Barclays Bank Plc, Re

Section 112(1)(d) of the Financial Services and Markets Act 2000 gives the court a broad ancillary jurisdiction when sanctioning a Part VII scheme. An order may modify contractual or other rights involving a third party and may have the practical effect of transferring part of that third party’s business, provided the order is incidental, consequential or supplementary to the scheme and necessary to secure that it is fully and effectively carried out.

Necessity is assessed by reference to the scheme’s commercial purpose and practical effect, including whether the transferred business can operate seamlessly and whether clients would otherwise suffer prejudice. Whether the statutory conditions are satisfied and whether the order should actually be made remain matters for the sanction hearing.

Barclays Bank Plc and Barclays Bank Ireland Plc sought directions concerning a proposed banking business transfer scheme under Part VII of the Financial Services and Markets Act 2000. The scheme was intended to transfer Barclays’ relevant European Economic Area business to the Irish company in preparation for Brexit.

Barclays Bank Plc was authorised to accept deposits, whereas Barclays Capital Securities Ltd was not. The applicants proposed that part of Barclays Capital Securities Ltd’s closely interconnected business should also be transferred to Barclays Bank Ireland Plc under section 112(1)(d), although it could not itself be transferred under the ordinary scheme provisions.

The immediate issue was whether the court had jurisdiction to make such an ancillary order. The court was not asked to decide whether the order should be made on the evidence at the eventual sanction hearing.

1. Jurisdiction. An order transferring the relevant part of Barclays Capital Securities Ltd’s business to Barclays Bank Ireland Plc was capable of falling within section 112(1)(d) of the Financial Services and Markets Act 2000. The provision’s limits are found in its own language: the order must be incidental, consequential or supplementary to the scheme and necessary to secure that the scheme is fully and effectively carried out.
2. The reference to “the scheme” means the scheme as a whole, rather than only the deposit-taking part which enables it to qualify for sanction under sections 106 and 111. Section 112(1)(d) was therefore not confined to orders concerning property or liabilities of the deposit-taking transferor under section 112(1)(a).
3. The authorities demonstrated a broad approach to the ancillary power. Orders may modify contractual rights and obligations between third parties where that modification is sufficiently connected with the sanctioned scheme. The court accepted that the reasoning in Re Hill Samuel Life Assurance Limited, [1998] 3 All ER 176, and the approach in Re Alliance & Leicester plc, [2010] EWHC 2585 (Ch), supported consideration of whether a step was necessary to implement a scheme in an effective and commercially sensible way.
4. Whether the order was necessary was fact-sensitive. The court could consider the scheme’s commercial purpose, the practical ability of Barclays Bank Ireland Plc to carry on Barclays Bank Plc’s business, the interconnectedness of the businesses, and the interests and potential prejudice of clients. On the assumed evidence, the proposed transfer was capable of being necessary.
5. It was also capable of being described as consequential or supplementary, even if describing it as incidental would be difficult. The actual exercise of the power, and the appropriateness of sanctioning the scheme, were reserved for the sanction hearing. The guidance was expressly without prejudice to contrary submissions at that hearing.
6. Directions were given for publication of notices, including notices required by regulations 5(2) and 5(3) of the Financial Services and Markets Act 2000 (Control of Business Transfers) (Requirements on Applicants) Regulations 2001.