Today new procedures are implemented in the English High Court to deal with the more complex and important cases concerning the domestic and international financial markets. This follows a consultation exercise launched in May 2015 which was the subject of a previous Dechert OnPoint. As anticipated, the new rules create a specialist Financial List and introduce a Financial Markets Test Case Scheme.

The Financial List

This initiative is intended to give parties to proceedings on the Financial List added procedural flexibility and access to experienced business judges.

The scope of the Financial List is fairly broad; claims which meet any of the following three criteria may be issued using this procedure:

  1. claims relating to loans, project finance, banking transactions, derivatives and complex financial products, financial benchmarks, capital or currency controls, bank guarantees, bonds, debt securities, private equity deals, hedge fund disputes, sovereign debt, or clearing and settlement, which are for more than £50 million or equivalent; 

  2. claims requiring particular expertise in the financial markets; or

  3. claims raising issues of general importance to the financial markets.  

Financial markets for these purposes include the fixed income markets (covering repos, bonds, credit derivatives, debt securities and commercial paper generally), the equity markets, the derivatives markets, the loan markets, the foreign currency markets, and the commodities markets.

The threshold for the value of claims only applies to the first category. This is because although an individual claim may have a relatively low value, its outcome may have a significant impact on the market.

Claims may be commenced in either the Chancery Division or the Commercial Court and will be allocated a designated judge who has been authorised to try such cases as a specialist in financial markets. Existing Commerical Court procedure will usually apply to claims in the Financial List.

The Financial Markets Test Case Scheme

This pilot scheme will supplement the Financial List, and will operate from 1 October 2015 until 30 September 2017, for Financial List claims commenced after 1 October 2015 which raise a point of general importance to the financial markets.

For cases which fall within this category, parties are able to issue by agreement proceedings which are intended to clarify a point of law that requires authoritative judicial guidance. There is no need for an actual dispute to have arisen between the parties, although they will have to demonstrate opposing interests as to how the legal issue is resolved.

This Scheme is designed to facilitate the resolution of market issues on which there is no previous authoritative English precedent, without having to wait for a dispute to arise between litigious parties with the relevant fact pattern. As a result, where there are unclear legal points in the context of the financial markets, it will be possible to resolve these more quickly than was previously possible, providing for greater certainty for market participants and others. To ensure that the claim will be a satisfactory test case the court is able to permit trade, professional and regulatory bodies or associations, or a third party that would be affected by the decision, to be joined as a party to the proceedings.  The general rule is that all parties will pay their own costs, whatever the outcome of the case. 

Aims of the new procedures

In a speech made on 8 July 2015, the Lord Chief Justice, Lord Thomas of Cwmgiedd, explained that the aim of this new procedure is to provide a faster, more efficient and economical forum for financial dispute resolution.

Lord Thomas commented that “[t]he new Financial List… will set an international benchmark. The new list will not only encourage international litigants to continue to use our courts, the principles they embody and their jurisprudence, but in doing so they will help to raise standards. Setting the bar high here will help to raise the bar high across the world.

The future for financial markets disputes?

Overall, these developments are welcome as they will allow substantial financial market disputes and problems to be determined in a suitable forum.  It is a sensible development to have test cases involving affected third parties and trade, professional and other bodies without the need for an actual underlying dispute, particularly when linked to the lifting of the normal rule that the losing party pays the costs of any successful party (although the Government may take the opportunity to increase the court fees payable for cases in the Financial List).

The impact of these changes will be followed with interest.