London has for many years been a hub for resolving financial markets disputes. But the High Court in London is facing increasing competition from rivals like the Dubai International Financial Centre Courts, and initiatives to persuade financial institutions to arbitrate their disputes. These competitors are putting pressure on the English courts to up their game when it comes to financial litigation.
Since the Rolls Building opened in 2011, London has been home to the world's largest business court, with state of the art facilities. And the English judiciary rightly maintains a best in class reputation. But current arrangements for litigating finance cases in the High Court could be improved upon. One size fits all court procedures in some divisions have not always kept pace with the needs of sophisticated litigants. And allocation of judicial resources can at times be a lottery. There is the occasional example of a case with far reaching implications for finance markets being decided by a judge with a background in family law (albeit swiftly reversed in the Court of Appeal).
The good news is that lessons are being learned. In July 2014 the Lord Chief Justice announced a review to look at "what more we can do to meet the needs of court users in financial cases, seeking views from institutions, the markets and the professions". Following an initial consultation, in January 2015 a working group was formed to develop specific proposals. Those proposals were published on 7 May 2015, and can be viewed on the Chancery Bar Association website.
The Financial List
The key elements of the working group's proposals are:
- The creation of a specialist "Financial List" for financial cases. Cases relating to loans, project finance, banking transactions, derivatives and complex financial products, financial benchmarks, capital or currency controls, bank guarantees, debt securities, private equity deals, hedge fund disputes, sovereign debt, or clearing or settlement will join that list, provided they are for £50 million or more, are ordered onto the list, require particular financial expertise, or raise issues of general importance for the financial markets.
- A specialist pool of judges with experience of financial markets disputes will hear Financial List cases. Judges will be docketed to cases at an early stage, so every hearing in a case will be before the same specialist judge.
- All Financial List cases will be subject to a bespoke procedure based on the existing Commercial Court procedure. This will apply even to cases started in the Chancery Division (such as Part 8 claims brought by securitisation trustees and special servicers). As the working group points out, the Commercial Court procedure is tried and tested, and designed for the efficient conduct of heavy cases. It is also already familiar to most finance disputes lawyers, so no new learning process will be needed. For similar reasons, all Financial List cases will be managed through the Commercial Court's registry and listing office.
- A new "test case" regime is to be set up. This will be a potentially important new mechanism to allow issues that are important to the financial markets to be determined authoritatively by the English court at an early stage, without the need for a live dispute to have arisen been two parties. This is a particularly welcome proposal, as it is easy to think of issues that have sat latent in, for example, the ISDA Master Agreements or the LMA documentation for years waiting for a case to be brought, and causing uncertainty to market players. Under this proposal, trade bodies like ISDA or the LMA could bring those issues before the court for the benefit of the rest of the market.
These proposals are welcomed as simple, easily implemented enhancements that promise to resolve the biggest issues facing the High Court as a financial dispute resolution centre. They offer dedicated access to judges experienced in financial markets issues and a streamlined, sophisticated procedural framework that is already tried and trusted. They also create a unique platform for financial markets issues with wider implications to be authoritatively decided at an early stage.
The working group's consultation period is now closed, and it is hoped that their recommendations will be implemented swiftly. As draft amendments to the Civil Procedure Rules have already been published, the Financial List may be up and running very soon.