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A lesson on limitation periods: HSBC defeats ECU foreign exchange market manipulation

The recent decision in the dispute between ECU and HSBC highlights the importance of limitation periods and the law of causation in foreign exchange (forex) market claims. Clive Zietman, Natalie Osafo, Mahdi Ebrahimi and Pav Theodoulou review the decision.

In the case of ECU Group Plc v HSBC Bank UK Plc [2021], the Commercial Court has decided that the proceedings brought by The ECU Group plc (“ECU”) against HSBC and others (“HSBC”) alleging manipulation of forex markets between 2004 and 2006 are barred by the limitation period. Additionally, the court held that HSBC’s actions did not directly cause any loss to ECU because ordinary market movements would have triggered the stop-loss orders (see explanation below) anyway.


In a widely reported and media-covered trial, HSBC was accused of “blatant and indefensible” forex fraud by ECU, a specialist currency debt management firm and ex-client of the bank. ECU provided its clients with loans obtained from several banks, the largest of which was HSBC Private Bank (UK) Limited (“HPBP”). HSBC was accused of misusing confidential information belonging to ECU between 2004 and 2006 and profiting from 52 transactions in that period.

According to agreements with its clients, ECU monitored the loans (in multi-currency platforms) and switched them between different currencies to maximise their value. Periodically, ECU instructed the banks to transfer the currency in which the loans were issued.

ECU brought multiple claims against HSBC related to loans referred to as “market” and “stop-loss” orders. A “market order” requires an immediate switch of currency, whereas a “stop-loss” is a conditional switch triggered where the prevailing forex spot rate reaches or exceeds a specified trigger level. ECU brought these claims in its own right and in its capacity as an assignee from certain loan customers.

There were four types of claims:

  1. Trading ahead claims based on the allegation that HSBC ‘traded ahead’ on a number of trades, going against instructions by ECU that this should not be done. (‘Trading ahead’ is where a market maker – HSBC in this instance – enters proprietary orders ahead of or along with customer orders that are executed at the same or a better price before the customer order.)
  2. Front-running claims based on the allegation that HSBC traded based on knowledge of ECU’s trigger rate, resulting in increased profits for HSBC.
  3. Margin claims based on the allegation that HSBC profited from adding margin to the exchange rate, which it was not entitled to do so.
  4. Collateral proprietary trading or “confidence” claims based on the allegation that some HSBC traders traded with the knowledge obtained from ECU for their own accounts.

Limitation issues

The standard time limit to bring a claim based on a simple contract is six years and in the case of a deed twelve years, starting from the date of the alleged breach of contract or deed. The purpose of the limitation is to require claims to be put before the court within a timeframe when the evidence necessary for their fair adjudication is likely to remain available and reliable.

Under section 32 of the Limitation Act 1980, the starting date can be different where the claim is based on fraud or the defendant deliberately concealed facts relevant to the claimant’s right of action. In such cases, day one becomes the day the claimant discovered the deceit or could do so with reasonable diligence. The Limitation Act aims to strike a balance between protecting defendants from stale claims and allowing claimants to overcome the expiry of the ordinary time limit where the statute so provides.

His Honour Judge Waksman QC, who examined the application by ECU for pre-action disclosure, stated that ECU did not know and could not reasonably have known of front-running in advance of HSBC’s earlier actions that led to a worldwide scandal and criminal convictions and civil claims against the bank’s foreign exchange traders. The judge found that HSBC’s dismissal of any front-running claims in 2006 constituted deliberate concealment of a material fact and allowed the case to proceed on this basis.

Arguments by ECU and HSBC

ECU argued that HSBC had deliberately committed breaches of its duties that were unlikely to be discovered for some time and that facts in relation to the claim had been deliberately concealed. ECU also claimed that HMRC’s fraudulent misrepresentation and/or conspiracy should be considered in relation to limitation. The claimant’s position was that a letter sent from HSBC containing a long and detailed rebuttal of any suggestion of front-running represents the “deliberate concealment” the Limitation Act requires for the limitation period to be extended.

Lawyers for HSBC argued that if the deliberate concealment was the alleged front-running, its discovery by ECU in 2006 means no facts had been concealed. In contrast, ECU’s case was that the relevant facts were not discovered by ECU prior to 4 February 2013. HSBC submitted that by 4 May 2006, when ECU raised an initial complaint, ECU was in a position to plead all its claim. ECU cited section 32 of the Limitation Act to postpone the limitation periods, alleging deliberate concealment of facts.

In assessing the arguments, Mrs Justice Moulder considered the evidence of Mr Petley, CEO of ECU, particularly his knowledge and belief in relation to the HSBC investigations and the data available to him in 2006. Mr Petley submitted that the circumstantial market data would not amount to evidence of dishonest front-running by HSBC sufficient to enable a claim. He also said he could not have been certain of HSBC’s conduct since the conditions were consistent with what could be considered ‘typical’ market movements.

Evidence and oral submissions

During cross-examination, Mrs Justice Moulder criticised the claimant’s evidence in its attempts to discredit witnesses, even expert witnesses. The judge cited the case of Gestmin SGPS v Credit Suisse [2013] as precedent that witnesses are usually not able to recall conversations and events properly if they were a long time ago. Mrs Justice Moulder turned to recordings of conversation and email exchanges in her judgment.

Some exceptions aside, the court approached the evidence submitted by the claimant with caution because most of the individuals involved remain employed by ECU, and so had a motive to support the case. Those who were not ECU’s employees were found to have strong knowledge of the market and the industry due to their multi-year experience in the sector, and so did not convince the judge that they did not have market information at the relevant time.

Mrs Justice Moulder found that ECU’s expert’s account tended to favour the company rather than providing a balanced view for the court. In contrast, HSBC’s expert had a good understanding of the case. In the four days of his cross-examination,…

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