OGH: No Liability after FMA's Failed Banking Supervision

Sept 23, 2022 Benn-Ibler Rechtsanwälte GmbH

The Republic of Austria is not liable for any financial losses sustained by bank customers as a result of faulty banking supervision by Austria’s Financial Market Authority (FMA). Any such losses are not covered by the protection afforded through Section 3 (1) sentence 2 of the Financial Market Authority Act (Finanzmarktaufsichtsbehördengesetz, FMABG). This also applies to damages arising out of failed activities of the Austrian National Bank (OeNB) within its task of banking supervision.

In the case at hand, the Austrian Financial Market Authority (FMA) barred a bank from continuing to conduct its banking business due to actions of the bank’s management bodies that were relevant under criminal and banking supervisory law. The plaintiff is now claiming against the Republic of Austria, as the plaintiff was no longer able to dispose of its credit balance of approximately EUR 1.3 million due to the ban on the bank’s business operations. Had the bank’s misconduct come to light earlier, the plaintiff would not have invested its money with that bank.

The court of first instance dismissed the action as inconclusive, whereupon the plaintiff filed an application with the Austrian Constitutional Court for a constitutionality review related to the provisions of Section 3 (1) sentence 2 of the FMABG. The latter court ruled against unconstitutionality as did the court of appeals.

The Austrian Supreme Court (Austrian Supreme Court) clarified as follows:

Pursuant to Section 3 (1) FMABG, the FMA is liable for damages caused by its executive bodies and employees under the Public Liability Act. However, the FMA's liability is limited to directly injured legal entities; reflex effects are thus excluded. Bank creditors are therefore not entitled to any public liability claims, as this would lead to infinite liability, which is clearly not intended by the law.

OGH 1 Ob 91/22x (14.07.2022)