Financial Markets Disputes: recent top cases, trends and themes for the future

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1 Financial Markets Disputes: recent top cases, trends and themes for the future Richard Bunce Robert Allen Chloe Culleton Ed Crosse FI & AMIF Autumn Legal Update 2017

2 In this headlines-only session Overview Themes In the rear view mirror On the road ahead On the horizon Case updates on commercial lending/contract/retail Privilege Jurisdiction Update on significant court developments 1 / B_LIVE_EMEA1: v1

3 35 Litigation involving banks and other major financial institutions (1) Claims issued January 2008 September No. of claims issued Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep Statistics based on information obtained from public sources by Bloomberg s court service. 2. Pleadings not yet available for all cases. Statistics therefore include cases identified on basis of parties names only. 2 / B_LIVE_EMEA1: v1

4 UK financial markets litigation Commercial Court statistics No. of actions commenced , , , , , , , , Source 1 Commercial Court published statistics 2 figure based on Bloomberg records 3 estimate based on Bloomberg records 3 / B_LIVE_EMEA1: v1

5 In the rear view mirror: key decisions in the last year RBS rights issue litigation Lloyds Bank shareholder litigation Banking contracts and good faith MSC Mediterranean Shipping Company SA v Cottonex Anstalt [2017] 1 All ER Comm 483 Implied representations Property Alliance Group Limited v RBS [2016] EWHC 3342 (Ch) Ringfencing (September 2017) 4 / B_LIVE_EMEA1: v1

6 In the rear view mirror: key decisions in the last year Lehman Waterfall I [2017] UKSC 38 The Supreme Court ruled on the distribution priorities in the administration of Lehman Brother International (Europe) LB Holdings Intermediate 2 Ltd [2017] EWHC 2032 (Ch) The High Court approved the settlement of the Lehman Waterfall III litigation Clutch of tail end IRHP mis-selling cases Clutch of miscellaneous duty of care cases (e.g. Taberna, LIA) 5 / B_LIVE_EMEA1: v1

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25 On the horizon Group litigation and class actions Mis-selling of financial products Claims related to regulatory findings (?) Cyber security Fintech FX Rate-rigging, benchmarking Commodities and commodities financing Brexit 24 / B_LIVE_EMEA1: v1

26 Contract African Export-Import Bank (2) Diamond Bank plc (3) Skye Bank plc v (1) Shebah Exploration & Production Co Ltd (2) Allenne Ltd (3) Ambrosie Bryant Chukwueloka Orjiako (2017) [2017] EWCA Civ 845 A contract made on a party s standard terms of business was not likely to trigger the application of the Unfair Contract Terms Act, where not all the terms were incorporated and those that had been were varied (1) Global Asset Capital Inc (2) Glenn Maud v Aabar Block S.A.R.L. (2) Aabar Investments PJS (3) Robert Tchenguiz [2017] EWCA Civ 37 When determining whether a contract had been made during the course of negotiations, the Court of Appeal found that the first instance judge had been wrong to find that a contract had been concluded orally when there was clear evidence of subsequent communications that were inconsistent with the conclusion of a contract BHL v Leumi ABL Ltd (2017) [2017] EWHC 1871 (QB) Where a bank was entitled to a fee of up to 15% of amounts collected for taking over the collection of the client's outstanding receivables it was under a duty to set the percentage with reference to the additional costs it would incur in doing so. 25 / B_LIVE_EMEA1: v1

27 Retail Finance Merricks v Mastercard Inc & Ors [2017] CAT 16 (21 July 2017) The Competition Appeal Tribunal dismissed an application for a collective proceedings order under section 47B of the Competition Act BAWAG PSK Bank v Verein Fur Konsumenteninformation (Case C-375/15) Consideration of whether information communicated to a customer via an e-banking platform inbox comprised a durable medium for the purposes of the Payment Services Directive. R (on the application of Aviva Life & Pensions (UK) Ltd) v Financial Ombudsman Service [2017] EWHC 352 (Admin) Establishing limitations and controls on the FOS s power to decide cases by references to what is fair and reasonable in all the circumstances 26 / B_LIVE_EMEA1: v1

28 Retail Finance R (on the application of Mazarona Properties Ltd & 2 Ors) v Financial Ombudsman Service (2017) [2017] EWHC 1135 (Admin) A complaint about a bank's withdrawal of a redress offer to a customer was found to be outside the FOS s remit because it was neither a s. 404 FSMA redress scheme nor a complaint about the provision of, or failure to provide, a financial service and so did not come under FOS s compulsory jurisdiction Thomas Nelmes v NRAM plc [2016] November An undisclosed agreement under which the lender was to pay the borrower's broker a commission deprived the borrower of the disinterested advice of his broker and was therefore found to be unfair under section 140A of the Consumer Credit Act Blackwater Services Ltd & Others -v- West Bromwich Commercial Limited [2016] EWHC 3083 (Ch) The application of an interest variation clause in a mortgage contract was legitimate: If at any time the Lender cannot determine or ascertain LIBOR or the Lender is of the opinion that its costs of funding would be in excess of LIBOR, then the Lender (acting reasonably) may determine and certify an alternative basis for calculating the interest rate for the Loan and will notify the borrower before the next Payment Date 27 / B_LIVE_EMEA1: v1

29 Privilege Re The RBS Rights Issue Litigation, [2016] EWHC 3161 (Ch) December The application (or lack thereof) of legal advice privilege to notes of interviews conducted by lawyers in the course of internal investigations. Decision (and therefore Three Rivers No.5) unchallenged as the appeal to the Supreme Court was withdrawn in February 2017 Director of the SFO v Eurasian Natural Resources Corporation Limited [2017] EWHC 1017 (QB) The application of litigation and legal advice privilege to documents produced during an internal investigation in the context of criminal litigation, including the question of when adversarial litigation is reasonably in prospect, and the limits of legal advice. 28 / B_LIVE_EMEA1: v1

30 Jurisdiction Dexia Crediop Spa v Comune Di Prato (2017) [2017] EWCA Civ 428 No basis for the displacement of an English law and jurisdiction clause (under Reg 593/2008, article 3) in circumstances where a standard form international interest rate swap contract contained international elements making it impossible to locate all the relevant elements outside England Ilyas Khrapunov v JSC BTA Bank : JSC BTA Bank v (1) Ilyas Khrapunov (2) Mukhtar Ablyazov (2017) [2017] EWCA Civ 40 Unlawful Means" for the purpose of the tort of conspiracy to injure by unlawful means can include contempt of court. Where that conspiracy arose in England, the English Court had jurisdiction to try the claim under the Lugano Convention even where the aim of the conspiracy was to breach a freezing order through disposals and dealings of assets based elsewhere Commerzbank Aktiengesselschaft v Liquimar Tankers management Inc and Another [2017] EWHC 161 (Comm) Asymmetric jurisdiction clauses are exclusive jurisdiction clauses for the purposes of Article 31 of Brussels I Recast (meaning in this case the court refused to stay English proceedings pending proceedings brought in Greece contrary to an asymmetric jurisdiction clause) 29 / B_LIVE_EMEA1: v1

31 Rolls Building Disclosure Working Group Have the Jackson LJ reforms of 2013 worked in practice? GC100 Feedback in April 2016 London Solicitors Litigation Association / New Law Journal 2017 Survey 70% feel that the current disclosure regime has been ineffective in controlling the burden and costs of disclosure No proper engagement between parties Lack of robust case management by the Courts Menu of disclosure options rarely used standard disclosure is the default Insufficient use of technology Part 31 is not fit for purpose focuses on paper based disclosure Establishment of the Rolls Building Disclosure Working Group in May / B_LIVE_EMEA1: v1

32 DWG: Key objectives Re-write and modernise the current rules on disclosure (CPR Part 31) Change culture and approach to disclosure by parties and Courts Impose express duties on parties, including to cooperate and engage Ensure that the Court has the information it needs at the Case Management Conference to make robust and informed decisions about disclosure Improve the menu of disclosure options to encourage a move away from standard disclosure Postpone cost budgeting until after the CMC 31 / B_LIVE_EMEA1: v1

33 DWG reform proposals (October 2017) A mandatory pilot for civil claims proceeding in the Business and Property Courts in London and regions Process starts with Basic Disclosure Service with the SOC of key documents: on which a party has relied (expressly or otherwise) in support of the claims or defences advanced in its statement of case; and that are necessary to enable the other parties to understand the case they have to meet Light touch approach with ability to opt out No obligation to serve adverse documents (at this stage) Party(ies) may then apply for Extended Disclosure 32 / B_LIVE_EMEA1: v1

34 Completion of the Disclosure Review Document Identify Issues for Disclosure following close of pleadings Parties meet to discuss the points identified in the DRD Issues for Disclosure Serve Disclosure Requests (optional) Discuss and agree scope Use of technology Identify areas of particular difficulty or challenge Propose which Disclosure Models should be used Disclosure Guidance Hearings Estimate Costs 33 / B_LIVE_EMEA1: v1

35 New menu of Disclosure Models Existing menu of disclosure options to be replaced by five Disclosure Models Model A: No order for Disclosure Model B: Limited Disclosure (documents on which you rely plus any adverse documents of which you are aware without the need for a further search) Model C: Request-led, search-based disclosure Model D: Search based disclosure (similar to standard disclosure) Model E: Wider search based disclosure (train of enquiry etc) No presumption you are entitled to Models D and E Each model proposed must be reasonable and proportionate (new criteria) 34 / B_LIVE_EMEA1: v1

36 Encouraging robust case management by the Courts The Court may give directions on the following to reduce the burden and cost of disclosure: Limiting searches (custodians, dates, locations etc) Requiring the use of data sampling, de-duplication techniques Directing the use of technology assisted review tools Orders for phased disclosure Cost shifting orders Orders for non-compliance or breach Further or revised disclosure certificate, additional searches, improved List, specific disclosure, witness statement to explain non-compliance Sanctions for non-compliance 35 / B_LIVE_EMEA1: v1

37 Other key features of the proposals Express duties on the parties and their advisers Obligation to disclose adverse documents (with Extended Disclosure) Clawback arrangements for inadvertent disclosure of privileged materials Document preservation notices Deferral of the Form H Cost Budgets until after the CMC Pre-action and non-party disclosure rules preserved 36 / B_LIVE_EMEA1: v1

38 Next steps and timing Approval from the Lord Chief Justice and Master of the Rolls (This week) Announcement of the Pilot and period of review, further feedback and training (December to February) Approval from the Civil Procedure Rules Committee (tbc.) Commencement of 2 year (mandatory) Pilot (Spring 2017) Brave New World 37 / B_LIVE_EMEA1: v1

39 Key contacts Richard Bunce Partner Dispute Resolution T E richard.bunce@simmons-simmons Robert Allen Partner Financial Markets Litigation T E robert.allen@simmons-simmons Chloe Culleton Supervising Associate Financial Markets Litigation T E chloe.culleton@simmons-simmons Ed Crosse Partner Financial Markets Litigation T E ed.crosse@simmons-simmons 38 / B_LIVE_EMEA1: v1

40 Q&A

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