The Court of Appeal has this month rejected arguments that lending agreements with LIBOR manipulating banks were void because of breaches of competition law.


In a long running battle, Deutsche Bank and other lenders are suing Unitech Limited and Unitech Global Limited (“Unitech”) claiming sums allegedly due under credit facility agreements, swap contracts and guarantees.

The bank has been pursuing Unitech, India’s second largest real estate company, over a USD 150 million loan it made to the company. In a separate action, the bank is attempting to recover USD 11 million as part of an interest rate swap contract. In 2012, Unitech issued a counterclaim alleging that the bank sold it an unsuitable product based on LIBOR rates. It claims that the loan swap and contracts were invalid because of the link to manipulated LIBOR rates.

Amongst a number of allegations, Unitech is contending that it was an implied term of its contracts with the bank that the bank would not seek to manipulate LIBOR and that a breach of that implied term entitled Unitech to rescind the contracts. The High Court refused permission for Unitech to amend its defence to also put forward a competition law argument. The amendment sought by Unitech was that the lending documents were:

“void as a result of the Bank’s breach of the anti-competition provisions of the Treaty on the Functioning of the European Union (“TFEU”) and Section 2 of the Competition Act 1998.”

Appeal to the Court of Appeal

Unitech appealed to the Court of Appeal against the High Court's decision. Underlying the proposed competition law defence were allegations by Unitech:-

  • That LIBOR had been manipulated in violation of Article 101 of the TFEU and Section 2 of the Competition Act 1998; and
  • In a bold argument – that even if there was no manipulation, LIBOR-setting was itself an unlawful information exchange in violation of Article 101 and Section 2 because it required each panel bank to state the rate of interest at which it believed it could borrow, thus revealing commercially sensitive information as to its own strength and credit worthiness.

By way of background: it is certainly the case that LIBOR manipulation can violate competition law. In December 2013, the European Commission fined Deutsche and several other banks for infringement of Article 101 in their manipulation of Yen LIBOR (although, as that decision related only to Yen, it was not a finding of direct relevance to Unitech).

However, the Court of Appeal held that, even if Article 101 and Section 2 were infringed by the bank's (horizontal) practices of manipulating LIBOR, or indeed setting it, that would not render void a (vertical) LIBOR – referencing agreement between an infringer bank and its counterparty. The court drew a line of precedent from the landmark case of Courage v Crehan [1999] ECC 455 in which it held, albeit on structurally different facts, that a connected vertical agreement was not void.

The battle continues

Unitech can still contend that, in offering to enter into agreements referencing LIBOR, Deutsche Bank made implied representations as to the integrity of LIBOR, entitling Unitech to rescind the agreements for misrepresentation as a result of the manipulation of LIBOR by Deutsche Bank. If the court upholds rescission it would put the parties back in the position they would have been in had the agreements not been entered into.


If the LIBOR allegation reaches trial, it will be the first case to do so. Typically, such cases do not proceed as far as trial because of settlement or for another reason.