Standard & Poor's lost a landmark case in Australia Monday over top-flight ratings given to financial products that collapsed in the build-up to the 2008 global economic crisis. The Federal Court of Australia ruled that S&P's AAA rating of constant proportion debt obligation notes created by banking giant ABN Amro and sold to the councils of 13 Australian towns, had been "misleading and deceptive".
It is the first time a ratings agency has faced trial over synthetic derivatives and the case could set an important precedent for future litigation. "(It is a) decision that is likely to have global implications, and be felt hardest in Europe and the US where similar products were sold to banks and pension funds," said Piper Alderman, the law firm representing the councils.
"No longer will rating agencies be able to hide behind disclaimers to absolve themselves from liability." IMF Australia, a publicly listed company that provides funding for large legal claims and bankrolled the case, said it was already mulling similar actions in New Zealand, Britain and the Netherlands. "We expect that investors, banks and regulatory authorities around the world will be examining this judgement carefully to determine the broader implications, said IMF director John Walker.