LIBOR: Disclosure and Open Justice

19 10 2013

Graiseley Properties Ltd & Ors v Barclays Bank Plc & Ors (Rev 1) [2013] EWHC 67 (Comm) (24 January 2013).

This is another judgment in interim proceedings in LIBOR related litigation in England and Wales. It was handed down in between the other judgments examined in this miniseries and in this application Flaux J was confronted with a slightly different set of issues. Following the amendment proceedings, at a Case Management Conference on 13 in November 2012 the issue arose as to the extent of electronic disclosure made by Barclays (B) because regulatory notices (in the US and UK) for LIBOR manipulation anonymised individual employees and reviews of employees’ email accounts. One could not discern the employees whose email accounts had been reviewed by regulators as opposed to those employees referred to in the notices in setting LIBOR. Like their US counterparts, UK regulators had investigated the manipulation of LIBOR and had made various findings.

During the investigation B’s employees’ e-mails were reviewed but the regulators’ findings did not name people. During the disclosure process, B was required to identify and state the position of the relevant employees. To ventilate disclosure, Flaux J ordered B to divulge to Graiseley (G) and the Court two lists (a) the 25 employees who were the subject of the notices (“short list”) and (b) the 207 employees whose emails were scrutinised by regulators (“long list”, encompassing the “short list”).

Subsequently, the Court was invited by the Department of Justice (DOJ) to (i) keep the names of all 207 to protect a US criminal investigation and (ii) maintain anonymity in respect of 30 persons’ identities referred to in the statement of facts because publicly disclosing this information could undermine the US investigation. In sum, 82 B’s employees/ex-employees – on the material before Flaux J, not involved or implicated in LIBOR manipulation and not on the short list or mentioned by the DOJ – applied for an order that their names and particulars which might lead to their identification should not be published other than to the parties and their legal advisers and any actual or potential witness or expert. It was submitted that B’s employees/ex-employees had a legitimate interest in remaining anonymous to avoid prejudice and unfairness and there was no competing public interest in identifying them.

In sum, firstly Flaux J held that B’s employees/ex-employees were not entitled to an order preventing their names and identities being revealed in open court. Secondly, there was no general exception to the principle of open justice to protect non-parties from identification in proceedings to avoid the risk of reputational harm.

In refusing the application, and reviewing voluminous principles of law and authorities, the Court held as follows.

There was no basis of derogating from the principle of natural justice and it was clear from the statement of the law by Lord Neuberger MR, as he then was, in the Practice Guidance (HC: Interim Non-Disclosure Orders) [2012] 1 WLR 1003 that the principle of open justice applied in its full rigour at the interlocutory stage and not just at trial: para 35. (Open justice remains a fundamental principle and generally hearings, judgments and orders, remained open to the public.) It was clear from the Practice Guidance that the derogation had to be established by clear and cogent evidence and that burden of establishing any derogation from the general principle of open justice lay on the person seeking to do so: para 37. Applying Pink Floyd Music Ltd v EMI Records Ltd [2010] EWCA Civ 1429, [2011] 1 WLR 770 at para 66, it was clear that anonymity orders would only be made in those cases where the applicant for the order establishes that it is strictly necessary for the proper administration of justice: para 52.

Thus, the application failed at the first hurdle because employees/ex-employees could not begin to establish by clear and cogent evidence that anonymisation was strictly necessary to secure the proper administration of justice: paras 37 & 67. For Flaux J “no principled reason” for distinguishing between cases – where protecting identities was a “central” issue as opposed to an “incidental” issue – existed. Human agents – whose identity was “important” – drove corporate identities and in respect of those involved in manipulating LIBOR, the point was “somewhat doubtful”: para 36.

Identifying the employees/ex-employees would not prejudice any criminal investigation because most of them were not implicated by the regulatory findings in the fixing or manipulation of LIBOR: paras 38–39. To argue otherwise was a “bad point”: para 38. Equally, it was “striking” that neither the FSA nor the Serious Fraud Office, which were empowered to initiate criminal proceedings, “wished to address any submissions to the court on this issue.” The belief that naming the people who, like the authorities, themselves knew of their nexus with LIBOR manipulation was “fanciful”: para 39. So naming them would neither impede foreign criminal investigations nor “prejudice a jury hearing a criminal trial at some stage in the future, let alone one in the United States.” The Court thought that the DOJ letter was an “assertion which could not be tested.”

Moreover, the employees/ex-employees had nothing to fear if the media chose to report their names: para 41. Furthermore, open justice would make uninformed and inaccurate reporting less, rather than more, likely: para 42. A suggested analogy with the procedure under section 393 (third-party rights) of FSMA 2000 was not “apt” because the fundamental principle of open justice did not apply to regulatory investigations as it did to court proceedings: para 44. For Flaux J, there was no general exception to the principle of open justice to protect non-parties from identification in proceedings to avoid the risk of reputational harm: para 54. Since the order sought was not in the interests of justice and the application failed at the first hurdle, no derogation was established and the court had no residual discretion to grant some lesser protection: para 57.

There were other compelling reasons why open justice should apply. The order proposed would impede G in the presentation and preparation of their case and this was “inimical” to the overriding objective of the Civil Procedure Rules 1998: para 58. Using an intricate code to preserve anonymity would create practical difficulties because the media would still be able to indentify the name of senior executives. Thus, a blanket anonymity order was not on the cards in any event. The problem was further exacerbated because G’s solicitors would have to redact case documents. Inevitably, inconveniencing G, this would increase costs because senior lawyers’ supervision would be required to ensure that the order was not inadvertently breached: para 59. Therefore, the proposed order presented “a real risk of prejudice” to G: this was a strong pointer “to it not being in the interests of justice to make the order sought.”

Equally, a number of the names in question were already in the public domain. The Treasury Select Committee Report named Barclays’ senior management. Given that other of B’s personnel were identified on the Financial Times and Reuters websites and imposing an anonymity order in respect of “people already named as involved, in documents or websites publicly available, would be absurd”: para 60.

B’s involvement in LIBOR manipulation was a part of the bigger picture. Numerous banks were involved. Therefore, there was “a legitimate public interest in the true picture in relation to the manipulation of LIBOR by banks generally, not just B, being brought fully to light”: para 61. The public was entitled to view the true picture, in respect of “all aspects of” LIBOR rigging, which would be facilitated by “fair and accurate media reporting”. Bearing in mind that LIBOR manipulation was big news and applying R (Mohamed) v Foreign Secretary (No.2) [2010] EWCA Civ 65; [2011] QB 218 that the media, not the courts, determines what to report and the way in which it is reported – and Article 10 (freedom of expression) of the European Convention on Human Rights (ECHR), the press had the right to report on LIBOR manipulation now and the public had a legitimate interest, which arose immediately and “not merely at trail”, in learning the identities of bankers alleged to be implicated in LIBOR manipulation: para 62. Furthermore, since B and the implicated employees did not challenge the FSA’s regulatory notices, there was “simply no justification for saying that the disclosure of that information to the public should have to await the conclusion of a trial.”

Therefore, it was not necessary to protect persons involved in LIBOR manipulation through an anonymity order because to do so “would be an affront to the principle of open justice and would potentially damage public confidence in the administration of justice”: para 63. Insofar as those who were innocent were concerned, the belief that “they could be prejudiced by being identified” was “somewhat unreal” because open court proceedings are likely to “foster fair and accurate reporting rather than the reverse.”

Finally, the order sought was disproportionate because it was too wide. Proportionality was not only a feature of the ECHR but it was a “critical element of any exception to the common law principle.” As Lord Diplock explained in A-G v Leveller [1979] AC 440 the court will only allow departure from the general rule “to the extent and to no more than the extent that the court reasonably believes it to be necessary”: para 64.

Therefore, contrary to the employees/ex-employees standpoint, the order was more than a minor incursion on open justice. It was a blanket order: too wide in its scope and “intrusive and prejudicial” to G’s case as it would hamper “the fair determination of interlocutory disclosure disputes which are likely to arise and, in that sense, inimical to the overriding objective under the CPR”: para 65.

It is also pertinent to note that in some circles Flaux J has been criticised for ruling that:

23 … this was not a case where it was necessary to balance the right of freedom of expression of the press against the right to respect for private and family life in Article 8. The individuals cannot invoke Article 8 rights because the case concerns their professional activities rather than their private lives.

Despite the existence of domestic and international jurisprudence which makes a different point on Article 8, other people think that given the international furore over LIBOR’s manipulation, Flaux J made a robust decision.

The next two posts in this miniseries (see here and here) analyse the judicial approaches espoused by the decisions in Deutsche Bank AG & Ors v Unitech Global Ltd & Ors [2013] EWHC 471 (Comm) and Deutsche Bank AG & Ors v Unitech Global Ltd & Anor [2013] EWHC 2793 (Comm).



4 responses

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