LONDON, May 9 (Reuters) - More than 100 London-bas
ed bankers scored a legal victory on Wednesday against Commerzbank , Germany's second-largest lender, for slashing their bonuses after huge losses at its former investment banking arm during the financial crisis.
Commerzbank, which has twice been bailed out by taxpayers, said it would seek leave to appeal after High Court Judge Robert Owen ruled it had breached its legal duties by failing to honour around 52 million euros ($66 million) of promised payouts.
The ruling flies in the face of government, public and investor scorn at the size of bonuses paid despite disappointing returns and billions spent by governments on rescuing banks since the 2008 crisis. It could also open the way for disappointed staff to sue other firms over payout disputes.
'We are disappointed with the court's decision and will seek leave to appeal,' a Commerzbank spokesman said in London. 'It is the bank's submission that there is every prospect that the Court of Appeal would come to a different view on this matter.'
Commerzbank had argued that its now integrated Dresdner Kleinwort subsidiary was both justified and obliged to slash 2008 bonuses as losses spiralled to 6.5 billion euros and threatened the survival of the business.
It went to the Court of Appeal last year in an attempt to dismiss the case before it came to trial, but lost.
After a legal battle that has lasted more than two-and-a-half years, lawyers for the 104 bankers urged Commerzbank to draw a line in the sand.
'The bank acted in breach of contract and has now been ordered to comply with its contractual obligations to pay,' said Clive Zietman, a partner at UK firm Stewarts Law, which is representing the bulk of the claimants.
'The bank's actions were unwarranted and unfounded in law ... The bank should now do the honourable thing and bring this matter to a close.'
One lawyer said the case may set a worrying precedent for other companies. 'This decision is very bad news for employers,' said Stefan Martin, employment partner at UK law firm Allen & Overy.
'Similar claims have failed in the past, but this decision will give fresh encouragement to employees whose employer has failed to deliver on employees' bonus expectations, even where those expectations were created in the context of informal discussions.'
Lawyers for the bankers said Commerzbank had already been running heavy losses when it was warned by the British regulator, the Financial Services Authority (FSA), to try to avoid an exodus of staff which might destabilise it.
Under former investment bank head Stefan Jentzsch, Dresdner Kleinwort set up a guaranteed minimum bonus pool of 400 million euros to hold on to staff, and repeatedly told them -- sometimes informally -- that this would be used to pay discretionary bonuses.
A subsequent decision by Commerzbank, which bought Dresdner Kleinwort in 2009, to slash payouts by 90 percent provoked the largest group action of its kind at the High Court.
'It is a triumph where David has successfully taken on Goliath and won, at least in this round of the battle,' said Jo Keddie, partner at law firm Winckworth Sherwood.
'This case has wider relevance to the financial sector since banks and institutions facing liquidity problems or merger scenarios in 2012 may well be required to honour pre-agreed bonus terms and conditions,' she added.
Commerzbank earlier on Wednesday posted a 63 percent drop in quarterly profits.
(editing by David Stamp) Keywords: COMMERZBANK BONUS/JUDGMENT
COPYRIGHT Copyright Thomson Reuters 2012. All rights reserved. The copying, republication or redistribution of Reuters News Content, including by framing or similar means, is expressly prohibited without the prior written consent of Thomson Reuters.
Datafeed and UK data supplied by NBTrader and Digital Look.
While London South East do their best to maintain the high quality of the information displayed on this site,
we cannot be held responsible for any loss due to incorrect information found here. All information is provided free of charge, 'as-is', and you use it at your own risk.
The contents of all 'Chat' messages should not be construed as advice and represent the opinions of the authors, not those of London South East Limited, or its affiliates.
London South East does not authorise or approve this content, and reserves the right to remove items at its discretion.