Commerzbank Can Appeal Dresdner Bonus Ruling

No Pot Of Gold

Commerzbank has won the chance to appeal a U.K. court ruling forcing it to pay about $64m in bonuses to 104 Dresdner Kleinwort bankers.

Bloomberg reports that Judge Andrew Longmore said at a London hearing Tuesday that there are grounds to appeal the May decision and told Commerzbank to consider trying to negotiate a settlement with the bankers until any appeal is heard.

Reuters reports that Commerzbank, which has twice been bailed out by German taxpayers, argues that its now-integrated Dresdner Kleinwort subsidiary was both justified and obliged to cut bonuses for 104 bankers because the survival of the business was at stake.

Commenting on the decision, Paul Quain, Partner at GQ Employment Law, said: 'This is a major case for all the banks, which will affect what bank bosses can say about bonuses in team meetings to motivate staff'.

'The legal saga over whether these bankers were offered a binding promise on their bonus is now set to proceed to the Court of Appeal'.

'Irrespective of whether Commerzbank ultimately wins or loses, the clear message for City businesses is that they need to be very careful saying one thing about bonuses in a team meeting, then changing their mind later when it comes to putting things in writing or actually paying the bonuses'.

Background to the ruling

The legal claim, which has been one of the most highly-contested claims the City has seen in years, was launched by 104 bankers from DKIB (Dresdner Kleinwort Investment Bank), after it was sold to Commerzbank in early 2009.

The bankers claimed that shortly before the sale to Commerzbank, senior management at DKIB announced a guaranteed bonus pool for staff of $514m in order to deal with FSA concerns over excessive staff departures.

However, following the sale to Commerzbank, the bank announced losses at DKIB of $8.35bn and paid out only 10% of the amount bankers had previously been provisionally awarded.

Commerzbank subsequently received emergency funding from the German Government to shore up its balance sheet.

In his May judgment, Mr Justice Owen in the High Court referred to the 'understandable sensitivity to the public perception of the payment of bonuses on such a scale in the context of the massive support for Commerzbank by the German government'.

However, he decided that the bankers did have a claim as the statements made by the bank created a contractual obligation that Commerzbank needed to honour.

Commerzbank Can Appeal Dresdner Bonus Ruling: U.K. Court

Commerzbank wins right to appeal UK bonus ruling

 

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