Barclays has called on the High Court in London to significantly reduce the value of a £560 million lawsuit brought by investors over a drop in its share price.

The bank is attempting to strike out claims from passive funds, which could slash the total value by more than half.

The lawsuit, filed in 2020, stems from regulatory scrutiny of Barclays' "dark pool" trading exchange a decade ago. Investors argue the bank's share price was "artificially inflated" due to "false representations" about its dark pool, which allows trades to be conducted privately.

On Monday, lawyers representing Barclays contended that passive funds, which buy shares automatically based on market indices, should not be permitted to sue as they had not directly relied on the bank's disclosures. Helen Davies KC, acting for Barclays, told the court there was a "fundamental deficit" in the claimants' case.

However, Jonathan Nash KC, representing the shareholders, argued in written submissions that all investors, whether active or passive, are "entitled to and do" trade on the basis that share prices incorporate "all material information".

The judge's decision will have significant implications for the ability of index-tracking funds to participate in similar lawsuits against UK companies over share price declines.

The dispute dates back to 2014 when approximately £2.5 billion was wiped off Barclays' market capitalisation in a single day. This followed a lawsuit by US regulators alleging the bank had favoured high-speed traders on its dark pool at the expense of institutional investors.

Eric Schneiderman, New York's attorney general at the time, claimed Barclays' dark pool was "full of predators — there at Barclays' invitation". In 2016, Barclays agreed to pay $70 million to settle the case with US authorities, admitting to making material misrepresentations.

The current lawsuit involves scores of investment funds, including passive funds managed by Amundi and State Street. Barclays is contesting the suit and seeks to strike out claims from 242 funds and sub-funds valued at about £330 million — more than half the total £560 million claimed against it.

This case is one of several filed in the High Court against London-listed companies, including Glencore and Standard Chartered, which are also contesting them. Most shareholder lawsuits have settled before trial, leaving little legal precedent in England and Wales on key issues such as the status of passive investment funds, which have become major holders of UK stocks.

The outcome of this case could set a significant precedent for future shareholder litigation in the UK, particularly regarding the rights of passive investors to seek compensation for alleged corporate misconduct.

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