A five minute roundup of upcoming cases and anticipated regulatory developments of interest to the Financial Services sector

On the Financial Services Horizon

Welcome to the fourth edition of our On the Financial Services Horizon newsletter – a regular update on upcoming cases and anticipated regulatory developments affecting the Financial Services sector.

Spring 2017

Cases to watch

  • National Bank Trust v Yurov – is the new owner of National Bank Trust, Otkritie Holding, entitled to US$830 million outstanding on non-performing loans which its former directors and shareholders allegedly concluded in breach of their duties to the bank? A nine week trial is due to start in the Commercial Court
  • RBS Rights Issue Litigation – trial on liability due to commence on 22 May
  • UBS AG (London Branch) and Anr v Kommunale Wasserwerke Leipzig GMBH and Ors – the bank is appealing a decision that it was not entitled to approximately $600m under a number of collateralised debt obligations which it had entered into with the defendant in 2006/7 and on which the defendant had defaulted in 2008. The bank was held liable under the law of agency for a bribe paid to the defendant by an intermediary despite the bank’s assertion that it knew nothing about the bribe. The appeal is due to start in the Court of Appeal on 12 or 15 May and should take at least two weeks

Regulatory developments

  • The European Union Financial Sanctions (Enhanced Penalties) Regulations 2017 SI 2017/560 in force from 2 May
  • The Bank for International Settlements’ FX Global Code is due to launch on 25 May. Both the FCA and the Bank of England have emphasised the importance of compliance with this code
  • The Bank of England’s consultation on establishing a Shari’ah compliant fund-based deposit facility closes on 23 May

Summer 2017

Cases to watch

  • African Export-Import Bank and Ors v Shebah Exploration & Production Company Limited and Ors – in this case a syndicate of lenders had used an industry model form facility agreement as the starting point for a complex loan agreement with a borrower. Should the terms be treated as the lenders’ standard terms of business so that the reasonableness test in the Unfair Contract Terms Act 1977 applied? Due in the Court of Appeal on 8 June
  • Canary Wharf Finance II PLC v Deutsche Trustee Company Limited and Ors – was a prepayment a mandatory prepayment or a voluntary prepayment under the terms and conditions of mortgage-backed debentures? Was a premium payable to the Noteholders as a result? Due to be heard by the Court of Appeal on 13 or 14 June
  • CGL Group Ltd v RBS and WW Property Investments Limited v National Westminster Bank – should claimants in two interest rate hedging product mis-selling claims be allowed to advance “Suremime” claims, i.e. should they be allowed to argue that by agreeing to FCA past business reviews the defendant banks owed them a direct common law duty of care in how they conducted such reviews? The Court of Appeal is due to hear both appeals on 20 or 21 June

Regulatory developments

  • FCA consultation on implementation of PSD2 ends 8 June. The FCA intends to publish a policy statement in Q3
  • The Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017 take effect on 26 June replacing entirely the current Money Laundering Regulations 2007. The new regulations implement MLD4 and the Fund Transfer Regulations
  • The Revised Wire Transfer Regulation (which is directly applicable in Member States of the EEA) will apply from 26 June. The regulation imposes further “know your customer” requirements for payment services providers
  • Member States must transpose the MiFID II Directive into national law by 3 July 2017
  • The FCA is inviting comments on proposals for new rules and guidance to address persistent credit card debt and to require credit card firms to assess whether customers are at risk of developing financial difficulties and to intervene appropriately. Comments must be submitted by 3 July

Judgments expected soon

  • Supreme Court – Lehman Brothers Limited (In Administration) v Lehman Brothers International (Europe) (In Administration) – the Lehman Brothers International (Europe) (LBIE) administration is unusual in that after providing for all debts proved in the administration there will be a large surplus. This has resulted in a number of applications seeking the courts’ directions on the priority in which the surplus should be distributed. One such application, known as Waterfall I, was heard by the Supreme Court in October last year and judgment is awaited. Amongst other issues, the court will decide whether certain subordinated debt payable by LBIE ranks ahead of claims to post insolvency interest and non-provable claims. Chris Parker of DLA Piper UK LLP acted for Lehman Brothers Limited
  • Taurus Petroleum Ltd v State Oil Company of the Ministry of Oil, Republic of Iraq – the Supreme Court will consider the jurisdiction to make a third party debt order/receivership order in respect of sums payable under letters of credit and where a debt under a letter of credit is situated. It will also decide, on the facts of the case, who the beneficiary was under the letters of credit. Heard by Supreme Court on 21 and 22 March 2017
  • Abdullah v Credit Suisse – mis-selling of structured products which were not suitable for the claimant’s investment objectives. Trial took place in the Commercial Court towards the end of March
  • Dexia Crediop SpA v Comune di Prato – an appeal against a decision that six interest rate swaps documented under ISDA standard forms were null and void because the bank failed to comply with mandatory Italian rules requiring it to give the defendant local authority written notification of its right to withdraw from each swap during a seven day cooling off period. Heard by the Court of Appeal on 8 May

If you are interested in any of the cases/topics highlighted in this publication, please let your usual DLA Piper contact know so that they can keep you informed about developments.

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