The European version of a class-action lawsuit that resulted in $2.3bn of settlements in the US is being filed in London on Monday, as lawyers move to bring a civil case against five banks claiming that dealers manipulated foreign exchange markets and caused investors significant losses on currency trades.
The civil case comes after European competition authorities fined Barclays, Citigroup, Royal Bank of Scotland, JPMorgan and Japan’s MUFG a combined total of more than €1bn in May for manipulating currency rates, after a five-year probe. Allegations about various banks colluding to fix currency benchmarks and exchange rates first surfaced in 2013 and have since resulted in more than $12bn of fines from global regulators.
The lawsuit, which is likely to seek billions from the banks and is being brought by the same legal firm that led the US class-action case, Scott + Scott, is one of the few large court cases to have been brought under the Consumer Rights Act 2015 that allows US-style, class-action lawsuits to be pursued if there have been breaches of competition law.
The claim alleges that Barclays, Citibank, Royal Bank of Scotland, JPMorgan and UBS unlawfully manipulated the foreign exchange market prices between 2007 and 2013. While UBS avoided a fine from the European regulator in exchange for whistleblowing, the bank is not exempt from facing civil claims, said David Scott, managing partner of Scott + Scott.
As part of the settlement with European authorities, the banks acknowledged their participation in a cartel and their liability for it. The banks named in the new lawsuit have yet to comment on the case.
The lawsuit, which is being spearheaded by Michael O’Higgins, former chairman of the Pensions Regulator, allows UK resident investors and non-UK investors to join if they participated in institutional foreign exchange trading. Mr Scott said he could not put a figure on the compensation being sought from the five banks, but estimated that it would be in the billions given that the UK accounts for 37 per cent of the $5.1tn-a-day currencies market.
“The conduct has been pretty egregious,” he told the FT, adding that the lawsuit had been filed at the earliest opportunity after the European Commission findings. The litigation is being kept “very focused and very narrow”, he said. “We are fully prepared to go to trial and we have spent two to three years on this,” he added.
Amount secured from 15 banks as part of a US class-action lawsuit
Unlike the US, the UK does not have class-action lawsuits but the Consumer Rights Act legislation was introduced in 2015 to make it easier for companies to pursue financial compensation if antitrust law has been broken.
The regime permits collective actions on behalf of large groups where a representative can bring a lawsuit on behalf of a whole class of claimants — except those who actively choose to opt out of participating in the legal action. The claim is being funded by Therium, one of a new breed of litigation funders that provide financing for legal action in return for a slice of the eventual compensation.
In the US, Scott+Scott secured a settlement of $2.3bn from 15 banks as part of a class-action lawsuit. But some of the largest investors chose to opt out of the claim, fearing that the slice of damages they would receive would be underwhelming. Instead, a group of large investors including BlackRock filed a separate claim against 16 global banks in November last year, alleging that they rigged prices.
The global regulatory investigations into currency trading practices also led to criminal cases in the US, although the Department of Justice has been able to secure only one conviction, which was not directly connected to currency benchmarks and is pending appeal. Mr Scott said the outcome of former HSBC executive Mark Johnson’s appeal and the lack of criminal charges in Europe will have no bearing on the outcome of the case.
So far the biggest claim under the Consumer Rights Act has been the £14bn lawsuit brought against Mastercard by former Financial Ombudsman Walter Merricks who is leading the case on behalf of 46m British consumers for losses they claim to have suffered due to alleged illegal credit-card fees.