High Court orders RBS LIBOR documents to be inspected and disclosed

15 June 2015
Author: JHA

The High Court has ordered the Royal Bank of Scotland (RBS) to hand over a number of documents relating to its communications with the Financial Conduct Authority (FCA) over alleged manipulation of LIBOR rates.

RBS had admitted misconduct in relation to other LIBOR currencies, but not in relation to pounds sterling. The claimant property developer argued that the bank had made misrepresentations to persuade it to enter into certain interest swaps. RBS argued that the FCA had found no misconduct on its part in connection with GBP LIBOR and refused to disclose documents produced by a special committee on grounds of legal advice privilege. RBS also argued that certain communications with the FCA were protected by without prejudice privilege.

Birss J held as follows:
Property Alliance Group v Royal Bank of Scotland Plc [2015] EWHC 1557 (Ch)

  • The special committee had not been set up exclusively for the provision of legal advice, as demonstrated by RBS’ skeleton argument: the committee was characterised as “formed … to oversee the investigations and potential litigation concerning LIBOR”. So not all documents produced by the committee were privileged. RBS had not explained the basis on which its claim to legal advice privilege was made. The said documents should therefore be handed over to the court for inspection.
  • A firm which was the subject of an FCA investigation had the right to withhold inspection of communications which were part of genuine settlement discussions with the FCA. That right applied in civil litigation with a third party. The fact that a Final Notice was issued did not mean that the right was lost. The right arose by analogy with the without prejudice rule. It could not be maintained in civil proceedings if the basis on which a Final Notice had been decided was itself in issue in the proceedings. In such a case the content of the settlement discussions would be admissible evidence. Here, the Final Notice did not make a finding of misconduct relating to GBP LIBOR; this however did not exonerate RBS. The Final Notice was the product of a settlement agreement. It was not the product of a full statutory process of investigation and decision making. The communications on which the agreement was based might have been incomplete, mistaken or misleading. RBS could not rely on what was absent from the Final Notice yet at the same time withhold inspection of those communications. The documents would therefore be inspected by the court.
  • RBS could maintain the claim to privilege of documents which were only shown to regulators on a limited basis and despite the existence of legal rights or duties on the part of the regulators to use, act on or publish the documents pursuant to their regulatory powers. However, RBS could not rely on absences from those regulators’ findings as indicating the limits of its misconduct and still seek to maintain as privileged the information put to them. Consequently, those documents would also be inspected by the court.
JHA in the Media | High Court | | Financial Conduct Authority | | Interest Swaps | | LIBOR | | Royal Bank of Scotland |

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