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is england a better place to locate your financial activity than new york? November 6, 2014

Posted by Bradley in : law , add a comment

If you are an investor in Argentina’s exchange bonds (the ones governed by English law) perhaps so. Mr Justice Newey was asked by some of these investors for:

a declaration that the €225 million [held by BNY Mellon] is held on the English law trust…, .. a declaration that, as a matter of English conflicts of law, an order of a foreign Court is ineffective in varying a contract governed by English law and .. an interim injunction restraining the Bank … from dealing with or disposing of the €225 million (or any other funds paid to it by the Republic in respect of the euro-denominated Exchange Bonds) other than by paying the money to the beneficial holders of the bonds…

The Judge suggested that had Judge Griesa been informed that an English court took the view that the provisions of the relevant trust meant that Argentina had no interest in the moneys in question such that BNY Mellon could not be required to return them to Argentina he might have based his decision not to order Argentina to return the money on this reason rather than on the fact that the FSIA does not authorize attachment or execution of sovereign property located outside the United States:

I have in the end been persuaded that a declaration from an English Court that the €225 million is held on trust for the holders of the euro-denominated Exchange Bonds and the second defendant (and, correspondingly, that the Republic has no beneficial interest in the money) is likely to be of interest to an American Court having to consider issues relating to the funds. It is noteworthy that, when he denied the turnover motions, Judge Griesa did so by reference to the Foreign Sovereign Immunities Act, not on the basis that the Republic could have no interest in the funds, an issue which he did “not reach”. Had there been a ruling from an English Court, the Judge might have felt able to proceed on the basis that the Republic could have no interest in the €225 million. Again, Judge Griesa might not have thought in terms of the money simply being returned to Argentina (as he did at the hearing on 27 June 2014) had it been evident from an English order that it was held on trust exclusively for the holders of the relevant bonds and the second defendant.

I am not at all sure about whether this would have changed the basis for Judge Griesa’s decision. The judge decided to allow an opportunity for the holdout creditors to express their views on the proposed declarations before making them. But it looks very much as though BNY Mellon will be in an uncomfortable position when the dust settles.

justice in 2014? January 6, 2014

Posted by Bradley in : law , add a comment

The criminal bar in the UK protests funding cuts by withdrawing labour. Nigel Lithman QC, Chairman of the Criminal Bar Association, complains that figures about barristers’ earnings released by the Government to the press (the Daily Mail) were misleading (citing the earnings of the better paid, rather than the median barrister). He writes:

Should not the Ministry of Justice be on our side? Should the Lord Chancellor not want a balanced picture given to the press?

friday question: should law students be reading literature? October 4, 2013

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This New York Times piece, reporting on David Kidd and Emanuele Castano‘s article, Reading Literary Fiction Improves Theory of Mind suggests that the answer may be yes.

posner and the highwaymen February 11, 2013

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Judge Posner likes the highwayman’s case, Everet v Williams. One highwayman sued his partner for his share of the ill-gotten gains of the enterprise. The court refused to help him out. Judge Posner cited the case in SEC v Lyttle in 2008 to reject claims by defendants in a securities case who argued that they themselves had been defrauded by another participant in the scheme (a defense Judge Posner characterized as ‘the “honor among thieves” defense’:

Their second defense is that Eldridge defrauded them, as shown by the fact that she pocketed the lion’s share of the $ 32 million stolen from the investors. The defendants, however, pocketed almost $9 million, and even if Eldridge took more than her fair share of the loot, that would not exonerate them. One is reminded of the high-wayman’s case. Everet v. Williams…One highwayman sued another, claiming that he was entitled to a larger share of the loot from a series of joint robberies. The suit was dismissed, both were hanged, and the plaintiff’s lawyers were fined for having brought a suit “both scandalous and impertinent.”

Last year he referred to the case in Schlueter v. Latek as the classic illustration for the following principle:

The common law teaches that if the opposing parties in a lawsuit are equally in the wrong and as a result neither has a colorable claim against the other—more precisely, if awarding relief to the plaintiff would reward wrongdoing—courts will not adjudicate their dispute.

And last week the case turned up again in Thomas v UBS. Clients of UBS sought to sue UBS for its failures to prevent them from breaching US tax law. Judge Posner does not like this claim:

This is like suing one’s parents to recover tax penalties one has paid, on the ground that the parents had failed to bring one up to be an honest person who would not evade taxes and so would not subject himself to penalties.

And then he gets to the highwaymen:

There is in general no common law duty to prevent another person from violating the law. At worst, UBS, as we’re about to see, violated an agreement with the IRS designed to prevent the kind of evasion that the plaintiffs engaged in. That might conceivably make UBS an aider or abettor of the plaintiffs’s tax evasion and so make this case a distant relative to Everet v. Williams … A highwayman had sued his partner in crime for an accounting of the illegal profits of their criminal activity. The court refused to adjudicate the case, and both parties were hanged. Minus the hanging and with certain exceptions (such as contribution and indemnity) irrelevant to this case, the principle enunciated in The Highwayman’s Case applies to accomplices in civil wrongdoing, as noted in our recent decision in Schlueter v. Latek… In The Highwayman’s Case one accomplice was seeking a bigger share of the profit from the crime from the other one; here one accomplice is seeking a smaller share of the costs of the crime from the other one. The principle is the same; the law leaves the quarreling accomplices where it finds them.