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Herbert Smith has scored a Court of Appeal victory that leaves banks that act as both the arranger and underwriter on a syndicated loan immune to legal redress.
The case concerned dealings between Goldman Sachs International and Belgian investment fund IFE over the purchase of e20m (£13.5m) worth of bonds and warrants in UK-listed car manufacturer Finelist Group.
Herbert Smith partner Damien Byrne Hill acted for Goldman Sachs, instructing Jonathan Nash QC of 3 Verulam Buildings.
The court heard that Goldman Sachs distributed information documents on the syndicated loan, but, upon the completion of the syndication, it had received further due diligence reports from Arthur Andersen that cast doubts on Finelist's financial performance.
Four months after completion of the syndication, Finelist went into receivership after years of fraudulent activity.
The three-judge court was asked to consider whether Goldman Sachs had a duty to disclose the new information.
The court held that there was no obligation to update the information due to a disclaimer being included in the documentation.
Fox Williams litigation partner Tom Custance, for IFE, said the judgment means a bank that acts as both underwriter and arranger can decide what information to put out to the market and when.
He added: "It's disappointing that the court has left the conflict of interests inherent in a bank's dual role as underwriter and syndicate arranger immune from legal redress."
Custance instructed Mark Howard QC of Brick Court Chambers for IFE.