State Liability for Unlawful Decisions of a German Stock Exchange Sanctions Committee

Participants in German stock exchange trading must comply with a variety of exchange regulations. However, violations may occasionally occur, leading to sanction proceedings before the sanctions committee of the stock exchange (e.g., the Frankfurt Stock Exchange, FWB, or the European Energy Exchange, EEX).

Pursuant to Section 22 (1) Sentence 1 of the German Stock Exchange Act (BörsG), the sanctions committee has the authority to impose a reprimand, a fine of up to 1 million euros, or a full or partial exclusion of the trading participant from exchange trading for up to 30 trading days. In particular, exclusion from trading can result in revenue and profit losses.

If, in the course of administrative court proceedings, it is determined that the sanction decision was unlawful, the question arises as to whether the trading participant who was unjustly excluded from exchange trading is entitled to claim damages. In particular, a claim for state liability pursuant to Section 839 Sentence 1 of the German Civil Code (BGB) in conjunction with Article 34 Sentence 1 of the German Basic Law (GG) may be considered. This claim must be asserted before civil courts rather than administrative courts.

However, the proper defendant is not the stock exchange, even though the sanctions committee is an organ of the exchange. This is because the stock exchange lacks the necessary legal capacity. Pursuant to Section 2 (1) of the German Stock Exchange Act (BörsG), it only has partial legal capacity and, according to Section 2 (11) BörsG, is only capable of being a party in administrative court proceedings. Similarly, the exchange operator (e.g., Deutsche Börse AG or Euwax Frankfurt AG) is not a proper party in a state liability lawsuit, as it is a private law company (BGH, judgment of October 22, 2009 – III ZR 295/08). Instead, the proper defendant is the federal state (e.g., the State of Hesse) that granted the legal entity of the exchange the license to operate the exchange pursuant to Section 5 (1) Sentence 1 BörsG (BGH, judgment of February 22, 2024 – III ZR 13/23).

In civil proceedings, the question of whether the stock exchange or the sanctions committee acted in breach of official duty is primarily determined by the administrative court ruling. Once this ruling has become legally binding, the civil court is generally bound by its findings.

Kronsteyn advises financial institutions on German financial market law—including stock exchange and securities law—and represents clients both in and out of court. If you are interested, please contact attorney Dr. Hendrik Müller-Lankow.