A cabal of international banks including ANZ Bank and Macquarie have applied to dismiss a class action against them in the US for the alleged rigging of the Singapore intra-bank interest rates on the grounds they are incorporated abroad.
If the application is successful, it could throw doubt on a separate action brought against Australia's big four banks and Macquarie for allegedly rigging the bank bill swap rate in New York.
Both cases have been brought by US investment houses Sonterra Capital and Frontpoint, the latter of which was the inspiration for the film The Big Short.
The second case regarding the BBSW also includes big-time US trader Richard Dennis, commonly referred to as the Prince of the Pit, as a plaintiff.
In that case, the big four Australian banks and Macquarie have been named as defendants. Separately in Australia, the Australian Securities and Investments Commission is suing National Australia Bank, ANZ and Westpac for allegedly rigging the bank bill swap rate.
The banks' lawyers argue the alleged rigging of the SIBOR and the swap offer rate (SOR) took place outside the US.
"All of the foreign defendants are headquartered in and organised under the laws of a foreign country – in Europe, Asia, or Australia," the banks argue.
"For each of the foreign defendants, their contacts with the United States and New York (if any) represent a comparatively small portion of their global business operations," the banks add.
However, lawyers for Frontpoint and Sonterra said the court should not dismiss the case as requested by the banks.
"The moving defendants ask this court to absolve them of violations of United States law because they are incorporated abroad," lawyers for Frontpoint and Sonterra said. "These foreign banks want the court to leave their domestic co-conspirator banks responsible to pay the entire bill for the domestic injury they, together, caused."
Lawyers for Frontpoint and Sonterra cited a case in the US where a victim of the Castro regime in Cuba was able to sue international and domestic banks which had blocked access to the country's assets held in their possession.
In that ruling the court found that "there is no reason to give advantage to a foreign bank with a branch in New York, over a domestic bank".
The lawyers for the US hedge funds bringing the action against ANZ, Macquarie and the other banks noted that all of the international banks "registered to do business and consented to jurisdiction in New York".
The international bank "defendants intentionally caused harmful effects in the United States. Defendants reaped illicit profits off the backs of US investors in the SIBOR and SOR-based derivatives market they manipulated using their US operations."
ANZ and Macquarie declined to comment, but both banks have previously denied any wrongdoing.
In 2013, ANZ and Macquarie along with 18 other banks were sanctioned by the Monetary Authority of Singapore after traders within each of the banks were found to have attempted to "inappropriately influence financial benchmarks", according to a media release from the authority at the time.This article was first published in www.smh.com.au
Author: Sarah Danckert