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Libyan Investment Authority v Goldman Sachs: David and Goliath?

15/07/2016 | Tom Spiller

We take a look at the recent trial of the dispute between the Libyan Investment Authority (the “LIA”) and Goldman Sachs.

At the core of the LIA’s claim lies a fairly familiar charge against Goldman Sachs; a charge which has been made all too often against financial advisors such as UBS, RBS and JP Morgan of late – that a sophisticated financial institution used its reputation for excellence to swindle its client. The LIA say that they were advised time and time again to enter into overly-complex transactions which not only lost them money, but resulted in very large fees being paid to Goldman Sachs. It is alleged that Goldman Sachs made an up-front profit of around $350m from the LIA, despite their advice resulting in substantial losses.

It was, they say, a clear case of the advisor putting its own interests above that of the client in an egregious breach of the duty that they were owed. If the LIA’s allegations are upheld by Mrs Justice Rose of the Chancery Division of the High Court then this case will stand as another unfortunate example of investments being recommended to a client on the basis that they will generate lucrative fees, rather than their suitability.

On the first day of the trial, counsel for the LIA, the heavy-weight Roger Masefield QC of Brick Court Chambers, read extracts from internal Goldman Sachs emails in which bankers engaged in back-slapping and congratulated each other for selling complex products to “someone who lives in the middle of the desert with his camels”.

There are also allegations that the Goldman banker in charge of the bank’s relationship with the LIA granted a much-sought-after internship at the bank to the younger brother of the LIA’s Vice-Chairman, that Goldman paid for expensive holidays and even procured prostitutes for LIA figures, in an attempt to create an exceptionally close relationship through which he could exert undue influence on the LIA.

In litigation, it is often the largest “too big to settle” cases that end up in long, expensive litigation because of the personalities involved, choosing to fight a matter all the way rather than be seen to be weak by making offers to settle. If this case is not settled shortly then it is almost certain that the trial will last for the eye-wateringly expensive period of two months that it has been listed for, serving as another reminder that only the most determined client, from nascent sovereign wealth fund to an individual or small business, will obtain justice from a financial institution that has wronged them.

But also that the English Courts remain the best suited arena in which these disputes should be fought. Rosenblatt’s dispute resolution department has extensive experience in representing both businesses and individuals in financial litigation. As we are not on any panels, we are rarely, if ever, conflicted from acting for claimants against banks and the larger financial institutions.

In many cases potential Claimants are put off by the sheer scale of their opponent because they cannot stomach a “David vs Goliath” battle; but, it is indeed the person with the sharpest and most well-aimed stone that wins, not the biggest combatant. Claimants who are prepared to be patient, and invest resources in obtaining legal advice from experienced solicitors need not fear and, if the correct strategies are used, many claims can be settled either before proceedings are issued, early on in the life of a claim or before trial. However, there is often no magic bullet in commercial disputes and both solicitors and Claimants must have the strength to persist and slug out a dispute, with disputes often taking over 12 months to come to trial.

Case-specific financial products such as after-the-event insurance and litigation funding are also available to help lighten the financial burden that litigation can place on Claimants who may otherwise be put off. Rosenblatt has also been involved in both since their inception and is well placed to connect its clients to the correct service provider.

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