In a judgment handed down on 4 November 2014, Mr Justice Males considered arguments concerning bribery and conflict of interest and held UBS was responsible for the acts of an intermediary agent even where UBS was not aware of the bribe being paid.

The judge considered the following questions: was the intermediary acting as agent for the bank; and was the bribe paid by the intermediary in the course of its employment as agent?

The case primarily concerned claims relating to a series of derivatives entered into by UBS and others with Kommunale Wasserwerke Leipzig (KWL), a German municipal water company.

KWL was found to have had capacity to transact (as a matter of German law) but was still held able to rescind the transaction based on arguments of bribery and a conflict of interest.

KWL and the intermediary involved in the transaction (Value Partners Group AG, a Swiss company) had a history of dealings. In the course of that history, a corrupt relationship had developed involving one of the managers at KWL which began with extravagant gifts and expenses, and then escalated to outright bribery. The corruption extended to the transaction at issue in this case, with the relevant individuals having conspired to extract a large part of the upfront premium paid to KWL for their personal benefit.