Linklaters advises Barclays on interest rate hedging redress scheme

The High Court has today published its decision in a judicial review application on an interest rate hedging redress scheme (R ex p Holmcroft Properties Limited v KPMG & others).  This is a key judgment that has been watched with keen interest by banks, interest rate hedging counterparties, regulators and professional service firms alike.

Linklaters LLP acted for Barclays Bank LLP, second interested party.

The High Court dismissed Holmcroft’s application, which sought to challenge KPMG’s actions in approving a redress offer Barclays made to Holmcroft in a redress scheme relating to past sales of interest rate hedging products (“IRHPs”). The Court found that KPMG’s actions “did not have a sufficient public law flavour” so as to be amenable to judicial review and that, in any event, there was no unfairness by Barclays in the procedure adopted.

Alison Wilson, Linklaters dispute resolution partner, said: “The Court’s decision should reassure those acting as skilled persons in customer redress schemes and other contexts. While the Court did not hold that public law duties could never arise on a s.166 appointment, it is clear from the Court’s reasoning that the situations where such duties could arise will be very few and far between.

“Helpfully, the Court also held (obiter) that if public law duties were found, they would in any event have to be framed in a manner which is consistent with the terms of engagement. This will be welcome news to those in professional services firms responsible for agreeing terms of engagement for similar roles with a public law connection, who should keep in mind the possibility of judicial review proceedings when negotiating such terms.

“This case also helpfully establishes that, in the context of customer redress schemes, it should be sufficient for the bank to provide a fair summary of the documents on which it relies when explaining any decision it has reached to a customer; there is no requirement to provide either the entirety of the factual information the bank holds, or the particular documents on which it relies. This will be reassuring to banks which frequently face large scale document requests in this context.”

The Linklaters team was led by Dispute Resolution partners, Alison Wilson and Patrick Robinson and associates, James Hennah and Fiona Campbell.

For further information please contact Rupert Winlaw (+44(0) 20 7456 3219) or Lianne Robinson (+44(0) 20 7456 5779)