Executive Summary
This case concerns a tax liability dispute arising from Nationwide Building Society’s failure to list certain US Medium Term Notes (2018-1, 2018-2, 2019-1, 2019-2) on the London Stock Exchange, which would have qualified them for a withholding tax exemption. The oversight led to a substantial UK tax charge. Nationwide initially pursued claims against both The Bank of New York Mellon (BNY), as Trustee and Paying Agent, and Allen & Overy (A&O), its legal adviser. Following concessions, Nationwide now targets only A&O. A&O in turn seeks contribution from BNY, alleging BNY owed a duty to confirm the listing status. BNY denies such duty and seeks summary judgment dismissing A&O’s claim.
Sanctions Highlights
— No sanctions implications identified in the case.
Emerging Risks
- Legal exposure for trustees and paying agents in complex debt issuance programs may increase if duties are interpreted broadly beyond contractual terms.
- Oversight in regulatory compliance (e.g., listing applications) can trigger significant tax liabilities and litigation risks.
- Potential for increased claims among professional advisers and trustees regarding indemnity and contribution in multi-party financial transactions.
Geopolitical Impact
- The case highlights the regulatory interplay between UK financial law and EU directives (notably EU Directive 2003/71/EC on prospectus requirements), underscoring ongoing cross-jurisdictional compliance challenges post-Brexit.
- The involvement of UK, EU, and US legal frameworks reflects the complexity of transatlantic capital markets and the importance of harmonized regulatory oversight.
- The UK’s Financial Conduct Authority and London Stock Exchange remain central to international debt issuance, reinforcing London’s role as a global financial hub despite Brexit.
Economic Intelligence
- The failure to list notes on the London Stock Exchange resulted in a significant withholding tax liability for Nationwide, illustrating the economic impact of procedural oversights in capital markets.
- The case underscores the financial risks borne by issuers and their advisers in structured finance programs, particularly in relation to tax treatment and investor protections.
- The dispute may influence market participants’ diligence and risk management practices regarding note issuance and listing procedures.
Strategic Recommendations
- Issuers should implement rigorous internal controls and external verification processes to ensure compliance with listing and regulatory requirements to avoid costly tax consequences.
- Trustees and paying agents must clearly define and communicate the scope of their duties in contractual documentation to mitigate liability risks.
- Legal advisers should maintain comprehensive oversight of procedural steps in securities issuance, including listing applications, to minimize professional negligence exposure.
- Market participants should monitor evolving regulatory frameworks in the UK, EU, and US to anticipate compliance challenges in cross-border debt issuance.
- Consider enhanced collaboration between issuers, trustees, and legal counsel to establish clear responsibilities and indemnity arrangements upfront.
---
**Source Notes:**
Case Title: *Sanctions Intelligence Digest*
Link: https://empyreanprotocol.com/litigation/view/www.bailii.org/ew/cases/EWHC/Comm/2025/1046.html