Functional or dysfunctional – the law as a cure?

Editors
Lars Gorton, Jan Kleineman & Hans Wibom

In the late fall of 2012 the Marianne and Marcus Wallenberg Foundation approached the Stockholm Centre for Commercial Law (SCCL) at Stockholm University regarding the planning of an International legal symposium in honour of the 50th anniversary of the Foundation. 
Following the approach by the Foundation there was an agreement that such symposium was to cover legal questions related to financial markets. 
There was a decision that the symposium would be arranged on August 29 and 30, 2013 under the heading “Functional or dysfunctional – the law as a cure? Risks and liability in the financial markets”. It was also decided that there would be a publication based on the papers given by the participants and the discussants. 
The topic of the symposium mirrors a particular interest of the SCCL jointly with that of the Foundation namely legal questions related to principles and rules of regulatory nature as well as principles and rules related to liability matters. After World War II financial markets have gradually undergone huge differences depending on new financial devices, new financial markets and new financial actors evolving together with changes in regulation and supervision. These are circumstances which have together created new frames for the financial industry. 
The economic and financial crises which have emerged have necessitated the adoption of new financial rules, the development of new regulatory bodies to handle risk matters and the supervision of the new financial regulations. In several countries there have also occurred a number of civil law cases involving claims of damages in contract and/or in tort against different actors in the financial area. Such litigation has involved banks, other financial entities, financial advisers also including auditors. In many cases the amounts of damages allowed to suffering parties have been substantial. 
New and believed to be better and more efficient regulatory means have been adopted to regulate financial business both nationally including e.g. the US and several other countries, regionally e.g. the European Union (EU) and also globally through steps taken within the Basle Committee. In the latter case such steps have involved the introduction of new requirements for adequate capital bases particularly in banks (Basle I, Basle II and Basle III – the latter not yet in force). 
Hence over a period of time courts have been involved in civil law disputes between individuals and/or business entities suffering economic injury from the acts of different financial actors, thus involving claims for damages. Also financial regulators have exercised their power against financial actors in different ways in relation to various breaches of financial regulations. We have thus seen over a period courts being involved ex post and financial regulators both ex ante and ex post with the ultimate aim to reduce financial risks (through better regulation, through better supervision but also through compensation to those who have suffered financially). 
The various events which have taken place related to the financial markets, not least during the first decade of the 20th century, have evoked repeated questions and discussions but they need further considerations. This has also been the background for arranging the symposium related to financial law matters. 
The first part of the symposium was thus assigned to mirror the ex ante aspects, i.e. the considerations for various regulations of the financial markets and the financial actors. The second part was assigned to discuss the ex post aspects, namely particularly contract and tort law cases where claims have been directed towards different financial actors and where in a number of cases courts have decided that they have to pay sometimes large amounts of compensation. As mentioned there have also been cases where regulatory authorities have claimed heavy penalties to be paid by financial actors considered to have breached regulatory requirements. 
Late in April 2014 a new Swedish Supreme Court case has meant a certain change in approach with respect to the liability of auditors, something which may also have a bearing on the functions of other actors in the financial sector. 
The program of the symposium was intended to mirror this development and it has also been made part of the publication. Several of the participants have been kind enough to participate in the publication which is now published as volume in the Stockholm Centre of Commercial Law series of publications. The publication as well as the symposium was financed by the Wallenberg Foundation and the Centre is grateful for having had the possibility to arrange the symposium jointly with the Foundation. We are also grateful to all those who participated in the publication. 

Stockholm spring 2014 
Lars Gorton, Jan Kleineman and Hans Wibom