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Evidence Presented in Landmark UK Libor Cases

On 15 October 2013, the Court of Appeal began a 3-day hearing to examine two separate cases brought against Barclays and Deutsche Bank linked to Libor-rigging.   The UK court will consider whether the banks mis-sold products that were based upon the rate and whether attempted manipulation of Libor can invalidate a loan or other deals.  In past rulings, judges have stopped short of saying Libor is relevant to all bank claims but said it could be used where contracts are specifically linked to the benchmark.

Barclays will attempt to dismiss a £70m legal claim from Guardian Care Homes, which alleges it was mis-sold complex interest rate hedging products based upon Libor.  The bank argues that the UK care home operator had sufficient understanding of the products to make its own judgement prior to entering into the agreements.  The case began as a mis-selling complaint but as of last October, the judge ruled that it could include claims of fraudulent misrepresentation connected to Libor manipulation.  Last year, Barclays paid $450m to settle allegations it manipulated Libor and was among a number of banks under investigation, including Deutsche Bank.

Deutsche Bank sued property firm Unitech last year for the repayment of a $150m loan and a related $11m interest-rate swap.  Unitech counter-sued claiming that the loan and swap deal were being manipulated by some banks at that time.  Last month, a UK court said that while there is evidence that that Libor rate had been manipulated, it did not make the loan void and Unitech must pay the loan but the dispute over the related swap should go to trial.

The landmark ruling is expected later in the year and is worth keeping an eye on.  If it ultimately turns out that any transaction by a Libor manipulating bank could be void ab initio, who knows what the consequences could be.

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