A landmark judgement barring passive investors seeking compensation from a publicly-quoted company has been upheld in the UK’s High Court.

Norwegian public-sector pension fund KLP and Swedish pensions and insurance group Folksam are among the claimants fighting British bank Barclays for compensation.

In October a judge struck out claims by passive investors but let other claimants proceed. Yesterday’s appeal against the strike-out was rejected.

The claims relate to wrongdoing dating back more than 10 years by a US division of Barclays for manipulating ‘dark pool’ trading systems. In 2016 Barclays paid hefty fines to both the New York Attorney General and the Securities and Exchange Commission (SEC) for the violations. The current case in London was initiated after the conclusion of those investigations.

More than 200 investors are seeking compensation for allegedly misleading statements in Barclays’ official publications, including successive annual reports.

There are three categories of claimants but it is the passive investors or index trackers that have been forced to appeal. In justifying its position to the court, KLP, for example, had been clear that it relied on the movements in the share price of Barclays alone.

The judge rejected this argument, known legally as Price/Market Relliance, while giving the other categories of claimants permission to proceed on the basis that they or their advisers had read or heard the misleading statements or publications by Barclays.

Adam Brown, a partner at law firm Simmons & Simmons in London, said after the October ruling that unless the judgement gets overturned on appeal, claims made by passive shareholders will generally not be viable.

This was one of the main points in yesterday’s appeal, arguing that the October judgement erred in concluding that relying on market efficiency could never suffice to establish a claim under the relevant UK securities legislation against omissions or misstatements by quoted companies.

“There are significant policy arguments (in particular the exclusion of claims by passive investors such as tracker funds) in favour of a more permissive interpretation,” argued the claimants’ lawyer.

The case is being led by shareholder redress specialist Woodsford and law firm Signature Litigation. They now have to mull with clients whether to challenge yesterday’s decision by going to the Court of Appeal.

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