UK investors may take what is an unusual route in British courts and file a class action case in 2011 against the Royal Bank of Scotland (RBS). While RBS has been defending itself in several such cases in the US where these types of court cases are more common, it is believed they will soon be facing the same defense in British courts. According to news sources the likely lead barrister in a legal fight would be Andrew Onslow QC, a top financial services barrister located in London. Mr. Onslow is described on his Web site as a specialist in international and domestic banking and professional negligence, especially credit crunch disputes.
The usual course of angry UK investors has been to join suit with others in class action suits in the US since those cases are fairly successful in American courts. The roadblock in the UK lies with the Financial Services and Markets Act. Investors are now having those in authority look into a possible case against the RBS despite the act due to massive loses occurring when the bank was nationalized which would be more likely if negligence were an issue in the losses.
Two of the investor groups that have begun to look into the possibility of recouping losses are the UK based North Yorkshire and Merseyside council pension fund groups. The wife of former Prime Minister Tony Blair, Cherie Blair, has been appointed to pursue RBS for compensation on behalf of the two groups.
The bases of the suit will focus on the fact that RBS tapped investors for £12 billion pounds shortly before going forward to secure another £45 billion pounds in taxpayer bailout funds. Further anger over the losses has occurred due to the payouts in bonuses to executives prior to and since the bailout. While the banking community has tried to publicly justify the payouts and ease the outcry of foul, those experiencing losses during the economic downturn do not believe that the payouts were a good business measure and could be considered neglect in nature.
One financial expert in Britain commented: “In Britain, the legal case against RBS is difficult because the Financial Services and Market Act requires quite a high degree of ‘intent’ on the part of directors to bring down a company – mere negligence isn’t enough. There are some that believe the rights issue debacle might be enough to build a case on.”
RBS has been seeking approval to begin paying bonuses in the hopes of retaining key employees. Sir Philip Hampton, Chairman of Royal Bank of Scotland admitted that last year the bank paid £1 million in bonuses to more than 100 bankers. Government has been seeking more disclosure of bonuses paid in light of analysts reporting a decline in lending in an economy when small businesses and individuals are in need of financial lending.
Vince Cable stated in an interview with the Sunday Times earlier this month that “”We’ve got to have disclosure rules; start shining light on what’s actually going on at the top of the leading institutions. If you keep people in the dark, you grow poisonous fungus.
“The banks shouldn’t underestimate our determination to act. They are deluding themselves, really seriously deluding themselves, if they believe the government is not going to take this seriously.”
It seems investors with financial losses as a result of RBS have decided to take it seriously as well.
Related posts:
Business Banking News