Mourant & South Square Litigation Forum 2018

On 20 September 2018 South Square and Mourant held their sixth annual Litigation forum in the lofty setting of Landing Forty Two, The Leadenhall Building in London.  The event brought together key figures and personalities in financial litigation, insolvency and restructuring to analyse prominent developments in these areas over the preceding year and to consider the trends which may develop for the future.

It was clear from the short welcome and opening address from David Allison QC, who co-chaired the Forum, that we are living in very uncertain times, but with uncertainty comes opportunity.

Session 1: Fraud and Asset Recovery

The first session was presented by Stephen Alexander, a partner in Mourant’s Jersey office and Advocate of the Jersey Royal Court, Marcus Haywood of South Square, Charles Lloyd, a partner in the London office of Macfarlanes LLP and Andrew Ford, the Principal at Lipman Karas in London.

Stephen began the session by highlighting the growing threat of fraud through a commonplace example of account fraud.  In the example, fraudsters infiltrated an institutional supply chain by providing what appeared to be authentic monthly supplier invoices with altered bank account and contact details.  After following up by phone, those invoices were then paid by the institution and months later when the real supplier followed up payment of its actual invoices, the institution realised that it has been paying invoices to the account of a fraudster and been defrauded. 

Stephen explained how modern problems in dealing with complex cross-border fraud are being tackled by offshore courts and argued that positive strides are being made.  He firstly considered the Judicial Committee of the Privy Council’s 2015 decision in Federal Republic of Brazil v Durant International Corp which determined, in part, the expanded scope of backwards tracing in cases where there is a close causal and transactional link between the incurring of a debt and the use of trust funds to discharge it. 

He then considered the Grand Court of the Cayman Islands’ 2018 decision in Algosaibi & Brothers Company v Al-Sanea & Ors and the principle that the courts may infer the necessary transactional links to give rise to a tracing claim where there is a scheme “specifically designed” to subvert the ability of creditors to recover misappropriated funds. Quoting from the judgment, Stephen noted: “…in an appropriate case the necessary links can be inferred from the circumstances, even in the absence of direct evidence” to ensure that a wrongdoer cannot benefit from acting particularly dishonestly or cunningly in creating a “maelstrom“.

In concluding, Stephen also briefly considered the downsides of these recent developments in case law.  He mentioned that, assuming that the perpetrator of a fraud is or becomes insolvent (as is often the case), the other unsecured creditors of that perpetrator will be somewhat disadvantaged because the remit in which a party has asset priority by way of a proprietary claim has expanded. 

Marcus then examined, through the lens of recent case law, how one of the main fraud defences, the illegality defence, has developed both in England and the Cayman Islands. 

The illegality doctrine operates as a defence to prevent a claimant from obtaining the rights and remedies to which he would otherwise be entitled as a consequence of his own illegal act.  It is therefore a defence that is of particular pertinence when considering fraud related cases where the claimant was the perpetrator of a fraud or caught up in it in some way. 

This defence has been radically reconsidered by the English Supreme Court in Patel v Mirza [2017] AC 467.  This case concerned an agreement whereby Mr Patel paid Mr Mirza a sum of money in order for Mr Mirza to place a bet on the future price of Royal Bank of Scotland shares, based on insider information that Mr Mirza expected to obtain.  That agreement, it was found, constituted an offence.  In the end the “bet” was not made because Mr Mirza never received the information which meant that the illegal purpose of the agreement was not put into effect.  However, Mr Patel sought to sue Mr Mirza for return of the monies he had paid him.

The Supreme Court rejected the traditional ‘reliance’ test for illegality in favour of a much more flexible ‘policy based’ approach, thereby fundamentally altering the scope of the defence in English law.  Lord Toulson (whose decision was followed by six of the other nine Supreme Court judges) best summarised the new position as follows (at [101]):

“one cannot judge whether allowing a claim which is in some way tainted by illegality would be contrary to the public interest, because it would be harmful to the integrity of the legal system, without (a) considering the underlying purpose of the prohibition which has been transgressed, (b) considering conversely any other relevant public policies which may be rendered ineffective or less effective by denial of the claim, and (c) keeping in mind the possibility of overkill unless the law is applied with a due sense of proportionality.”

Further, in considering whether it would be disproportionate to refuse relief as a matter of public policy, Lord Toulson (at [107]) noted that potentially relevant factors would include:

  • the seriousness of the conduct;
  • its centrality to the claim;
  • whether it was intentional; and
  • whether there was marked disparity in the parties’ respective culpability.

Lord Toulson’s test has also now been applied in two recent decisions arising out of the collapse of the SAAD group, namely, Singularis v Daiwa [2018] 1 WLR 2777 and AHAB v SICL & Others (Unreported) 31 May 2018.

So, what’s to be learnt from all of this?  First of all, the illegality defence is still going to play a very important role post-Patel in fraud based claims brought in England and given the more flexible ‘policy based’ approach adopted in that case it will likely have wider application in the future.  Secondly, the circumstances in which it will be applied will be very fact-dependant. 

Charles then considered how issues of forgery are being tackled in England.  He began this part of the session by making two preliminary points:

  1. An allegation of forgery is obviously an allegation of fraud; and
  2. The presumption is that a properly-executed document is valid and therefore:
    a. the burden of proof falls on the party alleging the forgery; and
    b. the more unlikely it is that the document is a forgery, the more compelling the evidence is going to have to be to prove that it is in fact one.

Taking these points into account, Charles noted that it is important for a party alleging forgery to challenge a document as soon as practicably possible.  In any event, pursuant to pursuant to CPR 32.19, the claimant needs to do so by the time witness statements are exchanged, or within seven days of the date of disclosure of the relevant document, if that is later.

Charles made the following observations regarding the ease of detecting forgery in written or printed documentation:

  • Paper –one can determine whether paper has come from the same batch, particularly in context of an allegation that one of the pieces of paper is different to the others in a document. It’s also possible to extract DNA/fingerprints from a document, if necessary;
  • Fountain pen ink – you cannot date this ink.  However, you can tell if the ink has come from the same pot and therefore it is possible to determine if parties have used the same pen, but different ink;
  • Ballpoint pens– there is a theory that it takes three and a half years for ballpoint pen ink to dry, meaning you can determine whether a document was signed before or after that date depending on the state of the ink;
  • Photocopiers –it is possible (particularly on older copier models) to determine if Tipp-Ex has been used on a document via an analysis of the photocopier glass and by checking whether shadows have been created on copies that have been made.

Turning to the use of handwriting experts, Charles considered that judges usually would like to first take into account all of the facts and supporting evidence and then evaluate the same before deciding whether a document is a forgery or not, with any evidence from a handwriting expert being used to ultimately support their analysis. 

In ending his portion of the panel session, Charles relayed the important point that litigants should also always consider using a local handwriting expert, particularly in circumstances where there are cultural differences in the manner in which people write. 

It was then left to Andrew to discuss the interaction between civil and criminal actions pertaining fraud, with a particular focus on the recent English decision in PCP Capital Ptrs (“PCP Capital“) v Barclays & Ors [2017] EWHC 2897 (Comm) and the criminal proceedings against, amongst others, Barclays following an investigation by the Serious Fraud Office (the “SFO“). 

PCP Capital is the investment vehicle of Amanda Staveley, who amongst other things, played a prominent role in the investment of billions of pounds in 2008 in Barclays by the ruling families of Abu Dhabi and Qatar, and by the Qatari sovereign wealth fund.  The arrangements between Barclays and Qatar have also been the subject of an investigation by the SFO.  As a result of this investigation, Barclays PLC (as opposed to Barclays, the bank) has been charged along with four senior executives (the “Barclays Criminal Proceedings“). 

In separate civil proceedings, PCP Capital is suing Barclays for, amongst other things, fraudulent misrepresentation, as to the terms on which other investors were offering to invest in the Bank. The claim is for more than £700m. (the “Barclays Commercial Proceedings“). 

The trial of the Barclays Commercial Proceedings was set to take place from January 2018 for a period of eight weeks, while the Barclays’ Criminal Proceedings are set down to take place for an estimated period of 12 to 16 weeks from January 2019.  Barclays, supported by the SFO, sought to invoke the Commercial Court’s inherent jurisdiction (as confirmed by section 49(3) of the Senior Courts Act 1981) by seeking to stay the Barclays Commercial Proceedings on the basis that the Barclays Criminal Proceedings and Barclays’ Commercial Proceedings arose from exactly the same facts and that if the Barclays Commercial Proceedings were to proceed there was a danger it might affect the fair conduct of the Barclays’ Criminal Proceedings.  The threshold conditions that need to be met in order for a stay to be granted are as follows:

  • The concurrent civil and criminal proceedings must “arise from the same facts”: Financial Services Authority v. Anderson [2010] EWHC 308 (Ch)
  • Some step in the civil proceedings “might lead to a potential miscarriage of justice in the criminal l proceedings”: Jefferson Ltd v. Bhetcha [1979] 1 WLR 898
  • Even assuming that these threshold conditions are met, there is still a strong presumption against staying civil proceedings.  In this context, the Courts will also be required to consider the following points:
    • The proceedings should not be stayed if safeguards can be imposed in respect of the civil proceedings which provide sufficient protection against the risk of injustice: Akciné Bendrové Bankas Snoras v. Antonov [2013] EWHC 131 (Comm).  A good example of this would be directions whereby the civil judge placed reporting restrictions on the events transpiring in those proceedings.
    • The responsibility for doing justice in the criminal proceedings lies primarily with the criminal court.  The criminal court has extensive powers to control the criminal proceedings and ensure fairness: Re Priority Stainless (UK) Ltd [2004] BCC 825;
    • The civil court must balance justice between the parties: Panton & Ors v. Financial Institutions Services Ltd (Jamaica) [2003] UKPC 86;
    • Even a real risk of prejudice is not necessarily decisive: Mote v. Secretary of State for Work and Pensions [2007] EWCA Civ 1324, [2008] HLR 27
    • The court must give strong weight to a claimant’s wish to pursue his right as expeditiously as possible: Christian Bittar and Others v. The Financial Conduct Authority and Another [2016] UKUT 265 (TCC); and
    • There is a public interest in protecting the interests of the innocent victims, just as there is a public interest in punishing criminals through the criminal courts: Balfron Trustees Ltd v. Peterson (Stay Application) [2001] C.L.Y. 665. 

In the end, the Commercial Court determined that in the balance of justice, the Barclays Commercial Proceedings should not proceed to trial before October 2019.  It is important to note that a general stay was not granted and therefore the further procedure steps leading up to trail could still be completed in the interim period.  In making its decision, it noted that while it could order reporting restrictions, the market would still be aware that the civil trial had taken place and that could lead to market speculation, notwithstanding there is no public judgment.  It also acknowledged that achieving justice includes timely justice, but that the course to be taken was the one which best served the interests of justice in these circumstances.

Session 2: Banking – legal risks and litigation for the next ten years

The panel for this session consisted of Robin Dicker QC of South Square, Sarah Parkes of Freshfields and Gayathri Kamalanathan, in-house counsel at Deutsche Bank.

Robin kicked off proceedings by considering the implications of a ‘no deal’ Brexit on the banking sector. He referred to the government’s recently published technical notice, entitled ‘Handling civil cases that involve EU countries if there’s no Brexit deal’ (the “Technical Notice”). The thrust of the Technical Notice was that in the event of a ‘no deal’ scenario, the UK:

  1. will retain Rome I and Rome II on applicable law;
  2. will repeal existing European rules relating to jurisdiction and the enforcement of judgments;
  3. will continue to apply the Hague Convention; and
  4. may apply to re-join the Lugano Convention at a later date.

Starting with the position on choice of law, Robin considered that there was unlikely to be any substantive change, due to the intention to retain Rome I and Rome II, both of which generally do not rely on reciprocity to operate.

As regards choice of forum, the position would likely revert to that before the advent of the Judgments Regulation. In particular, lawyers may find themselves dealing more frequently with the doctrine of forum non conveniens. As to the intention to continue to apply the Hague Convention, Robin noted that the UK will have to join in its own right, given that at present it is party to that convention by virtue of its membership of the EU.  Robin noted that the Hague Convention applies to exclusive jurisdiction clauses, but not to asymmetric jurisdiction clauses, which are relatively standard in the banking sector. So, in the event of a ‘no deal’, the position under the Hague Convention would not exactly replicate that under the Judgments Regulation.

Robin identified the key concern in the event of no deal to be the enforcement of English judgments.  The Technical Notice referred to the possibility of the UK re-joining the Lugano Convention in its own right at some subsequent date. Again, re-joining the Lugano Convention would not be a perfect solution: it differs in certain material respects from the Judgments Regulation. Robin sounded a note of caution by observing that the real danger lay in the ‘no deal’ outcome combined with a failure to re-join the Lugano Convention in short order. That really would result in rolling back the clock for UK lawyers, leaving the question of recognition of English judgments (including schemes) to be resolved by foreign courts as a matter of domestic law, in circumstances where recognition often appeared to involve the foreign court taking into account ‘soft’ political considerations. 

Next, Sarah Parkes from Freshfields spoke engagingly about the interaction between litigation and investigations, viewed through the lens of privilege.

Sarah observed that many of the recent decisions on privilege concern material produced in internal investigations by banks and financial institutions, such as the PAG v RBS litigation and SFO v ENRC. Increasingly, the courts have been called upon to clarify the role of privilege in circumstances where the role of prosecuting and regulatory authorities is broadening, there has been a general rise in securities litigation and investigations of a global nature have increased. 

Sarah turned first to litigation privilege. The first instance decision in SFO v ENRC appeared to deliver a heavy blow to the ability of banks to assert privilege over investigatory materials produced ahead of a prosecution. Partially overturning that decision, the Court of Appeal has now held that where proceedings were reasonably contemplated, then privilege in the investigatory materials is likely to subsist. Sarah noted that whether a regulatory investigation or a prosecution is reasonably contemplated is a question of fact in each case. It is therefore important for the key decision makers to document their state of mind as to whether in their belief any such prosecution is being contemplated.

Sarah then turned to legal advice privilege. It was clear from the Court of Appeal’s judgment in SFO v ENRC, that the Court considered the Three Rivers decision to be ripe for re-consideration, in the context of addressing who was the “client” within a large corporation for the purposes of privilege. The effect of the current law was to distinguish between large and small corporations. The Court of Appeal noted that a large corporation will be in a less advantageous position than a small entity, if the former cannot ask its lawyers to obtain the information needed to advise that corporation from the corporation’s employees with relevant first-hand knowledge, while benefitting from the protection of legal advice privilege. 

Next, Gayathri took to the podium to provide the in-house banking perspective, focussing on recent trends in the competition sphere.

As regards the UK position, Gayathri observed that the FCA has had concurrent competition authority since 2015, that the FCA’s messaging has made clear this will be a real area of focus and that its work in this area is supported by a large dedicated team. At an EU level, the European Commission has been very focussed on banks in particular. Gayathri pointed out that the European Commission has looked at the way French authorities use interim orders to temporarily stop potentially anti-competitive behaviour during ongoing investigations, noting that such orders could potentially be damaging where ultimately no infringement is identified.

Turning to some of the key cases involving CDS, FX and LIBOR, Gayathri noted how significant fines were made in respect of activity in these areas as a result of investigations that were competition driven, relating to information exchange. In particular, the fines resulted from common market conduct being put under the competition spotlight for the first time.

Looking ahead to emerging themes, the trend was for competition authorities to be broadening their efforts into the financial services sector more generally. The FCA had identified four asset management firms alleged inappropriately to have shared information in relation to a share placement: this might well be a sign of the FCA’s direction of travel. At a European level, the European Commission is considering syndicated lending in a number of member states, though this has not as yet resulted in a more formal investigation.

Session 3: When a Restructuring Dispute comes to Court: A Mock Hearing

This session saw William Trower QC sitting as judge on a mock application for sanction of a scheme of arrangement, hearing submissions from Daniel Bayfield QC of South Square and Jennifer Marshall of Allen & Overy (for the applicant) and from Philip Hertz of Clifford Chance and Jeremy Wessels, a partner in Mourant’s Guernsey office and Advocate of the Guernsey Royal Court (for an opposing creditor).

A fact pattern was set out in an entertaining video presentation, featuring some faces familiar to the audience. The date of the mock sanction hearing was assumed to be 1 March 2019, in circumstances where no deal had been signed by the UK and the EU, and no transitional provisions had been put in place. The provisions of the relevant scheme would last beyond 29 March 2019. The scheme company was a German incorporated company, which had effected a COMI shift to the UK (the “Company”). Its parent was a BVI Company with assets in the BVI, which had guaranteed the Company’s obligations under the finance documents. The finance documents were English law governed and included an asymmetric jurisdiction clause in favour of the English court.

The evidence of the BVI expert on effectiveness in that jurisdiction was cursory at best (contained on a postcard). The German law evidence was somewhat more convincing. The expert’s evidence was that the German court would give effect to the English scheme. The expert’s reasoning was that the order sanctioning the scheme might be a ‘judgment’ for the purposes of the Judgments Regulation. Alternatively, the scheme would be recognised as a matter of private international law, given that the English scheme was intended to take effect in relation to English law governed finance documents.

Submissions

Daniel was first up for the applicant. He framed the key issue as being whether the English court could be satisfied that the scheme would be recognised in Germany. Daniel’s primary submission was that an order sanctioning the scheme would fall within the Judgments Regulation as a ‘judgment’ on a ‘civil and commercial matter’, so long as Judgments Regulation applied to schemes. As to the scope of the Judgments Regulation, Daniel reminded the esteemed Judge of earlier submissions the pair had made before Lewison J in Dap Holding to the effect that that schemes were excluded from the original judgments regulation under Article 1(2)(b), on the basis that a scheme fell within the exclusion thereunder as a ‘judicial composition’. That submission did not take into account the dovetailing principle, which, it was now submitted, was designed to exclude nothing more and nothing less than proceedings falling under the Insolvency Regulation. Schemes were outside the English insolvency procedures set out in Annex A to the Insolvency Regulation and therefore they necessarily fall within the Judgments Regulation, given that a scheme was a civil and commercial matter.

Philip took up the cudgels on behalf of the opposing creditor. His main contention was that the Judgments Regulation did not apply to the schemes. Particular reliance was placed on Hildyard J’s judgment in relation to the recent Lehman scheme. In short, the arguments relied on were that schemes fall within the Article 1(2)(b) exclusion; Article 4 refers to persons being ‘sued’ and assumes a lis, but that in a scheme there is no real lis given the collective nature of the scheme proceeding; and finally, it was doubtful that the framers of the Judgments Regulation had schemes in mind at all.

Philip did not accept the application of the dovetailing principle to an English scheme. In particular, he noted that the authorities were inconclusive where the scheme company actually is in a separate insolvency process of its own. Overall, it stretched the language of the Judgments Regulation to breaking point to try to force a scheme of arrangement within its scope.

Speaking second for the applicant, Jennifer addressed the issue of effectiveness of the scheme in the two relevant foreign jurisdictions. She submitted that the test the English court should have in mind was whether here was a reasonable likelihood of a scheme becoming effective in the foreign jurisdiction. 

The German law evidence was clear that the scheme would likely be recognised by the German court. As to the BVI, Jennifer noted that a late skeleton argument filed by the other side referred to the opposer’s intention to petition for the winding up of the BVI parent company in the BVI. Jennifer submitted that the Pacific Andes case should be distinguished from the present case on the facts: the US Chapter 11 proceedings had only barely been adumbrated in that case, whereas here one was dealing with a fully-fledged scheme at the sanction stage. In those circumstances, it was submitted that the BVI winding up petition should not affect the English court’s exercise of discretion.

Rounding off the case for the opposer, Jeremy began by considering the breadth of the English court’s jurisdiction, and that English judges have (rightly) imposed discretionary limits on the exercise of that jurisdiction. As to the applicable test, Jeremy acknowledged that the scheme did not have to be effective everywhere, but did have to be effective where it counts.

Jeremy submitted that the German evidence was far from satisfactory. As regards the BVI evidence, this was even worse. Turning to the BVI winding up petition, Jeremy relied on Pacific Andes for the proposition that a bona fide winding up petition could not be trumped simply by the fact that the scheme company planned to enter some form of restructuring. He submitted that therefore the onus was on the Company to persuade the Court that the BVI winding up would have no impact on the effectiveness of the scheme.

Trower QC’s Judgment

Giving his judgment, William considered there were two principal issues: (1) whether the Judgments Regulation applied; and (2) whether the Court was satisfied that the scheme would be effective.

On the first issue, the answer was ‘yes.’ An application to sanction a scheme was a ‘civil and commercial matter’ and therefore prima facie the Judgments Regulation applies. Despite the wording of Article 1(2)(b), which on its face appears to encompass schemes, that exclusion does not extend to schemes not caught by the Insolvency Regulation. In particular, William accepted that the dovetailing principle should be applied here.  Further, the creditors were being ‘sued’ within the autonomous European meaning of that word for the purposes of the Judgments Regulation. Therefore, the Judgments Regulation did apply to a scheme sanction.

On the second issue, the question was to be determined against a background where the parties accepted that the scheme was a satisfactory one, and no one appeared to be submitting that it led to any unfairness. Under this heading, the questions were: (1) what the test of effectiveness is and (2) whether the court could be satisfied on effectiveness. William concluded that the test is whether the court can be satisfied to an appropriate level of certainty that the scheme will achieve its purpose. As to effectiveness, William noted that the German evidence was not satisfactory, but that its conclusions were not surprising. Even if the Judgments Regulation did not apply, it would hardly be surprising that a variation by the English court of English law governed obligations would be recognised elsewhere, by reason of Rome I or as a matter of private international law. Accordingly, William was satisfied that the scheme would achieve its purpose  in Germany.

A greater concern was the position in the BVI. Notwithstanding the deficient BVI evidence, the BVI expert’s conclusion was, again, not surprising. On the facts of the case, it seemed likely that the BVI court would decline to make a winding up order, noting the opposition by a body of creditors to the making of such an order. Therefore, the principle of ex debito iustitiae would not apply without qualification in the case of the BVI petition. In summary, there were substantial grounds to think that the scheme would be effective in the two jurisdictions where it mattered, and William exercised his discretion to sanction it.

Keynote Speaker

Lord Daniel Finkelstein OBE, who was ably introduced to the delegates by co-chair and Mourant Partner Peter Hayden, was the Forum’s keynote speaker.  Lord Finkelstein is well-known as a leading columnist and Associate Editor of The Times, responsible for the digital edition as well as the Saturday football column, the Fink Tank.  He is also a member of the House of Lords and an advisor to the Conservative Party.  

The purpose of his keynote address was to provide delegates with an insight into politics and how politicians work so that they can analyse all of it for themselves.  He kicked off by talking about how his football column taught him two things that are also relevant to politics.  The first is to be careful not to overestimate the importance of expert advice and predictions, and the second is to be able to distinguish between signal and noise. 

Looking at the first of these points, he said that in politics when we analyse things, we over-correlate for the knowledge that we have and we try to take patterns out of things that are essentially random. The reason we do that is due to continually underestimating the fact that nobody is following politics.  For instance, people generally do not know about politics, they don’t know who is in politics, they don’t understand the big terms, and they are not following the stories in the newspaper.  Put another way, people have political views, but they do not follow any of the details in politics.  He used the infamous “plebgate” story involving Chief Whip Andrew Mitchell to hit home the point.  What people may have considered to be a disaster for the Conservative Party ultimately, in Lord Finkelstein’s view, had no political impact at all because nobody knew who Andrew Mitchell is, people don’t know what a Chief Whip is, they didn’t know that he left 10 Downing Street that day, and they didn’t know whether he was on the government side or the other side. 

Lord Finkelstein then went on to say that people do not only not follow political stories, but they also understand a lot of things that come naturally to politicians (like their expert language), very differently.  For example, when he was working for the Conservative Party in the 1997 general election, the Liberal Democrats came out with a policy of putting a penny on tax to pay for education.  Many commentators said that it was going to be really popular with people.  The Conservatives decided they would poll it.  The pollsters said that people were in favour of putting a penny on tax to pay for education, but not a penny in the pound, just a penny!  Those polled didn’t know that was what the Liberal Democrats were talking about and when they were told what a penny in the pound was, they were completely horrified by the idea…

He then made the very powerful point that what really influences how people vote, is what happens to them and their own experience.  For instance, their view of the economy is because of their own experience of the economy (which is inextricably linked to the wages in their pocket) and that is a critical factor.  Thinking of this in context of the 2017 general election, Mr Finkelstein was of the view that politicians had massively underestimated the fact that real wages were going down when in 2015 they were going up. 

Lord Finkelstein then gave the delegates a further insight into some of his political principles:

  1. The Contrast Principle – he compared this to putting one hand in a bucket of cold water, one hand in a bucket of hot water, and taking them both out and putting them into a bucket of lukewarm water.  The hand that was in the cold water will feel hot and the hand that was in the lukewarm water will feel cold.  In his view, all of politics works through the contrast principle.  It’s not just about how good/competent somebody is, but also how well they stack up against their opposite number.  For example, during the 2015 general election it was about how popular David Cameron was in relation to Ed Miliband; not simply about how popular either of them was.
  2. The Mandy Rice-Davis Principle – this principle is derived from the famous response by Mandy Rice-Davis (who claimed to have had a relationship with Lord Aster) to Lord Aster QC putting it to her that he denied her claim and she replied “well he would say that wouldn’t he”.  The point made here by Lord Finkelstein is that politics is highly demographic, and not ideological.  In making the point, he referred to Brexit and seeing the UK as two countries, “Remainia” and “Leavia” if you will.  Remainia consists of people who have something to gain out of being connected to the outside world, or who can imagine themselves having the chance to move to another country and working there and don’t regard anybody coming from another country to work here as any sort of challenge to them.  Then there is Leavia, people who don’t see themselves as having much to gain out of this global market, who see themselves as challenged by it, who are pessimistic about the future. 
  3. The Slippery Road Principle – This is better known, in social ecology, as the fundamental attribution error where you attribute to someone’s personality, something that was actually a factor of the situation.  Applying this to the notion that the government is being weak and making a terrible mess of Brexit, Lord Finkelstein made the point that this may actually be because the government has not got a majority, Brexit is difficult to implement and it is hard to see what a good outcome might be, and not because the people who are implementing it are doing it in a clumsy way.
  4. The Loss Aversion Principle – Here Lord Finkelstein referred to the human condition of not wanting to lose something you have received (no matter how random that thing is) because it is in one’s nature to become quite used to that thing and keeping it.  He noted that this principle worked well in the Scottish referendum when it came to the fear around what would happen to Scotland’s economy if it could not keep sterling as the currency. 
  5. The Towel Principle – Lord Finkelstein took note of the little sign in hotel rooms which ask that guests hang their towel back on the rack if they want to help the environment, and the fact that a lot of people don’t.  In order to combat this, some hotels changed the words on the sign to include a statistic that 75% of people staying in those hotels hang their towel back on the rack during their stay.  As a result, the proportion of people who then hung up their towel rose by 10%.  The reason for this? We all want to know what people like us are doing: we copy social norms, and when people copy each other that has a profound effect.

In looking at the last two principles together, Lord Finkelstein noted that you can see how bandwagons of people across different spectrums are created in an election.  This is particularly the case when it comes to the issue of fairness. People feel cheated in the sense that someone is unfairly taking out of a system when others are putting into that system.  Banker’s bonuses are a good example.  These bonuses were never an issue for many years and they were simply bigger than everyone else’s salary, but the moment everyone thought, “I am paying into the banking system and these people aren’t doing anything, even keeping my money safe” it became an issue of fairness. 

In wrapping up the address, Lord Finkelstein advised those in the room that if you are trying to follow politics the most important thing to remember is that if you ever find yourself up watching news night, everyone else has gone to bed!

Conclusion

The Forum was closed by Peter Hayden.  Each of the sessions was thought-provoking and engaging, as evidenced by the animated discussions among delegates at the evening drinks.  Our thanks go out to all of the delegates for their support and continuing to make this annual event a great success. 

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