“Banks in Court” (Banken vor Gericht) is today’s Handelsblatt cover story (Update August 22, 2012: article was paywalled yesterday, now available online), devoted to the dramatic increase of banking litigation in Germany. Handelsblatt looked a various indicators: It surveyed the numbers of actions filed, the provsions made by banks for litigation risks and spoke to judges and lawyers. Activity is up in customer vs. bank litigation as well as in bank-to-bank litigation and most certainly in criminal investigations into the various bank activities.
The District Court (Landgericht) Frankfurt, arguably the busiest court in the country in this segment, saw a 90 % increase of legal actions brought by bank customers against banks, up from 1,200 matters in 2009 to 2,300 matters in 2011. The Frankfurt Court has since dedicated three additional benches (Kammern) of three judges each in order to cope with the increase, in addition to the seven it already had. In an interview, the Chairman of the German Judges Association (Deutscher Richterbund), Christoph Frank, said he reckons that an additional 3,000 judges and public prosecutors (Staatsanwälte) would be required to adequately address the increased workload overall, not exclusively, but mainly triggered by banking litigation.
The most spectacular litigation currently pending in which a customer has sued the bank must be the Kirch/Deutsche Bank litigation. But increasingly, German Mittelstand clients such as Ille Papier in the Spread Ladder Swap case are successfully bringing actions against banks, and municipalities have followed.
If Handelsblatt is to be believed, most bank-to-bank litigation has been brought against Deutsche Bank, be it LIBOR litigation in the United States, where even venerable private bank Metzler has joined a class action against Deutsche Bank, or in Germany, with Bayerische Landesbank seeking USD 810,000,000 in relation to toxic US mortgages. Similar actions have been brought by Landesbank Baden-Württemberg (LBBW), HSH Nordbank and IKB.
Ironically, some of the banks that go after Deutsche Bank are themselves the target of criminal investigations. Former directors of Bayerische Landesbank have been charged in relation to the doomed acquisition of Austrian bank HypoAlpeAdria, and former managers of HSH Nordbank are being prosecuted for allegedly illegal off-balance sheet investments.
In customer actions, the first judgments from the Federal Supreme Court are coming in (unless the banks choose to avoid setting a precedent) and clarify the law. In the criminal proceedings and in the bank-to-bank matters, however, important legal issues are still far from being settled. And with many civil actions having been filed only in December 2011, to stop the limitation period from expiring for claims that arose in 2008, the way up to the higher courts has only just begun.