It is often difficult to identify common themes arising from judgments that happen to be handed down at the same time, and the first half of 2016 has proved no exception. There have, however, been some interesting judgments in relation to agreements concluded on standard terms, both ISDA and LMA, and these are likely to be of use to those using these documents in future. The judgment of the Court of Appeal in Goldman Sachs International v. Videocon is of particular interest. There are also cases (LSREF III Wight and Hayfin) shedding light on more general principles of contractual construction.
Disputes involving derivatives contracts with quasi-public bodies continue to make for interesting case law. On this occasion, the court has considered again (in Banco Santander Totta) the provisions of the Rome Convention in relation to the applicability of mandatory rules of the law of another jurisdiction, and has come to a conclusion which seems to contradict a judgment we summarised in the last edition of this Update.
There have been developments in various different cases involving litigation relating to interest rate hedging products. Two judgments (Holmcroft and CGL) have (for different reasons) apparently despatched the possibility of claims being made for damages on the basis of the way in which banks have conducted their reviews of past sales. In addition, the Court of Appeal has reversed a first instance decision in the Deutsche Bank v. Unitech litigation, which would have precluded Deutsche Bank from receiving payment before trial of a substantial sum that it would be owed regardless of the outcome of the proceedings.
The SMR and parts of the certification regime were implemented during this period, but this has created few further waves over the first half of the year.
We have seen, however, further movement in relation to another major project for banks, in the form of publication of the PRA's and the FCA's approach documents in relation to ring-fencing transfer schemes. It seems likely that there will be a number of difficult practical issues to overcome for all concerned in seeking to have such schemes approved, as well as the inherent difficulty of designing a ring-fenced structure. We believe that the role of the skilled person, for example, will require a careful approach.
The final report of the Financial Advice Markets Review was also published, and it appears to acknowledge genuine difficulties in ensuring the provision of affordable, accessible financial advice to all who need it. Many of the issues raised in the report are unlikely to be quickly solved, and this is likely to be something of a long-term project for the FCA and others.
Less tangibly, there have been recurrent appearances of accountability and enforcement as themes. As well as final notices in individual enforcement cases (some of which are interesting), there have been developments in relation to the FCA's own likely approach to enforcement, settlement and its view on specific conduct issues.
What to watch out for
The second half of the year is likely to see the handing down of judgment in several key cases to which we have referred in earlier editions of this Update:
- The trial of the claims by Property Alliance Group against RBS (which include claims relating to alleged misrepresentations in relation to LIBOR) started in late May and is ongoing, but judgment is expected in the second half of 2016.
- The trial of the Libyan Investment Authority's claims against Goldman Sachs for undue influence in respect of equity derivatives entered into by the sovereign wealth fund began in June, and judgment is likely to be handed down by the end of the year.
- The appeal in Deutsche Trustee Company Limited v. Cheyne Capital Management (in relation to issues of construction in a CMBS transaction) was due to be heard in May, and judgment is therefore likely to be handed down over the coming months.
In addition, the appeal in the litigation involving Taberna and the failed Danish bank, Roskilde, is expected to take place in November, and is likely to be significant in the context of the purchase of notes in the secondary market (we considered the first instance decision in an earlier edition of this Update).
Regulatory and other developments
Many of the publications from the first half of the year are likely to have some consequence in the second. Banks will be starting to consider the PRA's and the FCA's approaches to ring-fencing transfer schemes, and working with appointees or potential appointees as skilled persons.
The FCA is likely to publish its revised rules in relation to enforcement, following its consultation in relation to the implementation of high-profile recommendations for changes. Such revised rules may overhaul practice in relation to settlement of enforcement cases in particular, and it is likely that the FCA's role in this regard will also remain subject to scrutiny from parliament in particular.
The implementation of the SMR, certification regime and conduct rules is far from complete, and some key further publications are awaited. The regulators' proposed approach to the duty of responsibility has not been set out, but is likely to follow the enactment of the necessary primary legislation. There are also likely to be conduct rules for non-executive directors not subject to the SMR. In addition, the FCA has promised to clarify whether or not it expects those with overall responsibility for the legal function within banks to be approved as performing a controlled function. There are likely to be other teething problems with the new regime to resolve, and the regulators and HM Treasury will also need to have an eye to the promised roll-out of the SMR to other regulated firms.
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