Michael Timmel v Aviso Zeta AG [2013] EUECJ C-359/12 (26 November 2013)

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(Directive 2003/71/EC and Regulation (EC) No 809/2004 – Base prospectus – Supplements to a prospectus – Final terms – Publication of a prospectus in electronic form)

1. According to the Prospectus Directive, (2) when securities are offered to the public a ‘prospectus’ (3) must be drawn up containing the information necessary to enable investors to make an informed assessment of the financial position of the issuer and of the rights attaching to the securities in question. (4) The Directive sets the legal framework and its implementing regulation (5) lays down detailed rules concerning the content and format in which information should be presented in a prospectus. The rules governing the drawing up of a prospectus are paradoxical in so far as certain ‘required information’ must be included in any prospectus, yet the implementing regulation provides that such information (although ‘required’) may be omitted if it is not known at the time when a base prospectus is approved and can only be determined at the time of issue. (6) Thus, the current matter might be described as giving rise to a curious question – how required is the ‘required information’?

2. In the main proceedings Mr Timmel claims that certain information that in principle was required to be published was omitted from the base prospectus relating to the securities for which he subscribed. Furthermore, that information was not included in a supplement to the base prospectus, but was inserted instead into a separate document known as the ‘final terms’, which was not submitted to the competent authorities of the relevant Member State for approval pursuant to the national legislation implementing the Prospectus Directive. Subsequently Mr Timmel launched legal proceedings, arguing that the prospectus had not been validly published and that he was therefore entitled to withdraw from the contract to purchase the securities in question. Against that background the Handelsgericht Wien (Commercial Court, Vienna) seeks guidance on the interpretation of the Prospectus Directive and its implementing regulation. It asks essentially: when must an issuer of securities offered to the public publish a supplement to a base prospectus, and what constitutes valid publication of a base prospectus in electronic form?

3. The Prospectus Directive makes provision for, inter alia, (i) the content and format of a prospectus; (7) (ii) the powers and arrangements in accordance with which national competent authorities are to approve a prospectus; (8) (iii) publication of a prospectus; (9) and (iv) rules for mutual recognition which ensure that a prospectus approved by the ‘home Member State’ (10) is valid for public offers of securities throughout the territory of the European Union.

4. The following recitals in the preamble to the Prospectus Directive are relevant. Recital 10 states that the aim of the directive and its implementing measures is to ensure investor protection and market efficiency. (11) Recital 19 explains that since investment in securities involves risk, investors should be fully informed in order to assess that risk. As regards the content and format of a prospectus, recital 24 explains that the content of a base prospectus should, in particular, take into account the need for flexibility in relation to the information to be provided about the securities in question. Recital 34 states that any new matter liable to influence the assessment of an investment, arising after the publication of a prospectus but before the closing of an offer, should be properly evaluated by investors and therefore requires the approval and dissemination of a supplement to the prospectus.

5. The following terms are amongst those defined in Article 2(1) of the Directive. The word ‘securities’ means ‘transferable securities’. (12) A distinction is drawn between ‘equity securities’ and ‘non-equity securities’. (13) An ‘issuer’ is a legal entity which issues or proposes to issue securities. (14) The person making an offer (or ‘offeror’) is a legal entity or individual which offers securities to the public. (15) An ‘offering programme’ is a plan permitting the issuance of non-equity securities having a similar type or class in a continuous or repeated manner during a specified issuing period. (16) Finally, a ‘base prospectus’ means a prospectus containing all relevant information as specified in Articles 5, 7 and 16 (of the Directive) in case there is a supplement, concerning the issuer and the securities to be offered to the public or admitted to trading, and, at the choice of the issuer, the final terms of the offering. (17)

6. Article 3(1) of the Directive requires Member States to introduce measures prohibiting any offer of securities to be made to the public within their territories without prior publication of a prospectus.

7. Regarding the content and format of a prospectus, the general rule in Article 5(1) of the Prospectus Directive is that a prospectus must: ‘… contain all information which, according to the particular nature of the issuer and of the securities offered to the public or admitted to trading on a regulated market, is necessary to enable investors to make an informed assessment of the assets and liabilities, financial position, profit and losses, and prospects of the issuer and of any guarantor, and of the rights attaching to such securities. This information shall be presented in an easily analysable and comprehensible form.’ (18) Pursuant to Article 5(3) of the Prospectus Directive, an issuer may choose to draw up the prospectus (i) in a single document as set out in Annex I to the Directive; (ii) as three separate documents composed of a registration document, a securities note and a summary note as laid down in Annexes II, III and IV to the Directive; or (iii) as a base prospectus as provided in Article 5(4), complemented by final terms.

‘For the following types of securities, the prospectus can, at the choice of the issuer, offeror or person asking for the admission to trading on a regulated market consist of a base prospectus containing all relevant information concerning the issuer and the securities offered to the public or to be admitted to trading on a regulated market:

The information given in the base prospectus shall be supplemented, if necessary, in accordance with Article 16, with updated information on the issuer and on the securities to be offered to the public or to be admitted to trading on a regulated market.

If the final terms of the offer are not included in either the base prospectus or a supplement, the final terms shall be provided to investors and filed with the competent authority when each public offer is made as soon as practicable and if possible in advance of the beginning of the offer. The provisions of Article 8(1)(a) shall be applicable in any such case.’

9. Article 7 of the Prospectus Directive provides that a prospectus whatever its format must contain the information that investors need in order to assess risk. The specific information to be included is set out in the relevant implementing measures. (19)

10. Article 8(1) provides that where the final offer price and the amount of securities to be offered to the public cannot be included in the prospectus Member States must ensure that either (a) the criteria and/or conditions in accordance with which those elements will be determined or, in the case of price, the maximum price, are disclosed in the prospectus; or (b) once a document has been lodged determining the final offer price and amount of securities which will be offered to the public, there must be a period of not less than two working days during which any acceptance of purchase or subscription of securities may be withdrawn.

11. As regards publication of a prospectus, Article 14 provides that, once approved by the competent authorities of the ‘home Member State’, the prospectus should be made available to the public by, for example, the issuer or the offeror as soon as practicable and in any case at a reasonable time in advance of the offer or at the latest at the beginning of the offer to the public in one of the ways set out in Article 14(2). Subparagraph (b) of that provision states that a prospectus in a printed form is published when it is ‘… made available, free of charge, to the public at the offices of the market on which the securities are being admitted to trading, or at the registered office of the issuer and at the offices of the financial intermediaries placing or selling the securities, including paying agents’. (20)

12. With regard to supplements to the prospectus Article 16(1) states: ‘Every significant new factor, material mistake or inaccuracy relating to the information included in the prospectus which is capable of affecting the assessment of the securities and which arises or is noted between the time when the prospectus is approved and the final closing of the offer to the public or, as the case may be, the time when trading on a regulated market begins, shall be mentioned in a supplement to the prospectus. Such a supplement shall be approved in the same way in a maximum of seven working days and published in accordance with at least the same arrangements as were applied when the original prospectus was published. The summary, and any translations thereof, shall also be supplemented, if necessary to take into account the new information included in the supplement.’

13. The implementing regulation lays down the detailed rules regarding the information to be contained in a prospectus. (21) Recital 21 in the preamble states that a base prospectus and its final terms should contain the same information as a prospectus. All the general principles applicable to a prospectus are to apply equally to the final terms. Nevertheless, where the final terms are not included in the base prospectus, they do not have to be approved by the competent authority. As regards obtaining access to information, recital 25 explains that ‘the enhanced flexibility in the articulation of the base prospectus with its final terms compared to a single issue prospectus should not hamper the easy access to material information for investors’. Recital 26 states that a base prospectus should set out in an easily identifiable manner which kind of information should be included as final terms. This requirement should be able to be satisfied in a number of different ways, for example, if the base prospectus contains blank sections for any information that might be inserted in the final terms or if the base prospectus contains a list that outlines the missing information.

14. Article 1 of the implementing regulation makes provision for inter alia: the format of a prospectus, the minimum information to be included (pursuant to Article 7 of the Prospectus Directive) and the methods by which a prospectus is to be published in order to ensure that it is publicly available.

15. Article 22(1) of the implementing regulation is entitled ‘Minimum information to be included in a base prospectus and its related final terms’. It provides that a base prospectus must contain the information items required in, inter alia Annex V, mentioned in Article 8 of that regulation. According to Article 22(2) of the implementing regulation, ‘[t]he issuer, the offeror or the person asking for admission to trading on a regulated market may omit information items which are not known when the base prospectus is approved and which can only be determined at the time of the individual issue’. Article 22(5) of the implementing regulation states that a base prospectus should include the following: (i) an indication on the information that will be included in the final terms and (ii) the method of publication of the final terms; if the issuer is not in a position to determine, at the time of the approval of the prospectus, the method of publication of the final terms, then there should be an indication of how the public will be informed about which method will be used for the publication of the final terms.

16. With regard to the publication of supplements, Article 22(7) of the implementing regulation states: ‘Where an event envisaged under Article 16(1) of [the Prospectus Directive] occurs between the time that the base prospectus has been approved and the final closing of the offer of each issue of securities under the base prospectus or, as the case may be, the time that trading on a regulated market of those securities begins, the issuer, the offeror or the person asking for admission to trading on a regulated market shall publish a supplement prior to the final closing of the offer or the admission of those securities to trading’.

17. Article 26 of the implementing regulation sets out the rules governing the format of the base prospectus and its related final terms. Article 26(5) states that the final terms attached to a base prospectus shall be presented in the form of a separate document containing only those terms or by being included within the base prospectus.

18. The rules concerning the publication of a prospectus in electronic form are laid down in Article 29(1) of the implementing regulation, which requires that a prospectus or base prospectus should be easily accessible when entering the relevant website.

19. Paragraph 5 of the Kapitalmarktgesetz (‘the KMG’) (Law on securities) provides that, if an offer of securities subject to the obligation to publish a prospectus is made without the publication of a prospectus or of the information provided for in Paragraph 6, investors who are consumers (22) are entitled to withdraw their offer or withdraw from the contract. Paragraph 6 of the KMG states that a supplement to the prospectus should be published where there is a significant new circumstance, material error or inaccuracy relating to the information contained in the prospectus which is capable of affecting the assessment of the securities and investments in question. Under Paragraph 10 of the KMG, a prospectus is considered to be published if it is published, inter alia, in an electronic form on the issuer’s website and if applicable on the website of the financial intermediary placing or selling the securities.

20. The base prospectus for the security ‘Dragon FX Garant’ was drawn up by Lehman Brothers Treasury Co. BV (‘Lehman Brothers’), the issuer, whose registered office at the material time was in Amsterdam. Apparently that prospectus was lodged with the Irish stock exchange which approved it on 9 August 2006. (23) Three supplements to that base prospectus followed on 29 August and 6 and 26 September 2006. Draft ‘final terms’ were made available on 19 September 2006 and the definitive version of that document was issued on 4 December 2006.

21. Mr Timmel claims that lawful publication of the prospectus in question did not occur at the stock exchange or at the offices of Lehman Brothers or its financial intermediary. The documents were, however, available for a while on the homepage of the Luxembourg Stock Exchange.

22. The documents could be found and retrieved only following a registration process. Only two documents per month could be consulted free of charge. Thereafter for each document consulted a fee had to be paid. In any event, it was necessary to pay a fee in order to consult the document entitled ‘final terms’. The registration process itself was complicated and required a comprehensive legal disclaimer to be read and an email address to be provided in order to receive an acknowledgment in English.

23. On 30 October 2006 Mr Timmel subscribed for 40 000 units of Dragon FX Garant, at a price of EUR 40 800. He acquired the securities on 1 December 2006.

24. Mr Timmel now claims that the base prospectus did not include the ISIN code, (24) the currency, any description of the underlying securities or their past and likely future performance or their volatility and it did not include any indication of the method by which the yield of the securities in question would be calculated. Accordingly, he declares that he wishes to withdraw from the agreement to purchase the securities on the ground that there had been a failure to meet the requirement to publish a prospectus under Paragraphs 5 and 6 of the KMG.

25. Mr Timmel has therefore lodged proceedings before the Handelsgericht Wien seeking to withdraw from the agreement to purchase the securities in question and claiming the return of the purchase price of those securities plus interest. The national court considers that the decision depends on whether Aviso Zeta AG (‘Aviso Zeta’) (‘the offeror’) was obliged to publish the information set out in Article 22(2) of the implementing regulation which is, in principle, required but unknown at the time of approval of the base prospectus. Accordingly, it asks:

(a) if accessing, downloading as well as printing, require registration on the website on which access may subsequently take place, whereby registration requires acceptance of a disclaimer and communication of an email address, or

(c) if free of charge access to parts of a prospectus is restricted to two documents per month, but it is necessary to download at least three documents in order to obtain all the required information within the meaning of the second subparagraph of Article 22(1) of [the implementing regulation]?

26. Written observations were submitted by Mr Timmel and Aviso Zeta (‘the parties to the main proceedings’), the Governments of Belgium, the Czech Republic, the Netherlands and Portugal, and the European Commission. At the hearing on 11 September 2013 the parties to the main proceedings, the Portuguese Government and the Commission presented oral argument.

27. The Belgian and Netherlands Governments and the Commission submit that the amending legislation (25) clarifies the rules governing the type of information that might be included in the final terms and the distinction between that document and a supplement to the base prospectus. However, I consider that the factual situation in Mr Timmel’s case must be examined in the light of the legal rules that applied at the material time. (26) Therefore, I shall not refer to the amending legislation in my assessment.

28. In that respect the implementing regulation should be interpreted in the light of the general framework of the Prospectus Directive. In so far as the wording of those two measures lacks precision, it is necessary to consider the scheme of the legislation at issue and its aims. I shall therefore refer to the context in which the legislation at issue operates, in particular to the purpose served by the base prospectus format, when considering the questions raised by the national court.

29. In certain respects the types of security used to raise capital finance has changed significantly since the Dutch East India Company first did so by issuing shares in the 17^th century. (27) Financial instruments have evolved to allow commercial enterprises greater flexibility in the tools employed to raise the funds they require. A wide variety of such instruments exists, including Euro Medium Term Notes, covered warrants or mortgage bonds. (28) They may be issued as part of an offering programme in which securities are offered to the public at different interest rates and with different redemption dates. In such circumstances, prior to subscription an investor should be able to establish the type of security that he wishes to purchase, for example a debt security like a ‘note’, and the identity of the issuer and perhaps any guarantor. However, it may not be possible to make available to him the details necessary to complete the transaction, such as the date of redemption of the note, the rate of interest attached to it or even the price.

30. An examination of the prospectus annexed to Mr Timmel’s observations shows that Lehman Brothers established a programme under which medium term ‘notes’ (29) were issued in a series of ‘tranches’. (30)

31. EU legislation has been framed deliberately (31) to take account of developments in how commercial enterprises raise capital finance whilst ensuring that investors have access to sufficient information to enable them to assess their exposure to risk. The structures chosen reflect a political desire to allow issuers flexibility with regard to drawing up the information contained in prospectuses. Under Article 5 of the Prospectus Directive, issuers are able to choose a format for the prospectus which best suits the type of security that is the subject of the issue. (32) The choice is one of three: (i) a single document; (ii) separate documents comprising a registration document together with a securities note and a summary note; (33) or (iii) a base prospectus complemented by final terms which was the format chosen by the issuer here. (34)

32. The purpose of the base prospectus format is to reduce the burden falling on an issuer of publishing multiple prospectuses containing the same general information. A base prospectus allows the issuer to choose to produce one document that is subject to approval by the relevant Member State’s competent authorities, containing information on the issuer, on any guarantor and on the securities in question. The same prospectus may then be used for any number of tranches issued within a programme. According to the Commission and the Governments of Belgium, the Netherlands and Portugal, it follows from the wording of the second and third subparagraphs of Article 5(4) of the Prospectus Directive that the base prospectus, the supplement and the final terms are in principle separate documents. Thus, issuers are entitled to choose to present the final terms separately from the base prospectus, as laid down in Article 26(5) of the implementing regulation. The issuer may choose there to present the details relating to the securities in question necessary to complete the transaction (such as the price or the quantity of securities per tranche). In such circumstances the final terms are simply filed with the relevant competent authorities and are not subject to an approval procedure.

33. By Questions 1 and 2 the national court asks in essence: where required information must in principle be published (as laid down in Article 22(1) of the implementing regulation), but is not known to the issuer (35) when the base prospectus is published yet becomes known in the intervening period between that point and publication of a supplement, must such information be included in that (or any subsequent) supplement? If the answer to that question is no, then does the exception from the obligation in principle to publish required information apply even if that information was known before the issue date of the securities in question (yet after publication of the base prospectus)? I shall consider these two questions together.

34. In examining Questions 1 and 2 it is necessary to consider the rules governing the publication of a supplement to a base prospectus and the distinction between a supplement and the final terms.

35. The legislator has used the expressions ‘the final terms’ in Article 2(1)(r) and ‘required information’ in Article 5(3) of the Prospectus Directive, but has not defined them in that measure or in the implementing regulation. Furthermore, the legislation at issue is silent on the distinction between information that should be contained in (i) the base prospectus, (ii) a supplement or (iii) the final terms.

36. There is no express obligation concerning the presentation of required information that becomes known after the base prospectus is published in circumstances where Article 16(1) of the Prospectus Directive governing the publication of a supplement is not in point. Accordingly, it would be necessary to read words into the implementing regulation to create such an obligation.

37. It seems to me that the scheme of the legislation is not consistent with reading such an obligation into the implementing regulation. Article 22(1) of that regulation lays down rules concerning the minimum information that must be included in a base prospectus and its related final terms. (36) The general framework relating to information that must be disclosed to investors is set out in Article 5(1) of the Prospectus Directive. (37) In that context Article 22(1) of the implementing regulation makes specific provision for the information that should be included in a base prospectus. That information varies according to the type of securities in question.

38. Article 22(2) of the implementing regulation recognises that although certain information is classified as being ‘required’ in principle it might not be known to an issuer when the base prospectus is approved; and furthermore that certain information can only be determined at the time of the individual issue of the securities in question. (38) Accordingly, an issuer cannot be obliged to disclose information that he does not know and cannot determine at the time a base prospectus is published. It is not said expressly in that provision, but none the less follows by necessary implication, that when an issuer does know or is able to determine the required information laid down in Article 22(1) of the implementing regulation such information must be published in the base prospectus.

39. Unlike the national court, I would not describe Article 22(2) of the implementing regulation as creating an exemption or derogation from the obligation in Article 22(1) of that regulation to present required information in a base prospectus, since a person cannot be subject to a requirement to disclose what it is acknowledged he does not know. It seems to me rather that Article 22(2) confirms that such an obligation cannot be imposed where an issuer does not know and does not have the required information.

40. The question then arises: should that information when it becomes known be published in a supplement or in the final terms?

41. Article 16(1) of the Prospectus Directive states that a supplement must be published where there is a ‘… significant new factor, material mistake or inaccuracy relating to the information included in the prospectus which is capable of affecting the assessment of the securities and which arises or is noted between the time when the prospectus is approved and the final closing of the offer to the public …’. (39)

42. Supplements have a particular purpose as explained in recital 34 in the preamble to the Prospectus Directive. That is confirmed in Article 22(7) of the implementing regulation, which states that a supplement must be published where Article 16(1) of the Prospectus Directive is triggered after the base prospectus has been approved and before the final closing of the offer of each issue of securities under that base prospectus.

43. The question then arises whether the type of information that becomes known after the base prospectus is published is such that it triggers the application of Article 16(1) of the Prospectus Directive. That is a matter for the national court to examine as it involves an assessment of the evidence concerning the nature of the information and its influence on an investor’s decision to subscribe for securities. Where the national court considers that the missing information would not have an impact on the decision to invest, but is relevant to completing the transaction in question, there would be no obligation to present it in a supplement. Rather, the final terms would be the appropriate document.

44. Within the context of an offering programme such as that at issue in the main proceedings, the final terms could properly include the details necessary to conclude a specific transaction, such as the final offer price and/or the amount of the securities in question. Whether that is the situation here is a matter for the national court.

45. As regards the scheme of the legislation at issue, the base prospectus and its supplements are different documents with different functions. It does not necessarily follow that rules which determine the content and format of the base prospectus apply equally to a supplement.

46. The base prospectus together with the final terms is considered to be equivalent to a prospectus published in circumstances where a commercial enterprise makes a single issue of securities in order to raise capital. (40) Furthermore, an issuer is subject to an obligation to indicate in the base prospectus the nature of the information that is to be included in the final terms. (41) There is no corresponding provision setting out rules governing the relationship between supplements and the final terms.

47. That view is confirmed by further examination of the legislation which draws a distinction between information that must be included in a base prospectus and any supplements and information that might be set out in the final terms.

48. First, like the base prospectus any supplement must be approved by the competent authorities of a Member State, (42) whereas there is no corresponding requirement under the Prospectus Directive for approval of the final terms. The third subparagraph of Article 5(4) of the Directive simply states that when a public offer is made the final terms must be provided to investors as soon as practicable and if possible in advance of the beginning of the offer in question and filed with the relevant competent authorities.

49. Second, a distinction is made between the type of information included in a supplement and that which goes into the final terms. Thus, Article 8(1)(a) of the Prospectus Directive states that if information such as the final offer price and the amount of securities that comprise an offer cannot be included in a prospectus, then the criteria and/or conditions that will determine those elements must be disclosed therein.

50. It seems to me that a distinction is here drawn by the legislator between, on the one hand, the details necessary to conclude a specific transaction (such as the final price of the securities in question) and, on the other hand, general information (such as a possible maximum price or how that might be determined). The latter information enables investors to make an informed assessment of any risks before they decide to subscribe and thus permits them to take investment decisions in full knowledge of the facts. (43)

51. If particular information cannot be included in the base prospectus because it is not known at the time when that document is published, but subsequently becomes available and is such as to affect the assessment of the securities it will trigger Article 16(1) of the Prospectus Directive and a supplement must be published. However, information concerning the final offer price is of a different nature. It is relevant to concluding the specific transaction in question rather than the assessment of the securities and hence the decision to subscribe and invest.

52. Third, Article 16(2) of the Prospectus Directive provides a right to withdraw where there is a failure to comply with the requirement to draw up a supplement. However, there is no corresponding right of withdrawal where there is a failure to file the final terms.

53. It follows that the omission from a prospectus of required information known to an issuer at the time of publication, where that information falls outside the scope of Article 16(1) of the Prospectus Directive and does not therefore trigger publication of a supplement, is an exception to the obligation to publish required information laid down in Article 22(1) of the implementing regulation. It seems to me that an interpretation to that effect is compatible with the aims of the Directive and its implementing regulation.

54. Such an interpretation would not impede the Prospectus Directive’s aims of improving market efficiency whilst at the same time supporting the maintenance of regulatory standards. (44) It is also consistent with the aim of ensuring that full disclosure of information is made to potential investors who would have access to the information necessary to complete the transaction in the final terms.

55. In circumstances where a base prospectus has been published: (i) is it permissible to omit required information from a supplement if such a supplement is published, even if that information is known before the issue date of the securities in question? Or (ii) may only information that became known at the date of issue be omitted from such a supplement?

57. The date of issue of the securities is not relevant in assessing whether particular information should be included in a supplement or the final terms. What matters is whether the information that becomes known is of a type that falls within the scope of Article 16(1) of the Prospectus Directive, thus triggering the obligation to publish a supplement. That is a matter for the national court to determine.

58. Such a view is consistent with ensuring that investors have access to information that enables them to assess risk. Thus, if Article 16(1) is triggered a supplement must be published. If not, a degree of flexibility is permitted and required information that was unknown at the time the base prospectus was published may be presented later in the final terms.

59. Accordingly, Article 22(2) of the implementing regulation should be interpreted as meaning that information that is in principle required to be provided to investors pursuant to Article 22(1) of that regulation, which was not known at the time of approval of the base prospectus, but was known at the time of publication of a supplement to that prospectus, does not have to be included in the supplement provided that the information in question does not give rise to a significant new factor, material mistake or inaccuracy relating to the information included in the prospectus which is capable of affecting the assessment of the securities for the purposes of Article 16(1) of the Prospectus Directive. That exception applies even where the required information becomes known before the issue date of the securities in question (yet after publication of the base prospectus).

60. By Question 3 the national court asks whether there is lawful publication where only a base prospectus is published without the information required by Article 22(1) of the implementing regulation, in particular that set out in the schedule to Annex V (concerning securities with a denomination per unit of less than EUR 50 000) and if the final terms (which presumably do contain that information) were not subsequently published.

61. The national court explains that in the main proceedings Mr Timmel claims that there was no lawful publication of the base prospectus at the stock exchange or at the offices of Lehman Brothers and its financial intermediary. The documents in question were available for a period of time on the home page of the Luxembourg Stock Exchange. It is stated in the base prospectus annexed to Mr Timmel’s observations that that document was submitted for approval to the competent authorities in Ireland. (45) However the national court has not made any findings of fact concerning the content of that base prospectus; which Member State was to be considered to be the ‘home State’ for the purposes of the Prospectus Directive; or whether the procedures laid down in the legislation at issue for approval of that document, any supplements and the final terms have been met.

62. The assumption behind the national court’s question is that the information laid down in Annex V to the implementing regulation was included in the final terms instead of the base prospectus. In order to establish whether it was valid to place that information in the final terms rather than the prospectus the national court should first establish whether that information was known at the time that the base prospectus was published. Second, the national court should determine whether the base prospectus indicated that such information would subsequently be set out in the final terms in accordance with Article 22(5) of the implementing regulation. Third, the national court should verify whether the base prospectus satisfies the requirements of Article 13(1) of the Directive in so far as it was published after approval by the relevant competent authorities.

63. It is implicit in the national court’s question that the required information was not included in any supplements. In the absence of any specific findings made by the national court it is nevertheless necessary to ask whether the information in question was such that it ought to have triggered the application of Article 16(1) of the Prospectus Directive and therefore required publication of a supplement.

64. Subject to the national court’s examination of the facts, if the required information was unknown at the time the base prospectus was published and if it does not fall within Article 16(1) of the Prospectus Directive then it would be permissible merely to include that information in the final terms.

65. Unlike the base prospectus or a supplement, it is not necessary for the competent authorities to approve the final terms before they are published. To effect lawful publication of that document, it must be provided to investors and filed with the competent authority when each public offer is made as soon as is practicable and if possible before the beginning of the offer in question. (46) It is for the national court to determine whether in fact that is what happened.

66. Accordingly, there is lawful publication where a base prospectus is published without the required information laid down in Article 22(1) of the implementing regulation, in particular as set out in the Schedule to Annex V thereto, if that information is not known when the base prospectus in question is approved and can only be determined at the time of the individual issue, and provided the requirements of Article 22(5) of the implementing regulation are met and the final terms are provided to investors and filed with the relevant competent authorities when each public offer is made as soon as practicable and if possible before the beginning of the offer as set out in Article 5(4) of the Prospectus Directive.

67. The national court here asks whether a base prospectus can be said to be ‘easily accessible’ to potential investors entering a website where the issuer grants access subject to certain conditions being met, for example: (i) there is a registration requirement; or (ii) registration is subject to acceptance of a disclaimer and provision of an email address; or (iii) payment is required; or (iv) no fee is required but free access to the required information as laid down in Article 22(1) of the implementing regulation is restricted to two documents per month.

68. The language of Article 29(1)(1) of the implementing regulation setting out the rules on publication in electronic form is plain in so far as it states that a base prospectus should be easily accessible to an investor when entering the website.

69. It seems to me that a simple registration requirement could be compatible with that provision if the procedure for investors to register is straightforward. However, I regard a condition such as making access to a website subject to registration, acceptance of a disclaimer (47) and provision of an email address as incompatible with the concept of easy accessibility.

70. Whilst it is true that we are now in what is commonly called ‘the information age’, it does not follow as the Commission and the Netherlands Government point out, that all potential investors have an email address. Such a condition would therefore automatically exclude any investor who does not use email.

71. Furthermore, the imposition of a requirement to accept a disclaimer creates an inequality of arms which is inconsistent with the Prospectus Directive’s aim of investor protection, in so far as the issuer (the party holding the information) is effectively able to impose the disclaimer on the investor but the latter cannot obtain access to necessary information concerning potential investments unless he agrees to accept the disclaimer. Such a condition is likely to dissuade potential investors and/or (potentially, at least) reduce the legal protection that they would otherwise enjoy.

72. Under the Prospectus Directive paper copies of the prospectus should be made available free of charge. (48) Therefore, it would be out of step with that position to permit a fee to be imposed for electronic access to documentation. It is clear that requiring investors to pay a fee to obtain access to a website hinders access and is therefore inconsistent with Article 29(1) of the implementing regulation.

73. Finally, where free access is restricted to two documents per month but the information that the investor needs is included in more than two documents, such a requirement is plainly inconsistent with the obligation in Article 5(1) of the Prospectus Directive to make available to the investor, in easily analysable and comprehensible form, the information which is necessary for him to make an informed assessment.

74. I therefore consider that it is incompatible with Article 29 of the implementing regulation to make access via a website to a prospectus or base prospectus subject to conditions such as: (i) requiring registration subject to acceptance of a disclaimer and provision of an email address; or (ii) requiring payment; or (iii) restricting free access to the required information as laid down in Article 22(1) of the implementing regulation to two documents per month.

75. Question 5 concerns Article 14(2)(b) of the Prospectus Directive, under which a base prospectus is considered as being available to the public when it is published in a number of different ways. (49) By that question the national court raises a classic issue of how to interpret a provision of EU law where there are differences between the language versions. The national court asks whether Article 14(2)(b) of the Directive should be interpreted as meaning that the base prospectus should be made available at the registered office of the issuer and at the offices of the financial intermediaries or whether there is a choice, meaning that the issuer can make the documents available at either his or the financial intermediaries’ registered offices.

76. The national court explains that according to the German version of the Directive the latter reading is correct. However the English, French and Spanish versions of the Directive require the documents to be made available at both sets of registered offices. (50)

77. It is settled case-law that where there is divergence between the various language versions of a Community text, the provision in question must be interpreted by reference to the purpose and general scheme of the rules of which it forms part. (51) Accordingly, the need for a uniform application and interpretation of EU legislation makes it impossible to consider one version of the text in isolation, but requires that it should be interpreted on the basis of both the real intention of the legislator and the aim the latter seeks to achieve, in the light, in particular, of the versions in all languages. (52)

78. The applicant, the Governments of the Netherlands and Portugal and the Commission contend that Article 14(2)(b) of the Directive should be interpreted as meaning that the prospectus should be available simultaneously at both the registered offices of the issuer and at the offices of the financial intermediaries. The Belgian Government takes a different view. It considers that under Article 14(2)(b) of the Prospectus Directive issuers have a choice and the base prospectus may be made available at either the registered offices of the issuer or the offices of the financial intermediary.

79. I agree with the former view. Since there is a difference in the linguistic versions of the Directive, all of which are equally authentic, it is necessary to establish a uniform interpretation that is consistent with the aims and scheme of Article 14(2)(b) of the Prospectus Directive.

80. It seems to me that where a base prospectus is made available to the public in printed form it should be available simultaneously at the registered offices of the issuer and at the offices of the financial intermediary.

81. That view is consistent with the aims of the Prospectus Directive. As the Netherlands Government submits, one of those aims is to provide for market efficiency which is achieved by granting an issuer a single ‘passport’ valid for the securities in question throughout the territory of the internal market. (53) If the issuer’s registered office is in one Member State and the base prospectus is only available in printed form there, yet the securities are offered for sale by financial intermediaries in other Member States where a printed version of that prospectus is not available, investors in those States will be at a disadvantage. That would undermine another of the Directive’s aims, namely investor protection.

82. That view is also consistent with the scheme of the legislation. Article 14(7) of the Directive states that where a prospectus is published in electronic form a paper copy must nevertheless be made available free of charge when requested by an investor. I agree with the Commission that investors are entitled to make such a request either at the issuer’s offices or at the financial intermediaries’ offices.

83. It therefore seems to me to be consistent with both the aims and the scheme of the legislation that paper copies of the prospectus should be available simultaneously at the issuer’s offices and at the financial intermediaries’ offices.

84. Thus, in my view, Article 14(2)(b) of the Prospectus Directive should be interpreted as meaning that the base prospectus must be made available at the registered office of the issuer and at the offices of the financial intermediaries.

85. I am therefore of the opinion that the Court should answer the questions referred by the Handelsgericht Wien to the following effect:

– information that in principle must be provided to investors pursuant to Article 22(1) of that regulation, which was not known at the time of approval of the base prospectus but was known at the time of publication of a supplement to that prospectus, does not have to be included in the supplement, provided that the information in question does not give rise to a significant new factor, material mistake or inaccuracy relating to the information included in the prospectus which is capable of affecting the assessment of the securities for the purposes of Article 16(1) of Directive 2003/71;

– that exception to the obligation to provide items of (required) information laid down in the second subparagraph of Article 22(1) of Regulation No 809/2004 applies even where the (required) information becomes known before the issue date of the securities in question (yet after publication of the base prospectus).

2 – Directive 2003/71/EC of the European Parliament and of the Council of 4 November 2003 on the prospectus to be published when securities are offered to the public or admitted to trading and amending Directive 2001/34/EC (OJ 2003 L 345, p. 64) (‘the Prospectus Directive’ or ‘the Directive’). The Directive has since been amended three times, including the amendments made by Directive 2010/73/EU of the European Parliament and of the Council of 24 November 2010 amending Directives 2003/71/EC on the prospectus to be published when securities are offered to the public or admitted to trading and 2004/109/EC on the harmonisation of transparency requirements in relation to information about issuers whose securities are admitted to trading on a regulated market (OJ 2010 L 327, p. 1). See further point 27 below.

3 – The word ‘prospectus’ is not defined in the legislation at issue. I understand it to refer to a disclosure document containing financial information concerning the issuer and the securities offered to the public or admitted to trading. A lively account of an historical event showing the unfortunate consequences that can follow where investors made decisions without recourse to disclosure documentation and before regulatory measures like the Prospectus Directive existed can be found in Balen, M., A very English deceit – The South Sea Bubble and the world’s first great financial scandal, Fourth Estate, 2009.

5 – Commission Regulation (EC) No 809/2004 of 29 April 2004 implementing Directive 2003/71/EC of the European Parliament and of the Council as regards information contained in prospectuses as well as the format, incorporation by reference and publication of such prospectuses and dissemination of advertisements (OJ 2004 L 149, p. 1) (‘the implementing regulation’). That regulation has been amended on a number of occasions including by Commission Delegated Regulation (EU) No 486/2012 of 30 March 2012 amending Regulation (EC) No 809/2004 as regards the format and the content of the prospectus, the base prospectus, the summary and the final terms and as regards the disclosure requirements (OJ 2012 L 150, p. 1); see further point 27 below.

6 – See Article 22 of the implementing regulation, cited in paragraph 15 below.

10 – Article 2(1)(m); see further Articles 17 and 18 of that directive concerning the approval of prospectuses by the competent authorities of the home State and the provisions for the mutual recognition of such prospectuses within the territory of the European Union.

12 – See Article 2(1)(a). The definition refers to Article 1(4) of Council Directive 93/22/EEC of 10 May 1993 on investment services in the securities field (OJ 1993 L 141, p. 27) (which has since been repealed and replaced). That definition covers shares in companies and other securities equivalent to shares in companies, bonds and other forms of securitised debt which are negotiable on the capital market and any other securities normally dealt in giving the right to acquire any such transferable securities by subscription or exchange or giving rise to a cash settlement excluding instruments of payment.

17 – Article 2(1)(r). I confess to having some difficulty in understanding the precise meaning of the words ‘in case there is a supplement’ within this definition, at least in the English version.

18 – Article 8(2) provides that a competent authority may authorise the omission of certain information from a prospectus.

20 – The alternative means of making a prospectus available include: (i) insertion into a newspaper that is widely circulated in the Member States in which the offer is made public and (ii) publication in electronic form on the issuer’s website and if applicable on the website of the financial intermediaries placing or selling the securities in question or on the website of the competent authority of the ‘home Member State’.

22 – Consumers within the meaning of this provision are private persons acting on their own account, not on behalf of a company. It appears that Mr Timmel falls within that definition in respect of his share purchase.

23 – As stated in the copy of the base prospectus annexed to the observations submitted on behalf of Mr Timmel.

24 – An ISIN code is a 12 digit alphanumeric code identifying a security. These codes are used worldwide by commercial enterprises of all types.

26 – Case C-120/08 Bavaria [2010] ECR I-3393, paragraph 41. The material time was during the course of 2006; see point 20 above.

27 – The Dutch East India Company was a chartered company established in 1602 when the States-General of the Netherlands granted it a 21 year monopoly to carry out ‘colonial activities’ in Asia. It is considered to be the first commercial enterprise to raise capital (approximately NLG 6 424 588) by issuing shares.

28 – See, for example, p. 14 of the Commission’s amended proposal for a Directive of the European Parliament and of the Council on the prospectus to be published when securities are offered to the public or admitted to trading and amending Directive 2001/34/EC (COM(2002) 460 final) and the accompanying Press release IP/01/1209 dated 9 August 2002.

29 – ‘Notes’ are a financial instrument or type of debt security; the holder is entitled to payment of principal (at the maturity date) and interest together with other contractual rights under the terms of the issue. They are generally issued in the context of a plan in a continuous or repeated manner during a specified period; see further the definition of an ‘offering programme’ in Article 2(1)(k) of the Directive in point 5 above.

30 – A ‘tranche’ comprises a certain quantity of a particular class of securities issued within the context of an offering programme.

31 – The original Commission proposal for a Directive of the European Parliament and of the Council on the prospectus to be published when securities are offered to the public or admitted to trading, COM(2001) 280, recommended a single prospectus format and therefore it did not contain such a provision. The facility for a choice of prospectus format was inserted into the amended proposal (COM(2002) 460), following the position of the European Parliament adopted at first reading on 14 March 2002. See OJ 2003 C 47 E, p. 525 and see further Press release IP/02/1209 dated 9 August 2002.

32 – See recital 24 in the preamble to the Prospectus Directive, mentioned in point 4 above.

35 – Article 22(2) refers to the issuer, the offeror or the person asking for admission to trading on a regulated market. For ease of reference, I have simply referred to the issuer in this Opinion.

36 – Article 22(1) implements the obligation in Article 7 of the Prospectus Directive regarding the specific information which must be included in a prospectus with a view to avoiding duplication of information when a prospectus is composed of separate documents, for example a base prospectus and its final terms. See point 9 above.

38 – See, for example, the reference to an offering programme in Article 2(1)(k) of the Directive and point 29 above.

45 – The registered offices of Lehman Brothers at the material time were situated in the Netherlands.

47 – It appears from the order for reference that the disclaimer in question was a comprehensive legal disclaimer which had to be accepted before the viewer could proceed further: see point 22 above.

48 – See Article 14(2)(b) of the Prospectus Directive. Potential investors will however have to bear the cost of purchasing a newspaper if they obtain access to a prospectus in that way (see Article 14(2)(a)). Where, as here, a substantial investment is being contemplated (see point 23 above) such a cost may appear not unreasonable to bear.

50 – At the time when the Prospectus Directive entered into force (on 31 December 2003) there were 15 Member States and 11 official languages. In 10 of those languages the word ‘and’ is used in Article 14(2)(b) of the Prospectus Directive. The word ‘or’ is used only in the German version of the text.

52 – Case C-569/08 Internetportal und Marketing [2010] ECR I-4871, paragraph 35 and the case-law cited.

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You are here: BAILII >> Databases >> Court of Justice of the European Communities (including Court of First Instance Decisions) >> Michael Timmel v Aviso Zeta AG [2013] EUECJ C-359/12 (26 November 2013) URL: http://www.bailii.org/eu/cases/EUECJ/2013/C35912_O.html Cite as: [2013] EUECJ C-359/12

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