Islington claims victory in rate swaps challenge

Islington Borough Council has fended off a £700,000 interest swap claim from Welwyn Hatfield District Council in the Court of Appeal.

The action resulted from an interest rate swap the two councils embarked on in 1987.

Such swaps, involving complicated speculation on interest rates, were ruled outside local authorities powers by the High Court in the early 1990s.

According to Islington, Welwyn Hatfield was simply trying to reopen a long-running case over the swaps agreement which had been concluded four years previously, when the court "made a final order in Welwyn Hatfield's favour".

Marie Rosenthal, Islington council's head of law, said that Welwyn Hatfield's claim was a clear attempt to take "a second bite of the cherry" after Islington had secured £500,000 from Westdeutsche Landesbank in a landmark ruling in the House of Lords.

Welwyn Hatfield had argued that the ruling, in which it was declared that the bank should only receive simple rather than compound interest on money it had loaned to Islington under a swaps agreement, meant it should now receive £700,000 from Islington.

The court said that "justice would not be achieved by allowing this case to be reopened after three years".

Rosenthal said: "If this claim had been allowed then it would have created a dangerous and commercially unacceptable precedent in allowing cases to be retried on the basis of a subsequent change in the law."