Earlier this month the High Court granted an application in part by the Property Alliance Group (PAG) for disclosure of any internal reports, reviews or summaries that set out the results of investigations into RBS’ LIBOR misconduct.
The case concerns a property developer (PAG) who entered into four interest rate swaps with RBS between 2004 and 2008 which employed three month GBP LIBOR as a reference rate. PAG allege that RBS made misrepresentations about GBP LIBOR in order to induce PAG to enter into the agreement. In its Defence RBS admitted misconduct in relation to Japanese Yen and Swiss Franc LIBOR but maintains that there was no misconduct in relation to GBP LIBOR, including three month GBP LIBOR.
Last November RBS was ordered to disclose any internal reports, reviews or summaries that set out the results of investigations into its LIBOR misconduct. While RBS carried out a search for such documents, it then objected to actually disclosing the documents on the grounds of privilege. RBS primarily objected to the disclosure of documents relating to the Deferred Prosecution Agreement (DPA) between themselves and the US Department of Justice; reports produced by RBS to the Japanese Financial Services Agency (JFSA) and communications between RBS and the UK Financial Services Authority (now the Financial Conduct Authority) which represent negotiations in connection with the FSA Final Notice.
The High Court did not allow RBS’ objections and ordered the disclosure of these documents.
In terms of the documents relating to the DPA and communications between RBS and the JFSA it was found that those documents were highly relevant to the current action and thus their relevance and the compelling public interest argument outweighed the possible, but highly unlikely prosecution in the US or sanction for breach of Japanese law.
In respect of the communication between RBS and the FSA, the bank was held to have waived privilege in those documents as a result of its reliance on the regulatory findings in its Defence. In that regards Birse, J held that RBS cannot seek to ‘have it both ways’ by relying on those documents in its Defence but refusing to disclose them in support of that.
The decision in respect of communication between RBS and the FSA clearly shows that you cannot have your cake and eat it. You cannot run a defence but then refuse to provide vouching for that defence. This case is a cautionary tale for anyone looking to run a defence on reliance on confidential or otherwise privileged documents.
These decisions are likely to impact financial services practitioners and their advisors with regard to their communications and negotiations with investigative bodies such as the FCA. Similarly, these decisions may also be significant for potential customers who are looking to bring claims against their banks in connection with complaints that are being investigated by regulatory bodies. These decisions may open up an avenue for potential claimants to get their hands on confidential documents which may assist to strengthen their claim of alleged misconduct by the bank.
It will remain to be seen whether the decisions in PAG’s case play a part in the increase of claims against banks for misconduct in connection with LIBOR or Forex manipulation.
If you have any queries arising from this article, please contact our Dispute Resolution team on 0131 226 8200.