Banks face potential class action over alleged currencies manipulation

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Allegations of foreign exchange price manipulation continue to haunt large banks as two courts in London consider separate cases related to claims that dealers in the past ripped off their clients on currency deals.

Two law firms are vying to lead an estimated £1bn class-action lawsuit against at least five banks over alleged foreign exchange rigging between 2007 and 2013, while asset manager ECU Group is accusing HSBC of fraud and misconduct in a High Court trial that started in mid-June. HSBC denies wrongdoing.

The potential £1bn class-action claim is one of the first US-style lawsuits brought on behalf of pension funds and asset managers against Barclays, Citibank, Royal Bank of Scotland, JPMorgan and UBS, with the bulk of the claims centring on alleged cartels dubbed “three way banana split” and the “Essex express.”

The Competition Appeal Tribunal is this week deciding on whether to approve an application to allow the litigation to proceed as well as deciding on a proposed class representative. The banks are urging the tribunal to block the collective action proceeding and say any claim should be an opt-in lawsuit, according to the fillings. The banks declined to comment.

In what has been likened to a “beauty parade”, the tribunal must decide whether to approve a collective action led by Phillip Evans, a former inquiry chair at the UK’s Competition and Markets Authority, who is backed by law firm Hausfeld or a rival action headed by Michael O’ Higgins, former chair of The Pensions Regulator. O’Higgins is backed by law firm Scott + Scott, which secured a US settlement of $2.3bn from 15 banks as part of a class-action foreign exchange lawsuit.

Banks have paid more than $12bn in regulatory fines after allegations first surfaced that dealers systematically manipulated foreign exchange rates over a period of years. While banks continue to fight claims, traders involved in the currency rigging scandal are faring better with US authorities dropping their case against two former staffers.

The tribunal claim is one of the first court cases brought under the Consumer Rights Act 2015, which allows US-style, class-action lawsuits to be pursued if there have been suspected breaches of competition law. It permits a representative person to bring a lawsuit representing an entire class of claimants except those who actively choose to opt out of the legal action.

O’ Higgins told the tribunal on Monday that he wanted to lead the claim because “fair competition is essential for responsible capitalism and free markets must be fair markets”. He said the cartel allegedly at the heart of the lawsuit needed to be “held to account and the proposed class [of claimants] compensated”.

Evans said he had been involved in several previous attempts to build class-action-style lawsuits and had been “enthused” by the 2015 law allowing collective action.

Both claims are being backed by litigation funders that provide financing for legal action in return for a slice of the eventual compensation. Evans has assembled a consultative panel to advise him that includes Nobel Prize-winning economist Professor Joseph Stiglitz. By contrast, O’Higgins has an advisory committee including Sir Christopher Clarke, a former Lord Justice of Appeal.

The hearing continues.

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