Libyan Investment Authority, Tripoli, lost its case against Goldman Sachs that alleged the bank exercised “undue influence” over the sovereign wealth fund in a number of derivatives trades that led to losses.
The sovereign wealth fund, which had $60 billion of assets at Dec. 31, 2014 — the latest available figure — brought the case against Goldman Sachs in 2014 U.K.’s High Court of Justice in London. The disputed trades took place between September 2007 and April 2008. The Libyan Investment Authority paid about $1.2 billion in premiums under the trades, with maturity dates set in 2011. “The total value of shares to which the LIA gained exposure under the disputed trades was about $5.2 billion,” the ruling said.
The sovereign wealth fund wanted to rescind the disputed trades and be repaid the premiums by Goldman Sachs. The Libyan Investment Authority’s main claim was that “Goldman Sachs procured the LIA to enter into the disputed trades by the exercise of undue influence.” At the time of the trades, the LIA was “a naive and unsophisticated institution.” The second basis is a claim that these trades “constitute unconscionable bargains.”
The LIA also alleged that Goldman Sachs “improperly influenced the LIA to enter into” four trades made in April 2008, by offering the younger brother of an LIA official an internship.
Justice Vivien Rose ruled that “although the offer of the internship may have contributed to a friendly and productive atmosphere during the negotiation of the April trades, it did not have a material influence on the decision” to enter into these transactions.
Ms. Rose said the relationship between the two parties “did not go beyond the normal cordial and mutually beneficial relationship that grows up between a bank and a client,” and the bank did not become a trusted adviser. Further, “there was nothing about the disputed trades that would raise a presumption, if such a protected relationship did exist, that they were the result of undue influence.”
Ms. Rose found no grounds for concluding that the level of profits earned by Goldman Sachs “was excessive given the nature of the trades and the work that had gone in to winning them.”
In a statement provided by a spokesman, Goldman Sachs said: “We are pleased to win this case, with a comprehensive judgment in our favor.”
In a statement on the Libyan Investment Authority’s website, Ali Mahmoud Hassan, president of the interim steering committee of the LIA, said: “Today’s ruling will not break our resolve, and we remain focused on the other litigations raised by the previous board of directors to put right the wrongs suffered elsewhere in the past. Libya’s wealth must be returned to the people of Libya.”