39-year-old James Keen headed a four-person prop trading team at Commerzbank which was closed in June 2005, when the firm decided to scale back its investment banking operations. Keen contended that he was due some $13.m in profit share for his contributions in 2003 and 2004, and also sought compensation for being axed mid-year without any allowance being made for a bonus payout. The Court said that Commerzbank had not breached the terms of his employment contract, and ruled that bonus payments were discretionary.
The trader lost his original claim in April, and the latest ruling is a major setback. Keen's lawyer, Charles Ferguson, has confirmed that he does plan to appeal the Court of Appeal decision to the House of Lords.
An additional claim relating to the part payment of bonuses in restricted stock will be heard in a separate case early next year.
This case is being watched carefully by firms operating in the financial markets, as the ultimate ruling will determine whether bonus payments to staff can be said to be truly discretionary. Commerzbank issued a statement, which said that the bank 'has always maintained that the decision with regards to the bonus awards relating to Mr Keen adhered to the terms of his contract of employment. Today's ruling confirms that the exercise of the bank's discretion with regards to the bonus awards he received was both reasonable and appropriate'.
The Evening Standard quotes Daniel Naftalin, a partner at law firm Mishcon de Reya, who said that 'this judgement will have a substantial effect on those employees dismissed in the next 3 months before they are paid their 2006 bonus. The judgement states that employees have to actually be working for the company to receive their bonus'.