Britain may refuse to produce RBS Libor documents, Canada argues

Fri Jan 25, 2013 5:25pm EST
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By Randall Palmer

OTTAWA (Reuters) - Britain cannot be relied on to force Royal Bank of Scotland Group Plc (RBS.L: Quote) to give Canadian authorities documents on alleged interest rate rigging, because the British government is RBS's majority shareholder, Canada's Competition Bureau argued this month.

An affidavit filed by Canadian lawyer on behalf of the Competition Bureau was the latest salvo in a sometimes nasty battle between the bureau and RBS over whether the bureau can compel the British banking group's Canadian subsidiary to hand over potentially damning records held at RBS's head office or elsewhere outside Canada.

The bureau, an arm's length agency of the Canadian government, is investigating whether RBS colluded with other banks and brokers in setting the yen London interbank offered rate (Libor) as part of a global rate-fixing scandal. At stake are corporate reputations and potentially huge fines.

RBS has argued that the Canadian government, acting for the bureau, could ask the British government, under a mutual legal assistance treaty, to compel the bank's head office to produce the documents instead of going to an Ontario court to try to force the Canadian subsidiary to hand them over.

University of Toronto law professor Michael Trebilcock, in an affidavit filed this month for the bureau at the Ontario Superior Court of Justice, suggested, however, that the British might just say no to Canada, the treaty notwithstanding.

"Cooperating with a request by the Canadian government poses significant risks for the UK government in terms of the potential criminal and civil liability of RBS for its role in the alleged international conspiracy to fix Libor rates, given its substantial equity interest in RBS, and hence it faces a fundamental conflict of interest," Trebilcock wrote.

He pointed out that as the result of bailouts during the recent financial crisis, the British government holds an 82 percent equity interest in RBS.

Trebilcock said London had broad discretion under the treaty to refuse any request from Ottawa if it thought it "would seriously impair its sovereignty, national security or other essential public interests or for any reason related to its domestic law."   Continued...