Libor Scandal May Hit U.S. Banks Harder Than Their British Counterparts

U.S. Banks Could Be Hit Hard By Rate-Rigging Scandal

* Suits harder and costlier to win in Britain

* 2010 U.S. Supreme Court ruling crimped legal tourism

By Chris Vellacott

LONDON, July 13 (Reuters) - Barclays Plc and other UK banks may escape lighter than their U.S. rivals if shareholders seek damages in the wake of an interest rate-rigging scandal, because such cases are costlier and harder to win in Britain.

Cases pursued in America by investors alleging they suffered a loss because of the wrongdoing of a financial institution, will often be deemed ineligible to be heard in U.S. courts when the bank in question is foreign, legal experts said.

But if investors opt to take their cases to UK courts, they will find Britain's legal structures make such claims harder to win, costlier and riskier.

"Would we like to sue Barclays in the New York courts we know well and we're very good at prosecuting in? Sure. But we're not going to because this is a UK situation," said Dominic Auld, a litigation expert at U.S. law firm Labaton Sucharow.

Since Barclays admitted its role in manipulating the London interbank offered rate (Libor), lawyers on both sides of the Atlantic are taking calls from investors.

"I did take a call this morning from an institutional investor who is interested in looking at litigation both from a UK perspective and the U.S ... I expect there will be a good deal of similar interest," said Owen Watkins, a barrister in the corporate department of London law firm Lewis Silkin.

More than a dozen banks are being investigated for their roles in setting Libor, including Citigroup, JPMorgan Chase & Co, Deutsche Bank, HSBC Holdings Plc , UBS and Royal Bank of Scotland..

Morgan Stanley analysts have calculated the litigation risk to each of the 16 banks involved in setting Libor, an estimate of the rate at which banks could lend to each other and a benchmark for setting many other types of loans, at between $60 million to $1.1 billion.

But lawyers say that while it was once commonplace for European investors to issue proceedings in the States, this transatlantic "legal tourism" was brought to an effective end in 2010 by a Supreme Court ruling in the United States.

In a case brought against National Australia Bank, the court ruled U.S. securities laws do not have jurisdiction over so-called "F cubed" cases involving foreign investors and a foreign company traded on a non-U.S. market.

In the case of Barclays, only about 4 percent of its market capitalisation is traded in the U.S. in the form of American Depository Receipts. Any pursuit of meaningful damages from investment losses related to falls in Barclays' share price caused by the scandal will have to be carried out in Britain.

"Bringing proceedings here is not easy because there are various questions about causation. But most importantly Barclays would fight hard and you take a substantial risk in relation to costs that you would have to pay if you lost," said David Greene, senior partner at London-based law firm Edwin Coe.

Furthermore, proceedings by institutional investors are rare and run against the traditions of the City of London financial district which had in part prompted disgruntled investors to make claims in the United States until it was halted by the F-cubed ruling.

"I don't think that sort of thing would be held in a UK court. I think they would just say the nature of the capital markets is shares go down as well as up. It's the guiding principle here," said one institutional investor who declined to be named because he is a major Barclays shareholder.

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