¹ Three Rivers District Council and others v Governor and Company of the Bank of England [2000] 2 WLR 1220Google Scholar; Three Rivers District Council and others v Governor and Company of the Bank of England [2001] UKHL 16.Google Scholar

² Three Rivers District Council [2000] 2 WLR 1220Google Scholar; Three Rivers District Council [2001] UKHL 16.Google Scholar

³ At first instance, after initial proceedings concerning various preliminary issues of law, Clarke J acceded to the Bank of England's application to strike out the action (Judgment of 30 July 1997 (unreported)). The Court of Appeal upheld Clarke J's decision in a joint majority judgment of Hirst and Robert Walker LJJ; Auld LJ dissented: Three Rivers DC v Bank of England [1999] EuLR 211.Google Scholar

⁴ Three Rivers District Council [2000] 2 WLR 1220.Google Scholar

⁵ First Council Banking Co-ordination Directive of 12 Dec 1977 (77/780/EEC).

⁶ Under the transition arrangements guiding the introduction of the Civil Procedure Rules (CPR) in 1999, the question whether the misfeasance claim should be struck out was determined according to the CPR: Three Rivers District Council [2001] UKHL 16, paras 12–13.Google Scholar

⁷ The Bank of England asked the House of Lords to give summary judgment against the claimants under Rule 24.2 CPR. Lords Steyn, Hope, and Hutton allowed the appeal against the striking out of the claim. Lords Hobhouse and Millett dissented.

⁸ Inquiry into the Supervision of the Bank of Credit and Commerce International HC Paper (1992–1993), no 198.Google Scholar

⁹ Three Rivers District Council [2001] UKHL 16, para 33 and 80.Google Scholar

¹⁰ Ibid, para 33 and 86.

¹¹ Ibid, para 132.

¹² Banking supervision was not without bureaucracy: there were many administrative permits and dispensations which had to be obtained if a full range of banking activities were to be attained. This served more as a barrier to entry than a basis for real supervision. ‘The underlying idea was to await the development of a new financial institution and then make a judgement’, Möschel, W, ‘Public Law of Banking’ (1991) Int Enc Comp Law, vol IX, ch III, at para 20.Google Scholar

¹³ The Bank never formally invoked the power of recommendation and direction contained in s 4(3) of the Bank of England Act 1946. The Bank's approach to supervision was that of a gentleman's code of ethics and self-regulation. See Penn, G, Banking Supervision (London: Butterworths, 1989), 10–11.Google Scholar

¹⁴ Ibid, 15.

¹⁵ The current Statement of Principles from 1998 was issued by the Financial Services Authority and is complemented by the very extensive Guide to Banking Supervisory Policy.

¹⁶ See the discussion of systemic risk in Cranston, R, Principles of Banking Law (Oxford: Oxford University Press, 1997), 71–2.Google Scholar

¹⁷ See, for instance, the submissions by the Governor of the Bank of England and its other representatives to parliamentary committees and the annual reports by the Bank on banking supervision.

¹⁸ The advantages for a banking supervisor are obvious. Compare systemic risk, which has not yet ever materialised in a systemic collapse, as the only standard of accountability with loss for depositors, which occurs with most individual bank failures.

¹⁹ See the discussion of these issues in Cranston, op cit, 91–2.

²⁰ For instance, it could be claimed that that the market would withdraw from a bank whose activity was restricted. This could bring about the collapse of the bank with possible consequences for the stability of the banking market.

²¹ This is well documented in the Rt Hon Lord Justice Bingham's Inquiry into the Supervision of the Bank of Credit and Commerce International (HC Paper (1992–3), No 198) and in Report of the Board of Banking Supervision Inquiry into Circumstances of the Collapse of Barings (1995). At 260 of the latter Report it was noted that no in situ inspection (‘visit’) to Barings Bank was ever undertaken before its collapse in 1995.

²² Banking Act 1987, s 1(4). See now Sch 1, s 19(1) of the Financial Services and Markets Act 2000. For an in-depth analysis of UK law, see Hadjiemmanuil, C, Banking Regulation and the Bank of England (London: LLP, 1996)Google Scholar and the more general discussion in Cranston, op cit, 91 et seq.

²³ This immunity reaches further than restricting mechanisms in other European jurisdictions. It is for instance undisputed that German regulators will be liable in negligence to the banks they supervise. The possible restrictions in German tort liability are in relation to depositors, other creditors and shareholders.

²⁴ See, eg, Lam v Brennan [1997] PIQR P488 (planning control); Reeman v Department of Transport [1997] 2 Lloyd's Rep 648Google Scholar (health and safety regulation). See discussion in McLean, H, ‘Negligent Regulatory Authorities and the Duty of Care’ [1988] OJLS 442CrossRefGoogle Scholar; Craig, PP and Fairgrieve, D, ‘Barrett, Negligence and Discretionary Powers’ [1999] Public Law 626 and 646Google Scholar.

²⁵ Yuen Run Yeu v Attorney General of Hong Kong [1988] AC 175; Davis v Radcliffe [1990] 2 All ER 536.

²⁶ See Bourgoin SA v MAFF [1986] QB 716, 776. See also Dunlop v Woollahra Municipal Council [1982] AC 158, 172; Jones v Swansea CC [1990] 3 All ER 737.

²⁷ Generally, see Craig, , Administrative Law, 4th edn (London: Sweet & Maxwell, 1999), 875–80Google Scholar; Arrowsmith, S, Civil Liability and Public Authorities (Winteringham: Earlsgate, 1992), 226Google Scholar ff; Wade, W, Administrative Law, 8th edn (Oxford: Oxford University Press, 2000), 765 ffGoogle Scholar; McBride, , ‘Damages as a Remedy for Unlawful Administrative Action’ [1979] CLJ 323CrossRefGoogle Scholar.

²⁸ Bourgoin SA v MAFF [1986] QB 716, 776. See also Dunlop v Woollahra Municipal Council [1982] AC 158, 172.

²⁹ Three Rivers District Council [2000] 2 WLR 1220 and [2001] UKHL 16.

³⁰ Ibid. See also [2001] UKHL 16, para 121 (Lord Hutton)

³¹ See argument in the Court of Appeal: Three Rivers DC v Bank of England [1999] EuLR 211, 243.

³² Three Rivers District Council [1999] EuLR 211, 270–2, 370 (CA).

³³ Three Rivers District Council [2001] UKHL 16, para 41.

³⁴ Ibid, 16.

³⁵ Three Rivers District Council [2001] UKHL 16, paras 44, 46, 62, and 76.

³⁶ See, eg, Three Rivers District Council [2001] UKHL 16, para 58.

³⁷ Three Rivers District Council [2001] UKHL 16, para 62. Another variant of this is referred to in Lord Hobhouse's judgment as ‘blind eye knowledge’—see para 164 ff.

³⁸ See Satnam and Kewal S (1984) 78 Cr App R 141.

³⁹ worth, A Ash, Principles of Criminal Law, 3rd edn (Oxford: Oxford University Press 1999) 186–87Google Scholar; see also 416 about Caldwell recklessness and deception offences: there dishonesty may be shown even when the defendant gave no thought to the obvious risk that a representation was false, Goldman [1997] Crim LR 894.

⁴⁰ Three Rivers District Council [2001] UKHL 16, para 60. See Ashworth, , Principles of Criminal Law 180–81Google Scholar about the distinction between the required state of mind and the process of drawing inferences about it which is also an issue in Lord Hope's speech. Cane, P ‘Mens Rea in Tort Law’ (2000) 20 OJLS 533, 542–3CrossRefGoogle Scholar takes this discussion further, and is less critical of the judicial process failing to distinguish between the required state of mind and the (factual) inferences than Ashworth.

⁴¹ Three Rivers District Council [2001] UKHL 16, para 46.

⁴² Ibid, para 60.

⁴³ Ibid, paras 60 and 76. He also expressed this in terms of the following test: ‘the public officer was aware of a serious risk of loss due to an act or omission on his part which he knew to be unlawful but chose deliberately to disregard that risk’ (para 46).

⁴⁴ Ibid, paras 57 and 62.

⁴⁵ Ibid, para 62.

⁴⁶ Ibid, paras 44 and 62.

⁴⁷ Ibid, para 44.

⁴⁸ Ibid, para 62.

⁴⁹ For a restrictive interpretation of the bad faith requirement in the Court of Appeal, see Greville v Sprake [2001] EWCA Civ 234; Thomas v Chief Constable of Cleveland [2001] EWCA Civ 1552.

⁵⁰ See the useful overview of the regulatory system in Three Rivers District Council [2000] 2 WLR 15 (abridged) [1999] EuLR 211 (in full) CA.

⁵¹ In particular, the First Banking Directive of 1977: First Council Banking Co-ordination Directive of 12 Dec 1997 (77/780/EEC).

⁵² See Cranston, op cit, 70.

⁵³ [2000] 2 WLR 1220, 1236.

⁵⁴ Ibid, 1242.

⁵⁵ See the discussion of the supervisory systems of other member states by Andenas, M and Fairgrieve, D, ‘To Supervise or to Compensate’, in Andenas, and Fairgrieve, , Judicial Review in International Perspective (London: Kluwer Law International, 2000).Google Scholar

⁵⁶ Societe Civile Immobiliere Parodi v Banque H. Albert de Bary et Cie (Case C–222/95) [1997] ECR1–3899; [1997] All ER (EC) 946, ECJ. Another interesting point concerns the French courts' application of the ECJ's preliminary ruling which arguably is inconsistent with that of the House of Lords. That should have resulted in a new reference to the ECJ by the House of Lords. See the Editorial in [2000] Euredia 305 signed by the Editorial Board under the title ‘European Banking Law as Applied by the House of Lords: Overshadowing the Acte Clair Doctrine’, and also the case note in [2000] Euredia 379.

⁵⁷ In Dillenkofer [1996] ECR 1–4845 para 22 the condition that the directive conferred rights on individuals was formulated in the following way: the result prescribed by the directive must entail the grant of rights to individuals and the content of those rights must be identifiable on the basis of the directive. This formulation does not allow a national court to disregard the European Court's case law on the interpretation of a directive!

⁵⁸ [2000] 2 WLR 1220, 1242.

⁵⁹ Directly effective EU law can be relied on in national courts. Member States can be held liable in tort for breach of EU law whether the provisions of EU Law are directly effective or not.

⁶⁰ This condition, established in the European Court's judgment in Dillenkofer [1996] ECRI–4845 para 22, was referred to in the judgments as ‘the Dillenkofer condition’.

⁶¹ See Part V below.

⁶² This was not brought to the attention of the English courts in the Three Rivers litigation.

⁶³ Conseil d'Etat, 29 Dec 1978, Darmont [1978] Recueil des Decisions du Conseil d'Etat, 542. Other agencies also exercised supervisory functions: see further Fairgrieve, D and Belloir, K ‘Liability of the French State for Negligent Supervision of Banks’ (1999) 10 European Business Law Review, 17.Google Scholar

⁶⁴ Cliquennois, , ‘Essai Sur La Responsabilité de l'Etat du Fait de Ses Activités de Contrôle et de Tutelle’ [1995] Les Petites Affiches, no 98, 4.Google Scholar

⁶⁵ This case is itself over 35 years old and relates to facts that took place in the 1950s. Conseil d'Etat 24 Jan 1964, Achard [1964] Recueil des Decisions du Conseil d'Etat, 43.

⁶⁶ Cour Administrative d'Appel de Paris, 30 Mar 1999, El Shikh, AJDA. 1999.951. See discussion in Andenas and Fairgrieve, ‘To Supervise or to Compensate? A Comparative Study of State Liability for Negligent Banking Supervision’ in Andenas, and Fairgrieve, , Judicial Review in International Perspective (London: Kluwer Law International, 2000), 348 et seq.Google Scholar

⁶⁷ Cour Administrative d'Appel de Paris, 25 Jan 2000, Kechichian, Req 93PA01250.

⁶⁸ See Errera [1990] Public Law 571; Raynaud and Fombeur, AJDA 1998, 418, 424.

⁶⁹ See Conseil d'Etat 20 June 1997, Theux, Recueil des Décisions du Conseil d'Etat, 253 concl Stahl (emergency services); Conseil d'Etat 29 Apr 1998, Commune de Hannappes, Recueil des Décisions du Conseil d'Etat, 185, RDP 1998.1001 note X. Prétot, JCP 1999.11.10109 note Genovèse (fire-services).

⁷⁰ Conseil d'Etat, 30 Nov 2001, Kechichian, AJDA 2002.136. See extended discussion in Fairgrieve, D, State Liability in Tort: A Comparative Law Study (Oxford: Oxford University Press, forthcoming).CrossRefGoogle Scholar

⁷¹ Subsequent to the issuing of a formal ‘lettre de suite’, which had been motivated by an inspection which had uncovered weaknesses in the bank's finances.

⁷² Chapus, , Droit Administratif Général, vol 1, 13th edn (Paris: Montchrestien, 1999), para 1463.Google Scholar

⁷³ Cliquennois, , ‘Essai Sur La Responsabilité de l'Etat du Fait de Ses Activités de Contrôle et de Tutelle’ [1995] Les Petites Affiches, no 98, 4.Google Scholar

⁷⁴ Only one claim had previously satisfied the traditional faute lourde requirement. This case is itself over 35 years old and relates to facts that took place in the 1950s: Conseil d'Etat, 24 Jan 1964, Achard [1964] Recueil des Décisions du Conseil d'Etat, 43. For discussion of this, see generally Fairgrieve, and Belloir, (1999) 10 European Business Law Review, 13.Google Scholar

⁷⁵ Tribunal Administratif de Paris, 7 July 1993 (unreported).

⁷⁶ Cour Administrative d'Appel de Paris, 30 Mar 1999, El Shikh, AJDA. 1999.951. For a fuller examination of the facts of the case, see Andenas and Fairgrieve, ‘To Supervise or to Compensate?’, op cit.

⁷⁷ In respect of the parallel claim concerning the exercise of the Commission Bancaire's disciplinary power, the French courts maintained the pre-requisite of faute lourde laid down in the case of Darmont in 1978 (n 63 above). The Court held that on the facts of the case the Commission Bancaire did not commit a faute lourde.

⁷⁸ For a more detailed examination of this point, see Andenas and Fairgrieve, ‘To Supervise or to Compensate?’, op cit.

⁷⁹ Ossenbühl, F, Staatshaftungsrecht (Munich: Beck, 1998), 64.Google Scholar

⁸⁰ German law is of interest here as a background to the First Banking Directive. It is also necessary to understand a point based on the legislative history of the directive concerning a proposed article in the Directive limiting liability to depositors (see under Part III above).

⁸¹ BGH Z 58, 96 at 98.

⁸² BGHZ 74, 144 at 147.

⁸³ BGHZ 75, 120 at 122. In the Herstatt case the claimants were a group of private depositors. The Gemeinschaftsfonds bzw. Feuerwehrfonds proved insufficient at the insolvency of the Herstatt-Bank in 1974. The response was the establishment in 1976 of the Einlagesicherungsfonds des Bundesverbands der deutschen Banken, as an industry initiative to pre-empt legislation establishing a public deposit guarantee scheme. See further Schimansky, H, Bunte, H-J, and Lwowski, H-J, Bankrechts-Handbuch, vol 1 (Munich: Beck, 1997), para. 25 at 3, 25.Google Scholar

⁸⁴ Ossenbiihl, op cit, 63–4.

⁸⁵ It is interesting to note that Art 34 GG also bars legislation that qualifies the degree of fault required for liability. French distinctions such as faute lourde could not be expected to pass review under Art 34 GG. The Constitution does not, on the other hand, bar a limitation of the right of recourse against the civil servant personally to a qualified form of negligence.

⁸⁶ See also the discussion by Schenke, WR and Ruthig, J ‘Amtshaftungsansprüche von Bankkunden bei der Verletzung staatlicher Bankenaufsichtsplichten’, NJW (1994), 2324Google Scholar; and Ossenbühl op cit, 64 with extensive references.

⁸⁷ Szagunn, V, Haug, U, and Ergenzinger, W, 6th edn, Gesetz über das Kreditwesen (Stuttgart: Verlag W Kohlhammer 1997), 170Google Scholar. The parallel UK immunity excludes also this kind of liability; this was indeed the main purpose of the immunity.

⁸⁸ Although the Corte di Cassazione did not actually decide on the issue of liability. After the Supreme Court's ruling in Cass 22 July 1993, n. 8181 in the case following the liquidation of the Banca Popolare di Fabrizia, the Tribunale di Roma, on the facts of the case, did not find in favour of the claimant. The Supreme Court held again in Cassa di Risparmio di Prato—Landini (Cass 27 October 1994, n. 8836) that the Banca d'ltalia could be liable in damages to investors for lack of supervision and that such claims fall within the competence of the civil courts. According to Article 2043 of the Italian civil code, which also applies to the public bodies, ‘any wilful or negligent act that causes an unjustified damage to another obliges the person who has committed the act to pay damages’. This covered only the infringement of someone's ‘rights’ and not their ‘legitimate interests’. A depositor would only have a legitimate interest in the supervision of the bank and not a right. In Cassa di Risparmio di Prato—Landini the possibility is opened up for granting depositors rights in this sense, making a damages remedy available. Focus shifted to the right of the integrity of their assets from the legitimate interest in the lawful use of supervisory powers.

⁸⁹ Cass Sez I, 3 Mar 2001, n. 3132. The new doctrine on tort liability for breach of legitimate interests generally was established in the case reported as Cass SSUU, 22 July 1999, n. 500. A damages remedy became available without having to reclassify the ‘legitimate interests’ as rights.

⁹⁰ See excellent discussion of this case, by Roberto, Caranta, ‘Public Law Illegality and Governmental Liability’ in Fairgrieve, D, Andenas, M, and Bell, J (eds), Tort Liability of Public Authorities in Comparative Perspective (London: BIICL, 2002).Google Scholar

⁹¹ In Brasserie du Pecheur SA v Federal Republic of Germany; R v Secretary of State for Transport, ex p. Factortame Ltd (No 4) [1996] ECR 1–1029.

⁹² At para 51.

⁹³ See Case C–424/97, Salomone Haim v Kassenzahnärztliche Vereinigung Nordrhein, judgment of 4 July 2000; Case C–140/97, Rechberger and Greindl v Austria [1999] ECR1–3499; Case C–321/97, Ulla-Brith Andersson and Susanne Wåkerås-Andersson v Swedish State [1999] ECR I–3551; Case C–302/97, Konle v Republic of Austria [1999] ECR 1–3099; Case C–319/96, Brinkmann Tabakfabriken GmbH v Skatteministeriet [1998] ECR 1–5255; Case C–127/95, Norbrook Laboratories Limited v Ministry of Agriculture [1998] ECR 1–1531.

⁹⁴ See Tridimas, , ‘Liability for Breach of Community Law: Growing up and Mellowing Down?’, in Fairgrieve, D, Andenas, M, and Bell, J (eds), Tort Liability of Public Authorities in Comparative Perspective (London: BIICL, 2002).Google Scholar

⁹⁵ However, so far no apparent attempt has been made by the Court to borrow, in developing causation rules for Member States' liability for breach of Community law, from its case law on Art 228(2) and liability for Community institutions with regard to causation, see the criticism by Gerven, W Van, ‘Taking Article 215(2) EC Seriously’, in Beatson, and Tridimas, (eds), New Directions in European Public Law (Oxford: Hart Publishing, 1998), 35–48.Google Scholar

⁹⁶ Three Rivers District Council [2001] UKHL 16, para 60. The distinction between the substantive test and the evidentiary matters is an unclear one, also in the practice of the English appellate courts, see A Ash worth, Principles of Criminal Law, 180–1 and P Cane ‘Mens Rea in Tort Law’ 542–3 (n 40, above).

⁹⁷ Wright, J, Tort Law and Human Rights (Oxford: Hart Publishing, 2001)Google Scholar; Markesinis, B, Auby, J-B, Coester-Waltjen, D, and Deakin, S, Tortious Liability of Statutory Bodies: A Comparative and Economic Analysis of Five English Cases (Oxford: Hart Publishing, 1999)Google Scholar; Amos, , ‘Extending the Liability of the State in Damages’ [2001] LS 1Google Scholar; Craig, PP and Fairgrieve, D, ‘Barrett, Negligence and Discretionary Powers’ [1999] Public Law 626.Google Scholar

⁹⁸ McDermott, J, ‘Commercial Implications of the Human Rights Act 1998’ (2000) BJIBFL 449, 453.Google Scholar

⁹⁹ Three Rivers District Council [2001] UKHL 16, para 6 (Lord Steyn), 33 and 80 (Lord Hope).

¹⁰⁰ Three Rivers District Council [2001] UKHL 16, para 92.

¹⁰¹ See, for instance, the recent decision by the European Human Rights Court in Al-Adsani v United Kingdom, Application no 35763/97, judgment of 21 Nov 2001.

¹⁰² Three Rivers District Council [2001] UKHL 16, paras 60 and 76.

¹⁰³ See, eg, Capital & Counties pic v Hampshire County Council [1997] QB 1004.

¹⁰⁴ Three Rivers District Council [1999] EuLR 211, 270–2 (CA).

¹⁰⁵ Ibid, 270.

¹⁰⁶ Three Rivers DC v Bank of England [2000] 2 WLR 1220, 1233 and 1267.

¹⁰⁷ In the regulatory sphere, see Yuen Kun Yeu v Attorney General of Hong Kong [1988] AC 175 (Privy Council); Cooper v Hobart, 2001 SCC 79 (Supreme Court of Canada).

¹⁰⁸ See the judgment of the European Court of Justice in Brasserie du Pecheur v Germany [1995] ECR I–1029, at para 90, [1996] QB 404, at 504.

¹⁰⁹ The major exception to this is the rule laid down in the case of Hedley Byrne & Co Ltd v Heller & Partners [1964] AC 465.

¹¹⁰ See references to the spectre of indeterminate liability in Cooper v Hobart, 2001 SCC 79 (Supreme Court of Canada).

¹¹¹ Bourgoin SA v MAFF [1986] QB 716; Roncarelli v Duplessis (1959) 16 DLR (2d) 689 (Canadian Supreme Court).

¹¹² Rookes v Barnard [1964] AC 1129.

¹¹³ Ibid.

¹¹⁴ See AB v South West Water Services Ltd [1993] QB 507.

¹¹⁵ Ibid.

¹¹⁶ R v Secretary of State for Transport exp Factortame (No 5), [1998] EuLR 456 (CA).

¹¹⁷ Kuddus v Chief Constable of Leicestershire Constabulary [2001] 2 WLR 1789.

¹¹⁸ See, in particular, Barrett v Enfield LBC [2001] 2 AC 550; Phelps v Hillingdon LBC [2001] 2 AC 619.

¹¹⁹ But the House of Lords extensively discussed cases from different Commonwealth jurisdictions. They are recognised as persuasive authorities. Lord Bingham foresees that judgments from other European countries will be dealt with in a similar way, see for instance his highly convincing and elegant argument in ‘A New Common Law for Europe’, in Markesinis, BS, The Coming Together of the Common Law and the Civil Law. The Clifford Chance Millenium Lectures (Oxford: Hart Publishing, 2000), 27,Google Scholar and in Fairchild [2002] UKHL 22, para 32, where, in para 168, also Lord Rodger comments on the use of comparative law. A predecessor as Senior Law Lord, Lord Goff of Chieveley introduced a use of comparative legal materials in the House of Lords which today is more extensive than in any other European court. But not in the present case. There is an extensive and interesting discussion of fault as an ingredient of tort liability for public authorities in different member states by AG Tesauro in Brasserie du Pecheur v Germany [1995] CR1–1029, [1996] QB 404, at para 85–90.

¹²⁰ This one exception is the statement about there being no supervisory authorities in the UK or Denmark before the First Banking Directive [2000] WLR 1220 at 1254. It is based on a factual misunderstanding.

¹²¹ Hotson v East Berkshire Area Health Authority [1987] AC 750.

¹²² Allied Maples Group Ltd v Simmons & Simmons [1995] 1 WLR 1602Google Scholar. Lunney, See and Oliphant, , Tort Law: Text and Materials (Oxford: Oxford University Press, 2000), 184Google Scholar; Markesinis, and Deakin, , Tort Law, 4th edn (Oxford: Oxford University Press, 1999), 183.Google Scholar See also the discussion of Community law rights to compensation for ‘lost profits’ and in particular the relevant French law by AG Tesauro in the Brasserie du Pêcheur v Germany [1995] ECR 1–1029, [1996] QB 404, at para 91–6.

¹²³ Spring v Guardian Assurance [1995] 2 AC 296, 327.

¹²⁴ Kitchen v Royal Air Force Association [1958] 1 WLR 563.