More recent developments in the English courts have confirmed that companies who were adversely affected by LIBOR and EURIBOR manipulation may be entitled to bring claims to recover their losses. We summarise these ongoing developments below and explain how such claims may be brought.

Background—LIBOR manipulation

The LIBOR scandal involved certain London Interbank Offered Rates ("LIBOR") and Euro Interbank Offered Rate ("EURIBOR"). Several banks, including Barclays Bank Plc, Royal Bank of Scotland, Deutsche Bank, UBS AG and J.P.Morgan, were sanctioned for seeking to manipulate LIBOR and EURIBOR rates between 2005 and 2010.

They have been fined by law enforcement agencies worldwide, including the US Department of Justice, the UK Financial Conduct Authority and the European Commission.

Civil claims in England & Wales

Companies that entered into interest rate swaps with banks involved in LIBOR manipulation have brought claims against banks in the English courts.

"...our markets rely upon the integrity of benchmark interest rates like LIBOR and Euribor because they form the basis for hundreds of trillions of dollars of transactions and affect nearly every corner of the global economy."
David Meister, former Enforcement Director, Commodity Futures Trading Commission

In a leading decision last year, the Court of Appeal confirmed in Graiseley Properties Limited & Others v Barclays Bank plc that the claimants were entitled to plead that Barclays had made implied representations to them relating to the accuracy of LIBOR and had breached these representations. The claimants sought to rescind the affected interest rate swap agreements, which would entitle them to recover all of the payments that were made under the swaps.

A similar claim by Unitech against Deutsche Bank is due to proceed to trial later this year.

The Graiseley and Unitech cases potentially open the door to claims against banks for breaches of representations made (implied or otherwise) when it comes to the application of LIBOR and EURIBOR rates.

Key points:

Following the Graiseley Court of Appeal decision, companies that entered into contracts with banks which involved LIBOR or EURIBOR rates may be able to bring claims against them on the following basis:

  • The contract was entered into between 2005 and 2010, when LIBOR manipulation was taking place. However, a more cautious approach needs to be adopted for contracts entered into before 2008 because of time limitation rules;

  • Examples of contracts that are likely to have been affected include floating rate notes, interest rate swaps or options, asset swaps, collateralized debt obligations, credit default swaps, inflation swaps and total returns swaps;

  • In order for the English courts to take jurisdiction, the claimant must have entered into a transaction with a UK-domiciled LIBOR/EURIBOR panel bank which was involved in the benchmark manipulation or the harmful event or damage caused by the transaction must have occurred in England; and

  • If it is established that the bank knowingly breached an implied misrepresentation and did so fraudulently then the claimant is entitled to rescind the transaction, giving it a right to be put back into the position it would have been in before the transaction was entered into. This means it would be entitled to recover all of the payments that were made under the contract.

Originally published in July 2014

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.