* Court had ordered RBS, others, to produce documents
* Competition Bureau alleged collusion in setting rates
* RBS Canadian branch said can't force documents from parent
* Court grants interim stay while RBS challenges orders (New throughout)
By Randall Palmer
OTTAWA, Feb 28 A Canadian court has put a hold on an order that Royal Bank of Scotland must turn over internal documents in connection with an investigation into whether banks manipulated key global interest rates, Canada's Competition Bureau said on Tuesday.
The Canadian branch of RBS contended it was unreasonable for the Canadian government to require it to produce a whole range of documents from its parent company in Britain.
The Competition Bureau, which won a court order last May requiring RBS to turn over a range of documents, is investigating whether RBS and other banks tried to influence how the London Interbank Offered Rate (Libor) is set.
The bureau, which investigates antitrust activities, had sought the documents after receiving co-operation from one of the banks involved - identified as Swiss bank UBS AG, according to people familiar with the situation.
On Nov. 30, Ontario Superior Court Justice Michael Quigley granted RBS an interim stay of the order to hand over the documents, until a challenge of the law can be heard. News of the stay emerged only this week.
RBS launched that challenge on Jan. 30, declaring that any requirement that a party produce documents that it is not able to produce on its own, violates constitutional guarantees against unreasonable search and seizure.
"The Court should not have granted the ... order as there was no evidence that (the) Canada branch (of RBS) has or is likely to have information that is relevant to the inquiry," RBS said in its legal submission.
Quigley, in his summary of RBS's representations in November, said the bank had said that not only could the Canadian branch not compel the parent to produce information, the RBS parent company would breach British law if it did so.
RBS also pointed out to Quigley that under a British-Canadian agreement, Canada could simply require Britain to issue a search warrant against the parent company.
Quigley's stay of the order remains in effect until RBS's broader challenge has been heard and determined. (Reporting by Randall Palmer; editing by Rob Wilson)