Jaron Dosanjh, 09 March 2018
The door has been opened by the Court of Appeal in PAG v RBS [2018] for misrepresentation claims to be brought by a counter-party to a derivative which is linked to LIBOR, FX or key benchmark where the Swap is with a bank which has been found to have engaged in the manipulation of a benchmark.
This judgment is now the leading authority on claims concerning a customer’s ability to rescind contracts with a bank that has manipulated the London Interbank Offered Rate (LIBOR). Although this case focused on LIBOR-linked derivatives, the same principles will surely apply to other key benchmark rigging (including the manipulation of FX markets).
This decision will be of particular interest to customers that believe they have been mis-sold a Forex hedging products or a LIBOR-linked derivative. These customers of RBS, Barclays, HSBC and Lloyds Plc may potentially have grounds to rescind the derivative contract if the implied representations made by the banks are considered false due to regulatory findings of benchmark rigging. RBS, Barclays, HSBC and Lloyds Plc have all either undermined the integrity of LIBOR or have been fined for Forex failings.
