12 January 2016
In Ashton, the Upper Tribunal has recently interpreted the somewhat problematic identification test laid down by the Court of Appeal in the Macris case.
Keen watchers of enforcement cases may well know something about Section 393 identification issues. For those less familiar, essentially, where a third party has been prejudicially identified in either a Warning Notice or Decision Notice given to another person, that third party should be given prior third party rights. In common with many others, Christopher Ashton (a former employee of Barclays) argued in front of the Upper Tribunal that he had been prejudicially identified in two Notices. The first was a Notice given to UBS AG on 11 November 2014; the second was a Notice given to Barclays Bank PLC on 20 May 2015. Both Notices referred to conduct relating to foreign exchange, referred to communications between Firms and quoted various statements that had been made by the participants.
The Upper Tribunal gave its judgement in light of the two stage set out in Macris (see Enforcement Watch 16 "19 May 2015: Court of Appeal determines identification issue"):
- The first stage of the Court of Appeal's test was to ask, without recourse to external material, whether the Notice identified a person other than the persons to whom the Notice had been given. For that purpose, the Court of Appeal had held that it was not necessary to be identified by name, but that there needed to be a key or pointer to a separate person. In the case of both Notices, the Upper Tribunal found that there was identification of a person. That is, where the Notices referred to "Firm A", they were clearly being used to describe the actions of a particular individual or individuals, using as they did, direct quotes from a participant. They could just as easily have used the term "Trader A" instead and would have left no doubt that a particular individual was being referred to, rather than the company generally. The first stage in the Macris test was accordingly satisfied.
- As to the second stage, the Court of Appeal had held that it was then permissible to have recourse to external material in order to determine, by means of what was described as an objective test, whether a particular person had been identified. The Upper Tribunal found that Ashton not been identified, and we comment on this in some detail below.
You can read the judgment here.
The main interest in this case lies in the interpretation by the Upper Tribunal of the second stage of the test laid down in Macris.
As we said in EW16, we consider that one of the real problems with Macris is that the precise practical ambit of the second stage of the new test is not clear. The Court of Appeal had decided that the second stage involved an objective test of deciding whether the words "would reasonably in the circumstances lead persons acquainted with the claimant/third party, or who operate in his area of the financial services industry" to believe at the date of the Notice that he is a person prejudicially identified. Part of that, so it said, was to look at external material in order to consider what, objectively, "persons acquainted with the claimant/third party or persons operating in the relevant area of the financial services industry might reasonably have known as at the date of the promulgation of the relevant Notice". Despite the Court of Appeal asserting that this was a workable test, we had some doubts. For example, it was not clear how one decided what might objectively be known by someone acquainted with that person.
It is interesting to see how the Upper Tribunal has now interpreted the second stage of the Macris test. It stated that:
- The test involves looking only at information that was in the public domain at the time the Notice was published.
- It does not refer to knowledge that can only be obtained by extensive investigation of available sources, such as the type of enquiries that a thorough investigative journalist would undertake. Instead, it essentially focusses on the knowledge that could reasonably be expected to have been obtained by well-informed market participants in the relevant area by the time of publication of the Notice. These are what the Upper Tribunal called "relevant readers". The crux, it said, was "what relevant readers would reasonably know and conclude", not whether it was logically possible to deduce the person's identity from publicly available material.
- As to use by the Court of Appeal of the term "acquaintance" and its reference to someone who worked in the same area:
- "acquaintance" indicated someone who "although they might have met the person in question from time to time was more in the category of someone who knew of him because of his position in the market rather than a person who had deep personal knowledge of him and his affairs";
- it did not include those "with intimate knowledge of the relevant events (for instance those who actually participated in any particular set of transactions, or who advised the person about them) or those with special personal knowledge of him professionally (such as someone who sat next to the person at work)";
- it also did not include "those who worked in Mr Ashton's immediate team and who he reported to";
- it did include for example those who worked in Barclays outside Ashton's own team.
- "Relevant readers" would also include Ashton's counterparties in other leading banks operating in the same area as well as the customers and counterparties of his business unit.
Having set out its interpretation of the Court of Appeal's test, the application of that test to the facts is of rather less general interest. Nevertheless, the application of the test to the facts is not without interest, and readers may care to consider the media articles that the Upper Tribunal was asked to look at and why it found that they did not refer to Ashton. Essentially, Ashton's arguments relied upon his claims that (i) the chats in question must have been known by the relevant reader to relate to the chat room known as the Cartel, and that (ii) Ashton was known to be part of the Cartel chat. The Upper Tribunal found that it was not the case that the relevant parts of the Notices would have been understood to refer to the Cartel and, even if they had been, the relevant reader would not have known that they were at a time when Ashton was a participant in it.
With the second stage of the test formulated as it is, there are plainly very real practical difficulties that can be experienced in third party cases. These may be experienced both by the regulators in deciding whether to give third party rights, and by third parties in deciding whether they truly have been identified as a matter of law. The FCA has been granted permission to appeal Macris to the Supreme Court, with the hearing now listed for October this year. We await with eager interest to see how the Supreme Court formulates the test and how that deals with the very real practical issues that have arisen from the test laid down by the Court of Appeal.