The Commercial Litigation Summit 2016: Marked to market

In a centrepiece debate, a group of heavyweight disputes veterans came together to discuss London’s much-lauded new finance court. Can it live up to expectations?

Even amid a packed programme at Legal Business‘s second annual Commercial Litigation Summit, the discussion on the newly-launched Financial List, the dedicated court backed by specialist judges and an innovative appeals track, was a highlight of the day.

The debate – chaired by Travers Smith disputes veteran Andrew King, and including High Court judge Mr Justice Knowles and One Essex Court heavyweight Laurence Rabinowitz QC – attracted well over 100 litigation specialists to gauge the early running of what is to some the most promising move by London’s civil courts since the 2011 launch of the Rolls Building.

The court, which launched officially in October 2015, has a threshold of cases worth £50m and has been designed to handle the most complex securities, banking and finance disputes, with a particular focus on the cases with the widest market impact.

Backed by a 12-strong roster of judges with a huge range of market experience, the List has attracted particular attention for its highly unusual Financial Market Test Case Scheme (FMTCS), a pilot to allow the courts to determine issues of wider importance without a crystallised cause of action.

‘The opportunity is there to use this unique test-case procedure and to make it work as imaginatively as we can. This has a great deal to offer.’
Mr Justice Knowles

Though the scheme has yet to be used, it has become a powerful illustration of the willingness in the Bench to imaginatively support not only the City as a finance centre but also London as a global disputes hub.

Summing up the sentiments of many regarding the court, Knowles commented: ‘Some may have appreciated this more than others, but it is one piece of a broader judge-led strategy that is designed, above all, to serve users.’

At the time of the conference, held on 24 May in central London, the court had 15 cases listed to be heard, eight issued on the List and seven transferred in. Three cases have been tried. The range of matters covered includes financial products, loan finance, financial benchmarks, debt trading and sovereign debt.

Knowles discussed his experience of presiding over one of the three cases to have gone to trial, a dispute over the meaning of a Loan Market Association standard-form documentation between a US-led fund, a major UK bank and a Japanese-based insurance group.

Knowles noted: ‘Each of those very sophisticated institutions came at the problem in the case with a quite different perspective on how the transaction worked. One of the things that appealed to them was the opportunity for that to be examined properly within the Financial List regime.’

Rabinowitz was one of the first to appear before the court, advocating before Mr Justice Blair on a transfer from the Commercial Court in a dispute over interest-rate swaps sold to a Portuguese transport company. The case, which was subject to an International Swaps and Derivatives Association (ISDA) agreement that imposed English law, involved complications over whether the matter could be handled under Portuguese law.

The silk praised the new court for creatively building on foundations that the legal profession is familiar with. ‘Lawyers are conservative and we do not like new things, especially if they require us to learn new skills. The beauty of the Financial List is that, although new, it probably does not require you to learn any new skills. There is all the advantage and none of the disadvantage of something new. It is strongly supported by the judiciary and there is a huge advantage in that for litigants, because you get a care and attention which exceeds even that in the Commercial Court and the Chancery. You have a fantastic opportunity at your disposal.’

Rabinowitz also noted the flexibility of the new court, including in his case consideration in a pre-trial review of whether to call in expert witness testimony ahead of opening submissions, an unusual move in litigation. He added: ‘People are willing to move to a different rule or a different approach, if it is appropriate to the case. That is why it is exciting and a very useful route for litigants to go, if they have the right sort of case.’

Boies, Schiller & Flexner partner Natasha Harrison, likewise, noted the confidence in the new court’s grip of complex securities matters on a case she handled, revolving around whether there had been a default on a complex securitisation.

‘Arbitration is confidentiality and not much else. What you are getting by going to court is the ability to appeal.’
Laurence Rabinowitz QC, One Essex Court

 

 

‘I would never have advised the client to issue an application in a Part 8 proceeding for summary judgment had we not had the Financial List. The complexity of the documents and some of the issues would mean a traditional judge might shy away from a summary judgment. We applied. To me, it was an absolute delight to have a judge come in who understood the structures and was immediately up to speed.’

Professing herself to be ‘very excited’ by the launch of the court, Harrison concluded: ‘[The Financial List] is going to attract further international investment, encourage institutions to write their documents to English law and in English courts, because they know they will have a specialist judge who understands their business and the instruments they are ruling on. It is going to bring some very positive things to the London markets.’

Picking up this point, there was confidence on the panel that the court would encourage fresh thinking across London’s civil courts. Fellow panellist, Joe Smouha QC of Essex Court Chambers, noted: ‘What we are going to find in the Financial List is that there is a great receptiveness to looking at those techniques and that they will be not only initiated by the parties but also judge-led. I am sure what we will go on to see is the road-testing of some of those techniques, which will then be rolled out, and we will see more often in the Commercial Court and the Chancery Division more generally.’

Early consideration

If there was substantial enthusiasm in the room for the City’s new finance court, there were questions raised over the related issues of achieving the delicate balance of specialisation with the breadth expected of senior judges, while maintaining an effective appeals track.

Responding to a question from the floor over the court encouraging a two-tier judiciary with the Financial List potentially draining the Commercial Court and Chancery Division of finance experience, Knowles countered: ‘I honestly do not think it is a problem, but it is something that we must all be very attentive to.’ He added: ‘Specialisations are emerging all the time within the legal system and that goes for the judiciary as well.

Smouha was similarly sanguine on the point: ‘I do not think one should assume that a two-tier characterisation suggests every judge in the Commercial Court and the Chancery Division would want to be a Financial List-nominated judge. One Commercial Court judge told me he was delighted he would never have to see an ISDA Master Agreement case again.’

With the new court built on the foundation of specialisation, there was some concern over whether the Court of Appeal would be able to quickly handle appeals from the court with judges with enough grounding in the area. Smouha noted: ‘The Court of Appeal is congested and commercial appeals, by their nature, tend not to have the features which meet the conditions for granting expedition. It will be important that, where Financial List cases are of general importance to the markets, appeals are determined quickly.’

Smouha also called for the Court of Appeal to make a clearer commitment to support the List. ‘My understanding is that the Master of the Rolls is very conscious of [the need to quickly and effectively handle appeals] and that there is an intention, both in relation to speed and in relation to the judges, to deal with it. I would suggest it would be useful for the Court of Appeal to make a public statement to that effect as a part of the development of the Financial List.’

Rabinowitz, however, noted his experience of a speedy appeal on his case, with the hearing listed for October, less than six months since the appeal was lodged. ‘If that is an indication of what is to come, it does look as if people have taken seriously the importance of Financial List cases, which do raise issues of significance to the market being moved on very quickly to the Court of Appeal.’

Knowles, likewise, argued the senior judiciary is behind the new court. ‘The whole system is supportive. You can count on a Financial List case being diligently considered the moment the application, whether for permission or otherwise, reaches the Court of Appeal. Proper, early consideration of the question of speed is one thing that the appellate courts are ready to give.

As to constitution of panel, again, the Court of Appeal is very alive to that. The tradition that we are likely to still see is that the third member of a three-person court may be deliberately from an adjacent or different field, but two very close to the field in question.’

The better for the market

In the final section of the debate, the panel addressed the importance of the new court in setting precedents for the markets at a time when some parties are choosing arbitration. Rabinowitz drily noted: ‘To me, what you are getting with an arbitration is confidentiality and probably not much else. What you are getting by going to court – and this is particularly important, when you are talking about the Financial List – is the ability to appeal.

‘We have all had experience of arbitrations: people always go into or agree to arbitrations because they think: “If there is a dispute, I am going to be right and I am going to win.” Anyone who has been involved in litigation knows that neither may hold true. One of the problems about having a single-level tribunal is that what keeps a tribunal honest is the knowledge that someone can review their decisions.’

Building on the point, Rabinowitz underlined the role of transparency for the wider market. ‘If you are confident about the way you conduct your business, and that your conduct is legitimate and will be upheld by a court, then you would want a determinative ruling that what you have done is right, so it has an effect not just for that case but across your business and, indeed, across your industry.’

Signature Litigation partner Graham Huntley picked up the point. ‘Many of us have seen important ISDA issues being addressed with an arbitration that cannot squeeze within the section 68/69 appeal route. To the extent that this Financial List encourages more of those disputes to be dealt with in public, the better for the market.’

Harrison noted: ‘If you think about where the law has been developing over the last ten to 15 years, it has been heavily in the financial markets. If the law is going to continue to develop, we need those types of cases being heard by the judiciary.’

Knowles stressed the commitment of Financial List judges to keep consulting actively on the development of the court, citing an annual market briefing on the court following the first one held in October last year and plans to set up ad hoc groups of users.

Rounding off, the discussion turned to the much-touted FMTCS appeals route, with Knowles commenting: ‘This is the area where, emphatically, we would like your help, your ideas, your suggestions and your proposals. It is a world first. The Lord Chief Justice talked about so much of litigation being fighting a fire that is already underway. Here is an opportunity to get in early.’

Knowles concluded by calling for engagement on the appeals track. ‘The opportunity is there to use this unique test-case procedure and to make it work as imaginatively as we can, so please give it consideration. I am absolutely sure – and so are the judges – that this has a great deal to offer.’

alex.novarese@legalease.co.uk

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