Three small firms that believe they were under-compensated by big banks over interest rate swaps mis-selling are battling for the right to sue in the Court of Appeal today.
If they succeed, lawyers believe the case, which is being heard today and tomorrow, could open the floodgates for hundreds of new legal claims.
The Financial Services Authority, now known as the Financial Conduct Authority (FCA), estimated in 2012 that up to 40,000 interest rate swap agreements may have been mis-sold to small businesses since 2001.
These swaps are financial products that were sold to businesses to protect them against interest rate fluctuations. When the financial crisis hit, and interest rates began to fall, many companies that had fixed their rates at higher levels lost large amounts of money.
In 2012, the FCA ordered banks to compensate the businesses through a redress scheme. Many of the companies believe their claims were not treated fairly and that they were under-compensated, including the three in court today.
Property holding firm CGL Group is the lead case, with the company attempting to sue Royal Bank of Scotland. WW Property Investments, meanwhile, is pursuing RBS-owned NatWest. And Barclays is being sued by the Bartels family, which owned a hotel in Wales.
The firms, which brought their cases separately, each believe that they were under-compensated and treated unfairly by their respective banks, which decided how much to payout independent of the FSA.
Each of the three firms had their claims thrown out by the High Court last year. Today, in the Court of Appeal, the firms have been bundled together and are trying to revive their cases by arguing that the banks, contrary to what the High Court ruled, owed them a duty of care under the FSA review.
The hearing is due to last all of today and tomorrow before a Court of Appeal decision is made.
Legal sources have said that if they are successful, hundreds of other firms which felt they were under-compensated as part of the FSA review could bring High Court claims against the banks.
David McIlroy of Forum Chambers said: "This case shows how thousands of companies feel that the FCA redress scheme did not give them justice. If successful, many companies will at last have the opportunity to get the compensation they are due."
An RBS spokesperson said: “We believe that the original judgments in these cases are correct and intend to vigorously defend the appeals.”
Barclays declined to comment.