LAUNCHING a lawsuit against a major bank has never been easy. As anyone who has been involved in heavyweight litigation knows, the process of bringing a claim of any kind is expensive, hazardous and distracting. Regardless of the merits, no bank is likely to roll over very easily when faced with legal action. In order to succeed or to settle on sensible terms, a claimant needs both financial muscle and determination, as well as a strong case.<br /><br />The problem faced by a prospective claimant is made all the more difficult by the fact that very few law firms in Central London can or will sue a bank. The simple truth is that most significant banks have built up panels of top City law firms to act on their behalf and they have cast the net far and wide. <br /><br />The result is that those firms cannot sue the bank in question if they wish to continue receiving instructions. The conflict problem goes beyond that created by professional conduct rules and in many cases is simply a commercial decision taken by the law firm. Indeed, most law firms who act for banks will not sue others for fear of upsetting their clients by possibly creating an anti-bank precedent – the issue really is that sensitive. <br /><br />A cynic might suggest that banks have routinely and deliberately made certain that they instruct a very wide range of firms in order to conflict out as many lawyers as possible. Much has been written about this in the legal press given the restricted choice open to clients wishing to contemplate anti-bank proceedings. <br /><br />It will be interesting to see how, if at all, the landscape changes. In a recession, there will be less big-ticket property and commercial work, forcing law firms to rely on their dispute resolution departments for salvation. A juicy bank-against-bank case, for example, may prove too tempting for the litigators in a law firm whose commercial department might hitherto have held the upper hand.<br /><br /><strong>CONFLICT-FREE<br /></strong>A small band of City firms such as Clyde & Co, Barlow Lyde & Gilbert, Quinn Emanuel and Stewarts Law are amongst the busy few who (a) are conflict-free and (b) have the requisite resource and experience to take on complex banking litigation cases.<br /><br />So, why has there been a surge in litigation against banks? There are several reasons. Firstly, as I said, the current economic situation has forced banks to take measures that they would not take in normal circumstances – sometimes testing the boundaries of the law. One very active area has been created by banks calling in loans on highly technical grounds so as to force their customers either to refinance or to accept more onerous or expensive terms. Remarkably, they are picking on performing loans as soft targets which, not surprisingly, has caused some previously loyal customers to challenge them with a vengeance. <br /><br />Secondly, there are hints of deep-seated unhappiness among shareholders in some banks who feel cheated and misled by their behaviour over the past 18 months. Whether this will give rise to US-style securities litigation remains to be seen but the seeds of discontent have most certainly been sown.<br /><br />Thirdly, there has been an inevitably rise in fraud cases, as misbehaviour is unearthed as a result of the downturn. Banks often become immersed in these situations, having been the conduit for funds and this in turn creates scope for disputes of all kinds involving constructive trusts, disputes about title and the like.<br /><br /><strong>COMPLEX INSTRUMENTS<br /></strong>Fourthly, the recession has cast a spotlight on the complex financial instruments created and traded by the banks, which instruments have now turned sour. <br />There are numerous parties now alleging that they were misled or were misinformed about the true risk that lay behind the bonds and derivative products that they were assured as being safe. Given the sums involved, litigation in this field is spreading rapidly.<br /><br />Fifthly, another hotbed of banking disputes concerns allegations of professional negligence. When money has been lost or when investments have nose-dived, aggrieved parties are calling into question the arms of the banks who were there to represent their financial interests and who were supposed to act in a responsible and prudent manner.<br /><br />Sixthly and finally, because the legal framework that governs financial institutions has developed so extensively over the recent years of economic stability, there will undoubtedly be regulatory repercussions in the current economic downturn. <br /><br />For litigation lawyers it is all going horribly right. The economic environment means that disputes of all kinds are being generated, not least of all against banks. <br /><br />Litigation is not for the faint-hearted and not everyone with a claim with be able to assert it. For those that do, it will be very interesting to see whether or not public policy considerations come into play to protect the banks, not least of all given that large chunks of some of them are owned by the tax-payer. These are interesting times.<br /><br />Clive Zietman is Head of Commercial Litigation at Stewarts Law<strong><br />DOWNTURN CASES BANKS UNDER PRESURE<br /></strong>Around 100 bankers are suing Commerzbank for £30m of unpaid bonuses. The case arose after the German bank acquired Dresdner Kleinwort last year, and decided that a $400m bonus pot should not be used to pay bankers, citing changed economic circumstances. Individual bankers are looking for between €45,000 and €1.67m. <br /><br />Two female bankers have brought a high-profile case against Nomura, accusing the Japanese bank of sexual and racial discrimination. One of the women said that she had been told that she had been made redundant because she was “too outspoken and female”. Both women worked for Lehman Brothers until their part of the company was taken over by Nomura. <br /><br />A number of hedge funds are going to the High Court for the return of money that they lost in the collapse of Lehman Brothers. They claim that some of the £600m that was “lost” when the bank collapsed is rightfully theirs. As Lehman no longer exists, the funds are bringing the case against PricewaterhouseCoopers, its administrator.