The English court system has added to its stable of specialist courts a Financial List, to deal with major banking and other financial disputes.
This is a positive illustration of the English courts not resting on their laurels as a pre-eminent venue for commercial dispute resolution but taking active steps to ensure that they meet the needs of financial markets users and enhance London’s status as a global financial centre.
Most welcome is that cases in the list will be managed by judges and by full docketing. In the past some practitioners have taken a dim view of docketing – basically for fear of having a judge take against their client or case early on and then being stuck with the same judge through to trial. But docketing is clearly the way of the future and the risks will in most cases be outweighed by the benefits. Having the case managed by someone who has an incentive to get to grips with the substantive issues from the early stages (particularly in large and complex disputes) can be invaluable in terms not only of efficiency but also of the quality of case management decision-making.
The real value of the Financial List – as with most specialist lists – will lie in the fact that the docket judge will be chosen from a dedicated pool of jurists with specialist knowledge of financial markets, who will receive ongoing training to maintain and refine that knowledge. In my experience of financial disputes, a judge’s level of understanding of how financial markets and institutions operate has a real impact on their ability to scrutinise the merits of parties’ positions properly. That includes case management issues such as the scope of disclosure and expert evidence.
The quality and scope of the judicial training will be a crucial factor in whether the Financial List meets its full potential. In my view, it will be important that it extends beyond familiarity with common financial products and concepts, to include an understanding of the different roles, functions, processes and information-flows within large financial institutions. Building market users’ confidence in the depth of knowledge in the list will go a long way to entrenching London’s position as a pre-eminent venue for the resolution of financial disputes.
Less clear at the moment is the likely value of the proposed ‘test case scheme’ to be piloted for two years within the Financial List. The stated purpose of the scheme is to provide ‘immediately relevant authoritative English law guidance’ on issues of general importance to the financial markets, without the need for an existing cause of action (and with the parties bearing no costs risk). That objective is clearly laudable and again demonstrates the English courts’ willingness to explore innovative options to meet the needs of financial markets users.
However, as is so often the case, the devil is in the detail or, more accurately in this case, the lack of detail. The materials published to date about the scheme (principally the new Practice Direction PD 51M) leave unanswered a multitude of questions as to what type of issues it will be suitable for and how it will operate in practice.
Most fundamentally, the usefulness of any particular test case to the markets will depend heavily on how narrowly the issue for the court’s determination is able to be defined. There may be only limited instances where the question for the court can be identified in the abstract, independently of any factual scenario. In many cases, particularly where the issue concerns the construction of a particular word or phrase in industry standard contracts, the question for the court may need to be framed by reference to competing interpretations that arise in a particular factual context. Any variations to that factual context may render the court’s guidance distinguishable and of limited use to the wider market.
Even where an issue can be identified in the abstract, there is a more general concern about the court deciding important legal issues in a factual vacuum. It is often the case that the merits of competing positions on a legal issue are only properly appreciated by viewing them in the factual context in which they arise. I am not convinced that considering issues hypothetically (and on the submissions of parties who might not invest into the argument the resources they would, if they were pursuing or defending a real claim) is the optimal method for reaching a just and fair result on issues that will have significant, practical importance in the markets.
In any event, given the interests at stake in many financial disputes, the scheme is unlikely to be used by the markets, unless there is complete clarity as to how it will work in practice. Of course, a low take-up of the scheme might not, in itself, be problematic – nothing ventured, nothing gained. However, it would be unfortunate, if the existence of the scheme prejudiced litigants’ ability to have their rights and liabilities in a particular case determined promptly, as a result of delays caused by the setting-up and running of a test case (including ironing out the scheme’s teething problems).
It would also be unwise to discount the risk of the scheme being misused by those seeking to draw attention to grievances where there is no genuine legal issue. Even if a case was ejected from the scheme at the first case management conference, the fact that a party had commenced a test case could clearly be used to attract media and political attention to a cause.
But while the jury must remain out on the merits of the test case scheme, the proposals as a whole should be regarded as a positive development for both users of financial markets internationally and for the English legal system more widely.
Tim Parkes is London head of litigation at Herbert Smith Freehills
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