UK Supreme Court: Does the FSA Need to Give a Cross-Undertaking as to Damages in Favour of Third Parties?

On 12 and 13 December 2012, the UK Supreme Court will be hearing an extremely interesting appeal. The case of The Financial Services Authority (a company limited by guarantee) (Respondent) v Sinaloa Gold plc and others (Respondents) and Barclays Bank plc (Appellant) UKSC 2011/0244 concerns cross-undertakings, damages, freezing injunctions and third parties. The issue thrown up by the appeal is whether the Financial Services Authority (FSA) should generally be required to give a cross-undertaking in damages to third parties affected by a freezing injunction obtained pursuant to its statutory regulatory functions over and above the costs incurred in complying with the order. See Supreme Court’s judgment here. 

I. Background

The FSA regulates financial services and markets under the powers and duties conferred upon it by the Financial Services and Markets Act 2000 (FSMA). In December 2010, the FSA commenced proceedings in the Chancery Division against the three named defendants, Sinaloa Gold (S), PH Capital Invest (PH) and Mr Glen Hoover (GH), whom it alleged were involved in what is commonly referred to as a “boiler-room fraud” involving the sale of S’s shares.