Hello and welcome to the Fides Weekly Update. Take a look at this week’s key trends, moves and developments in legal and compliance.
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1. LITIGATION AGAINST GLOBAL BANKS RISES 37%
Litigation against the largest 50 global banks has increased 37% in 2016, according to research published this week by RPC.
The number of High Court cases in which banks were named as a defendant jumped from 115 to 157 last year, increasing consistently year-on-year since 2011. This was based on an analysis of court hearing lists, and covers allegations relating to Libor and the mis-selling of hedging products.
UK banks made up two thirds of the majority of the 784 High Court cases involving the top 50, with Barclays, HSBC, Lloyds and Royal Bank of Scotland (RBS) accounting for 67%, or 530, cases over the past 5 years. RBS was the defendant in the highest number of cases (118), with Barclays in a close second (106).
There have been several high profile cases involving these banks over the past few years, most notably the ongoing ‘rights issue’ case against RBS. Representing 27,000 shareholders, Signature Litigation have brought a £4bn group action against the bank who have claimed that they were misled into signing up for a £12bn rights issue in 2008. As reported this week, the cost estimate of legal fees paid by RBS to external counsel Herbert Smith Freehills to defend the bank in the dispute has now reached £125m.
The research attributed such a rise in litigation to the long term fallout of the financial crisis, together with a greater willingness of parties to contemplate litigation than was seen before the crash.
As the economy has recovered, many businesses have found themselves in a better financial position to launch a legal claim than they were in the immediate aftermath of the financial crisis. This, alongside the availability of third party litigation funding, where companies offer to foot the expensive legal costs of bringing a claim in return for a share of compensation awarded if the lawsuit is successful, has driven many cases.
Furthermore, claimants typically have six years to launch a claim before their time limit expires, which has meant that the last round of cases relating to the financial crisis were only brought to the High Court last year.
Whilst this shows a greater willingness by individuals and companies to litigate against the banks, the cases the banks have faced in the High Court are likely to be the tip of the iceberg, as many financial disputes are settled by banks before lawsuits are formally lodged.
As Simon Hart, Partner at RPC says: “Whilst the well-publicised systemic problems, like Libor or Forex manipulation may not be repeated in the near future, there is still a large number of disputes that pass across our desks every week relating to the investment banks.”
Nevertheless, this trend poses interesting questions for City law firms, many of whom are conflicted in acting against the UK’s largest banks, whilst further entrenching the dominance of litigation boutiques within this side of the market.
2. THE END OF THE LIBOR SCANDAL: BARCLAYS DUO ACQUITTED IN LIBOR RETRIAL
Two former traders at Barclays were cleared of any wrongdoing in connection with the rigging of benchmark rates by a jury at Southwark Crown Court on Thursday.
Having already stood trial last summer, Barclays traders Stylianos Contogoulas and Ryan Reich returned for a retrial after the jury was unable to reach a verdict on the conspiracy to defraud the Libor rate. The Serious Fraud Office (SFO) appealed for this retrial, claiming that the Barclays duo were plotting with fellow Barclays employees between June 2005 and September 2007 to rig Libor.
The FT reported that Emma Deacon QC, who was representing the SFO, argued that Mr Reich and Mr Contogoulas were “driven by money” to make more profit on their trading and saw “honesty and integrity” as “entirely expendable”.
Meanwhile, Roland Ellis, Senior Associate at criminal litigation and commercial disputes boutique Bivonas Law, was pleased with the verdict, which he believes was the end to a “trying ordeal for the past seven years”.
Mr Reich and Mr Contogoulas are only two of six total Barclays individuals initially prosecuted for rates manipulation. Jay Merchant was served a six-and-a-half year sentence, whilst Peter Johnson and Jonathan Mathew were each jailed for four years, and Alex Pabon was handed two years and nine months.
The re-trial brings to a close all Libor prosecutions brought by the Serious Fraud Office. It also marks the end one of the largest scandals the financial markets has seen in recent times, leading to the mass levels of regulatory change that we’re experiencing today.
Market manipulation, along with further misconduct issues, primarily triggered an overhaul of the Financial Services Authority, now split into the Financial Conduct Authority and the Prudential Regulation Authority, and further sparked the development of a substantial level of new regulation, affecting all areas of financial services. Having redefined the workings of the global banking system, the regulator has now turned its eye onto the asset management industry, conducting an in-depth review into the £7 trillion industry. The interim report from this review was published in November last year, and its findings imply that we should envisage a similar transformation descend upon the sector.
The SFO are currently in the process of bringing a prosecution of six individuals for manipulating Euribor, a global interest rate benchmark. The six are due to stand trial in September.
Movers & Shakers of the Week
FCA drops three City firms from its supervisory panel of advisers
BT appoints 37 UK and Ireland legal advisers into its legal network
Standard Chartered is finalising a review into its international legal panel, expected to be complete in a few weeks
TransferWise is electing a select group of firms as its preferred legal advisers on a loose roster
Government kicks off a review for a two-year ‘finance and highly complex transactions panel’
Slaughters bulks out Brussels competition offering
Slaughter and May appoints six competition lawyers from its London to Brussels office in response to Brexit
Clifford Chance creates Australia managing partner role
Banking partner Richard Gordon is set to lead Clifford Chance’s Australia practice and Sydney office, whilst energy partner Paul Lingard shall become Perth managing partner
Fieldfisher appoints new head of Manchester office
Former managing partner for Halliwells Ian Austin will replace corporate Matt Fleetwood as Manchester head as Fleetwood exitswill fellow corporate partner Jim Truscott to set up a corporate boutique
Channel 4’s Prash Naik steps down after three years as general counsel
VW hires new chief compliance officer
Former associate general counsel for Daimler, Kurt Michels has joined Volkswagen Group in the role of chief compliance officer
Latham boosts London litigation capability
Ian Felstead leaves Olswang ahead of three-way merger to join Latham & Watkins’ litigation practice
Further European real estate hire in Paris
Hogan Lovells hires Michaël Lévy as a real estate partner in its Paris office from Bersay & Associés
Winckworth Sherwood further strengthen real estate offering
Head of real estate for Rosenblatt Solicitors Andrew Kinsey has decided to join Winckworth Sherwood’s 100-strong real estate team
Office Openings & Closings
KWM pulls out of Saudi by closing down Riyadh office
Shakespeare Martineau set to open tenth UK office in Manchester
US securities litigation specialist Pomerantz launches in Paris with in-house lawyer hire