Porsche Securities Litigation: German Federal Court of Justice Seeks ECJ Guidance on Key Liability Questions for Holding Companies

On 18 November 2025, Germany's Federal Court of Justice (Bundesgerichtshof, "FCJ"), acting as the appellate court in the KapMuG proceedings, suspended proceedings in the landmark Stuttgart Porsche securities litigation. It referred a series of questions to the European Court of Justice ("ECJ") for a preliminary ruling. This decision was published on 28 January 2026.^[1]

The Porsche litigation represents one of the largest investor securities actions in European legal history, and the ECJ's answers to these questions will shape the landscape for similar claims going forward.

The referral concerns fundamental questions about when a holding company can be held liable for failing to disclose share price relevant insider information arising from its subsidiary's operations—questions that carry significant implications for securities litigation across Europe, far beyond the current case.

Case Background

The case arises from the Volkswagen diesel emissions scandal ("Dieselgate"). Porsche Automobil Holding SE ("Porsche SE"), a Stuttgart-based holding company whose primary business is holding participations in automotive companies, held a majority stake in Volkswagen AG during the relevant period (2014-2015). Certain individuals served simultaneously on the boards of both companies during that period, notably the former CEO Prof. Dr. Martin Winterkorn (member of Volkswagen AG’s board of management and supervisory board member at Porsche SE) and Hans Dieter Pötsch (member of the board of directors at both Volkswagen AG and Porsche SE).

When the diesel manipulation scandal broke publicly in September 2015—with the U.S. Environmental Protection Agency issuing a Notice of Violation and threatening penalties of up to $18 billion—share prices of both Volkswagen and Porsche SE collapsed. A group of investors, led by the Wolverhampton City Council pension fund, brought claims against Porsche SE for damages arising from the alleged failure to publish timely ad-hoc disclosures about the emissions manipulation.

The FCJ, as competent appellate court following the mostly dismissing 1^st instance judgment of the Stuttgart Higher Regional Court in the model proceedings, concluded that it cannot decide on certain foundational legal issues relating to the case without seeking clarification from the ECJ.

The Key Legal Questions Referred to the ECJ

The FCJ has referred four main questions (with sub-questions) to the ECJ, all concerning the interpretation of Article 6(1) of the EU Market Abuse Directive (Directive 2003/6/EC), which requires issuers of securities to disclose insider information that "directly concerns" them "as soon as possible".

Question 1: Can a Holding Company Be "Directly Concerned" by Events at Its Subsidiary?

The first question asks whether a holding company without its own operating business can be "directly concerned" by events occurring in the business operations of a listed subsidiary it controls.

The FCJ's Leaning: The FCJ inclines toward a broad interpretation. It notes that where a holding company's business consists of managing participations, insider information originating from a subsidiary's operations can affect the holding company's own sphere and have direct effects at its level.

The Court emphasizes that neither German law nor the EU Directive contains provisions concentrating disclosure obligations on whichever entity in a corporate group is "closest" to the relevant information. The FCJ points out that holding companies and their subsidiaries may address different investor groups, and the significance of information for the holding company does not necessarily become apparent merely from the subsidiary's disclosure.

Question 2: Is Disclosure Required Only When the Issuer Has "Attributable Knowledge"?

The second question concerns whether Article 6(1) should be interpreted to require disclosure only once the issuer has attributable knowledge of the insider information.

The FCJ's Leaning: The FCJ tends toward the view that the disclosure obligation should not depend on actual knowledge reaching the responsible body within the issuer. Instead, the Court leans toward a standard where disclosure is required once insider information would have reached the responsible disclosure unit if the issuer had reasonable organisational structures in place. The FCJ reasons that a knowledge-dependent obligation would undermine market transparency goals and enable issuers to shield themselves from disclosure duties (and, consequently, liability) through inadequate internal information flows.

Question 3: Is Knowledge Attribution Governed by National Law or EU Law?

The third question asks whether the conditions under which knowledge can be attributed to an issuer are determined by member state law or whether EU law provides governing principles.

The FCJ's Leaning: The FCJ indicates that this question is closely connected to Question 2 and suggests that if EU law sets standards for when disclosure must occur, it may also constrain how member states apply knowledge attribution rules. The Court notes that relying purely on national attribution rules could create inconsistent application across the EU and potentially undermine the Directive's objectives.

This question includes important sub-questions concerning:

• Attribution of dual-mandate directors' knowledge: Whether knowledge acquired by a board member at the subsidiary (through their role there) should be attributed to the parent company where they also serve as a director.
• Impact of confidentiality obligations: Whether attribution is blocked when the dual-mandate director owes confidentiality duties to the subsidiary.
• Effect of subsidiary's own disclosure obligation: Whether attribution depends on whether the subsidiary itself was required to disclose the information or was entitled to defer disclosure.

The FCJ's Leaning on Sub-Questions: The FCJ indicates that under German law principles, knowledge of a dual-mandate director should generally be attributable to both companies they serve, even where that specific knowledge of a certain information piece was acquired in (only) one capacity. However, the Court acknowledges that confidentiality obligations may limit the director's ability to share that information, which raises complex questions about whether attribution should still occur.

Question 4: Attribution of "Constructive" or Imputed Knowledge Across Corporate Boundaries

The final question asks whether knowledge that is merely imputed or attributed to a subsidiary (rather than actually known by individuals) can be further attributed from the subsidiary to its parent company.

The FCJ's Leaning: Under German law principles, the FCJ would decline such "chain attribution". The Court reasons that knowledge organisation duties do not extend across the legal boundaries of separate corporate entities, and a parent cannot be required to establish control mechanisms beyond its own legitimate sphere of influence. However, the FCJ seeks clarity on whether EU law mandates a different result.

Implications of the ECJ Ruling on the Pending Diesel-related Securities Class Actions

The ECJ ruling will – primarily and directly – affect the legal position and recovery chances of Porsche SE shareholders who are members of the KapMuG Model proceedings against Porsche in Stuttgart, which is now pending for decision with the FCJ. Subject to the content and direction of the ruling, the FCJ may issue a final decision on Porsche SE’s liability itself, or, which is the more likely scenario, refer the case back to the Stuttgart court for re-examination and potential further taking of evidence in the light of the ECJ and FCJ guidance.

Additionally, the rulings will affect the ongoing KapMuG action at the Higher Regional Court of Brunswick, which deals with the securities information liability of Volkswagen AG as well as that of Porsche SE as holding company. So far, the main focus of this model case has been on the role and liability of Volkswagen AG itself, but the court will eventually also turn to Porsche SE’s liability, the legal basis for which is virtually identical to that in the case that the FCJ now referred to the ECJ.

Broader Relevance Beyond This Case

The ECJ ruling that will stem from this referral is significant far beyond the Volkswagen and Porsche case. It will shape the legal framework for further securities liability disputes of parent/holding companies, and may even influence the future design and setup of compliant information reporting systems within groups of companies:

For Securities Litigation Generally: If the ECJ confirms that disclosure obligations are not dependent on actual board-level knowledge, but rather on what a properly organised issuer should have known, this will substantially strengthen investor claims in cases where issuers argue they were unaware of problematic developments within their organisations.

For Holding Companies and Corporate Groups: The case will clarify the scope of disclosure obligations for any listed holding company with significant participations in operating subsidiaries. A broad ruling could require holding companies to establish more robust information channels from subsidiaries and expand internal compliance structures.

For Dual-Mandate Directors and Governance Structures: The ruling will have significant implications for the common practice of placing parent company executives on subsidiary boards and how their knowledge is attributed across legal entities. If knowledge attribution follows the director regardless of where information is acquired, this fundamentally affects governance risk assessments and may eventually lead to a reduction of dual-mandate structures.

For Harmonisation of EU Securities Law: The questions concerning whether attribution rules are governed by EU or national law will affect the degree of harmonisation in this area. Greater EU-level prescription would create more uniform standards but could potentially override established national corporate and civil law principles in the area of knowledge attribution.

Investment Considerations

While the FCJ's clear leanings suggest a favourable disposition toward investor-friendly interpretations, the ultimate outcome depends on the ECJ's ruling. The core tension in this case—between protecting market integrity and respecting corporate separateness—reflects fundamental questions in European corporate and capital markets law that the ECJ has not previously addressed in this context.

[1] The published decision is available for download in the FCJ archive here: II_ZB___9-23.pdf