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Firm wins major High Court victory in Lehman Brothers derivatives case



United Kingdom

Fieldfisher wins major High Court victory in billion dollar Lehman Brothers derivatives case

Fieldfisher wins major High Court victory in billion dollar Lehman Brothers derivatives case

Fieldfisher has today won a major victory in the Lehman Brothers 'Side Letter' litigation, a case that for the first time has ruled on the interpretation of early termination provisions in the 2002 ISDA Master Agreement close-out provisions.

The firm represented Lehman Brothers Finance SA, a Swiss affiliate of the Lehman Group, in its case against Lehman Brothers International Europe (LBIE) - Ref: [2012] EWHC 1072 (Ch).  Mr Justice Briggs delivered his judgment today in the case which was heard in the High Court.

The case turned on the interpretation of a single page letter which, depending on its meaning, was said to be worth over US$1 billion. Drawing on previous case law relating to the 1992 ISDA Master Agreement provisions, the Court ruled that the 2002 ISDA Master Agreement requires the determining party to value transactions 'clean' (meaning that the determining party has to make the assumption, however improbable, that the transactions would continue to maturity with both sides fulfilling their obligations). The fact that the 2002 ISDA Master Agreement allows for the creditworthiness of the determining party to be taken into account when obtaining quotations does not alter that legal position.

It remains to be seen whether LBIE will appeal the decision.

Lehman Brothers Finance SA was advised by Fieldfisher LLP finance partners, Duncan Black, Edward Miller and Guy Usher. The firm instructed barristers David Railton QC of Fountain Court Chambers and Jonathan Russen QC of Maitland Chambers. Lehman Brothers International (Europe) was advised by Linklaters LLP which instructed barristers Iain Milligan QC and Julian Kenny of 20 Essex Street.

Field Fisher Waterhouse LLP has a growing reputation for advising on complex banking litigation, including derivatives cases. This is the latest victory for the team, which has advised on a string of Lehman-related cases including the Supreme Court's decision in the 'Client Money' case which concluded in February this year.

Guy Usher said: “Since the collapse of Lehman Brothers in 2008 we have been working on a range of matters that deal with the fall out. The insolvency has thrown up a number of cases where ISDA clauses are, for the first time, being tested by the courts. This is obviously a very significant decision for the Lehman Brothers Finance estate and lends useful support to settlement negotiations with its own street counterparties who have raised similar arguments to LBIE."

For further information, please contact:

Paula Nugent, PR Executive, Field Fisher Waterhouse LLP on 020 7861 4526

Louise Eckersley, PR Manager, Field Fisher Waterhouse LLP on 020 7861 4120

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