Barclays Settles Second LIBOR Mis-Selling Case

A View from Constantine Cannon’s London Office

By Natalia Mikolajczyk

Barclays confirmed on Friday that it has settled another case alleging that it mis-sold LIBOR-tied derivative products.

The lawsuit was filed by Domingos Da Silva Teixeira (DST), a family-owned construction and property company based in Braga, Portugal. As reported by the Financial Times, DST alleged that the British bank engaged in mis-selling, which involves misrepresenting the characteristics of a product or service, by “repeatedly induc[ing] it to restructure and replace its derivative products.”

DST identified 16 allegedly unsuitable derivative transactions, including interest-rate swaps, commodity-based swaps and a foreign-exchange swap. DST sought damages of 11.1 million euros ($15.4 million) in its claim before the Commercial Court in London. Although Barclays has admitted in a June 2012 settlement with the U.S. Department of Justice that it engaged in rigging of LIBOR and EURIBOR, Barclays maintained that DST did not suffer any loss from the manipulation.

Barclays refused to comment on the settlement, stating merely that a “commercial resolution” was formally reached by the parties in the proceedings before the Commercial Court. King & Spalding, counsel for DST, also refused to comment.

Whether this is a beginning of a wave of settlements related to LIBOR-rigging allegations remains to be seen. Last week, Barclays entered into its first out-of-court settlement of English LIBOR-related litigation with Graiseley Properties, owner of Guardian Care Homes. Deutsche Bank faces similar mis-selling allegations filed by Unitech.

Many commentators in London have noted that although there is no precedent of banks actually admitting wrongdoing in specific cases brought by customers, Barclays’ settlements may encourage additional customers to come forward to assert claims against Barclays and other financial institutions.

– Edited by Gary J. Malone