Commerzbank has lost a ruling against a UK court that will see it pay London-based bankers around £44m in bonuses, plus costs. The bank had argued that its now-integrated Dresdner Kleinwort subsidiary was justified in slashing 2008 bonuses. The bank was able to reduce costs as losses hit €6.5bn (£5.5bn at current exchange rates).
Some lawyers warned that this case sets a worrying precedent for banks that have had informal bonus discussions that may now be required to honour pre-agreed bonus terms. The dispute hinged on Commerzbank's often informal promises of bonuses, and whether these contstituted a contractual agreement.
Commerzbank have released a statement on the ruling:
Commerzbank is disappointed with this decision and is considering its legal options. It is a regrettable outcome in view of the on-going regulatory, public and shareholder calls to establish a sound relationship between banks’ performance and variable remuneration.
It remains the Bank’s belief that as a matter of law, no binding contractual commitment was made, that bonus amounts communicated were provisional and that it was reasonable and rational to reduce the bonuses in the light of the Eur6.5bn loss that Dresdner’s investment banking operation posted for 2008.
In other jurisdictions, national courts upheld Commerzbank's position. In October 2011 the highest court in Germany, the Bundesarbeitsgericht, ruled in Commerzbank’s favour on the same case for employees whose contracts fell under German employment law in the third and last instance.
In Italy and Japan, the bank succeeded in having claims with the same facts dismissed. In New York arbitration proceedings earlier this year, the claims were rejected.