JP Morgan, Deutsche Bank, UBS and Depfa Bank won a judicial review against the SFO and the home secretary, quashing the watchdog’s request for papers that are wanted by authorities in Milan.
Lord Justice Gross said the SFO had an “obvious lack of authority” to act on the Italian prosecutors’ requests, and quashed its decision on grounds of unreasonableness.
But the judge said he has a “considerable degree of sympathy” with the SFO’s actions and those of the home secretary, who passed on the Italians’ requests to the watchdog.
The case relates to a criminal and civil investigation into debt swaps arranged for the City of Milan between 2005 and 2007.
Italian prosecutors argue that the banks did not tell Milan what they were charging for the swaps. The banks deny charges of fraud and settled a separate civil case earlier in the year, agreeing to unwind some of the transactions.
The SFO wrote to the banks in 2011, requiring them to produce accounting information and correspondence linked to their dealings with Milan, at the behest of Italian prosecutors.
The watchdog recently installed David Green as its new director as it tries to move on from its investigation into property tycoon Vincent Tchenguiz, which was officially dropped on Monday.