Schriften zur Europäischen Rechtswissenschaft /European Legal Studies /Etudes juridiques européenes 5 Fundamental Rights, Contract Law and the Protection of the Weaker Party A Comparative Analysis of the Constitutionalisation of Contract Law, with Emphasis on Risky Financial Transactions Bearbeitet von Olha Cherednychenko 1. Auflage 2007. Taschenbuch. XXVI, 629 S. Paperback ISBN 978 3 86653 043 0 Format (B x L): 22,4 x 14,1 cm Gewicht: 850 g Recht > Europarecht, Internationales Recht, Recht des Auslands > Rechtsvergleichung Zu Leseprobe schnell und portofrei erhältlich bei Die Online-Fachbuchhandlung beck-shop.de ist spezialisiert auf Fachbücher, insbesondere Recht, Steuern und Wirtschaft. Im Sortiment finden Sie alle Medien (Bücher, Zeitschriften, CDs, ebooks, etc.) aller Verlage. Ergänzt wird das Programm durch Services wie Neuerscheinungsdienst oder Zusammenstellungen von Büchern zu Sonderpreisen. Der Shop führt mehr als 8 Millionen Produkte.
Fundamental Rights, Contract Law and the Protection of the Weaker Party
Fundamental Rights, Contract Law and the Protection of the Weaker Party A Comparative Analysis of the Constitutionalisation of Contract Law, with Emphasis on Risky Financial Transactions Olha O. Cherednychenko Schriften zur Europäischen Rechtswissenschaft / European Legal Studies / Etudes juridiques européennes Band 5 / Volume 5 / Volume 5 European Legal Studies Institute, Osnabrück Molengraaff Institute for Private Law, Utrecht Amsterdam Institute for Private Law Institute of European and Comparative Law, Oxford Sellier. European Law Publishers
Schriften zur Europäischen Rechtswissenschaft / European Legal Studies / Etudes juridiques européennes herausgegeben im European Legal Studies Institute, Osnabrück von Christian von Bar im Molengraaff Institute for Private Law, Utrecht von Ewoud Hondius im Amsterdam Institute for Private Law von Martijn W. Hesselink im Institute of European and Comparative Law, Oxford von Stefan Vogenauer Ph.D. Thesis of Olha O. Cherednychenko, born in 1978 in Kiev (Ukraine), for the award of a doctorate degree at Utrecht University on the authority of the Vice-Chancellor Prof. Dr. W. H. Gispen in accordance with the decision of the Ph.D. Board as defended in public on Wednesday 18 April 2007. (Ph.D. Thesis Supervisor: Prof. Dr. F. W. Grosheide, Utrecht University). CRC-prepared by: G. J. Wiarda Institute, Utrecht University Institute for Legal Studies, Boothstraat 6, 3512 BW Utrecht, The Netherlands. ISBN 978-3-86653-043-0 Die Deutsche Nationalbibliothek verzeichnet diese Publikation in der Deutschen Nationalbibliografie; detaillierte bibliografi sche Daten sind im Internet über http:// dnb.d-nb.de abrufbar. 2007 by Sellier. European Law Publishers GmbH, München. Dieses Werk einschließlich aller seiner Teile ist urheberrechtlich geschützt. Jede Verwertung außerhalb der engen Grenzen des Urheberrechtsgesetzes ist ohne Zustimmung des Verlages unzulässig und strafbar. Das gilt insb. für Vervielfältigungen, Übersetzungen, Mikroverfi lmungen und die Einspeicherung und Verarbeitung in elektronischen Systemen. Gestaltung: Sandra Sellier, München. Herstellung: Karina Hack, München. Druck und Bindung: AZ-Druck und Datentechnik, Kempten. Gedruckt auf säurefreiem, alterungsbeständigem Papier. Printed in Germany.
Preface During my student years I became increasingly interested in the interrelationship between public and private law in different legal systems. The subjects which I followed as a student therefore ranged from (European) contract law and (European) company law to (comparative) constitutional law and European substantive law. The research project devoted to the constitutionalisation of contract law was an ideal opportunity for me to combine the knowledge of different fields which I obtained during my studies in order to further explore the interrelationship between public and private law which had fascinated me for a long time. Are there cross-links between fundamental rights and contracts which we conclude with each other? If so, how do fundamental rights and contract law relate to each other? Should it be possible for an individual who has lost all his or her property while speculating on the stock exchange to invoke the fundamental right to free development of his or her personality against the bank who has not prevented him or her from doing so? Or should it be possible for the wife who stood surety for the debts of her husband to invoke her right to family life against the bank who claims the possession of the family home after the husband has become bankrupt? Not only are these issues located on the borderline between (European) constitutional law and international human rights law, on the one hand, and private law and contract law, on the other, but they are also impossible to grasp without a comparative approach. These considerations motivated me to embark on research on the constitutionalisation of contract law, with emphasis on risky financial transactions, and to write this book. I would like to acknowledge those people who have contributed to the completion of this book and who have made the process of its writing not only possible, but also highly inspiring and enjoyable. In the first place, I would like to express my genuine appreciation to my supervisor, Professor Willem Grosheide, for the opportunity to write this book, for his confidence in me and for making me believe in my academic self by constantly guiding and encouraging me through the whole process of working on this book. I would also like to thank the esteemed members of the evaluating committee, Professor Ewoud Hondius, Professor Jan Smits, Professor Stefan Grundmann, Professor Hector MacQueen and Professor Henk Kummeling, for their willingness to sit on this committee and for their valuable comments. In addition I am also grateful to Professor Wilco Oostwouder and Professor Kamiel Mortelmans for agreeing to comment on the book and for their very constructive remarks.
VI Fundamental Rights, Contract Law and the Protection of the Weaker Party A word of gratitude is also due to my colleagues. I would like to thank my old colleagues from the Molengraaff Institute for Private Law who were with me during the four years of this research. Dear Molengravers, it was a great experience and a great pleasure to work with you. In particular, I would like to thank Esther Engelhard and Jerzy Koopman for their willingness to support me during the public defence of my thesis and for their friendship. At the final stage of working on this book I am very grateful for the support which I received at the private law department of the Free University of Amsterdam. I would like to thank my new colleagues at this department, in particular Professor Chris Jansen, Professor Arno Akkermans, Professor Masha Antokolskaia and Daniel Haas for their constant help and encouragement. This research was conducted within the framework of the Ius Commune Research School and I have benefited greatly from the research and teaching programme and the cooperation that takes place within this school. I am also grateful to the Institute of Advanced Legal Studies of the University of London and the London School of Economics for allowing me to have access to their remarkable collections. A special word of thanks should be extended to Peter Morris for editing the text of this manuscript and for his friendship. I also thank Titia Kloos and Willemien Vreekamp of Utrecht University s Wiarda Institute for putting the manuscript in a camera ready format. Last, but not least, I would like to offer my warm thanks to my parents and my grandmother for making me feel natural when carrying out my research, for their concerns and for lending an ear when it was needed. To Igor, thank you for your understanding, patience and unfailing support. To all my friends, thank you for being with me. Olha Cherednychenko Utrecht, March 2007
Table of contents Preface List of abbreviations V XXI Part I Introduction 1 Chapter 1 Introduction 1.1 The origin of the present study 1.1.1 Different solutions to the same problem 3 1.1.2 Two tendencies in modern contract law 4 1.1.2.1 Towards the constitutionalisation of contract law 5 1.1.2.2 Towards a more society-oriented contract law 8 1.2 Purpose and issue definition 11 1.3 Delimitation of the research 14 1.4 Methodology 16 1.5 Structure 18 Part II The relationship between fundamental rights and private law against the background of the public/private divide 21 Chapter 2 The public/private divide and its role today 2.1 Introduction 2.1.1 General 23 2.1.2 The roots of the distinction between public and private law 23 2.1.3 The primacy of private law 25
VIII Fundamental Rights, Contract Law and the Protection of the Weaker Party 2.1.4 Modern challenges to the distinction 25 2.1.5 The aim, methodology and plan of the Chapter 26 2.2 Characteristics of private law 2.2.1 Private parties as subjects involved in a legal relationship 27 2.2.2 Protection of private interests 29 2.2.3 The horizontal and dispositive character of rules 31 2.2.4 Enforcement according to private initiative and by means of special tools 33 2.2.5 Corrective justice 36 2.2.5.1 Perplexities concerning the divide between corrective and distributive justice 36 2.2.5.2 The distinctive feature of corrective justice according to Aristotle 38 2.2.5.3 Private law as the domain of corrective justice? 40 2.2.5.3.1 The connection between corrective justice and private law 40 2.2.5.3.2 Contract law: still the domain of corrective justice? 42 2.2.5.3.3 The growing role of distributive justice in other fields of private law 45 2.2.5.3.4 Example: constitutional values as a source of distributive justice in tort law 45 2.3 Rationale of the distinction between public and private law 49 2.4 Synthesis and conclusion 55 Chapter 3 Fundamental rights and private law: a relationship of subordination or complementarity? 3.1 Introduction 3.1.1 General 57 3.1.2 From the traditional to the modern role of fundamental rights in private law 57 3.1.3 Subordination/complementarity 59 3.1.4 The aim, methodology and plan of the Chapter 61 3.2 German law 3.2.1 Introduction 63 3.2.2 The rise of the theory of indirect effect as a foundation for the application of fundamental rights in private law 65 3.2.2.1 The Lüth case 65
Table of contents IX 3.2.2.2 The two extremes: direct effect versus no effect 66 3.2.2.3 An in-between solution the theory of indirect effect 69 3.2.2.4 Autonomy of private law as a rationale behind the theory of indirect effect : a logical point or a paradox? 71 3.2.2.4.1 Introduction 71 3.2.2.4.2 Constitutional rights as an overarching system of values and private law in the theory of Lüth: subordination or complementarity? 72 3.2.2.4.2.1 The limits to the new function of constitutional rights in private law 72 3.2.2.4.2.2 The new tasks of the private law courts 75 3.2.2.4.2.3 Complementarity as a starting point 77 3.2.2.4.3 Control by the Federal Constitutional Court over decisions of the private law courts: deference or over-review? 78 3.2.2.4.3.1 The Federal Constitutional Court s role under the doctrine of Lüth 78 3.2.2.4.3.2 Deference in the case law of the Federal Constitutional Court: Mephisto 80 3.2.2.4.3.3 Over-review in the case law of the Federal Constitutional Court: Deutschland Magazin 82 3.2.2.4.3.4 A serious invasion of a constitutional right as justification for over-review? Parabolantenne 84 3.2.2.4.3.5 The Federal Constitutional Court s possibilities for intervention within the ambit of private law 86 3.2.2.4.4 More a paradox or a logical point? 87 3.2.3 The rise of State duties to protect constitutional rights a new foundation for the effect of fundamental rights in private law? 89 3.2.3.1 The Handelsvertreter case 89 3.2.3.2 The concept of State duties to protect constitutional rights and its meaning for private law 92 3.2.3.3 The role of private law under the theory of State duties to protect constitutional rights 96 3.2.3.4 Control functions of the Federal Constitutional Court under the theory of State duties to protect constitutional rights 99 3.2.3.5 The relationship between the theory of indirect effect and the theory of State duties to protect constitutional rights 103 3.2.3.5.1 Introduction 103 3.2.3.5.2 The view of Canaris 104 3.2.3.5.3 The position of the Constitutional Court 106 3.2.3.5.4 Other views in the literature 107 3.2.3.5.4.1 No farewell to the theory of indirect effect 107 3.2.3.5.4.2 Farewell to the theory of indirect effect 108 3.2.3.5.4.3 Transformation of indirect effect into direct effect 110
X Fundamental Rights, Contract Law and the Protection of the Weaker Party 3.2.3.5.5 Parallel existence or mutual exclusion? 111 3.2.4 Synthesis and conclusion 114 3.3 Dutch law 3.3.1 Introduction 115 3.3.2 The issue of the horizontal effect of fundamental rights during the Constitutional Reform of 1983 117 3.3.3 The prevailing approach in the case law 119 3.3.3.1 Dispensing with dogmatic problems 119 3.3.3.2 Direct horizontal effect 122 3.3.3.3 Explicit indirect horizontal effect 124 3.3.3.4 Implicit indirect horizontal effect 125 3.3.3.5 The role of fundamental rights in private law: synthesis 126 3.3.4 The recognition of the general right to personality in Dutch law: towards a new approach to the effect of fundamental rights between private parties? 128 3.3.4.1 The Valkenhorst case 128 3.3.4.2 The general right to personality as a common denominator for public and private law: the view of Nieuwenhuis 129 3.3.4.3 Support in the case law? 132 3.3.5 Synthesis and conclusion 134 3.4 English law 3.4.1 Introduction 135 3.4.2 The issue of the horizontal effect of human rights in the text and legislative history of the Human Rights Act 137 3.4.3 The effect of the Human Rights Act from a doctrinal point of view 140 3.4.3.1 No effect 140 3.4.3.2 Direct horizontal effect 141 3.4.3.3 Strong indirect horizontal effect 142 3.4.3.4 Weak indirect horizontal effect 144 3.4.4 The approach of the courts 145 3.4.4.1 Introduction 145 3.4.4.2 The position of the courts before the entry into force of the Human Rights Act 146 3.4.4.3 The position of the courts in cases involving legislation: Ashdown, Wilson and Copsey 147 3.4.4.4 The position of the courts in cases involving common law: privacy cases 152 3.4.4.5 Towards a weak indirect horizontal effect? 157 3.4.5 Synthesis and conclusion 159 3.5 Synthesis and final conclusion 160
Table of contents XI Chapter 4 The impact of European fundamental rights and freedoms on the relationship between fundamental rights and private law in national legal systems 4.1 Introduction 4.1.1 General 163 4.1.2 The importance of the supranational dimension 163 4.1.3 The aim, methodology and plan of the Chapter 164 4.2 European Convention on Human Rights 166 4.2.1 Introduction 166 4.2.2 The horizontal effect of the ECHR through the positive obligation of the State 168 4.2.3 Horizontal effect through a fundamental rights review of national court decisions in private litigation? 173 4.2.4 The importance of the margin of appreciation in cases (potentially) involving horizontal effect 179 4.2.5 The ECtHR s approach to the margin of appreciation in cases (potentially) involving horizontal effect in practice 183 4.2.6 Synthesis and conclusion 189 4.3 EU law 4.3.1 Introduction 191 4.3.2 The effect of EC freedoms in private law 193 4.3.2.1 The position of EC freedoms in EC law and national private law 193 4.3.2.2 Direct horizontal effect of EC freedoms 197 4.3.2.3 State duties to protect EC freedoms in private law? 200 4.3.2.4 EC freedoms and the general principle of private autonomy 202 4.3.3 The effect of EU fundamental rights in private law 204 4.3.3.1 The special character of the protection of fundamental rights in EU law 204 4.3.3.2 Possibilities for the effect of EU fundamental rights in private law under the present state of the case law of the ECJ 206 4.3.3.2.1 Fundamental rights review of EC legislation 206 4.3.3.2.2 Review of the Member States measures for compliance with EC legislation which reflects fundamental rights 207 4.3.3.2.3 Fundamental rights review of the Member States measures which implement Community law 208 4.3.3.2.4 Fundamental rights review of the Member States measures which derogate from Community law 208
XII Fundamental Rights, Contract Law and the Protection of the Weaker Party 4.3.3.2.5 EU fundamental rights as a justification for the Member States restrictions on EC freedoms 209 4.3.3.2.6 The alignment between EU fundamental rights and private law: how far is the ECJ prepared to go? 212 4.3.3.3 Potential possibilities for the effect of EU fundamental rights in private law 215 4.3.3.3.1 EU fundamental rights as a source of strong persuasive authority in the Member States 215 4.3.3.3.2 The right to civis europeus sum in every Member State? 216 4.3.4 EC freedoms versus EU fundamental rights in a private law context: implications for private law 218 4.3.5 Synthesis and conclusion 221 4.4 Synthesis and final conclusion 224 Part III The issue of the protection of the weaker party against risky financial transactions in fundamental rights law and contract law 229 Chapter 5 The protection of the weaker party against risky financial transactions by means of fundamental rights 5.1 Introduction 5.1.1 General 231 5.1.2 The importance of the decision of the German Constitutional Court in the Bürgschaft case 232 5.1.3 The aim, methodology and plan of the Chapter 233 5.2 The idea behind resorting to fundamental rights in contract law: the Bürgschaft case 234 5.2.1 The facts of the case 234 5.2.2 The decisions of the private law courts 235 5.2.3 The decision of the Federal Constitutional Court 236 5.3 The interests protected by fundamental rights 5.3.1 Introduction 241 5.3.2 The German constitution 242 5.3.2.1 The Bürgschaft case: the conflict between two meanings of freedom of contract on the basis of the constitutional right to free development of one s personality and the principle of the social state 242
Table of contents XIII 5.3.2.2 Other potentially relevant constitutional rights and principles in cases involving risky financial transactions 247 5.3.2.2.1 Human dignity 248 5.3.2.2.2 The general right to personality 253 5.3.2.2.3 The right to marriage and family life 256 5.3.3 The Dutch Constitution 257 5.3.4 The European Convention on Human Rights 260 5.3.5 The Constitution for Europe 263 5.3.6 Fundamental rights as a double-edged sword 265 5.4 Competition between fundamental rights 5.4.1 The importance of the issue in the context of risky financial transactions 266 5.4.2 Solutions to the problem of competing constitutional rights in German constitutional law 268 5.4.3 Constitutional law solutions and the problem of competition between fundamental rights in the context of risky financial transactions 269 5.5 Resolving the conflicts between fundamental rights 5.5.1 Perplexities concerning the issue 272 5.5.1.1 General 272 5.5.1.2 The absence of a hierarchy between fundamental rights 272 5.5.1.3 The difficulty of establishing the content of absolute fundamental principles: the case of human dignity 275 5.5.2 The methods of resolving the conflicts between fundamental rights in private law disputes between private parties 275 5.5.2.1 Resolving conflicts between constitutional rights under the theory of indirect effect 275 5.5.2.2 Resolving conflicts between constitutional rights under the theory of State duties to protect constitutional rights 278 5.5.3 Striking a balance between the right to private autonomy and the right to private autonomy in conjunction with the principle of the social state in Bürgschaft 281 5.5.3.1 An outcome of the balancing a directive 281 5.5.3.2 Uncertainties surrounding the meaning of the directive 283 5.5.3.2.1 The notion of structural inequality in bargaining power and contract law 283 5.5.3.2.2 The scope of the protection of the weaker party against risky financial transactions 285 5.5.4 Contractual justice in cases involving risky financial transactions and the balancing between fundamental rights 287
XIV Fundamental Rights, Contract Law and the Protection of the Weaker Party 5.6 The implications of the protection of the weaker party by means of fundamental rights for the relationship between fundamental rights and contract law 5.6.1 The need for a clear differentiation between the kinds of horizontal effect in contract law 289 5.6.2 Direct horizontal effect 291 5.6.3 Strong indirect horizontal effect 293 5.6.4 Weak indirect horizontal effect 295 5.6.5 The kind of relationship between fundamental rights and contract law and the problems of competition and striking a balance between fundamental rights 297 5.7 Synthesis and final conclusion 298 Chapter 6 The protection of family members against suretyships by means of contract law 6.1 Introduction 6.1.1 General 301 6.1.2 Peculiarities of the suretyship contract 302 6.1.3 The problem of an emotionally transmitted debt 303 6.1.4 A purely national law matter 304 6.1.5 The aim, methodology and plan of the Chapter 305 6.2 German law 306 6.2.1 Introduction 306 6.2.2 The approach to suretyships by family members before the 1993 decision of the Constitutional Court in Bürgschaft 307 6.2.3 The approach to suretyships by family members after the 1993 decision of the constitutional court in Bürgschaft 309 6.2.3.1 th th The struggle between the 9 and 11 Senate of the Supreme Court 309 6.2.3.2 The current approach to suretyship contracts beyond the family sureties ability to pay 313 6.2.3.2.1 Gross disproportionality 315 6.2.3.2.2 A close emotional relationship with the principal debtor 318 6.2.3.2.3 Rebutting the presumption of immorality by the creditor 318 6.2.3.3 The current approach to well-off family sureties 320 6.2.4 The character and scope of the protection of (potential) family sureties 324 6.2.5 Synthesis and conclusion 329
Table of contents XV 6.3 Dutch law 6.3.1 Introduction 331 6.3.2 The Van Lanschot v. Moeder Bink case: protecting family sureties by means of duties to inform 332 6.3.2.1 The facts of the case and the decision of the Supreme Court 332 6.3.2.2 The scope of the duty to inform 334 6.3.3 The character and scope of the protection of (potential) family sureties 335 6.3.4 Synthesis and conclusion 337 6.4 English law 6.4.1 Introduction 339 6.4.2 Pre-O Brien responses 340 6.4.2.1 Agency theory 340 6.4.2.2 Special equity theory 340 6.4.2.3 The doctrine of notice 341 6.4.3 The O Brien case: the creditor on constructive notice 341 6.4.3.1 The facts of the case and the decision of the House of Lords 341 6.4.3.2 Policy considerations 342 6.4.3.3 The meaning of the doctrine of notice 343 6.4.3.4 The application of the principle of constructive notice 344 6.4.3.4.1 The existence of a legal wrong 345 6.4.3.4.2 When a creditor is put on inquiry 346 6.4.3.4.3 The reasonable steps to be taken by the creditor 346 6.4.3.5 Criticism of the O Brien approach 347 6.4.4 The Etridge case: refining the application of the principle of constructive notice 349 6.4.4.1 Background and importance of Etridge 349 6.4.4.2 Novelties of Etridge 351 6.4.4.2.1 The existence of a legal wrong 351 6.4.4.2.2 When a creditor is put on inquiry 352 6.4.4.2.3 The reasonable steps to be taken by the creditor 353 6.4.4.2.4 The reasonable steps to be taken by the solicitor 355 6.4.5 the character and scope of the protection of (potential) family sureties 358 6.4.6 Synthesis and conclusion 360 6.5 Synthesis and final conclusion 361
XVI Fundamental Rights, Contract Law and the Protection of the Weaker Party Chapter 7 The protection of investors against risky investment transactions in the execution-only relationship by means of contract law 7.1 Introduction 7.1.1 General 365 7.1.2 Types of investment services 366 7.1.3 Peculiarities of the execution-only relationship 367 7.1.4 The aim, methodology and plan of the Chapter 368 7.2 EC law 7.2.1 Introduction 372 7.2.2 The conduct of business rules under the ISD I 373 7.2.3 The conduct of business rules under the ISD II 375 7.2.3.1 The loyalty principle 376 7.2.3.2 The informed consent principle 377 7.2.3.3 The know your customer principle 378 7.2.4 The character and scope of investor protection in the execution-only relationship 382 7.2.5 Synthesis and conclusion 384 7.3 German law 7.3.1 Introduction 386 7.3.2 The relationship between contract law and the conduct of business rules 389 7.3.3 The duties of care in the execution-only relationship under contract law 391 7.3.4 The conduct of business rules and the extent of their application in the execution-only relationship 393 7.3.4.1 The general duty of loyalty 393 7.3.4.2 The duty to know one s customer 396 7.3.4.3 The duty to inform one s customer 399 7.3.5 The character and scope of investor protection in the execution-only relationship 404 7.3.6 Synthesis and conclusion 406 7.4 Dutch law 7.4.1 Introduction 408 7.4.2 The relationship between contract law and the conduct of business rules 411 7.4.3 The duties of care in the execution-only relationship under contract law: Kouwenberg v. Rabobank 414 7.4.4 The conduct of business rules and the scope of their application in the execution-only relationship 420
Table of contents XVII 7.4.4.1 The general duty of loyalty 421 7.4.4.2 The duty to check the customer s room for expenditures 421 7.4.4.3 The duty to check the compliance of the customer s transactions with margin requirements 423 7.4.4.4 The duty to make a customer profile 425 7.4.4.5 The duty to inform one s customer 427 7.4.5 The character and scope of investor protection in the execution-only relationship 430 7.4.6 Synthesis and conclusion 433 7.5 English law 7.5.1 Introduction 435 7.5.2 The relationship between common law and the conduct of business rules 437 7.5.3 The duties of care in the execution-only relationship under common law 441 7.5.4 The conduct of business rules in the execution-only relationship 443 7.5.4.1 The duty to check the compliance of the customer s transactions with margin requirements 445 7.5.4.2 The duty to know one s customer and the duty to ensure the suitability of one s recommendation or a discretionary decision for the customer 446 7.5.4.3 The duty to ensure clear, fair and non-misleading communication 447 7.5.4.4 The duty of disclosure 448 7.5.4.5 The duty to ensure the customer s understanding of the risks 449 7.5.5 The character and scope of investor protection in the execution-only relationship 451 7.5.6 Synthesis and conclusion 452 7.6 Synthesis and final conclusion 454 Chapter 8 The protection of investors against risky investment transactions in the advisory relationship by means of contract law 8.1 Introduction 8.1.1 General 459 8.1.2 Peculiarities of the advisory relationship 460 8.1.3 The aim, methodology and plan of the Chapter 461
XVIII Fundamental Rights, Contract Law and the Protection of the Weaker Party 8.2 EC law 8.2.1 Introduction 462 8.2.2 The conduct of business rules under the ISD II 463 8.2.2.1 The loyalty principle 463 8.2.2.2 The informed consent principle 464 8.2.2.3 The know your customer principle 465 8.2.3 The character and scope of investor protection in the advisory relationship 468 8.2.4 Synthesis and conclusion 469 8.3 German law 8.3.1 Introduction 470 8.3.2 The duties of care in the advisory relationship under contract law: Bond 471 8.3.3 The conduct of business rules in the advisory relationship 476 8.3.3.1 The general duty of loyalty 476 8.3.3.2 The duty to know one s customer 479 8.3.3.3 The duty to inform one s customer 481 8.3.4 The character and scope of investor protection in the advisory relationship 483 8.3.5 Synthesis and conclusion 485 8.4 Dutch law 8.4.1 Introduction 487 8.4.2 The duties of care in the advisory relationship under contract law: Kouwenberg v. Rabobank 489 8.4.3 The conduct of business rules in the advisory relationship 494 8.4.3.1 The general duty of loyalty 495 8.4.3.2 The duty to check the customer s room for expenditures 496 8.4.3.3 The duty to check the compliance of the customer s transactions with margin requirements 497 8.4.3.4 The duty to make a customer profile 499 8.4.3.5 The duty to inform 503 8.4.4 The character and scope of investor protection in the advisory relationship 506 8.4.5 Synthesis and conclusion 509 8.5 English law 8.5.1 Introduction 511 8.5.2 The duties of care in the advisory relationship under common law 512 8.5.3 The conduct of business rules in the advisory relationship 517 8.5.3.1 The duty to check the compliance of the customer s transactions with margin requirements 519
Table of contents XIX 8.5.3.2 The duty to know one s customer and the duty to ensure the suitability of one s recommendation for the customer 520 8.5.3.3 The duty to ensure clear, fair and non-misleading communication 524 8.5.3.4 The duty of disclosure 525 8.5.3.5 The duty to ensure the customer s understanding of the risks 527 8.5.4 The character and scope of investor protection in the advisory relationship 530 8.5.5 Synthesis and conclusion 531 8.6 Synthesis and final conclusion 533 Part IV Synthesis and assessment 537 Chapter 9 Towards a complementary relationship between fundamental rights and contract law 9.1 Introduction 9.1.1 General 539 9.1.2 The aim, methodology and plan of the Chapter 540 9.2 The relationship between fundamental rights and contract law in light of the distinction between public and private law 541 9.2.1 Tensions between the tendency towards the subordination of private law to fundamental rights and the tendency towards complementarity between the two 541 9.2.2 The need for further differentiation between the kinds of horizontal effect of fundamental rights in contract law 544 9.2.2.1 Direct horizontal effect 545 9.2.2.2 Strong indirect horizontal effect 546 9.2.2.3 Weak indirect horizontal effect 546 9.2.3 Public/private distinction as a substantive argument against the subordination of contract law to fundamental rights 547 9.3 The relationship between fundamental rights and contract law in light of the practical need to protect the weaker party 9.3.1 Perplexities concerning the subordination of contract law to fundamental rights 549
XX Fundamental Rights, Contract Law and the Protection of the Weaker Party 9.3.2 Is there a practical need for the subordination of contract law to fundamental rights with a view to protecting the weaker party? 553 9.3.3 Should the protection of the weaker party in Europe be harmonized through the horizontal effect of EU fundamental rights? 557 9.4 The plea for a complementary relationship between fundamental rights and contract law 9.4.1 The importance of contract law for the protection of the weaker party 560 9.4.2 The role of fundamental rights in modern contract law: towards the weak indirect horizontal effect 564 9.4.3 Fundamental rights and the conduct of business rules 569 9.4.4 The role of the national constitutional courts, the ECtHR and the ECJ in securing complementarity between fundamental rights and contract law 570 9.5 Final remarks 573 Bibliography 577 Table of Cases 609 Index 621 Curriculum vitae 631
List of abbreviations A.A.L.R. AC AcP A.F.L.J. AFM ALJ All ER All ER (Comm) AnwBl AöR ArA AULR Anglo-American Law Review Law reports, Appeal Case (Third Series) Archiv für civilistische Praxis Australian Feminist Law Journal Autoriteit Financiele Markt Australian Law Journal All England Law Reports All England Law Reports (Commercial Cases) Anwaltsblatt Archiv für Öffentliches Recht Arbeidsrechtelijke Annotaties Auckland University Law Review BAG Bundesarbeitsgericht BAGE Amtliche Sammlung der Entscheidungen des BAG BB Betriebs-Berater. Zeitschrift für Recht und Wirtschaft BGB Bürgerliches Gesetsbuch BGH Bundesgerichthof BGHZ Amtliche Sammlung der Entscheidungen des BGH in Zivilsachen BKR Zeitschrift für Bank- und Kapitalmarktrecht Bte Besluit toezicht effectenverkeer 1995 Bull. Civ Bulletin des arrêts de la Cour de Cassation. Chambres civiles BVerfG Bundesverfassungsgericht BVerfGE Amtliche Sammlung der Entscheidungen des BVerfG BYIL British Yearbook of International Law C.A. CanadJNS CE CESR CYELS Ch Chap. Ch. Div. CLC Court of Appeal Canadian Journal of Netherlandic Studies Conseil d Etat Committee of European Securities Regulators Cambridge Yearbook of European Legal Studies Law Reports, Chancery Division (Third Series) Chapter Chancery Division CCH Commercial Law Cases
XXII C.L.J. CLP C.M.L.R. COB ColumbJ.E.L. ColumbL.R. Com LR Conv. CP DB Dfl. DM Duke L.J. D.U.T.R. DVBL DZWir ECHR ECJ ECR ECtHR Ed. Eds EdinLR E.H.R.C. EHvJ E.H.R.L.R. EHRM EHRR EJCL ELJ ERCL ERPL ESC EuGRZ EuR EuZW EVRM Fundamental Rights, Contract Law and the Protection of the Weaker Party Cambridge Law Journal Current Legal Problems Common Market Law Review Conduct of Business Sourcebook Columbia Journal of European Law Columbia Law Review Commercial Law Reports Conveyancer and Property Lawyer Consultation Paper Der Betrieb Wochenschrift Dutch Gilder Deutsche Mark Duke Law Journal Derivatives Use Trading Regulation Deutsches Verwaltungsblatt Deutsche Zeitschrift für Wirtschafts- und Insolvenzrecht Convention for the Protection of Human Rights and Fundamental Freedoms 1950 = European Convention on Human Rights and Fundamental Freedoms 1950 European Court of Justice European Court Reports: Reports of Cases before the Court of Justice and the Court of First Instance European Court of Human Rights Editor Editors Edinburgh Law Review European Human Rights Cases Europees Hof van Justitie European Human Rights Law Review Europees Hof voor de Rechten van de Mens European Human Rights Reports Electronic Journal of Comparative Law European Law Journal European Review of Contract Law European Review of Private Law The European Securities Committee Europäische Grundrechte-Zeitschrift Europarecht: in Verbindung mit der Wissenschaftlichen Gesellschaft für Europarecht Europäische Zeitschrift für Wirtschaftsrecht Europees Verdrag voor de Rechten van de Mens
List of abbreviations XXIII EWCA Civ EWiR Court of Appeal (Civil Division) Entscheidungen zum Wirtschaftsrecht Fem.L.S. Feminist Legal Studies FF French Franc FIMBRA Financial Intermediaries, Managers and Brokers Regulatory Association Fn. Footnote FSA Financial Services Authority FSA 1986 Financial Services Act 1986 FSMA 2000 Financial Services and Markets Act 2000 FuR Familie und Recht G.Y.I.L. HL H.L. Deb. HLR HR HRLJ HRQ German Yearbook of International Law House of Lords House of Lords Debates Harvard Law Review Hoge Raad Human Rights Law Journal Human Rights Quarterly ICLQ ICR IIC International and Comparative Law Quarterly Industrial Cases Reports International Review of Industrial Property and Copyright Law International Journal of Law, Policy and the Family Iowa Law Review Industrial Relations Law Reports IJLPF IowaL.R. IRLR ISD I Investment Services Directive I 1993 ISD II Investment Services Directive II 2004 JBL JCP J.F.R.&C. JOL JR JURA JuS JZ KCD KHCB Journal of Business Law La semaine juridique, enterprise et affaires Journal of Financial Regulation and Compliance Jurisprudentie Online Juristische Rundschau Juristische Ausbildung Juristische Schulung Juristenzeitung Klachtencommissie Dutch Securities Institute Commissie van Beroep (of the Dutch Securities Institute)
XXIV KritJ KVGR Fundamental Rights, Contract Law and the Protection of the Weaker Party Kritische Justiz Kritische Vierteljahrsschrift für Gesetzgebung und Rechtswissenschaft Law Com Law Commission L.C. Law in Context L.I.E.I. Legal Issues of Economic Integration Lloyd s Rep. P.N. Lloyds Law Reports Professional Negligence L.Q.R. The Law Quarterly Review English pound Md.L.R. MDR Mich.L.R. MiFID MJ MLR Maryland Law Review Monatschrift für deutsches Recht Michigan Law Review Markets in Financial Instruments Directive Maastricht Journal of European and Comparative Law Modern Law Review NbBW Nieuwsbrief Burgerlijk Wetboek NILR Netherlands International Law Review NJ Nederlandse Jurisprudentie NJB Nederlandse Juristenbald NJCM-Bulletin Nederlands tijdschrift voor de mensenrechten NJW Neue Juristische Wochenschrift NJW-RR NJW Rechtsprechungs-Report NLJ New Law Journal No. Number Nos Numbers NQHR Netherlands Quarterly of Human Rights NRge Nadere Regeling gedragstoezicht effectenverkeer 2002 NTBR Nederlands Tijdschrift voor Burgerlijk Recht NTER Nederlands Tijdschrift voor Europees Recht NVWZ Neue Zeitschrift für Verwaltungsrecht NZA Neue Zeitschrift für Arbeitsrecht NZL.R. New Zealand Law Review O&F OJ OJEC OJLS ÖV ÖZöR Onderneming en financiering Official Journal of the European Union Official Journal of the European Communities Oxford Journal of Legal Studies Die öffentliche Verwaltung: Zeitschrift für Verwaltungsrecht und Verwaltungspolitik Österreichische Zetschrift für öffentliches Recht
List of abbreviations XXV P.L. P.N.L.R. QB RdA Reports RLR RM Themis RMUE Rn. RO RVDV Public Law Professional Negligence Law Reports Law Reports, Queen s Bench (Third Series) Recht der Arbeit: Blätter für die Wissenschaft und Praxis des gesamten Arbeitsrechts Reports of Judgments and Decisions of the European Court of Human Rights Restitution Law Review Rechtsgeleerd magazijn Themis Revue du Marché Unique Européen Randnote, Randziffer Wet op de rechterlijke organisatie Rechtspraak van de week S. Section S.A.L.J. South African Law Journal Series Publications of the European Court of Human Rights: Judgments and Decisions SEW Sociaal-economische wetgeving Sing JLS Singapore Journal of Legal Studies Ss Sections Ste Stichting toezicht effectenverkeer TelAvivU.S.L. TPR TvC TvO UK UKHL UPennsL.R. UPittsL.R. U.S. VAR Vol. VrA VuR Wis.L.R. WLR WM Tel Aviv University Studies in Law Tijdschrift voor privaatrecht Tijdschrift voor Compliance Tijdschrift voor openbaarbestuur United Kingdom United Kingdom House of Lords University of Pennsylvania Law Review University of Pittsburgh Law Review United States Supreme Court Reports Vereiniging voor Administratief Recht Volume Vermogensrechtelijke annotaties Verbraucher und Recht Wisconsin Law Review Weekly Law Reports Wertpapier-Mitteilungen
XXVI Fundamental Rights, Contract Law and the Protection of the Weaker Party WpHG Wertpapierhandelgesetz WPNR Weekblad voor privaatrecht, notariaat en registratie Wte Wet toezicht effectenverkeer 1995 Yale L.J. YEL ZaöfRV ZAS ZBB ZEuS ZEV ZfRV ZHR ZIP ZöR ZRP Yale Law Journal Yearbook of European Law Zeitschrift für ausländisches öffentliches Recht und Völkerrecht Zinsabschlagsteuer Zeitschrift für Bankrecht und Bankwirtschaft Zeitschrift für europarechtliche Studien Zeitschrift für Erbrecht und Vermögensnachfolge Zeitschrift für Rechtsvergleichung Zeitschrift für das gesamte Handels- und Wirtschaftsrecht Zeitschrift für Wirtschaftsrecht und Insolvenzpraxis Zeitschrift für öffentliches Recht Zeitschrift für Rechtspolitik