Royal Bank of Scotland (RBS) has won a legal victory against a property firm trying to bring an important test case for misselling derivatives, after the Supreme Court refused permission to appeal.
Manchester-based Property Alliance Group (PAG) had claimed RBS missold interest rate derivatives which were referenced to Libor, after the bank was implicated in rigging the lending benchmarks.
Three top judges considered the application to take the case to the Supreme Court, after it had previously been rejected by the High Court and the Court of Appeal. They refused the application, saying the case “does not raise a point of law of general public importance” in an order made this week.
PAG had argued in its appeal that RBS made implied representations that they were not rigging Libor rates when they sold derivatives used to protect against interest rate movements. The Court of Appeal found that to be the case, but said those representations were limited to the Libor rates offered on the specific currency referenced in the contracts.
RBS was fined £390m by UK authorities in 2013 for Libor manipulation, among multiple other big fines. However, the rigging in which the bank engaged was related specifically to Japanese yen and Swiss franc versions of Libor, not the sterling equivalents used in PAG contracts.
Michael Brown, a banking litigation lawyer at Bird and Bird who acted for PAG, told City A.M. the claimants were “surprised and disappointed” by the decision, which closes PAG’s last avenue for legal action.
However, the case may still have implications for possible claimants against other lenders. RBS had argued there was no implied representation as to their role in setting Libor, but the court found that there was, albeit limited to the Libor rate for the specific currency referenced in the contract.
Libor, the London Interbank Offered Rate, is still used daily as a benchmark to measure the interest rates on contracts worth trillions of pounds across the world. However, regulators across the world have urged firms to move away from it, after its reputation was tarnished by the massive rigging scandal which saw banks enter false submissions in order to profit.
A spokesperson for RBS said: “The bank is pleased that this litigation has now concluded.”