What happened?

Manipulation of foreign exchange (FX) benchmarks has been one of the largest and longest-running probes into collusion between banks and related misconduct. Antitrust authorities and financial regulators around the globe have issued over €10 billion in fines since the investigations began in summer 2013.

The European Commission’s investigation, which is still on-going, involves at least the following banks: Barclays, Bank of America, Citigroup, Deutsche Bank, JP Morgan, HSBC, RBS, UBS and Credit Suisse. The parties are reportedly in settlement discussions with the EU competition watchdog.

Credit Suisse, however, has recently stated that it is withdrawing from the settlement discussions, because it does not agree with the scope of the Commission’s case that would form the basis of the settlement. It specified that it “does not believe that its employees engaged in any systemic conduct in the FX markets that violated the European Union’s competition rules, and would vigorously contest any proceedings brought on that basis”.

Why does this matter?

The Commission now faces the prospect of a so-called ‘hybrid case’, in which it issues a summary infringement decision against some parties, whilst having to continue its investigation into others. Credit Suisse’s decision not to settle could see it let off without sanction, or subject it to a full infringement decision, which it may appeal to the European courts.

The Commission favours the settlement procedure as a means of concluding cartel investigations quickly and cleanly, and thereby limiting the prospects of appeals. Clearly, the Commission need not establish that conduct is systemic in order to find a violation. It is striking that Credit Suisse states that it disagrees with the basis of the proposed settlement, rather than denying all the allegations or refusing any settlement at all. As such, the statement may be a means of pressuring the Commission to narrow the basis of its case against the bank for settlement purposes, or it might simply be intended to put would-be claimants on notice that Credit Suisse will robustly defend any case brought against it.

In the recent Trucks cartel – another hybrid case – Scania refused to settle and was separately fined some €880 million. While the aftermath of the Commission investigation has led to civil claims against the settling parties in the United Kingdom, Ireland, the Netherlands and Germany, Scania has – for now – either not been included or subsequently dropped as a defendant. Naturally, this does not prevent contribution proceedings being brought against it by the other defendants for any damages they would have to pay on account of Scania’s participation in the cartel.

What happens next?

If settlement discussions with the other banks are successful, the Commission would move to issue a summary infringement decision. However, if any bank were to refuse to settle, the Commission would have to issue a full statement of objections against them, to which the banks would have an opportunity to respond in writing and orally, before a final decision is made.