In Federal Deposit Insurance Corporation v Barclays Bank Plc & Ors [2020] EWHC 2001 (Ch), Mr Justice Snowden of the Chancery Division of the High Court of England and Wales has refused an application on limitation grounds for summary judgment or strike out of FDIC’s LIBOR claims. Subject to any appeal, it is open to FDIC to argue, if challenged on limitation grounds, that it could only have discovered the facts relevant to its allegations following regulatory findings made less than six years before the issue of proceedings, and that it could not have based a claim on materials available earlier. This decision will be of interest to banks and financial institutions seeking to rely on limitation defences to claims arising out of or related to regulatory or other enforcement action.

The applicant for strike out is one of several banks alleged to have manipulated LIBOR. From 2007, the bank and other defendant banks were members of the contributing 16 panel banks who made daily interest rate submissions to the British Bankers Association (the “BBA”) on the rate at which they believed that they could borrow on the inter-bank market in London. The BBA then published the daily USD LIBOR for various maturities. FDIC, an independent agency of the US government, alleges that the defendant banks manipulated USD LIBOR from August 2007 to at least the end of 2009 through the practice of “lowballing”, the submission of artificially low interest rates which did not reflect the relevant defendant bank’s honest assessment of the rate.

FDIC claims breaches of statutory anti-competitive conduct duties. FDIC claims that the defendant banks colluded with the BBA to suppress the level of USD LIBOR in breach of Article 101 of the Treaty on the Functioning of the European Union or section 2 of the Competition Act 1998.

The bank applied for summary judgment or strike out, arguing that FDIC’s claim is time-barred. The bank argued that the six-year statutory limitation period had expired by the time of FDIC’s claim.The bank submitted that FDIC therefore had no real prospects of satisfying section 32(1)(b) of the Limitation Act 1980 which provides relief against the limitation defence in cases of deliberate concealment by a defendant. The bank argued that by 10 March 2011 sufficient facts were in the public domain to enable FDIC, with reasonable diligence, to plead a complete cause of action against it. FDIC argued that the critical evidence to support its claim was not available until after 10 March 2011, in the form of (i) regulatory findings in 2012, and (ii) evidence from criminal trials of traders and brokers in 2015.

The Judge said that FDIC would have needed a “solid foundation” of evidence prior to 10 March 2011. Snowden J considered the relevant authorities and concluded that in cases where allegations of fraud or deceit are pleaded, claimant reliance on ‘speculation and inference’ is not sufficient. Where dishonest conduct is alleged (as against the defendant banks by FDIC here), pleadings will need a “solid foundation” in the evidence. Snowden J noted that none of the financial journalists, academic and other commentators who considered issues over USD LIBOR prior to March 2011 had concluded that there must inevitably have been collusion between the panel banks. At this stage, innocent explanations for the sustained low level of LIBOR such as market dysfunction or parallel conduct were still plausible. As such, although various materials in the public domain had raised doubts over USD LIBOR, there was no solid evidence in the public domain to support a case of actual or blind-eye knowledge and continued lowballing.

The Judge dismissed the bank’s application, leaving FDIC open to raise a defence to the limitation argument at trial. Snowden J accepted FDIC’s contention that regulatory findings against the panel banks in 2012 represented a tipping point in the evidence available to FDIC. These findings, “for the first time, and very strikingly, … showed that there had been widespread and systematic misconduct” and not merely isolated instances of misconduct by traders or isolated failures of management at panel banks. In his judgment, it was “entirely realistic” for FDIC to contend that publication of the regulatory findings was the “missing element” of solid evidence to conclude the most likely explanation for the sustained low level of USD LIBOR was collusion. The bank had failed to demonstrate that the limitation issue should be determined summarily. If the bank seeks to advance a limitation argument when it files its defence, it is open for FDIC to raise section 32(1)(b) of the Limitation Act 1980 and for the trial judge to determine the issue. 

Michael Munk, Associate in London and Zoe Cameron, Legal Advisor in London

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