Federal Court of Justice rules fund fee clause in general and special fund rules invalid

In its judgment of 5 October 2023 (case no. BGH III ZR 216/22), the German Federal Court of Justice (BGH) ruled market standard clauses in fund rules that, inter alia, provided for the deduction of a ‚flat fee of 1.5% p.a.‘ from the assets of an undertaking for collective investment in transferable securities (UCITS) by the management company to be invalid because such clauses were not clear and easy to understand for investors and therefore unreasonably disadvantageous. These challenged clauses were based partly on the samples provided by the German Investment Funds Association (BVI) that had been agreed on with the German Federal Financial Supervisory Authority. The judgment therefore potentially affects a significant number of fund providers operating in Germany that have used these or similar clauses at least to some extent in their own business. However, this judgment is also relevant to foreign fund providers who market their products in Germany. Besides the uncertainty as to what costs a fund may incur going forward if one of its fee clauses is invalid, there are also legal risks surrounding fees charged in the past. To the Newsletter.