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FX investors move nearer to potential trial

Investors damaged by the unlawful rigging of foreign exchange markets between 2007 and 2013 have made significant progress towards recompense, following a ruling on a claim brought to the Competition Appeal Tribunal (CAT) by former UK pensions regulator Michael O’Higgins.

O’Higgins filed the action last July against Barclays, Citibank, Royal Bank of Scotland (RBS), JPMorgan and UBS. The action was brought by Michael O’Higgins FX Class Representative Limited, a company he set up specifically for that purpose, and is being financed by third-party litigation funder Therium Capital Management.

The banks were fined more than €1bn by the European Commission (EC) in May for violating EU competition law by exchanging commercially sensitive information and trading plans for foreign exchange deals, co-ordinating their trading strategies via two cartels, the so-called “Three-way Banana Split” and “Essex Express”.

But while the companies have admitted responsibility, investors who were affected have not been compensated, and this “follow-on action”, under the Consumer Rights Act 2015 (CRA), is intended to seek civil redress.

At a CAT case management conference earlier this month, Mr Justice Marcus Smith set out a timetable for activity and also made it clear that the class action would not be delayed until after a similar case, “Merricks”, has been heard by the Supreme Court next May.

The Merricks class action, one of the first brought under the CRA, was filed by Walter Merricks, a former financial services ombudsman, on behalf of millions of consumers who made purchases on Mastercard between 1992 and 2008. The action seeks compensation for unfair interchange fees paid by consumers on credit card transactions.

The CAT refused to certify the class on the grounds that financial loss could not be determined for each individual, and also that the case was not suitable for an aggregate award because of the sheer numbers of transactions affected and the lack of data from consumers and retailers.

However, this was overturned on appeal.

The Supreme Court will now set the legal test for certifying the Merricks claims as eligible for inclusion in collective proceedings – effectively deciding the CAT’s remit – in a hearing next year.

However, Mr Justice Smith ruled that the first hearing for the FX case, dealing with funding arrangements, will be in February 2020, with the formal application for class action certification provisionally scheduled to start in early 2021.

O’Higgins told IPE: “We were very pleasantly surprised by the speed with which the court acted, and could not have hoped for better. The judge made it clear that he wanted to keep things moving on and will not delay the case for the Supreme Court ruling.”

David Scott, partner with law firm Scott + Scott which is representing the claimants, said: “We feel confident that certification will be allowed. Unlike the Merricks case, the amount of loss can be accurately determined because the institutional claimants and the defendants will have records of the relevant FX transactions.”

The banks concerned have already paid $2.3bn (€2bn) in damages to US-domiciled investors who sued them, following $10bn-worth of fines imposed by regulators around the world, including the US Department of Justice and the UK Financial Conduct Authority.

UK-domiciled investors are automatically included in the class action, while non-UK domiciled entities may also be included on an opt-in basis as long as they are not US, Australian or Canadian domiciled. Non UK-domiciled entities will need to register their interest in the claim at www.ukfxcartelclaim.com.

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