Approximately 20.000 Austrians have invested money in shipping funds. In contrast to shares or open funds an investment in a closed-end (shipping) fund is typically temporary and involves a specific object, such as a container vessel or a chemical tanker. The funds administrators pooled not only the capital of private investors but also bank loans and financed container ships. In this manner especially the small investors hoped to benefit from professional investment managers, who may be able to increase better returns and to reduce some systemic risks (e.g. capital risk or liquidity risk). Often the funds promised investors annual returns of 7-8 percent.
Due to the financial crisis, rising fuel prices, excess capacity, falling freight rates and after banks refused to extend credits many shipping funds suffered losses, came into financial emergency and filed for insolvency. Not only banks but also private investors lost their investments.
The complexity of the investment construction of shipping funds raised many questions which require answers. These essential questions will be answered by the courts. As a result of many court proceedings (especially in Austria and Germany, where the jurisdiction is similar and has progressed sufficiently) it became clear, that the private investors are qualified as limited liable partners („Kommanditist”).
A limited partnership (Kommanditgesellschaft) is a legal form for purposes of operating a commercial enterprise with personal liability of at least one partner towards third party creditors limited to the amount of his capital contribution only. This legal form includes in addition to one or more general liable partners („Komplementär”) one or more limited liable partners („Kommanditist”). The limited liable partners contribute money (or property, „Kommanditeinlage”) and have no right to participate in the management of the partnership. The limited partner in effect trades management rights for the limitation of his personal liability, which is confined to the amount of contributed money („Kommanditeinlage”). Profits and losses of the partnership are to be distributed among the partners on a per capita basis.
Another important question which was answered by the courts (ruled by the German Supreme Court „Bundesgerichtshof” and assumed by Austrian courts) was related to the limited liability of the private investors. In many cases it turned out that the achieved annual returns were not gained business profits but just repayments of the original capital contributions for which the private investor was considered as liable.
As a matter of course private investors who have lost their investments can successfully seek compensation for damages if certain conditions are fulfilled. In many cases the private investors have been misadvised by banks or financial consultants about the characteristics, the risks, the included obligations. Especially in that case it is advisable to get in touch with an attorney at law, who will help you to enforce your claim.