* Suits harder and costlier to win in Britain
* 2010 U.S. Supreme Court ruling crimped legal tourism
By Chris Vellacott
LONDON, July 13 (Reuters) – Barclays Plc and other
UK banks may escape lighter than their U.S. rivals if
shareholders seek damages in the wake of an interest
rate-rigging scandal, because such cases are costlier and harder
to win in Britain.
Cases pursued in America by investors alleging they suffered
a loss because of the wrongdoing of a financial institution,
will often be deemed ineligible to be heard in U.S. courts when
the bank in question is foreign, legal experts said.
But if investors opt to take their cases to UK courts, they
will find Britain’s legal structures make such claims harder to
win, costlier and riskier.
“Would we like to sue Barclays in the New York courts we
know well and we’re very good at prosecuting in? Sure. But we’re
not going to because this is a UK situation,” said Dominic Auld,
a litigation expert at U.S. law firm Labaton Sucharow.
Since Barclays admitted its role in manipulating the London
interbank offered rate (Libor), lawyers on both sides of the
Atlantic are taking calls from investors.
“I did take a call this morning from an institutional
investor who is interested in looking at litigation both from a
UK perspective and the U.S … I expect there will be a good
deal of similar interest,” said Owen Watkins, a barrister in the
corporate department of London law firm Lewis Silkin.
More than a dozen banks are being investigated for their
roles in setting Libor, including Citigroup, JPMorgan
Chase & Co, Deutsche Bank, HSBC Holdings Plc
, UBS and Royal Bank of Scotland..
Morgan Stanley analysts have calculated the litigation risk
to each of the 16 banks involved in setting Libor, an estimate
of the rate at which banks could lend to each other and a
benchmark for setting many other types of loans, at between $60
million to $1.1 billion.
But lawyers say that while it was once commonplace for
European investors to issue proceedings in the States, this
transatlantic “legal tourism” was brought to an effective end in
2010 by a Supreme Court ruling in the United States.
In a case brought against National Australia Bank, the court
ruled U.S. securities laws do not have jurisdiction over
so-called “F cubed” cases involving foreign investors and a
foreign company traded on a non-U.S. market.
In the case of Barclays, only about 4 percent of its market
capitalisation is traded in the U.S. in the form of American
Depository Receipts. Any pursuit of meaningful damages from
investment losses related to falls in Barclays’ share price
caused by the scandal will have to be carried out in Britain.
“Bringing proceedings here is not easy because there are
various questions about causation. But most importantly Barclays
would fight hard and you take a substantial risk in relation to
costs that you would have to pay if you lost,” said David
Greene, senior partner at London-based law firm Edwin Coe.
Furthermore, proceedings by institutional investors are rare
and run against the traditions of the City of London financial
district which had in part prompted disgruntled investors to
make claims in the United States until it was halted by the
F-cubed ruling.
“I don’t think that sort of thing would be held in a UK
court. I think they would just say the nature of the capital
markets is shares go down as well as up. It’s the guiding
principle here,” said one institutional investor who declined to
be named because he is a major Barclays shareholder.
