Goldman Sachs looses appeal against Novo Banco

Goldman Sachs has lost the appeal to The Supreme Court in the case of the Oak Finance loan – the court hasn’t cleared The Bank of Portugal (BdP) and Novo Banco of the charges, but it considered that there are no reasons for the case to be handled in London, as requested previously by Goldman Sachs. Consequently, this decision will now have to be made in Portuguese territory.

“It could have legal implications for the way future disputes about how failed banks are dealt with in Europe. Many cross-border bank loans are written under UK law, which can lead to lawsuits being pursued in British courts even for banks that collapse in other countries,” said Martin Arnold, FT’s banking editor, earlier this afternoon.

Yet, the verdict of the British Supreme Court is crystal clear: “It is not for an English court to decide what would amount to an appeal from an administrative act of the Portuguese Central Bank.”

Oak Finance is a financial loan created by Goldman Sachs – it had lent €835m to BES before its collapse. The decision BdP took in December 2015, of transferring debt from Novo Banco to the “bad bank” BES has been strongly contested by Goldman Sachs and other investors, as they know the probability of being reimbursed after BdP’s move became extremely low.

For Goldman, had the case been judged in London, the probabilities of reimbursements could rise – BdP, however, advocated persuasively that the decision had to be made by Portuguese courts.

This decision has been highly criticized by the top investors of BES; not long ago a hedge fund called Novo Note Group which combines Attestor Capital, BlackRock, CQS, and Pimco have taken BES to court under the allegation that it is giving privilege to national investors following a “discrimination based on nationality”.

Another London hedge fund, Winterbrook Capital, has filed accusations against the Bank of Portugal “outlining several events of default”. This was, accordingly to the London-based hedge fund, a must needed reaction to the recent decisions taken by the regulator.

This claim was worsened by the Novo Note Group’s announcement that it would not issue the €400m in Novo Banco subordinated bonds. “Each one of us has independently decided not to participate in the issuing of these bonds”, stressed the spokesman of the group as the operation was settled.