Cassa di Risparmio della Repubblica di San Marino SpA v Barclays Bank

Posted on 09/03/2011 · Posted in Financial Litigation

Ratings, exclusion of liability

The Claimant was a financial institution based in San Marino and the Defendant was Barclays Bank. The Claimant alleged that the Defendant had mis-sold it complex financial products of €406million nominal value.

The financial products sold by the Defendant to the Claimant were structured notes with embedded collateral debt obligations, the main risk for the Claimant being default on those obligations. In early 2005 when financial difficulties arose, the Defendant restructured the notes. Ultimately the Defendant repurchased some of the debt and the remainder became worthless.

The Claimant contended that the Defendant sold the notes on the basis that they had an AAA credit rating when in fact the Defendant knew the product was far riskier than the rating indicated. It also contended that the restructuring of the product in 2005 exposed it to further risk contrary to the Defendant’s assertions at the time.

The judge found that in telling the Claimant that the product had an AAA credit rating the Defendant was not making a statement as to the risk of default. Rather in telling the Claimant the credit rating of the product, the Defendant was merely informing it of the credit rating agency’s opinion of the product.

The judge also looked at the contractual documentation entered by the parties. He found that the Claimant had agreed that it understood and accepted the risks of products sold to it by the Defendant. A further non-reliance clause also protected the Defendant against the sophisticated investor.

Link: Cassa di Risparmio della Repubblica di San Marino SpA v Barclays Bank [2011] EWHC 484 (Comm)

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