Barclays won a US lawsuit dismissal from shareholders that claimed former executives and the bank misled them on activities related to Libor fixing and therefore lost them money later.
The main problem with the case, led by the Carpenters Pension Trust Fund of St. Louis in Missouri and the St. Clair Shores Police & Fire Retirement System in Michigan, was that the US District Judge Shira Scheindlin in Manhattan said that the plaintiffs failed to prove that the Libor rigging activities translated in financial loss.
To rub salt in the Barclays' American depository share owners' wounds, Scheindlin declared that the plaintiffs would be denied the chance to amend their lawsuit one more time, after failing to address previously "identified deficiencies in their second amended complaint."
The case, which sought class action status, maybe in the US jurisdiction but it has highlighted how difficult it is for plaintiffs, whereever you are, to claim that they were financially worse-off as a result of banks attempting to manipulate rates.
This is even in their case where Barclays settled with US and UK authorities for £290m ($444m, €342m) in June last year.
In the UK, the High Court ruled that Barclays would have to face Guardian Care Homes (GCH) over allegations of mis-selling derivatives and fixing Libor, which the business is suing the bank around £70m.
But while GCH decided to amend its claim, in light of Barclays settling with authorities last year, it could potentially work against them or make it harder for the group, if the case goes to trial.
"If the judge for the GCH case asks for the group to present and prove that Barclays fixing Libor directly resulted in a financial loss for the company, through its loan and derivatives products, then this could be a difficult hurdle to jump," said Abhishek Sachdev, FCA-authorised managing director at Vedanta Hedging.
"I have said to some clients that it is too early to include Libor fixing as a substantial proportion in a claim as not all banks have settled with relevant authorities around the world on alleged rigging."
The GCH Case
GCH's case centres around loan and finance deals between Barclays and itself during 2007 and 2008 and subsequently two multi-million pound IRSAs attached to it.
IRSAs are contracts between a bank and its customer where typically one side pays a floating, or variable, rate of interest and receives a fixed rate of interest payments in exchange.
They're used to hedge against extreme movements in market interest rates over a given period. Companies that have seen the value of these products move against them as rates fell during the recession, now owe banks crippling sums of money in interest payments each year.
GCH's IRSAs were linked to Libor.
After first claiming that the bank mis-sold it these derivatives, it added Libor fixing into its filing later on.
Since it first filed in April last year, Barclays won the right, one year later, to try to dismiss the first attempt to bring it to court by GCH. The court case has now been delayed until 2014.
How Libor is Calculated
With all the blustering and focus on a single bank, or even two or three, being blasted for manipulating rates, it has become increasingly apparent that a number of critics have forgotten that it takes more than one institution to actually move Libor rates.
Every day, Libor setters at banks submit their rate levels, which are an estimate of how much it would cost to borrow money from each other on different currencies and products, to Thomson Reuters Corp, which calculates the data on behalf of the British Bankers Association (at the time).
The highest and the lowest submissions are stripped from the final set of data and the average rate level is calculated from the remaining submissions and published for individual currencies before midday in London.
So for instance, even if one bank set the rate higher or lower than any of the other banks, then that number would be stripped out.
For the Libor rate to be manipulated to the extent of moving rates, it would require mass collusion and contact between different institutions, not just internally at one bank.
Regulators around the world are still investigating dozens of other banks.
Determining Actual Rates
So as we've established, to determine implicitly that a bank had been successful in moving rates on any given day, we would need a majority (if not all) banks to have concluded settlements or determinations by regulators around the world.
At the moment, we know that Barclays, RBS and UBS have settled with US and UK authorities over attempts to rig or collude to manipulate benchmark interbank lending rates.
What we don't know, as with the relevant regulators that are investigating around 16 other banks, is how successful the banks have been in moving Libor.
"Even if all investigations by regulators have been concluded, it still needs to be determined whether the attempted rate manipulation by a specific bank made an impact on Libor level on any given day," said Sachdev.
Furthermore, it would be extremely difficult to determine how financially worse off you are or were on Libor rates.
"It's important to establish the exact loss you incurred if you have a Libor-linked loan or derivative, just because a bank has settled with authorities for manipulating Libor, it doesn't mean that a loss was suffered by the customer," said Sachdev.
"However, legal arguments that lawyers are making, is that regardless of the loss caused to the claimant, the issue with the bank is that it fraudulently misrepresented the benchmark rate it included in the contract, which has an inherent guarantee and warranty that these would not be rigged."
Another Benchmark Case
The US lawsuit is not exactly like the GCH case as the care home group is embedding the Libor fixing claim into their swap mis-selling filing.
While the Barclays' American depository share owners' lawsuit was more of a linear claim, there have been examples of similar cases to GCH, which try to claim that, by banks attempting to rig Libor, they have lost out financially.
Most comparable is the UK lawsuit by Unitech, which was suing Deutsche Bank, for mis-selling derivatives linked to Libor.
Unitech said it wouldn't have agreed to the loan or swap had it known Deutsche Bank was manipulating Libor, making both agreements invalid.
However in February 2013, Judge Jeremy Cooke rejected the Indian property firm's bid saying that Germany's largest bank didn't imply Libor was honest by linking a $150m loan and interest rate swap to the benchmark rate.
Judge Cooke added that requiring banks to make implicit promises about the entire Libor-setting process in contracts is "unrealistic."
"It seems to be that some of the larger claimants are trying to add LIBOR manipulation to their swap mis-selling claim, but this is by no means easy because Judge Jeremy Cooke recently threw out an attempt by Unitech to link Libor manipulation to their $150m swap mis-selling claim," said Sachdev.