In the complex world of crowdfunding regulations, Germany stands out as a unique case. The current government draft for implementing the European Crowdfunding Service Provider Regulation (ECSPR) has raised significant concerns. At stake is the future of the German crowdfunding market, and this draft could have far-reaching implications not only for Germany but also for the broader European digital finance ecosystem.
Liability and Its Impact
At the heart of the issue lies the treatment of liability. Under the currently applicable German law (Wertpapierhandelsgesetz), members of the administrative, management, or supervisory bodies of project sponsors or crowdfunding service providers can be held personally liable for ordinary negligence. This strict standard deviates significantly from established norms in German prospectus liability law and creates considerable uncertainty for stakeholders.
Interestingly, the European Commission has raised informal questions about the German approach to crowdfunding liability. European laws, including the ECSPR and the Prospectus Regulation, provide for prospectus liability but do not impose such stringent requirements on individual members of these bodies. Germany’s stricter interpretation has drawn attention as a potential outlier within the EU regulatory framework.
The German implementation of ECSPR has faced sharp criticism in academic circles. Legal experts argue that extending liability to members of management bodies undermines traditional legal structures. Furthermore, the differentiation between negligence standards for various types of body members creates ambiguity and complexity. This misalignment adds another layer of uncertainty for crowdfunding service providers operating under German jurisdiction.
The Role of the Future Financing Act (ZuFinG)
Responding to interventions by German associations and EUROCROWD, the German government initially sought to address these competitive disadvantages for German crowdfunding service providers through the forthcoming Future Financing Act (ZuFinG). Early discussions led to the publication of a cabinet draft in Spring 2023, which aimed to align German crowdfunding liability rules with existing norms and create a more level playing field.
While the crowdfunding sector welcomed this early draft, the actual government draft released in Summer 2023 appears to have taken a different direction. The revised draft introduces changes to liability rules under ECSPR but stops short of fully meeting industry expectations. Liability has now been limited to gross negligence, and a reversal of the burden of proof has been introduced. While these changes could strengthen investors’ positions, questions about ordinary negligence remain unresolved.
As this debate unfolds, the German crowdfunding industry is watching closely. The outcome of these liability discussions could significantly influence the broader European digital finance market. Resolving these issues may require intervention through European tort law under Rome II or corrective actions by the European Commission. However, the question remains: Can these challenges be effectively managed beyond national interests?
Listen On
Recently, EUROCROWD participated in a podcast alongside German colleagues from the Digital Lending Association. The panel included our member Andreas Knopf (General Counsel at INVESDOR), Germany’s leading academic on the issue, Prof. Dr. Petra Buck-Heeb (University of Hanover), and Max Mordhorst (Member of the German Bundestag), under the moderation of Constantin Fabricius, Managing Director of the Digital Lending Association. You can listen to the 55-minute podcast (in German) on Spotify, Apple, Amazon, or Google.
Further Reading
For a deeper dive into the topic, consider these resources:
- Sonderausgabe zur Schwarmfinanzierung, Zeitschrift für Bank- und Kapitalmarktrecht (BKR)
- Kommentar zum Vermögensanlagengesetz mit Vermögensanlagen-Verkaufsprospektverordnung und Schwarmfinanzierungsverordnung, by Lea-Maria Siering and Anna Lucia Izzo-Wagner
- Crowdfunding in the EU – Key Legal, Regulatory & Tax Issues, Report by EUROCROWD & PwC
