29/03/2017
Libyan Investment Authority v Goldman Sachs
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Philip Edey QC, instructed by Enyo Law LLP, acted as co-lead counsel on behalf of the LIA, a sovereign wealth fund created towards the end of the Qaddafi regime, in its claim against Goldman Sachs for around $1.2billion.
Over a four month period at the start of 2008, the LIA entered into a series of equity derivative contracts with Goldman Sachs, under which (i) the LIA paid Goldman Sachs a total of $1.2bn by way of premium; (ii) the LIA would only receive a pay-out if the share price of the relevant equity was above a certain point in the future. The transactions were entirely synthetic, in the sense that the LIA received no shares under them. By the maturity date under each of the trades, the relevant share price was in each case at a level which meant the LIA got nothing: an investment of $1.2bn had turned into zero. By contrast, in a letter to the US SEC, Goldman Sachs estimated that it had made a total of $220m from the trades.
The LIA’s case was that, at the time, it was an unsophisticated investor (albeit a very wealthy one) and that Goldman Sachs exercised undue influence over it. It also said that the trades entered into were unconscionable bargains. On either basis, the LIA contended that it was entitled to rescind the trades and to the return of its premium. Goldman Sachs denied undue influence and denied that the trades were unconscionable bargains. It also sought to rely on various disclaimers and exclusion clauses set out in its standard contractual document.
The case was tried over seven weeks in the Chancery Division, before Rose J, attracting news headlines around the world.
On 14 October 2016, Rose J handed down her judgment dismissing the claim against Goldman Sachs ([2016] EWHC 2530 (Ch)).
The judgment contains an analysis of the law of undue influence and unconscionable bargains (paras.130-161). One of its most notable features is its rejection of the LIA’s contention that the offer of an internship by Goldman Sachs, other than on merit, to the brother of a key decision-maker at the LIA just days before that decision-maker agreed to enter into trades under which the LIA paid premium of $800m, was improper and, as such, a form of actual undue influence (paras.162-194).
The LIA has sought permission to appeal.
