Claimants Bring UK Class Action Against Investment Banks for FX Manipulation

What has happened?

On 29 July 2019, claimants brought a class action in the UK Competition Appeal Tribunal (CAT) against five investment banks, alleging potentially billions of pounds in damages from cartel conduct in the foreign exchange markets. 

The claim follows on from a recent antitrust infringement decision of the European Commission, by which the five defendant banks – Barclays, Citigroup, JP Morgan, RBS and UBS – settled the authority’s long-running foreign exchange investigation. In the decision, the banks admitted that their traders had exchanged competitively sensitive information and coordinated trading in foreign exchange markets in the period 2007 to 2013. The European Commission imposed total fines of EUR 1.07 billion. A further European Commission decision is pending against non-settling bank Credit Suisse in the same investigation, which may result in further fines, as well as an extension of the scope of the UK litigation.

The class is represented by Michael O’Higgins, former Chairman of the UK Pensions Regulator, and consists of a broad class of claimants, including pension funds, asset managers, hedge funds and corporates. To proceed to trial, the CAT must certify the claim by way of a collective proceedings order (CPO), i.e. it must confirm that the claim is brought on behalf of an identifiable class, raises common issues, and is overall suitable to proceed as a class action.

Why does this matter?

This is now the seventh CPO application since the UK introduced class actions in the Consumer Rights Act 2015. The CAT, in considering early applications, has openly stated that it intends to tread carefully in certifying proposed classes, given the novelty of class actions in the UK and the challenges that they present for the legal system: “collective proceedings on an opt-out basis can bring great benefits, if successful… but like almost all substantial competition damages claims they can be very burdensome and expensive for defendants… The eligibility conditions… require the Tribunal to scrutinise an application for a CPO with particular care, to ensure that only appropriate cases go forward.” (Justice Roth, in Merricks v Mastercard)

The certification procedure is therefore still in its infancy. Of the previous applications, none thus far have been certified by the CAT: the first application (Gibson v Pride Mobility Products) was abandoned after it failed to receive certification; the second application (Merricks v MasterCard) is on appeal to the Supreme Court after conflicting judgments before the CAT and the Court of Appeal (see here); and other applications (on claims concerning the Trucks cartel and price-fixing by UK railway operators) have yet to be heard pending the judgement of the Supreme Court. 

Clearly, along with this new foreign exchange claim, there is now a sufficient body of pending class actions for the CAT to develop precedent (taking into account any guidance that might result from the Supreme Court in the pending Merricks case), and clearly articulate the grounds on which class certification should be granted.

More broadly, the proceedings also highlight the increased litigation risk faced by investment banks from antitrust misconduct. Naturally, such misconduct exposes banks to investigations by antitrust authorities, and also by financial regulators, including the UK Financial Conduct Authority. Misconduct now also exposes them, as a matter of course, to private litigation in Europe – brought both on an individual and class action basis. Indeed, this new class action commenced in the CAT will run alongside an FX-related joint antitrust claim brought in the UK High Court by over 100 investors against the same five defendants, as well as HSBC.

What happens next?

The claimants are seeking a CPO, which would allow their class action against the defendant banks to proceed to trial before the CAT. However, the appeal in Merricks v Mastercard will not be resolved for some time, and the Supreme Court’s ruling may have a bearing on this and other applications. It is thus possible that, although the CAT may consider preliminary issues, the main hearing on the CPO application may be adjourned until the Supreme Court has clarified the test for certification.

How can Cadwalader help?

Cadwalader’s antitrust team is one of only a few to focus on the financial services sector. We regularly represent companies before the EU, UK and US antitrust authorities, and are specialists in offering ‘end-to-end’ advice on antitrust investigations and related litigation in this sector, working closely with our financial regulatory, white collar and litigation colleagues.

If you would like to discuss the issues arising in this alert, or how we can help you more generally, please contact Vincent Brophy and Tom Bainbridge.

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