RBS 2009 Annual Report Download - page 336

RBS Group Annual Report and Accounts 2009334
Notes on the accounts continued
32 Memorandum items continued
Unarranged overdraft charges
In common with other banks in the United Kingdom, the Royal Bank and
NatWest have received claims and complaints from a large number of
customers in the United Kingdom seeking refunds of unarranged
overdraft charges (the “Charges”). The vast majority of these claims and
complaints have challenged the Charges on the basis that they
contravene the Unfair Terms in Consumer Contracts Regulations 1999
(the “Regulations”) or are unenforceable under the common law penalty
doctrine (or both).
In July 2007, the Office of Fair Trading (“OFT”) issued proceedings in a
test case in the English High Court against the banks which was
intended to determine certain issues concerning the legal status and
enforceability of contractual terms relating to the Charges. The test case
concluded in November 2009 with a judgment of the Supreme Court in
favour of the banks. As a result of the court rulings made in the test
case, the Group expects substantially all of the customer claims and
complaints it has received relating to the Charges to fail. The Group
cannot at this stage predict with any certainty the final outcome of all
customer claims and complaints. It is unable reliably to estimate any
liability that may arise as a result of or in connection with these matters
or its effect on the Group’s consolidated net assets, operating results or
cash flows in any particular period
.
Shareholder litigation
The company and a number of its subsidiaries and certain individual
officers and directors have been named as defendants in a class action
filed in the United States District Court for the Southern District of New
York. The consolidated amended complaint alleges certain false and
misleading statements and omissions in public filings and other
communications during the period 1 March 2007 to 19 January 2009,
and variously asserts claims under Sections 11, 12 and 15 of the
Securities Act 1933, Sections 10 and 20 of the Securities Exchange Act
1934 and Rule 10b-5 thereunder.
The putative class is composed of (1) all persons who purchased or
otherwise acquired Group securities between 1 March 2007 and 19
January 2009; and/or (2) all persons who purchased or otherwise
acquired Series Q, R, S, T and/or U non-cumulative dollar preference
shares issued pursuant or traceable to the 8 April 2005 SEC registration
statement and were damaged thereby. Plaintiffs seek unquantified
damages on behalf of the putative class.
The Group has also received notification of similar prospective claims in
the United Kingdom and elsewhere but no court proceedings have
been commenced in relation to these claims.
The Group considers that it has substantial and credible legal and
factual defences to these claims and will defend them vigorously. The
Group is unable reliably to estimate the liability, if any, that might arise or
its effect on the Group’s consolidated net assets, operating results or
cash flows in any particular period.
Other securitisation and securities related litigation in the
United States
Group companies have been named as defendants in a number of
purported class action and other lawsuits in the United States that relate
to the securitisation and securities underwriting businesses. In general,
the cases involve the issuance of mortgage backed securities,
collateralised debt obligations, or public debt or equity where the
plaintiffs have brought actions against the issuers and underwriters of
such securities (including Group companies) claiming that certain
disclosures made in connection with the relevant offerings of such
securities were false or misleading with respect to alleged “sub-prime”
mortgage exposure. The Group considers that it has substantial and
credible legal and factual defences to these claims and will continue to
defend them vigorously. The Group cannot at this stage reliably estimate
the liability, if any, that may arise as a result of or in connection with the
these lawsuits, individually or in the aggregate, or their effect on the
Group’s consolidated net assets, operating results or cash flows in any
particular period.
World Online International NV.
In November 2009 the Supreme Court in the Netherlands gave a
declaratory judgment against World Online International NV, Goldmans
Sachs International and ABN AMRO Bank NV in relation to claims
arising out of the World Online initial public offering of 2000. It held that
these defendants had committed certain wrongful acts in connection
with the initial public offering. The judgment does not establish liability
or the amount of any loss. The Group does not believe that any final
liability or loss will have a significant effect on the Group’s financial
position or profitability.
Summary of other disputes, legal proceedings and litigation
Members of the Group are engaged in other litigation in the United
Kingdom and a number of overseas jurisdictions, including the United
States, involving claims by and against them arising in the ordinary
course of business. The Group has reviewed these other actual,
threatened and known potential claims and proceedings and, after
consulting with its legal advisers, does not expect that the outcome of
these other claims and proceedings will have a material adverse effect
on the Group’s financial position or profitability in any particular period.
Investigations
The Group’s businesses and financial condition can be affected by the
fiscal or other policies and other actions of various governmental and
regulatory authorities in the United Kingdom, the European Union, the
United States and elsewhere. The Group has engaged, and will
continue to engage, in discussions with relevant regulators, including in
the United Kingdom and the United States, on an ongoing and regular
basis informing them of operational, systems and control evaluations
and issues as deemed appropriate or required and it is possible that
any matters discussed or identified may result in investigatory actions by
the regulators, increased costs being incurred by the Group,
remediation of systems and controls, public or private censure or fines.
Any of these events or circumstances could have a material adverse
impact on the Group, its business, reputation, results of operations or
the price of securities issued by it.