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The BES resolution prompted a lawsuit against the Banco de Portugal and the Novo Banco. But in this legal war the Portuguese supervisor says that he won an almost decisive battle. The English High Court has ruled in a case involving Goldman Sachs and the New Zealand Pension Fund that the settlement measures enforced by the authorities should be judged in the country of origin.
decision can set a precedent for cases of bank resolutions in the European Union . It will be analyzed by the Spanish and European authorities, who face dozens of lawsuits due to the resolution of the Banco Popular in June of last year.
In addition to this effect, the Supreme Resolution deliberately releases the resolution fund. risk of having to pay 850 million dollars (725 million euros at the current exchange rate) to Goldman Sachs and the New Zealand pension fund, plus interest. In addition to helping to validate some of the arguments of the Bank of Portugal in cases brought before it by other major creditors of the new bank.
From Threat to Relief
But the Goldman affair against New Bank even started in the worst way. The US bank and New Zealand investors have asked the UK courts to require that the loan granted to BES by Oak Finance, a financial vehicle raised by Goldman Sachs, be a New Bank liability and not a BES.
In the first place, although the Bank of Portugal did not intervene in the proceedings, the English court ruled that Goldman was correct. This funding was worth $ 835 million. and the New Zealand entity. He decided that the case should be judged in London, since Oak Finance was under English law. A decision that would open the door for these investors.
On August 3, 2014, this debt was recorded on the balance sheet of the new bank. But on December 22 of this year, the Bank of Portugal decided that the financing of Oak Finance still belonged to BES and was never part of the responsibilities of the new bank.
Avoiding Chaos in Resolutions
The bank headed by Lloyd Blankfein and the New Zealand Fund argued that the December decision of the Bank of Portugal was not a resolution measure, since it had been applied in August, and the case could therefore be tried in England.
However, the Supreme English considered, in the judgment of this Wednesday, that the resolution measure applied to BES did not occur in a "legal vacuum" "and that the decision made more than four months later was still part of the resolution process.
"It's a common-sense victory that avoids the potential chaos that could be caused if courts of different jurisdictions could interpret the same decision European Forms Resolution Authority, "said Stuart McNeill, a lawyer at Pinsent Masons, in an article published on the site of the company representing the new bank, adding that the decision would have ramifications in other cases of settlement in Europe
Enyo Law, a company that represented the Bank of Portugal, considered in a note that the decision "will undoubtedly bring considerable comfort" European resolution authorities. "They will be relieved to know that when resolution powers are exercised, a reorganization measure does not have a different effect in England than in the state of origin," he says.
Despite the victory in a major battle, Banco de Portugal and the big creditors of BES / Novo Banco is far from over . The Goldman Sachs case and the New Zealand fund will continue in Portuguese courts. In order for the bank to be repaid, she must prove that she was not a dominant investor in Oak Finance at the time of settlement.
Shortly before the settlement, Goldman Sachs held more than 2% of BES.
Impact on BlackRock and Pimco Processes
In addition to this process, Banco de Portugal also faces shares of the Novo Note Group, which encompasses financial institutions such as BlackRock Investment Funds in Pimco. The group complains before the Portuguese courts that it was discriminated by the decision of the Bank of Portugal to pass, at the end of 2015, five series of bonds of the new bank for a bad BES of nearly two billion euros
On the side of the Bank of Portugal, the opinion of the Supreme of England that the resolution process is dynamic and that the subsequent decisions taken are still part of this measure are the welcome. Novo Note argues that the Goldman case is not comparable and that this week's decision does not create any negative precedent for the case.
Portuguese courts have already rejected certain precautionary measures instituted by BES / New Creditor Bank . However, almost four years after the resolution, no decision has yet been taken on the cases, suggesting that final (final) decisions should take years to appear.
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