Finance litigation trends: Spring 2025 update

April 24, 2025

Harriet Jones-Fenleigh James Lockwood Samson Spanier Jonathan Hawkins Rahul Mansigani

Posted in Group action litigation Contractual interpretation Fraud Governing law and jurisdiction Mis-selling and Misrepresentation FinTech Derivatives Cryptoassets White collar crime

In this finance litigation update, we focus on key cases, developments and hot topics to help in-house counsel to stay up to date.

You can access more detailed briefings using the links; and if you would like further information on a topic then please contact us.

1. Group securities litigation

There have been recent important judgments relating to group shareholder claims under sections 90 and 90A of the Financial Services and Markets Act 2000 (FSMA). These sections provide that issuers of securities may be liable to pay compensation to persons who have suffered a loss as a result of misleading statements or dishonest omissions in certain published information relating to the securities. The recent developments have focused on reliance, and on whether a representative action would be appropriate. The developments are of significant importance with regard to the total monetary liability of issuers, and to the tactical advantages that claimants and defendants might seek to gain.

Regarding reliance, there have been two recent High Court decisions considering the requirement for ‘reliance’ by shareholder claimants in securities litigation under s.90A and Schedule 10A of FSMA. The issue is important as the test could act as a significant limitation on the scope of securities litigation. In both cases, the defendant applied to strike out the claims brought by passive investors such as index tracker funds who had not read or considered the published information complained about. The judges did not agree on what was required to show reliance and so the correct legal test is currently uncertain.

In Allianz Funds Multi-Strategy Trust & Ors v Barclays Plc [2024] EWHC 2710 (Ch) Leech J held that ‘reliance’ in s.90A referred to the settled common law test of reliance as used in the tort of deceit. To establish the necessary reliance on an express representation, claimants must show that they read or heard the representation, that they understood it in the sense which they allege was false, and it caused them to act in a way which caused them loss. The Court rejected a wider US-style ‘fraud on the market’ approach to reliance, i.e. it was not enough that when making their investment decisions that the claimants had relied on the company’s share price in an efficient market where the share price takes into account published information. In the case of an omission, it was not necessary to show that the claimant relied on the omitted statement, but the claimant must show it relied on the published information from which the statement was omitted. Applying this test, Leech J struck out approximately 60% of the value of the claims, on the ground that the index tracker funds did not read or consider the relevant information. Our summary of the decision is available here.

However, a different judge took a different view in another case, Persons Identified in Schedule 1 v Standard Chartered PLC [2025] EWHC 698 (Ch). The issuer sought to strike out the claims which were based on the ‘fraud on the market’ approach to reliance. However, the Court refused to strike out the claims. Green J held that he was not convinced that the Barclays case was wrong, and indeed the Barclays case could well be right, however, the correct test for reliance was not clear for a number of reasons. These included that the common law test for reliance creates an inconsistency between the test for misstatements and for omissions despite Schedule 10A applying the same requirement to both situations. It was arguable that a broader test was intended. Such disputed legal questions should be resolved on the basis of the actual facts established at trial. See further details of this decision in our article here.

The other important development for securities litigation concerns whether the shareholders can use representative actions. In Wirral Council v Indivior PLC [2025] EWCA Civ 40 the Court of Appeal upheld the High Court’s decision to strike out the first attempt to bring a group shareholder claim under s.90/s.90A FSMA as a representative action under CPR 19.8. CPR 19.8 provides that where more than one person has the ‘same interest’ in a claim, one person may bring a claim as a representative on behalf of the group. In this case, the claimant brought a representative action on behalf of various institutional and retail investors, and structured its claim as a ‘bifurcated’ claim i.e. it proposed to use the representative action to seek a declaration on the issues common to the represented class, with individual claims to follow on. The common issues related solely to the defendant company’s knowledge of or recklessness regarding the publication of the misleading information. The ‘claimant issues’, including their reliance on the information, causation and loss, would be determined in the follow-on claims. Under this approach, the individual claimants would not be required to develop or particularise their case at the initial stage and the litigation burden would be one-sided. The Court of Appeal held that the claims should be pursued in multi-party proceedings. The claimants’ object of using the bifurcated representative procedure in this case was to avoid the court using its case management powers to order the claimants to advance some of the claimant-side issues in parallel with the defendant-side common issues (as had been ordered in other s.90 FSMA claims proceeding as multi-party claims). Under the representative procedure, the claimants would not be required to identify which head of reliance they relied on (following the decision in Allianz discussed above), and the Court would be deprived of its powers to strike out speculative, unmeritorious claims. The decision emphasises the importance of the court’s case management powers and shows how the courts will not allow claimants and litigation funders to use the representative procedure to gain a tactical advantage in the litigation. The decision is likely to be welcomed by issuers. See further details in our article here.

2. Tariffs, market volatility, margin calls and insolvency

The sudden escalation of tariffs in spring 2025 is leading to significant uncertainty which in turn is likely to lead to complex legal issues. Already there has been a rise in volatility and the drying up of credit, especially for America’s more risky corporate borrowers which are having difficulty selling debt in the bond market.

This makes margin calls more likely, which in turn is likely to lead to close-outs of ISDA master agreement derivatives. The usual playbook for disputing margin calls includes (i) insisting on strict compliance with notice obligations and timing, (ii) challenging valuation, and (iii) checking the terms and discretionary basis of the margin call. On valuation, counterparties might challenge the valuation of collateral (particularly if it is illiquid such as private company shares, options or structured credit products as opposed to listed shares) and/or argue that the collateral was sold too cheaply. Where there is at least some form of discretion, banks may face arguments that there should be a Braganza implied term such that exercise of the margin call should be exercised in good faith and not in an arbitrary, capricious or irrational way.

Inflation, higher interest rates, lack of available credit and the potential rise in margin calls which accelerate payments, are also likely to lead to an increase in corporate distress, restructurings and insolvencies, in turn giving rise to disputes around the enforcement of security and parent / personal guarantees.

In turn, this may lead to investor claims against financial advisors following market losses, especially if investors purchased more high risk products.

Furthermore, fraud is more likely to come to light following the acceleration of borrowing and a rise in insolvencies, as office holders investigate how companies were run.

Meanwhile, the rise of tariffs is likely to cause supply chain disruption. This is turn may lead to litigation about the allocation of risk in contracts, and potentially force majeure and frustration.

Tariffs may also lead to attempts at smuggling and circumvention of capital controls, and potentially increased use of the crypto ecosystem. This in turn could raise complex issues around fraud, illegality and crypto exchange liability.

3. End of FCA’s interest rate hedging product redress scheme confirmed by High Court

The High Court has dismissed a challenge to the FCA’s decision to not implement a redress scheme in respect of the mis-selling of interest rate hedging products for more sophisticated customers: The All-Party Parliamentary Group on Fair Banking v The Financial Conduct Authority [2025] EWHC 525 (Admin). The effect is to bring an end to the redress scheme.

In 2012, the FSA (the predecessor of the FCA) implemented a voluntary redress scheme with various banks in relation to the mis-selling of these hedging products between 2001 and 2012. In negotiations with the FCA, some banks had made clear that they would not agree to a voluntary (as opposed to mandatory) redress scheme which covered more sophisticated customers. The voluntary redress scheme implemented by the FCA did not cover the more sophisticated customers. The scheme which the FCA implemented included a test for sophistication, based on annual turnover of more than £6.5 million, a balance sheet of more than £3.26 million and more than 50 employees.

Subsequently, an independent review (the Swift Review) concluded that the differential treatment of sophisticated customers was not justified. The FCA did not agree, and the FCA stated that it would not take further action or extend the redress scheme to sophisticated customers.

The All-Party Parliamentary Group on Fair Banking (a group of MPs and some lords from the UK Parliament) commenced judicial review proceedings against the FCA’s decision, primarily on the ground that it was irrational. However, the High Court dismissed the challenge. In essence, this was because the FCA was entitled to take into account its statutory duty to protect different consumers by reference to the differing degrees of experience and expertise that consumers have, the use of company size criteria is a well-established proxy for sophistication, the FCA reasonably saw a voluntary scheme as preferable in order to implement redress quickly, and the FCA could reasonably disagree with the Swift Review’s position. The FCA’s decision was not irrational, a test which affords the FCA a wide margin of discretion. The Court also held that it was unnecessary for the FCA to consult about the Swift Review, because it was well aware of views, including of disappointed sophisticated customers, already.

The High Court’s decision brings clarity and closure to the redress for interest rate hedging products, and is a reminder that, while the FCA is amenable to judicial review, the test for a successful challenge is high.

4. ‘Subject to consent’ provisions in loans and other financial contracts

The High Court recently held that adding a ‘subject to consent’ provision could limit a bank’s discretion to refuse consent: Macdonald Hotels Ltd and another v Bank of Scotland plc [2025] EWHC 32 (Comm).

The litigation concerned a non-disposal undertaking and a negative pledge drafted with specific carve-outs allowing the borrower to seek the lender’s consent. The Court held that the inclusion of the proviso meant that the parties must have intended the discretion to refuse consent not to be absolute. A term was implied that a lender would not be entitled to refuse consent for reasons unconnected with what it perceived to be its own commercial best interests or to refuse consent when no reasonable entity in the position of the lender could have refused consent. The Court went on to hold that, on that occasion, the bank had not breached the implied term in not granting the consents requested, as this was in its own commercial best interests.

The decision highlights the risks of weakening restrictive covenants (or any contractual undertakings) by adding apparently harmless ‘subject to consent’ provisos. For new lending or security arrangements, lenders should seek to keep undertakings as absolute restrictions without consent provisos – even without any specific provision, borrowers are able to request and lenders to grant waivers in particular cases. For existing contracts, financial institutions should take care that, when a request for consent is refused, the reasons for refusal are documented. The decision also gives scope for future litigation on the intentions of the lender. Our update on the Macdonald Hotels case is at here.

5. The Arbitration Act 2025 receives Royal Assent

On 24 February 2025, the Arbitration Act 2025 (the 2025 Act) received Royal Assent and will come into force on a date to be confirmed. The 2025 Act will insert a number of amendments into the Arbitration Act 1996 with the aim of modernising it in order to enhance the status of England and Wales as a leading international forum for dispute resolution.

There are important changes which financial institutions will need to consider. Notably, the 2025 Act introduces a new default rule that, absent a choice of law clause, the law of the seat of the arbitration governs the arbitration agreement. Financial institutions which use English law governed contracts but wish to select another seat, should consider whether to include an express clause specifying the law governing the arbitration agreement.

In relation to arbitral procedure, parties will have greater access to summary dismissal for claims with no real prospect of success.

Our team has prepared a summary of the key reforms and their practical implications which is available here.

6. Enforcement of judgments and asymmetrical clauses – the 2019 Hague Convention is coming into force

The 2019 Hague Convention (the Convention) will come into force for the United Kingdom on 1 July 2025. It provides for the judgments of UK courts to be recognised and enforced in the courts of other nations where it is in force – notably, including the EU. The Convention extends to the enforcement of a judgment obtained under a non-exclusive jurisdiction agreement.

The Convention is likely to be particularly relevant for enforcement of contracts containing asymmetric jurisdiction clauses. In an asymmetric clause, one party submits to the exclusive jurisdiction of one court, while the other party has the option of commencing proceedings in other courts. Asymmetric clauses are common in lending arrangements, where it will be the lending bank that has the advantage of being able to choose where to bring a claim. Judgments obtained pursuant to asymmetric clauses will be captured by the Convention, which may increase their enforceability in Convention countries, including the UK and the EU.

Asymmetric clauses are popular with financial institutions, despite concerns as to their validity and enforceability in certain countries. In Società Italiana Lastre SpA (SIL) v Agora SARL (Case C-537/23), the Court of Justice of the EU (the CJEU), has attempted to deal with some of these concerns, confirming that an asymmetric clause is valid provided it designates courts with sufficient precision. The CJEU only dealt with clauses restricted to choice of EU Member States, so asymmetric clauses selecting non-EU Member States will continue to be dealt with under the national law of individual states. But courts in EU Member States may well be influenced by the approach of the CJEU and, taken together with the UK’s accession to the Convention in 2025, the outlook for asymmetric clauses appears to be improving.

7. Failure to prevent fraud

The new UK failure to prevent fraud offence will come into force in September 2025.

This is a game-changing offence. It makes it much easier to prosecute UK and non-UK companies for fraud, and will have a similar impact to the UK Bribery Act (which has resulted in multiple large deferred prosecution agreements under the ‘failure to prevent bribery’ offence). The UK government has said that it expects the ‘offence will encourage more companies to implement or improve prevention procedures, driving a major shift in corporate culture to help reduce fraud’.

Under the new offence an organisation (whether or not it is a UK organisation) may be criminally liable where an employee, agent, subsidiary, or other ‘associated person’ commits a fraud intending to benefit the organisation, where that fraud has a UK nexus, and the organisation did not have reasonable fraud prevention procedures in place. More detail on the new offence is set out here.

Guidance has recently been published by the Home Office and UK Finance on the new offence, and what might be considered reasonable procedures. In February 2025, guidance was published regarding the financial services sector, and our update is at Failure to Prevent Fraud: New guidance for the financial services sector | Global Regulation Tomorrow. Many firms are currently conducting risk assessments in relation to the new offence, and identifying where enhancements are required to existing anti-fraud policies and procedures: Failure to prevent fraud: What should you be doing before September? | Inside Disputes | Global law firm | Norton Rose Fulbright.

8. APP fraud

There has been an important judgment about the rights of victims of Authorised Push Payment (APP) fraud. Victims have looked to the common law to provide them with redress. In Philipp v Barclays the Supreme Court held that victims of APP fraud could not rely on the Quincecare duty to found a claim. However, the Court left open the possibility that banks may owe a duty of retrieval to victims, i.e. a duty to take steps once made aware of the fraud to recover the payments that had been induced by the fraudster. In the recent case of Santander UK PLC v CCP Graduate School Ltd [2025] EWHC 667 (KB), the High Court held that a receiving bank does not owe any such retrieval duty to a third-party victim who has no contractual relationship with the receiving bank. It remains arguable that a retrieval duty is owed by a sending bank which will have a direct contractual relationship with the fraud victim, but we are yet to see a case where a fraud victim has established liability based on breach of this duty.

Meanwhile, the UK Payment Systems Regulator (PSR) made a significant reduction to the reimbursement limit for APP fraud claims from £415,000 to £85,000. The new cap aligns with the Financial Services Compensation Scheme reimbursement limit and, according to the PSR, aims to protect consumers while ensuring that the fraud reimbursement scheme is sustainable. The new measures came into force on 7 October 2024.

Payment service providers to whom the scheme applies were required to amend the terms and conditions of their relevant contracts by 9 April 2025 to provide that they will reimburse their consumers as and when required under the scheme.

The maximum reimbursement level will be reviewed in Q4 2025. The PSR has also committed to publish a post-implementation review by October 2025.

The Payment Services (Amendment) Regulations 2024 entered into force on 30 October 2024. The statutory instrument amends the Payment Services Regulations 2017 to allow payment service providers to delay the execution of an outbound payment transaction by up to four business days where there are reasonable grounds to suspect fraud or dishonesty, thereby supporting efforts to tackle APP fraud.

Plans to replace Action Fraud, the UK's national reporting centre for fraud and cybercrime, have been delayed but remain underway. The government aims to replace the much-criticised Action Fraud with a £150m, modern, state-of-the-art reporting system supported by PwC and Capita. The government has recently confirmed that a “phased introduction of the new service is underway and will continue throughout 2025”.

9. Digital assets and the Digital Assets Bill

The Digital Assets Bill is currently being debated by the UK Parliament and is expected to become law this year. The Bill gives explicit statutory recognition of digital assets as a ‘third form’ of property. Passage of this Bill will not only give certainty as to the property nature of digital assets but also allow the English common law to develop in a way that suits the unique characteristics of digital assets, without being hampered by false analogies with existing categories of property including intangible assets. It will provide a boost to the digital asset economy and further scope for continued development of the law.

The Bill can be seen against the backdrop of the development of case law in the past few years where the question of whether digital assets should be considered property, and the liability of exchanges for third party frauds, have been considered – recapped below.

Exchanges play a central role in the digital asset ecosystem. Current and future plans to regulate their operation occurring worldwide as the digital asset economy matures, depends on their legal treatment. This has been the subject of recent and ongoing litigation in the UK which has highlighted areas of development and uncertainty. For instance, in Piroozzadeh v Persons Unknown [2023] EWHC 1024, Binance, a crypto exchange, successfully argued that an injunction against it sought by a victim of fraud should be discharged on the basis that it functioned in a similar way to a bank: digital assets deposited with it were not segregated and the depositor retained only a contractual claim against it rather than any proprietary rights in crypto assets. This complicates proprietary or restitutionary claims against exchanges. It is also revealing as to how exchanges operate, particularly given that it was the exchange itself setting out its position, and may inform the regulatory approach to exchanges going forward.

‘Push payment fraud’ is another growing concern for the digital assets economy, particularly for financial institutions. The latest development in this area is D’Aloia v Persons Unknown [2024] EWHC 2342 (Ch), in which the High Court considered whether crypto exchanges could be liable for the return of fraudulently misappropriated cryptocurrency. While the court found in favour of the exchange, on the basis that the cryptocurrency could not be traced to it, the decision merits careful attention by crypto exchanges. The judge found that the exchange had sufficient knowledge to found liability for allowing the fraudster to withdraw funds from its account. If the claimant had been able to provide more evidence on the movement of the cryptocurrency through different accounts to allow it to be traced, the crypto exchange might have been held liable.

Of wider interest to all financial institutions dealing with cryptocurrencies will be the judge’s finding that the cryptocurrency constituted property, following a detailed analysis of the authorities and academic arguments. This is the first judgment following a contested trial to deal with this issue, together with proprietary remedies. For as long as the Digital Assets Bill is not passed by the UK Parliament, D’Aloia remains an important legal precedent on this point.

Interestingly, in D’Aloia, the judge also found that Tether, the cryptocurrency taken from the claimant, was persistent. In other words, coins sent from one account were the same as those arriving in another account. The Law Commission has previously suggested that the transfer of digital currencies might be more likely to take place by the destruction of the coins in the first account and the creation of new coins in the second account. Persistence of digital currencies will affect tracing and proprietary remedies.

As financial institutions, sponsors, developers and others participate in public blockchains, perhaps by providing infrastructure to support consensus or custody mechanisms, arguments arise as to whether they owe a duty of care to other participants. The same applies to participants in DeFi pools, perhaps by sponsoring a new pool or setting parameters for liquidity or collateralisation. These arguments were highlighted by the high-profile Tulip Trading litigation. This reached the Court of Appeal in a jurisdiction challenge (see Tulip Trading Ltd v van der Laan [2023] EWCA Civ 83). The claimant argued – among other things – that software developers and miners of Bitcoin owe a duty of care to Bitcoin holders, essentially because the decentralisation of Bitcoin is a ‘myth’. The expected trial in 2024 did not take place after the case was resolved. But it has highlighted to market participants that they may owe duties of care. Many are already taking advice on operational measures to limit their potential exposure and 2025 could see further litigation in this area as well as other areas of uncertainty, such as the partnership status, especially cross-border, of crypto organisations including DAOs and DeFi pools.

10. Sanctions and Supreme Court clarification on cross-border payments

On 8 and 9 December 2025, the Supreme Court is hearing the appeal from the Court of Appeal decision Celestial Aviation Services Ltd v UniCredit Bank AG (London Branch) [2024] EWCA Civ 628, about the impact of sanctions on cross-border payments.

The Court of Appeal had overturned a High Court decision which sparked significant concern among financial institutions and corporates alike as to the performance of contracting parties’ obligations when impacted by sanctions. In particular, the decision limits the extent to which payments in cash may be required where a party is prevented by sanctions from making a payment by way of bank transfer.

In 2023, the High Court had found that UniCredit was not necessarily prohibited by US sanctions from paying out under letters of credit, as payment could be made in cash, rather than through a US account. Among the Court of Appeal’s findings, it helpfully rejected the assumption that payment obligations might always be performed through payment in cash or alternative currencies with a view to avoiding violations of US sanctions.

The Celestial Aviation case follows a number of other important cases concerning the intersection of sanctions and commercial litigation, notably Gravelor Shipping Ltd v GTLK Asia M5 Ltd [2023] EWHC 131 (Comm) and RTI Ltd v MUR Shipping BV [2024] UKSC 18.

Our team has considered the Court of Appeal’s judgment in Celestial Aviation and prepared a summary of the key takeaways which is available here. Whether the Supreme Court will reverse the Court of Appeal’s decision and restore the decision of the High Court remains to be seen.