Property Alliance Group v Royal Bank of Scotland Plc

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Posted in:Banking and Finance, Real Estate|June 12, 2015 | Join the mailing list

Three decisions of the High Court have been handed down in regards to the above case.  Two became publicly available on 8th June 2015, and one became available on 19th February 2015.  There is a fourth decision in 2014 not detailed below (see [2014] EWHC

The case against RBS is that the Property Alliance Group (“PAG”) ought to be entitled to damages as a consequence of the unlawful manipulation of GBP LIBOR by traders at RBS.  The Bank has admitted to US, UK and Japanese regulators that it indeed carried on
business during which traders had manipulated LIBOR.  However, there has been no finding of manipulation of GBP LIBOR by RBS and no admission by them as to the same.

The principal issues  at the heart of these decisions are:-

(1)    If  the Bank can be forced to reveal its own internal investigation reports that were submitted to Japanese Financial Regulator;
(2)    whether a US “document” that has been sealed by a US Court and subject to a confidentiality clause is subject to inspection;
(3)     and if PAG can continue with a LIBOR claim in regards to GBP LIBOR despite that the Bank has never admitted to manipulating GBP Sterling LIBOR, only Swiss Franc and Japanese Yen.

In a scathing decision that will cause great consternation for RBS, the Court made some damning findings at paragraphs 92 to 101 of the third decision:

[2015] EWHC 1557 (Ch)

Mr Justice Birrs said, inter alia, at paragraph 92:

“The RBS Final Notice makes findings of misconduct relating to [Swiss Franc] and [Japanese Yen] LIBOR. It does not make a finding of misconduct relating to GBP LIBOR. It would be tempting to draw the conclusion RBS had therefore been exonerated in relation
to GBP LIBOR, which after all is the reference rate in the PAG swaps. Tempting but wrong. This Final Notice is the product of a settlement agreement. Although it was arrived at after the first investigatory phase of work by the regulator, it is not the product
of a full statutory process of investigation and decision making. The communications on which the agreement is based might have been incomplete, mistaken or misleading (whether inadvertently or not).”

What follows is equally unhelpful to RBS.  In one of the earlier decisions by the Court ([2015] EWHC 322 (Ch)) Birrs J confirms that the reports to and by the Japanese financial regulator can be subject to inspection.  According to the judgment the Japanese
regulator had objected to the inspection of the five reports and claimed it would be contrary to Japanese law.  There was a suggestion that it would cause damage to the regulation of Japanese financial industry.  Birrs J did not agree and confirmed that the
reports were very germane to the investigation of whether or not RBS manipulated or attempted to manipulate GBP LIBOR.  That decision will be very beneficial to any party wishing to consider a GBP LIBOR claim (subject of course to other issues).

The second case found in similar terms and was reported on when the decision was handed down.  A US document was subject to a confidentiality clause and was also under seal with a US Court.  Birrs J handed down a decision that allowed disclosure of the document,
but directions imposed a duty not to refer to it or its contents in open Court without permission.

The result of these three decisions is of significant important to potential claimants who may wish to bring a claim against a Bank that has been subject to a finding or admission of manipulation of LIBOR.  In this case and in the previous cases involving Barclays
and Deutsche Bank, the Banks have stated that they were not fined for manipulating GBP LIBOR (it being noted that attempts at GBP LIBOR manipulation are contained in the findings of Barclays, but it was not fined for it).  The ability to now have access to
the actual investigations, resulting reports and with this the actual evidence of what happened will enable bank customers to properly assess and evidence claims relating to LIBOR manipulation potentially opening up some significant cases.  

If there are any issues in this update or more generally that you would like to discuss, please contact one of our Banking and Financial Regulatory team on 0161 829 2599.

(The information and opinions contained in this article are not intended to be comprehensive, nor to provide legal advice. No responsibility for its accuracy or correctness is assumed by Berg or any of its partners or employees. Professional legal advice
should be obtained before taking, or refraining from taking, any action as a result of this article.)

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