The EGB Claim

On 20 May 2021 the European Commission, the EU’s executive arm, found seven investment banks guilty of breaching its antitrust rules. Fines totalling €371 million were imposed.

Bank of America, Natixis, Nomura, RBS (now NatWest), UBS, UniCredit and WestLB (now Portigon) participated in a cartel through a group of traders working on their EGB desks and operating in a closed circle of trust. These traders were in regular contact with each other mainly in multilateral chat rooms on Bloomberg terminals.

In these chat rooms, the relevant traders exchanged commercially sensitive information. They informed and updated each other on their prices

and volumes offered in the run-up to the auctions and the prices shown to their customers or to the market in general.

They also discussed and provided each other with recurring updates on their bidding strategy before the auctions of the Eurozone Member States when issuing Euro-denominated bonds on the primary market, and on trading parameters on the secondary market.

The conduct partially took place during the financial crisis and more specifically between 2007 and 2011, and affected the entire European Economic Area (EEA). The behaviour of the seven banks violates EU rules that prohibit anticompetitive business practices such as collusion on prices.

European Government Bonds or EGB are debt securities issued in Euro by the central governments of the Eurozone Member States. The governments issue EGB to raise funds in international financial markets: they borrow money for a fixed term and predefined interest rate. The bond holder periodically receives the interest (coupon) and the principal amount at the agreed maturity date.

Bonds are first issued on the primary market where a limited number of investment banks, the ‘primary dealers’ can bid for the bonds in auctions or sometimes acquire them via syndication. The primary dealers then place and trade the bonds with other investors on the secondary market. These investors include asset managers, pension funds, hedge funds, and major companies.

Any person or company affected by anti-competitive behaviour as described in this case may bring the matter before the courts of the Member States and seek damages. The case-law of the Court and Council Regulation 1/2003 both confirm that in cases before national courts, a Commission decision constitutes binding proof that the behaviour took place and was illegal.

This legal action is seeking to return hundreds of millions of pounds to pension funds, asset managers, hedge funds, and corporates from around the world who were affected by the EGB cartel. The fact that some of the banks were not fined, for instance as a result of their leniency application, does not mean that they cannot be held liable for damages.

In accordance with the EU-UK Withdrawal Agreement, the European Union continues to be competent for this case which was initiated before the end of the transition period (“Continued Competence Case”). The EU shall reimburse the UK for its share of the amount of the fine once the fine has become definitive. The collection of the fine, the calculation of the UK’s share, and the reimbursement will be carried out by the European Commission.

Under Article 92 of the Withdrawal Agreement, the Commission remains competent for ongoing administrative procedures relating to competition in the UK, that may impact trade between the EU Member States, provided these procedures were initiated before the end of the transition period (31 December 2020). Decisions issued by the EC in Continued Competence Cases are binding on the UK and any appeals are subject to review only by the EU courts.