Barings bondholders are set to receive a pay-off of £190m under a settlement plan unveiled last week but one lawyer described the two-year conciliation process which brought it about as a “shambles”.
If approved by bondholders, the settlement hammered out by the City Disputes Panel (CDP), which was asked by the Barings liquidators to conciliate between litigating parties more than two years ago, will provide pay-outs to three separate groups of bondholders who had been litigating to recover money from residual Barings assets.
But lawyers from several of the eight City law firms representing the various parties in the dispute privately criticised the CDP for its lack of mediation training and resources.
The panel, chaired by retired Law Lord, Lord Templeman, with Sir David Calcutt QC and investment banker Stanislas Jassukovich, began holding discussions with each party in late 1995.
It is understood the panel suggested a settlement in spring last year but it was only last week, after many more details had been hammered out, that the lawyers for each party felt able to put the settlement to the various groups of noteholders.
Slaughter and May partner George Seligman, who acted for the liquidators at Ernst & Young, said that the settlement represented a triumph of conciliation but he conceded that there were “some lessons to be learnt” by the CDP if it was to handle such complex cases again. “Proposals need to be carried forward a bit more quickly and they probably need to address some more of the detail,” he said.
One lawyer representing bondholders was more forthright: “It was a total shambles.”
If the settlement won shareholders' approval “it'll be no thanks to the CDP. They are badly under-resourced. They need to get a good lawyer and a good accountant seconded to them. It took them 12 months to get to grips with the issues”.
Another said: “I don't believe judges are the greatest mediators. They have no sense of it at all and no real training. Their technique is to bang your head against a wall until you cry out and say stop… I found it a rather crude way of dealing with some complicated issues.”
But one lawyer for the 1986 noteholders, Howard Morris of Denton Hall, pointed out: “People were never going to walk away from this feeling happy. The CDP provided a mechanism to bring the dispute to an end. If they hadn't been there, we would have only been starting to go to court now.”
Richard Freeman, chief executive of the CDP, said there had been over 150 meetings with a huge number of parties fighting over hugely complex issues: “At one point I was dealing with 23 law firms, all with their different views and they expect a solution in minutes?” He said the panel of very prominent City and legal figures had the expertise to cope.
Jayesh Patel of Theodore Goddard represented Law Debenture, the trustees of the 86 Notes while Celia Gardiner of Norton Rose and Howard Morris of Denton Hall represented the two companies chosen to represent the 1986 noteholders, Donaldson Lufkin & Jenrette Securities and National Bank of Egypt, respectively.
Andrew Wilkinson, originally at Clifford Chance, represents the 1994 noteholders and brought them with him as clients when he moved to US firm Cadwalader Wickersham & Taft this February.
The trustees of this issue, Law Debenture, are represented by Andrew Legg of Linklaters.
The Perpetual Noteholders Action Group, which had been litigating against the parties involved in offering their issue in 1994, are represented by SJ Berwin partner David Harrel and the trustees, Law Debenture, by Gordon Stewart of Allen & Overy.
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Barings settlement: who gets what from whom
1994 noteholders will get all of their original $150m investment back minus a discount of £3.5m. The funds will come from a still solvent Barings subsidiary.
The 1986 noteholders will get about £54m around 60 per cent of their original investment and Perpetual noteholders will get only £23.8m only around 24 per cent of their investment.
These funds will be paid by some of the defendants to litigation, including former Barings auditors Coopers & Lybrand, some Barings directors and some from parties who were not defendants, particularly Dutch group ING which bought Barings in 1994 for £1 after it collapsed.
The only parties who will not receive anything are the preference shareholders, with holdings nominally worth more than £50m, advised by Dominic Hopkins at Hewitson Becke & Shaw. Sir Richard Scott heard their pleadings at a court hearing late last year and he has yet to rule whether their litigation against the Barings auditors should be settled.