Bird & Bird's London dispute resolution team has successfully represented Första AP-Fonden ("AP"), a Swedish public entity that manages pension capital on behalf of the Swedish population, against the Bank of New York Mellon ("BNY Mellon"), one of the world's largest financial services corporations, in a major financial services dispute.
AP's claim arose out of BNY Mellon's management of AP's securities lending programme. The legal proceedings began in the London Commercial Court in 2010, following the losses that AP had suffered under its programme with BNY Mellon in relation to a US$35.5 million investment in 'medium-term notes' issued by Sigma Finance Inc ("Sigma"). Sigma was the world's largest structured investment vehicle, which failed in September 2008 at the height of the financial crisis.
The judgment – announced this Wednesday – found that BNY Mellon had been negligent and in breach of its contractual duty in its communications with AP regarding the Sigma investments. The evidence revealed that the views and recommendations that BNY Mellon had expressed to its other clients regarding Sigma were, in the Judge's words, "opposite and irreconcilable" with the views it expressed to AP. The information that BNY Mellon did provide to AP was held to be misleading, amounting to negligent misstatement and negligent misrepresentation.
Jeremy Sharman, partner, Bird & Bird said: "This is a significant judgment, not least in that it is one of the rare instances where a large banking institution has been found liable by English Court for negligence and contractual breach of duty in respect of events relating to the 2007/2008 financial crisis. It is also likely to have implications for the securities lending industry (which has an estimated $13 trillion of securities available for loan), especially as to the nature and scope of duties that securities lending agents owe to their clients."
Jan Matej, Counsel at Första AP-Fonden said: "We were very pleased with the decision of the Commercial Court in London that found BNY Mellon liable for the losses AP had suffered following the bank's decision. This dispute was hard fought but AP always believed that BNY Mellon had fallen below the standard of care to be expected of a securities lending agent in its position. The judgment is a vindication of our view and with Bird & Bird's help we were able to prove it. We have been very pleased with Bird & Bird's support over the past few years in helping us to reach this outcome."
The Bird & Bird team was led by Jeremy Sharman and included associates Luke Arbuthnot and Russell Williamson. You can read the judgment here