* Investors sued ABN, S&P after losing $14.9 mln in
* Federal court in 2012 said S&P, ABN "deceived" investors
* Friday's ruling say ABN, S&P will each be liable for 100
pct of losses
(Adds details about compensation, comment from the litigation
funder IMF Bentham)
By Swati Pandey
SYDNEY, June 6 Australia's federal court on
Friday dismissed appeals by Standard & Poor's and ABN Amro
after investors successfully sued the ratings
company and the Dutch bank over credit derivatives that lost
almost all their value in the run-up to the 2008 financial
The court also ordered the pair to completely compensate the
investors for their losses, and not just be liable for 33
percent as decreed in the first ruling.
S&P and ABN Amro had both appealed after the Federal Court
in November 2012 found they had "deceived" 12 local government
councils that bought ABN Amro credit derivatives, saying they
should never have been given triple-A ratings by S&P.
The case was the first time a rating agency had faced trial
anywhere in the world over the complex financial products widely
cited as one of the factors that triggered the crisis. In the
original ruling, the 12 councils in New South Wales state were
awarded a total of about A$30 million for losses and damages.
"The significance of this judgement cannot be
overestimated," said Amanda Banton, partner with legal firm
Piper Alderman which is representing the local councils.
"The implications for other claims currently in the court
are enormous," she added.
S&P said it was disappointed with the ruling, but did not
specify whether it would appeal again.
"We continue to believe that it is bad policy to enforce a
legal duty against a party like S&P, which has no relationship
with investors who use rating opinions, yet impose no
responsibility on those investors to conduct their own due
diligence," it said in a statement.
Calls and an email to ABN Amro out of normal business hours
went unanswered. The bank was one of a number of Dutch lenders
that were nationalised as part of a government bailout in the
John Walker, executive director at Bentham IMF,
which is funding the claim, said S&P and ABN Amro could make
another appeal by seeking leave to the High Court, but he said
that was very rare.
In a separate case, a second Australian class action lawsuit
against S&P was filed in April last year. Last December European
institutional investors also sued Royal Bank of Scotland
and S&P in Amsterdam for damages of up to $250 million suffered
on sophisticated financial products.
On Friday, the Australian judges reviewing the appeals ruled
that S&P and Amsterdam-based ABN Amro had misled the local
councils that bought triple A-rated notes created by the bank
called "constant proportion debt obligations".
The councils were assured by the Australian Local Government
Financial Services, an investment manager which sold the
so-called "Rembrandt" notes arranged by ABN Amro in late 2006,
that they had a less than 1 percent chance of defaulting. Within
six months, they had done just that and the councils lost A$16
million ($14.89 million), or 90 percent of the funds they had
"S&P's rating of the Rembrandt notes was unreasonable,
unjustified and misleading and ABN Amro knew that to be so," the
judges said on Friday in a 513-page ruling.
($1 = 1.0743 Australian Dollars)
(Reporting by Swati Pandey; Editing by Kenneth Maxwell and