Articles by author
The issues with interest calculations in arbitration awards
There is often much angst about choosing the right method of calculating interest on an arbitral award and, indeed, which interest rate to use. There are no criteria that can be applied a priori to assist in the selection in a particular case. Rather, the key is to determine what monetary return the injured party might have earned had they had use of the arbitral award over the relevant period of time. This amount can then be readily translated into a method and interest rate to suit the arbitrator.
1 JAN 2021LIBOR transition: ISDA Protocol first mover disadvantage and other international perspectives
In this article, the authors consider some of the key international developments in Q4 2020 relating to LIBOR transition. They conclude that parties should exercise significant caution before signing up to the ISDA 2020 IBOR Fallbacks Protocol.
1 JAN 2021It is dangerous to use pithy terms to describe the complex risks of a fund
For marketing purposes, the complex and multiple risks of a fund are often summarised in catchy terms which ultimately are inaccurate or incomplete. This can lead to a charge of misrepresentation and censure by the regulator and litigation by the investors.
1 FEB 2022A contradiction of terms: is stock-lending compliant with the ethos of an ESG fund?
The market share of ESG funds is rising rapidly and by some estimates is set to become a third of the total market as measured by assets under management. Many questions around ESG funds have yet to be resolved. There is active debate about the issues between, amongst others, asset managers, investors, regulators, lawmakers, scientists and pressure groups. However, some questions can be answered immediately. An ESG fund which shorts a stock which it would deem to be environmentally sound, or, more likely, lends it to another fund to short is acting against the principles of the ESG ethos which attracted its investors in the first place. This is because there is a tension between portfolio returns and environmental concerns. There is a risk of accusation of mis-selling resulting in litigation and censure by the regulator unless the fund’s modus operandi and their rationale are explicit.
1 JUN 2022Musk v Twitter: it’s not just lawyers who have an opinion on the likelihood of success of the litigation: the market does too!
Despite entering into a binding agreement with Twitter, Elon Musk has backed out of completing the purchase of the company at $54.20 per share. Twitter has commenced action in the court of Delaware. If it wins, its share price should increase to around $54.20 from the current $37.74. On the other hand, if it loses the share price will drop to $37.40, the level it was prior to the announcement of the bid. From this it is possible to calculate the probability of success of Twitter’s action implied by the current market share price (using some assumptions). This market implied probability can be compared to that obtained using legal analysis, which can then inform investors whether to buy or sell Twitter shares. It also gives litigators a rare opportunity to back their analysis!
1 SEP 2022Pre-hedging versus front-running: six of one, and half a dozen of the other?
Institutions which provide market liquidity, such as banks, are in possession of very valuable confidential client data – their trading intentions. Trading intentions can generate revenue for the bank with little or no risk. This requires the bank to trade for its own account using the client’s confidential information before it trades for the client. This behaviour is generally given two labels: “front-running”, which is considered to be illegitimate, and “trading-ahead”, which is thought to be legitimate. However, their effects are often identical which should imply that their legitimacy should also be the same.
1 JUL 2022Capacity: is the question of hedging or speculation mis-stated?
The question of legal capacity to act in purported hedging transactions inherently assumes that all transactions are binary: either hedges or speculations. In this article, Hanif Virji explains how the reality is more complex – going beyond even a one-dimensional spectrum to a multi-dimensional one.
1 OCT 2022Credit Suisse, AT1 bonds and taking the BIT between the teeth
Given the huge losses suffered by Additional Tier 1 bondholders, it is unsurprising that lawyers are exploring various potential avenues for investors to obtain redress. This article focuses on investment treaty claims. In the authors’ view, such claims provide a potentially attractive route for investors to recover losses.
1 MAY 2023Valuing swaps: what exactly are “hidden costs” and “mark-to-market”?
Calculating the value of an interest rate swap, or any financial security, has always been extremely important not just for market participants, but also in litigation. Several aspects of the analysis – such as mark-to-market (MTM) and hidden costs – have been highlighted in cases. This article explains the valuation method and its importance to litigation.
1 APR 2023What is collateral special value?
Shares in a private company must be valued when they are given as collateral for a loan and the borrower does not pay the interest and capital when due. Unlike for quoted companies, the subjectivity in valuing a private company results in a wide range of valuations. Even when standard methods are used, there are additional questions of whether the valuations should include, for example, synergy benefits which would accrue to a buyer of the shares – the so-called “special value”. The range of valuations and special value could be problematic, particularly for the borrower. In such transactions, disputes can be avoided if the valuation method and the parameters required by the model are agreed at inception.
1 JUN 2023
