RBS has suffered a substantial blow following the High Court’s decision on three applications (the “Applications”) made by Property Alliance Group (“PAG”) in its claim against RBS for the mis-sale of various interest rate hedging products (“IRHPs”).

The judgments in the Applications are very encouraging for any party considering a mis-selling claim against a bank implicated in the LIBOR manipulation scandal.

Banks are, understandably, extremely reluctant to have compromising documents disclosed to Claimants and considered in open court. The prospect of senior executives being cross-examined in court about their knowledge of individual traders’ and rate-setters’ activities is not a prospect that any bank is likely to relish. Such concerns are said to have played a significant part in Barclays’ decision to settle the claim brought against it by Graiseley Properties, which included a claim for rescission of the various IRHPs it had entered on the basis that it was induced to do so by the bank’s representation that LIBOR was true LIBOR, not manipulated LIBOR. Since that settlement, and the helpful recent decision of the High Court on the PAG Applications (discussed in greater detail below), companies bringing, or considering bringing, claims against banks in relation to IRHP mis-selling would be well-advised to consider the potential availability of a claim based on LIBOR manipulation.


PAG, a property developer with a portfolio worth about £200 million, is pursuing a claim against RBS alleging (1) that it was induced to enter into various IRHPs by misrepresentations made by RBS in relation to the setting of LIBOR and (2) that the IRHPs themselves contain implied terms in connection with RBS’ conduct relating to LIBOR. These IRHPs all used 3 month GBP LIBOR as a reference rate.

This argument (the “LIBOR Argument”) was also run by the claimant in Graiseley v Barclays plc, another claim against a bank for IRHP mis-selling. The case settled before substantive judgment on the merits was handed down, reportedly for a figure of circa £40m.


The judge in the PAG proceedings, Mr Justice Birss, had already decided at a hearing in November 2014 that RBS should provide full standard disclosure. However, due to the large number of documents such a review would encompass, it was suggested that the scope of LIBOR-related disclosure be restricted to internal reports, reviews and summaries relating to the LIBOR misconduct allegations, as these would reveal which currencies should be the focus of disclosure.

RBS provided a disclosure list to PAG dated 12 January 2015, purportedly in line with the directions given by Birss J in November 2014. However, RBS refused inspection of most of these documents for various reasons. It is this refusal that forms the crux of the Applications on which the Court has now given judgment.

First Application: The US department of Justice (the “DoJ”) application ([2015] EWHC 321 (Ch))

RBS was subject to a Deferred Prosecution Agreement (“DPA”) with the DoJ resulting from its involvement in the LIBOR rigging scandal. An attachment to the DPA provided a list of other benchmark rates which were the subject of ongoing investigation by the DoJ. It was considered that this list would be of real significance to the PAG case, and would be likely to assist the court and the parties in focussing future disclosure exercises.

However, RBS argued that it was obliged to resist inspection of the attachment pursuant to the obligations of confidence it owed to the DoJ under the DPA. Furthermore, the bank argued that to allow inspection would put it at risk of being in criminal contempt of an order of a US judge that the attachment be kept under seal (i.e. inaccessible to all but the US court, the parties and their advisors).

Birss J found against RBS, requiring it to produce the document for inspection within four weeks (to allow time for RBS to apply to the US court for clarity on the issue of contempt if it so wished), putting significant emphasis on the potential importance of the document to the matters at issue in the overarching litigation. By way of compromise, he ordered that the document should be protected from discussion in open court without permission, pursuant to CPR 31.22(1), and was of the view that this would be enough to appease any concerns of confidentiality, and those of the US courts. However, he was quick to note that the CPR 31.22(1) restriction would have to be considered further when the case approaches trial, and that he regards it likely that wider publicity would prevail in those circumstances if the document did indeed transpire to be pertinent to the issues at hand.

Second Application: The Japanese regulator application ([2015] EWHC 322)

This hearing is analogous in many ways with that involving the DoJ, except in this instance the documents of which PAG sought inspection were five reports produced by RBS to the Japanese Financial Services Agency (“JFSA”). Although the hearing was originally held in private, in line with a request from the JFSA, upon conclusion Birrs J found that there was no good reason why the judgment should remain so.

RBS objected to inspection of the reports because the JFSA had itself objected to inspection, on the grounds that to do so would be detrimental to the regulation of financial services in Japan. RBS further argued that if it were to contravene the JFSA’s wishes in this respect, it would be in conflict with Japanese law.

Birrs J did not find RBS’ arguments persuasive, and ordered it to produce the reports for inspection (with a similar four week delay to allow an application to the Japanese courts if RBS so wished). He relied again upon the potential high relevance of the documents to the matters at hand, inferring that they are reports which address manipulation or alleged manipulation of LIBOR by RBS staff.

Third Application: The “privilege” argument application ([2015] EWHC 1557)

RBS also refused inspection of various groups of documents on the basis of privilege, as set out below.

  1. Legal advice privilege in relation to documents relating to the Executive Steering Group (RBS’ rate-setting investigation committee, much of whose work was carried out by RBS’ external legal advisers, Clifford Chance).
  2. Without prejudice privilege in relation to communications between RBS and the FSA in the period leading up to the publication of the FSA Final Notice dated 6 February 2013.
  3. Non-waived legal advice privilege and litigation privilege in relation to certain documents, despite the fact that these documents had been provided or shown to regulators in the US and Japan.

Birrs J upheld PAG’s attacks on each of these groups of documents.

In relation to the ESG-related documents, RBS had not provided sufficient information about the role of the ESG or the documents over which it asserted privilege. The court was unable to understand the basis upon which privilege was claimed. Birrs J therefore considered that the best approach was for there to be inspection of the documents by the court, to assess the merits of RBS’ privilege assertions.

In an interesting finding of law (on a point it appears the court has not had to consider before) Birrs J found that generally a party who is investigated by the FCA has the right to withhold documents on a similar basis to ‘without prejudice’ privilege where the communications in question were part of genuine settlement discussions. The fact that RBS had positively relied on the regulatory findings in its Defence however (in stating that there had been no regulatory findings of misconduct on the part of RBS in connection with GBP LIBOR) meant that it would be unjust to allow it to rely on this right to withhold disclosure of the communications that led to the publication of those findings. For example, those communications might explain why there were no GBP LIBOR findings in the Final Notice.

In relation to RBS’ non-waiver argument, Birss J found that generally, despite the relevant regulators’ extensive powers to use and even publish the documents that RBS had provided to them, confidentiality and privilege in those documents would not be lost unless the regulators actually acted upon these powers. However, in the circumstances Birrs J again referred to RBS’ reliance on the regulatory findings in its Defence and said that it could not have it both ways. RBS could not be allowed to rely on the absences from the regulators’ findings as indicating the limits of its misconduct whilst on the other hand seeking to maintain as privileged what it put to those regulators.


The above judgments signal significant progress for claimants seeking to establish actionable wrongdoing off the back of LIBOR manipulation, in the context of IRHP mis-selling and more generally.

In particular, a defendant bank will not necessarily be able to hide behind confidential agreements with regulators to avoid disclosure of LIBOR related material in claims brought against it. Neither will the risk of prosecution in foreign courts, for disclosing documents that a foreign court had ordered to be kept confidential, necessarily provide the banks with a shield.

This is good news for any claimant bringing a LIBOR-based claim. As a result of these decisions, such a claimant ought to be much better placed to properly evidence their claim, and, assuming the documents support such a claim, it will apply significant pressure on the defendant bank to advance settlement proposals sooner rather than later.

The banks can find some solace in the fact that, under normal circumstances, settlement discussions with a regulator will be protected by a doctrine analogous to without prejudice privilege, and that privilege in other documents will not be lost by handing them over to regulators. However, they should be wary of relying positively upon these communications (or indeed any issue to which these communications would be pertinent) in a Defence.

The latest developments in the PAG litigation have added strings to the bow of the LIBOR Argument. Although we will have to wait until the case goes to trial in May 2016 to see the LIBOR Argument’s full force, in the meantime claimants should be encouraged in its deployment where the defendant bank has been caught up in the LIBOR manipulation scandal.

News arrow-right-alt