Key takeaways:

• The UK Supreme Court has handed down its long-awaited decision in Sevilleja v Marex [2020] UKSC 31. The Court held that the rule prohibiting reflective loss is limited to shareholders only and does not extend to creditors. This overturns nearly 20 years of authority in England which expanded the rule against reflective loss.
• There was, however, no general consensus as to how far the reflective loss principle should be limited going forward. The majority, led by Lord Reed, favoured retaining the rule, while the minority, led by Lord Sales, favoured abolishing the rule entirely.
• The decision has brought long-awaited clarity to a complex area of English law. The decision has clarified that the reflective loss rule only applies to a narrow category of claims and will assist creditor shareholders and unsecured creditors who may have faced obstacles to bringing claims prior to this judgment. The decision is likely to be of more limited applicability to shareholder claims generally; however, the “bright line” test adopted by Lord Reed may be difficult for practitioners and courts to apply in practice when faced with shareholder claims “where the company has a right of action in respect of substantially the same loss”.