Implied Representations in Derivative Transactions after Property Alliance Group Ltd v The Royal Bank of Scotland Plc

Abstract

The London Interbank Offered Rate (LIBOR), the most important figure in finance underpinning USD350 trillion-worth of financial products, and other benchmark rates were manipulated between January 2006 and March 2012 by leading international banks. Recent litigation concerning LIBOR-referenced transactions, which were concluded during this period of benchmark rate manipulation, has opened the door to implied misrepresentation claims against banks involved in the manipulation. This essay outlines and critically analyses the decisions of the English Court of Appeal in Property Alliance Group Ltd v The Royal Bank of Scotland Plc and the English High Court in Marme Inversiones 2007 SL v Natwest Markets Plc in order to construct a framework for bringing an implied misrepresentation claim in the context of benchmark rate manipulation under English law. While these decisions demonstrated that the courts are willing to imply a representation from a bank that it had not manipulated a benchmark rate, both decisions considerably limited the scope of such a representation with the effect that the falsity of the representation is difficult to prove. This essay also examines the impact of the developments in the English law on New Zealand, arguing that, although the law of misrepresentation has been largely reformed, the New Zealand courts are likely to look to the English law if a similar case arises before them.