By Agence France-Presse In a landmark case in France, U.S. financial services firm Morgan Stanley was ordered to pay more than 30 million euros (US$38.5 million) in damages Jan. 12 after a Paris court ruled that it had issued unfair market analysis of luxury house LVMH Moet Hennessy Louis Vuitton SA. The commercial court also appointed an expert to assess the extent of financial losses caused to LVMH as a result of the bank's reporting. His report -- due by the end of April -- would lead to further damages being paid, the court said. Morgan Stanley promised an appeal. "It is a judgment that is terrifying for all financial analysts," said Patrick Ponsolle, president of the bank's French operation. "The big losers in all of this are going to be the whole financial community, but above all the investors -- large and small." The court ruled that the facts "constituted a serious offense carried out by Morgan Stanley at the expense of LVMH and this offense led to considerable moral and material damage." Setting the moral damage at 30 million euros, it "reserved the right to complete the sentence for material damage" once the expert's report has been made. The case centered on charges that Morgan Stanley had breached the so-called "Chinese Walls" separating the research and commercial sides of its business, issuing analysis that favored its client Gucci. LVMH sued Morgan Stanley in October 2002, demanding 100 million euros in damages for "erroneous and biased" research which it said had been carried out by top luxury-goods analyst Claire Kent. In a court hearing in November LVMH said that the bank had for three years issued false advice about the luxury house's financial situation when it was engaged in a failed bid to take control of Gucci. The U.S. bank vehemently denied the charges and counter-attacked, demanding 10 million euros in damages as well as the publication in 20 newspapers and magazines of the judgment -- which it hoped would be in its favor. In France, a new financial security law intended to entrench the principle of "Chinese Walls" obliges investment banks to separate their functions and sets up a new, tougher regulator, the Financial Markets Authority (AMF). Copyright Agence France-Presse, 2004