations are drawing nearer to a close, trial dates for the joint oral hearing have not yet been set.
With respect to the legal actions filed by the OW Bunker bankruptcy estate (see Section V), all parties involved are expected to closely observe whether the High Court decision of dismissal will be appealed to the Supreme Court. In its decision, the High Court noted that general principles of force of law and finality, as well as general considerations of costs and efficiency, cited in the Supreme Court ruling in UfR 2010.1431,34 indicate that a plaintiff should, as a general rule, include all due claims for damages in the same legal action case. The High Court did not attach significance to the fact that the external funding had only been made available after the commencement of the first legal action, nor to the fact that the cases in question are heard jointly, cf. AJA, Section 254. This despite arguments by the bankruptcy estate that, since the cases in question are heard and decided together (and together also with the other OW Bunker cases pending before the High Court), (1) the risk of irreconcilable judgments is eliminated, and (2) it will be possible for the defendants to defend themselves against all claims at once, thus avoiding duplication of work and saving costs. If the High Court decision stands, it leaves the question as to whether the bankruptcy estate will instead seek to raise its claims in its other pending legal action (although this, from reading the case description in the High Court decision, would seem to go against the terms of the external funding agreement).
As our thoughts were turning to spring, a different kind of challenge emerged with the constantly unravelling news of the covid-19 outbreak and the different national response initiatives. As of April 2020, the covid-19 developments have led to a highly volatile and turbulent Danish market. One example of this is the suspension of trade in some listed Danish funds of funds.
While, for obvious reasons, it is not yet possible to assess the legal implications of the global covid-19 crisis, all financial market participants are forced to put efforts into establishing how to navigate the new market conditions and must be ready to apply contingency plans. With respect to financial companies' disclosure obligations, the Danish FSA issued a statement on 20 March 2020 that the outbreak of covid-19 may result in the need for suspension of financial expectations and issuance of profit downgrades among issuers. According to the Danish FSA, such suspensions and downgrades of already announced expectations will generally constitute inside information; thus the Danish FSA stated that issuers are expected to inform the market accordingly (i.e., as soon as possible after issuers become aware of the need to suspend or downgrade their financial expectations for the 2019 year-end result). The Danish FSA noted that this also applies before final figures are available.35 Adding to this, the European Securities and Markets Authority recommends that issuers provide transparency on the actual and potential impacts of covid-19 to the extent possible based on both qualitative and quantitative assessments of their business activities, financial situation and economic performance in their 2019 year-end financial report if these have not yet been finalised, or otherwise in their interim financial reporting disclosures.36
1 Karsten Kristoffersen is managing partner and Josefine Movin Østergaard is a senior associate at Bruun & Hjejle. The authors wish to thank Lotte Marie Dirksen for her assistance in producing this chapter.
2 Markets in Financial Instruments Directive (EU) No. 65/2014, Markets in Financial Instruments Regulation (EU) No. 600/2014 and Market Abuse Regulation (EU) No. 596/2014.
3 The Capital Markets Act, Section 211.
4 AJA, Part 36 on appeals.
5 MAR Articles 8 and 14.
6 MAR Articles 10 and 14.
7 MAR Articles 12 and 15.
8 MAR Articles 7 and 17.
9 The Capital Markets Act, Sections 12(1) and 247.
10 MAR Article 18.
11 Reported in the Danish Weekly Law Reports for 2002 – UfR 2002.2067 H.
12 Reported in the Danish Weekly Law Reports for 2013 – UfR 2013.1107 H.
13 Supreme Court judgment as reported in the Danish Weekly Law Reports for 2013 – UfR 2013.1107.H, Paragraph 1145.
14 Peer Schaumburg-Müller and Erik Werlauff 'Ansvar for børsemission', article published in the Danish Weekly Law Reports for 1997 (UfR 1997.456.B), p. 460.
15 AJA, Section 348.
17 AJA, Sections 148a–148b.
18 AJA, Section 353.
19 AJA, Section 358.
20 AJA, Section 298.
21 AJA, Section 254a.
22 AJA, Section 336a.
23 Bent Iversen and Lars Lindencrone Petersen, Danish Business Law, 6th Edition (2015), p. 115.
24 The Capital Markets Act, Section 234. Subject to limitations in the Capital Markets Act, Sections 237–239.
25 Statistics provided by the Danish FSA (latest update 22 January 2020). Available at: www.finanstilsynet.dk/Tal-og-Fakta/Statistik/Statistik-for-overtraedelser-af-regler-paa-kapitalmarkedet, accessed on 25 March 2020.
26 AJA, Section 238.
27 AJA, Section 243.
28 Regulation (EU) No 1215/2012 of 12 December 2012.
29 Ibid., Articles 17–18.
30 Ibid., Article 24.
31 Ibid., Article 7(1).
32 Ibid., Article 7(2).
33 Ibid., Article 7(5).
34 Reported in the Danish Weekly Law Reports for 2010 – UfR 2010.1431 H.
35 www.finanstilsynet.dk/Nyheder-og-Presse/Sektornyt/2020/Suspensioner_og_nedjusteringer_COVID19_200320. Accessed on 5 April 2020.
36 www.esma.europa.eu/press-news/esma-news/esma-recommends-action-financial- market-participants-covid-19-impact. Accessed on 5 April 2020.