By Kirstin Ridley
LONDON, March 5 (Reuters) - Commerzbank said on Tuesday an English judge made “surprising” errors when ordering Germany’s second largest lender to pay 104 London-based bankers 52 million euros ($68 million) in bonuses.
At the start of a three day Court of Appeal hearing, the bank said that it had made no binding contractual agreement to pay the bankers their 2008 bonuses as the credit crisis raged in 2008 and the lender’s losses spiralled.
According to court documents, the bank said High Court Judge Robert Owen made a series of mistakes in his judgment last May, including that staff notification by a single live ‘broadcast’ on the bank’s intranet was potentially binding.
Commerzbank called this interpretation of a section in its staff handbook, “both surprising and erroneous”.
The three-year legal battle shines a light on a bygone era before political and public scorn became focused on fat banker bonuses, blamed for encouraging a culture of risk that helped trigger the financial crisis and economic recession.
Commerzbank says it acted responsibly and reasonably when it slashed discretionary bonuses by 90 percent as the credit crunch put the future of its now integrated investment banking arm, Dresdner Kleinwort, at risk.
The bankers, whose claims range from around 15,000 euros to 2.6 million euros, contend that Commerzbank reneged on contractual promises and that heavy losses at Dresdner Kleinwort had been well known when their bosses made and repeated bonus pledges.
The dispute hinges on whether these promises were binding and enforceable, whether Commerzbank was entitled to make 2008 awards dependent on bank performance after buying Dresdner in 2009 and whether it could subsequently slash some bonuses legally.
Commerzbank was forced to take its case to the Court of Appeal directly after Judge Owen refused to refer the appeal last May, saying the bank had acted in a “highly reprehensible” manner.
He further enraged the bank by suggesting it had sacrificed the contractual rights of its employees “on the altar of public perception” to save it embarassment after being forced to seek a government bailout following the Dresdner deal.
The Court of Appeal is expected to deliver its judgment in around eight weeks.
Commerzbank’s chief executive Martin Blessing said last month he would waive a 700,000-euro bonus for 2012 as the slowing economy, stiff competition, a raft of new regulations and rationalisation costs eat into earnings.