Financial Regulation and Civil Liability in European Law

Financial regulation is commonly associated with a set of ex ante rules imposed by government on the financial sector in the public interest and accompanied by mechanisms of public supervision and enforcement, usually by administrative agencies, to deter violations. In contrast to this sector-specific public regulation, civil liability has been traditionally conceived as an ex post remedy in contract or tort that can be relied upon by the aggrieved party against the wrongdoer, typically before a civil court, to obtain compensation for damage suffered. As such, civil liability is a major corrective tool of private law, which primarily seeks to ensure the balance between the interests of private individuals through their respective rights and remedies. Yet, a strict functional separation between financial regulation and civil liability along these lines is not reflected in the current legal framework for financial markets that has been profoundly shaped by EU law.

The intricate interplay between financial regulation and civil liability in the legal order of the European Union provided the theme for the recently published book Financial Regulation and Civil Liability in European Law (Olha O. Cherednychenko & Mads Andenas (eds), Edward Elgar, 2020). In my framing chapter, I present the research design and major findings of this book project, mapping and analysing the original assessments by the contributing authors.

In particular, the chapter considers the level of coordination between financial regulation and civil liability achieved throughout different sectors of financial services and activities, such as payments, credit, and securities, as well as among the various actors involved in public, private, and hybrid enforcement, such as courts, alternative dispute resolution bodies, and financial regulators. Combining the top-down and bottom-up comparative legal analysis, law and economics, and experimentalist governance, the study shows that a coordinated approach to the interplay between financial regulation and civil liability is currently lacking, both at EU and national level. It also outlines directions for cross-sector and cross-actor coordination to develop more fully at EU and national level.

Overall, the chapter highlights the need to fundamentally rethink the role of civil liability, and private law remedies more generally, as a regulatory and compensatory tool in European financial law and sets out an analytical framework—with both theoretical and empirical components—for further inquiry. A more coordinated approach to EU financial regulation and private law remedies would break down the boundaries between public and private law, viewing these two areas of law as distinct but closely interrelated.

Olha O. Cherednychenko is a Professor of European Private Law and Comparative Law at the University of Groningen, the Netherlands, and Director of the Groningen Centre for European Financial Services Law (GCEFSL).