The Supreme Court of Sweden (Högsta domstolen) has referred a new case to the Court of Justice of the European Union (CJEU) concerning the Market Abuse Regulation (Regulation 596/2014) and insider trading. The case, which is known as Case C-229/24, Brännelius (TK and OP v Riksåklagaren), concerns ‘when’ is a public procurement decision ‘public’.
Under Article 7(1)(a) of the Regulation, inside information is defined as information of a precise nature, which has not been made public, relating, directly or indirectly, to one or more issuers or to one or more financial instruments, and which, if it were made public, would be likely to have a significant effect on the prices of those financial instruments or on the price of related derivative financial instruments.
Certain commercial information made available to companies is market sensitive. Companies must inform the public as soon as possible of certain inside information which directly concerns them, and must ensure that the inside information is made public in a manner which enables fast access and complete, correct and timely assessment of the information by the public and, where applicable, by a specifically prescribed method (Article 17 of the Regulation). In the context of public procurement, an award decision may constitute a public document, be it regarding a successful or unsuccessful tendering procedure for a tenderer.
The facts of the case involves a municipality in Sweden, Umeå, who is the owner of a municipality company, Umeå kommunföretag AB, which in early 2018 tendered for private operators to run electric buses and charging stations for them within the city. Whilst five companies expressed interest in the public procurement, only two actually submitted bids (the tenderers).
Of the two bidders, the losing tenderer was Hybricon Bus Systems AB. Within minutes of being told by the municipality company that it was not being awarded the tender, an operating officer in Hybricon arranged for the sale of his shares to another person, who also sold their shares in Hybricon.
Later on the same day, the announcement was made by the company that it was not successful in the tender. Being a publicly traded company on a stock exchange, the disappointment was felt immediately, and its share price fell. Given that this was subsequent to the share sales by the two individuals, they both limited their potential loses, given one of them was privy to information was not, at the time of their share sale, in the public domain.
The two persons was subsequently found guilty of insider trading before a District Court (tingsrätten), and were given suspended sentences and had some financial assets seized. On appeal at the Court of Appeal (hovrätten), it made some amendments, but upheld the conviction. The Supreme Court of Sweden is now faced with the case.
In essence, the two persons are claiming that the particular information that came into one of their domain – that Hybricon was to be an unsuccessful tenderer – ceased being insider information once the decision had actually been sent to the five companies (two tenderers and three interested tenderers).
The Supreme Court of Sweden wants to know whether the information in the public procurement decision – the award decision sent to five companies – is to be considered as no longer to be considered confidential (thus, vindicating the two individuals), or whether the information is to be consider as no longer confidential only when the company announced in a press release of its unsuccessful tender application (thus, vindicate the public prosecutor)?
The Supreme Court of Sweden asks two questions in its reference to the CJEU. First,
Is it necessary for public disclosure to have taken place in the manner referred to in Article 17 of the market abuse regulation in order for information to be considered to have been made public in accordance with Article 7(1)(a) of the regulation?
And second,
If public disclosure can take place in another manner, what circumstances should be taken into account in determining whether information should be considered to have been made public within the meaning of Article 7(1)(a)?
More information on the new case, Case C-229/24, Brännelius (TK and OP v Riksåklagaren) as the reference for a preliminary ruling from the Supreme Court of Sweden (Högsta domstolen) can be accessed here.