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Disputes Nightmares: Lessons from the front line [The Julius Baer case]

Posted on 18 September 2023

In our first Disputes Nightmare Scenario Flash Webinar, Adam Epstein teamed up with Ben Strong KC (One Essex Court) to share insights and practical lessons for the industry, drawn from their experiences in the hard-fought Julius Baer case.

The Upper Tribunal overturned the FCA's decision to ban three former Julius Baer employees, accused of acting recklessly and without integrity in respect of arrangements entered into by third parties through the bank. Our Financial Services Investigations and Enforcement team, led by Adam Epstein, successfully represented Thomas Seiler in this case. 

Employment Partner, Laura Penny, also joined the webinar to discuss employment issues arising when an FCA investigation is in prospect.


Adam Epstein
My name is Adam Epstein and I am a partner here at Mishcon's and I’d like to welcome you to our, the first in our Disputes Nightmare Scenario series.  Just before we get started properly, a few administrative issues.  If anybody has got any tech issues then please put them in the chat box and there will be somebody on hand to try and do their best to sort you out and any questions that you have if you can put them in the Q&A chat and we will take a question at the end and people will be able to follow up with us later on with other questions that they’ve got or if they want to otherwise engage us and engage with us we’ll be sending out an email on that.  So anyway as I say, this is the first in our Disputes Nightmare Scenario series and the nightmare in this case relates to an FCA matter and our client in this was Thomas Seiler and the nightmare was that he was sitting in Switzerland minding his own business a few years ago when he was suddenly hit with an FCA investigation relating to his time as an employee of Julius Baer and the case against him and certainly against two individuals was that he lacked integrity and it was said that he lacked integrity because he turned a blind eye to red flags concerning money that was effectively stolen from a client of the bank by overcharging the client fees and paying them to a supposed middle man.  And there was some real jeopardy in this case from actually fortunately he didn’t have the jeopardy of facing a financial penalty because the FCA didn’t pursue that presumably because they had limitation issues but he faced a possible ban from the industry, so the stakes were really hard for him.  So the process was that he ran through the investigation and then we were in front of the internal FCA Tribunal called the RVC and the RVC agreed with FCA enforcement that he lacked integrity for those reasons and we disagreed with that very strongly, as did the client so he referred the case on to the Upper Tribunal and the Upper Tribunal as people may know is far more like a Court where there’s proper cross examination and all the issues are looked at in full and the result was that the Upper Tribunal said that he did not lack integrity, there weren’t red flags that he missed and that it would be irrational to prohibit him on that basis and that’s where we stand.  So it was a great result for Thomas but it is also a very important case.  It’s an important case because it’s got some really far reaching and I think probably the most sustained criticisms that we have ever seen against the FCA in an Upper Tribunal judgment and it’s got real ramifications for future FCA investigations.  So what we are going to do is we are going to have a few presentations and as I said, we’ll take a question at the end and we will then have a follow up email where you will be able to ask us more questions or otherwise engage with us.  So let me introduce you to the people who are going to speak; so as I said, I am Adam Epstein.  I lead the case here at Mishcon.  Ben Strong KC from One Essex Court was our lead Barrister and he will give you few key takeaways from his perspective.  I’ll give a few from mine.  We were going to have our client, Thomas Seiler here but real apologies he’s fallen ill and hasn’t been able to make it but he does send his apologies and we obviously wish him well.  So before Ben and I tell you our, our reflections on the case I thought it would be a nice idea to have one of our employment partners, Laura Penny speak to you about managing employment issues when an investigation is in prospect or has started.  So Laura let me just hand over to you for a few minutes.

Laura Penny
Thanks very much Adam.  Yes as Adam says, I am one of the employment partners here at Mishcon and the reason that we thought it might be quite helpful to have a few minutes from me and I promise it’s only a few minutes is because very often in scenarios where you have the prospect or the actual of an FCA investigation that the subject matter of that will be the subject matter that can also fall under an employer’s investigation and disciplinary processes and so quite a lot of my work and Adam’s work together is that we will act for clients either employers or employees in tandem in those processes.  For obvious reasons those things that the FCA might be interested in in terms of conduct and behaviours are things that employers may also be interested in but there is a balance to be drawn between and actually we very often find that it is the employment processes that get going first, the FCA is not known for its quite turnaround and picking up these issues but frankly employers are the ones on the ground and are more likely to be the people who may have discovered these issues in the first place in any event and what typically happens in these processes is that you will then go through an investigation process.  The investigation process will conclude as to whether there is anything that needs to be elevated to a disciplinary process.  You will then go through a disciplinary process and more often than not there will then be an appeal pursued so you will go through an appeal process as well and there are various issues in terms of balance.  As I say those things often come first but people are often, employees are often very cautious of participating in those processes particularly when there is the real spectre of the FCA perhaps being involved either currently or at a later date.  So you are likely to face a couple of challenges as employers that you may not in a typical disciplinary process and those can be anything from employees not wanting to cooperate at all with those processes to employees demanding lawyer representation in those processes because you know, on the back of an argument that they are potentially career limiting if the FCA does get involved.  And so, there is a, there are a few challenges to anticipate in pursuing the employment side of life.  Equally there is a balance between what the FCA might be looking at and what an employer might be looking at and differing criteria frankly as to the reasonableness and the extensiveness of any investigation that, that needs to be carried out to conclude on either of those basis.  The message really for you as employers for those employers on the call is, you absolutely can pursue individual employment processes as against individuals albeit that there may be as I say either the prospect or the actual investigation from the FCA ongoing and indeed in lots of circumstances you will be obliged to do that and you will have a very difficult conversation with the FCA if you don’t do that frankly.  So with all that in mind and that balance to be drawn on the employment front I am going to hand back to one of the people who were far more involved in this case than me on a hypothetical basis and that’s Ben Strong KC who Adam mentioned is our, was the lead Barrister on this from One Essex Court so Ben, over to you.

Ben Strong KC
Thank you very much Laura and thank you to Adam for asking me join from One Essex Court.  There are really a huge number of points that one could talk about arising out of Judge Harrington’s doorstop of a decision but I just want to give you a brief taster on possible implications from just three points and the first is that the case concerns events between 2009 and 2012 but the hearing in the Upper Tribunal didn’t take place until 2022, more than 10 years later.  The decision notice against the individuals didn’t come until 5 years after the investigation had started having proceeded in the Upper Tribunal’s words ‘at a glacial pace’.  The reason for that was the FCA’s failure to start the case appropriately and that lead to frequent changes of personnel including four changes of Head of Department in the course of the investigation and I have to say a rather uncomfortable experience in the witness box for the FCA’s last case manager who they put up to explain what had been going on.  Now the Upper Tribunal’s conclusion was that the Authority should, and I quote, ‘Give serious consideration to whether it is appropriate to continue the investigation which it doesn’t have the resources to complete within a reasonable period of time and where it has decided that its priorities for its limited resources lie elsewhere’.  Now what would that mean in practice?  Presumably fewer investigations. It might mean fewer proceedings taken against individuals because typically corporates want to settle with the FCA relatively quickly and move on but individuals may have more to lose and they fight so the FCA might see corporate as slightly lower hanging fruit.  Well we’ll have to wait and see exactly how the FCA responds to this aspect of the decision but they must have found it particularly bruising.  Now some of you might be wondering whether the implication is that if a party can drag out a case for as long as possible the FCA will be inclined to give up rather than face more criticism.  I rather doubt it myself.  I also suspect that one effect of the case might be that the FCA is going to insist on very quick responses to heed to the warning notice which is the first part of the formal procedure but if they do insist on very quick responses that’s going to lead to a different set of problems because it often won’t be fair to insist on speed at that stage.  That’s my first point. 

The second point concerns the Tribunal’s criticisms of the FCA for not obtaining evidence from relevant witnesses and there are two aspects to note here I think.  First the FCA didn’t attempt to interview witnesses located overseas or even ask the local regulators so carry out interviews for them.  Importantly in this case there was no interview with any of the overseas compliant staff and on the facts of this case comparing their understanding and reaction to that of the individuals under investigation was very important in judging whether the individuals lacked integrity.  Now we know that the FCA is keen to pursue investigations with cross border aspects and certainly there’s no reason why the fact that there’s some cross border aspects should dissuade it from pursuing inappropriate cases but what this decision suggests is if the FCA is going to do that they are going to have to put more effort in to obtaining evidence from overseas and that obviously takes time and money so again the FCA may have to take some tough decisions about what investigations to pursue.   Now the Tribunal decision contains another comment related to witnesses and that is that the FCA was criticised for not calling as a witness an individual called Mr Campionu.  He was a Julius Baer employee who sent what the FCA cast as a whistle blowing email.  All the individual criticised that email as highly disingenuous because they said it appeared that Mr Campionu had known all the relevant facts and turned a blind eye.  They said that it would be wrong to ban them whilst taking no action at all against him.  One of the other individuals, Mrs Whitestone also said that it was relevant to the case against her that Mr Campionu, her immediate boss had bullied and undermined her.  Now the FCA said they hadn’t called him because they couldn’t put him forward as a witness of truth – in other words the FCA didn’t believe what he told them including that he had not known of the wrongdoing to which the others were alleged to have turned a blind eye.  The Tribunal said that as a public authority the FCA should have called Mr Campionu so that the individuals could cross examine him anyway.  So the Upper Tribunal was saying that the FCA should call witnesses whose evidence it thinks it doesn’t need and who no one else wants to call either.  As I understand this has really put the cat among the pigeons round at Endeavour Square because it’s not uncommon for there to be a witness that the FCA doesn’t really want to call and they are now thinking that they might have to do so.  Well for myself, I am not sure it will always make sense if the FCA’s call someone they don’t want to although if they do it will usually assist the individual against whom the Authority is taking action because these witnesses are not always going to say things that are helpful to the individual, certainly Mr Campionu wouldn’t have done.  A witness that neither side wants to rely on usually won’t give evidence which assists the Tribunal one way or the other.  Now the position in Thomas Seiler’s case might have been different but I can’t help feeling that once the FCA has called a Campionu-type witness a couple of times the Upper Tribunal may see that this doesn’t always work and they might signal that we can all move back to each side just calling the witnesses it wants and thinks it needs. 

My final point, the third point, is about the situation when the FCA investigates several parties in relation to the same facts particularly a corporate and the individuals that it employs.  Now, JBI didn’t contest the facts alleged by enforcement about the individuals and that lead to the FCA publishing a final notice against JBI with the fine in it and of course that final notice contained all the factual allegations which the individuals were contesting, setting them out as if they were established.  Now the FCA agreed to add a note at the beginning about the fact the individuals were contesting it but it wasn’t a terribly satisfactory solution for the individuals.  The fact that the Upper Tribunal has now exonerated the individuals doesn’t help them either if the FCA continues to publish the JBI final notice in full as they’ve said they want to do.  Now we are hopeful that we will reach a solution which protects Thomas’ interests about this but it is taking some time.  Leaving aside Thomas’ particular case there is a real difficulty about proceedings against more than one party where one of them, usually the corporate wants to settle and move on and the others don’t.  The FCA and the corporate won’t want to hold up a disposal of the case whilst the other decide, I mean it is also not very satisfactory to keep the outcome of the corporate case out in the public domain potentially for years while the individuals’ proceedings continue.  Of course the FCA can avoid this problem by going against the corporate or the individual but not both, that could of course tie in with better focussing the resources to avoid delays as I have mentioned.  But that solution won’t always be in the public interest so this problem is going to continue to arise and I can’t give you a solution which will fit all cases.  But where one case completes before the others there does need to be proper thought about how to balance the public interest in making known that action has been taken and the rights of those whose proceedings continue not to have their reputations damaged unjustly.  So all I can say is I hope that being aware of the issue in advance at least gives you an opportunity to think about it and address it before too much reputational damage is done.

So those are my three points, I said I was going to make three points, there they are.  I don’t know if any of you want to discuss about the case with me, please do get in touch with me afterwards but for now I will hand back to Adam.

Adam Epstein
Thank you very much for that Ben.  Well all good things come in three’s so I also have three key takeaway practical points to mention.  So the first of those is something that, that’s quite important on a psychological level, it’s holding your nerve.  So, and the importance of that.  So the client here lost in the RVC but carried on and won in the Upper Tribunal and so it can be a rather nerve wracking thing to choose to carry on and appeal it in front of something that’s much akin to a Court but I think this just shows that in the right case if you hold your nerve and this is what can happen.  And the reason why I said before that it can be quite worrisome for people to be carrying on to the Upper Tribunal is for quite a few different reasons.  One is a fairly obvious one which is the agony is prolonged and another is that if you are in the Upper Tribunal things generally play in public which can sometimes be not that comfortable and you are cross examined by somebody like Ben which also might not be that comfortable and of course the outcome is uncertain.  We know now of course that Thomas won but at the time he wasn’t to know that and there can be a real anxiety about costs as well.  So it’s partly how much the Tribunal itself might cost in fees to get there.  It’s also that there are in unusual circumstances or rare circumstance adverse costs against bodies but for individuals one of the big points is they are often covered by insurance and in policies there are different provisions about claw back of that insurance and if you lose, depending on the reasons why you lose and that can be quite an anxiety.  But like Thomas, if you are facing a life time ban from the industry and you think you’ve done nothing wrong you may have little choice but to carry on but really this is to say if you hold your nerve and the Seiler case shows what can be done.  So that’s my first point.

The second point I wanted to make was I mentioned at the beginning about the RDC versus the Upper Tribunal and I just wanted to have a couple of minutes on whether the RDC really is a suitable forum.  So the RDC is, it’s not a judicial determination, it’s not a judicial hearing, it’s the FCA’s internal Tribunal and they are very keen to call it not a hearing but a meeting and what that means is that it is, it is I suppose it is a bit of hybrid of the two but you don’t have for example, witness statements and cross examination of witnesses and so in a case like this which has got actually quite a detailed factual matrix which has got potentially contested witness evidence between three different witnesses and three different subjects and each subject has got their own separate meeting you can see actually there’s quite a problem for the RDC in knowing how to decide a case where there’s contested witness evidence.  So there is a procedure that was introduced a few years ago by which you could leapfrog the RDC and go straight to the Upper Tribunal.  So I just wanted to spend a minute or so just talking about whether that’s a good idea.  I think there are usually good reasons not to leapfrog not least of which it is if you go to the RDC it means you have two bites of the cherry.  If you go and you win the FCA cannot appeal it so that’s an end.  And of course the RDC is in private and so no one will ever be any the wiser about it.  The fact the RDC is a meeting and not a judicial hearing also means that it’s less forensic and actually in certain cases that might suit a subject and it could lead to a better outcome in the right case.  But there can be good reasons to leapfrog.  People may have seen a blue pressed case recently in which they did just that and went straight to the Upper Tribunal although the reasons weren’t set out in the judgment but if you are obviously going to lose because there’s a conflict of evidence and the RDC is just going to throw its hands up and say it can’t decide, that might be a reason.  But I think a really big reason that people might decide to do as seen by this case is timing.  If you’ve got an investigation that’s taking a really long time and then you interpose the RDC into it that could add on another year, eighteen months so going to the Tribunal could give you a shorter time frame and the third practical point I wanted to make was about the prospect of conducting your own investigation with the FCA placing reliance on that investigation.  So my experience this used to happen a reasonable amount although certainly not in criminal cases but then FCA lost its enthusiasm for it and my view is certainly that there is the potential for it to happen again in appropriate cases and the Seiler case I think shows one.  So in this connection people, I don’t know whether people have seen or not but there is a PRA consultation recently under which one of the proposals is that, and this very thing might happen, very much under the PRA supervision but the firm conducting the investigation and if it does that the proposal is that the firm will get a bigger discount from any settlement.  Now that may be a real incentive for a firm to do it but for my money a real beneficial for many firms may be the speed of it.  If you may be facing an FCA investigation where the FCA is under resourced or for whatever reason isn’t going to manage to conclude an investigation for two or three years, a real benefit of the speed, a real benefit sorry, of doing it would the speed of getting it done quickly.  So think this could well form more part of the dialogue in the future with the FCA should you or shouldn’t you conduct your own investigation for them.  But you would certainly need to the FCA along with you and as I say the FCA may well commit giving the issues of delay although it may be of less interest to them where individuals are involved.

So those were the three points that I wanted to make and I said that we would take one question at the end.  I can see that we’ve got a number of; I can see that we’ve got a number of questions here and I am just flicking through them to see which may be appropriate.  How about there’s a nice question here from Simon Morris at CMS who says to us, ‘Do you believe the Tribunal will be this robust in future years after Tim Harrington has retired?’, which I think is a rather good and possibly a controversial question.  Ben do you want to have the first answer at that?

Ben Strong KC
I don’t know is the answer, it depends who takes over and I have to confess, I don’t know if you know Adam, I don’t know who is going to take over.  Do you know who it is?

Adam Epstein
I don’t and I also heard a rumour that maybe I am actually staffing and circulating this rumour now by doing it on this call that he was maybe going to hang on for a little bit longer but I haven’t heard the latest on that.

Ben Strong KC
Well the answer to the question is it obviously depends on who it is.  I don’t see any reason why, why the Upper Tribunal would be any less robust than Tim Harrington, I mean there have been a number of cases where the FCA has not conducted its investigation as thoroughly as it might and in particular is not, has made mistakes in the document gathering exercises and when that keeps happening again and again and again, now Harrington got very, very frustrated about it in our case but if it happens in another case I would have thought the Tribunal would be just as frustrated.

Adam Epstein
I suppose what Simon will know and maybe others on the call will know, maybe they won’t is that Tim Harrington was chair of the RDC for a long time.  Obviously you know that Ben and he was as chair of the RDC, he was actually very critical of FCA enforcement in a number of cases that I’ve seen in ways that I’ve not seen so much from subsequent chairs so my, as Ben says, it depends entirely who takes over but my suspicion is that maybe, maybe Judge Harrington is possible a little bit more robust than others maybe and he also wonder whether it being his last case if it really was then maybe there was a bit of a swan song to it.

Ben Strong KC
The other thing I say about it is it will be interesting to see whether they continue the way in which this has happened before where Judge Harrington has really done most of the financial services cases or whether they spread it around a bit more in the way it used to happen to a greater extent.

Adam Epstein
That is true.  We may see other people being less bold if that happens maybe the opposite.  Anyway thank you for that question and thank you for that Ben and Laura as well.  As I said at the outset, there will be an email going around within the next couple of days which will give people an opportunity to engage more with any of us or to ask further questions so I am just going to say thank you very much from all of us for attending and we hope you found this case session into the issues raised by the Seiler case useful.  Thank you.



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