Bankers Trust wins $69 million derivatives case
Bankers Trust wins $69 million derivatives case
NEW YORK (Reuter): Bankers Trust New York Corp said the
commercial court of the English High Court of Justice in London
ruled in the bank's favor in a US$69.2 million lawsuit against
the Indonesian company PT Dharmala Sakti Sejahtera.
Bankers Trust said the litigation involved a derivatives
dispute between it and the Indonesian company. Bankers Trust had
sued Dharmala.
The court also ruled that Bankers Trust must be reimbursed for
its legal costs.
Bankers Trust said the case involved swaps contracts between
it and the Indonesian company that were entered into in early
1994 under the terms of the International Swaps Dealers
Association (ISDA) master agreement.
Bankers Trust said Dharmala sought to escape from the
contracts by alleging that Bankers Trust misrepresented the trade
and breached duties it assumed to advise Dharmala.
Bankers Trust said the court, in its ruling, affirmed that
usual principles of commercial law apply in the derivatives
market.
Bankers Trust said the court declined to find that ordinary
derivatives dealings with commercial counterparties impose
extraordinary duties on derivatives dealers.
Dharmala alleged that Bankers Trust misrepresented terms of
the trades. It alleged that the bank said the transactions were
safe, involved limited risk and would be replaced at no cost if
losses occurred.
Bankers Trust said that after a three-week trial in July, the
court concluded that Bankers Trust never made such
representations, acted honestly and did not mislead the
Indonesian firm.
Bankers Trust said the court noted that while the bank's
salesman may have employed considerable enthusiasm, skill and
persuasiveness in marketing the trades, this did not mean he had
acted dishonestly or had misrepresented the trades.
Bankers Trust said the court concluded Dharmala had
considerable experience in evaluating complex swaps transactions
and had represented itself as capable of independent evaluation.
Bankers Trust said the court found that Dharmala's assertions
that Bankers Trust assumed an obligation to advise the Indonesian
firm were not valid.
Bankers Trust derivatives transactions have produced disputes
with several U.S. firms.
Bankers Trust is currently in a legal battle with Procter &
Gamble Co. Earlier this year it settled a dispute with Gibson
Greetings Inc.
Bankers Trust stock was up 1-5/8 to 66-1/2 in early afternoon
trading. Wall Street traders attributed the rise to the bank's
victory in the Dharmala case.