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HSF client Goldman Sachs loses costs argument against sovereign wealth fund ahead of $1bn trial

A pre-trial review of the upcoming $1bn court battle between Goldman Sachs and the Libyan Investment Authority (LIA) has seen the bank lose a key costs argument at London’s High Court.

The $1bn claim against Goldman Sachs relates to nine financial derivative transactions which the LIA entered into with the bank between January 2008 and April 2008. The LIA paid upfront premiums to the bank to enter into the disputed trades which subsequently expired as worthless in 2011.

The LIA argues HSF client Goldman Sachs exploited the LIA’s position of vulnerability as a newly established sovereign wealth fund that lacked experience in dealing with derivative instruments.

In recent weeks, the LIA, represented by Enyo Law, sought a costs order against Goldman Sachs of £70,000, after the bank abandoned a particular challenge, forcing Enyo to amend its pleadings. An additional order was made for the bank respond to the LIA’s request for further information.

Presiding over the hearing on 3 May, Mrs Justice Rose held: ‘Despite that lack of clarity in the correspondence, that does not, in my judgment, persuade me that the LIA should not get at least the bulk of the costs thrown away by Goldman Sachs raising and then abandoning the point about lack of authority. It is a strong thing to plead an allegation, in effect, against a firm of solicitors that they have commenced a major piece of litigation without making sure that they are properly authorised by their client to do so.’

She added that Goldman Sachs must have known that by raising the challenge it would ‘engender a great deal of work on the part of the LIA and their advisers to gather together the evidence and the documentation needed to prove authority.’

‘The total costs claimed amount to over £141,000 incurred in relation to disclosure, correspondence, factual witness involved in the ratification of the authorisation… If, having made such an allegation, it turns out that the allegation was misconceived, and the solicitors can show that they are properly authorised, then the party making the allegation must, in my judgment, pay the costs.’

Deducting 10%, the judge ordered Goldman Sachs to pay £63,000 in costs to the LIA. The full trial is listed to commence on 13 June for seven weeks.

The LIA has instructed Enyo Law’s Simon Twigden to represent it while Herbert Smith Freehills partner Damien Byrne Hill is representing Goldman Sachs.

Enyo Law is also currently acting for the LIA at the High Court in a $2.1bn claim against Societe Generale for a rescission of a series of trades allegedly entered into with members of the latter group between November 2007 and October 2008.