The Evolution of the Liability of Credit Rating Agencies in the United States and in the European Union: Regulation after the Crisis

Credit rating agencies have assessed the creditworthiness of issuers and debt instruments for over a century. Nevertheless, in the United States and in the European Union a first regulation of rating services was passed only at the beginning of the twenty-first century, respectively in 2006 and 2009. Statutory liability rules were later adopted in the United States with the Dodd-Frank Act of 2010 and in the European Union with Regulation (EU) no 462/2013. Despite some similarities between the American and European existing discipline, significant differences still exist and pave the way for regulatory arbitrage opportunities in the ratings market. The reasons for divergence are clearly historically based and derive, in part, from the different traditions of the two legal systems. Accordingly, this article compares the evolution of the US regulatory framework and case law on the liability of rating organizations towards investors with the uniform rules adopted by the European Union since 2009, absent a comparable case law at the European level. It is argued that, in both systems, while it is easier to establish liability in case of intent, burden of proof rules generally place a significant, if not insurmountable, obstacle to damage compensation for investors.