UBS, RBS, HSBC, Barclays note difference between FX spot trading and FX consumer retail transactions to rebuff legal complaint

Maria Nikolova

Allegations regarding international FX spot trading activities cannot establish personal jurisdiction over non-US banks based on claims concerning the immediate physical exchange of currency in retail transactions at local banks in the United States, according to the defendants.

A lawsuit involving a number of top banks accused of conspiring to to fix FX benchmark rates now hinges upon the difference among various type of Forex activities and upon the question of personal/general jurisdiction.

Whereas plaintiffs in the case, captioned Nypl v. JP Morgan Chase & Co. et al (1:15-cv-09300), have tried to prove that non-US banks: Barclays PLC (LON:BARC), HSBC Holdings plc (LON:HSBA), UBS AG (SWX:UBSN), Royal Bank of Scotland Group plc (LON:RBS) and Royal Bank of Scotland plc, have to be sued in New York, the defendants have vigorously objected and have tried to show that non-US banks cannot be sued in New York due to lack of jurisdiction.

On Thursday, November 16th, the so-called “foreign defendants” in the case – Barclays PLC, HSBC Holdings plc, UBS AG, Royal Bank of Scotland Group plc and Royal Bank of Scotland plc, filed another memorandum with the New York Southern District Court, arguing that the case against them should be dismissed for lack of jurisdiction.

According to the banks, the plaintiffs never directly confront the premise that allegations regarding international FX spot trading activities cannot establish personal jurisdiction over the foreign defendants based on claims concerning the immediate physical exchange of currency in retail transactions at local banks in the United States. Moreover, the banks in question are either: (i) foreign parent holding companies that do not have FX trading or retail operations of any kind; or (ii) corporations that do not engage in the United States in the FX consumer retail transactions through which plaintiffs contend they were overcharged.

The plaintiffs contend that the foreign defendants “aimed to cause harm in the United States by collusively including the price-fixed benchmark exchange rates in the pricing of consumer retail transactions.” But that contention, according to the defendants, disregards that the Foreign Defendants do not engage in the asserted FX consumer retail transactions in the United States.

Also, according to the banks, the plaintiffs have not averred facts concerning a conspiracy in their asserted FX consumer retail market. They have alleged only a “mechanical, direct correlation” between pricing in that asserted market and FX spot market benchmarks, in that the “FX benchmark rates are a component of consumer retail prices”. However, the alleged correlation between FX spot market benchmarks and FX consumer retail prices implies at most a foreseeable domestic consequence, which is insufficient to show intentional targeting, particularly given the Foreign Defendants’ absence from the asserted FX consumer retail market in the United States.

In addition, the numerous settlements reached among the US authorities and the banks are seen as completely different from the case at hand as the Government resolutions concern the completely different spot market and thus cannot show jurisdiction over the consumer retail claims here.

The various government resolutions resolved allegations about FX spot market conduct. Those resolutions cannot support specific jurisdiction over this action predicated on transactions in the asserted FX consumer retail market. Nor did those proceedings in other forums result in consent to this Court’s jurisdiction over this action, the defendants argue.

The defendants’ memorandum also notes that the plaintiffs have not met the requirements of a conspiracy jurisdiction theory. They have not alleged that the named Plaintiffs’ transactions in the asserted FX consumer retail market at their local banks—critical to personal jurisdiction even under their argument—were “within the scope of” the alleged collusion concerning benchmarks in the FX spot market determined in London (the World Markets/Reuters benchmark) and Frankfurt (the European Central Bank benchmark).

The Court is asked to dismiss the complaint against the foreign defendants.

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