Foundations and Elements of Civil Liability of Regulatory and Policymaking Institutions in the Capital Market: A Comparative Study of Iranian, French, and English Law

Abstract

The capital market, as a vital pillar of the modern economy, serves as a mechanism for mobilizing financial resources, ensuring the efficient allocation of capital, and protecting investors. Within this market, regulatory and policymaking institutions regulate the conduct of market participants and promote transparency and financial stability through the enactment of laws, regulations, directives, and binding policies. Nevertheless, hasty, inadequately informed, or investor-rights-incompatible decisions may result in extensive pecuniary and non-pecuniary losses. The principal issue concerns the legal foundations and constituent elements of the civil liability of these institutions and the circumstances under which they may be held liable for resulting losses. This issue is particularly complex because factors such as fault, causation, foreseeability of harm, the principle of legality, governmental immunities, and the difficulty of quantifying damages complicate the establishment of liability. Using a descriptive-analytical and comparative method and relying on library-based examination of legislation, judicial practice, and authoritative legal documents, this article investigates the issue within the legal systems of Iran, France, and England. The findings indicate that all three systems recognize the necessity of compensating losses caused by harmful decisions of public institutions; however, they differ significantly with respect to the foundations, constituent elements, and barriers to liability. In Iran, fault-based liability, risk theory, the Islamic legal maxim of la darar (no harm), and principles of investor protection provide the principal theoretical framework; however, the multiplicity of institutions, ambiguity regarding the legal status of the Securities and Exchange Organization, and the broad scope of sovereign acts make the establishment of liability difficult. In France, administrative fault, no-fault liability, and risk theory operate alongside the active role of the Conseil d’État; nevertheless, acts of state and the requirement of gross fault in certain contexts remain important obstacles. In England, liability is principally grounded in negligence, breach of statutory duty, and misfeasance in public office; however, statutory immunity, restrictions on recovery for pure economic loss, and a cautious judicial approach limit institutional accountability. It is concluded that the liability of such institutions should be proportionate to the relevant risks, transparent in its operation, and complementary to ex ante regulatory supervision.