November 8, 2013 2:54 pm

Barclays and Deutsche Bank to face Libor claims in civil cases

Barclays and Deutsche Bank face new private litigation threats stemming from the Libor scandal, after the UK Court of Appeal ruled that two companies could include rate manipulation allegations in their lawsuits over derivatives deals.

In the closely watched Guardian Care Homes case, the appeals court upheld an earlier decision that allowed the care homes group to amend its claim against Barclays over interest rate swaps to include the manipulation issue.

The Court of Appeal also overturned a separate decision by another judge that prevented Unitech, an Indian company, from including Libor manipulation in its swaps claims against Deutsche.

Barclays paid £290m last year to settle with US and UK regulators over Libor rate-rigging. Deutsche Bank is under investigation in the same global probe but has not been charged with wrongdoing.

Both banks participated in the Libor rate-setting panels at the time they sold Libor-linked swaps to their customers. As a result, the appeals court concluded that the businesses could include rate-rigging allegations in their claims.

“In the present case, however, the banks did propose the use of Libor and it must be arguable that, at the very least, they were representing that their own participation in the setting of the rate was an honest one. It is, to my mind, surprising that the banks do not appear to be prepared to accept that even that limited proposition is arguable,” Lord Justice Longmore said in his ruling.

Deutsche Bank said in a statement: “We are disappointed by the court’s ruling, which we will appeal.

In depth

Libor scandal

Analysis BIG PAGE Libor pfeatures

Regulators across the globe probe alleged manipulation by US and European banks of the London interbank offered rate and other key benchmark lending rates

“This is a longstanding case of a loan that was made and not paid back. The defendant’s introduction of broad and unsupported allegations about Libor is a bid to delay payment and divert attention from its unpaid debts, which we will continue to vigorously pursue.”

Barclays said in a statement: “The Court of Appeal’s decision resolves two conflicting legal judgments. With or without the Libor claims, the allegations of mis-selling have no merit.

“Graiseley [the owners of Guardian] had a suite of advisers and a lot of financial experience and skill in-house. They entered into their swap agreements with sufficient understanding to exercise their own judgment as to whether the products would meet their business objectives. Graiseley is a significant business and owes Barclays £70m.”

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