Court of Appeal revives £2.7bn FX litigation in boost to UK collective action regime

Appellate court overrules Competition Appeal Tribunal by approving class on opt-out basis
The High Court in London

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The Court of Appeal has resurrected a £2.7bn class action against six investment banks, including Barclays, NatWest and JPMorgan, for alleged foreign exchange (FX) manipulation. 

In a unanimous ruling handed down by Lord Justice Green, the Court of Appeal allowed proceedings brought by Philip Evans, represented by Hausfeld, to go ahead on an ‘opt-out’ basis, overturning an earlier ruling by the Competition Appeal Tribunal (CAT) to limit the claims to an ‘opt-in’ basis. 

Legal commentators agreed the ruling provides the UK’s collective action regime with a major boost, sending an important signal to the CAT on where it should set the threshold for opt-out cases, which are much easier to pursue than those approved on an opt-in basis.

Evans’s claim was also preferred to that of Michael O’Higgins, represented by Scott+Scott, as a lead representative, confirming the CAT’s narrow decision in favour of the Evans’s claim. 

Both sets of litigation followed well-publicised cartels in FX spot trading, reported to UK and EU regulators, which led to fines for the six banks of more than €1bn. 

The CAT had previously declined to certify the claims on an opt-out basis, with Mr. Justice Marcus Smith expressing concerns over the strength of the claims in a split decision. It allowed the Evans claim to proceed as lead claimants.

On the main issues – the CAT’s decision on the assessment of the merits, whether to opt-in or opt-out, and selecting an appropriate class representative – the Court of Appeal found for the claimants.

Green found the CAT was wrong in law to have chosen opt-in proceedings, a decision which would have effectively ended the litigation. While this was “a difficult and finely balanced judgment call”, Green said, “the CAT erred in adopting an overly strict approach to the evidence needed to establish a viable case on causation”.

In the absence of evidence from the banks and following a subsequent European Commission infringement decision which post-dated the CAT’s judgment and provided more information about the banks’ misconduct, the case should proceed.

He added: “[The CAT] was wrong to treat a necessarily provisional view as definitive and accord it more or less decisive weight in the scales against opt-out, knowing and intending that this would bring the claim to an end.”

As for who should be lead claimants, the CAT had found there “was virtually nothing between the two candidates but… the Evans team won, just”. The Court of Appeal backed this judgment, given that the CAT was “the expert in how proceedings play out at the nuts-and-bolts level”. 

Commenting on the judgment, Evans said: “The ruling acknowledges the practical difficulties of opt-in legal proceedings and confirms the access to justice principle which underpins the collective action regime. The opt-out approach is crucial to ensure that claims may be pursued on behalf of all affected individuals and businesses.”

Hausfeld’s global co-chair, Anthony Maton, added: “A judgment of this nature was required for all those UK businesses – big and small – who have suffered a loss due to the manipulation of the FX markets to achieve restitution.”

Through his solicitors, O’Higgins welcomed the ruling on opt-out proceedings but was “disappointed that it will be on behalf of a narrower class”, saying “as a result, many will lose out”. Both he and his lawyers were considering their next steps. The O’Higgins claim was supported by Therium, the litigation funder. 

Henry Warwick KC, of Henderson Chambers, said the ruling made it clear it was wrong to prefer certification on an opt-in basis where it would be impracticable on the evidence, which was particularly important in cases where insufficient take-up for an opt-in collective action means that a claim would not be viable.

Robin Henry, head of disputes at Collyer Bristow, agreed: “The practical effect is that [claims] will now have the critical mass to proceed, with thousands of claimants benefiting if the claims are successful, even if they have not actively taken steps to participate.”

The judgment in the FX Cartel case was handed down alongside a ruling in the Trucks Cartel litigation, in which the Chancellor, Sir Julian Flaux, confirmed a CAT decision allowing it to proceed on an opt-in basis. The same tribunal – including Green – sat in both cases. 

Former Law Society president, David Greene, the co-chair of the Collective Redress Lawyers Association, said: “The Court of Appeal, perhaps under the influence of competition specialist, Sir Nicholas Green, is setting the purposive tone for the CAT’s role as gatekeeper for [collective proceedings] as it has previously.”

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