Selling-out on interest rate derivatives

01 Jan 2018

Commercial and Regulatory

Travels in unreality: Hard cases for SMEs and the making of English Financial Law

October 2017 feature article in Butterworths Journal of International Banking and Financial Law by Paul Marshall

In this hard-hitting and challenging JIBFL article, in his overview of the present position, Paul Marshall suggests that SMEs mis-sold interest rate derivatives have been exploited by the banks, and then in turn failed by the FCA, financial regulatory law, and the courts.

Of the leading decisions, Peekay, the foundation for the recently discovered but controversial doctrine of “contractual estoppel”, blurs the boundary between contractual representations and promises (warranties) and still remains to be authoritatively explained by the courts; Springwell, commonly said to support the proposition that ordinarily banks do not advise their customers, on its facts is so far from a one-off OTC transaction of a hedging product with an SME as to be readily distinguished.

Paul suggests that, upon proper analysis, yet to be undertaken in any decision, it is possible for ‘basis clauses’ to be both valid at common law (as it now stands), but also on their true construction, taking into account contextual issues of inequality of bargaining position, informational disparity and timing, to be exclusion clauses liable to be unenforceable under s. 3(1) of the Misrepresentation Act 1967 unless satisfying the test of reasonableness.

Click here to read the full article. This article was published in Butterworths Journal of International Banking and Financial Law on 29th September 2017.

If you would like further information on any of the issues covered in the article, please contact Paul’s clerk Ben Connor at or call 020 7242 4986.