Two giants of the US financial services market, insurer Metlife and investment bank JP Morgan, have begun a legal battle in the UK High Court over a $107m sum the insurance firm says it is owed after ‘breaches of contract’.
Metlife is suing its banker for not paying what it says is the true value of Argentine inflation-linked bonds, purchased in 2007, after the state rigged data to distort inflation figures.
The insurer’s Argentinean unit claims JP Morgan is using a figure it ‘knows to be false and distorted’, with the investment bank’s Buenos Aires managing director Facundo Manujin having acknowledged the state’s ‘falsification’ of inflation measurement the consumer price index.
Metlife has instructed Tim Strong, a disputes partner at Taylor Wessing, and John Taylor QC of Fountain Court to bring the claim. Metlife’s legal team will argue that the losses were caused by JP Morgan’s use of an index that economists argue only accounts for a third of true inflation levels and is not in good faith of the deal. The insurer is also seeking interest and costs.
JP Morgan’s own economist admits that inflation levels were over double that of the consumer price index but the investment bank argues that there is ‘no event, no matter how grotesque the restrictions or limitations placed on the calculation’ that could alter the level of return on the bond.
Allen & Overy partner Calum Burnett and David Wolfson QC of One Essex Court have been instructed by JP Morgan. Hearings are set to conclude by 30th January.