Banking and finance disputes review

Publication | September 2011


In this edition, we review a range of recent significant banking decisions. We noted in the last edition that, in the English courts, the battleground appeared to be moving on from claims of mis-selling to attempts to characterise disputes regarding financial products as disputes relating to lack of capacity. Article 22(2) of the Brussels Regulation could then be invoked to move cases from the chosen court (England) to the courts of the country where the entity in question is based in the hope they may be more sympathetic. This tactic, which has proved common in disputes with European public bodies who have bought derivatives, has been brought to an abrupt end for entities based in the EC by the decision of the European Court of Justice in Berliner Verkehrsbetriebe v JP Morgan Chase Bank NA [2011] EUECJ C-144/10.

However, it would premature to assume these mis-selling claims by investors in the English courts will no longer be brought in the English courts. In spite of a spate of decisions which should give no encouragement to disappointed investors looking to attempt to sue banks for mis-selling, the English courts continue to tackle mis-selling claims brought by sophisticated investors as the judgment in Cassa di Risparmio v Barclays Bank [2011] EWHC 484 (Comm) demonstrates. This case conforms to an emerging pattern demonstrating that it is difficult for sophisticated investors to pursue mis-selling claims in the English courts. The case was however unusual in that it concerned allegations that the bank had knowledge that the default risk of a structured product was higher than the rating assigned to it by credit rating agencies suggested. Allegations of fraud and, where private individuals are concerned, wrongful customer classification, are ensuring that mis-selling claims continue to be litigated, despite the formidable obstacles to success presented to claimants by the recent case-law.

Derivatives disputes continue to be topical and we consider the English courts’ ruling on how to calculate the amount owed following the early termination of OTC financial derivatives under the 1992 ISDA Master Agreement (Britannia Bulk plc (in liquidation) v Pioneer Navigation Limited and Ors [2011] EWHC 692 (Comm)).

We look at the proposed amendments to the Brussels Regulation which includes welcome proposals to eliminate “torpedo claims” as well as what are likely to prove more controversial proposals to eliminate national jurisdiction rules in favour of harmonised European rules.

The UK Bribery Act 2010 came into force on 1 July 2011. The Ministry of Justice Guidance to the Act has been published and provides much needed advice on corporate hospitality and facilitation payments. In addition, we look at the anti corruption guidance for financial institutions prepared by the Wolfsberg Group. The FSA continues to be active and we take a look at the new penalty framework in action by reference to a recent fine relating to market abuse and the litigation concerning attempts to challenge FSA guidance on PPI insurance.

Finally, in light of our recent merger with Canadian and South African practices Ogilvy Renault and Deneys Reitz Inc., we are delighted that this edition has a greater international focus. We look at two recent Canadian decisions which recognise that there is a need to circumscribe the duties of banks where a bank’s facilities were used in a fraud of which it had no actual knowledge, and a recent South African decision concerning the ability of banks to unilaterally withdraw banking services based upon reputational concerns.

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Michael Godden
Partner - Banking and finance disputes

Paul Morris
Partner - Banking and finance disputes

Radford Goodman
Partner - Finance and insolvency disputes

Sam Eastwood
Partner - Business ethics and anti-corruption

Charles Evans
Partner - Regulatory enforcement

Dorian Drew
Partner - Regulatory enforcement

Susan Dingwall
Partner - Insurance and reinsurance