UK banking and financial services: key litigation trends of 2020

A number of decisions from the English courts in 2020 illustrate the litigation trends that are likely to have implications for the financial services industry in 2021 and beyond.  

The coronavirus pandemic has yet to generate any significant volume of litigation in the English courts; however, it did see the first use of the Financial Markets Test Case scheme, with the Financial Conduct Authority using the procedure to seek legal clarity about the meaning and effect of certain business interruption policy wordings. Proceedings were started in June 2020 and, following a leapfrog appeal, the Supreme Court handed down its judgment in January 2021, just over seven months later. There was also a rare example of an English Court considering the scope and effect of a material adverse effect (MAE) clause in Travelport Ltd and others v WEX Inc ([2020] EWHC 2670), WEX having invoked a MAE clause in a share purchase agreement to pull out of $1.7bn acquisition. The Court found in favour of WEX on the main issues, holding that there are no special rules that apply when interpreting MAE clauses. We expect to see more disputes arising this year as a result of the pandemic, such as disputes concerning the close out of derivative contracts, and disputes arising out of lending or forbearance decisions.

Financial institutions may face an increased litigation risk from competition misconduct following the Supreme Court’s decision in Mastercard Incorporated and others v Walter Hugh Merricks CBE ([2020] UKSC 51) to remit Mr Merricks’ collective proceedings order (CPO) application to the Competition Appeal Tribunal (CAT) for reconsideration. The Supreme Court's decision in Merricks also means that a number of other collective proceedings in the CAT that were stayed pending that decision will now proceed to certification hearings, including two competing applications made to the CAT for a CPO in the foreign exchange litigation, which will be heard in July 2021.

Financial institutions continue to find themselves subject to wide-ranging orders to disclose documents and information; however, two cases serve to show that there are limits to the orders the Courts will make. In Burford Capital Ltd v London Stock Exchange ([2020] EWHC 1183 (Comm), the High Court refused Burford’s application for Norwich Pharmacal relief against the London Stock Exchange, where Burford was seeking to identify those involved in alleged unlawful market manipulation. In Lees v Lloyds Bank plc ([2020] EWHC 2249 (Ch)), the High Court gave helpful (albeit obiter) commentary that it could decline to exercise its discretion in favour of an individual who had made data subject access requests (DSARs), even if the data controller’s responses were inadequate, in circumstances where those DSARs were numerous, repetitive and made for a collateral purpose.   

The Quincecare duty continues to be a feature of English litigation following its re-emergence in Singularis Holdings Ltd (in official liquidation) v Daiwa Capital Markets Europe ([2019] UKSC 50), having been argued in both Stanford International Bank Ltd (in liquidation) v HSBC Bank plc ([2020] EWHC 2232 (Ch)) and Gareth Hamblin and another v World First Limited and another ([2020] EWHC 2383). The boundaries of privilege also continue to be tested in the courts, with cases too numerous to mention here. Perhaps the most notable decision was that of The Civil Aviation Authority v Jet2.com ([2020] EWCA Civ 35), where the Court of Appeal clarified that, when assessing if a communication or document is protected by legal advice privilege, a dominant purpose test must be applied. Finally, decisions in Lamesa Investments Limited v Cynergy Bank Limited ([2020] EWCA Civ 821) and Banco San Juan Internacional, Inc v Petroleos De Venezuela SA ([2020] EWHC 2937 (Comm)) provided an important reminder of the need for parties to allocate potential sanctions risks when drafting English law contracts.

Sarah Parkes and I provide more information on these trends in our article published in PLC Magazine on 28 January 2021.