Commerzbank Can Appeal Dresdner Bonus Ruling: U.K. Court
Commerzbank AG (CBK), Germany’s second- largest lender, won the chance to appeal a U.K. court ruling forcing it to pay about 50 million euros ($64 million) in bonuses to more than 100 Dresdner Kleinwort bankers.
Judge Andrew Longmore said at a London hearing today that there are grounds to appeal the May decision and told Commerzbank to consider trying to negotiate a settlement with the bankers until any appeal is heard.
“This is a major case for all the banks, which will affect what bank bosses can say about bonuses,” employment lawyer Paul Quain, who isn’t involved in the case, said in an e-mail. “Irrespective of whether Commerzbank ultimately wins or loses, the clear message for City businesses is that they need to be very careful saying one thing about bonuses in a team meeting, then changing their mind later.”
The economic slump that began with the 2008 collapse of Lehman Brothers Holdings Inc. led banks to seek government bailouts, slash bonuses and scale back their investment-banking divisions. Commerzbank, which took an 18.2 billion-euro bailout from Germany, said at the Dresdner trial it was entitled to cut bonuses by 90 percent because of record losses at the division.
Judge Robert Owen ruled in May that a 2008 promise by then- Dresdner Chief Executive Officer Stefan Jentzsch to guarantee a 400 million-euro bonus pot was binding, even though Frankfurt- based Commerzbank discovered losses of 6.5 billion euros when it took over the division the following year.
Mark Levine, a lawyer representing a group of the Dresdner bankers, declined to comment after today’s hearing.
Andrew Walton, a Commerzbank spokesman, said “it was reasonable and responsible to reduce the bonuses” and the bank has successfully defended claims brought by other employees in Germany and Italy over bonus cuts.
“We view it as an encouraging sign that we will be able to defend our position,” he said in an e-mail.
Commerzbank has said that profit in the second half of the year would fall “significantly” from the 644 million euros of net income it reported for the first half, citing higher provisions for bad loans.
To contact the reporter on this story: Kit Chellel in London at firstname.lastname@example.org
To contact the editor responsible for this story: Anthony Aarons at email@example.com