European justice closes the door for Popular shareholders to claim Santander

Shareholders who suffered losses due to the resolution of

cannot claim compensation from Banco Santander on the basis that they received faulty information when acquiring those titles before the dissolution, as ruled on Thursday by the

.

The judges point out, however, that European law provides for a safeguard that allows if the shareholders and creditors affected by a resolution suffered more losses with this operation than they would have suffered in an ordinary liquidation, they can claim in court the return of the difference.

The resolution of Banco Popular, ordered in 2017 by the European authorities due to the problems that the entity was having, resulted in the amortization of all its shares to zero and its sale to Santander for a symbolic euro, causing an

by of those who lost their investment.

The court has followed the criteria of the General Counsel when responding to a preliminary ruling raised by the Provincial Court of La Coruña on the case of two clients who had acquired shares in the capital increase of Popular in 2016 and, after the resolution of the entity , claimed compensation alleging that the prospectus for that issue contained faulty information.

In essence, he was asking whether the European banking rules adopted after the financial crisis, which require shareholders and creditors to be the first to suffer losses in the event of resolution, preclude shareholders who bought securities before dissolution from being able to claim later due to this misinformation and be compensated.

The ruling is crucial for those affected who are waiting for their claims to be resolved, since in December the Spanish

decided to paralyze all proceedings pending a ruling by the CJEU.

In it, the CJEU responds that the applicable European directives "prevent that, after the total amortization of the shares of the share capital of a credit institution or an investment services company subject to a resolution procedure, those who have acquired shares within the framework of a public subscription offer issued by said entity or said company, before the start of such resolution procedure, exercise, against said entity or company or against the entity that succeeds it, an action for liability for the information contained in the brochure.

They also oppose the exercise of an action for annulment of the subscription contract for those shares which, due to its retroactive effect, would lead to the restitution of the equivalent value of said shares plus the interest accrued from the date of execution of the contract, indicates the verdict that agrees with Banco Santander.

The court underlines that, although there is a general interest in protecting investors, it cannot be considered that this prevails over the general interest of guaranteeing the stability of the financial system pursued by the resolution rules, which apply only in situations of "maximum urgency", exceptional and to protect a public interest.

The judges point out that compensation can be obtained when the losses suffered in the resolution are greater than those that would have generated a liquidation to use.

However, the

concluded in 2020 that an ordinary liquidation would have generated losses greater than the 11,400 million that were lost with the resolution and, therefore, no compensation is possible.

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