Jamie McConnell

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“Remember, remember…” a timely reminder of Limitation Periods and the Law of Causation in the Foreign Exchange Markets

Disputes / 04 November 2021

With Guy Fawkes Night upon us, the Commercial Court has provided a timely reminder in its judgment that was handed down on 1 November of the importance of Limitation Periods, along with the application of the Law of Causation in Foreign Exchange Market claims, in The ECU Group Plc v HSBC Bank Plc [2021] EWHC 2875 (Comm).

The HSBC parties successfully defended the ECU Group’s claims based on (i) a limitation defence, and (ii) additional arguments that the alleged wrongdoing had not caused any loss and there was no wrongdoing in any event.

In 2006 the ECU Group complained to HSBC in relation to allegations that various HSBC entities had manipulated the interbank spot rate in the Foreign Exchange Markets to trigger stop loss orders between 2004 and 2006.

In simple terms, the allegations were that the HSBC entities had caused the stop loss orders (which are security measures that mean when the value of a currency falls below a prescribed level, that currency is sold at the prevailing market price) to occur to the detriment of the ECU Group and its clients.  This was because the ECU Group provided multi-currency debt management services to its clients who had multi-currency loan facilities and they incurred losses on their Foreign Exchange Market trades when their stop loss orders were triggered.

Limitation Defence
The ECU Group’s claims were all dismissed by the Commercial Court because as part of the HSBC parties’ defence to the claims, they pleaded a limitation defence.

The Commercial Court held that the limitation period had expired because the ECU Group was in a position to set out most of its claims in 2006 (and those that it was not in a position to set out, it could have been with reasonable diligence).  This meant that the HSBC parties were able to successfully defend all claims on the basis that they were time barred.

Our previous article provides further information on Limitation Periods and when the clock starts ticking and can be accessed here.

Law of Causation Defence
We should however point out that whilst a successful limitation defence will generally succeed regardless of the strength of the merits of any claim, the Commercial Court also held in this case that any alleged wrongdoing had not caused the ECU Group any loss because ordinary market movements would have triggered the stop loss orders anyway (so any wrongdoing did not cause the loss).

In addition, the Commercial Court did not consider that any deliberate wrongdoing had occurred in any event.

This case not only provides a timely reminder of the importance of Limitation Periods in any claim, but it also demonstrates how the Law of Causation is applied in claims that relate to the Foreign Exchange Markets.


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