A new ruling has opened an opportunity to achieve compensation for those mis-sold interest rate swaps. Many real estate companies, and indeed other companies sold complex financial products tied to LIBOR by the big banks, may well be able to rely on this case to bring claims.
Property Alliance Group (PAG) entered into LIBOR-referenced finance agreements with RBS which required PAG to take out interest rate hedging instruments. From 2007-8 when interest rates fell dramatically, the level of interest that PAG was paying under the swaps substantially exceeded that which it was receiving from them. This had a corresponding impact on the break costs, which totalled more than £8 million by the time PAG terminated the agreements in 2011. This behaviour was apparently widespread in the UK real estate market at the time.
Earlier this year, PAG lost their claim in the Court of Appeal and there have since been various articles, many by banking side lawyers, asserting that this means no other claims can be brought.
However, on a closer reading of the judgment, this may not be the case. The Court of Appeal did identify an implied misrepresentation as to LIBOR being accurate and correctly set; it was just in PAG's specific case there was no breach of this. Therefore, in other cases, companies may be able to show the necessary falsity, reliance and intent.
Limitation for LIBOR-related claims against all the banks is fast approaching, so companies who may be affected will need to act quickly.
To read the judgment in full, please click here.