Civil Liability of Rating Agencies: An Insipid Sprout from Brussels

Abstract

Recently, a private cause of action against rating agencies has been introduced into EU law. This paper analyses the need and justification for such liability. Features of the new cause of action are compared to those existing in other major economies; in particular, those of the U.S. and Australia. The paper criticizes the fact that the EU leaves open to Member States to define the essential terms of rating agency liability and, thereby, fails to secure a uniform regime. The problems of the new rule are compounded further by difficulties in determining the applicable national law that fills in its gaps. Finally, it remains unclear whether the scope of the liability also covers U.S. rating agencies. It is concluded that the new regime is merely a cover-up to mask continuing differences between EU Member States concerning the appropriateness of rating agencies’ civil liability.