LONDON (Reuters) - Around 100 London-based bankers will hear on Wednesday whether they have won a protracted legal battle against Commerzbank, Germany’s second-largest lender, over 52 million euros (41.8 million pounds) in unpaid bonuses.
Judge Robert Owen will read out his long-awaited decision at around 10:30 a.m. British time, in London’s Royal Courts of Justice, three months after the hearing pitched Commerzbank CEO Martin Blessing against former Dresdner investment bank head Stefan Jentzsch.
The row, which kicked off in late 2009, shines a light on a bygone era before bankers’ bonuses became a target of scorn and outrage for politicians and a public forced to prop up banks after the financial crisis. Commerzbank has twice been bailed out by German taxpayers.
British Prime Minister David Cameron said in January London’s bonus culture was “out of control”, and Hector Sants, the outgoing CEO of the Financial Services Authority, has urged bankers to focus on integrity rather than financial reward.
The 104 bankers, whose claims range from around 15,000 euros to 2.6 million, argue that this is a battle about holding an employer to account. Employers, they argue, should not be allowed to renege on promises made to staff.
“This case has been hotly contested by the bank for more than two years, and our clients would welcome an end to what has become a very protracted and expensive piece of litigation,” said Clive Zietman, a partner at UK law firm Stewarts Law, which is representing the bulk of the 104 claimants.
“Whatever ruling the judge makes, it will be studied very carefully by all concerned as it may well have wider implications that go beyond the facts of this case.”
The row hinges on whether promises made and repeated are binding and enforceable, whether Commerzbank was entitled to make 2008 awards dependent on bank performance after buying Dresdner in 2009 and whether it could then slash some bonuses.
The ruling is unlikely to bring this case to a close, as both sides are expected to try to appeal if the decision goes against them.
Commerzbank has argued that Dresdner Kleinwort was not only entitled to slash discretionary bonuses in wake of the financial crisis, but under an obligation to do so, because it was battling for its financial survival.
“To cut the bonus pool after Dresdner Kleinwort posted a loss of 6.5 billion euros was responsible and justified,” the bank said in a statement.
The bankers countered that the financial woes of the German lender had little to do with its legal obligations, alleging the bank reneged on contractual promises made to staff in internal meetings in 2008 as well as in letters.
They launched their legal battle after some were paid only 10 percent of the bonuses they had been promised out of a guaranteed minimum bonus pool of 400 million euros.
The bank, they argued, set up the bonus pool after the FSA warned it might face a destabilising staff exodus because its former owner, Allianz, was considering selling or winding down the investment banking arm.
Commerzbank has been embroiled in battles in both London and Germany over its decision to slash guaranteed and discretionary bonuses.
($1 = 0.7663 euros)
Additional reporting by Alexander Huebner in Frankfurt; Editing by Will Waterman