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Field Fisher Waterhouse advises Lehman Brothers Finance AG on a Settlement and Court of Appeal Decision



United Kingdom

Fieldfisher advises Lehman Brothers Finance AG on a Settlement and Court of Appeal Decision

European law firm Fieldfisher advised Lehman Brothers Finance AG (in Liquidation) ("LBF"), the Swiss equity derivatives entity in the Lehman group, on a settlement with Lehman Brothers International (Europe) (in Administration) ("LBIE"). 

The settlement is a very significant step in the bankruptcy of LBF as LBIE was LBF's primary custodian and trading partner in the Lehman Group. The liquidator of LBF is confident that the settlement will result in significant value being returned to the LBF estate.

Fieldfisher's team was led by Derivatives Partners Guy Usher and Edward Miller.  Linklaters (Richard Holden and James Gardner) represented Lehman Brothers International (Europe) (in Administration) ("LBIE"). 

In one piece of litigation between the same parties (on which Fieldfisher and Linklaters again both advised their clients), the English Court of Appeal issued its judgment last week in the appeal made by LBIE against the decision of Mr Justice Briggs in the first instance concerning the legal effect of a side letter entered into by LBF and LBIE relating to various back-to-back OTC derivative transactions between LBIE and LBF.

At first instance the judge found in favour of LBF to the effect that no value should be given to the side letter in the close-out calculation for these derivative transactions. The Court of Appeal found in favour of LBIE and determined that it should be taken into account.  Fieldfisher partner Duncan Black and Linklaters partner Christa Band led on this litigation.

Guy Usher, Partner at Fieldfisher, said:

"The appeal decision will have no impact on LBF or LBIE if the settlement becomes effective as anticipated. However, it is a very significant decision in the OTC derivatives market as the Court of Appeal has decided that the valuation principles applicable to the 1992 ISDA Master Agreement (which have become hard law by virtue of a series of court cases since Lehman collapsed) are not to be applied in the same way to the 2002 ISDA Master Agreement.

"The difference in valuation approach probably affects about half of today's ISDA Master Agreements and will mean that on the same facts there could be very different outcomes under the two agreements."

For further information, please contact:

Ibrahim Kamara, PR Manager, Field Fisher Waterhouse LLP on 020 7861 4120

Guy Usher, Partner, Field Fisher Waterhouse LLP on 0207 861 4209

Edward Miller, Partner, Field Fisher Waterhouse LLP on 0207 861 4205

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