Property Alliance Group Ltd v The Royal Bank of Scotland Plc

In this judgment I give the reasons for making an order at a case management hearing on 11^th February 2015 about documents which are reports produced by the defendant to the Japanese Financial Services Agency (JFSA). These proceedings and the background relevant to the making of this order are explained in another parallel judgment arising from the same hearing on 11^th February 2015, [2015] EWHC 321 (Ch). That other judgment concerned Attachment C to the Deferred Prosecution Agreement (DPA) between the defendant bank (RBS) and the US Department of Justice. I will not repeat that background and context here.

The issues in this case involve allegations of manipulation of LIBOR by RBS. As explained in the parallel judgment, RBS was ordered to produce documents which disclose internal reports, reviews and summaries relating to the allegations of LIBOR manipulation. RBS produced a disclosure list signed by Paul de Gruchy, Senior Legal Counsel of RBS on 12 January 2015. Appendix B of the disclosure list relates to documents which RBS objects to inspection of on various grounds.

Section 4 of Appendix B of the disclosure list relates to five reports produced by the defendant to the JFSA. Necessarily neither the court nor PAG has seen these documents. However from the circumstances and their presence in the list I infer that they are reports which at least to some extent address manipulation or alleged manipulation of LIBOR by RBS staff. They may relate only to manipulation of Japanese Yen (JPY) or they may not. They may only traverse the same misconduct as that admitted by RBS in these proceedings and to the US DoJ in Attachment A to the DPA, relating to JPY and Swiss Franc (CHF) LIBOR or they may not. What is clear however is that subject to the objection to inspection, the order made by this court on 24^th November 2014 obliges RBS to disclose them because they are relevant to the issues in this case.

RBS objects to inspection of the reports by PAG or the court on the following ground: “because the Japanese Financial Services Agency has objected to inspection of these documents on the grounds that to do so would be detrimental to the regulation of financial services in Japan.” By an application made on 5^th February 2015 RBS seeks an order permitting it not to provide copies for inspection or alternatively an order preventing any party referring to the documents in open court and, insofar as it is necessary to make reference to the documents, providing that the court will sit in private.

RBS’ application is supported by a witness statement of its solicitor, Samuel Coulthard. Mr Coulthard’s statement exhibits a copy of a letter from the JFSA dated 4^th February 2015. The letter itself asks that the letter be kept confidential save to the extent necessary for RBS to put the JFSA’s objections to the English court and in a separate one page annex marked “confidential” explains the JFSA’s reasons why it wishes the reports to be kept confidential. Mr Coulthard also describes the provisions in Japanese law (an act called the Act on Access to Information Held by Administrative Organs) which he submits covers these reports and indicates why, given the JFSA object to inspection of the reports, RBS would then be in conflict with Japanese law if it was ordered to produce the documents for inspection. Mr Coulthard asks on his client’s behalf that the hearing of the application itself should be in private, given the JFSA’s request.

PAG submits that RBS should be ordered to produce the document for inspection without restriction and does not accept that the hearing should be in private. I decided to hear the application in private at least at this stage. It was simply not practical to deal with the application in any other way given the request of the JFSA.

The legal principles applicable to this application are the same as the ones referred to in the parallel judgment dated 11^th February 2015. In brief summary:

I have decided that I will order RBS to produce the five documents for inspection in this action. This order will take effect four weeks from the date on which it is made (11^th February 2015). In addition to the provisions of CPR r31.22(1) which will necessarily apply to the document I will make a special further order at this stage providing that until further order, neither party may refer to the document in open court without permission obtained in advance.

My reasons for making the order in these terms are as follows.

First, the documents are potentially highly relevant in this action. As I have explained above, I infer they are reports which address manipulation or alleged manipulation of LIBOR by RBS staff at least to some extent. This sort of material is likely to assist PAG and this court in dealing with the case.

Second, in the annex to their letter the JFSA describe the information as “Supervision related Information” and go on to explain that disclosure of such information might impair the stability of the financial system as a whole and cause harm to the rights, competitive position and other legitimate interests of the clients of the subject financial institution. While I accept that these concerns could apply in a generic way to Supervision related Information, I do not see how they can apply to these reports in the circumstances of this case. It is already a matter of public record that RBS staff have been involved in the manipulation of JPY and CHF LIBOR and the question of the extent of the LIBOR manipulation is a matter of real public interest.

Third, the strongest reason advanced by the JFSA why the documents should not be produced for inspection is the third and only other reason given in the annex. It is that disclosure of the reports, prepared in response to questions from the JFSA, would impair the trusting relationship and cooperation between the regulated financial institution and the regulator. The JFSA is concerned that it may become difficult to obtain honest cooperation from financial institutions and make it difficult to obtain accurate facts in future supervision.

I have no doubt about the sincerity of the JFSA’s position explained in the annex, nevertheless the concerns are expressed in general and unspecific terms. Set against the concerns of the JFSA is the obvious and compelling public interest in establishing the full extent to which financial institutions have been engaged in manipulation of LIBOR, to the extent that those issues are relevant to the proceedings before the court, which as I have explained already, they are.

Fourth, I regard the likelihood that RBS would be sanctioned for any breach of the Japanese statute as very remote. The information revealed in the documents must be RBS’s own information. There is no suggestion that the documents contain any confidential information belonging to the JFSA.

Fifth, it does seem to be correct that the reports fall within the definition of “Non-disclosure Information” under the Japanese legislation. That may also further explain why the JFSA itself regards that information as confidential. However while the statute does appear to provide for restrictions on the JFSA from disclosing such information pursuant to a disclosure request, it is not clear to me on what basis the statute itself even purports to prevent RBS from disclosing its own information before the English court pursuant to an obligation to the court to do so.

Sixth, the order is set to take effect in four weeks, which gives RBS time to approach the JFSA if it believes it should.

Seventh, once produced for inspection the documents will be subject to CPR r31.22, which prevents their use save for the purposes of the proceedings, subject to exceptions and again I refer to the parallel 11^th February 2015 judgment which addresses this in more detail. As in that judgment relating to Attachment C, I will include a further safeguard requiring permission in advance before any reference is made to the reports in open court.

However I will add this. Unlike the position relating to Attachment C about which the US DoJ explained that the content related to ongoing criminal investigations, there is no suggestion that these reports to the JFSA relate to ongoing investigations. Accordingly once PAG and the court has seen the contents of the reports, it may be appropriate to revisit the question of any ongoing restriction on references in open court.

For the reasons explained, I will order RBS to provide inspection of the five reports produced to the Japanese Financial Services Agency on the terms referred to.

Although this application was heard in private, having heard the application there seems to me to be no good reason why this judgment should remain private (nor why any transcript of the hearing of the application should remain private). I will direct that this judgment and any transcript will cease to be private on 11^th March 2015, that is four weeks from date of the hearing, with permission to apply in the meantime.