The High Court dispute between Greensill Bank AG and the Department for Business and Trade is not merely another complex piece of post pandemic litigation. It is a forensic examination of how the United Kingdom constructed, supervised and ultimately failed to insulate its emergency economic architecture from conflicts of interest, concentration risk and legal ambiguity. At stake is not only a claim exceeding three hundred and thirty million pounds, but the credibility of the state as a guarantor, the enforceability of public law standards in commercial schemes and the international reputation of London as a jurisdiction of regulatory seriousness.
The allegation that Greensill Capital UK advanced three hundred million pounds to companies controlled by Sanjeev Gupta under loan schemes capped at fifty million pounds per corporate group goes to the heart of the Coronavirus Business Interruption Loan Scheme and its larger sibling, the Coronavirus Large Business Interruption Loan Scheme. These schemes were created under extraordinary circumstances, but they were not designed to operate in a legal vacuum. They were anchored in contract law, public law, banking regulation and state aid principles that remain fully operative.
The court is now being asked to determine whether a private lender with deep structural conflicts could lawfully exploit definitional ambiguities in the schemes, and whether the government acted within its contractual and administrative law powers when it withdrew its guarantees.
Emergency lending and the legal scaffolding of CBILS and CLBILS
The CBILS and CLBILS frameworks were established in March and April 2020 under powers delegated to the British Business Bank, itself a government owned development bank operating under the Companies Act 2006. The legal foundation for the guarantees lay in contractual agreements between accredited lenders and the Secretary of State, administered by the Department for Business and Trade and its predecessor departments.
These agreements were not informal understandings. They were detailed contracts governed by English law, incorporating express duties of good faith, compliance with scheme rules, accurate borrower classification and prudent lending standards consistent with Financial Conduct Authority principles and the Prudential Regulation Authority rulebook.
The schemes were also constrained by public law duties. The Department was required to exercise its powers rationally, proportionately and for proper purposes, in accordance with long established principles articulated in cases such as Associated Provincial Picture Houses v Wednesbury Corporation and later refined through proportionality jurisprudence influenced by the Human Rights Act 1998.
At the same time, lenders were subject to the FCA Principles for Businesses, including Principle 1 on integrity, Principle 2 on skill, care and diligence, and Principle 11 on relations with regulators. Even where Greensill Capital UK operated as a non bank lender, its activities were embedded within a regulated financial ecosystem and dependent upon the credibility of its representations to public authorities.
The central factual dispute concerns whether the six companies that received CLBILS loans were linked enterprises within the meaning of the scheme rules. These rules mirrored the European Union definition of partner and linked enterprises used in state aid law, which the United Kingdom retained during the transition period and embedded into domestic guidance to prevent the circumvention of lending caps through corporate fragmentation.
Under these definitions, companies are treated as part of the same group not only where there is formal share ownership, but also where there is effective control, dominant influence or economic unity. Courts have consistently interpreted such concepts broadly in competition law, insolvency law and public procurement contexts, focusing on substance rather than corporate form.
If the Department for Business and Trade establishes that the borrowers were ultimately owned or controlled by Sanjeev Gupta, the argument that they were independent entities becomes legally fragile. English courts have repeatedly rejected artificial corporate structuring designed to evade statutory or contractual limits, from the seminal decision in Prest v Petrodel to modern cases concerning regulatory arbitrage.
The allegation of failure to act in good faith therefore carries exceptional weight. Good faith in English law, while historically limited, has expanded significantly in relational contracts following cases such as Yam Seng v International Trade Corporation and Bates v Post Office. The CLBILS guarantee agreements exhibit many of the hallmarks of relational contracts: long term cooperation, predictable performance obligations, mutual trust and a shared regulatory objective.
If the court finds that Greensill Capital UK intentionally structured lending to defeat the group cap, the legal consequences extend beyond breach of contract. Such conduct would likely constitute misrepresentation, potentially engage the tort of deceit and raise questions under the Fraud Act 2006, particularly sections 2 and 3 concerning false representation and failure to disclose information.
The government’s claim that Greensill participated in corporate restructuring arrangements for the Gupta companies introduces a further layer of legal gravity. If loans were used to refinance related entities or support intra group transfers, this would raise red flags under insolvency law and financial assistance provisions of the Companies Act 2006.
It also intersects with the Serious Fraud Office investigation into GFG Alliance for suspected fraud, fraudulent trading and money laundering. While no criminal conviction has been secured to date, the existence of an active investigation contextualises the government’s decision making and undermines the narrative that the termination of guarantees was arbitrary or politically motivated.
From a regulatory standpoint, the use of public guarantees to sustain a corporate group already under financial stress may engage the doctrine of moral hazard and could be characterised as an abuse of state resources, a concept central to European state aid law and now reflected in the United Kingdom’s Subsidy Control Act 2022.
The contractual claim and its public law limits
Greensill Bank AG’s argument that the Department acted capriciously raises the familiar tension between contractual certainty and administrative discretion. While the guarantee agreements are private law instruments, they are exercised by a public authority discharging statutory functions.
The courts have consistently held that public bodies cannot contract out of their public law duties. In cases such as R v East Sussex County Council ex parte Reprotech and United Trade Action Group v Transport for London, the judiciary reaffirmed that contractual powers exercised by public authorities remain subject to judicial review standards.
Accordingly, the Department was entitled, and arguably obliged, to withdraw guarantees where it reasonably concluded that scheme integrity had been compromised. To continue honouring guarantees in the face of apparent manipulation would expose the taxpayer to unjustifiable risk and could itself constitute misfeasance in public office.
The sum claimed, more than three hundred and thirty million pounds, would represent a direct transfer of public funds to a bank whose group structure and risk management practices have already collapsed under regulatory scrutiny. Greensill Bank AG itself entered insolvency proceedings in Germany in 2021, overseen by BaFin and German courts, further complicating enforcement and recovery prospects.
The involvement of former Prime Minister David Cameron, while formally cleared by the lobbying inquiry, remains a profound institutional embarrassment. The Ministerial Code and the Transparency of Lobbying Act 2014 were designed to protect the state from precisely this form of proximity between political authority and private financial interests.
That the inquiry found Cameron’s conduct compliant with the narrow letter of the rules does not address the structural weakness of those rules. The perception of preferential access corrodes confidence in the neutrality of emergency economic policy and exposes the government to allegations of regulatory capture.
In international terms, this damages the United Kingdom’s standing as a jurisdiction committed to clean governance, particularly at a time when it seeks to attract foreign investment in critical sectors such as infrastructure and clean energy.
International repercussions and financial diplomacy
The Greensill litigation is being watched closely by international banks, sovereign wealth funds and export credit agencies. Government guarantees are a cornerstone of modern financial diplomacy, enabling states to mobilise private capital during crises. If such guarantees are perceived as unstable or politically reversible, the cost of future emergency borrowing will rise.
Conversely, if the government were compelled to honour guarantees obtained through contractual manipulation, the message to global markets would be equally damaging: that the United Kingdom lacks the legal resolve to protect public funds from sophisticated financial engineering.
This case therefore occupies the uncomfortable intersection of domestic contract law, administrative law and international financial credibility.
The deeper lesson is that the CBILS and CLBILS schemes were constructed for velocity, not resilience. Accreditation processes were compressed, due diligence was limited and concentration risk was underestimated.
The British Business Bank, operating under political pressure to deploy funds rapidly, lacked the statutory powers and operational capacity to conduct granular ownership analysis across complex multinational corporate groups.
This failure was not unique to Greensill, but Greensill represents its most extreme manifestation.
The trial, expected to commence in 2027, will involve extensive forensic accounting, corporate control analysis and expert evidence on banking practice. The court will scrutinise the precise wording of the guarantee agreements, the contemporaneous correspondence between Greensill and the Department and the internal risk assessments conducted within government.
It is improbable that the claim will succeed in full. Even if technical breaches by the Department were established, damages would likely be reduced substantially on grounds of contributory fault, mitigation and illegality.
A finding that Greensill Capital UK acted in bad faith would be catastrophic for the claimant’s position and could trigger further regulatory and criminal scrutiny.
A cautionary tale for the post pandemic state
The Greensill affair illustrates how quickly emergency measures can metastasise into systemic vulnerability when legal safeguards are subordinated to political urgency.
This litigation is not about one financier or one steel magnate. It is about whether the United Kingdom can reconcile rapid economic intervention with the rule of law.
If the courts affirm the government’s right to withdraw guarantees in the face of contractual abuse, it will signal that emergency does not extinguish legality. If not, it will entrench a precedent that public funds may be leveraged through corporate complexity and aggressive interpretation.
Either outcome will shape the legal landscape of crisis finance for decades.
For now, the case stands as a stark reminder that financial engineering, when combined with political access and regulatory haste, can expose the state itself to the most expensive form of risk: the risk of being legally obliged to underwrite private failure.