In the first half of 2016, there were a number of interesting judgments in relation to agreements concluded on standard terms which are likely to be of relevance to those using such documents in future. This theme continued throughout the second half of the year, with the Court of Appeal decision in Cheyne Capital v. Deutsche Trustee Company, which concerned general principles of contractual interpretation in the context of a CMBS transaction, and the High Court decision in Lehman Brothers International (Europe) v. ExxonMobil Financial Services BV, in which the court considered the termination provisions contained in the Global Master Repurchase Agreement 2000 and the meaning of the phrase “close of business” in that context.
Further, there have been a number of cases dealing with procedural issues, including the first judgment in a case conducted under the new Shorter Trials Scheme pilot. Meanwhile, on the issue of costs, the Court of Appeal has also upheld a first instance decision regarding the liability of third party litigation funders for costs on an indemnity basis.
The second half of 2016 saw substantial further developments in relation to the application of the SMR.
In the first half of the year, the FCA promised to clarify its position as regards overall responsibility for the legal function within banks, and whether that person required approval under the SMR for a senior management function. In September 2016 the FCA published a Decision Paper on that issue, which sets out what the FCA considers to be the risks and benefits of potentially including the head of legal within the SMR. The issue has provoked considerable controversy and, perhaps understandably, the prevailing view of the majority of those within the legal profession, including the Law Society and the BBA, is that the legal function should not fall within the scope of the SMR. Particularly for those working within the legal function of banks and other financial institutions, this issue is likely to have been the most significant regulatory development of the second half of 2016.
In addition, the regulators have published a consultation paper regarding their proposed amendments to DEPP, explaining how the duty of responsibility under the SMR, which replaced the controversial presumption of responsibility for SMFs, will be enforced. The consultations set out the considerations which the FCA and PRA will take into account when determining whether a particular SMF was responsible for the activities which the breach concerned.
What to watch out for
The judgment in Property Alliance Group Ltd v The Royal Bank of Scotland plc (RBS)  EWHC 3342 (Ch), which was handed down on 21 December 2016, is likely to have considerable significance for financial institutions throughout 2017. This was the first LIBOR case to be taken to trial, and the Court dismissed all of PAG's claims. For queries relating to this case, please contact any of the Dentons team members.
The first half of 2017 is likely to see the handing down of judgment in a number of significant cases, including:
- the appeal by Portuguese transport company, Companhia de Carris de Ferro de Lisboa SA, and others against Banco Santander (please see our summary of the first instance decision)
- the trial of the Libyan Investment Authority’s claim against Sociéte Générale, which is due to begin in April 2017. We summarise the decision in the "Libyan Investment Authority’s claim against Goldman Sachs".
Regulatory and other developments
A number of significant publications from the second half of this year are likely to have further implications into 2017, particularly in the context of the SMR.
9 January 2017 is the relevant date by which firms must respond to various of the regulators’ publications regarding the SMR, including the FCA’s consultation on the application of the Conduct Rules to NEDs and the proposed amendments to DEPP regarding the enforcement of the duty of responsibility, in relation to which final rules are expected later in 2017. Responses to the FCA’s discussion paper regarding overall responsibility for the legal function are also due by 9 January 2017. The FCA has stated that it will issue a consultation in due course, and provide information on any transitional measures which may be needed for firms, once it has reviewed the feedback to its discussion paper.
Apart from the SMR, following its consultation in August 2016, the FCA is also expected to make a further announcement in Q1 2017 regarding its proposed rules in relation to PPI complaints, in particular its proposal that a cut-off be introduced by which any future complaints must be received.