Time is running out for claims in relation to products sold at the height of the financial services boom. Ben Rigby speaks to leading barristers about a busy time at the banking Bar

It is a busy time to be a banking barrister. A survey by Sweet & Maxwell in October 2011 found the big four UK banks being involved in 43% of all FTSE 100 High Court cases up to July 2011, leading Tom Hibbert, head of financial disputes at Reynolds Porter Chamberlain to say claimants were "approaching the end of the window in which claims can be made relating to complex financial products sold at the peak of the financial services boom".

Alex Taylor, director of clerking at Fountain Court, says that while such claims have plateaued, he is seeing new enquiries in relation to securitisation issues. But, he says, there has been spike in cases being issued so as to beat any Limitation Act periods expiring, noting: "We enjoyed good growth in 2007, 2008 and 2009, particularly aligned to the bank charges case, which absorbed a lot of resource, both at silk and junior level."

In recent years, those chambers with banking specialisms have seen work increase on both the retail and investment side, as well as in the regulatory area. Outgoing senior practice manager Nicholas Hill (pictured) of 3 Verulam Buildings (3VB) says that in common with most sets, his has seen "increases in work in four main areas: banking and finance (both domestic and international), civil fraud, international arbitration and commercial litigation".

Behind such instructions lies a greater desire, says Hogan Lovells partner Philip Parish, for counsel to better integrate with solicitors. Parish finds: "Those drawn from chambers, such as Brick Court, 3VB, and Fountain Court, are genuinely very flexible, with a wide suite of skills," singling out Fountain Court's Timothy Howe QC as "someone who exactly fits that mould".

3VB's Richard Brent agrees, saying: "Larger cases, like Lehman Brothers, bring out these kind of teamwork skills; but their extent varies from junior to junior and from case to case."

Follow the money

One of Hill's star silks, Sonia Tolaney QC (pictured), suggests that the increase in work has a number of origins. One is disputes over swaps involving Italian local authorities, who have sought to resile from their investments with a number of banks. These claims, she says, are being strongly defended by banks, both in the Commercial Court and in various courts in Italy.

Tolaney has emerged as one of a select group of counsel involved in such claims, with Fountain Court's Richard Handyside QC similarly active, being reportedly involved in no less than six actions involving various Italian local authorities.

One City partner praised them both, saying: "In 10 years' time, people are going to talk about the likes of Tolaney and Handyside in the same way they talk about Brindle and Sumption now."

Hill has seen the development of teams within chambers whereby newer silks partner with senior silks, but admits his junior silks are taking a lead for themselves. "There are popular followings for the likes of Stephen Philips QC, Andrew Onslow QC and Ewan MacQuater QC, for example, matched by followings for the likes of Beltrami, Tolaney and Nash as well as continuing demand for those at the peak of their careers like Ali Malek QC and John Jarvis QC."

The distinction between old and new silks is not as polarised as people think, he says. Paul Martenstyn, senior team leader at Fountain Court, agrees Handyside is very familiar with work in the swaps sector, adding: "He is drawing upon experience in that field equally well established at the top end, from the likes of David Railton QC, Michael McLaren QC, and Bankim Thanki QC."

Thanki was particularly praised by firms that Legal Week spoke to, having seen appearances in Winnetka Trading v Julius Baer, Lornamead Acquisitions v Kaupthing Bank and the colonial life inquiry in Trinidad, to name a few.

Jurisdiction challenges

One Essex Court's David Wolfson QC says another trend is the extent to which jurisdictional issues are raised when international parties are involved, with barristers asked to take a view about where the claim should be tried and how judgment might be enforced.

One case led to May 2011's European Court of Justice (ECJ) judgment in Berliner Verkehrsbetriebe v JP Morgan. The ECJ dismissed an attempt by a German municipality to avoid an English exclusive jurisdiction clause in a swap contract. The municipality argued that, as the transaction was beyond its capacity, the case was about the validity of a corporate decision, and should be heard in Germany under European Union rules, giving priority to the state of incorporation in such cases.

Those claims have increased, Tolaney notes, including disputes concerning the true construction of provisions of International Swaps and Derivatives Association (ISDA) master agreements, cases concerning investor classification and sophistication and breach of duty.

Brick Court's Jasbir Dhillon, having recently been involved in a structured finance case involving the construction of such an agreement, agrees: "These claims are significant – even more so if they go to appeal." Tolaney adds that sovereign debt claims are also emerging, saying: "Barristers are familiar with many of these types of claims, having litigated them following the last recession."

Claims arising out of the insolvency of Kaupthing and Lehman Brothers continue to be brought, where Erskine Chambers Richard Snowden QC and 20 Essex Street's Iain Milligan QC are also busy.

Fountain Court's Taylor points out the banking Bar plays an important role alongside insolvency specialists: "Tim Howe QC's position in one case saw him alongside Tom Smith, from South Square." This comes, lawyers say, from being familiar with many of the products used by banks.

The role of arbitration

In emerging markets many banks and counterparties tend to prefer arbitration to resolve their disputes, insisting on using English law and jurisdiction clauses as a passport to doing business.

Wolfson cites derivatives work in particular as an area where there are a significant number of claims being arbitrated; Dhillon agrees, particularly for multinational cases involving high-net-worth investors located in jurisdictions possibly presenting difficulties for enforcement through the courts.

He cites the example of claims involving derivatives governed by English law being required to be tested against Islamic Sharia tradition as one faultline.

The hard yards

The courts are increasingly examining the contractual terms on which products were sold and the doctrine of contractual estoppel is becoming a well established line of defence.

Wolfson says there is anecdotal evidence that some customers are choosing to litigate elsewhere because the Commercial Court is seen as pro-bank, but banks remain willing to litigate in London, and so do claimants. In any event, the work has become harder – barristers suggest cases have become more complex, harder to settle and worth more to win, or costlier to lose.

Wolfson says the credit crunch has meant that, in a jittery market, "clients often wanted to wait and see how matters progressed. Now, they want to enforce their rights, take their claim and get value, or to defend themselves against that enforcement".

The tougher banking environment has had an impact on the liquidity of medium-sized companies, and further challenges are likely to arise, with banks actively enforcing their rights and businesses finding it harder to meet their contractual obligations.

First to retaliate

While increases in work spring from pre-2008 investments failing or client default, for clients that took early and decisive action, many claims are being settled.

It is an area that Patricia Robertson QC of Fountain Court knows well. She says that quite often, "a factor for the bank is how to manage bad news; the bank will face down bad publicity if it has a strong case, but if you are going to tell a bank to settle, it's best to do it early" as public litigation "can flush out copycat claims" where "the risks are business critical, even for big institutions".

Critically required, she says, is a deep analysis of available evidence, legal and regulatory issues at a pre-action stage in order to determine whether to fight or settle, and what line will best challenge the other side's view of their own risks.

That involves, Robertson says, a risk assessment which, given the sums typically at stake, "may be on a substantial scale", involving early documentary analysis as well as preliminary expert evidence. "Sometimes a mutual pre-action exchange of views is helpful, decision-maker to decision-maker," she says.

Enter the juniors

Another development for the Bar is work on the consumer side of banking, which has morphed remarkably, given current numbers of claims concerning payment protection insurance.

Tolaney suggests that in future, there may be fewer such claims, thanks to appellate decisions and settlement policies, although the junior Bar remains busy dealing with such cases across the county courts.

Hogan Lovells partner Andrea Monks (pictured) says: "The junior end of the Bar is developing its own relationships with larger firms like ours, something not always seen 10 years ago. [Such cases] have meant that firms like ours have had to instruct junior barristers on volume cases in a way we didn't do previously.

"[This has] had a huge upside for the best junior barristers, who have been able to build great relationships off the back of it."

3VB's Hill agrees, saying that as interlocutory work has dropped off in the courts, opportunities to develop advocacy skills have had to change. "[Such claims] give them experience they might not otherwise have had. It works for both us and law firms, as only a small number of sets can deal with claims like this in bulk, with frequent negotiations, contested hearings, work against litigants in person and solicitor-advocates, and with appeals to the county court bench."

Monks adds that as a result she knows juniors incredibly well. "That means we'll continue to instruct them on bigger cases as their careers progress."

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Fountain Court's Raymond Cox QC – how contractual estoppel benefited banks in 2011

2011's key banking decisions began with Bank Leumi v Wachner, which took a restrictive view of when trading floor opinion becomes general advice, or personal recommendation, for the purpose of a duty under Financial Services Authority (FSA) rules. Since Springwell v JP Morgan, it remains very difficult for a claimant, without the assistance of express terms, to establish that a bank owes such a general duty of advice. Deutsche Bank v Khan, scheduled for trial in January 2013, is expected to raise this question yet again in the context of a bank taking over the borrowing of a family of customers.

More recent cases have, however, shown a greater willingness to accept that personal recommendations were made (Zaki v Credit Suisse, Rubenstein v HSBC). The trend suggests that banks will find it hard, in practice, to avoid what client-facing employees and traders say to customers being treated, at least as recommendations under the FSA's rules, unless they build into contracts sufficiently tight clauses which prevent anything said being a recommendation or advice.

Elsewhere, Cassa di Risparmio v Barclays lies to rest the explosive idea that stating that a collateralised debt obligation note was AAA rated meant anything more than that was what the rating agency had said. 'AAA' did not mean the note was low risk. Any other view would certainly have led to a tidal wave of litigation; as it is, no-one seems to be keen to take up this challenge.

Cassa is also one of a number of cases that limited the effect of no reliance, or no representation clauses by a restrictive reading. The non-reliance clause in Cassa was not wide enough to prevent the claim of a misrepresentation that the note was low risk. Camerata v Credit Suisse was another case where the non-reliance clause did not assist the bank because it was read, so that it only applied to cases where the bank bought investments for the investor, and did not cover negligent advice by the bank.

Finally, the fightback against contractual estoppel clauses took a different turn in Standard Chartered v Ceylon, where counter estoppels were raised. Arguments that the bank's own conduct, and reliance by the customer, justified an estoppel by acquiescence, or by convention, which prevented the bank from relying on its contractual estoppel clauses, were considered, although not upheld.

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