SFO appears safe for now after proposed merger with the National Crime Agency omitted from Queen’s Speech

The UK Government appears for the time being at least to have scrapped plans to merge the Serious Fraud Office (“SFO”) with the National Crime Agency (“NCA”). The controversial proposal to abolish the SFO did not feature in the Queen’s Speech, suggesting that it has been put on the back burner following the failure of Prime Minister Theresa May to gain an overall majority following the recent General Election.

The proposal to combine the SFO with the NCA was previously met with disapproving comment from many who suggested that it would damage the UK’s reputation in fighting fraud and corruption. The apparent decision to drop the proposal also comes just after the announcement that the SFO has charged Barclays Bank and four of its former executives with conspiracy to commit fraud and the provision of unlawful financial assistance.

The apparent change in the Government’s plan and the latest charges against Barclays may prove a lifeline for the SFO, particularly now that its powers continue to gain some traction. However, this is not the first time the Government has tried to abolish the SFO and, whilst the charges against Barclays go in its favour, it may still have to work hard to keep its place as a prosecuting authority. A senior official has said that the Government continues to “review options”. Nevertheless, the recent hefty settlements with Rolls-Royce and with Tesco highlight the progress the SFO is now making and it could be that the options being reviewed shift from abolition to funding.

Retailers Consortium v MasterCard – an update on ongoing MIF litigation

Background

Our previous blog piece (20 September 2016) described how, in 2007, the EU found that MasterCard’s Multilateral Interchange Fees (“MIFs“) were unfairly high. This decision was applicable to cross-border transactions using MasterCard and Maestro cards in the European Economic Area (“EEA“). The finding was that Mastercard’s MIF breached Article 101 of the Treaty on the Functioning of the European Union (“TFEU“) because they restricted competition between retailers’ banks and inflated the cost of card acceptance by retailers.

On 14 July 2016, Sainsbury’s was awarded £68.5 million plus interest by the Competition Appeal Tribunal in a decision which stated that Mastercard had restricted competition by setting fees on card transactions in the UK.

2017 decision by Mr Justice Popplewell

Interestingly, it was reported back in March that MasterCard had won a High Court legal battle brought by a group of twelve retailers which included Asda, New Look and Morrisons, in respect of MIFs. The retailers were relying on the European Commission decision from 2007 (outlined above) which was upheld in 2014.

The retailers’ case against MasterCard was based upon MIFs in three relevant territories: (i) transactions in the UK (UK cardholders at UK retailers) (ii) transactions in Ireland (Irish cardholders at Irish retailers) and (iii) cross border transactions (in the UK and Ireland by EEA cardholders). The retailers argued that, over the last ten years, they had spent approximately £437 million on MIFs. The Court was being asked to consider whether the MIFs set by MasterCard for debit and credit transactions in the relevant period, in respect of the three relevant territories outlined above, were anti-competitive in breach of UK, Irish and EU competition law.

In line with the European Commission ruling, Mr Justice Popplewell sitting in the High Court did consider that MIFs, in isolation, were anti-competitive. However, Mr Justice Popplewell went on look at the wider position – specifically, to consider the commercial impact on MasterCard if they set their MIF at zero. In this scenario, would MasterCard have survived in the face of competition from the Visa regime? Mr Justice Popplewell thought it likely that if MasterCard had a zero MIF and Visa’s MIFs were set at their actual levels, card issuing banks would have taken their business to Visa (and clearly, a Visa monopoly would be no better for consumers and no less anti-competitive).

In light of the above, Mr Justice Popplewell considered the MasterCard’s MIFS were necessary for the functioning of its payment system, describing them as “objectively necessary as an ancillary restraint“. Paragraph 44 of Mr Justice Popplewell’s judgment discusses the ancillary restraint doctrine, which can essentially operate to take a practice outside of the Article 101 TFEU prohibition in a situation which is predominantly “pro-competitive” but “has as one of its constituent parts what would be a restraint on the autonomy of the parties if considered in isolation“.

In addition, Mr Justice Popplewell did not consider there was any restriction of competition because, had MasterCard had a zero MIF, it would not have survived in the market. It was not appropriate to think that in the scenario of MasterCard operating a zero MIF, Visa would only have been able to operate at lower rates also.

The Future?

The decision of Mr Justice Popplewell is certainly likely to impact upon the ongoing class action brought by Walter Merricks CBE on behalf of some 46 million consumers, as discussed in further detail in our last blog piece. It seems far less likely that the consumer class action will be successful in the UK in light of the latest decision in the MasterCard litigation.

 However, MasterCard’s request to appeal the judgment in the Sainsbury’s case was refused on 22 November 2016, therefore despite Mr Justice Popplewell’s recent ruling; the decision in the matter of MasterCard and Sainsburys (which cost MasterCard some £68.5 million) is unlikely to be reversed.

 

SFO win a reminder of the limits of privilege in internal investigations

In May the Serious Fraud Office persuaded a High Court judge to order Eurasian Natural Resources Corporation to hand over internal investigation documents it had claimed were privileged. The decision brings back into focus the vexed question of which documents produced in corporate internal investigations can be withheld in subsequent regulatory investigations and prosecutions. Continue Reading

Long awaited certainty on cut-off for PPI claims

In a previous blog post, we discussed how the Financial Conduct Authority (“FCA“) was backing a call by the banks for the introduction of a two year cut-off for PPI claims.

Deadline

The FCA has now announced that the final deadline for making a new PPI complaint will be 29 August 2019.   Andrew Bailey (Chief Executive of the FCA) commented that “putting in place a deadline and campaign will mean people who were potentially mis-sold PPI will be prompted to take action rather than put it off. We believe that two years is a reasonable time for consumers to decide whether they wish to make a complaint“. Continue Reading

Subject access requests likely to increase in customer disputes?

Financial institutions often receive a subject access request made under the Data Protection Act 1998 (“SAR”) from individual customers as pre-cursor to a formal complaint or a legal claim.

That is because a SAR enables the customer to access a significant amount of information held by the organisation about him or her. A customer can thereby access potentially sensitive information, effectively by way of advance disclosure at minimal cost which can then enable a customer to build a legal case against the institution.

SARs cannot be ignored and must be responded to promptly and in any event within 40 days of receipt.

In the recent case of Dawson-Damer v Taylor Wessing LLP, the Court of Appeal made three important points about SARs:

  • A SAR will be valid and must be responded to even if a collateral purpose is to obtain information for the purposes of litigation.
  • The exemption in the Data Protection Act 1998 (DPA) that allows data controllers to withhold material that is subject to legal professional privilege does not extend to other protected information, such as information that can be withheld under trust law principles. .
  • It is not necessary to supply personal data in response to a SAR if to do so would involve disproportionate effort (section 8 (2) of the DPA). The Court said that assessing proportionality includes looking at the work needed to find the relevant personal data and then to produce copies.

The final point is likely to be welcomed by financial institutions facing broad and unreasonable SARs. But other aspects of the decision are not so helpful and we may see an up-tick in individuals using SARs in disputes, directing the SAR to both counterparties and their solicitors.

Squire Patton Boggs appointed to FCA/PRA Skilled Person panel

“Skilled Person” reviews under section 166 of FSMA have become a major feature of the financial services regulatory landscape in recent years. FCA figures show that 51 reports were commissioned in 2016 alone, up from 47 in 2015. Under FSMA the regulators have wide powers to require financial services firms to commission skilled person reports into almost any aspect of the firm’s business.

Following a thorough tender process Squire Patton Boggs has been appointed as one of only three law firms on the regulators’ panel of organisations approved to conduct skilled person reviews on financial crime issues (Lot E of the panel). We have demonstrated to the FCA that we have the skills, experience and expertise to conduct reviews on all aspects of financial crime including market abuse, anti-money laundering, anti-bribery and corruption, third party payments, market manipulation, insider trading, and governance of these areas. The revised skilled person panel went live on 1 April 2017, and will run for four years.

Firms can sometimes view the appointment of a skilled person as a negative development and potentially a stepping stone into the FCA enforcement process. But our general experience is that if proactively managed (both by the firm, its advisers, and the skilled person) a s.166 review can be a positive exercise in identifying and resolving areas for improvement in a collaborative way with FCA supervisors. Where it is approached in the right way, enforcement action following on from a skilled person report is actually much rarer than firms might think.

We are looking forward to working with the regulators and firms involved in skilled person reviews during the life of the panel. If you are facing a s.166 skilled person review or would like to discuss the panel and how we can help clients in a regulatory process, please don’t hesitate to get in touch.

Supreme Court confirms London Whale notices did not identify Achilles Macris

In a previous blog I described how the FCA is facing a number of challenges from individuals complaining that they are identifiable from regulatory notices addressed to their employers. By way of recap, under section 393 of the Financial Services and Markets Act 2000 (“FSMA“), individuals are granted third party rights, meaning that if an FCA notice identifies and is prejudicial to someone other than the person to whom it is given, a copy of the notice should be given to them.  Continue Reading

Insurers, professionals and lenders: two Supreme Court decisions in one day

AIG Europe Limited v Woodman and others [2017] UKSC 18

Supreme Court clarifies the correct interpretation of the aggregation clause contained in the Solicitors’ Minimum Terms and Conditions of Insurance (“MTC”) in what will be considered a partial victory for insurers. Continue Reading

High Court reaffirms FOS discretion to depart from the law when “fair and reasonable”

The recent case of R (Aviva Life and Pensions) v Financial Ombudsman Service discusses and reaffirms the position that the Financial Ombudsman is not bound to follow the law when making its determinations but must instead make decisions that are “fair and reasonable in all the circumstances”. This reaffirms the Court of Appeal decision in R (Heather Moor & Edgecomb) v FOS from 2008, but casts some doubt upon whether the law in this area should remain as it is. Continue Reading

First major LIBOR rigging claim dismissed by Financial List judge: speedread

After a 38 day trial, Mrs Justice Asplin handed down a 187 page judgment just before Christmas in the long-running Property Alliance Group Ltd v The Royal Bank of Scotland plc case. She rejected claims of mis-selling, breach of good faith obligations and misrepresentations associated with LIBOR.

Property Alliance Group sued RBS over four interest rate swaps taken out between 2004 and 2008, linked to GBP 3 month LIBOR. RBS moved the relationship to a division known as the Global Restructuring Group (“GRG”) in Spring 2010. PAG terminated the swaps in June 2011, incurring an £8.3 million break cost. PAG brought claims that fell into three categories: Continue Reading

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