The Persons Identified in Schedule 1 to the Re-Amended Particulars of Claim v Standard Chartered Plc

Hearing dates: 8 and 9 May 2024

Approved Judgment

This judgment was handed down remotely at 10.30am on 17 June 2024 by circulation to the parties or their representatives by e-mail and by release to the National Archives.

The question raised by this appeal is whether Michael Green J (“the Judge”) was wrong to decline to strike out certain parts of the claimants' pleadings.

Basic facts

This section of this judgment is principally derived from an agreed case memorandum and the Judge's judgment (“the Judgment”), given on 8 November 2023.

The defendant, Standard Chartered plc (“SC plc”), is a public company listed on the main market of the London Stock Exchange and the Hong Kong Stock Exchange. It is the parent company of Standard Chartered Bank (“the Bank”), a company incorporated by Royal Charter which operates as a global retail, wholesale and investment banking institution.

In September and December 2012, the Bank entered into settlement agreements with various US authorities (“the 2012 Settlements”) in connection with failures to comply with US economic sanctions. As part of the 2012 Settlements, the Bank agreed to forfeit $227 million and admitted that “[s]tarting in early 2001 and ending in 2007” it had violated US and New York State law by illegally sending payments through the US financial system on behalf of entities subject to sanctions. The Bank also admitted that it had sought to conceal the involvement of sanctioned counterparties by manipulating and falsifying electronic payment information. The 2012 Settlements stated that the Bank had “made the decision to exit the Iranian business” in October 2006, ended its US-dollar business for Iranian banks by March 2007 and suspended all new Iranian business in any currency by August 2007.

On 17 December 2012, Brutus Trading LLC (“Brutus”) filed a “ qui tam” action in the US District Court for the Southern District of New York (“the First Brutus Action”). “ Qui tam” actions are claims brought by private individuals or entities (known as “relators”) on behalf of the US Government seeking monetary recovery which is shared between the US Government and the relators. Brutus was founded by a former employee of the Bank, Mr Julian Knight, and an individual who had previously worked with (but not for) the Bank, Mr Robert Marcellus. In the First Brutus Action, Brutus alleged, among other things, that the Bank had misled the US authorities in the run-up to the 2012 Settlements by failing to disclose sanctions violations involving Iranian clients after 2007.

From 5 March 2013, SC plc's annual and half-year reports and other announcements contained disclosures about, among other things, ongoing investigations by US and UK authorities. The claimants, however, dispute the adequacy of the disclosures.

In October 2014, media outlets reported that US authorities had reopened investigations into the Bank in respect of sanctions violations. In November 2015, SC plc stated that US authorities were investigating sanctions compliance in respect of the period after 2007 and the completeness of the Bank's disclosures to the US authorities at the time of the 2012 Settlements.

From April 2016, global news agencies reported allegations that Maxpower Group PTE Ltd (“Maxpower”), a company incorporated in Singapore in which the Group has held a minority interest, had between 2012 and 2015 engaged in a corrupt scheme to bribe Indonesian government (and other) officials to win or renew contracts or obtain other advantages such as quicker payments (“the Bribery Scheme”). SC plc does not admit that Maxpower engaged in the alleged scheme, but it denies that the group of which it is the parent (“the Group”) or its employees made, directed or condoned any improper payments. The Bank voluntarily approached the US and UK authorities to disclose the bribery allegations relating to Maxpower. The allegations were investigated by the US Department of Justice, which closed its enquiry without bringing any prosecution against the Group. SC plc has said that it is unaware of any ongoing investigations into Maxpower by any authority.

In February and April 2019, the Bank entered into settlement agreements with US authorities in respect of further non-compliance with US sanctions law and with the UK's Financial Conduct Authority (“the FCA”) in respect of anti-money laundering breaches (“the 2019 Settlements”). By these, the US authorities imposed a further financial penalty of some $947 million and the FCA imposed a penalty of £102 million. The US authorities found that, in breach of US sanctions law, the Group had between 2008 and 2014 facilitated payments worth some $600 million from clients resident in Iran and payments worth some $20 million involving entities from other sanctioned countries. The FCA found that there were “serious, and sustained” shortcomings in the Group's financial crime controls, customer due diligence and ongoing monitoring.

By this stage, Brutus had sought and obtained voluntary dismissal of the First Brutus Action and, in November 2018, filed a new “ qui tam” action in the US District Court for the Southern District of New York (“the Second Brutus Action”). As amended on 20 September 2019, the complaint in the Second Brutus Action (“the Brutus Complaint”) alleged that the 2019 Settlements addressed “a relatively small subset of the course of conduct by [the Bank] in violation of the Iran sanctions”. Brutus' case was supported by declarations by Mr Marcellus, Mr Knight and another former employee of the Bank, Mr Anshuman Chandra.

On 21 November 2019, however, the US Government filed a motion to dismiss the Second Brutus Action, explaining that Brutus' allegations had been thoroughly investigated by several government agencies and that they had formed the view that “most of the transactions at issue were legitimate winding-down of the Bank's preexisting relationships … and the remaining transactions were otherwise not problematic”. On 2 July 2020, the US District Court for the Southern District of New York granted the motion on the basis that the Government had given “valid government purposes” for doing so and that Brutus had not shown these to be “fraudulent, arbitrary and capricious, or illegal”. Brutus appealed, but the appeal was dismissed in August 2023.

The present proceedings

The present proceedings involve four claims which are being case-managed together and have been the subject of a single set of consolidated pleadings. The claims are brought by some 230 claimants pursuant to sections 90 and 90A of the Financial Services and Markets Act 2000 (“ FSMA”). These sections provide for compensation to be payable in certain circumstances where there have been misstatements or omissions in prospectuses or other published information relating to securities. In the present case, the claimants, all of whom are said to have held interests in securities issued by SC plc, assert deficiencies in numerous items of published information issued by SC plc between 2007 and 2019. Claimants who participated in rights issues for which SC plc published prospectuses in 2008, 2010 and 2015 also contend that the prospectuses included untrue or misleading statements or had omissions.

The claims are in part founded on the Bribery Scheme and on allegations found in the Brutus Complaint. Statements in information published by SC plc are said to have been “rendered false” by the Bribery Scheme and the “Relevant Misconduct”. It is also said that the Bribery Scheme and the “Relevant Misconduct” were omitted despite being required to be included. The “Relevant Misconduct” is defined in paragraph 25 of the re-amended particulars of claim (set out in full in paragraph 37 below) to refer to “misconduct described above, insofar as it formed the subject matter of the 2019 Settlements and the Brutus complaint”. In this respect, therefore, the claimants are relying both on matters which SC plc admitted in the 2019 Settlements and on matters alleged in the Brutus Complaint which SC plc denies.

Following the first case management conference, the trial was given a provisional time estimate of 96 days.

The legislation

Section 90 of FSMA is concerned with listing particulars, including prospectuses. Under section 90, subject to exemptions to be found in schedule 10, a person responsible for listing particulars is liable to pay compensation to someone who acquires securities to which the particulars apply and suffers loss in respect of the securities as a result of an untrue or misleading statement in the particulars or the omission from the particulars of required information.

Section 90A of FSMA explains that schedule 10A to the Act makes provision relating to the liability of issuers of securities to pay compensation to persons who have suffered loss as a result of “a misleading statement or dishonest omission in certain published information relating to the securities” or “a dishonest delay in publishing such information”. Unlike section 90, section 90A and schedule 10A apply to a wide range of published information, including annual and half-year reports....