Court Of Appeal Strikes Out Pass-On Defence In Forex Manipulation Claim

• Published date: 20 June 2022
• Subject Matter: Corporate/Commercial Law, Anti-trust/Competition Law, Litigation, Mediation & Arbitration, Corporate and Company Law, Antitrust, EU Competition , Trials & Appeals & Compensation
• Law Firm: Hausfeld & Co LLP
• Author: Mr Tim Brown and Jamie Nicolaides

On 23 March 2022 the Court of Appeal struck out arguments put forward by the Forex defendants that investment funds had passed on their losses by cashing out of investments.

The Court of Appeal judgment in Allianz Global Investors GmbH and Others v Barclays and Others [2022] EWCA Civ 353 is a welcome ruling for claimants in competition damages claims. If successful, the defendants' arguments would have had wide-ranging consequences regarding entities able to claim for losses arising from competition law infringements, and potentially made damages claims unduly complex and burdensome.

Background

In 2018 a number of claimants, including investment funds structured as trusts, companies and limited partnerships, issued a competition damages claim in the English High Court in relation to Forex manipulation. The claim was made against several banks found by the European Commission to have colluded to exchange commercially sensitive information and coordinate certain benchmark foreign-exchange (Forex) rates between 2003 and 2013. The banks ran a pass-on defence, among other defences, arguing that the investment funds would have passed on any losses incurred to investors. The banks took the position that even if the Forex manipulation had resulted in less advantageous Forex transactions and these lowered the value of the fund, the investors had ultimately suffered that loss, rather than the fund itself.

Strike out application

In January 2020, a number of investment funds applied to strike out the defendants' pass-on arguments. The applicants asserted that it was not arguable that losses suffered by an investment fund were passed on to investors who redeem their investments at a lower value. The applicants argued that to the extent that any investor suffered a reduction in value of investments due to Forex manipulation, the investor itself does not have the right to claim for this reduction.

The High Court dismissed the strike out application, ruling in February 2021 that the defence of pass-on was in principle available on the basis alleged. The High Court determined that the defence was not defeated by the trust principle, the reflective loss principle (referred to in the judgment as the company issue), or the partnership principle. The defence therefore had a real prospect of success in this case and should proceed to trial.

Appeal

The applicants appealed to the Court of Appeal (the Court). The three grounds of appeal challenged the High Court's findings on...