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The general principles governing a lead manager's duties under Belgian law were confirmed by the Brussels' commercial court on February 10 2000.

The case related to the failure by the Canadian Confederation Life Insurance Company to reimburse subordinated Eurobonds issued in 1993 and was started by disgruntled investors against the co-lead managers, among whom is a leading Belgian bank. As none of the investors involved acquired the Eurobonds through the intermediary of one of the lead managers, the case against the lead managers was made on the basis of Belgian tort law only.

The court confirmed that, although lead managers do not guarantee the solvability of the issuer, they should ensure the trustworthiness of the financial information communicated by the issuer in the preparatory phase of the issue, and in particular within the framework of the prospectus drafting.

It is clear that the lead managers will be liable under Belgian civil law if they agree to act as lead managers when at the same time they could not be unaware that the issuer would not be able to reimburse. This raises the double question of: (i) whether the lead managers acted as prudent and diligent professionals placed in the same circumstances; and (ii) whether by doing so they would or should have discovered the issuer's weak financial situation. In answering the latter question negatively, the court paid great attention to the issuer's AA rating.

This recent case confirms the principles set out in the judgment of the commercial court of Brussels of March 26 1997. In that case some of the banks that actually sold the same Eurobonds were held liable on other grounds, including the general duty to negotiate in good faith. Today, the law of April 6 1995 will impact on any future similar case.

Michael Olislaegers

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