Court of Appeal Opens the Door to LIBOR and Benchmark Misrepresentation Claims
5 Pages Posted: 23 Apr 2018
Date Written: April 3, 2018
Abstract
Despite planning to phase it out by 2021 and replacing it with a proxy, the FCA calls the London Inter-bank Offered Rate (LIBOR) a “systemically important benchmark”. In the case of Property Alliance Group Ltd v The Royal Bank of Scotland Plc [2018] EWCA Civ 355 (02 March 2018), Etherton MR, Longmore and Newey LJJ considered the subject of LIBOR manipulation. These proceedings concerned a series of swaps that were sold to PAG by RBS. Notably, their Lordships held that in the present case there were lengthy discussions between PAG and RBS before the swaps were concluded. RBS was undoubtedly proposing the swap transactions with their reference to LIBOR as transactions which PAG could and should consider as fulfilment of the obligations contained in the loan contracts. In these circumstances the Court of Appeal was satisfied that RBS did make some representation to the effect that RBS itself was not manipulating and did not intend to manipulate LIBOR. They held that that RBS did impliedly represent that it was not manipulating and did not intend to manipulate sterling LIBOR. In addition to endorsing the logic in the case of Graiseley Properties – that the banks were representing that their own participation in the setting of the rate was an honest one – the outcome in this case marks a significant development and it shall undoubtedly steer future misrepresentation claims of this nature.
Keywords: Banking, Benchmarks, Conduct Costs, Contract, FCA, LIBOR, Litigation, Negligent Misstatement, Misrepresentation, Market Manipulation, RBS, Rescission, Swaps
Suggested Citation: Suggested Citation