Germany’s largest bank didn’t imply the London interbank offered rate was honest by linking a $150 million loan and interest rate swap to the benchmark, Judge Jeremy Cooke said in rejecting Unitech’s request to change its claim. The New Delhi- based company and a unit “were relying on their own judgment.”
Unitech said in court papers for today’s hearing it wouldn’t have agreed to the loan or swap had it known Deutsche Bank was manipulating Libor, making both agreements invalid. Requiring banks to make implicit promises about the entire Libor-setting process in contracts is “unrealistic,” the judge said.
Deutsche Bank and more than a dozen other lenders are being investigated by regulators worldwide over rate rigging. Though the bank has suspended seven employees so far and is under pressure to release results of an internal probe into Libor submissions, it hasn’t been censured by regulators.
Kathryn Hanes, a Deutsche Bank spokeswoman, didn’t immediately reply to an e-mail seeking comment. Unitech’s lawyer Richard Gwynne declined to comment outside court.
Unitech was the second U.K. plaintiff seeking to use rate- manipulation allegations in a case over swaps that turned out to be costly. Affiliates of Guardian Care Homes Ltd. won permission in October from Judge Julian Flaux to accuse Barclays Plc (BARC) of benefiting from its attempts to fix the benchmark. About $300 trillion of contracts worldwide are tied to Libor.
While Cooke conceded his interpretation had been different from Flaux’s, “every case will turn upon its own facts,” he said. He gave Unitech permission to appeal his decision, saying it would be helpful for a higher court to hear the issues.
Deutsche Bank sued Unitech last year saying it owed $11 million under an interest-rate swap and hadn’t repaid a $150 million loan to a lending group. Unitech countersued claiming the rate swap wasn’t suitable or properly explained.
The case is Deutsche Bank AG v. Unitech Limited, High Court of Justice, Queen’s Bench Division, 12-464
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