UK banks face billions of damages from class actions

The UK’s leading banks are facing at least 109 class and group action lawsuits across different jurisdictions, which could potentially cost them billions of pounds, according to new research from international law firm RPC. The firm expects a significant rise in class actions in the UK and across Europe over coming years, with an inevitable increase in the number of ESG-related cases. The arrival of a growing number of litigation funding firms will help drive this trend, warned RPC. Just over two-fifths (41) of the class and group actions listed by the London-based firm relate to interest rate manipulation, while almost a fifth (18) related to breaches of the US Anti-Terrorism Act. Barclays faces the most class and group actions (41) of all the UK’s biggest banks, followed by HSBC with 31 and NatWest with 28. The class and group actions have been disclosed to shareholders of the banks concerned. Examples of the class actions include situations where the defendant bank has participated in an illegal cartel to fix LIBOR or manipulated foreign exchange rates, explained RPC. Prevalent in the US and Australia, class and group action lawsuits are becoming increasingly common in the UK and certain European jurisdictions. At the end of last year all EU member states were required to enact the EU Directive on Representative Actions for the Protection of the Collective Interests of Consumers (RAD). EU member states will need to have at least one procedural mechanism in place by June that meets minimum standards set out in the directive. Consumers are allowed to seek collective redress when they claim to have been harmed by a business through breaches of certain European consumer laws. The policy areas covered by these laws are wide-ranging. They include data protection, financial services, travel and tourism, energy and telecommunications, as well as general consumer law such as rules on unfair contract terms and misleading advertising. Under the RAD, effective procedures must be established for both domestic and cross-border infringements. Following the analysis of class actions against UK banks, Simon Hart, partner at RPC, said: “It’s clear that the leading UK banks are still parties to an enormous number of legal disputes globally with customers and market counterparties. Many of these relate to legacy matters of compliance failings and market manipulation, the effects of which the banks are struggling to shake off.” "However, the range of actions both in terms of subject matter and jurisdictions highlight the ongoing legal risks faced by banks. It does not take much analysis to conclude that we will see ESG-related claims being added to this list over the next five years. Coupled with an increase in asset price volatility, a recessionary environment and litigation funders looking for more cases, over the short to medium term it is realistic to expect the number of class and group actions to grow globally,” he added. Litigation funding is becoming increasingly established among corporates and individuals as they can pursue legal claims without risking their own money. Daniel Hemming, another partner at RPC, believes banks and other large UK corporates are likely to face a gradual rise in class actions. “Often the quantum of these cases against the banks is so significant that litigation funders are front of the queue to back these class and group actions. The funders also have a role to play in building the group of claimants where that is appropriate,” he said. “Litigation funders have the potential to shift the balance of power in favour of claimants in these kinds of cases. Banks and other large corporates can no longer rely on the prohibitive cost of these cases putting off potential claimants,” he continued.

UK banks face billions of damages from class actions

Corporates and banks must brace for rising tide of ESG related actions

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