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RBS loses claims to privilege in LIBOR Rigging test case


Property Alliance Group Limited v the Royal Bank of Scotland Plc

Birss J has today handed down an important interlocutory judgment on disclosure and privilege in this test case brought by the Property Alliance Group. The case involves claims relating to LIBOR manipulation as well as the conduct of the notorious (and now disbanded) RBS Global Restructuring Group (GRG).

The LIBOR claims arise out of the revelations in February 2013 that RBS (along with a number of other banks) had been engaged in the manipulation and inter-bank coordination of LIBOR (the London Interbank Offered Rate). RBS has admitted misconduct in relation to the Japanese Yen and Swiss Franc LIBOR rates and has received substantial fines from a number of regulators, including the FSA (as it then was), the US Department of Justice, and the CFTC. However, there has to date been no public finding against RBS in relation to the manipulation of the GBP or USD LIBOR rates, which are the rates that are most commonly used in over the counter (OTC) and exchange traded derivatives contracts.

LIBOR-related disclosure has already been the subject of a number of earlier interlocutory judgments in this case: [2014] EWHC 4308, [2015] EWHC 321, and [2015] EWHC 322. Essentially, at a CMC in November 2014, Birss J ordered RBS to disclose any internal reports, reviews or summaries that set out the results of investigations into its LIBOR misconduct. RBS duly carried out a search for such documents, but objected to providing inspection and sought to assert privilege in a variety of different forms.

The categories of documents in relation to which RBS objected to providing inspection included the following:

  1. Documents relating to the work of its rate-setting investigation Executive Steering Group, in relation to which RBS asserted legal advice privilege ("the ESG Documents");
  2. Communications between RBS and the FSA in the period leading up the publication of the FSA Final Notice dated 6 February 2013, in relation to which RBS asserted without prejudice privilege ("the Without Prejudice Documents"); and
  3. Documents in relation to which RBS continued to assert legal advice privilege and litigation privilege despite the fact that they had been provided or shown to a number of regulators in the US and Japan ("the Non-Waiver Documents").

PAG challenged each of these claims to privilege and that challenge has been upheld by Birss J, who found that:

  1. RBS had failed to provide sufficient information about the role of the ESG and the documents over which privilege had been claimed in order to enable the Court to understand the basis on which legal advice privilege was asserted. The Court would therefore have to inspect the ESG Documents for itself in order to determine whether any of the claims were well made or whether it was possible for any of the documents to be provided in redacted form.  
  2. The subject of an FCA investigation has the right to withhold inspection of communications that were part of genuine settlement discussions between that firm and the FCA. That right arises by analogy with the without prejudice rule, and it is convenient to use that expression to refer to it, but it is not identical to the normal rule in civil litigation. However, in this case, RBS had positively relied on the regulatory findings in its Defence (and, in particular, on the absence of any findings of misconduct in relation to GBP or USD LIBOR) and, in these circumstances, it would be unjust for it to be able to withhold disclosure of the communications that led to the publication of those findings.
  3. RBS was entitled to maintain its claim to privilege in the documents that had been provided or shown to regulators, notwithstanding the fact that the regulators had extensive powers to use or publish those documents. Confidentiality and privilege in the documents would not be lost unless and until the regulators actually exercised their powers to use or publish the information in the documents. However, as with its communications with the FSA, RBS had waived privilege in these documents as a result of its reliance on the regulatory findings in its Defence: "RBS really cannot have it both ways. It cannot on the one hand rely on the absences from the regulators' findings as indicating the limits of its misconduct and yet on the other hand seek to maintain as privileged what it put to them."

The decision will be of interest to all those who have to consider making and challenging claims to privilege in the context of regulatory investigations and it appears to be the first occasion on which a court has had to consider whether communications with a regulator could ever be subject to without prejudice privilege. 

The trial is due to start in May 2016 and is expected to last 6-8 weeks.

The judgment is here.

Click here for link to The Lawyer article

Tim Lord QC and Kyle Lawson of Brick Court Chambers appeared for PAG, instructed by Cooke Young & Keidan.