Barclays Fails to Break Libor-Fixing Link in U.K. Lawsuit

Barclays Plc (BARC) lost a bid to throw out part of a lawsuit brought by an elder care company accusing the bank of benefiting from manipulation of the London interbank offered rate.

Judge Julian Flaux in London said the claim, the first of its type to be brought in the U.K., can go ahead as it had a reasonable chance of success at trial and criticized the bank and its lawyers for trying to strike it out at an early stage.

“Your clients know jolly well what it is that’s being alleged,” he told Beltrami. “The real issue is that they are trying to shut it out at this stage because they don’t like it.”

Affiliates of Guardian Care Homes Ltd. sued Barclays to invalidate a loss-making interest-rate swap based on Libor. It originally filed the suit against Britain’s second-biggest bank for selling the swap improperly and later sought the court’s permission to add the Libor-fixing claim.

Regulators worldwide are investigating allegations banks altered submissions used to set Libor in an effort to benefit traders, or to appear financially healthier than they were. Barclays paid a 290 million-pound ($465.6 million) fine in June to settle with regulators over rate rigging. The Guardian suit is one of the first European lawsuits tied to allegations banks tried to shift the benchmark to benefit them.

Adrian Beltrami, a lawyer representing Barclays, argued the swap contract didn’t mention how the Libor rate was set so the claim over the interest rate shouldn’t go forward.

Test Case

Barclays is “trying to take Libor out of the Libor test case” before trial, Guardian’s lawyer Tim Lord said.

Guardian, based in Wolverhampton, England, claims a Libor- based interest-rate swap bought from Barclays isn’t valid because the bank knew, or should have known, the rate wasn’t accurate. The deal cost Guardian about 12 million pounds, according to the lawsuit.

Barclays “consistently sought to lower submissions for the purposes of the Libor fixing process” with the knowledge of senior managers including former Chief Executive Officer Bob Diamond, Lord said.

Beltrami said Guardian requested “indiscriminate disclosure” and the bank wants to narrow the terms of the case to a manageable level.

“This business had a suite of advisers, including Rothschilds, as well as several law firms and a lot of financial experience and skill in-house,” said John McGuinness, a Barclays spokesman. “This is a significant business which owes Barclays 70 million pounds. We do not believe any aspect of the case has merit and are defending it.”

Barclays was previously denied permission to have the swap claim decided by British financial regulators instead of a judge.

To contact the reporter on this story: Kit Chellel in London at cchellel@bloomberg.net

To contact the editor responsible for this story: Anthony Aarons at aaarons@bloomberg.net

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