Law change could help schemes sue banks over FX and Libor scandals
The introduction of US-style class actions in the UK next month could enable schemes to seek damages collectively from bank manipulation of Libor and foreign exchange (FX).
The Consumer Rights Act 2015 which applies from October will allow opt-out or opt-in class actions where there have been breaches of competition law. The FX and Libor scandals could fall under this definition, potentially leading to a flood of class actions in the UK courts.
US class actions where claimants opt-out do not exist in the UK which only allows group action litigation which is opt-in and involves a collection of individuals with similar claims. When opt-out class actions are allowed from October, they will only apply to UK-domiciled claimants while those domiciled abroad must specifically opt-in.
There is reportedly already some interest from UK schemes at bringing forward claims against the banks over the FX manipulation.
Losses could run into millions of pounds, especially as pension funds and firms that manage their assets use the FX markets on a regular basis to balance their portfolios. Suing over FX will be challenging for schemes as they would need to look at the merits of their FX trades, which counterparties they used, as well as calculating potential losses.
Being able to join big class actions would make it easier for schemes to sue.
RPC partner Simon Hart believes that such class actions would probably suit small rather than large pension funds.
"If schemes have just suffered a small loss they may want to join a group of like-minded claimants. But if it's a big pension fund and involves FX rigging for example, the losses are potentially very significant, and there isn't a huge amount of attraction to join a large US-style class action. They may as well keep control and bring forward their own action on their own terms."
It is hoped the recent guilty pleas from several banks and subsequent fines running into billions of dollars will also make it easier for pension funds to sue.
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