A look to the future with Jeffrey Golden of P.R.I.M.E. Finance and Emma Giddings of Norton Rose Fulbright

We spoke with Professor Jeffrey Golden and Emma Giddings about interesting recent and forthcoming cases in the banking and finance world and asked them for their views on likely developments in the banking and finance sector over the next 12 months.

How do you see the sector developing in the next 12 months?

Professor Jeffrey Golden (JG): My focus is really more specialised these days, and I am most interested in developments relating to dispute settlement in the financial markets, an area which I think has been too neglected for too long. For example, we have dedicated huge amounts of time and other resources to the reform of financial market regulation, and compliance with the same, for a very long period now. All this is important, but it is in the nature of 'preventive medicine'. By analogy, courts and arbitration tribunals are our 'hospitals'. Yet the issue of how best to ensure that these are adequately resourced and equipped too often gets short shrift. For a number of us, that seems a dangerous mistake, and the specialist panel that PRIME Finance represents (more than 100 market and legal experts with more than 3,000 years of relevant experience), committed as it is to enhancing the effectiveness of dispute settlement for complex product cases and other financial market disputes, reflects an innovative response and an effort to redress that balance.

Emma Giddings (EG): There is a vast amount of new regulation in the banking sector in the aftermath of the financial crisis--notably EU and US legislation. We will continue to see the impact of banking reform and recovery and resolution, benchmark reform, the continuing application and development of Basel III (CRD IV and CRR), derivatives reforms and restrictions on proprietary trading. Other interesting developments include the increased regulatory scrutiny of the shadow banking sector. These issues are truly global in scope so we coordinate with colleagues in our offices around the world to track developments and assist our clients in analysing and addressing the impact of these reforms.

What are the common challenges you're facing in your daily practice?

EG:  As is always the case, legal developments affecting our clients such as those I have mentioned above will dictate the focus of our banking and finance practice over the next year and our recent global growth presents us with a unique ability to examine those issues from a global perspective.

What are the upcoming developments you're most interested in?

EG: I have a particular interest in monitoring the development of benchmark reform. It will be interesting to see what further changes are made to survey based rates such as LIBOR to address concerns that they are not sufficiently anchored in real transaction data (bearing in mind the desire not to adversely impact the vast amount of existing transactions which use LIBOR as a benchmark) and also how the proposed EU regulation on financial benchmarks will develop.

What do you think is the most important/interesting case of the year thus far?

JG: You would be forgiven if you missed what I believe to be one of the more interesting case decisions of the year so far. The case, Greenclose Ltd v National Westminster Bank Plc [2014] EWHC 1156 (Ch), [2014] All ER (D) 127 (Apr), was decided last month (April) and involved a dispute about what constituted good notice under an ISDA Master Agreement. Now that may sound like a very technical issue, and one of secondary importance--especially where, as here, the case was very fact specific, the bank/customer relationship relatively mid-market and the amount in dispute much smaller than we have seen in many other reported cases from the derivatives market.

However, what I found most telling about this case were comments by the judge, Mrs Justice Andrews DBE (who by the way I think reached a right result), that:

  •  it was a shame that ISDA itself had not made submissions and the fact that there has also been no expert testimony was unfortunate, and
  • it was relevant that, given that the parties' ISDA Master was a version of a standard form used throughout the world, 'the way in which I determine the issues of construction is bound to have ramifications beyond this case'

The spirit of these remarks seems to accord with a phenomenon that a number of industry commentators, including myself, have observed, namely, that because of standardisation often parties outside an ISDA dispute may have a greater interest in the outcome of the case (at least collectively) than the parties which are litigating the matter. Increasingly, we are seeing judges like Andrews J acknowledging this wider interest in ISDA cases and seeking to construe the contract accordingly and by reference to market expectations. They are also quick to acknowledge the considerable history to the documentation and the markets interest in legal certainty, and perhaps as a result seem to be putting a premium on specialised and expert knowledge where it is available.

EG: Torre Asset Funding Ltd v Royal Bank of Scotland Plc [2013] EWHC 2670 (Ch), [2013] All ER (D) 27 (Sep) was a case decided late last year but interesting for a number of reasons, notably its examination of the role of the agent bank in financings adopting LMA style agency provisions. Understanding the risks and responsibilities of the agency function is a topic of real concern for banks and this case provided some useful guidance on the issue.

More recently, I found the decision of the Court of Appeal (confirming the earlier decision of the High Court) in Barclays Bank plc v Unicredit Bank AG [2014] EWCA Civ 302, [2014] All ER (D) 203 (Mar) interesting. Documents are often peppered with references to 'reasonableness'--usually in an attempt to introduce an element of objectivity to the exercise of a discretion by one of the parties. This case may lead parties to re-examine what they expect to achieve by the inclusion of such language.

Are there any upcoming cases you're particularly interested in?

JG: Looking ahead, I will be watching closely, like many others, the cases coming up that will focus on alleged LIBOR and other market rate rigging. Here again it is difficult to ignore both a widespread market interest in outcome and the challenge of ensuring the requisite experience and technical competence to sift through the facts and make informed and correct decisions.

Gillian Tett, writing in the Financial Times a year after the Lehman collapse, questioned whether it would be difficult to get convictions for wrong doing in the financial markets in such cases because of the complexity of the subject matter and because of uneven knowledge in the courts and among prosecutors about finance. In the civil cases as well, there are still a number of Lehman and other post-financial crisis cases where the courts must contend with a lot of history and specialised market practice, and where, because of standard terms, the market will hold its breath since widespread usage of the same terms will amplify a court's mistake in deciding a term's proper meaning, which mistake could then travel like wildfire around the global marketplace. Let's hope the judges, arbitrators and possibly juries deciding these cases get them right!

EG: I will also be interested in the alleged LIBOR and market rigging cases. It will be interesting to see if and how those cases will influence policy makers in their attempts to further regulate LIBOR and other benchmarks.

First published on LexisPSL Banking & Finance. Click here for a free trial.

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