The Office of Fair Trading (OFT) has lost its court battle to launch an investigation into the fairness of unauthorised overdraft charges.

Five Justices of the Supreme Court, led by Lord Phillips of Worth Matravers, ruled this morning (25 November) in favour of seven banks and one building society, ending the two-year case which was initially brought to the High Court in 2007.

Today's judgment overturns earlier High Court and Court of Appeal rulings that stated that overdraft charges could be assessed on their fairness under the Unfair Terms in Consumer Contracts Regulations introduced in 1999.

The ruling will be seen as a blow to the OFT which has attempted to prove that the charges, which have affected thousands of customers, are illegal.

The OFT is now seeking discussions with banks, consumer organisations, the Financial Services Authority and the Government and is due to make a further announcement in December.

In a statement, the OFT said: "The OFT is disappointed by today's Supreme Court judgment, and it will also be disappointing for many consumers. The OFT will now consider the detail of this judgment before it makes a decision on whether or not to continue its investigation into unarranged overdraft charging terms."

Forsters partner Andrew Head commented: "This is a significant victory for the banks but it appears to have been decided on narrow technical grounds – that assessing the unfairness of the overdraft charges is outside the powers of the OFT – rather than on the underlying merits of the case. The banks may have won the battle but the war is by no means over. Expect the OFT to regroup for another assault."

A clutch of major UK law firms took advisory roles on the case.

Simmons & Simmons advised Barclays, with Jonathan Sumption QC of Brick Court Chambers instructed as counsel. Slaughter and May advised Nationwide alongside 3 Stone Buildings' Geoffrey Vos QC, while Addleshaw Goddard was instructed by Clydesdale, with Richard Salter QC of 3 Verulam Buildings (3VB) instructed as counsel. Ashurst advised Abbey National alongside 3VB's Ali Malek QC.

Elsewhere, Linklaters and One Essex Court's Laurence Rabinowitz QC advised the Royal Bank of Scotland, Freshfields Bruckhaus Deringer and Mark Hoskins QC advised HSBC, while Lloyds TSB turned to Lovells and Fountain Court's Bankim Thanki QC.

The OFT used in-house counsel with 4 Stone Buildings' Jonathan Crow QC instructed as counsel.

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